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4 Tax Tips for Retirees

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Whether you’re just easing out of the workforce or you’ve been in retirement for a few years now, making the right financial moves is critical. You’ve worked your whole life to enjoy your retirement here at the Jersey Shore.  It’s important to stay on track with these tax tips. If you’re working with an advisor or taking a look at your finances yourself, one central goal during retirement is protecting your wealth from unnecessary taxes.

Below we’ll explain four tax tips you can utilize throughout the year to help minimize your tax obligations in retirement.
Tip #1: Take Your Required Minimum Distributions (RMDs)

First, it’s important to note that as part of the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, passed on March 27th, 2020, RMDs are not required for the remainder of 2020.

However, with 2020 wrapping up, it’s worth going over the RMD rules for 2021 purposes.

An RMD is an amount that must be withdrawn from your retirement account. These required withdrawals begin when you, the retirement plan account owner, reach age 72. The rules apply to employer-sponsored retirement plans, traditional IRA plans and Roth 401(k) accounts.  These RMD rules do NOT apply to a Roth IRA.

If your IRA custodian or retirement plan administrator doesn’t calculate your RMD for you – it’s on YOU to do it. To find out what your RMD is, the IRS provides life expectancy tables to utilize according to your circumstances. If you do not withdraw the RMD (or the correct amount), the amount not withdrawn will be taxed at 50 percent, which is why it’s critical to take your RMDs and withdraw the correct amount.

Tip #2: Manage Your Retirement Income 

Social Security will likely account for a portion of your income in retirement. However, not all of your benefits are taxable, and there are ways to minimize or, at times, eliminate taxes on your Social Security benefits.

Rules regarding Social Security income taxes also vary from state to state, so always check with your state regulations to determine the best solution for you. What works for you here in Monmouth County may not work for a retiree outside of New Jersey.

It’s also important to manage your investment accounts properly for tax purposes.  Drawing down accounts in the right order can help reduce your tax bills during retirement.  A financial planner can help create a retirement income plan to determine where to draw from first.

Tip #3: Pay Your Quarterly Taxes (IF NEEDED) 

If you don’t have taxes withheld automatically, you may need to pay estimated tax payments. Individuals who are expected to owe $1,000 or more – or those whose withholding and refundable credits are 1) less than 90 percent of the tax owed or 2) at least 100 percent of the tax on the previous year’s return – must pay estimated tax.

In some cases, you might decide to pay quarterly taxes, even if you are not required to, in an effort to avoid the inconvenience of paying a large sum all at once. If you miss a payment or underpay, you may be charged a penalty.

Tip #4: Get to Know State Tax Laws Where You Plan to Retire

If you’re relocating to a new state during retirement, consider the impact of the move on your financial situation. Retirement here in Spring Lake, NJ would look different than retirement in Miami, FL.  Retiring here at the Jersey Shore would be different from a tax perspective than retiring in New Hampshire. Florida and New Hampshire don’t tax on income or only tax on dividends and interest. On the other hand, they may have higher property taxes. In addition to nicer weather or a more serene lifestyle, you might decide to move to a new state in an effort to save on taxes.

Once you stop working, most folks are operating on a finite amount of money in retirement.  It’s crucial to make the right financial decisions in retirement.  Having a plan for your retirement income taxes can help make your money last longer.  If you need help creating a retirement tax plan, we’d be happy to speak with you.  Click this link to schedule an initial call with our team!

 

How to Make Your Financial Goals a Reality

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In last week’s blog post we helped you outline some general financial goals for 2021.  Now that you’ve set your goals, how you do actually stick with them?  Far too often, whether it’s a personal or financial goal, goals in the new year are left stranded by mid-February.  Financial progress isn’t made overnight, so it’s crucial to find ways to stay on top of your goals each year. Building off of last week, we’ve outlined 4 ways for you to stay on track with your 2021 financial goals.

4 Tips to Help You Keep Your 2021 Financial Goals:

Come Up with A Specific Plan

Having a well thought out, specific plan really is the best way to accomplish your goals.  Loosely defined, ambiguous goals are hard to stick with because they’re hard to measure progress. It’s important to not only have goals, but to have a plan of attack in place as well.

