It’s a new year again. For many, that means it’s once again time to assess life and identify areas for improvement. Of course, this period of reflection usually results in a list of resolutions or goals. Many people resolve to eat healthier or exercise more frequently. Others may focus on their education or career development. Some people may use this time to look at their house and plan out various home improvement projects for the coming year.
Financial goals are also a popular choice for New Year’s resolutions. The beginning of the year is the perfect time to analyze your financial situation and develop a list of action items. A regular annual financial checkup can help you stay on top of potential risks and on track to meet your biggest financial goals.
Feeling pressure to save more for retirement? You’re not alone. According to a study from Gallup, more than half of Americans are worried that they won’t have enough money to fund their retirement. In fact, Gallup has conducted a study on Americans’ top financial worries every year since 2000, and retirement has always been cited as the top concern.1
According to a separate study from the Economic Policy Institute, there’s good reason for the widespread concern about retirement. The study found that half of Americans have no retirement savings. The average savings balance is just over $95,000, but the median balance is only $5,000.2
Are you starting to think about your legacy and how you’ll pass it on to the next generation? It’s never fun to think about your own death. However, it’s too important to ignore. You may have a substantial amount of assets that you want to distribute to loved ones. You may have a spouse, children or other family members who are dependent on you for support. You might even own a business that could face hardship after your death.
All these issues require some level of estate planning. If you fail to develop a robust estate plan, you could leave your loved ones, business partners and others in a difficult financial situation.
Are you thinking about retiring early? Maybe you’ve accumulated enough savings to retire in your 50s. Or maybe you’re facing a health issue or job loss that’s pushing you into retirement. No matter the reason, early retirement can present a number of unique challenges.
One of the biggest issues that early retirees face is taking distributions from their qualified retirement accounts, such as IRAs and 401(k) plans. These accounts are tax-deferred, which means there are no taxes on growth as long as the funds stay inside the account. However, distributions may be taxed as income. Additionally, if you withdraw funds from a 401(k) or an IRA before age 59½, you could face a 10 percent early distribution penalty.
From the Desk of: Todd Gregory
Are you this type?
You always go for the better price…
It’s called “price protection,” a little known credit card perk which some credit cards offer. If you buy something and it goes on sale, you can call your credit card company--and they’ll refund you the difference.
So, if saving money appeals to you, and you own a Whole Life or a cash-value Life Insurance policy, read on….
Do you have a written plan that covers every aspect of your financial life? If your answer is no, you’re not alone. According to a study from the Certified Financial Planner Board of Standards, only 19 percent of Americans could be categorized as “comprehensive planners.” The remaining 81 percent may plan for specific goals or challenges, like retirement or debt management, but don’t have a comprehensive plan that pulls everything together.1
Certainly, some planning is better than none. If you lack a comprehensive financial plan, however, you could be missing out on opportunities and may be unaware of potential threats.
The different areas of your financial life are likely intertwined, so any planning that you implement in one area could affect another. For instance, your retirement planning could impact your estate planning. Your college savings for your children could impact your ability to save for retirement.
While the benefits are fairly straightforward, there are a few complexities to consider. With some advanced planning, you can further maximize the tax advantages of the Roth IRA for future generations. There are also some mistakes that could wipe out any potential tax benefits.
Are you one of the millions of Americans who have decided to use a Roth IRA to accumulate retirement assets? That may be a wise idea. The Roth IRA has a number of appealing features, including tax-deferred growth and tax-free distributions after age 59½.
Have you used a traditional IRA to save for retirement? You’re not alone. Traditional IRAs are among the most popular retirement savings vehicles. Much of their popularity is due to their unique tax treatment. You can deduct your IRA contributions, and all growth is tax-deferred as long as it stays in the account.
Of course, you can’t avoid taxes on your traditional IRA growth forever. Distributions from your traditional IRA are treated as taxable income. That means that in retirement, your traditional IRA income could create a tax liability and possibly even push you into a higher tax bracket.
Some people delay traditional IRA distributions to avoid the tax hit. However, the latest you can delay your distributions is to age 70½. At that point, you have to begin taking required minimum distributions (RMDs).
Are you approaching retirement? If so, you’re probably finalizing your plans and making sure you’re on solid financial ground. Retirement can be a major financial challenge, so it’s important to take any additional planning steps necessary while you’re still working.
However, you may want to focus your planning on more than just retirement. This is also a good time to review your estate plan. It’s possible that your life has changed since you initially established your estate planning documents. Maybe your plan doesn’t address every possible risk. Maybe you don’t have a plan at all.
Are you considering the purchase of a life insurance policy? Perhaps to provide protection for your spouse, children or other loved ones? Or possibly to support your estate planning and business planning goals?
Life insurance can be a powerful financial tool. If you have dependents, they can use your life insurance death benefit to overcome financial challenges in the aftermath of your death. You could leave a life insurance benefit to loved ones to help them fund their education or reach other major goals.