Medicare Benefits Planning

One of the most critical benefits affecting American citizens is the Medicare Program.  For those individuals who qualify at age 65, this program provides health coverage for inpatient care (Part A), outpatient care (Part B), prescriptions (Part D) and other areas.  This article will focus on these three most common areas of care.

To qualify for Medicare benefits, you must have worked in a job that withheld Medicare contributions from your paycheck while working at least forty quarters (i.e., 10 years).  This is a very low bar to meet eligibility for such a comprehensive medical plan.  Of course, as with many federal laws, exceptions apply to the general guidelines.

The important concept of medical coverage through Medicare is that it functions similar to the private insurance you may have received while employed in your career.  For example, Medicare covers 80% of your covered qualified medical charges for inpatient care.  This means your hospital stay may be covered but you will be expected to pay the remaining 20% unless you purchase a Medicare Supplement Plan.

Supplement plans are relatively inexpensive and can be the difference between destroying your lifetime savings and the security your family needs.  There are many carriers of such plans and each state may differ as to the carriers available.  It is critical that you determine the appropriate Medicare Supplement Plan you desire that is contracted with your various medical providers.  Supplement plan consultants are often helpful to narrow the field of possible plans and to assist in the selection of a plan that meets your budget.

To enroll, or to change plans, you should be aware of the upcoming Open Enrollment Period.  For 2022, the period is October 15 through December 7.  It is critical that you review your current plan for potential savings as new plan changes and plan providers are introduced into the marketplace.  Often people will purchase a supplement plan and, like the infomercial, “set it and forget it”.  This is a big mistake that could cost you thousands of dollars.

Let’s review the outcomes of such a person who failed to obtain a supplement plan and suffered a significant health issue.  While in the Intensive Care Unit of a major hospital, the medical care she received was excellent.  She left the hospital after 10 days of care and felt so much better… until she started receiving the bills!  The total cost of the hospital stay was more than $120,000 for all the medical care provided her.  Without a supplemental plan, she was responsible for more than $24,000 of the total cost.

Medicare Part D is a complicated area of law.  It is vital that you seriously consider enrolling in this program when you are first eligible or you will be penalized for each month you delay enrollment.  This sounds rather harsh but the method of funding the program is through premiums assessed individuals who utilize the benefit.  Considering that most people may live a relatively healthy life until age 75, the ten-year period of qualification to election date may cause you to incur a significant penalty at a time when you may need your savings for other priorities.  

The cost of medical care continues to rise at an unprecedented pace in the United States.  We highly recommend those individuals enrolling for their Medicare Benefits to seriously consider purchasing a supplement plan.  Monthly premiums vary depending upon the level of care and the carrier issuing the policy.

If you are approaching your 65th birthday, it is critical that you file for your Medicare Benefits approximately 60 – 90 days prior to your birthday.  It will be a lot easier to blow the candles off your cake if you aren’t worrying about medical bills.  Seek the assistance of a CERTIFIED FINANCIAL PLANNER™ professional to guide you through this critical and difficult process. Make it a wonderful week!

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Lifetime Decisions on Social Security Benefits

Perhaps one of the “Top 10” retirement questions we receive is when to elect social security benefits. The question is one that is complicated to answer due to the fact that many unknown variables exist within this question. Just a few considerations are: 1) How long will I live? 2) How can I maximize my benefits? 3) What is the best strategy to gain the most household benefits? 

Let’s tackle the first question since it is preeminent to the prediction of mortality. The answer to the question of “How long will I live?” requires greater analysis than a simple number presented as the target date. What age were your parents and grandparents at their deaths? Do you have any comorbidities or systemic health issues? What are your current cash flow needs? Are you married? Widowed? Do you have a dependent child that has been diagnosed special needs? All of these factors, and many more, give rise to a greater amount of analysis to properly estimate your date of filing for benefits.

According to the U.S. Centers for Disease Control, in a study published in 2019, men enjoy a life expectancy, at birth, of 75.1 years and women 80.5 years. Of course, these are averages and many of us will live to 100 years of age and beyond. Curiously, the projected ages for men and women declined in the past year by approximately 0.9 to 1.2 years. Was this due to the effects of the pandemic or is this a normal fluctuation of the population cycle? 

