Four Powerful Steps To Take Control of Your Finances

Note from the author: Contribution limits have been updated to reflect 2024 limits. The other information in this blog post remains the same as the original post.

Between work, family, friends, hobbies, carving out space for yourself, and everything else going on in your life, it’s so easy to let your money fall to the wayside. 

  • How much did you spend on takeout this week? 
  • Did you invest your bonus check?
  • Are your expenses increasing with kids going back to school?
  • Have you purchased the insurance policy you’ve been eyeing?
  • Did you increase your 401(k) contributions?
  • Are you on the best health plan?

Sometimes handling your money can feel like going to the doctor; while it’s something you have to do, you likely put it off as long as possible. But just like your health, taking an active and engaged role in your money can help you get more out of the experience. 

Financial planning isn’t idle—it’s an active sport. Today, we’re going to show you four ways to reclaim control of your money and why doing so is empowering and freeing. 

Level-Up Your Investments

Investing is a critical part of achieving your financial goals, but are you making the most of your investment opportunities? Consider the following. 

Max Out Contributions to Retirement Accounts

Retirement is perhaps the most significant savings goal of your life, and as such, it’s vital to evaluate your current investments and find intentional ways to improve. For starters, aim to max out your retirement accounts, including your 401(k), IRA, and HSA, including catch-up contributions. For 2024, contribution limits are as follows:

  • $23,000 for your 401(k) with an extra $7,500 in catch-up contributions if you’re over 50.
  • $7,000 in an IRA with $1,000 in catch-ups over 50. 
  • $8,300 for family coverage and $4,150 for single coverage for your HSA. Catch-up contributions are a bit different, with $1,000 extra available for those over 55.

Even if you can’t reach these limits, contribute the maximum amount possible for your household. Trust us; you won’t regret stashing away a little more now to support your retirement lifestyle later.

Look Into An In-Sevice 401(k) Rollover.

If you have access to a 401(k), it’s likely where a majority of your retirement savings rest. But is that the best home for your hard-earned investments? 

Far too often, 401(k)s have limited investment options and come with higher administrative, fund, and management fees, all of which assuage your net returns. 

Some providers allow for in-service 401(k) rollovers, which essentially allows you to transfer all or a portion of your 401(k) funds to a traditional IRA while still working and actively contributing to the account. 

Why would you consider this strategy?

First, you wouldn’t have to pay taxes on the rollover. Since you fund both a 401(k) and traditional IRA with pre-tax dollars, you wouldn’t be responsible for taxes on the transfer. 

Next, IRAs offer a wealth of investment options. Such diversity can help broaden your allocations, increase diversification efforts, and minimize costs. Low-cost investing, like in ETFs, is vital for net returns. While fees will always be part of investing, it’s often best to actively minimize them and prioritize your total return. 

Finally, you have more control over your fund manager. With an in-service rollover, you can give your financial advisor access to manage your IRA. Doing so can help you, and your financial team builds your portfolio in ways that align with your risk tolerance and capacity, time horizon, and investment goals, something that’s just not possible to the same degree with a 401(k).

Consider a Roth Conversion

Roth IRAs are excellent long-term savings vehicles and can be a significant part of your retirement income plan. 

Why?

Tax-free withdrawals. 

Optimizing tax-free withdrawals in retirement brings more flexibility and control to your income plan. It can also help keep your tax liabilities at bay. Reducing your taxable income can influence your Medicare premiums, taxes on Social Security benefits, net investment income tax, among other things. 

Make too much to contribute to a Roth IRA directly? Fear not; a Roth conversion allows you to transfer all or a portion of your traditional IRA into a Roth IRA. While you’ll have to pay income tax on the conversion, utilizing this strategy could optimize your tax liability long-term. A Roth conversion may be proper for you if:

  • You’re experiencing a low-income year
  • You have extra cash to cover the tax bill from the conversion
  • You’re confident your tax bracket will be higher in the future

Put Your Cash To Work

The appropriate amount of cash in your portfolio depends on your unique needs, but in general, you shouldn’t have cash without a purpose. Sure, create your emergency fund. But you don’t need excess cash collecting dust in your savings account. 

Instead of earning less than a 1% return in your bank account, look at other ways to allocate your money to support long-term goals. Perhaps you can use some of it to save for your grandchild’s education, or maybe you want to give your retirement accounts a cash windfall. 

Take Advantage of Your Benefits Package—All of It

Fall is right around the corner, and with it comes open enrollment. Now is the time to ensure that you’re taking advantage of all the benefits your employer offers. 

  • Do you want to bump your payroll deferrals for your 401(k)?
  • Are you on the right insurance plan for your family? Keep in mind that you must be on a high-deductible health plan to contribute to a health savings account (HSA).
  • Have you elected for appropriate group insurance policies like life and disability coverage? Procuring the right insurance coverage for you depends on several factors. You may want to obtain individual policies for life insurance, even disability coverage if you plan on leaving your job or desire extra protection. 
  • Do you have access to stock options or deferred compensation plans? How can you make a proactive plan?
  • Does your employer offer tuition assistance or reimbursement for higher education? Maybe now is the time to pursue your much-desired MBA. 
  • Are you using all of your vacation days? Taking intentional time away from the office (yes, that also includes your email inbox) is essential.

Open enrollment is an excellent time to check items off your financial to-do list. It also sets you up nicely for the following year. 

Double Down on Debt Repayment

Debt is a double-edged sword. In some cases, it gives you the funds to pursue your goals like buying a house, expanding your business, getting an education, and more. 

But sometimes, it can hurt you, like pushing your credit card to its limit or buying something you can’t afford. 

Taking control of your money includes taking control of your debt. Re-examine your debt situation by walking through the following steps. 

  • Assess how much debt you have (including interest). List everything from mortgage to car payment to business loan to credit cards. Then, take a look at anything you’re having trouble with. Are your credit card bills higher than you’d like? How can you be more intentional about spending?
  • Create a consistent plan to pay it off. Determine how you can make additional payments toward your debt. Maybe you can forego takeout for a month to pay off your credit card, for example. 

Remember, debt comes in many forms. It’s essential to know the type of debt you have, so you can make a realistic plan to pay it off. A solid debt repayment strategy may even help you retire debt-free—a common yet highly elusive goal. 

Check-In On Your Goals

Your financial goals are the foundation for your financial plan. Knowing what you’re working towards better informs your saving, spending, investing, and giving habits. Take another look at your goals and determine how you can better use your resources to support them.

Evaluating your goals can also reenergize your momentum towards achieving them. If retirement is only five years away, that may get you thinking about all the things you want to accomplish before, like paying off your mortgage, creating an exit strategy for your business, crafting a plan for your lifestyle, among so many other things. 

Bonus: Work With A Coordinated Financial Team

Perhaps the best way to take control of your money is to partner with a trusted professional team. A financial advisor ensures that your money is working for you and helping you achieve your goals. 

At Legacy Wealth, we believe in a coordinated approach. Your finances comprise several moving parts—retirement, estate, taxes, and more. Our firm is unique in that we can offer all of these services under one roof. Now you can have confidence that each piece of your financial strategy is built to support the others. 

We believe there are too many silos in finance and our coordinated approach seeks to change that, providing you with confidence, clarity, and efficiency with your money.

Taking control of your money may seem intimidating, but it’s an empowering way to ensure your resources support your goals. If you’re ready to reimagine your financial experience, get in touch with us here to start your Legacy Wealth Advisors journey today. 

We can’t wait to serve you. 

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. 

