Financial Planning

Why You Should Rethink Using Your Retirement Savings for Anything OTHER Than Retirement OR  Should You Use Your Retirement Savings to Pay for College, Fund a Down Payment, Start a Business, or…Anything Else???

Why You Should Rethink Using Your Retirement Savings for Anything OTHER Than Retirement OR Should You Use Your Retirement Savings to Pay for College, Fund a Down Payment, Start a Business, or…Anything Else???

As the years go by and your paychecks keep coming in, you diligently save for retirement, even benefiting from your employer’s match. Every now and then, you check your account statement, and that growing nest egg sure looks impressive!

 

So, when it’s time to fund your child’s college education, make a down payment on your dream home, or launch the small business you’ve been pondering for years, you might wonder: “Should I dip into my retirement savings?”

 

Our expert advice? A resounding “no!”

 

We understand the temptation, and as financial advisors, we often encounter this question. Let’s explore why using your retirement savings for other purposes isn’t a wise decision.

 

Reason #1: Penalties

 

Cashing out your retirement account early comes with several penalties:

 

  • Early Withdrawal: Withdrawing from your 401(k) before age 59½ incurs a 10% penalty from the IRS.

 

  • Taxes: The IRS mandates a 20% tax withholding on most 401(k) withdrawals.

For example, withdrawing $10,000 for a house down payment would result in a $1,000 penalty and $2,000 in taxes, leaving you with just $7,000.

 

Pro Caveat: If you’re set on using your 401(k) for a down payment with no other options, consider converting it to an IRA. First-time homebuyers can withdraw $10,000 without the 10% penalty.

 

Reason #2: Lost Growth

 

Early withdrawals disrupt the compounding process and may leave you with a smaller nest egg than you anticipated, potentially affecting your quality of life in retirement.

 

Like all investments, your retirement account grows through contributions and the power of compounding. The larger the balance, the greater the compounding effect. What does that mean for you? Essentially, that you have to contribute less to earn more over time.

 

By withdrawing $100,000 for your child’s college tuition or to kickstart your own business, not only are you reducing your account balance, but you’re also sacrificing the compounding benefits that this sum would have provided—which means you’ll have to put more money in to see the same net result.

 

Here’s an example. Imagine you’re 45 years old with $250,000 in your retirement account when you decide to withdraw $100,000 for college or a new business. Your account now has $150,000, and assuming an 8% interest rate and no further contributions for the next 20 years, your balance at age 65 would be around $699,000. However, if you had maintained the original $250,000 balance with the same 8% rate and no additional contributions, you’d retire with approximately $1,165,000. This difference of about $466,000 could significantly alter your retirement lifestyle.

 

Reason #3: A Later Retirement Start Date

 

It should come as no surprise that early withdrawals can push your retirement finish line way back, because your account balance is such a large part of what determines your retirement readiness. When you remove a large portion of your savings, you risk not having enough money to maintain your current lifestyle in retirement. With increased life expectancies and the rising costs of healthcare and living expenses, it’s more important than ever to ensure that your retirement savings remain intact and continue to grow.

 

You don’t want to find yourself struggling to make ends meet in your later years or being forced to work longer than you initially planned. This can be a huge blow to your overall well-being and quality of life.

 

Financial Planning: An Alternative to Withdrawing from Your Retirement Account

 

We understand that considering an early withdrawal from your retirement account is likely driven by financial necessity or concerns about the economy. However, there are alternative options to explore. From initiating college savings plans early to establishing emergency funds, we’re here to help you manage your overall financial well-being and achieve your savings and retirement objectives.

 

If you require guidance in this area, we invite you to schedule a consultation. The support and expertise of a financial advisor can significantly impact your ability to preserve and grow your wealth for the future, as well as help you meet your cash flow needs today.

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

How to Pay Fewer Taxes on Retirement Account Withdrawals

How to Pay Fewer Taxes on Retirement Account Withdrawals

Where there is income, there will be tax. So, it’s no surprise that building a successful retirement income plan will have a lot to do with how much tax you will pay on your account withdrawals.

