Financial Planning for a Couple’s Age Gap

Financial Planning for a Couple

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, remarry or start a life-partnership with someone significantly younger.

According to the latest study from the National Center for Health Studies (2017 statistics), the average woman is living 81.1 years compared to 74 years in 1960; the average man is living 76.1 years compared to 67 years in 1960. 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 and social security income earlier for one member, coupled with differing longevity factors presents a planning challenge compared to other couples.

Age gap couples may have up to a half-generation between their ages and 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:

  1. 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.
  2. Health insurance coverage will be impacted if the older member carried the health insurance and goes on Medicare, requiring the younger one to find new insurance.
  3. 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.
  4. 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 to off-set moving the couple into a higher income tax bracket. Most retirees have a higher income tax consequence for the first few years of their retirement.

If you’re in an age-gap relationship and need guidance in planning for your retirement start-date gap, now is a great time to get started on your unique financial plan. Contact us today to talk about your unique situation with no obligation.

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

New Year, New Financial Resolutions?

New Financial Resolutions

The start of a New Year is the time when most people decide to implement changes in some areas of their lives. Whether it is health or money related, starting the New Year off with a plan feels good! According to research from YouGov Omnibus, last year 1 out of every 5 people (20% of the population) that made resolutions stuck to them, while 63% of the population said they didn’t make resolutions anyway! Even though 80% of New Year’s Resolutions made by ‘Resolution Makers’ fail by the end of the first quarter, having ‘resolutions’ is a positive thing because keeping them helps you change.

Here are the top financial resolutions that may be on your list for 2019:

  • Reduce Credit Card Debt: Are you one of the ‘revolver households’ that carries credit card debt month after month? Make 2019 the year you cut up the cards until you stop carrying balances.
  • Start an Emergency Fund: Start with a minimum of one month’s expenses. A fully funded emergency fund should have six months or more of expenses and should be in an account that you won’t access and one that’s not tied to market performance.
  • Save for Retirement: Set your retirement savings contributions to ‘auto-pilot’ and if your provider has automated increases, that’s even better! Make an effort to maximize your contributions, if possible. But then again, if you’re doing everything on this list, you can achieve this in 2019.
  • Reduce Spending: The less you spend, the more you can save. Although this one seems simple, without reviewing your spending at least at the beginning of this year, you have no way of knowing what you can cut out to reduce your spending. If you feel like you were financially insecure in 2018 or on the brink of it, 2019 is the year to take back control.

It takes a little effort but writing down your financial resolutions and having them in a visible place is crucial to keeping them. Much like a written financial plan, you are more likely to follow your financial resolutions when they are in writing. After you’ve written down your resolutions, share them! Tell others about your plan, your progress, and your failures. Lastly, keep your resolutions simple by taking baby steps and believe that you can achieve your goals in 2019.

 

Contact Us for a Portfolio Review

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

3rd Annual Charity Golf Tournament

Golf for a good cause?! We are there!

Check out our 3rd Annual Charity Golf Tournament highlights from December 17, 2018, benefiting the Sojourner Center of Arizona. Our clients and guests donated toys and more to brighten the holidays for those affected by domestic violence. While we’re still working on the final tally, there were well over 100 donations. 

Everyone enjoyed a gorgeous day on the links, playing a scramble tournament and multiple other contests, followed by a delicious dinner.  We can’t wait to do it again next year!

New IRS Changes for Retirement Plans in 2019

Growth in 2019

 

The IRS announced last month in November cost-of-living adjustments to limits on contributions to retirement plans for 2019. There hasn’t been an increase in some plan types since 2013, which is why now is a great time to take advantage of maximizing retirement contributions. According to a 2017 FINRA study,  10% of American retirement savers are contributing the maximum allowed. Are you?

Here’s the breakdown of the 2019 IRS changes for retirement plans:

  • 401(k)s, 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan will rise to $19,000 next year, up from $18,500 in 2018.
  • IRA contributions (Pre-Tax, Roth, or a combo) rose to $6,000 from $5,500, the limit that has been in place since 2013.
  • Catch-up contribution limits if you’re 50 or older in 2019 remains unchanged at $6,000 for workplace plans and $1,000 for IRAs.
  • SEP IRA or a solo 401(k) goes up from $55,000 in 2018 to $56,000 in 2019, based on the amount they can contribute as an employer, as a percentage of their salary. The compensation limit used in the savings calculation also goes up from $275,000 in 2018 to $280,000 in 2019.
  • SIMPLE retirement accounts goes up from $12,500 in 2018 to $13,000 in 2019. The SIMPLE catch-up limit is still $3,000.
  • Defined Benefit Plans goes up from $220,000 in 2018 to $225,000 in 2019. 
  • Deductible IRA Phase-Outs for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $64,000 and $74,000. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $103,000 to $123,000 for 2019.
  • Roth IRA Phase-Outs for taxpayers making Roth IRA contributions is $193,000 to $203,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $122,000 to $137,000.