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

/by

4 Home Upgrades Retirees Should Consider If They Want To Age-In-Place

Home sweet home. There’s really no plac

Home sweet home. There’s really no place like it—and 75% of people over 50 agree. Aging in place is a common goal for retirees, and it’s not too difficult to see why: comfort, familiarity, memories, community. 

But the reality of aging in place is often more comprehensive than locking the door and throwing away the key. 

Many people didn’t buy their homes with aging in mind. They bought it for proximity to family, a good school district, active community, among other things. 

In retirement, you should consider your new needs in a home. 

So if you’re set on staying put, here are a few upgrades to consider to help make the transition smoother. 

Make All Interior and Exterior Entrances ADA-Accessible

There may be a time when you need to use a wheelchair or a walker that your narrow Victorian or classic Colonial wouldn’t be able to accommodate. 

Consider adding a ramp to an entrance or exit to make for greater accessibility coming and going from your residence. Home Advisor found that the average cost for a professional ramp is about $2,000. If you have stairs to your front or back porch, you could also look at adding a rail. 

It might also be wise to widen some doorways and hallways to accommodate medical equipment like a wheelchair. To do this, doors should be 32 inches wide with a 36-inch clearance. Widening a hallway usually calls for massive interior work, which could cost you tens of thousands of dollars. Thankfully, new builds may have hallways built to accommodate wheelchairs. 

You could also look into swapping out the door knobs for door pulls, making for a smoother entrance into each room. 

Does your house have stairs? Ensure that you don’t need to access the upstairs for daily living like your main bedroom, bathroom, laundry room, etc. Limiting activity up and down the stairs will be vital as you age. You could always look into a stairlift, but those can be quite costly, about $3,000-$4000.  

Add Railings and Grab Bars To Prevent Fall Hazards 

According to the CDC, falls are the leading cause of injury-related deaths for those 65 and older. No house will be completely fall-proof, but it remains critical to safeguarding your home from this hazard. 

Consider concentrating your energy in wet spaces like the bathroom. Bathrooms can be narrow, dark, and damp: a breeding ground for falls. You could really hurt yourself, making it essential to focus attention on these rooms. 

Start by installing rails and grab bars near the water closet and the shower to offer more stability. Fixr estimates the average homeowner pays about $250 for a typical L-shaped bar rail.

You could also look to install a zero-entry shower. For example, these don’t have a big lip like stepping in and out of an antique clawfoot tub. 

An ADA-compliant bathroom remodel can cost anywhere from $1,000-$19,000 depending on all of the elements you want to include. It’s a big-ticket item, but one that may be worth exploring. 

Remodel With Accessibility In Mind

While some people have different thoughts about open concepts, “no walls” living could be a great accessible feature. 

Without walls, you aren’t crammed and have more space to maneuver the house freely. If the entry into the kitchen is small, for example, connecting it with your other rooms could make it easier to navigate.

Let’s take a look at other intentional remodeling ideas.

  • Create kitchen islands with proper clearance on all sides. 
  • Ensure some countertops are low enough to be a work/prep space.
  • Lower kitchen and/or bathroom sinks
  • Install light switches, fans, thermostats, and other power outlets low enough on the wall for better accessibility. 

Increase Home and Health Security 

Now could be a good time to consider investing in an alarm system for added home protection. You could also add outdoor sensor lights, entrance sensors, glass break sensors, outdoor cameras, and more, depending on the level of security you want or need. The upfront cost for a new security system tends to be a couple of hundred dollars, and the monthly fee will run about $30 on average.   

We believe it’s also prudent to have a plan for your health safety should something happen in your home. If you live alone, a service like Life Alert could be something to consider.

You can also look at hiring a home caregiver to come in weekly to help you with household tasks like laundry, cooking, and cleaning that can be hard on your body as you age.

Tips To Help Pay For It

Depending on the type of home you have, you may want to consider a light or an extensive remodel. 

How will you pay for it? There are several options. 

First, you can explore a home equity line of credit (HELOC). Tapping the equity you’ve built in your home may be an avenue for funding major renovations. 

Think about HELOCs like a credit card. The bank provides access to your home’s equity that you can use when you need it. At the time of this writing, many come with favorable terms like minimal closing costs and reasonable interest rates. 

You could also withdraw assets from a retirement portfolio to cover the costs. Keep in mind that you will be subject to income taxes on the distribution unless you are taking a qualified distribution from a Roth account. Depending on the final estimate, it might be too much to withdraw from your portfolio at one time safely.

Cash is another viable option. If your home requires minimal work, this could be an excellent way to keep your cash working for you. 

Before you sign on the dotted line, be sure to obtain quotes from several contractors. You could be surprised by the difference in cost.  

Age In Place With Safety In Mind

If aging in place is your goal, we believe it’s essential to first approach it from a safety lens. Several home improvements can bring function and safety to your forever home. 

You should consider using your money to further your goals, and our team would love to help you create a plan to do just that. If you would like to talk about adding a home remodel into your retirement plan, get in touch with our team today. 

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. 

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

/0 Comments/by

4 Key Reasons Retirees Keep Working (And 4 Reasons Why They Stop)

Retirement marks an important transition—one where many put in their notice and leave their current employer. 

But that doesn’t necessarily mean that retirees stop working altogether. As of 2023, 19% of adults over 65 were either working or looking for work as compared to roughly 10% 35 years earlier. 

Working in retirement can add several benefits, but there are also some compelling reasons why many retirees stick to their nest egg and leave their working days behind them. Today, we’ll take a look at the pros and cons of working in retirement and how to decide what’s right for you. 

Let’s dive in.

Top Considerations for a Retirement Career

For some, working in retirement makes their golden years that much sweeter. Dedicating time, resources, and energy to spaces that lift you up can enhance your retirement lifestyle. Below are some reasons why working in retirement can be beneficial. 

1. Establish Regular Routine  

You might have been looking forward to shaking up your routine in retirement—not getting up at the same time, having to be out the door early, and back home late. But routines, especially grounded ones, can be beneficial for new retirees. A routine can prevent listlessness, boredom, and dissatisfaction. A steady job (whether part-time or full-time) can bring the routine and stability you’re used to.

2. Find Fulfillment and Meaning

Working in retirement doesn’t mean that you have to stay at a job you dislike or even in the same field. In fact, it’s likely the opposite!

You might pursue a passion project, take on a regular volunteering gig, serve on the board of a community organization, or perhaps explore a new idea altogether. Spending your time on things you’re passionate about fills your life with purpose and meaning. 

Say you’re a retired music teacher and you want to start a community choir, or perhaps you’re artistic and want to open an artisan shop on Etsy or other online retailers. You might also consider consulting in your field of expertise. The list goes on and on. 

3. Create a New Community

Think about your typical work week routine. You likely came across several different people throughout your day: the barista in the morning, colleagues at work, friends you meet at the gym after your shift, etc. But when you retire, those connections may become much more challenging to sustain. 

This dramatic change in community is an issue many retirees face, which can lead to loneliness. Retirees with an enriching community are happier and healthier. Working, even if in a different capacity, gives you a built-in community of people. When you’re pursuing a project or work you love, then those people likely share similar values and goals, giving you a deeper sense of community.  

4. Added Financial Cushion 

Hopefully, when you retire you’ve reached your ideal number. But extra income could go a long way to furthering more of your lifestyle goals like travel, entertainment, and spoiling your grandkids. 

Your new employer may also offer health coverage, which gives you more options health-wise and rein in out-of-pocket health costs. Many retirees experience sticker shock once off a company’s health plan, so if you’re covered by another employer, that’s one less thing you need to spend money on. 