 

In all honesty, planning for the “money-out” phase of retirement is often more complicated than the “money in” phase. That’s why it’s often likened to climbing Mt. Everest—because 80% of injuries occur not on the way up, but on the way down.

 

So how do you limit your tax liability to improve your odds of retirement success? Here are a few considerations to get you started.

 

First, understand how your retirement income will be taxed.

 

It is much easier to shield your money from taxes during your retirement plan’s accumulation phase than in the distribution phase. That’s because, as you start receiving income in retirement, the IRS can come at you in ways you may not have considered.  An income source on the left will affect the tax treatment on the right and could affect your Medicare and Social Security in the background. Like we said, there are a ton of moving parts.

 

What this means is that what you see on the surface, as far as your retirement account balances and your projected cash flow from these accounts, may be different from what you actually get. So many retirees are blindsided with lower-than-expected cash flows because they weren’t prepared for how their income would be taxed.

 

  • Ordinary income taxes on withdrawals.

 

The money accumulated in your 401(k) or IRA is worth less than the amount stated on your account statement. That’s because, after all the years of tax-deferred accumulation in those accounts, the IRS is waiting in the wings to get its share. That happens as soon as you start taking distributions, which are taxed as ordinary income. 

 

So, if you have accumulated $500,000 in your 401(k) or IRA, here is what it would be worth after taxes:

 

$325,000 if you’re in the 35% tax bracket

$315,000 if you’re in the 37% tax bracket

 

Understanding where you stand on an after-tax basis is crucial in planning your distributions, so they have the most negligible impact on your tax bracket. It also puts you in a position to consider strategies that can help mitigate the impact of taxes. 

 

  • Requirement minimum distributions: If you think you can avoid taxes by not taking distributions, the IRS forces you to take withdrawals starting at age 73 through the required minimum distribution (RMD) rules, whether you need the income or not. This can have the effect of pushing you into a higher tax bracket, increasing your tax liability. However, with that understanding, you can explore strategies to mitigate its impact. 

 

  • Social Security “tax torpedo”: Not only are withdrawals from tax-deferred accounts fully taxable, but they can also trigger the Social Security “tax torpedo,” which exposes as much as 85% of your Social Security benefits to ordinary income taxes. 

 

Then, choose strategies for controlling taxes in retirement.

 

Knowing what they know now in terms of retirement income taxation, many retirees would probably have chosen a different strategy that included allocating more of their retirement contributions among post-tax accounts that generate tax-favored capital gains or a Roth IRA for its tax-free withdrawals (which are is not considered provisional income included in the Social Security tax calculation). 

 

However, retirees knocking on retirement’s door still have an opportunity to develop an income strategy that can effectively minimize their taxes and stretch their assets further into the future. 

 

Tax-Efficient Withdrawal Strategies: An essential strategy for reducing taxes on retirement account withdrawals is implementing a tax-efficient withdrawal strategy. This involves withdrawing funds from taxable accounts before tax-deferred accounts, which can help reduce tax liabilities with a more favorable capital gains tax. It’s essential to work with a financial advisor to determine the best approach for your situation.

 

Consider a Roth IRA conversion: While contributions to a Roth IRA are not tax-deductible as with traditional IRAs, withdrawals are tax-free. A Roth’s tax-free income in retirement can lower your overall taxes in several ways, not only increasing your cash flow but also extending your retirement capital further into the future. 

 

  • The tax-free income will not push you into a higher tax bracket, as would taxable withdrawals from a tax-deferred qualified retirement plan.
  • The tax-free income will not count towards the stealth Social Security tax torpedo on excess earnings.
  • There is no required minimum distribution rule for a Roth IRA, enabling you to keep growing your retirement capital tax-free. 

 

The tax code allows individuals who otherwise don’t qualify for a Roth IRA to fund a traditional IRA or 401(k) plan and then convert it to a Roth. There is no income limit or limit on how much or how many times you convert. 

 

When you do convert, it triggers a tax on the conversion amount because it is treated as a taxable distribution. For example, if you transfer $10,000 from a tax-deferred qualified retirement account to a Roth, that amount is added to your adjusted gross income (AGI) and taxed at your federal tax rate. 