The most important election many of us will make that has a lifetime impact is the election to receive social security benefits. Much confusion exists around the timing of this election. We highly recommend that each client examine their needs, lifestyle and circumstances when determining the filing date for benefits. For example, if your lifetime savings is not projected to meet your cash flow needs due to the lower returns from the current market cycle, you may wish to analyze the lifetime loss of SSA benefits by electing earlier than your Full Retirement Age (FRA). It is not ideal to make lifetime decisions based on short-term needs. For an individual who is age 62 and would reach FRA at age 67, if benefits are elected at any time from age 62 to 66 years and 364 days (provided it is not leap year), his or her benefits will be reduced permanently by 30%. Depending on your lifetime earnings report, this may be a significant loss of benefit.

Lastly, the best strategy for your household is to determine the ages of each spouse and then review the earnings reports for each by obtaining them on www.ssa.gov . If the higher earned benefit spouse were to delay benefits until reaching age 70, instead of claiming at age 67, a 24% increase in monthly benefits would be availed to the surviving spouse upon the death of the higher earner. The bonus earned by the higher-earning spouse is material in the fact that many spouses may live to be 90 years of age or more which allows significant time for the collection of the bonus payments. Upon the death of the higher benefit spouse, the survivor would “step in the shoes” of the deceased and receive their benefit (while forgoing the survivor’s original earned benefit).

It is critical that you make the best decision for your family. A proper analysis of the hundreds of options of benefit elections is necessary to give you confidence in this lifetime decision. If you wish to plan appropriately for your SSA benefits, contact a CERTIFIED FINANCIAL PLANNERTM professional to assist you in this important lifetime decision.

Today is another 24-hour period for you to find gratitude and happiness. Spread your smiles to those around you and you will reap what you sow. I have a saying that may be appropriate – “If smiles were contagious, would you start a pandemic?” See you on the walking trail!

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Defining Retirement Success

The word “success” scares a lot of people, confuses some and eludes most. This word is such a phenomenon that many of us can’t define it in terms that are relatable to others. Why is this so? I believe the word “success” has been given a bad reputation because many people associate the word with wealth or money.

Success is simply the level of happiness you attain in life. If this means you must possess great wealth to be happy, be careful for what you wish. Many of the wealthiest families I know have experienced significant familial hardships throughout the decades. Too many opportunities for negative aspects of life to become entrenched in your family are realized. Simply put, to seek a goal of having an abundance of wealth for wealth’s sake is not a proper goal. It is the person you become while attaining wealth that should be the goal – more charitable, more caring, more family supportive.

As retirement planning specialists, we are often asked, “How much money do I need to retire?” This question is valid and the answer is, “Enough to meet your family’s needs and acquire some of your wants.” When we state this response to our client the wheels start turning in their mind and their eyes become bigger. The follow-up response is, “How do I know what my needs and wants are for this purpose?”

Now we are at the point of the matter. Too often retirees compare their personal situation to generic plans or the specific plans of others with dissimilar facts. The most significant and impactful approach to retirement success is cash flow planning. By understanding your cash inflows and managing your cash expenditures on a monthly basis, you will gain confidence that your time in retirement will be enjoyed.

Let’s explore some critical errors to avoid in retirement. The first four to five years of retirement should be funded in a manner that you are not required to take significant distributions from your long-term funding sources such as Traditional IRAs or Roth IRAs. To leave these pools of money intact is critical in the later years of retirement when additional cash outflows are required for health maintenance and other lifestyle needs.

Another error in retirement is improper use of resources in elimination of debt. Ideally, we prefer our clients to be debt-free before initiating retirement. However, in some cases this is simply not feasible. To effectively create a means where your assets are creating sufficient income streams to address the monthly outlay for housing or automobiles, your asset allocation should consist of more income-generating assets such as bonds, real estate and value stocks. Project the return your portfolio may generate and compare the need for the payments you must tender each month. If your portfolio is generating a greater return than the interest charged on your indebtedness, you are on the right track. In this instance, your earnings on the investments will, over time, completely liquidate the indebtedness. 

If retiring in the current market cycle, additional challenges will need to be overcome in your investment strategy. Further, if possible, it would advisable to delay retirement if you’re concerned about the sufficiency of income from your existing sources to fund your lifestyle in retirement.