Earning income also means that you can keep saving in retirement accounts like an IRA. The SECURE Act made it possible for anyone who earns income to contribute, meaning you could continue to build your savings.  

Added income could also boost your Social Security benefits in the long run, since your benefit is based on lifetime earnings. As you can see, there are several ways that working can add to your retirement income plan and pad the bottom line. 

5. Bonus: Increased Activity

It can be challenging to stay active throughout your day. Working in retirement keeps new and seasoned retirees on their feet, strengthening their minds and bodies. Regular activity is critical in retirement because active retirees tend to be healthier, live longer, and are at a lower risk for major health issues like falling high blood pressure, or other chronic conditions.

Why Many Retirees Hang Up Their Hat for Good

Working in retirement isn’t for everyone. You might feel added pressure to bring in a certain amount each month and that can be overwhelming for a phase of your life that you’ve worked so hard to secure. Let’s take a look at the reasons why working in retirement isn’t right for everyone. 

1. You Don’t Need the Added Income. 

For retirees who’ve found financial freedom, the idea of working might not be appealing. If you’ve carefully curated your retirement number, created a cash-flow plan, and have your investments squared away, you may not want to spend extra time on another job. That’s okay! 

You deserve your retirement to be how you’ve planned (and saved) for it. Think through how you want to spend your time and where you’ll find your meaning and fulfillment. Maybe you’ll volunteer in the community garden, spend time with your grandkids, travel more, and really enjoy the life you’ve planned and earned.

2. You’re Worried About Reducing your Social Security Benefit 

When you collect Social Security has a significant impact on your monthly checks. Under traditional circumstances (if you’re not widowed, a qualified dependent, or disabled) you can collect as early as 62—with about a 30% benefit reduction. 

If you collect early and still work, your benefits might also be subject to more withholding via the earnings test. The Social Security Administration (SSA) sets a limit for how much money you can make in a given year and still collect benefits. In 2024, $1 is withheld for every $2 earned above $22,320. In the year you reach your full retirement age (FRA) $1 is withheld for every $3 earned above $59,520. 

Keep in mind that this money is just withheld, not permanently lost. Once you reach FRA, you’ll start to receive those benefits back. But it could present cash flow issues early on. 

Pro tip: Be mindful of your tax situation in retirement, and how added income could impact your tax bracket.

3. You Plan to Retire a Little Later 

Sometimes just working a couple of extra years can eliminate the need to work at all in your golden years. This can be a comfort to many who haven’t quite hit their ideal retirement number yet or who want to make work optional not a necessity. 

If you want to work longer to save up, consider the following:

  • Max out all your retirement accounts (401k, IRA, etc.)
  • Allocate more money to your brokerage account
  • Build up your emergency fund
  • Keep paying down debt. 

Let’s say that working another two years means you could retire at your desired number, debt-free. That is definitely a trade-off worth considering.

4. Life Forced Your Hand 

Not everyone retires because they want to or they’re ready. Health concerns, caring for aging parents, layoffs, and forced buyouts are all factors that push many workers in their mid-to-late 50s to retire earlier than planned.

If that’s the case for you, we have a trusted team to help you adjust your plan as needed. Between investments, insurance, savings, we’ll be able to help you come up with a plan that’s still true to you and your goals.   

Is Working in Retirement Right for You?

As with any retirement decision, it’s critical to weigh the pros and cons with your unique situation in mind, money, goals, and all.

Ask yourself,

  • Do you have a strong retirement plan? 
  • Where are you on your retirement savings journey? 
  • Do you enjoy your job? 
  • Are you energized by the possibility of an encore career or next step? 
  • Are you confident in your cash flow plan? 
  • Is your retirement plan comprehensive and reflective of your retirement goals long-term?

We’d love to help you create a plan that works best for you. Get in touch with our team today. 

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

/by

How An In-Service 401(k) Rollover Can Potentially Boost Your Retirement Savings

Let’s start off today’s post with a question.

True or false: You can only rollover funds from a 401(k) if you leave your job. 

The answer? False!

Though it might be surprising at first, under certain circumstances, you can perform an in-service 401(k) rollover. This strategy allows you to transfer some or all of your funds from your 401(k) to an IRA while still working with your current employer.

What’s an in-service 401(k) rollover and is it right for you? Let’s find out. 

What’s an in-service 401(k) rollover?

An in-service 401(k) rollover extends an opportunity for you to transfer some or all of your 401(k) into an individual retirement account (IRA) while still working. This function presents an important chance for investors: more control over their retirement savings.

Most companies allow you to retain the full benefits of your workplace retirement plan—paycheck deferrals, company match, active status—even if you roll over the funds to a different account. 

The best part? Unlike a Roth conversion that costs you money upfront, an in-service 401(k) rollover doesn’t cost you anything. Transferring money this way also allows you to bypass the $6,000 IRA contribution limit, enabling you to contribute more money at a time.  

Several 401(k) providers allow for an in-service rollover, but be sure to check with your specific carrier on any particular rules or regulations. Some may suspend service, set a limit on account activity, or require that you hold the funds for a specific period before the rollover. 

Three important benefits of an in-service 401(k) rollover

Retirement is perhaps the largest savings goal of your life. What else do you spend your entire career saving for? Given the importance of your retirement plan, it must be tailored for your unique goals. How you save is a significant part of that story.

Rolling over funds from a 401(k) to an IRA while working has several fundamental benefits that can further catalyze your retirement savings goals. Let’s look at the top three.

More robust investment selections and strategies

For all the positive elements of 401(k)s, investment selection and plan affordability aren’t always part of them. One of the main drawbacks of a 401(k) is the limiting investment options. Investment choices may be restricted to select mutual funds, value securities, and company stock, all of which offer minimal control over corresponding fees.

We just don’t like to invest that way. At Legacy Wealth Advisors, our investment approach centers around low-cost, long-term investments. We believe that investing shouldn’t be about wading through fees, rather it should be an agent toward working towards your biggest financial goals. 

Investing in an IRA may give you more flexibility and control to choose investments that align with your investment goals. With an IRA, you aren’t limited to the small approved basket of securities from your plan administrator. You have access to a much wider reach, providing increased opportunities to build a more unique and customized portfolio. 

Of course, with great power comes great responsibility, and the choices you make need to be strategic to be more advantageous for you in the long run. 

This point dovetails nicely to our second benefit of an in-service rollover: your advisor’s ability to manage the fund. 

Ability to select a fund manager

A 401(k) is where many people house a significant portion of their nest egg. Without proper access to the account, your advisor can’t help you streamline your investment strategy across that rather robust platform. But with an IRA, they can. 

An in-service rollover gives you the chance to work with your advisor in a more hands-on way. Your advisor would manage your investments from risk tolerance to asset allocation to tax efficiency and asset location to rebalancing and more. 

This makes for a more uniform investing experience. Through an in-service 401(k) rollover, we’ve been able to help clients build portfolios aligned with their unique goals for the future. 

Increased control over investment fees

If you’re not careful, high investment fees can eat up portions of your net profit. While not all fees are bad, many 401(k) plans carry additional fees compared to an IRA, such as individual service fees and administrative fees. (Looking at your annual prospectus can give you exact figures for any fees being taken out of your investments or contributions.) You can select a financial institution with more reasonable account, management, and operational costs. 

