You may have heard a lot on the news about President Biden’s tax plan. Are you worried about how it will affect you and your tax situation? In this episode of Financial Symmetry, Grayson Blazek helps to demystify Biden’s tax proposal. You’ll learn how you may be affected and whether or not you should be worried. Don’t wait until April 15 to start your tax planning! Press play to learn what you can expect next year.
Short Video Recap: https://youtu.be/wFzuPLnT9qc
Even though you may have heard plenty about Biden’s tax plan, it still isn’t the law--yet. As of May 2021, there has been no bill signed. This much-discussed tax plan still needs to make its way through Congress. There may be changes that take place in the way the plan is structured as part of the negotiation process. Although it hasn’t passed yet, it is still a good idea to learn as much as you can about the proposed tax law so that you can get a jump start on your future tax planning.
If your annual income level is at or below $400,000 there are many tax planning opportunities that come with the proposed tax law. The most notable change to the current tax plan is in the child tax credit. This tax credit will rise from $2000 per child to $3000. Additionally, for children under the age of 5, the child tax credit will be even higher--$3600. You may even see your tax credit hit your account early starting in July of 2021. Learn what you should be watching out for as Grayson Blazek explains how the new child tax credit will work.
The proposed tax law could turn retirement planning on its head. Many people use a 401K as their preferred retirement savings vehicle, but with the new proposal, the tax benefits of the 401K may no longer be as attractive for high-income earners. The Roth IRA could become the preferred avenue. When the new tax plan takes effect you may want to change your retirement contribution strategy. Press play to learn why.
Even though it is important to plan ahead when it comes to taxes, you don’t want the tax tail to wag the dog. This means that you don’t want your tax planning to decide everything about your financial planning. Taxes are a big part of financial planning, but it is also important to note that they are simply an inevitable side effect of making money. Now that you know a bit more about the future of tax laws you can begin to think forward to next year and beyond to structure any big liquidation events and consider where you stand financially. Download the Biden Tax Plan Decision Tree at FinancialSymmetry.com.
A recent survey discovered that millions of Americans 55 or older are in a rush to retire. The pandemic has many contemplating retiring years earlier than originally imagined after adopting a "life is short" mentality.
Video recap: https://youtu.be/q5r5ZiVw7d4
But before you rush into a decision to retire early you’ll want to consider it carefully. We've listed 6 steps below to analyze if you are ready to retire.
Why retire early?
Since the pandemic has made us all consider how we are spending our time, people have become more and more frustrated with their daily grind. Many people would like to spend more time with their families or pursuing hobbies that they enjoy.
However, if you are in a position to retire early it is important to think about why you really want to retire beyond the initial urge to leave the work world behind. It is important to consider how you will spend your days. Think about your purpose so that you are retiring to something, rather than simply running away from the 9-5. Have a plan, not just a portfolio.
Grayson Blazek and I have come up with 6 strategies to consider when thinking about early retirement. We’re using the word RETIRE as an acronym to help keep it easy to remember.
The question of whether to retire early is one that should not be taken lightly. You can use these 6 considerations to help you contemplate your retirement readiness, in addition, you can also download our Pre-Retirement Checklist to ensure that you are making the right decision for you and your family.
Have you ever been on your way to an epic summer road trip and then all of a sudden you come upon a roadblock? That can ruin the excitement you feel for the upcoming trip. This can happen in retirement as well. In retirement, you may confront roadblocks on your journey and if you don’t know how to maneuver around them it can leave you feeling stuck.
On this episode of Financial Symmetry, Allison Berger joins me to discuss 3 not so obvious retirement roadblocks that you may encounter along your retirement journey. We want to be your GPS so that if you experience them you can find your way around them without too much hassle.
Your first years of retirement are so important when it comes to investment returns. Sequence of return risk is when you have several years of bad returns at the beginning of retirement when you are starting to withdraw your money. There is no way to control your market returns, but there are ways to mitigate this risk.
To combat sequence of return risk, you’ll need to maintain a balanced portfolio the way you maintain a balanced diet. Use the financial food groups! In retirement, you can no longer subsist solely on financial junk food (stocks). You’ll want to make sure that you have a healthy serving of vegetables (bonds and cash) thrown into the mix.
After maintaining a growth mindset in the accumulation stage of life by using mainly stocks, you may be hesitant to reduce your risk load in retirement. However, having a balanced portfolio can ensure that you won’t be forced to sell when prices are down.
You want to ensure that your money will be worth something in retirement, but inflation reduces purchasing power over time. We can visualize how inflation works by thinking about what the price of milk was 20 years ago. Inflation not only impacts the prices of goods but also impacts your retirement income. Even with the cost of living adjustments, your Social Security may not have the same buying power in 20 years.
Inflation is also known as the silent assassin. It is most dangerous for those who are overly cautious. To fight inflation you’ll need to make sure that there is some growth in your portfolio. You’ll need to take on some risk.
It is important to understand how different events can impact your taxes. The best way to combat unforeseen tax bombs is through multi-year tax planning. Most people are used to tax planning one year at a time, but retirement offers an opportunity to plan ahead. You can reduce your lifetime tax burden by thoughtful planning.
If you put together a financial plan for retirement you’ll have a road map for the years ahead. In retirement, you’ll want to become flexible and look for opportunities. This is part of what we do with our clients. If you are interested in using us as your GPS to help you through those retirement roadblocks then check out our website and click Learn More.