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Financial Symmetry: Balancing Today with Retirement

When considering retirement, do you wonder what financial opportunities you may be missing? Busy lives take over and years pass without taking advantage. In this retirement podcast, the Financial Symmetry advisors unveil financial opportunities, to help you balance enjoying today so you are ready to retire later. By day, they are fiduciary fee-only financial advisors who answer questions about tax savings, investment decisions, and how to save more. If you’ve been putting off your financial to-do list or are just not sure what you’ve been missing, subscribe to the show and learn more at www.financialsymmetry.com. Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for over 20 years.
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Now displaying: October, 2021
Oct 18, 2021

The decumulation stage of retirement is different from all those years you spent accumulating your retirement savings.

Video Recap: https://youtu.be/UyvHGltT1Z0

This is why you need to have a retirement plan in place to help guide you through this transition. Unfortunately, the same plan won’t work for everyone which is why it is important to understand what type of strategy would work best for you. 

On this episode of Financial Symmetry, Allison Berger and I will check out the risks and opportunities to consider as you approach the decumulation stage of your life. Listen in to hear what you need to consider to make the most of your personal retirement plan. 

What to consider if you are retiring before age 59.5 

If you are planning to retire before the age of 59.5 you first need to make sure that you have all your ducks in a row. Before age 59.5 you won’t be able to access your various retirement accounts without a penalty, so you’ll want to make sure that you have access to money for this time period outside of a traditional retirement account. You could obtain funds from a brokerage account, home equity, rental properties, or an inheritance. Before you retire early, think about which funds you could source without having to take a penalty by dipping into your tax-deferred accounts. 

You’ll not only need to know where your money is coming from when retiring early, but you’ll also have to think about health insurance. Obtaining health insurance before you are eligible for Medicare can be quite costly. Many people choose to go with COBRA or the ACA. Make sure you consider the costs of health insurance when creating your retirement plan. 

The younger you retire the more susceptible you are to sequence of return risk. Sequence of return risk can lead many people to become conservative with their investments, however, this leads to increased inflation risk. To consider these two types of risk it is important to have a balanced portfolio

Retirement between the ages of 59.5 and 65

If you are planning to wait until full retirement age at 67 or beyond then you may be funding the early years of retirement all on your own without the help of Social Security. Once you reach the age of 59.5 you can access your retirement accounts without penalty. However, it is important to remember that income from your IRAs, 401Ks, and 403Bs will be taxed when you access them. 

Sequence of returns is still a factor this early on in retirement so make sure that your portfolio can weather the storms that the market could bring. Listen in to discover what you should be thinking about 2 years before you apply for Medicare. 

Retirement considerations after age 65

Once you reach 65 you can enroll in Medicare and will no longer have to worry about paying for costly medical insurance. This is a good time to start thinking about when you will take Social Security and the tax ramifications. If you are unfamiliar with the Social Security tax bubble check out episode 101 to learn more. 

During retirement, your annual tax plan should always be taken into consideration with your overall retirement tax plan to ensure that you save as much as you can over the course of your lifetime.

Retirement strategies don’t always go according to plan

You’ve probably heard of popular retirement strategies like the 4% rule, the guardrails, the bucket strategy, or a systematic withdrawal approach. These strategies are all great on paper but they can often fall apart when life gets in the way. We like to take a flexible approach to retirement planning that is based on your life and your financial plan. We look at the big picture to think about how you can reduce your lifetime tax rate and create a plan that works with your financial goals. 

Examine where you are on your retirement journey. Think about your risks and opportunities when creating your retirement plan. Listen to this episode to hear what you need to think about during the different phases of your retirement. 

Outline of This Episode

  • [2:40] What to consider if you are retiring before age 59.5 
  • [7:30] Considerations for those between the ages of 59.5 and 65
  • [9:49] Retirement strategies don’t always go according to plan
  • [12:10] Retirement between ages 65 and 72
  • [16:39] Retirement in the post-RMD age
  • [22:28] Progress principles

Resources & People Mentioned

Connect With Chad and Mike

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Oct 4, 2021

The American Families Plan hasn’t yet become law, but that doesn’t mean that you can’t prepare for the changes that may be coming.

Video recap: https://youtu.be/DFVgJZPwEIc

In this episode we consider the planning opportunities that could arise with the changes in tax legislation. Our goal is to ensure that you have all the tools in your toolbox so that you can minimize your tax burden. 

Who will most be affected by the tax law changes? 

The current tax law comes from the Trump administration and dates back to 2017. Prior to the current tax cuts, the marginal tax rate for those making over $400,000 was 39%. The present marginal tax rate is 35% for married couples who earn $650,000 or more.

The American Families Plan essentially reverts the tax cuts back to the pre-2017 rates. Those most affected by the proposed tax plan are higher-income earners. The current administration sees the tax changes as a way for high-income earners to pay their fair share of taxes rather than burdening those at lower income rates.

How will capital gains taxes change?

If the American Families Plan passes and becomes law then the new income tax structure would go into effect in January of 2022 which doesn’t leave much time for tax planning. 

In addition to the changes in marginal income tax rates and compressing the income brackets, there are proposed changes to the capital gains tax. The original capital gains tax plan had been to keep the capital gains tax at the income tax rate, but new changes to the legislation have dropped that rate to 25% for those who earn $400,000 or more.

Unlike the income tax plan, the capital gains tax proposal would take effect the day it was written which was in September of 2021. This leaves no time for advanced tax planning, however, Grayson Blazek offers plenty of ideas in this episode on how you can best prepare for any upcoming changes in the tax code.

Are we saying goodbye to the backdoor Roth IRA?

The backdoor Roth has been a strategy that high-income earners have been able to utilize for years to continue to fund Roth IRAs. Under the new proposal, the backdoor Roth would disappear. Rather than lamenting the loss of this useful tax tool, a better outlook is to be thankful that you were able to implement it when you could. To ensure that you take full advantage of what could be the last year of the backdoor Roth, make sure to get all of your backdoor Roth contributions in by January 31, 2021.

How will the American Families Plan affect families?

The main way that this proposed legislation will affect families is by the extension of the expanded child tax credit. The American Rescue Plan increased the child tax credit up to $3000 per child and the American Families Plan would ensure the continuation of this credit. In addition, American families would continue to receive the benefit monthly as they have in the latter part of 2021. 

Make sure to listen to the entire episode to hear the rest of the highlights of the proposed legislation. We want to keep you informed of all the potential effects of the changes in the tax code so that you can make careful decisions in your tax planning. If you have any questions regarding these changes or are looking for an advisor that stays on top of the latest in tax planning legislation, please reach out to us at FinancialSymmetry.com.

Outline of This Episode

  • [2:40] Who will be most affected by the tax law changes?
  • [6:15] How will capital gains change?
  • [10:50] The death of the backdoor Roth IRA and mega backdoor Roth IRA
  • [12:44] Who would be affected by a surtax on ultra-high income earners?
  • [15:33] Changes to RMDs
  • [20:26] Estate tax changes
  • [22:55] The child tax credit
  • [25:52] Today’s progress principle

Connect With Allison and Grayson

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