As we mentioned earlier, by investing in an IRA you can better control the fees produced by your investments. High-cost mutual funds aren’t always the most lucrative way to build wealth long-term. Rolling your funds into an IRA gives you more control over the fees you pay—from custodians to investments and more.

A Word of Caution: When Not to Roll Over an In-Service 401(k)

Every investment account and every investor comes with a unique set of parameters, goals, and needs. While some or all of the benefits listed above may apply to your situation, it’s possible that there are demerits to consider as well, such as:

  • Does rolling over your plan decrease or negatively impact your employer match?
  • Does your 401(k) offer exceptionally low fees that beat what you can get with an IRA? (Fees tend to be more competitive the larger your employer’s plan; in contrast, a small business is less likely to have competitive fees.)

Again, reviewing your plan prospectus on your own or with an advisor can help you find the details of any fees or restrictions for your plan.

Legacy Wealth Advisors can help you craft your retirement journey

Our goal at Legacy Wealth Advisors is to give you the tools, resources, and confidence to craft your financial life in a way that’s true to your goals and values. 

When it comes to investing, there are several different avenues to help you get where you want to go. While a 401(k) is a beneficial account, making the most of an opportunity to roll over all or part of it into an IRA may give you more options and control over your money both now and in the future. 

Is an in-service 401(k) right for you? Get in touch with our team to talk more about how this strategy could impact you.  

Disclaimer: Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

/by

How Consolidating Accounts Can Save Your Retirement and Estate Plans

It’s that time of year for sunny mornings, luscious blooms, and hauling out the cleaning products—spring is in the air.

Spring cleaning gives people an opportunity to dust off the dreary winter days and ring in a new season of life. But perhaps one of the most underrated byproducts of springtime is discovery. 

Think back to spring cleaning your office and all the random elements you discovered—the receipt lost in the folds of your drawer or the old photo of you and your kids on a family vacation, perhaps your favorite pen that’s ink has long dried up.

Some finds are hidden treasures, whereas others are simply taking up precious space. It’s time to purge the unnecessary clutter in your life and make room for more organization and clarity. 

This intentional discovery process can also be applied to your financial life. Depending on where you turn, you could find an old 401(k) account here, an expired life insurance policy there, a separate investment account in another space—the list goes on and on. 

These old accounts aren’t just simple clutter you can shove to the back of your drawer, they can actually become a roadblock for future financial success. Ready to ditch your financial hoarding and deep clean your money? 

Save Time, Money, and Heartache By Consolidating Your Financial Accounts

Consolidating is simply combining multiple entities into a single point. The goal is to streamline and declutter, making processes more efficient. 

Think about this idea in terms of your TV streaming services. Do you really need premium accounts for Netflix, Hulu, HBO, ESPN, Prime, and likely several others? Probably not. You can look at the ones you get the most value out of, and consolidate the rest. 

From a financial perspective, consolidating could mean anything from bank accounts to investment accounts to long-lost insurance policies. Varying accounts can lead to financial chaos especially in retirement and estate planning.

The Top Reasons Consolidating Boosts Your Retirement Plan

Trimming the number of retirement accounts you have can increase your nest egg. Let’s take a look at some critical benefits of combining retirement accounts. 

You may pay fewer fees

Investment accounts always come with fees—management, accounts, maintenance, expense ratios, and more. When you consolidate your accounts, you may experience decreased fees as you’ll have fewer institutions that hold your money. 

Better control over required minimum distributions (RMDs)

Depending on your birth year, you’ll need to take RMDs from most retirement accounts (excluding Roth IRAs) the year you turn either 70-½, 72, 73, or 75. If you forget or withdraw too little, the IRS sticks you with a 50% penalty. It may be simpler to take your RMDs from two accounts as opposed to five or more each year!

Offers a birds-eye-view of your investments

When your investments are in one or two places, you can more easily manage your funds. It makes routine maintenance like rebalancing more efficient as well.  

When you shouldn’t consolidate retirement accounts

Consolidation isn’t all minimalist bliss, there are some compelling reasons to maintain separate retirement accounts. 

  • Different retirement accounts carry different benefits
    • It’s important to weigh the benefits of each account before combining them together. Let’s say that you’re moving companies and want to roll over your old 401(k). One option is to roll the balance into the 401(k) with your new employer, but if the investment options aren’t as robust and the fees are a bit high, it might serve you to roll the funds into an IRA instead. Even though it’s another account, it could help you save more money in the long run.
  • Consider your tax situation
    • Each retirement and investing account is taxed differently. It may be important to have a mix of tax-deferred (401k and traditional IRA), taxable (brokerage account), and tax-exempt (Roth) accounts to give yourself more freedom and flexibility to build a tax-efficient income plan. 
  • You’re planning to retire early
    • Most retirement accounts have early withdrawal penalties if you take out funds before 59 ½. Your employer plan may allow you to take penalty-free partial withdrawals from a 401(k) if you fully retire by 55, something that wouldn’t be possible with a traditional IRA, for example. 

Each of these situations is unique to you and your goals. Before consolidating all of your accounts, work with your financial advisor to see which ones will benefit you most in your golden years. 

Your retirement plan isn’t the only place where consolidation comes in handy. Estate planning is infinitely smoother with a streamlined plan. 

Why Consolidating Simplifies Your Estate Plan

Consolidating accounts revamps your estate planning process, making the process much simpler for you, your pros, and your heirs. Let’s take a look at a hypothetical client example. 

Say there are two separate clients, John and Joe. Both have estates worth about $2 million. Between his investments, insurance, and other financial accounts, John had 5 different financial custodians. This rather reasonable number made it simple to update beneficiaries and asset titling, giving John a realistic sense of the value of his estate. It also made tax planning easier and allows for a more seamless transition to heirs. 

Joe, on the other hand, spread his money across nearly 30 financial institutions. This vast range of providers makes it difficult to ensure that the assets are titled properly and that the beneficiaries are updated. It also makes the financial impacts of his estate that much more complicated—values of each account, tax filing and planning information, goals, etc. Not to mention, the extra time, stress, and cost just wading through all of that information will cost him and/or his family.

Consolidating can drastically impact the value of your estate by:

An Advisor Can Help Declutter Your Financial Life

Over the years, it’s easy to let financial accounts pile up like dust on a high ceiling fan. But consolidating and streamlining your accounts can restore unity to your financial plan. 

Even though the process sounds simple, consolidating isn’t as easy as merging accounts together. You should consider the benefits of each account, fees, taxes, and more before making any final decisions. 

At Legacy Wealth, it’s our mission to help you use your financial resources in meaningful and fulfilling ways. Ready to spring clean your accounts and take a deep breath of fresh air? Get started with our team today.

Disclaimer: Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

/by

Do You Need Long-Term Care Insurance?

Long-term care is an emotional topic. It’s challenging to navigate conversations about your health as you age, leaving many families unprepared when these needs arise. Long-term care not only comes with emotional baggage but also a substantial price tag.

For some, long-term care insurance can help. 

Today, we are going to walk through the ins and outs of long-term care insurance and how to prepare for your and your family’s health throughout retirement. 

What is Long-Term Care?

It’s estimated that those over 65 have a 70% chance of requiring long-term care at some juncture. Planning for it now can help alleviate stress and confusion later on. Proper planning also gives you more options for care, giving you a better chance of receiving the best care for your situation. 

Many people automatically equate long-term care to an insurance policy. But before you bring brokers into the conversation, it’s best to fully understand what long-term care means. 

Long-term care covers an array of services that facilitate a person’s unique health needs over a set period. People who require long-term care often need help with daily activities like washing, dressing, and eating. Many facilities can help perform this care like a nursing home, assisted living facility, adult daycare center, home care, and more.