Whether it’s fitness or financial goals, it all starts with a strategic plan. You don’t need to wait for the new year to start this process, but the turn of the calendar is as good a time as any to get going. Set clear goals and a timeline for how you are going to achieve them. Starting with a plan helps hold you accountable.

Enjoy the Process 

Who said that sticking to your financial goals couldn’t be fun? Make it fun to stick to your plan! Maybe you could find a family member or friend looking to tackle financial goals together.  It would make things more enjoyable and establish a stronger sense of accountability.

Having clear, specific, measurable goals also allows you to build in small rewards along the way.  Reach a new financial milestone?  Reward yourself a little bit!  Now obviously don’t get carried away with the rewards, but just enough to add a little extra motivation.

Track Your Progress 

If you’re not tracking your progress along the way, how are you supposed to know if you’re getting close to accomplishing your goals?  It’s easy to lose track of your ultimate goal if you don’t actively track what you’re doing.

Luckily, in 2020, there are plenty of ways to keep track!  Personal finance apps can help you track your spending/savings habits, or even go the old fashioned way and use a notebook.  Tracking your progress will help you see progress in real time, keep you motivated, hold yourself accountable, and provide a way to reflect back on the process once it’s all said and done.

Create a Support System 

Find a few trustworthy friends and family members that can help by holding you accountable. This is an essential part of maintaining your financial progress. If friends and family see that you are struggling to stay true to your resolutions, they can interfere and help you get back on track so that you can achieve your goals.

Keeping, and reaching, a goal in the new year is possible! Don’t let your new financial goals for 2021 fall by the wayside like so many other resolutions.  Don’t let your financial goals become that unused gym membership in February.  Use these easy tactics to help keep yourself on track.  You’ll be thankful that you did.

If you have yet to set your financial goals and need help, we’d be happy to sit down with you!  Working with a financial planner can make goal setting much less intimidating.  We can work with you to set up a manageable plan of attack to help make 2021 your best year yet!  Click here to schedule an initial call with our team.

How to Simplify Your Financial Life

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Retirement isn’t something that materializes overnight.  We spend a large amount of time preparing for it, but the worry and anxiety doesn’t automatically disappear. Taking an active role in an attempt to simplify your financial life is crucial to a happy retirement.

Unfortunately, a lot of retirees have financial regrets later in life.  About 70% of Baby Boomers wish they had saved more or started saving earlier in life. In a survey by the Insured Retirement Institute, more than half of the respondents said Social Security was a must for them in order to sustain their lifestyle past their working years.  Getting a head start on retirement saving can lessen the reliance on Social Security in retirement.

However, all hope is not lost. The Center for Retirement Research at Boston College reports that the average retirement age has decreased thanks to a higher life expectancy, more education, less laborious jobs and more. So, while Baby Boomers may not feel very confident about their retirement, newer generations may have a bit of a brighter outlook when it comes to reaping the benefits of all their hard work through the years.

There is enough going on in your life near retirement and trying to make sense of your financial assets shouldn’t be one of them.  There are ways to keep things simple, or at least make them MORE simplified than how they currently are.  When it comes to retirement planning, the KISS (Keep It Simple Stupid) method is the way to go.  Here are a few ways to make sure your retirement in financially as simple as it can be.

Consolidate as Much as Possible

Are you one of those people who has three different bank accounts, two different IRA’s, a few old 401(k)’s and some other accounts that you’re entirely sure what they are or where they came from?  Well if so, you’re not alone, but it’s time to consolidate.

By picking one institution to hold all your assets, you make it a lot easier for yourself to keep track of your resources. If you can, consolidate your accounts to just one checking and savings account, which requires selecting one main credit card to carry in your wallet. Having trouble deciding which one to keep? A good rule of thumb is to choose the credit card you have had the longest since you’ll have most likely built up the most credit.

Finding just one financial professional to manage everything for you in one place is another way to consolidate your financial life. With fewer usernames and passwords to remember and fewer statements to organize every month, these steps can help you keep everything under control as you transition to retirement.

