News

17
Feb

Why Your Advisor Is Talking to You about Fixed-Indexed Annuities

Once thought of as a single retirement funding source, fixed-indexed annuities are becoming part of a retirement strategy. Not only for pre-retirees and those in retirement. Why? First, the reality of Social Security retirement is at risk. As well as the reduction of benefits is a concern as our population ages. Secondly, fixed-income annuities provide an income stream in retirement that you can’t outlive.

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10
Feb

Drawing Social Security Early and Still Working? The Social Security Earnings Test is Crucial.

Many people decide to ‘semi-retire’ early and start taking their Social Security Retirement benefit at the earliest age possible. It’s appealing to be able to work part-time or where you have an interest. You may start a small business while making an income and receive Social Security retirement benefits. While early retirement and a part-time job may be of interest to you, it can affect your Social Security Retirement benefits if you aren’t full retirement age. Take the social security earnings test to learn more about your social security benefits.

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3
Feb

The SECURE Act Is Law- Notable Changes to Retirement Savings

Effective January 1, 2020, the SECURE Act, a progressive change to retirement savings plans, is now law. The last legislation to retirement savings happened when Congress allowed for the automatic enrollment of employees. Also the addition of Target Date funds to retirement plans in 2006.

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27
Jan

Your Retirement Nest Egg- A Carton Full of Options

Many people refer to their retirement savings as a “retirement nest egg,” but in theory, it should be made up of many sources of retirement income-many eggs. Even if Social Security and a company retirement plan were their only retirement savings sources, likely they haven’t thought about their withdrawal strategy. It’s not as simple as just drawing down retirement income from one or two sources without a plan. Have the following been considered?

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20
Jan

Aging in Place: Growing Older at Home

The U.S. population continues on growing older, with the baby boomer generation now the largest generation ever. By 2035, one in three heads of households will be someone age 65 and older. The American population will have one in five people age 65 or older, an increase of 30 million people over the next thirty years. Not all people in this group have recovered from The Great Recession, leaving them with lower incomes and homeownership rates than previous generations. As our population ages, the demand for affordable housing connected to accessible services will continue to increase, and many will find their own homes the only affordable option.

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13
Jan

Why Fixed- Indexed Annuities? A Closer Look at Protecting Retirement Income

One of the most critical things in retirement is not having enough income to last one’s lifetime. An annuity can help you by protecting retirement income. Retirees need a reliable source of income that protects them from the complex issues of unpredictable market-creating havoc in their retirement portfolio. For this reason, fixed-indexed annuities are becoming a standard solution in financial planning, along with other client-appropriate investments.

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6
Jan

Until Debt Do Us Part

The thought the division of joint debt discussed when saying “I do,” to any relationship. For couples that combine both assets and liabilities, a split signals the dilemma of dividing both. About half of all marriages in the U.S. end, according to the American Psychological Association, making debt a significant hindrance to financial security for some divorcees.

In a perfect world, the spouse that acquired the debt would pay if off; however, that is not always the case. Creditors will hold both spouses listed on the note or agreement. This is regardless of the way the court determines the debt is to divide.

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23
Dec

Understanding Fixed Income: For Today and the Future

Fixed income is something many Americans don’t understand, according to the 2019 survey, “Fixed Income, Not Fixed Thinking,” by BNY Mellon Investment Management, one of the largest asset managers in the world. The study revealed that the majority of Americans surveyed have a limited understanding of fixed income investments, regardless of age, income, education level, and other demographics. The lack of understanding ranged from bonds, different fixed-income solutions including fixed-income insurance products, comprehending how fixed-income plays into retirement planning, and understanding its risk in comparison to other asset classes.

The same study revealed that Americans think fixed income is important solely in the immediate run-up to retirement, or during the decumulation phase when investors start to draw from their retirement nest egg. However, fixed-income solutions can play a part in anyone’s portfolio at any age.