Deciding to retire is a huge life event. One shouldn’t make this decision without consideration for all aspects of life that require use of resources. If you are considering retirement within the next five years, it would benefit you to create a plan of action that will give you confidence and comfort that your life will continue on your terms. Contact a CERTIFIED FINANCIAL PLANNERTM professional to obtain a second opinion or construct a plan that meets your goals and desires. Remember, you retire for the first time only once. It is better to be confident than to be forced to correct course at a time in life you should be enjoying your time. Make it a great weekend!

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Opportunity or Tragedy?

The world has become a tenuous planet over the past couple of years. Many people have been impacted, some positively and many negatively. How do you think a person can become positively affected by such trauma and chaos in the world? First, the maintenance of attitude. 

Negative people only seek ratification of their advice by recruiting others to the depths they find themselves. The positive people will be a much smaller, yet growing, group of people. No matter the opportunity, someone will always find the negative or “how can I lose” option in the venture. This mindset has not created happy people but rather a group of cynical, and often, maligned population that is skeptical of all positive attributes of life.

A person’s attitude is influenced in many ways. It is better to feed your mind with positive stories of successful people than to focus on excessive newsfeeds of the tragedies of the world. I recommend a good book be the focus of your time rather than negative news on a daily basis. 

Another attitude influence is the friend circle you maintain. Personally, I spend ninety-nine percent of time around people that are successful, optimistic and charitable. There is always a success story shared among the group that inspires the rest of us to keep growing and making the world a better place for mankind. The most important asset we hold is our attitude. Assets and net worth are merely tools to accomplishing and maintaining a positive outlook in life by contributing the improvement of less fortunate people. When I see the reaction of families that are recipients of positive support, it motivates me to work harder in creating greater change in our community.

The stock market has recently reached bear market territory. That simply means the S&P 500 Index has fallen by 20% since January 1, 2022. Many of us look at our investment statements on the day after such market changes are posted and frown. Some of us look at this lower price in stocks as an opportunity to buy undervalued stocks that will pay dividends for decades to support our livelihood. Remember, the United States stock exchanges are auction markets. For every one that wishes to sell a stock, someone else must be willing to buy it. 

For example, if I were to sell XYZ stock and posted my intentions on the exchange at “market”, a buyer could purchase the stock at whatever its price at the moment of purchase was posted in the marketplace. However, if I were a potential purchaser, I may wish to calculate a target price for which I wish to purchase XYZ and order a stock buy at the price. This means if I want to purchase for $25 and the stock is currently at $26 in the market, my buy order will go unfilled until the stock hits the order price called a buy limit order.

Why I am telling you all of this about attitude and your finances? The real reason is that you have worked for more than 30 years accumulating sufficient assets for your lifetime needs. Don’t allow your fears to cause you to make an immediate decision on a lifetime investment because of short-term market activities. We, as a country, have been here before in the markets and we will improve, and most likely, set new market highs in the future. The bigger question is when.

The manner you have invested your lifetime savings is critical to your long-term success. If you have concerns about your portfolio’s allocation and capabilities to withstand significant market headwinds, consider contacting a CERTIFIED FINANCIAL PLANNERTM professional. The goal is lifetime income for a better night’s rest. Stay positive!

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How To Remain Prudent During Market Cycles

What goes up must come down! Whoever authored this statement of life events and business activities should receive the award for the Most Obvious Statement. However inane the statement, it does contain a little truth when applied to our current economic cycle in the United States.

Factors such as inflation, supply chain disruption, interest rate increases, U.S. Government fiscal policies and continued underemployment in our country have caused significant volatility in the markets. It has been a literal rollercoaster for the various market indices used to measure performance of the exchanges in the U.S.

At the start of 2022, the S&P 500 Index was at 4674.77 and closed on May 6, 2022, at 4175.48. This decline of 16.26% has caused investors to worry about the future of their retirement assets. To mitigate the emotional impact of such a decline, consider past market declines and learn from the period of time after the correction. For example, by remaining calm and investing in a well-diversified portfolio, you will recover your unrealized losses in the future. If you are planning to make a large purchase during a market downturn, it may be fiscally more responsible to consider bank loans which carry a much lower rate of interest. Once the markets recover and the value of your portfolio is an unrealized gain, sell a portion of the investments to liquidate your debt.

Another measure of thriving during market cycles is to utilize noncorrelated investments that respond better to inflationary pressure. For example, real estate is a sector of the economy that maintains cash flow and value during market declines. Think about this approach to your income needs during a period of market contraction. Real estate investors continue to collect rents on a monthly, or some other predictable period, basis no matter the state of the economy. 