Does Medicare Cover Long-Term Care?

The short answer: no. Long-term care isn’t often covered by health insurance (or disability insurance) including Medicare. Some expenses could be covered by Medicaid, but only if the beneficiary has a specific financial need, which many people won’t qualify for. 

Long-term care can be quite costly. The national cost for a private nursing home is just over $100,000 (nearly $117,000 in Michigan) per year according to Genworth, which could easily take a toll on your retirement assets. Without proper protection, you and your family could be on the hook for covering these expenses out-of-pocket.

To help mitigate this risk, some people purchase a long-term care insurance policy.

How Does Long-Term Care Insurance Work?

You can purchase a long-term care policy through several private insurance companies, selecting the right coverage amount for your needs. Many companies institute maximum daily and lifetime benefits i.e they would cover up to $200 per day and $400,000 total.

To qualify, you need to fill out some paperwork and likely undergo a medical exam, the results of which will determine your eligibility for coverage. Once you’re approved, you begin paying premiums. 

While every policy is different, for many policies, benefits kick-in when you are unable to perform at least two out of six ‘activities of daily living’ (ADL). These activities include:

  • Bathing
  • Dressing
  • Eating
  • Toileting (bathroom care)
  • Transferring (getting in and out of bed, chair, or other seated position)
  • Caring for incontinence (uncontrollable bladder)

Once you know you need care and would like to make a claim, the insurance company will review your medical documents, history, and doctor’s recommendations. A separate nurse evaluation may also be required. Your healthcare team will then outline a plan for your care, which the insurance company will review before they approve your claim.

Many long-term care policies have an elimination period of 30, 60, or 90 days. This period means that you are required to pay for care out-of-pocket before benefits are given. Once the elimination period ends, you’ll receive benefits according to your plan for care and policy specifications. 

What Are The Costs of A Policy?

You pay for your long-term care policy through ongoing premiums. The cost of premiums varies drastically, depending on your unique situation. Several factors work together to help determine the cost of your policy:

  • Age
    • Policies tend to be more expensive for older beneficiaries.
  • Health
    • Those with greater health risks (underlying conditions, family health history, etc.) will likely have higher premiums.
  • Gender
    • Premiums tend to be more expensive for women (nearly $1,000 more on average) due to longevity—the CDC estimates that women outlive men by 5 years.
  • Martial status
    • Married couples tend to have lower premiums than single people.
  • Amount of coverage
    • The more coverage you want, the higher your premium will be. Remember, your coverage translates into daily and lifetime maximums.
  • Insurance company
    • Different companies will be more or less cost-effective. Work with your advisor and independent broker to find the right company and coverage for your needs. 

Premium prices are also impacted by other parts of your policy like the coverage period and elimination period. Plans with longer coverage periods and shorter elimination periods will likely be more expensive, for example.

When Should You Purchase A Policy?

While there is no hard and fast rule about long-term care coverage, many advisors recommend researching and purchasing a policy in your mid-50s to mid-60s. This way, you start paying premiums closer to the time when you can collect the benefits. 

By delaying past 65, your premiums will increase exponentially or you might become ineligible for coverage altogether. Long-term care insurance certainly isn’t the type of policy you can purchase when you need benefits—it’s a policy designed to help protect you in the future. 

You also don’t want to buy a policy too early (your 30s and 40s), because you could be saving and investing the thousands of dollars you would be paying premiums. The right time to purchase a policy for you will be specific to your needs, health plan, family history, and retirement assets.

Is Long-Term Care Insurance Right For You?

Requiring some form of long-term care might be more common, but that doesn’t necessarily mean that purchasing an insurance policy is right for you. A long-term care policy is designed to help cover the exorbitant costs of long-term care, but there are other ways to settle the tab.

Perhaps you are in good health, have a strong family health history, and a much higher-than-average savings plan. This combination might make you more confident that your current assets could cover any costs incurred. You might also already have a plan to move in with your adult children, entrusting your care to your family as long as possible. 

While there are alternative options, many people find that having a long-term care policy provides clarity for the future and added flexibility for care options. A robust policy could protect you should an unexpected health issue arise and you and your family need more support. 

You don’t want to walk into retirement unprepared for your changing health needs. The average couple is expected to spend $295,000 on medical costs in retirement excluding long-term care. With long-term care costing about $300 per day, even one year in a nursing home could put your nest egg in jeopardy. 

Take some time this year to prioritize your future health needs. Don’t let your emotions get in the way of creating and implementing a plan that will be best for you. Work with your financial advisor to talk through your needs and see if a long-term care policy is right for you. 

Our team at Legacy Wealth wants to help you live a happy, healthy, and fulfilling retirement, and proper healthcare planning plays a significant role in achieving that goal. Would you like to discuss your unique risk management plan? Schedule a 15-minute call with us today. 

Note from the author: When we publish our blogs we attempt to use the most current information. Now that this blog is a year or more old, we want to advise you that some of this information may be dated, although we believe that the base of the blog still contains lots of valuable information. If you ever have questions about the contents of our blog, please reach out to us at info@legacy-wealth.com.

General disclaimer: Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. 

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning, legal services, or insurance products but may provide references to tax services, legal providers, or insurance services. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

/0 Comments/by

Are You Ready To Retire? Answer These 7 Questions First

The start of a new year sparks fresh thoughts, ideas, and inspiration. For you, this might be the year you consider retirement. Making the leap to retirement is a significant step in your life both mentally and financially, and you want to enter into this new phase of your life with both eyes wide open. 

Before you say goodbye to your 9-5, carefully walk through the following questions.

1. Do you have a spending plan that works?

Retirement is one of the largest savings goals of your life. You’ve dedicated decades to accumulating enough wealth to support your desired lifestyle, therefore before you retire, you need to know that your expenses are taken care of. This process involves analyzing your income streams against your projected expenses. 

Start by listing your income channels. 

  • Social Security (use a tool to calculate your projected benefit).
  • 401(k)
  • IRA (Traditional, Roth, SEP, Simple, etc.)
  • Other investments (brokerage account, real estate holdings, rental properties, etc.)
  • Annuity
  • Pension
  • Cash reserve

Then, take a look at your estimated retirement expenses.

  • Housing 
  • Food
  • Utilities
  • Taxes
  • Debt
  • Insurance
  • Travel
  • Entertainment

Once you have customized these lists to reflect your situation, take a look at the outcome. Does your proposed spending plan work? Have you accounted for big-ticket items like a move, trip, or large purchase in the first few years of retirement? Do you still have room to build up an emergency fund and other savings goals? Have you taken some time (2-6 months) to test out your spending plan?

Financial preparation is a fundamental ingredient for a solid retirement plan and can offer more confidence as you make the transition.

2. Have you made a plan for your health?

Healthcare costs can eat up nearly 15% of your retirement budget. Fidelity estimates that a retired couple will spend $295,000 on healthcare costs alone in retirement and that number is only projected to rise, which means pre-retirees need to create a plan to account for these costly expenses. Ask yourself,

  • Do you have a plan for health insurance? (remain on your current plan, obtain it through a new employer, get coverage under your spouse’s plan, or enroll in Medicare).
  • Have you researched your Medicare options and made a plan for the coverage you need? (Original Medicare, prescription drug coverage, and supplementary coverage through an advantage plan or Medigap plan). 
  • What health-specific savings measures do you have in place? (health savings account, long-term care insurance, emergency savings, additional investments, etc.)
  • Are you prepared for any long-term care needs?