If you aren’t contributing the maximum into these types of retirement accounts, you can increase what you’re contributing overall. If you have questions about these increases or want meet regarding your overall saving and investing, now is the time to plan for 2019.

 

Contact Us for a Portfolio Review

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Qualified Longevity Annuity Contracts: Making Your Money Last

Qualified Longevity Annuity Contracts

 

Among the primary concerns people have as they approach retirement is, “How long will I live and will my money last?” In addition to traditional retirement savings such as employer-sponsored retirement plans, there’s now another type of retirement account that guarantees you won’t go broke during retirement. Qualified Longevity Annuity Contracts (QLACs) allow you to invest 25% or $130,000 (whichever is less) from your IRA or 401k into this type of annuity. QLACs are different from more traditional types of annuities.

Currently, 3% of large U.S. companies offer QLACs as part of their 401k plans. These companies see QLACs as a good option for retirees to access money after their pre-tax assets are depleted because of the guaranteed income stream they provide and the ‘late in life’ required minimum distribution (RMD) requirement.

Some retirement planners refer to QLACs as a ‘personal pension plan’ because when the annuitant starts distributions, they are guaranteed the payments for the rest of their life. QLACs are used as part of a retirement portfolio strategy because of these unique features:

  • Payments can begin anytime between ages 70 ½ and 85 (The RMD age is 85).
  • QLACs can be funded from a qualified retirement plan, Traditional IRA or Roth IRA, or with after-tax dollars.
  • Originally designed by the Internal Revenue Service, the QLAC must meet certain requirements for it to be a QLAC.
  • QLACs are not issued by every insurance company and not every annuity can be used as a QLAC.
  • QLACs can be ‘layered’ and funded during an individual’s working years for use in retirement.
  • Since QLACs are issued by an insurance company, buyers must be aware of the financial stability of the issuer. For this reason, buying QLACs from multiple companies should be considered if part of a retirement strategy.
  • Distributions are taxed at an individual’s regular tax rate.
  • Most QLACs offer an inflation rider, which increases payments as the cost-of-living (COLA) is adjusted by the IRS at the same time Social Security payments are increased.

QLACs are a way to guarantee an income stream in retirement that you can’t outlive. If you’re interested in finding out more or which companies issue annuities that meet the IRS’s QLAC requirements, contact me for additional information.

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Safeguarding Your Personal Information Online and Offline

Safeguard Your Information

Here in the U.S., our personal information is exposed daily at frequencies and levels we’ve not experienced before. It doesn’t take a data breach from a technology company to expose us, we are doing it to ourselves without being aware. Each time we use technology (Facebook, Instagram, online exposure) our personal information is gathered by companies and used to market to us or sold to other interested parties for the same purpose.

Earlier this year the State of California passed legislation to limit what technology companies gather from internet users, but only when they have the user’s consent. Although this has more to do with online activities such as social media, shopping or opting in to receive something ‘free,’ people need to realize their exposure to risk when they participate online.

Europe has personal privacy data laws it strictly enforces, but the U.S. currently doesn’t have federal laws to protect an individual’s personal information from being exposed by their own internet activity. What can you do to protect yourself both online and offline?

  1. Don’t provide information about yourself on your social media profiles. This includes contact information, your birthdate, where you went to school, or who your relatives and children are, for example. Keep your profiles secured and not public. Unfortunately, the only true way to eliminate your social media profile information from being compromised is to not have a profile or participate in social media.
  2. Don’t provide information for ‘free downloads’ from websites, unless you know or do business with the company asking you to provide your information. The information they request is usually your email address for delivery of the free information.
  3. Routinely change your online passwords and keep them in a secure place (if you write them down). Eliminate online security issues by typing website addresses into your browser each time and don’t use the same password for multiple accounts.
  4. Destroy your personal documents yourself or have a business destroy the documents in front of you. If you leave your documents in the hands of someone else, you have no guarantee your information won’t be shared.
  5. Keep your financial information in one place, preferably locked up and secured. Keep only year-end information, original policies and contracts along with updates. Keeping a ‘paper trail’ exposes your information and isn’t necessary since financial companies you do business with can provide you with the information you may need.

We don’t always think about protecting our personal identifying information or our important documents until something happens. One of our greatest losses can be prevented by thinking through how we can protect our personal information.  Everything from life insurance policies, birth certificates, social security cards, passports, home and car titles, and even photos should be protected in addition to what is virtually available about us on the internet. 

 

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Do You Understand Your Employee Benefits?