Of course, no investment is immune to such historic market events as the Wall Street Crash of 1929 or Black Monday in 1987. The key to facing any market disruption is to not allow emotions to control your decision making. One of my favorite quotes of Warren Buffett, “Be fearful when others are greedy and greedy when others are fearful” comes to mind during times we are currently experiencing.

Lastly, remember that you most likely took several decades to amass your retirement assets. The intention of these assets is for them to last you several decades in the future. Unless the need for capital was immediate at retirement, your portfolio will grow and contract as market conditions change. By maintaining a long-term perspective, you will be better suited to investing in positions that are below their book value and allow for a growth opportunity in the future. There are positions that are available for you to make reasonable long-term returns while the overall economy is in contraction.

Keeping perspective and maintaining a well-diversified portfolio will help you weather the storms of the economy much better than attempting market timing. Predicting markets is not an approach that serves you well. If you wish to evaluate your portfolio, contact a CERTIFIED FINANCIAL PLANNERTM professional. Worry never solved a challenge.

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Buy or Sell?

Life has a way of keeping things interesting. After a long cycle of bull returns, the time for profit-taking has arrived. This is the process of capturing the gains in the investments that have performed well. I will explore some of the factors that are currently active in the economy, the markets and what you can do to maximize your family’s best interest.

The overall economy is improving in the United States. When I state that comment I sort of cringe thinking about the impact that is being felt by the families of our country. Inflation has reached a 40-year high at 7.5% according to tradingeconomics.com. Some of the factors leading to this excessive rate are labor shortages, soaring energy costs and supply chain disruptions. Based on a review of ktvz.com, March and April, 1980, inflation had risen to an unprecedented peace time level of 14.6%. Acknowledging that this rate is extremely high by today’s standards, the highest inflation factor in the United States was experienced in 1778 at 29.78% (Investopedia.com). 

Improvements in market controls, inventory production, delivery methods and banking policies contributed to maintaining a more reasonable inflation experience for many decades. It is not unusual for the people of the United States to be subjected to a 2% – 3% inflation rate in our overall economy. However, in our modern world where we rely on transportation and housing that must be heated and cooled with natural gas or electricity, an inflation rate above 4% begins to reflect on people’s lifestyles.

The unemployment rate is at historic lows for our country. This rate often touted by politicians to show their outstanding work on the economy is misunderstood by the mass of Americans. To properly understand the application of the rate to the economy, you must consider that underemployed and those individuals not actively looking for work are not considered in developing the rate. For those individuals seeking employment, there are currently more job opportunities than workers to fill them. This is a big plus for our economy. During times of high demand for skilled workers the hourly wage rises. It is simple economics – supply and demand. When demand for something (or someone) rises and the supply (people looking for work) is static or lower, the price for labor will be higher. 

Rising wages are good for workers until they realize the costs of goods rise along with them. Companies will increase prices on goods to cover the increased cost of labor while maintaining the profit margin necessary to continue operations.

Another factor affecting the economy is the supply chain disruption. Goods that are manufactured outside the United States must be imported for sale by businesses to the public. Recently, the shelves of some of the largest retailers have been limited or out of products demanded by the public for their functions in life. Don’t get me started about the “Toilet Paper Run of 2020”. There was plenty of the product for the current needs of people in our country. However, a rumor on social media stoking the fears of people caused a panic to buy greater quantities of toilet tissue. Some of the memes on social media were hilarious! At one point it appeared that toilet tissue would become the currency of choice due to the high value it held in the public’s mind.

All these factors create economic conditions of expansion or, more recently, contraction in the economy. People are subjected to many emotions in life. However, in my 34-year career, I have discovered two emotions that are most prominent when it comes to financial decisions about a person’s retirement and investment accounts – fear and greed. Memory fades quickly from the very positive returns of only a few months earlier when a market correction appears. People who have enjoyed almost 14 years of positive returns in their portfolios are suddenly stricken with the fact that markets can (and often do) go down.

Recently, I asked a client if she would sell her home if it went down in value. The look on her face was as if I had asked her to donate a kidney! Her response was “that is a long-term asset and has tremendous value to me”. I then asked the simple question, “Your retirement account is your lifetime asset. Why do you want to sell it when it is down?” She simply stated, “You are right.” The stock market is the only investment I am aware that people buy when its high and sell when its low. This is the opposite to increasing your overall lifetime return and cash flow.

