Do you remember those goals you set for yourself at the beginning of the year? Likely in our current situation, they have changed significantly. When you were setting financial goals and aspirations for 2020, our world looked quite different.

The novel Coronavirus has changed the way we approach our jobs, families, relationships, and finances. With high market turbulence, many people have had to rethink their financial strategies altogether to get them where they need to be.

Today, our team wanted to take a moment to breathe and re-charge. We are, in fact halfway through 2020 making it a great time to readjust ourselves to promote financial and personal wellness in the second half of the year.

Here are some tips from our team to help center and balance your finances. 

Adapt your plan to life changes

Any big changes happen in your life? Of course, we are being facetious as we have all experienced a major wrench into our daily life and habits. Dining rooms become offices, back porches are break rooms, living rooms are classrooms and play areas, and kitchens are always a mess. 

Now that you have had some time to adjust to this new way of life, it is important to ensure that your financial plan best reflects these new circumstances. This means different things for everyone depending on employment status, business funds, and more. For you, it might be a new emphasis on saving measures or cutting back on expenses. 

No matter what, be sure that you take a look at your household expenses and how they have changed given your present circumstances. Once you know where you are, you can start to make a plan going forward. With interest rates lower, maybe it is time to refinance your house for a lower rate, or perhaps you need to take out a limited loan or credit to keep your business afloat. Once you know where you are, you can work with your financial planner to adjust your plan as you need to. 

Remember, your financial plan is a living document and should be adapted when things in your life change. This can be any big life event like a marriage, divorce, new child, and more. Whether you need to adjust your debt repayment plan, reassess your insurance needs, create a better retirement savings plan, or alter your estate plan take the time to do that as major changes arise. 

Take another look at your budget

Odds are that many of your household expenses have changed in the first half of the year. Some expenses may have gone down like schooling, daycare, vacations/trips, and entertainment whereas other expenses may have increased like takeout, grocery trips, and online shopping. 

Take some time to look at how your spending habits have altered to reflect your new normal. You may find that you need to adjust your budget to better reflect your current circumstances. A budget is a great way to keep track of your household expenses. It can and should change as your needs do. 

The second half of the year often sees the greatest spike in expenses from summer vacations to holiday gifting. Now is a good time to plan and save for some of those extra costs. Keep in mind that this year may look different for you. With a change in income, you may not be able to spend the way you are used to for holidays. That is okay. Be sure that you know what you can do so that you don’t go into debt. 

Build up your emergency fund

You may have needed to dip into your emergency fund at some point during this crisis. That is what a rainy day fund is for after all. Be sure that you take a look at your spending habits and new budget to see how much more you may need to funnel into your emergency fund to protect you and your family. 

No one knows how long the virus will distort our daily lives and having a cash reserve prepared in case of any other unexpected changes or developments can give you a financial cushion. Most advisors recommend having 3-6 months of living expenses (house, utilities, food, internet, etc.) in an emergency fund. But families like to try and build that up to 9-12 months especially with kids to care for. 

Even if it is just a little at a time, prioritizing replenishing this fund will be an important financial move this year. 

Tackle your taxes

Taxes extend way beyond April 15. When implemented correctly, effective tax planning can give your finances a boost and keep you on strong financial footing. Proactive tax planning needs to be done throughout the year to be most effective. 

Once December hits, there is little that you can do to lower your tax bill, but by actively applying tax-efficiency into your financial habits year-round you will see wonderful results come April. 

Mid-year is a good time to check your withholding to make sure you are paying the right amount in taxes each month. If you withhold too much, you essentially are giving the government an interest-free loan. Withhold too little and you can expect to owe much more come tax season. 

It is also a good time to look into your charitable giving strategies as many of those will lower your tax bill. Contributing regularly to your tax-deferred retirement accounts like 401(k) or traditional IRA will also lower your taxable income for the year. If you can, try to max out these savings vehicles ($19,500 for 401(k) and $6,000 for IRA). With changes to your income, you may not be able to max these vehicles out but try to contribute enough to qualify for your employer match if you have one. 

Your financial advisor will also be able to help you implement the right tax-efficient strategies for your goals. 

Check-in on your debt-reduction strategy

Debt is one of the biggest roadblocks for reaching financial goals. You likely have a strategy to tackle your debt and now is a good time to check-in on your progress. Take into account all types of debt you may be experiencing like credit cards, student loans, home mortgages, etc. and see how you are doing on each front.

With lower interest rates, it can make repaying credit card debt more manageable as some credit cards have adjustable rates which are often in line with the federal funds rate. Be sure to take advantage of these lower rates to get that debt out of your life. 

Since the government suspended student loan payments (including interest) through September, you can have a breather on student debt. If you can, try to pay more toward the principal amount to lower how much you end up paying over the life of the loan. 

Now might be a good time to look into refinancing your home mortgage for a better rate. Take a look at the rates out there and make sure that you have factored in additional cash needs for closing costs. 

Making a plan to reduce your debt will help you reach your financial goals. Set up a time to talk about your debt plan with your financial advisor who can help you take advantage of opportunities to pay down your debt faster. 