Employee Benefits

As we approach the end of 2018, many employers are scheduling their benefits meeting requiring you to select yours before the end of the year. Not all benefit options are the same and understand each is crucial to making an informed decision. Ask your HR department or the advisor or agent representing the benefit what you don’t understand or ask them to provide you additional information prior to the benefits selection deadline. Many insurance and health benefits don’t allow you to change them once selected. However, employer-sponsored retirement plans allow you to select different funds, rebalance and change payroll contributions at any time per federal law.

Retirement Plan Options & Employer Match

You may have multiple choices of providers or funds available for you to choose from. Not all employer retirement plan providers provide assistance on fund selection or on-going advice. We can help you with the following:

  • Determining how the retirement plan fund options fit your risk profile
  • Including your company retirement plan assets in your financial plan
  • Monitoring the fund options and offer guidance on rebalancing
  • Rolling over your former employers plan into an IRA

Employer-Sponsored Life Insurance

Life insurance is the most inexpensive way to add protection to your family and your assets if you die. Employer life insurance plans ‘group’ you with other employees to reduce the cost of the insurance. Many times there is a need for additional life insurance outside of their employer plan since the death benefit is usually limited and based on your income.

Questions to ask:

  • Is this life insurance portable if I leave?
  • Will I still be insured after age 65 (some plans drop you after this age) if I’m still employed?
  • Can I add more insurance or am I committed to a certain death benefit amount?
  • Can I insure other members of my family?

Note that death can cause the early liquidation of assets if there isn’t adequate life insurance.

Employer-Sponsored Disability Insurance

Not being able to work due to injury can quickly deplete financial assets. Disability insurance replaces lost income from a short-term injury or disability or a permanent disability. Social Security Disability benefits won’t replace 100% of your income. Purchasing additional disability insurance coverage is a good idea if you’re in your prime earning years. Ask, so you understand:

  • Is disability insurance is underwritten based on my profession, age, and my possible risk of injury at work?
  • If I take Social Security Disability Benefits if I’m injured, is my Social Security Retirement Benefit reduced or eliminated in retirement?

Employer-Sponsored Health Insurance Solutions

Your company may provide you with health insurance choices that you are unable to modify. Ask your insurance provider:

  • Are there additional coverage choices for vision, dental, wellness, or indemnity insurance coverage based on my job role?
  • Can I customize a health insurance plan based on my specific needs?
  • Can I insure additional family members?

Part of asset protection is having insurance coverage in place so that you don’t have to prematurely liquidate personal savings, investment accounts or retirement accounts.

We are here to assist you in any way we can with the information you’re being provided regarding your employee benefits. Contact us today for a simple, no-cost conversation.

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Your ‘To-Do’ List: Schedule a Fall Financial Review

Fall Financial Review

Scheduling a fall financial review is especially important this year due to the Tax and Jobs Act and impending market changes. We’ve been enjoying an overall robust stock market and seeing some recent volatility, which makes now a prime time to meet. Fall tends to be when people start thinking about next year and what they want to accomplish financially by reviewing the following:

Your Financial Plan

People with a written financial plan are more likely to follow it when they work with their advisor and monitor the plan’s recommendations throughout the year. If you don’t have one, it’s time to have one done now. Having a financial plan puts you in a better position to start on your plan immediately at the beginning of 2019. 

How the Tax and Jobs Act May Impact Your Investments

Along with your tax professional, I may suggest extra contributions to your pre-tax accounts before the end of this year or converting pre-tax investments to after-tax investments. With the income ranges for tax bracket changed for 2018, you still have time to make some strategic changes before the end of the year if you are on the upside of a higher tax bracket.  In addition, receiving a bonus at the end of the year can impact this if you’re trying to keep your taxable income lower and stay in the same tax bracket.

Planning for Next Year

Starting the New Year strong with a financial plan in place after a fall review puts you in a better position to start your plan immediately at the beginning of next year.  People with a written financial plan are more likely to follow the plan when they work with their advisor and can monitor recommendations throughout the year.

Reviewing This Year’s Investment Performance

Reviewing fund and stock performance over 2018 helps us assess what changes are necessary for next year in your portfolio.  At some time the bull market will come to an end, which is why planning for underperformance is critical. If your investments didn’t perform to your expectations it’s time we evaluate your portfolio.