Buy or sell? Each person must deal with their fear or greed. By remaining calm when others are frantic and scared, you will be rewarded with greater opportunity for growth over a lifetime. Make certain your risk tolerance is properly reflected in a diversified portfolio and your cash reserves will accommodate 90 – 120 days of living expenses. This correction will pass.

Your lifetime of financial security for your family is no laughing matter. To alleviate the stress from worrying about your finances, seek out a CERTIFIED FINANCIAL PLANNERTM professional to help you build confidence in your future so you can laugh all the way to retirement and beyond.

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Three Steps to Reduce Risk In Your Portfolio

Wouldn’t the world be a better place if you could predictably earn 8% returns on your portfolio every year and only invest in certificates of deposit? Of course! One problem with this thinking is that you wouldn’t live in the United States of America and the dollar would be worthless.

You face some type of risk every day of your life. While driving your car through town, you may experience an automobile accident. This is the risk of driving a vehicle. You think about staying home and raking leaves. A sudden gust of wind causes a tree limb to fall on your roof causing significant damage to your home. This is environmental risk.

We all seek the best outcomes but many of us do not wish to experience the associated risks involved in the process. The universe works within a risk/reward paradigm. When more risk is accepted, we expect a higher reward. By investing in certificates of deposit, you believe you are undertaking a risk-free investment. Alas, you may expose yourself to interest rate risk, inflation risk, default risk (highly improbable, but a risk nonetheless) and liquidity risk. That sounds like a great deal of risk for an FDIC-insured investment.

Diversify Your Portfolio

The best approach to life is to manage risk, not attempt to alleviate it. The first method of mitigating risk is to fully diversify your portfolio. Diversification does not remove the risk factors but may lower them to a more acceptable level by investing in many different types of investments that are noncorrelated. Simply put, don’t put all of your monetary eggs in one basket.

Inexperienced investors make mistakes that may cost them significant money and time. 

Two emotions generally guide individuals in their investment approach – fear and greed. One of the best methods of taking advantage of the stock market, an auction market in which one entity is selling the shares and another is buying them, is the focus on the emotions of other investors in the market. The famous investor, Warren Buffett, is cited as originating a quote that is used as the premise to maximizing your opportunities in the stock market – “Be fearful when others are greedy. Be greedy when others are fearful.”

Understand the Investments You Are Buying

The second method of reducing risk in your portfolio is to understand the investments you are buying. Significant hype typically precedes Initial Public Offerings (IPO) as the underwriter is attempting to create a market for a stock. Without a historic picture of the company’s capabilities to generate a profit and pay a dividend, beyond its operations as a private company, the investor is buying based solely on prospective anticipated performance (i.e., hope). Many of the companies going public provide novel products and services not yet proven in the marketplace. For example, many IPOs will list for a price that reflects much higher value than the performance of the company may sustain. After the hype of the issue, realism sets in and the price may fall to a level that is a fraction of the issue price.

When to Rebalance Your Portfolio

Lastly, consider rebalancing your portfolio to its original target allocation when the variance is 5% – 10% above the intended percentage. For example, when your portfolio experiences growth in one asset class, the allocation for the original investments will change. Stocks have performed reasonably well in 2021 and bonds have provided lower yields. After the year has faded, you look at your portfolio and realize your 60/40 portfolio is now 75/25! Good news is that you have a larger portfolio value but inherently gained more risk. By rebalancing the portfolio consistently and timely, you will maintain better control of the risk in the portfolio.

Many investors may receive a benefit from seeking the assistance of a Certified Financial PlannerTM professional to analyze their portfolio. By implementing a few consistent steps in managing your retirement assets, you may increase your probabilities to achieve your ultimate goals. 

See you on the jogging trail!

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How To Secure a Happy Retirement Life

One of the most asked questions from our new clients is “How much wealth do I need to last my lifetime?” The obvious answer is “depends.” To help you quantify your needed savings for lifetime income, we will provide you three areas of life that must master to live the life you choose.

First, you must become a saver, not continue as a consumer. The highest savings rate in U.S. history was reached during the pandemic. Not surprising as most people did not feel safe shopping at local stores and malls but rather ordered online. Granted the online experience for shopping has improved exponentially, it is still not the experience most shoppers seek when a day is planned for the exchange of goods and currency (that is the phrase I use when my wife and daughters go shopping).

