Financial Planning - Archive

HOW TO SPRING CLEAN FOR A BETTER FINANCIAL LIFE

Financial Planner · Mar 12, 2021 ·

Simple & Powerful Ways to Declutter Your Financial Life — Simple & Powerful Ways to De-clutter Your Financial Life

Clutter is a common annoyance, especially in a busy household. But did you know it sneaks up in your financial life as well? And that it can also cost you money?

“Financial clutter” is distracting, and it makes it hard to see the progress you’re making toward your financial goals. It can even hide problems until they become big and urgent. Clutter doesn’t appear out of nowhere. It grows over time, adding another layer of stress to our already busy lives. The solution is simple: Get rid of the clutter. While it may not sound glamorous, it doesn’t have to be tedious or painstaking.

But it does need to be done from time to time because clutter won’t go away by itself. And the results are well worth the effort. Getting started is easier than you might think. If you focus on a few key financial areas as part of your spring cleaning, a little bit of tidying up can go a long way toward eliminating clutter. It can also help you refocus and put you in a better frame of mind when it’s time to make important financial choices. Here’s where to begin…

7 Simple & Powerful Ways to De-clutter Your Financial Life

1.) Organize Your Documents & Accounts

Have piles of statements or documents piling up? Go through them and decide: Can I set up paperless statements or billing to reduce the clutter? Do I actually need to keep this? If so, back it up digitally and file it away. Shred everything else.

Next, review your accounts. Do you have bank, credit, or other accounts you haven’t used in months? If you’re paying fees for those, consider closing them (if doing so wouldn’t ding your credit score).

2.) Review Your Beneficiaries

We recommend reviewing your beneficiaries and estate documents regularly so that you can make sure the people, trusts, and institutions you have listed still represent your wishes. If you don’t already, we strongly recommend naming a second or contingent beneficiary or representative in case the primary is unable to step in or inherit assets.

3.) Update Your Subscriptions

Digital clutter can be just as stressful as physical clutter. And our inboxes are usually ground zero for the digital clutter we have to face daily. If your inbox is overflowing, identify any listserv, subscription, or promotional messages you haven’t opened in a couple of months and unsubscribe from them. (Tip: search for “unsubscribe” to identify promotional messages.) As you do this, organize and/or archive any emails you need to save. Also, take a look at your other subscriptions. Review the ones you have for software, magazines, memberships, or other items. Cancel the ones you don’t need or use.

4.) Go Over Your Insurance Policies

When’s the last time you reviewed your policies? Life, health, and disability policies often get regular attention, but your auto, homeowner’s, and other policies need review as well. For example, are you driving as much this year? If not, you might qualify for a better rate on your auto policy. Make some big purchases or upgrades? You’ll want to update your personal property inventory and maybe review your homeowner’s coverage.

5.) Reconsider Your Tax Withholding’s

Don’t let the wrong withholding give Uncle Sam a free loan or set you up for a surprise tax bill! Take a fresh look at your withholdings, and think about changes in your family, income, and/or assets over the past year. Also, consider any changes you may be planning in these areas this year. All of these can be good reasons to update your tax withholdings.

6.) Automate Your Savings

Haven’t reviewed your savings in a while? Now’s the time. When you have subscriptions that are auto-drafted, it’s easy to forget about them and spend more than you intended. On the flip side, automatic deposits into your savings make it easy to save more with less effort. Explore the options available from your financial institution. Transfers can be set aside from direct deposits or as recurring events at any frequency. You can even set up round-up deposits, so you are contributing to your savings with every purchase you make. As you consider the options, think about what you need to put away for future plans, upcoming tax bills, and the unexpected rainy days.

7.) Check in on Your Financial Goals

Financial spring cleaning isn’t just about removing clutter and setting up systems. It’s also about restoring clarity and reconnecting with the purpose of your financial life. Take some time to revisit and reflect on your financial goals and how they connect to your values. Are you still working toward the same dreams? Do you need to update them or add new ones? Be sure to celebrate your progress!