Go Automatic and Paperless

The beauty of technology today is that you don’t have to worry if you paid your credit card bill this month.  You don’t have to worry if you paid your utility bill this month.  Automatic payments make it easier to stay up to date on any type of payment you might have.

Another great piece of technology is the ability to go paperless for pretty much every account out there.  If you have one financial professional (see above), having all of your financial statements in one place, ready to view at any time, makes it much easier to stay organized. You’ll still get a notification every month once your payment and statement are ready, and you can easily download your statement right to your computer if you prefer to have your own copy saved for easy access.

By not having to constantly organize and shred paper, you’ll free up more time to enjoy other things in your retirement, like spending time with your family, pursuing a new passion and working on abandoned home projects. Less clutter will naturally make you feel more organized and in control of your financial future moving forward.

Focus on What Brings the Most Value

In 2020, we live in a “subscription” lifestyle.  One downside of automating payments is potentially losing sight of what you’re still paying for.  Keeping an eye on which subscriptions you actually use and enjoy is another way to consolidate expenses and simplify your life.  The same can be said for insurance policies.  As you approach retirement, some insurance policies may not be appropriate for your situation anymore.  It’s important to review your policies.  A financial planner can help make these assessments for you.

Being cognizant of what you’re paying for a monthly basis can really add up over time.  Saving a few bucks here and there can give you the ability to better allocate those dollars to things you truly care about.

Small Steps Lead to Less Stress

Simplifying your financial life isn’t just on the physical balance sheet either.  It’s also a mental battle too.  Keeping things simple also means focusing on things you can control.  There is a lot that goes on that is out of our control.  In retirement, focusing on what is within your power is one way to keep things simple.  We all deserve to enjoy a nice, simple, stress-free retirement.  Getting bogged down in things outside of our control is unnecessary worry and stress.

There are a handful of other ways to keep your financial life simple as you go into retirement.  Working with a financial planner can help you identify all the different ways to make the most of your retirement.  Having a plan will ease financial stress and make sure you’re as ready as you can be!  If you don’t have a financial planner, we’d be happy to speak with you.  Click here to schedule an initial call with our team.

4 Surprises in Retirement

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Retirement is a big chapter in your life and is the reward for a lifetime of hard work. What do you plan on doing during your retirement?  If you’re here at the Jersey Shore it could mean more time at the beach.  For a lot of folks, it means more time to travel the world and spend more time with family. Retirement can be an exciting and validating time. However, it’s impossible to plan for EVERY twist and turn retirement can throw you.  With retirements lasting over 30 years nowadays, it’s expected to have some surprises along the way. Here are a few “common” surprises many people experience during their retirement:

Even in Retirement Your Home Will Be a Large Expense

Paying off your mortgage can be a great feeling. While your plans for retirement may be paying off your mortgage and using those additional funds to put towards your travel plans, taking trips to see loved ones, and fulfilling lifelong dreams, your housing will still be one of the largest expenses you will have to worry about during retirement. The upkeep on your home and increasing taxes can still take up a large chunk of your monthly budget. As any homeowner would know, there’s ALWAYS another project that requires your attention (and money) popping up around the house. There are certainly those who manage to keep housing costs down, but for many people it’s still a big-ticket item in their monthly budget.

Healthcare Costs Can Be Massive and Take You By Surprise

One of the largest expenses retirees will face in their later years is healthcare costs. This can account for up to an average of over a quarter of a million dollars. Those with major health problems will incur even more. Ways to help reduce this cost include health savings accounts and trying to stay as healthy and active as possible. Retirees should plan to have money earmarked for healthcare costs each year.  Working with a financial planner can help you create a plan for healthcare both before AND during retirement.  This isn’t something you want to leave to chance.

You Will Likely Continue to Work In Some Capacity

The traditional “retirement” has changed over the years.  Where it used to mean someone stops working completely, it can have many different meanings today.  Many people will continue to work into their retirement, but the type of work will often change. Some will use their retirement to launch a new type of career, some will work to pay for unexpected expenses, and some will work as a way to simply keep busy and meet new people. This is also the time when many people will volunteer for causes that they wish to support.