The savings rate for U.S. citizens in 2021 was a whopping 13.7% (www.statista.com)! This level of savings exceeds the 11% experienced in 1960. Is it enough to meet the demands of rising costs of living for most people? Perhaps if this savings trend were to continue for a period of 40 years representing the work life of most people, their post-career years would be sufficiently funded.

To bring another statistic into this discussion, the total savings of U.S. citizen in 2021 exceeded $2.3 trillion. This is a staggering amount of money considering the U.S. Government has distributed $4 trillion dollars during the pandemic. The average balance maintained in the 401(k) plan of a 65 years of age and older person is $216,720 according to www.personalcapital.com.

If you seek a lifetime of income, in the realm of reasonable support, it is important that you become a saver on a consistent basis to allow the compounding of investments to perform over a significant period of time.

Second, you must determine what happiness is for you in life. One of our clients was an older woman whose husband predeceased her while she was in her career. Her position was mostly clerical, and she enjoyed her work. During her career, she had the opportunity to invest in the company’s stock through a plan where the employer matched her contributions to buy the stock. The highest salary she earned during her career was $51,000, which was two years before her retirement from the company. Granted she worked for a good company and was fortunate to begin her career with the company while it was a fledgling start up organization.

At the age of 66 and 4 months, coincidentally her full retirement age for Social Security Benefits, we assisted her in filing for her benefits and prepared her for retirement. When we opened the most recent envelope containing her statement from the employee stock ownership plan, she could not help but grin at my expression. Her stock value was $1.5 million! She also was prudent and saved money through her employee retirement plan. The sum of this account exceeded $700,000. She looked at me and asked, “Is this enough for me to retire and keep my lifestyle?” Of course, we needed to perform our analysis and testing but offered her some probabilities that she would be simply fine in retirement.

The moral of the story is that time, once again, is the greatest impact on lifetime savings. Start early, be consistent with contributions and treat the account as your next income stream by never borrowing from the account for current lifestyle needs. Happiness for her was continuing to live in her home, travel to worldly destinations and help her grandchildren with college expenses. She, by thoughtfully planning, is still doing all the things that make her most happy in life.

Lastly, you must protect your health as you prepare for an active retirement. My father was one of those people that worked hard all his life and genuinely enjoyed his career. He suffered a heart attack in his early 40’s that opened his eyes to better care for himself so his future would be enjoyable. After finally retiring at 72 years of age, he has lived a wonderful life in retirement. He is reasonably healthy, has enjoyed cruises to Alaska and continues to do whatever he chooses to keep a smile on his face. 

His father, my grandfather, died in his early 60’s. I always told dad that he would need to take advantage of the opportunities to maintain his health so that he could break the average mortality for males in our family. He smiled that sheepish grin and said, “I am setting a new bar for the Williams men!” 

Exercise regularly, save consistently and find your happiness in life. By preparing prudently today, your tomorrows will be most enjoyable!

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Retirement Challenges and Successes

Another year of life has arrived. What are you doing to grow as a person? Grow your wealth? Grow your influence? It has been proven by scientists that individuals who live sedentary lifestyles after their career lose the cognitive abilities they once possessed. To help you keep up your psychological and emotional edge in life during these challenging times, practice the activities outlined in this article.

Get up and get going

Get up and get going. The simple act of walking each day and experiencing the wonder of nature will keep your mind inspired and active. There are differences of opinion that you should walk 10,000 steps per day or 5,000 steps per day. I say, walk until you feel sufficiently energized. If your heart rate is up to an acceptable level determined by your personal physician, walking for as little as 20 minutes per day can help you keep your mental faculties acute and ready for challenges in life that will most certainly arise.

Live each day with a plan for purpose

Live each day with a plan for purpose. Too many of us simply rise from bed and allow the “winds of the day” to blow our lives in any direction without our consent. This is not you. Set yourself a routine of rising from bed at the same time each morning and preparing a list of activities for the day that will stimulate your mind and work your body. For example, I do not start my day without clear understanding of what I must complete for the day. This type of planning gives your mind something to work on even when you are doing something else.

Perform one random act of kindness a day

Perform one random act of kindness a day. What does being kind have to do with your mindset? Everything! When we selflessly give to others in need, no matter the size or scope of the deed, your brain floods your body with dopamine. This chemical in the body brings happiness, euphoria, and other positive feelings. By helping others, you will also feel a sense of accomplishment that gives you energy to continue serving and care for yourself in a better manner. Another benefit to performing a random act of kindness is that the recipient can “pay it forward” to others in need and we can build a better community and planet based on mutual respect.

