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Archives for July 2019

Get on the same page as your spouse

Have you ever had a disagreement with your husband, or wife about money?

Have you ever bickered about a big financial decision, or your investments?

Money is the #1 issue that couples fight about.

It’s the elephant in the room that could create even bigger problems!

Below are 5 critical questions that every couple must answer to get on the same page.

How will you spend your money in retirement?

You may have one thing in mind, but your spouse has another. This can be dangerous. What do you plan to do as a couple? What do you plan to do on your own? Figure this out now, before it’s too late.

Make a detailed budget, and stick with it. What money is coming in, and what is going out? How much income do you have versus savings.

Remember, one will live longer than the other, and is likely to have steep health care costs later in life. Take everything into account.

How much risk are you willing to take?

Asset allocation/diversification remains to be one of the critical pillars of retirement planning. A properly diversified portfolio – one that mirrors your appetite for risk – could help protect you in any kind of market downturn.

Are you on the same page with your spouse about how much risk you should be taking? This is a trouble spot with nearly every new couple we meet. They have different ideas on how they should be invested.

Show me someone who got crushed in the 2008 financial crisis, and I’ll show you someone who didn’t have a diversified portfolio.

Most clients we see are in one of two camps … they’re either taking on far more risk than they realize, or they’re taking on far more risk than they need to at this stage of the game. Is potential upside that’s left in the stock market worth the downside risk?

How will you claim your social security benefits (with both of you in mind)?

Social security remains to be one of the critical pillars of retirement planning. This is the foundation of your income plan.

DON’T claim your benefits without considering survivor and spousal benefits. The rules have changed for how and when you can use these strategies to your benefit. And you could make an irreversible mistake if you don’t know what you’re doing. The only way to know for sure is with a social security analysis. Because every couple’s situation is different.

Most Americans take their social security benefits at face value. And they wind up leaving tens of thousands, if not hundreds of thousands of dollars on the table.

The questions as to how or when to claim your benefits is more complicated than you think. This decision could trigger an avalanche of unexpected taxes, and send your Medicare premiums through the roof. It could also cause you to forfeit additional benefits that are rightfully yours. So the money you were counting on to help support you in retirement, could be a fraction of what you thought it was going to be.

What are your life expectancies, and how do you plan for that?

Today, people are living well into their 80’s and 90’s. And it’s not uncommon to know of someone who is 100+ years old. In fact, some seniors aren’t just surviving in their older years, they’re thriving. And the statistics keep improving every year.

The longer you live means the longer you have to make your money last in retirement. And women live longer than men, so your plan should take that into account.

Today, there are more than 300,000 “centenarians” in the world. And that number is projected to grow to 2.2 MILLION by the year 20-50. Which is just 30 years from now.

Women live longer than men. In fact, 85% of centenarians … are women! And because of this, 90% of women will be solely responsible for their own finances at the end of their lives.

How will you pay for health care (and long term care)?

Don’t forget about healthcare and long-term care

You need to ensure that a health issue with you or your spouse, doesn’t turn into a financial catastrophe.

According to different sources, a typical 65-year-old couple can expect to spend North of $250,000 on healthcare and medical expenses in retirement (that’s not covered by Medicare)

Don’t think you’ll need long term care? According to Forbes, “Nearly 70% of all people who live to age 65 will require some form of long-term care … (and the expense is staggering!

Couples ought to think and plan for retirement differently than single folks do. By making retirement decisions with a joint outcome in mind, money can last longer and both spouses can look forward to a more secure retirement.

Don’t let these 4 tax traps ruin your retirement

Most people are focused on their investment returns, but they’re ignoring the one thing that could have an even bigger impact on their nest egg.


Taxes.

Taxes will likely be your biggest expense in retirement. Below are 4 retirement tax traps you should get in front of before you start planning that retirement party.

Retirement Tax Trap #1: Claiming Social Security could trigger higher taxes.

Claiming your Social Security benefits could be one of the most important financial decisions of your life. How and when you claim Social Security could impact far more than just the amount of your benefits check. It could also trigger paying taxes on as much as 85% of your benefits.

Don’t make your decision solely based on maximizing your benefits. Instead, consider how it could impact your taxes, Medicare premiums and spousal benefits.

Retirement Tax Trap #2: Taxes on your IRA, 401K (and other retirement accounts)

Contributing money to your IRA and 401K is easy. But withdrawing this money in retirement is complicated and confusing.

Remember, you must pay taxes when you withdraw this money in retirement. And Required Minimum Distributions will further complicate matters. When you turn 70 ½, “RMD’s” force you to start withdrawing money from these accounts, whether you want to or not. And this could result in paying more and more taxes every year

The key is to create a strategy for RMD’s in your late 50’s or early 60’s.

Retirement Tax Trap #3: Not having tax diversification

According to Kiplinger Magazine, “For the average individual, diversification has always focused on equities, and equities alone. And that’s a problem.”

Your money should be invested in different categories to diversify your tax risk.

Most financial accounts fall into 3 categories: taxed always, taxed later and taxed rarely. If you have too many eggs in one basket, it could spell serious financial trouble in retirement.

Retirement Tax Trap #4: Not switching to a ROTH IRA or 401K

An IRA or 401K allow tax-free contributions. But you must pay taxes when you withdraw this money in retirement unless you convert some, or all your traditional IRA or 401K to a ROTH.

A ROTH IRA or 401K doesn’t allow tax-free contributions (that’s the catch), but you pay zero taxes when you withdraw money in retirement. ROTH accounts are not subject to RMDs either. That means you get tax-free growth, which could add up to tens of thousands of dollars in retirement (possibly more).

Meet with a qualified financial advisor to see if you should convert your IRA or 401 to a ROTH.

Summary

The good news is you have more control over how much you pay in taxes in retirement, than any other time of your life. But this doesn’t automatically happen. It requires a forward-looking tax plan.

Danielle Christensen

Paraplanner

Danielle is dedicated to serving clients to achieve their retirement goals. As a Paraplanner, Danielle helps the advisors with the administrative side of preparing and documenting meetings. She is a graduate of the College of St. Benedict, with a degree in Business Administration and began working with Secured Retirement in May of 2023.

Danielle is a lifelong Minnesotan and currently resides in Farmington with her boyfriend and their senior rescue pittie/American Bulldog mix, Tukka.  In her free time, Danielle enjoys attending concerts and traveling. She is also an avid fan of the Minnesota Wild and loves to be at as many games as possible during the season!