7.) Check in on Your Financial Goals

Financial Lesson:

When You Get Rid of the Clutter, You Make Space to Enrich Your Financial Life Few of us have our financial lives in perfect order. Even if we get close or we do achieve it, perfect order is never a finish line. It’s a moving target — because life isn’t static. That’s why we have to maintain our financial lives to sustain and enrich them. If we don’t, financial clutter can build up as quickly as the papers on our desks. It can cost us money, expose us to risk, and stall the progress we want to make toward our financial goals. Some simple spring cleaning can put an end to that. It provides an opportunity to examine key parts of our financial lives so we can tidy them up before they get messy. It also helps us avoid overwhelm by giving us a framework to check-in, reorganize, and make important adjustments to support our evolving needs and long-term objectives. This sets us up to be proactive and establish good financial habits. It also gives us new clarity and real control over the trajectory of our financial futures. And the power of financial spring cleaning isn’t limited to your personal finances. It can extend to businesses, philanthropy, relationships, and beyond.

What Should You Do With Your Old 401(k) or Employer Plan?

Financial Planner · Jan 28, 2021 ·

FREE Guide Reveals 5 Options for Old 401(k), 403(b), and some 457 Plans

What Should You Do With Your Old 401(k) or Employer Plan?

This FREE Guide will help you get crystal clear on which of these 5 options is right for you and the steps you should take next. Inside, you’ll discover:

The 5 options for handling your old employer plan (and what to do next)
The critical steps to avoid a surprise tax bill or accidentally making your account permanently taxable
The pros and cons of each strategy to help you make the right choice for you

“You have to make a critical decision… because if you make a mistake… you could inadvertently end up with a surprise tax bill and lose the power of tax-deferred growth… After you’re done reading this guide, you’ll decide which of these 5 strategies makes the most sense for your old retirement plan and how you can take the first steps that are right for you.”

What Should You Do With Your Old 401(k) or Employer Plan? — “You have to make a critical decision… because if you make a mistake… you could inadvertently end up with a surprise tax bill and lose the power of tax-deferred growth… After you’re done reading this guide, you’ll decide which of these 5 strategies makes the most sense for your old retirement plan and how you can take the first steps that are right for you.”

5 Powerful Ways to Set Authentic Financial Goals In Uncertain Times

Financial Planner · Jan 26, 2021 ·

What is your biggest obstacle to achieving your goals in 2021?

It’s not a lack of time or bad timing. It’s not age, ability, or finances. And it’s not even the coronavirus.

Believe it or not, research says it’s you.¹

In fact, most of us trip ourselves up when it comes to achieving our goals. That includes New Year’s resolutions.²

Even when we have the best intentions, we can get in the way of our own progress.

And that’s far more likely to happen during times of uncertainty.³

That’s when we tend to stagnate. We avoid long-term plans and push pause on our big goals. And we become paralyzed by uncertainty. Sometimes, that means we simply give up on setting goals entirely.⁴

And, yet, New Year’s goals help us.

They give us a sense of control and keep us grounded in unpredictable times. And they can help us cope with uncertainty and motivate us to keep trying to improve parts of our lives.⁵

So, how do you overcome uncertainty paralysis? How do you set goals when everything feels so up in the air?

With a handful of simple, powerful principles that can help you set the right goals and expectations.

If you can use these principles as you set and pursue your goals, you’ll be able to choose better goals that are within your power to achieve. You can also discover new paths to progress — even during the most chaotic times.

Click here to read more >

THE 6 “HIDDEN” TAX SAVING OPPORTUNITIES OPENED UP BY NEW TAX RULES

Financial Planner · Nov 17, 2020 ·

The Tax Cut and Jobs Act (TCJA) passed at the end of 2017 and the SECURE (Setting Every Community Up for Retirement Enhancement) Act passed at the end of 2019 radically changed your tax picture.

Most Americans are going to pay less in taxes under the tax brackets, and a few are going to use this great opportunity to permanently lower the taxes they pay. The COVID-19 pandemic and relief acts also spurred new tax wrinkles you should know about.

I want to emphasize that this is a limited opportunity. The 2017 rules are scheduled to expire in 2025 (if they don’t disappear sooner under a new administration), and most taxpayers will see a tax hike.

However, this sneaky IRS move means you’ll probably pay more in taxes even before they expire. To reduce the impact of the new tax laws on government revenue, the IRS changed how it increases things like thresholds, deductions, and credits for inflation.3It sounds like a minor procedural move, but it’s actually a big deal. In plain English, this change means that many taxpayers will “creep” into higher tax brackets as their incomes grow because the tax brackets themselves won’t increase as much as they used to for inflation.