Your retirement should look the way YOU want it to.  If you want to take on part-time work, go for it.  If you want to never work another day in your life, go for it!  These decisions are all up to you, BUT whatever decision you make – PLAN FOR IT.

Retirement Can Last Longer Than Expected

The average retirement age used to be calculated based on life expectancy with most people assuming that they will be retired for around 15 years. With improved healthcare and advancement in medical technology, many people are actually living longer than the national average. As we’ve said in videos, podcasts, and other blog posts – retirement today can last some people upwards of 30+ years.  That’s a LONG time!  The financial plan needs to reflect that possibility and strategies change drastically when you’re planning for 30 years instead of 10-15 years.  Be sure that your retirement projections are adequate for a number of different possibilities.  Again, this is where working with a trusted financial planner really is valuable.

You can try and minimize the unexpected surprises. Expect the unexpected and plan for the items listed above to give you the best start at creating the retired life you always dreamed of. If you’re worried about the unknown of retirement, or if you’re prepared for retirement, get in touch with us.  We would be happy to help build you a financial plan and retirement plan that will help minimize any anxiety surrounding the next chapter of your life.  Click here to schedule an initial call with our team.  There is no cost or obligation involved!

 

The Stock Market & Presidential Elections

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The 2020 election has proven to be one of the more contentious elections in recent history.  However, that seems to be par for the course when it comes to elections.  “Contentious” is not a new adjective to describe Presidential elections.  From the political match-up of Jefferson v. Adams to this year’s Biden v. Trump, mud has always been slung, accusations have always been made and uncertainty seems to be everywhere.

The internet and social media have definitely changed how we consume information about the elections over the last handful of years.  Facebook posts, email blasts, TV ads, you name it – we are constantly being bombarded by political messages every day.  

Pair this with the fact that 2020 has been anything but ordinary, and you have an election year truly like no other.

Take the Emotions Out of Investing

Whether you’ve been guilty of it yourself or you’ve seen others take part, social media channels like Twitter and Facebook make it all too easy to share all kinds of information. This is true in any instance, but it can be especially effective when these posts are about political candidates.

The problem is, being inundated day in and day out with information about our country’s political future (especially information that’s alarming or scary) can take its toll on anyone watching or listening. You’ve already heard the predictions – “If Biden wins, the stock market is sure to tank.” Or, “If Trump gets re-elected, the stock market is sure to tank.” Whether it’s a pundit talking on television, or your co-worker in the break room, EVERYONE seems to have an opinion.  What does this mean for your investments?

As an investor, you have a few responsibilities here.  It’s important to try and make a conscious effort to drown out the noise on social media and financial TV. Think about YOUR personal financial goals and make sure to keep in regular contact with your investment advisor. He or she can offer the educated, unbiased advice you need to stay on track in the face of uncertainty.  Whether it’s a contentious election, a pandemic, or something else – there will always be something making headlines and moving the markets. As fiduciaries here at Mullooly Asset Management, we have a legal obligation to act in YOUR best interest.

Historical Stock Market Performance During Election Years

Just because the stock market has acted certain ways in the past does not guarantee it will continue to do so in the future. But as an investor, it may interest you to see how the stock market has performed historically during and after presidential elections years. Below we’ve charted out the S&P 500 returns since the 2000 election:  

Election YearPresidential Candidates Performance During Election Year Performance For Following Year 
2000Bush v. Gore-9.10%-11.89%
2004Bush v. Kerry+10.88%+4.91%
2008Obama v. McCain-37.0%+26.46%
2012Obama v. Romney+16.0%+15.06%
2016Trump v. Clinton+11.96%+21.83%

Additionally, below shows the S&P 500’s percentage of return during a president’s full term dating back to 1981. This information was gathered from YCharts and presented by Forbes:

President YearsS&P 500 Return
Donald J. Trump (R)2017-+43%
Barack H. Obama (D)2009-2017+182%
George W. Bush (R)2001-2009-40%
Bill J. Clinton (D)1993-2001+210%
George H.W. Bush (R)1989-1993+51%
Ronald W. Reagan (R)1981-1989+117%

There are so many differing factors that play into market performance.  Simply basing your long-term investment decision on which political party is in power is not a recommended strategy.  As you can see above, the stock market hasn’t cared if a Democrat or Republican is in control, and you shouldn’t either when it comes to your investments.