 

 If you have $100,000 in a traditional IRA, it can be converted all at once. However, considering the tax implications, it may be better to convert portions of it over several years. 

 

Qualified Charitable Deduction to Offset RMDs: A Qualified Charitable Deduction is a direct, tax-free transfer of funds from your IRA to a qualified charitable organization. To be eligible, you must be at least 73 and ready to take your first RMD. It’s a direct transfer, so the check must be payable to the charitable organization by December 31 to qualify. If married, you and your spouse can each transfer up to $100,000 tax-free from your IRA each year, even if it exceeds your RMD.

 

The QCD is unavailable for 401(k) plans, SEPs, or SIMPLE IRAs. However, if you roll any of those plans into an IRA, it becomes QCD eligible. 

 

These strategies have tax implications, and everyone’s tax situation is different. You should always consult a qualified professional tax advisor to discuss your specific tax situation and how these tax reduction strategies apply to your situation. 

 

 

Find the Plan That’s Right for You

At Platt Wealth Management, we like to encourage our clients to dream, plan, and do. Don’t let an underdeveloped tax strategy get in the way of “doing” all you’ve dreamed and planned for.

If you’re in need of a financial guide to help you make your way through the “money in” and/or “money out” stages, we would love to see if we’re a good fit. Simply schedule your complimentary phone consultation to discuss your opportunities. 

 

 

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Top # Medicare Planning Mistakes and How to Avoid Them: A Guide for High-Net-Worth Clients

Top # Medicare Planning Mistakes and How to Avoid Them: A Guide for High-Net-Worth Clients

Linda had always been the picture of health. She ate well, exercised regularly, and never had any major health issues. So when she retired at the age of 65, she didn’t think much about long-term care. After all, why would she need it?

 

For the first few years of retirement, Linda enjoyed traveling, spending time with family and friends, and pursuing her hobbies. But then, she started to notice that she was having more trouble with everyday tasks. Her arthritis made it difficult to get around, and her memory wasn’t what it used to be.

 

Despite these challenges, Linda was determined to stay in her home as long as possible. She hired a part-time caregiver to help her with housekeeping and personal care, but she didn’t think much about the cost. After all, she had plenty of savings, and she assumed that Medicare would cover any medical expenses she might have.

 

But as Linda’s health continued to decline, her care needs became more complex. She needed help with bathing, dressing, and getting in and out of bed. She needed medication management and supervision to ensure that she didn’t wander away from home. And as her needs increased, so did the cost of her care.

 

Linda was shocked to discover that Medicare doesn’t cover long-term care. She had assumed that her savings would be enough to cover any costs, but she hadn’t counted on needing care for years on end. She had no long-term care insurance, and she hadn’t set aside enough money to pay for the care she needed.

 

As a result, Linda’s savings quickly dwindled. She had to sell her home to pay for her care, and she had to rely on Medicaid to cover some of her expenses. She was no longer able to afford the things that had brought her joy in retirement, like travel and hobbies. Instead, she spent her days in a small room in a nursing home, watching TV and waiting for visitors.

 

Linda’s story is a cautionary tale for anyone who thinks that long-term care is something they can worry about later. The truth is that none of us know what the future holds. Planning ahead for long-term care can be the difference between a comfortable retirement and financial ruin.

 

But, this is just one of the many common mistakes high net worth investors have made when planning for the Medicare piece of their retirement puzzle.

 

Don’t make a major Medicare planning mistake like Linda did. Start planning for your future today, and talk to a financial advisor about how you can protect your assets and ensure a secure retirement.

 

Mistake #1: Bottom of Form Not Understanding Medicare

 

One of the biggest mistakes high net worth clients make is not understanding the different parts of Medicare. Medicare is made up of several different parts, including Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage), and Part D (prescription drug coverage). It’s crucial to understand how each part works and what they cover to ensure you have the right coverage for your needs.

 

Mistake #2: Choosing the Wrong Medicare Plan

 

Choosing the wrong Medicare plan can be a costly mistake. You may be tempted to choose a plan with a lower premium, but this could result in higher out-of-pocket costs for medical expenses. On the other hand, choosing a plan with a higher premium could be a waste of money if you don’t need the additional coverage.