Bottom line: many taxpayers will pay more in taxes over the next few years due to this hidden tax increase. It might be only a few hundred dollars every year, but over time, even small tax increases add up! Unless you take steps now to reduce your taxable income. The current tax rates might be the lowest you’ll see for the rest of your life, and I want you to make the most of them.

All 6 opportunities in this guide are actions you can take right now to potentially lower your taxes this year and in the years to come. I strongly recommend that you take this list, along with your tax return, to your CPA and financial adviser to see which tax reduction opportunities have opened up for you.

Borrowing From Your Retirement Plan: New CARES Act Rules

Financial Planner · Sep 28, 2020 ·

It’s been nearly half a year since Americans first became widely aware of the Coronavirus contagion within the United States. For a short month, it looked as if we had the virus in hand; since then, it has spread wildly out of control in many areas.

In late March, Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act). This bill offered provisions related to distributions from retirement accounts such as an IRA or 401(k). One of the key goals was to enable workers to make penalty-free withdrawals from a retirement plan to sustain them while out of work due to the Coronavirus.

Borrowing From Your Retirement Plan: New CARES Act Rules

To be eligible to make penalty-free withdrawals, plan participants must meet one of the following criteria:

The account owner, spouse, or a dependent is diagnosed with COVID-19
The account owner experiences one of the following financial consequences due to the virus:
Furloughed
Laid-off
Work hours reduced or place of business closed (including for self-employed)
No access to childcare
Quarantined

The Act stipulates that workers can self-certify that they meet at least one of the criteria. Be aware, however, that if it is later discovered that the account owner did not meet the criteria for a coronavirus-related distribution, he might be required to pay the early withdrawal penalty.

Also, while this penalty is waived for qualified workers, they must still pay income taxes on the amount withdrawn. However, there are a few ways to mitigate the income tax burden on those withdrawals. The first is to through regular distribution. These are the parameters:

You have up until December 30, 2020, to make a distribution
The total aggregate limit is $100,000 from all plans and IRAs
The distribution waives the 20 percent income tax withholding requirement
Income taxes will be due when filing a 2020 tax return
Retirement account owners who no longer work for an employer are free to take a distribution
Current employees may take a distribution only if the employer plan allows for a hardship or in-service distribution (note that the CARES Act permits employers to amend plan documents to allow coronavirus-related distributions)

While a retirement plan distribution does trigger income taxes for the tax year withdrawn, you can spread the tax burden out over three years. For example, let’s say you withdraw $18,000 this year. You may report the full amount as income on your 2020 tax return; or you can claim $6,000 a year on your 2020, 2021 and 2022 returns. This strategy reduces the chances of bumping your income into a higher tax bracket.

The second way to is to pay the distributed amount back into your retirement plan. Initially, you will have to pay income taxes on the amount withdrawn. However, if you pay it back within three years, you can file to get the taxes you paid refunded. One caveat with this plan is that eligible retirement plans will treat repayment of this type of distribution as a rollover event for tax purposes. Be aware that if the retirement plan does not accept rollover contributions, it is not required to change its terms for this purpose.

Your third option is to withdraw money as a loan if your employer permits loans from the retirement plan. This is another scenario in which you must repay that money within a specified time period. You do not have to pay income taxes on loan, but you do have to pay interest on the amount borrowed. The good news is that the interest you pay also goes into your account.

Under normal circumstances, retirement account loans are limited to $50,000 or 50 percent of the account balance, whichever is less. But for a coronavirus loan, you may borrow up to 100 percent of your vested balance or $100,000, whichever is less. You will need to repay that loan within the plan’s stated repayment period, although the CARES Act gives 2020 borrowers an additional year to repay this type of loan from an eligible retirement plan. Be aware, though, that you’ll owe both income taxes on the outstanding balance and the penalty for withdrawals made before age 59½ if you do not repay that loan in time.

Note that these CARES Act provisions are available only for the first 180 days after the Act was passed, which was on March 27, 2020. As Congress debates new legislation to aid struggling Americans suffering from the pandemic, this provision could be extended.