It’s vital to account for your changing health needs, especially as you age. You want to make a plan when times are good, instead of scrambling when health needs arise. 

3. Is your estate plan up to date?

It’s prudent to update your estate plan regularly and after a major life event, and retirement certainly fits the bill. With your assets changing places and income streams shifting, you want to make sure that your assets are properly titled and you have the right beneficiary designations.

Retirement is also a good time to check in on your power of attorney and medical directive designations. Are there any changes you need to make? Should you have a conversation with each person about your wishes moving forward? Do you need to alert them of any changes to your health or overall plan?

Retirement marks a time of change. Initiating conversations with family and loved ones concerning your estate can help you and them effectively navigate those difficult questions. Open dialogue will ensure that everyone is prepared should something unexpected occur. While talking with family about estate planning is difficult, it’s vital to bring honesty, openness, and transparency to the situation. 

4. Is your debt-clock still ticking?

Retirees should do their best to eliminate any debt before sailing into their golden years. That means paying off your mortgage, car, personal loans, student loans, credit card debt, etc. Debt can hinder your cash flow in retirement and constrict some of your flexibility in terms of your spending, saving, and investing. 

Be conscious of the debt you still have and make an intentional plan to pay off as much as possible before you retire. While you might not be able to fully pay off your mortgage, for example, you should prioritize eliminating high-interest debt like credit cards, auto loans, and personal loans. 

You don’t want to have to use your Social Security check to pay down your credit card bill each month—you’d rather use it to support your lifestyle. Living a debt-free retirement gives you more freedom and flexibility in your plan. 

5. Have you accounted for your time?

Filling your days is among the most difficult components of retirement planning. You want to find fulfillment, meaning, and purpose in your life, and it can be a challenge to discover what that means to you at first. Consider the following questions. 

  • Will you continue to work, whether full-time or part-time? 
  • Are you ready for an encore career?
  • Can you lean into volunteer work?
  • Is there a new skill you want to learn or a passion project you want to embark on?
  • How will you stay physically fit?

Building a new routine is a challenge for many new and seasoned retirees alike. For decades, you’ve had your days drawn out for you, and curating something new will likely take some trial and error. You want to bring intention and care into your daily life and to do that, you should spend your time on the people, places, and things that mean the most to you. For you, that might mean Saturday morning breakfast with your grandchildren, weekly volunteering, and working part-time at a local shop. 

Don’t underestimate thinking through your daily habits. Many people think about their retirement lifestyle in terms of their large-scale wishes like a trip to Europe, a golf course membership, and long lunches with friends. But these things, while important, aren’t necessarily part of your daily life. What’s left once you are tired of eating out at the same place or exhausted by the early t-time or if you’re unable to travel? 

You’ll find your retirement lifestyle in the small moments and the daily habits you build. Take time to think and test out these ideas to help you build a retirement life you love.  

6. Are you mentally prepared to retire?

Retirement can take a toll on your mental health. It’s critical to gauge your thoughts and feelings surrounding retirement and what it means for you. Many retirees find it difficult to adjust to the new way of life, especially in the beginning. A few ways to help are,

  • Maintain and form new social connections.
  • Stick with an exercise routine.
  • Do your best to eat healthily.
  • Create a daily routine you enjoy.
  • Give back through volunteering and charitable donations.

Remember, retirement is a personal journey—one that you have to be ready for. Your ideal timeline might be different than your spouse, friends, or coworkers, and that’s okay. As long as you are true to yourself and your goals, you will be able to do retirement your way. 

7. Do you have a written financial plan?

A written financial plan can bring more confidence and care to your financial life. According to Schwab’s Modern Wealth survey, 63% of people with a written plan felt financially stable and only 28% of people without a plan shared that same comfort. 

Even beyond financial stability, the same survey found that those with a plan were more likely to consider risk in their investments, regularly rebalance their portfolios, and ultimately feel certain in reaching their financial goals. Positive action tends to beget positive results. The more you can engage in your plan, the more likely it will reflect your true values and goals for the future. 

We love helping clients curate a retirement plan uniquely suited for their goals and dreams for the future. A written financial plan can catalyze your confidence and help you walk with purpose into this new phase of your life.

There are numerous nuances in your retirement plan, from your investments to your lifestyle to your health; there is always something to think about. Having the help of a trusted professional can give you peace and clarity to dive into this new adventure as prepared as possible. 

Is retirement on your horizon? Schedule a 15-minute call with our team to talk through your unique vision for your golden years. We can’t wait to serve you. 

/0 Comments/by

Can You Still Build Wealth In Retirement?

Financial planning is fluid. It moves, contours, and evolves as you walk through life. Your plan in your 20s will be fundamentally different than in your 50s. Everything from your goals, priorities, and vision for success will change throughout your life, but one element should remain constant—your engagement. 

Active engagement in your financial plan will help you align your money with your goals, values, and priorities—this engagement becomes even more prevalent in retirement. Retirement represents a significant life transition, both personally and financially. It’s important to remain active in your financial plan throughout retirement to help work towards bringing your goals and lifestyle to fruition, and building wealth plays a significant role.

Your wealth-building journey doesn’t end in retirement. Here’s how you can work to further your finances in your golden years. 

Stay invested

Investing is a wealth-building agent normally discussed on your journey to retirement, but what happens when you get there? Many people think that your investment journey comes to a halt, but that’s far from the truth. 

There are several reasons to remain invested throughout retirement, such as outpacing inflation, funding new goals, and accounting for lifestyle changes. Inflation is an important metric for retirees because few income channels take it into account. While Social Security may include an annual cost of living adjustment, your 401(k), IRA, and pension plans don’t have that luxury. 

Your risk and security balance may shift, but it shouldn’t merely fall to one side or the other. Many people tip the scale in favor of security, but we find that leads to an overly conservative portfolio. How can you stay invested in retirement while keeping your changing risk tolerance and income needs in mind?

At Legacy Wealth Advisors, we talk about this in terms of a “retirement red zone”. In the 5-10 years leading up to and after retirement, we look at applying a more conservative approach to your investments to protect your assets and cash flow. We feel This strategy helps mitigate the sequence of returns risk, which seeks to protect assets from negative returns early on in retirement. 

But once you are a decade or so into your golden years, it may be prudent to apply more risk. Of course, what’s right for you will depend on your retirement goals, risk tolerance, time horizon, income channels, and lifestyle factors. 

Re-evaluate your investment goals

Your investment strategy may change in retirement, but it doesn’t stop. Ask yourself,

  • How have your investment goals shifted since entering retirement?
  • What does your risk tolerance look like and how can you make intentional updates to your investments to best reflect it?
  • How can your investments further your lifestyle needs/wants? (leaving an inheritance, funding a move or trip, providing more flexibility, etc.)

Your needs will change as you move through retirement and so should your investment strategy. Being present and engaged in your plan will help you best align your investments with your other goals. 

Don’t hang up your hat

Every person’s vision for retirement is different. While a traditional view might be spending your time on a beach relaxing as the waves crash at your feet, other people might have a radically different outlook. 

For many, that includes working. According to a study by United Income, 20% of people 65 and older were working or looking for work. Other studies suggest that working by choice in retirement can boost overall life satisfaction. What does this mean for you? You might want to start your own business, embark on a passion project, work part-time at a local shop, or take classes to learn a new skill. 

Retirement is an opportunity for you to engage in work you find meaningful. Your next adventure doesn’t have to be in the same or adjacent field, just something that you are excited to pursue. 