 

Mistake #3: Not Reviewing Medicare Coverage Annually

 

Your health needs can change from year to year, and so can your Medicare coverage needs. It’s important to review your coverage annually during the open enrollment period (October 15 to December 7) to ensure that you have the right coverage for your needs. Failing to do so can result in missed opportunities to save money or receive better coverage.

 

Mistake #4: Failing to Plan for Long-Term Care

 

Medicare does not cover long-term care, which can be a significant expense for high net worth individuals. Failing to plan ahead for these costs, either by purchasing long-term care insurance or setting aside savings, can be a costly mistake that depletes retirement savings.

 

Mistake #5: Not Working with a Financial Advisor to Avoid Medicare Planning Mistakes

 

Working with a financial advisor who specializes in Medicare planning can help high net worth individuals avoid costly mistakes. An advisor can help you understand the different parts of Medicare, choose the right plan for your needs, review your coverage annually, and plan for long-term care costs. By working with an advisor, you can have peace of mind knowing that your Medicare planning is in good hands.

 

“Working with a financial advisor has been a game-changer for my retirement planning. Before, I was making costly mistakes with Medicare and had no idea how to plan for long-term care costs. But my advisor has helped me navigate these challenges and ensure a financially secure retirement.” – John D., high net worth client

Next Steps

 

Medicare planning can be complicated and confusing, but it’s a crucial part of retirement planning for high-net-worth individuals. By avoiding common Medicare planning mistakes and working with a financial advisor who specializes in Medicare planning, you can ensure a financially secure retirement. Don’t wait until it’s too late to start planning. Schedule a call with Platt Wealth Management today to learn how we can help you avoid costly Medicare planning mistakes and achieve your retirement goals.

 

You can omit this or replace it with a real testimonial if you’d like.

 

 

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Didn’t Prepare for Your Taxes Very Well Last Year? Here’s What to Do Now

Didn’t Prepare for Your Taxes Very Well Last Year? Here’s What to Do Now

Taxes are no fun. In fact, they might join root canals at the top of the list of “least favorite things to do with your time,” which is why many folks tend to wait until the last minute to deal with tax-prep related responsibilities.

 

While it feels great just to get them done and out of the way, you may have missed some things in haste that could have produced a better outcome or decreased the chance of errors. Luckily, it can be different this year. All it takes is some mindful choices, a little organization, and perhaps a financial advisor partner to see better outcomes in the future.

 

Check Your Tax Withholding for the Upcoming Year

 

Federal income tax is a pay-as-you-go-tax, which means you pay the tax as you earn income during the year. In order to determine how much you pay out of each paycheck, you are asked to adjust your withholding amount on your W-4. Filing status, number of withholding allowances claimed, and additional withholding all affect how much is withheld from each paycheck. One way to avoid a surprise tax bill at the end of the year is to make sure you aren’t withholding too little throughout the year. To check and change your withholding, you need to review and possibly complete a new Form W-4 and submit it to your employer.

 

Avoid Triggering Major Tax Events

 

One of the ways many folks end up with a large tax bill at the end of the year is by liquidating assets that carry hefty capital gains taxes on them. Just last year, we worked with a client who inherited a lump sum from her mother and liquidated a significant amount of money to put a down payment on a house. But, because she wasn’t working with any type of financial or tax advisor at the time, she wasn’t aware of the tax liability that would result from doing so.

 

A good rule of thumb to keep in mind is this: if it looks like income, it will be taxed. There are moves that we could have made with this client (if she had been working with us at the time) to help her avoid this huge tax bill in the first place, but let it just go to show that major money moves, more often than not, come with major tax consequences. Always consult with a financial advisor before receiving funds or liquidating assets for income.

 

Get Organized

 

Keeping all your important tax documents in one place can make it much easier to coordinate with your accountant or CPA when the time comes. Below is an annual checklist you can use to start getting organized today.