If the upcoming election has you worried about the future of your portfolio, take some time now to speak with your investment advisor or financial planner. They may be able to provide important insights into whether or not your investments are still aligned with your long-term goals.  If you don’t have an advisor, we would be happy to speak with you.  Click here to schedule an initial call with our team!

 

7 Steps to Financial Success

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Creating success in life, both financial and personal, is no stroke of luck.  We constantly talk about the process behind successful financial planning, and it can really apply to any aspect of life.  Whether you’re saving for retirement, working through a financial plan, hitting a new career milestone, or accomplishing a personal goal – there are a handful of steps along the way to help you get there.

Let’s take a look at seven steps to take on the path to success.

Visualize Your Future Goals

Instead of setting an abstract goal like “retire in my 50’s”, it can really help to try and visualize what you want your life to be like when you retire.  How did you get to that retirement date? What does your family situation look like? Where are you living?

Having specifics in mind while you visualize your future will make it easier to work towards those visualizations.  It will help you gain more clarity and this goal-setting process works as your framework towards a better future – both financially and personally.

Work Backwards From Your Goal 

When it comes to financial planning, setting specific goals is the key to success.  After all, how can you work towards a goal if you don’t know what the goal is?  Once those goals are in place, you can begin to reverse-engineer your career and personal life to help get you there.

Try setting quarterly goals or 90-day goals and evaluate them accordingly, while constantly reviewing them as you move forward. This will help you make short-term progress while keeping your eyes on long-term goals. Clearly outlining goals will make them seem much more realistic. It’s a good idea to have a mix of goals such as financial, strategic, relationship and personal goals.

Be Accountable

Easier said than done, we know.  This is where working with a financial planner can be really valuable.  A good planner will help keep you accountable for your financial goals.  Working with a life coach, or even just sharing your goals with others can provide a real incentive to continue on your path and work hard to achieve the outcome you desire. Additionally, consider surrounding yourself with others who will lift you up and share with them what you hope to do. Having like-minded people nearby will only make your day to day easier.

Have a Deadline 

Having a clear end game in mind is crucial to accomplishing your goals.  Without a set deadline, it becomes easier to procrastinate and push things further into the future. When the goal is realistic, you will feel more properly and emotionally invested in the outcome. It should feel challenging yet also achievable.

Write it Down

Studies show that we become 42% more likely to achieve our goals and dreams, simply by writing them down on a regular basis. This is something we stress here when it comes to financial planning goals for folks.  There is more of a personal commitment when you put pen to paper and physically write your goals down. Also, if something is written down, then you can look back for motivation when you need it.

Baby Steps

It’s great to have huge career goals and big life milestones you want to achieve.  However, these massive goals can seem overwhelming in the day to day.  Breaking down your big goals into smaller, more manageable goals will help you make significant progress.

When we build financial plans for clients, we always start at the base or foundation.  We work our way up through the basics to the very top.  The same should be done with your goals.  Start with step 1 and slowly work your way towards the top of your “goal pyramid” so to speak.

Work Towards Your Goals Every Day

Goal setting is very important in every aspect of your life.  Having financial goals is just as important as having family goals, personal goals, and career goals. What is the motivation or desire for why you set your goals? Think about:

  • Why do I want this?
  • How am I going to get there?
  • How will this make my life better?

Once you know the answer to these questions, it will really help you to strive for a stronger future and understand what you need to change to achieve your dreams.

It’s easy to get caught up in the daily grind of everyday life and put your dreams and goals on the backburner.  Try your hardest to not let that happen to you.  By following these basic steps, you’ll increase your chances of accomplishing a lot of what you wanted to in your life.

For your financial goals, if you feel overwhelmed and think you can’t do it alone – we’re here to help you!  Click this button to schedule a meeting with one of our team members and we’d be happy to help you on your way towards crushing your financial dreams!