This venture won’t only be positive for your mental state, but it can also significantly impact your balance sheet. If you think that you couldn’t possibly start a new business in retirement, let’s see if these famous entrepreneurs can change your mind. 

The founder of GEICO Leo Goodwin started the company at 50 after years in the insurance business. Harland David Sanders, a.k.a, Colonel Sanders, founder of Kentucky Fried Chicken didn’t franchise until 62. These are just a couple of examples of people who jumped on their landmark business plan later in life. 

No matter what you decide to do, making a plan for your time can help you find fulfillment and purpose in your golden years. It can also further your financial goals and give you the flexibility to use your money more freely. 

Prioritize your lifestyle

Building wealth in retirement can facilitate the lifestyle you have been dreaming about.

You may want some extra money to take your dream vacation, sell your house and move closer to your extended family, help contribute to your grandchild’s education, give more to charity, etc. 

Building wealth in retirement can help further your vision and put more money toward the people, places, and things that matter most to you.

Think about your estate

Building an estate plan that works for you is an important part of retirement planning. As you continue to accumulate wealth, you may realize that you need a more sophisticated estate planning strategy. Ask yourself,

  • Do you want to leave your children an inheritance?
  • Is it important that some of your estate be donated to charity?
  • How can your wealth-building journey help promote those goals?

Building wealth in retirement can help you find and reap the rewards of financial independence. We love working with clients to help them coordinate their finances with their goals, dreams, values, and vision for the future. 

Are you ready to continue your wealth-building journey into your golden years? Schedule a 15-minute call with our team today to learn more. 

 Note from the author: When we publish our blogs we attempt to use the most current information. Now that this blog is a year or more old, we want to advise you that some of this information may be dated, although we believe that the base of the blog still contains lots of valuable information. If you ever have questions about the contents of our blog, please reach out to us at info@legacy-wealth.com.

General disclaimer: Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. 

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

/0 Comments/by
,

WHAT ARE THE BEST RETIREMENT ACCOUNTS FOR YOU?

Note from the author: All contribution limits have been updated to reflect 2022 limits.

You know that you have to save for retirement, but where do you put all of your hard-earned money? While there are many retirement savings vehicles out there, making the most of the right ones can set you up for a safe and happy retirement. 

What accounts are available, and which ones are best for you? Let’s take a look and find out.

Individual Retirement Accounts

IRAs are among the most popular savings vehicles around. With flexible investment options, greater control over fees, and generous contribution limits, IRAs can help you save a significant amount in taxes each year. 

IRAs come in all shapes and sizes, and you can likely find one that will suit your needs. The two most popular ones we will look at today are:

  1. Traditional IRA
  2. Roth IRA

Both accounts allow you to save up to $6,000 in 2022, with an additional $1,000 in catch-up contributions for those over 50. (These limits are put in place by the IRS, and can be found listed here.) These accounts also offer increased flexibility and control over the investments you choose. The critical difference between these two? Taxes. Let’s see how taxes function in these accounts, and how it could serve your retirement plan. 

Traditional IRA

Traditional IRAs are tax-deductible retirement accounts. Investors contribute pre-tax dollars, enjoy tax-deferred growth, and only pay taxes when they withdraw funds in retirement. This contribution tactic lowers your annual taxable income, which could improve your tax bracket and overall tax bill come April. 

Traditional IRAs do have required minimum distributions (RMDs), which, thanks to the SECURE Act, pushed the starting age to 72. RMDs mark the time when you have to start taking regular withdrawals from your account. But the CARES Act suspended RMDs for 2020, meaning that retirees don’t have to begin withdrawals for another year. 

What’s the catch? The IRS puts a limit on the amount you can deduct if you or your spouse is enrolled in a workplace retirement plan or if your income surpasses a certain amount. If a workplace plan doesn’t cover you, you can always deduct your full contribution up to the annual limit. But if you are covered elsewhere, that’s where the rules start to change. 

Let’s say that you are married filing jointly. In this case, the IRS gives you two options. 

  1. If you have coverage under another workplace plan and you make over $109,000, you can only take a partial deduction. If you make over $129,000, you can’t take a deduction at all.
  2. If your spouse has coverage under another plan and you don’t, your partial deduction starts once you make over $204,000 and stops if you make over $214,000. 

The limits on your deductions don’t impact the amount you can contribute. Instead, it just changes the tax-benefits you can take part in. Proper tax planning is crucial to a solid retirement plan, which makes the accounts you choose to contribute to so important. 

Follow the link here to find the full lists of IRS limitations on Traditional IRA deductions for 2021 and 2022.

Roth IRA

A Roth IRA is a particular account that has gained popularity in recent years. Unlike a traditional IRA where contributions are tax-deductible, Roth contributions are never tax-deductible. Instead, you fund the account with after-tax dollars, the account grows tax-free, and qualified distributions are tax-free in retirement. 

Qualified distributions stipulate that the account is at least 5 years old, and you are at least 59 ½ when you begin withdrawing money from it. There are some exceptions, like if you have a disability or are using the funds for qualified expenses like first-time homebuyers ($10,000 limit). 

This saving strategy can boost your retirement income plan by assuming a more substantial tax burden now and mitigating that responsibility in retirement. Your income will likely increase the longer you are in the workforce, meaning if you contribute to a Roth early on in your career, you will be in a lower tax bracket than you would be in retirement. 

Sound too good to be true? The thing about Roth IRAs is that they have income limits for contributions. Where traditional IRAs have income limits for deductions, Roths have limits for contributions. For 2022, if you file as single and make over $144,000, or married filing jointly and make over $214,000, you can’t contribute directly to a Roth IRA.

For those whose adjusted gross income (AGI) exceeds these limits, you can look into a Roth conversion, a strategy that takes assets from a traditional IRA and moves them into a Roth account. There are significant tax considerations when making this decision, so be sure to seek advice from your financial advisor. 

Workplace Retirement Account: 401k

Most workplaces have long replaced their defined-benefit programs (pensions) for a less expensive alternative: defined-contribution plans like a 401k. A 401k allows employees to make salary deductions and funnel those savings into an investment account owned by the employer. 

In 2022, you can contribute up to $20,500 with an additional $6,500 for those over 50. As you can see, these limits are much higher than an IRA, allowing for more retirement savings year to year. But even though you can contribute more, what you contribute to is usually much more limited. Since your employer sponsors 401k plans, the investment options are more limited, and you have less control over where you can invest your money. 

Like a traditional IRA, your contributions to a 401k are made with pre-tax dollars and taxed upon distribution in retirement. 401ks are also subject to RMDs when the account owner turns 72, making tax planning a crucial part of this plan. 

While a majority of the savings burden falls on employees, with a 401k, employers can also contribute to their employees’ savings journeys with an employer match. A match program usually results in a dollar for dollar match up to a certain percentage, anywhere 3-6% is typical. 

But these programs often state that the match will only happen if the employee is contributing that same or higher percentage. So if your company has a dollar for dollar match up to 6%, you should add at least 6% of your salary, so you don’t leave money on the table. There is a combined contribution limit of $61,000 (of $64,500 if 50 or older) in 2022. 

Health Savings Account (HSA)

An HSA is an incredible investment tool available to those enrolled in a high deductible health plan. This account helps people save for healthcare costs, and with healthcare being a primary concern for retirees, this is an excellent account to add to your savings plan. 

HSAs offer three fundamental tax advantages:

  1. Contributions are pre-tax.
  2. All gains grow tax-free.
  3. Qualified distributions for healthcare purposes remain tax-free.