Build your confidence in your future

Build your confidence in your future. Review your financial picture and see if you have allowed parts of your budget to creep into areas that are not being utilized efficiently for your lifestyle. We often start subscriptions for products or services that automatically renew and fail to remember that we did not cancel them. Another area to focus is our savings pattern. For example, you may have saved 5% of your earnings monthly last year but your income has risen this year. If you do not utilize the additional cash flow and it is deposited in a non-interest bearing checking account, you will lose the benefit of earning interest on the funds. 

Read

Lastly, read something stimulating to you each day. A good novel, a biography or anything that challenges your mind to create the background of the story or place yourself in the plot as a character that impacts the potential outcome of the storyline. The mind and body of humans are tremendously powerful devices that require our continual input of challenges, fuel, and rest.

This is a new year! Don’t become so relaxed in life that you fail to live it abundantly on a daily basis. Make 2022 a different outcome for you by facing the challenges of life confidently through strength gained by implementing one or all of the above strategies. You can truly become what you desire in life and build a better community in the process. See you on the walking trail!

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IRA Planning for 2021

The pandemic of the past two years has brought a tremendous amount of pain to many lives but there is a positive aspect in that dark cloud of gloom. One of the best attitudes, when performing tax and financial planning for your family, is to seize opportunities that are given you. In other words, capitalize on the negatives that impact your life and make the proverbial “lemonade from lemons.”

Many businesses are suffering net operating losses during 2021. If you are an owner of the business and the operation is conducted as a sole-proprietorship, partnership or S-Corporation, you may have a valuable tax saving asset in your future. The net operating losses of these entities are claimed on the tax returns of the owners. For example, if you were a fifty percent (50%) partner in a partnership that lost $100,000 in ordinary income for 2021, you would receive the benefit of $50,000 loss to be reported on your personal return. 

With your personal return reporting a loss, or much lower income than you otherwise typically report, your Traditional IRA is holding a great value in it beyond its balance. Consider the conversion of your Traditional IRA, in whole or in part, to a Roth IRA prior to the end of 2021. A taxable event will be triggered when the conversion is performed but your tax computation is based on your taxable income which, when claiming your share of the net operating loss, may be lower than your typical year sheltering the income from the conversion from taxation.

The purpose for converting your Traditional IRA to a Roth IRA is to change the future taxability of the account. You will be taxed on distributions received from the Traditional IRA in the future. The Roth IRA does not mandate required minimum distributions to you at age 72 as a Traditional IRA. Also, you may use the benefits of the Roth IRA to accumulate tax-free income streams from a very young age.

If you believe tax rates are going down in the future, you may wish to contribute to a Traditional IRA to enjoy the current tax savings. However, if you think tax rates will be higher in the future, you may wish to forgo the tax deduction of today and contribute to a Roth IRA.

Both types of IRA may invest in many different types of investments – stocks, bonds, mutual funds, etc. The structure and taxation of the two IRA types are the distinguishing benefits each allows for a taxpayer. The IRS continues to close loopholes such as “back door” Roth IRA conversions and other planning opportunities. 

To maximize your opportunities for most challenges in life, it is always an innovative idea to allocate your investments between qualified and nonqualified accounts. Qualified accounts such as IRAs and 401(k) plans are generally taxable upon distribution of the assets to the owner. However, nonqualified accounts such as transfer on death accounts and joint accounts pay taxes during the growth of the assets. When you wish to retire, the type of account may play heavily in your financial plan design.

IRAs are tremendous tools for tax planning. Don’t assume that you simply invest in the IRA every April to save taxes. There are so many other uses of IRAs for estate planning, gifting and lifetime income planning that are often overlooked. As retirement planning experts, we have witnessed a tremendous number of people who fail to maximize the benefits of IRAs. 

Proper allocation of your assets is necessary to stage a retirement plan that will serve you well in life. Seek out the assistance of a CERTIFIED FINANCIAL PLANNERTM professional to help you plan for the future that you wish to achieve. Remember, when you fail to plan, you plan to fail. Be the exception. Take a pragmatic approach to your lifetime of income and enjoy the best of life on your terms. See you on the walking trail! 

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