Take a break

There is a lot going on right now. It is important that you are able to take a step back from it all to focus on the people, places, and things that matter the most to you. Our team is here to help you balance your personal, professional, and financial goals to help create a plan that optimizes and enhances all of those aspects of your life. 

By taking control of your financial situation, even in times of uncertainty, you will feel more confident to tackle the challenges ahead. These may be uncertain times, but know that you are never facing your finances alone. Legacy Wealth is here to help and serve you. Ready to see how you can adjust your financial plan this summer? Schedule a 15-minute call with us. 

To continue our celebration of National Social Security Month, we are going to talk about a facet of the system that many people overlook and find confusing: spousal and survivor benefits. 

Social Security benefits aren’t limited to one person; spouses, ex-spouses, and surviving spouses are all entitled to additional benefits. Let’s take a look at how each of these works to give you a better idea of how it could be applied to you. 

Spousal Social Security benefits

Spousal Social Security benefits were designed to help both partners in a marriage receive monthly benefits. A spouse may claim up to 50% of their partner’s benefit as their spousal benefit. 

In order to be eligible for a spousal benefit, the following must be true:

• You are at least 62, though waiting until full retirement age, FRA (67 for those born 1960 or later) can increase your benefit
• You have been married for at least 10 years
• Your spouse must already actively claim their benefits

A common misconception with spousal benefits is that they reduce the benefit of your spouse. This is not true, both benefits are mutually exclusive, a spousal benefit is simply determined by the work record of one spouse. 

The maximum spousal benefit you can receive is 50% of your spouse’s benefit which is calculated at their full retirement age. If you have a work record, you can also receive benefits from your individual record. 

The Social Security Administration will pay you the higher of the two amounts (your work record or your spouse’s work record). You can no longer apply for benefits both on your spouses and your own work record. Let’s take a look at an example to help illustrate this point. 

Mike and Miranda have been married for 25 years. Miranda has been in the workforce longer than Mike, making her work record more robust. At her full retirement age of 67, Miranda is eligible for a $1750 monthly benefit. Mike files for a spousal benefit at his full retirement age and will receive 50% of Miranda’s benefit, leaving him with $875 per month. 

But, if Mike’s work record would allow him to receive a monthly check higher than his spousal benefits, the Social Security Administration would pay the higher of the two amounts. Say, for example, on his own work record, Mike’s benefit would be $1000. The SSA would pay Mike the $1000 off his own record as opposed to the $875 off of Miranda’s record. 

Remember, by collecting benefits early, you will see a permanent reduction over the course of your life. This is true for traditional and spousal benefits. 

Benefits for ex-spouses

Ex-spouses are still entitled to receive spousal benefits on their former partner’s work record if the marriage lasted for at least 10 years and if the person filing for benefits has not remarried. It is important to know that you are still able to claim benefits if your former spouse remarries. 

The process for ex-spouses works the same way as a traditional spousal benefit. You would be entitled to a maximum of 50% of your ex-spouse’s benefit. If you have your own work record, you would receive either your benefit or your spousal benefit, whichever is higher. 

Claiming this benefit won’t impact your former spouse’s benefit, nor will they be notified when you do start claiming benefits. This process is all individual. As an ex-spouse, you don’t have to wait until your former partner claims benefits in order to claim yours, which differs from the rules of current spouses.

Survivor benefits

For those who have a spouse pass away, they are entitled to receive survivor benefits as long as the marriage lasted at least 9 months. This time frame can be waived if you are caring for a child under 16. 

Unlike traditional Social Security, a survivor can apply for benefits as early as age 60 should they need to. The maximum survivor benefit is 100% of the late spouse’s benefit if the person filing has reached their full retirement age. Benefits decrease based on how far below FRA you are when you claim. 

The way that you take your survivor benefit is determined by when you and your spouse begin claiming benefits. If neither of you has claimed benefits, you can maximize the survivor benefit by having the higher-earner delay enrolling until 70. This increases the overall benefit and will become the survivor benefit for the remaining spouse. 

If both you and your spouse have already claimed your benefits, the higher of the two payments becomes the survivor benefit and the smaller payment will be stopped. 

If your late spouse started collecting benefits but you have not, you may be able to restrict your application in order to maximize both the survivor benefit and the benefit from your own work record. For example, you may be able to take the survivor benefit and delay your credits until age 70 when you switch to benefits from your own record that would be higher than the survivor benefit. It is important to discuss this and other Social Security strategies with your financial advisor.

Ex-spouses are entitled to the same survivor benefits if their former spouse passes away as long as the marriage lasted at least 10 years.

Understanding your benefit

Couples have different strategies to consider when it comes to collecting Social Security benefits. The most important thing is maximizing your benefit in order to give you the life you and your spouse want in retirement. 

Spousal and survivor benefits are important and complex facets of Social Security. Working with a trusted professional that can help outline your options and set you up for the best chance of success is the best way to maximize this benefit. 

We are focused on family wealth management here at Legacy Wealth. Finances are a family matter and we are there to support yours as you navigate the many twists and turns that come with these transitions. How can you maximize your spousal Social Security benefits? Schedule a 15-minute call with us to find out. We can’t wait to hear from you.