Your HSA balance can roll over year to year, making it a fantastic investment opportunity. In 2022, you can contribute up to $3,650 for self-only coverage and $7,300 for family coverage. Our team would love to talk with you more about how an HSA could benefit your retirement plan.

Branch out of retirement-specific accounts

Several reliable investment options aren’t retirement-focused. One channel we recommend considering is an exchange-traded fund (ETF). ETFs are a low-cost, high-value investment vehicle that provides diverse market exposure.

ETFs, give investors increased flexibility as trading occurs while the market is open, diversify portfolios, can help keep investment costs low, and can be tax-efficient. By investing in avenues outside traditional retirement accounts and workplace plans, you can continue to build wealth and become more financially secure. 

Active wealth building will give you the tools and resources to reach your goals. It also brings freedom and flexibility into your plan, giving you the tools to use your wealth in a way that enhances your life. 

Which plans are right for you?

Investing in the right places can make a significant impact on your retirement income. While there are many elements to consider when investing for retirement, here are some to keep in mind:

  • The time horizon for each account.
  • The investment options available.
  • Your risk tolerance and management.
  • Account fees.
  • Tax considerations.
  • General retirement income plan.

Here at Legacy Wealth Advisors, we love helping clients invest in the appropriate vehicles for their investment needs. Investing for retirement isn’t one-size-fits-all, and our customized approach will help you reach your unique goals and dreams for retirement.

Ready to refine your retirement plan? Schedule a 15-minute call with our team today.

/0 Comments/by

The Building Blocks You Need For A Strong Retirement Plan

Retirement planning is like songwriting—while there may only be 12 notes to pick from, there is an infinite number of combinations and songs you can produce from them. Any seasoned musician knows that it’s not just the notes that make up a song. Sure, you start there, but it is the intonation, rhythm, melody, and harmony, as well as the structure that gives it life. 

We feel the  same is true when creating a retirement plan. In reality, there are usually only certain factors included in a retirement plan: income, cash flow, taxes, investments, health care, lifestyle, etc. These are the notes, the starting point of the plan. 

But a retirement plan comes to life when you infuse it with passion, purpose, and values. Each person brings their own unique set of experiences to the retirement planning process, and that’s where the magic happens—when the song takes shape.

Today, we are excited to bring you an overview of the basic tenets that comprise a retirement plan.

Map out your lifestyle.

What is the first thing that came to mind when we said “retirement planning”? In all likelihood, it had something to do with money, and that makes sense. The financial aspects of retirement are crucial, but your desired retirement lifestyle plays just as an essential role in the creation of your plan. 

Once you have an idea of how you want to live in retirement, then you can work towards building a financial plan to help support those goals. Someone who wants to downsize and stay near family in Macomb will have different financial needs than someone who wants to build their dream lake house in Traverse City. 

It all comes down to what you want your life to look like. This planning is especially important for married couples because they need to build a plan that complements each person. Once you start talking about retirement planning, you may have thought that you wanted to travel the world, and you come to find that your partner’s passport has long expired. It is essential that both people are on the same page and can start to build a plan together. 

Below are a few questions to inspire your thoughts about what may be important in your retirement lifestyle. 

  • Where do you want to live? Would this require a move? If so, have you spent significant time in this new area? Where is your home in relation to family, friends, and loved ones?
  • How do you see yourself spending your time?
  • Will you work part-time or pursue an encore career?
  • Is traveling a big part of your life?
  • How will you maintain or develop new relationships?
  • In what ways will you stay mentally and physically active?
  • How will you bring meaning, fulfillment, and value to your routine?

These are some big questions that require you to flesh out the answers with time, preparation, and trial and error. Before you retire to that beach in Florida, make sure that you are just as equipped to handle the hot summers as you are to escape the Michigan winters.

Carefully consider your finances.

A study by AARP found that nearly half of retirees share a fear: running out of money. With increased longevity and a strain on overall retirement savings, outliving retirement income is now retirees’ top fear. To help alleviate this concern, you need a robust financial plan in place that supports your retirement goals long-term.

The first step is to have a handle on your projected income. Start by listing off all of your regular income channels.

  • 401(k), IRA, other retirement accounts
  • Social Security
  • Pension
  • Real estate
  • General investment portfolio
  • Part-time work/encore career
  • Cash
  • Other savings

Understanding how much money you will have coming in each month/year will be a great indicator of building a retirement budget that supports your goals. A healthy income plan is about finding a balance between saving for the future and living a fulfilling life today. The right advisor will be able to work with you to strike that balance.

You’ll also want to have a proactive tax plan in place to mitigate the costs of Required Minimum Distributions (RMDs), portfolio withdrawals, tax brackets, charitable contributions, and more. Armed with a solid tax plan, will help you keep your tax bill at bay, and set yourself up for the future. 

After looking at all of the financial factors, you may find that you need to save a bit more to live the life you want. Here are a few ways to help do that,

  • Max out your retirement accounts.
    • For 2022, you can contribute up to $20,500 to a 401(k) and $6,000 to an IRA. 
  • Take advantage of catch-up contributions.
    • Those over 50 can exceed the annual limit for 401(k) and IRA contributions. In 2022, you can add an extra $6,500 to your 401k and an additional $1,000 to an IRA. These additional funds can significantly boost your savings.
  • Work a little bit longer.
    • While not always an ideal option, it could provide you with the flexibility you need to live the life you want. Working longer can also increase your Social Security benefit since your monthly paycheck is determined by your 35 highest-earning years and the SSA algorithm. 
  • Cut discretionary expenses like take-out, subscriptions, and more.
    • You might be surprised by how much you could save each month by cooking for yourself.

Prioritize your health.

Healthcare costs can eat up about 15% or more of your retirement budget. A Fidelity study found that an average retired couple would spend about $295,000 in healthcare alone throughout their golden years. 

While this number takes into account premiums, deductibles, copays, and other out-of-pocket costs of Medicare, it doesn’t take into account over the counter medication or long-term care, which many retirees will need at one point or another in their lifetime. This situation means that healthcare planning needs to be a top priority for pre-retirees.

There are several potential ways to plan for the costs of healthcare in retirement,

  • Open and actively contribute to a health savings account (HSA).
  • Contribute extra to other investment vehicles.
  • Make the proper Medicare elections for you and your needs.
  • Look into additional insurance coverage (long-term care insurance).

The right plan for you will depend on your current and projected health, any pre-existing conditions, as well as your family health history.

Let your goals and values guide you.

Your retirement plan should be individual to you and your outlook on life. That’s what makes retirement planning unique. You can use the resources available to you to create a beautiful new phase of your life. 

You must let your values and goals act as the foundation of your retirement plan. They will help inform your lifestyle choices, which, in turn, will impact your financial decisions. Our team at Legacy Wealth Advisors wants to help you uncover your retirement goals and work to build a plan that brings them to life. 

Ready to start creating the retirement plan of your dreams? Schedule a 15-minute call with our team to learn more about how we can help you.

 

 

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. 

The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed.

/0 Comments/by
Link to: Get Started

Any more questions? Feel free to contact us!

If you have questions about retirement planning and want to work with a financial advisor that cares about you and your goals, let’s talk.

Legacy Wealth Advisors | 41700 Hayes Rd., Ste. A Clinton Twp., MI 48038
Phone: 586.273.0072 | Fax: 888.501.2361 | Email: info@legacy-wealth.com

About  | Contact | News

© 2023 Legacy Wealth Advisors