Fixed-Indexed Annuities

One such fixed-income solution, fixed-indexed annuities, offer protection of principal, growth based on the performance of the index it follows and provides fixed payments for the insured’s life during the decumulation phase. Interested is credited when the index value increases, but the interest rate is guaranteed never to be less than zero, even if the market goes down. All annuities are insurance products and not traded on public markets. Annuities are guaranteed by the claims-paying ability of the insurance company issuing them.

A secondary 2019 study by WealthManagement.com Research, “How Advisors are Using Fixed-Income Annuities,” reports that two-thirds of advisors surveyed are very familiar with these products and have incorporated them into client portfolios to obtain these key objectives:

  • Principal protection
  • Tax-deferred growth
  • Retirement income planning
  • Avoid Social Security income offset
  • Current income
  • Estate/Legacy planning

Before purchasing a fixed-indexed annuity, it is important to understand all fees associated with the annuity, if your money is available right away, and the surrender fees, if any. Secondly, there are pros and cons to purchasing a fixed-indexed annuity:

Pros:

  • Your principal is protected from a down market, and you won’t lose your initial investment or accumulation.
  • Grow on a tax-deferred basis.
  • The return is based on an index (ex. The S&P 500), which grows the annuity’s value over time.
  • Provides a guaranteed lifetime income and protection against longevity risk; you receive annuity payments for life.

Cons:

  • Some are complex, costly, and aren’t always necessary for the investor.
  • A Fixed-income annuity is not a growth-market product and is unregulated. Ask for written information from the insurer about the annuity product and don’t just accept the ‘sales-hype.’

If you have questions regarding fixed income options or fixed-indexed annuities as a way to protect the premature depletion of your assets during a down market in retirement, contact our office.

Additional Disclosure: The newsletter and links are being provided as a service to you. Please note that the information and opinions included are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. The information is not intended to be used as the sole basis for financial decisions. Nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

Additional Disclosure: An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax-qualified plans, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income. Taxes and penalties may apply to non-qualified distributions. Consult a tax advisor for specific information.

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We specialize in providing strategies and guidance for those who are seeking a better lifestyle in retirement. At LKN Financial, we know that it is your retirement, and you should have control over it. In addition, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

16
Dec

Financial Planning for a Couple’s Age-Gap

Couples usually don’t retire at the same time when they have an ‘age gap’ between them. An age gap relationship is one where there is eleven or more year’s age difference between them. Age-gap relationships are becoming more common as people are choosing to marry later in life with someone significantly younger. This type of relationship requires some additional financial planning.

The latest study from the National Center for Health Studies (2017 statistics), states the average woman is living 81.1 years. In 1960 it was 74 years. In 1960 the average man was living 67 years today the average man is living 76.1 years. The increase in life expectancy is helping to change the age differences in many couples, making financial planning even more critical.

In age-gap relationships, one member continues to work for a decade or longer than the other. The drawing of retirement assets coupled with differing longevity factors presents a financial planning challenge.

Age-gap couples may have up to a half-generation between their ages. They should consider planning for two different scenarios to reflect their age difference. These couples shouldn’t rely on a financial plan based only on the older member’s financial information and longevity factors. Some things to consider for these couples:

The older member may want to delay taking Social Security benefits until their full retirement age unless they have health issues. Delaying the benefits of the older member will benefit both if the older member was the higher income earner.

Health Insurance Coverage

If the older member carried the health insurance and goes on Medicare health insurance coverage will be impacted. This will require the younger one to find new insurance.

Basing the financial plan on the partner with the longer life expectancy will help the combined portfolio last over a longer time horizon. Both expected retirement dates should be included even if they are a decade or more apart.

Tax Consequences

Considering the tax consequences for drawing down retirement assets at two different starting dates is important. With one member continuing to work, they should maximize their pre-tax retirement account contributions. This will off-set moving the couple into a higher income tax bracket. Most retirees have a higher income tax consequence in the first few years of their retirement.