 

  • Gather Your Personal Information

 

Your best source for your personal information is last year’s tax returns. They have Social Security numbers for you, your spouse, and your dependents. Note any changes that need to be applied to this year’s returns, such as additional dependents or an address change. They’re also good as a starting point for identifying all your deductions and credits. If you’re starting with a new CPA or accountant to help you, they’ll require this to get started.

 

  • Gather Your Income Documents

 

W-2 forms. You should receive your W-2 form by January 31, either through the mail or electronically.

 

1099 forms. You should receive a 1099 form for various sources of income, including 1099-MISC for any contract work you’ve done, 1099-K for income received by third parties, such as PayPal, 1099-INT for interest earned, and 1099-DIV for any dividends received.

 

Letter 6419-Advanced Child Tax Credit. If you received advanced child tax credit payments, you need to compare the amount you received during 2021 with the amount you are allowed to claim on your 2021 return. If you received less than the amount you are eligible for, you can claim a credit for the remaining amount on your return. If you receive more than you’re eligible for, you may need to repay all or a portion of the excess amount.

 

  • Gather Records and Receipts for Deductions

 

Generally, you can only claim deductions if they can be documented. This can be the most time-consuming part of tax preparation, but it can be worth it if it means lowering your tax bill. Unless you think your total deductions will exceed the standard deduction ($12,550 for individuals or $25,100 for joint filers in 2021), you don’t have to worry about itemizing your deductions on Schedule A. If your total deductions were close to the standard deduction last year, it may be worth running through them this year to see if any additional deductions could bring you over the top.

 

One place to look for additional deductions is with sales taxes. While you don’t need to keep sales receipts for claiming the standard sales tax deduction (based on IRS formulas), any sales taxes paid on large items, such as a car, home renovation, appliances, can be claimed on top of that.

 

A note regarding charitable deductions: The charitable deduction limit increase allowed under the CARES Act has been extended to 2021 deductions. That means you can claim charitable giving deductions up to 100% of your Adjusted Gross Income (AGI) on cash donations.

 

As always, your charitable contributions must be documented to claim them.

 

In addition, the above-the-line deduction for charitable deductions has also been extended to 2021. So, if you don’t itemize, you can still claim up to $300 ($600 for joint filers) of charitable donations on your 1040 form.

 

Other above the line deductions that can be claimed even if you don’t itemize:

 

  • IRA contribution
  • Health savings account contributions
  • Self-employment expenses
  • Moving expenses for military members
  • Student loan interest payments
  • Educator expenses

 

  • Estimated Tax Payments

 

If you make federal estimated tax payments, have your record of payments handy. This will help you and/or your tax preparer ensure all the bases are covered.

 

The tax preparation checklist may apply to most taxpayers, but every situation is different. If you are a business owner, you will need to follow most of the same steps in preparing to file your Schedule C. By taking the time and effort to thoroughly prepare for filing, you’ll cut down on the time involved in completing your taxes online. If you file your taxes with a tax preparer, you’re likely to save on fees.

 

Work with a Professional Financial Advisor

 

When it comes to taxes, you don’t know what you don’t know. And with the ever-changing tax code, there is A TON of stuff you wouldn’t know if you weren’t in the thick of it every day. That’s why we always remind our clients that tax planning is an integral part of wealth planning, and should be top of mind year-round, not just during tax season.

 

At Platt Wealth Management, we work with clients not only on financial life planning and investment management, but tax strategy, as well. We also collaborate with their tax professionals to help ensure all the bases are covered year-round. That way, when tax time rolls around, we don’t encounter any costly surprises.

 

If this sounds like the type of partner you’d like to have in your corner, we encourage you to schedule a complimentary consultation over the phone or virtually via Go-to-Meeting. Or, you can call the office directly at 619.255.9554. We serve clients locally in San Diego, California and virtually throughout the country. We look forward to meeting you.

 

 

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Beyond the 401K: Where High Earners Should Invest to Save for Retirement

Beyond the 401K: Where High Earners Should Invest to Save for Retirement

 

At the heart of it, saving for retirement isn’t terribly complicated. You know you need to max out your employer-sponsored 401K so you can receive your employer match and allow your investments the opportunity to grow tax-free. This is undoubtedly the best place to start. But if you’re a high earner, your 401K won’t be nearly enough to fund your retirement nest egg. So where do you invest next?