Contact Us for a Portfolio Review

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

5 Questions Answered: Social Security Retirement Benefits

Social Security Benefits Q+A

  1. How is my social security calculated? Social Security is calculated using your 35 highest paid earnings years and then averaged using the benefits calculation formula.  You must have worked full time for at least 10 years to qualify for any social security retirement benefit.  Currently, full retirement benefits age is between age 66 and 67 (October 2018). More adjustments by the Social Security Administration for the full benefit payment age are anticipated affecting calculations for those born after 1967.  To see what your payment may be based on your age visit:  https://www.ssa.gov/benefits/retirement/
  2. Will Social Security Be There For Me? Social Security will pay promised benefits through 2033.  After that, it will pay about 75% of benefits.  Options to raise taxes to cover this shortage or to decrease benefits after 2035 are being discussed. American workers currently employed pay for those currently receiving benefits; benefits paid into Social Security are not ‘banked’ for an individual’s future use. 
  3. What is Social Security? A Retirement Plan? Social Security is considered insurance and was proposed by President Roosevelt and Congress and signed into law in 1935.  It was never intended to be enough to completely fund retirement for individuals but meant to supplement an individual’s retirement investments and savings.
  4. How do I file for Social Security Retirement Benefits? You can file by visiting an office, by calling (800) SSA-1213, or online at www.ssa.gov. You can file up to 4 months before you want payments to begin.
  5. Can My family receive benefits upon my death for certain situations? If you die your surviving spouse can be paid up to 100% of your payment if they are at least Full Retirement Age or receive a reduced amount as early as age 60.  An individual can be paid 75% of your benefits at any age if they are caring for your child under age 16.  Your unmarried child can be paid 75% of your benefits if they are under 18, under 19 and in high school or at any age if they were permanently disabled before age 22.  Your parent over age 62 can be paid your benefits if they were dependent upon you.

The continuation of Social Security Retirement benefits after 2033 continues to be a hot topic as the U.S. population ages and younger generations continue to decline in population. Fewer Social Security taxes paid into the Social Security system will continue to impact future payments. Individuals reaching full retirement age after 2035 may want to consider contributing more to their after-tax and pre-tax retirement accounts or purchasing a fixed annuity as a replacement for decreased or lost Social Security Retirement benefits. 

Learn More about Annuities…

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Tolerate the Turbulence

Volatility will always be around on Wall Street, and as you invest for the long term, you must learn to tolerate it. Rocky moments, fortunately, are not the norm.

Since the end of World War II, there have been dozens of Wall Street shocks.

Wall Street has seen 56 pullbacks (retreats of 5-9.99%) in the past 73 years; the S&P index dipped 6.9% in this last one. On average, the benchmark fully rebounded from these pullbacks within two months. The S&P has also seen 22 corrections (descents of 10-19.99%) and 12 bear markets (falls of 20% or more) in the post-WWII era.1

Even with all those setbacks, the S&P has grown exponentially larger. During the month World War II ended (September 1945), its closing price hovered around 16. At this writing, it is above 2,750. Those two numbers communicate the value of staying invested for the long run.2

This current bull market has witnessed five corrections, and nearly a sixth (a 9.8% pullback in 2011, a year that also saw a 19.4% correction). It has risen roughly 335% since its beginning even with those stumbles. Investors who stayed in equities through those downturns watched the major indices soar to all-time highs.1

As all this history shows, waiting out the shocks may be highly worthwhile.

The alternative is trying to time the market. That can be a fool’s errand. To succeed at market timing, investors have to be right twice, which is a tall order. Instead of selling in response to paper losses, perhaps they should respond to the fear of missing out on great gains during a recovery and hang on through the choppiness.

After all, volatility creates buying opportunities. Shares of quality companies are suddenly available at a discount. Investors effectively pay a lower average cost per share to obtain them.

Bad market days shock us because they are uncommon.

If pullbacks or corrections occurred regularly, they would discourage many of us from investing in equities; we would look elsewhere to try and build wealth. A decade ago, in the middle of the terrible 2007-09 bear market, some investors convinced themselves that bad days were becoming the new normal. History proved them wrong.

As you ride out this current outbreak of volatility, keep two things in mind:

One, your time horizon. You are investing for goals that may be five, ten, twenty, or thirty years in the future. One bad market week, month, or year is but a blip on that timeline and is unlikely to have a severe impact on your long-run asset accumulation strategy. Two, remember that there have been more good days on Wall Street than bad ones. The S&P 500 rose in 53.7% of its trading sessions during the years 1950-2017, and it advanced in 68 of the 92 years ending in 2017.3

Sudden volatility should not lead you to exit the market.

If you react anxiously and move out of equities in response to short-term downturns, you may impede your progress toward your long-term goals.  Please reach out to us to review your portfolio and goals in today’s market.

 

Contact Us for a Portfolio Review

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

 

Citations

  1.  marketwatch.com/story/if-us-stocks-suffer-another-correction-start-worrying-2018-10-16 [10/16/18]
  2.  multpl.com/s-p-500-historical-prices/table/by-month [10/18/18]
  3. crestmontresearch.com/docs/Stock-Yo-Yo.pdf [10/18/18]

Locations

Speak to our financial team today about your future goals and how we can help. Most offices are open Monday - Friday, 9 AM- 5 PM, unless otherwise noted.

Contact Us