If you are in an age gap relationship we have the skills and guidance needed to help plan your retirement.

Additional Disclosure

The newsletter and links are being provided as a service to you. Please note that the information and opinions included are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. This newsletter is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not intended to provide specific legal or tax advice and cannot be used to avoid penalties or to promote, market, or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney. Planning services are generally available at additional cost and can only be offered only by appropriately licensed registered investment advisors.

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We specialize in providing strategies and guidance for those who are seeking a better lifestyle in retirement. At LKN Financial, we know that it is your retirement, and you should have control over it. In addition, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

9
Dec

10 Financial Tasks To Complete Before 2020 (Yes, You Have Time)

Here we are, already to the end of 2019! The end of a year and the start of a new one is when most people decide to clean up and implement changes in some areas of their lives. Whether it is financial or health-related, starting the New Year off with tasks completed feels good! Here are ten financial tasks that can make a difference to you now, and later:

Task #1- Increase Retirement Savings Contributions

Increasing or maximizing your pre-tax and after-tax retirement savings contributions helps in two ways; first, it helps to ensure you will have more money in retirement. Second, contributions into pre-tax retirement savings accounts help to lower your taxable income in the year the contributions made.

Task #2- Take your Losses

If you decide to sell losing assets before 2020, you may be able to use those losses to offset your taxable capital gains. Make sure to consult your tax professional to understand if tax-loss harvesting will benefit you or not.

Task #3- Consider Converting to a Roth IRA

Since contributions and earnings in a Roth IRA grow tax-free, converting your tax-deferred retirement savings into a Roth may make sense for you. Although you are required to pay taxes on the entire contributions and earnings, the conversion in 2019 may be a tax-smart move in the long term.

Task #4- Prepare for 2019 Tax Reporting

You don’t need to wait until 2020 to meet with your tax professional. Having an idea of how much you may need to pay in taxes for 2019 can benefit you when you still have time to contribute to tax-sheltered investment accounts opened by December 31st, 2019, to off-set personal income and capital gains. Especially if you’ve made more money in 2019 than in previous years, having an idea of taxes due in the 4th quarter and pre-paying taxes can save you stress later. 

Task #5- Evaluate Health Savings Account (HSA) Contributions

HSAs allow pre-tax contributions, much like your pre-tax retirement savings. However, when used at a later date for health-related expenses, including future long-term care expenses, the contributions and accumulation are tax-free upon withdraw. Make sure you are maximizing your contributions to enjoy the benefits of using the account later and lowering your taxable income for 2019!

Task #6- Contribute to your Children’s or Grandchildren’s 529 College Savings Plan

Many states offer a state income tax credit or deduction up to a certain amount for parents or grandparents that contribute.

Task #7- Rebalance, Rebalance, and Rebalance

Market swings cause portfolio allocations to change over time. The end of the year is a great time to rebalance all of your investment accounts.

Task #8- Spread Your Wealth to Benefit Non-Profits

Donor-Advised Funds allow you to deduct your contributions to a non-profit. Due to the Tax Cuts and Jobs Act, contributions must be made into a donor-advised fund in 2019 to be itemized and deducted on your 2019 tax return.

Task #9- Check and Update Beneficiaries

Check and update beneficiary information on your employer retirement plan and all life insurance policies. Has there been a marriage, divorce, or name change for any beneficiary? Keeping beneficiary information and your information current is essential to help avoid problems later if there is a death claim.

Task #10- Schedule Your Annual Review for 2020

The beginning of a new year is a great time to schedule an annual investment review, complete or update your financial plan.

If you have questions regarding any of the above financial tasks, contact our office to complete these before we say goodbye to 2019 and welcome 2020!

Additional Disclosure: Diversification and asset allocation strategies do not assure a profit or protect against loss.

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We specialize in providing strategies and guidance for those who are seeking a better lifestyle in retirement. At LKN Financial, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!