 

401K Limits Aren’t Enough

 

As we head into 2023, the elective deferral limit for anyone participating in a 401k plan will be $22,500 (an increase from $20,500 in 2022). With the catch-up contribution limit, that amount is $30,000 for those aged 50 and over. But for high earners, these annual limits won’t be enough to create the income you need to continue your current lifestyle in retirement.

 

So, to create that comfortable retirement you’ve always dreamed of, it’s time to put more of your money to work.

 

  • IRAs—Traditional and Roth

 

Individual Retirement Accounts (IRAs) are the natural next place to save as they are also tax advantaged. But, there are two types—traditional IRAs and Roth IRAs. The main difference in these two types of accounts is when the tax savings are captured. Traditional IRAs utilize pre-tax money for contributions and are taxed upon withdrawal in retirement, whereas Roth contributions are funded with post-tax dollars, but retirement withdrawals are tax-free.

 

However, Roths have no Required Minimum Distributions (RMDs). This type of account allows you to begin withdrawing money on your timeline and not the one that is determined by the IRS.

 

In 2023, you’ll be able to contribute up to $6,500 to both types of IRAs – $7,500 for those over 50.

 

Keep in mind, though, that Roth IRAs do have income limits:

 

  • For single filers: $138,000 to $153,000
  • For married couples filing jointly: $218,000 to $228,000
  • For married and filing separately: up to $129,000

 

Chances are, you probably earn too much to open a Roth IRA, but don’t worry. You can still take advantage of the Roth account benefits by converting traditional IRA fund into a Roth through an annual Roth Conversion.

 

  • Health Savings Account

 

After you’ve maxed out your 401K contribution, funded a traditional IRA and perhaps performed a Roth IRA conversion, you should turn your sights toward Health Savings Accounts. Their name might be throwing you for a loop, but HSAs can be great retirement saving vehicles. Here’s why.

 

Health Savings Accounts are heralded for their triple-tax advantage: they are funded with pre-tax dollars, experience tax-free growth, and qualifying medical expenses are covered with tax-free withdrawals. Considering the average American couple will spend $315,000 in out-of-pocket medical expenses in retirement, HSAs provide a way to save for them while also generating tax-free retirement income. Or, you can withdraw the funds and use them as you need (for non-medical related expenses) once you have reached age 65 and simply pay regular income tax on those withdrawals.

 

Keep in mind, only folks with a high-deductible health plan are eligible to open an HSA. However, if you lose or change away from your high-deductible plan, your HSA remains in your possession and the money can remain invested.

 

  • Brokerage Accounts, Real Estate, & Business Ventures

 

Once you have maxed out your tax-advantaged options, there are several options to choose from when it comes to investing for the future. If you’re comfortable with a little more risk, the following have proven great ways to supplement retirement income.

 

Brokerage Accounts (Taxable): Taxable brokerage accounts remain the most flexible for high earners with a substantial capacity to save. There are no income limits, annual contribution limits, and the assets can be accessed at any time for any reason. While you won’t benefit from any tax breaks with this account, you are in complete control.

 

Real Estate: There are multiple ways to invest in real estate. You can invest in residential properties to rent out, buy and flip houses, invest in a company that buys and flips houses, purchase commercial property to lease, or even invest in a Real Estate Investment Trust (REIT). This type of investing is typically best for investors with large cash reserves and an understanding of the real estate market.

 

Business Ventures: Since 2015, investors have been able to invest in startups and small businesses through brokers or crowdfunded campaigns. This can be an exciting option, but typically quite risky. You’ll want to make sure you do your due diligence and to familiarize yourself with what your investment entails and what your compensation options look like. Or, if you want to keep things closer to home, you can choose to invest in a friend of family member’s business. But, like with any large transaction, be sure you have the proper legal paperwork in place before handing over your money. This type of investment is attractive to those passionate about entrepreneurship and comfortable with risk.

 

Fill One Bucket, Then the Next

 

If you want to maintain or enhance your quality of life in retirement, it’s important that you put your money to work as efficiently as possible to keep from overpaying in taxes or missing out on potential income. We can help. If you’re ready to put your money to work, let’s chat. We can help you determine which savings vehicles will enable the happy, comfortable, and stress-free retirement you need.

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

The Pros and Cons of Retiring at Different Ages

The Pros and Cons of Retiring at Different Ages

While retirement sounds like an absolute dream, getting there can often feel a little stressful. Are you saving enough? How much do you really need? Will the market be favorable when you do? And, the big one: When can you actually retire?

 

Narrowing down the best time, or really the best age, for you to retire comes with a lot of considerations, especially what sort of lifestyle you want to have in retirement. So, we’ve put together this list of the pros and cons of retiring at different ages to help guide you to your ideal retirement window.

Retire Before Age 65

 

Retiring before age 65 is traditionally “early” and is what most of us would like to do. However, the Center for Retirement Research data shows that most Americans retire before or at age 65 with men retiring at an average age of 65 and women at an average age of 62. But is an “early retirement” right for you?

Pros

The two biggest advantages are that you are likely to have more energy and better health at a younger age. Plus, shifting from a full workday to either a part-time job, monetizing a hobby, or finding volunteer opportunities can help make the retirement transition easier.

Cons

Your retirement funds will also have to last longer if you retire early. Leaving behind your career and what are probably your highest earning years early will mean you could be leaving however many years of potential retirement savings (and potentially an employee match) behind. Plus, while you are eligible for Social Security at age 62, your monthly amount will be less if you don’t wait until you are old enough for your full benefit. And, finally, you will need to have a plan for health insurance since you won’t be able to get Medicare until age 65.

Retire Between Ages 66 and 70

 

Sixty-five has been viewed at the age of retirement since Social Security was established. However, as of 2022, Social Security views the full retirement age at 66 for those born between 1943 and 1959 and at the age 66 plus a few months depending on your exact birth year if you were born between 1955 and 1959. For anyone born after 1960, the full retirement age is 67.

Pros

Getting a few more years of savings and investing on top of waiting until you are eligible for both Medicare and your full Social Security benefit can make a huge difference in your finances. Private insurance premiums and prescription co-pays are not cheap after all. Plus, you paid into Social Security all of those years. So even if you have a pension and other retirement savings accounts, waiting just a few more years to get your Social Security benefits will ensure you get the full amount you are eligible for.

Cons

Well, you saw the data above. Most Americans aren’t waiting to age 66 to retire and most don’t want to. So waiting those extra years could feel like you’re back in school waiting for that last month of school to get over.

Retire at Age 70 and Older

 

If you’re in the group of folks who have to wait until 67 to get their full Social Security benefits, waiting just another couple years may not seem too bad. But is there anything to gain or lose?

Pros

Some folks just love their work and feel like they would be lost without it. And that’s OK! So continuing to work longer may be better for you mentally and emotionally if you fall into that category. Plus, if you wait until age 70 or older to start taking your Social Security benefits, your payout will be the highest on top of the extra years of retirement savings and investing. You may never have to worry about having enough money in retirement.

Cons

You will not be able to predict what your energy level or overall health will look like as you get older. Your health could start declining before you retire or after. You could be giving up the opportunities to travel or do other things you enjoy that you always planned to do in retirement if you wait. Even if your nest egg is larger, you could end up not having enough time to use it.

 

Finding the Right Answer

 

There is not really a right or wrong answer to when you should retire. Each person and your unique circumstances can change and so can the financial landscape. Many of our clients even benefit from doing a “test run” on their retirement plan before they actually leave work to see if this changes their perception of their need. Either way, we encourage you to lean on an expert to help guide you to a retirement plan that works best for you.

 

At Platt Wealth Management, we empower our clients to lead their best lives by providing them with the financial expertise they need. We help our families think through their goals, and even dreams they never thought possible. Then, we work together to put in place financial options that give them peace of mind. Schedule a call with our team today to discuss your opportunities.

 

 

 

 

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

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