Financial Planning

It’s that time of year again—the time when many people set ambitious goals but struggle to follow through on achieving them.

As you reflect on your financial health, it’s important to remember that everyone is in a different place financially. Tailoring your resolutions to fit your unique situation can make a significant difference. Here are five steps that can help you set and achieve your financial goals, along with suggestions and strategies for short-term, mid-term, and long-term goals to help keep you on track.

 

Step 1: Reflect on Your Current Financial Situation

Begin with a thorough examination of your existing financial landscape. Review your income, expenses, assets, and liabilities. This analysis will provide a comprehensive understanding of your economic standing and help you craft a personalized plan for your financial future.

Step 2: Establish Clear Objectives

Articulate your financial objectives clearly. Whether your aim is to build an emergency fund, plan for a dream vacation, buy a home, or prepare for retirement, identifying your goals sets the foundation for your financial journey. Consider the time frame associated with each objective, from short-term to long-term commitments. (See below for more.)

Step 3: Make Your Goals SMART

Adhering to the SMART criteria helps to ensure your goals are clear and achievable:

• Specific: Clearly define what you want to accomplish. For example, “Save $10,000 for a car down payment.”
• Measurable: Set specific amounts and deadlines, like “Save $500 per month for 20 months to reach $10,000 by a specific date.”
• Achievable: Make sure your goals are realistic within your current financial situation.
• Relevant: Align your financial goals with your overall life objectives.
• Time-Bound: Set a deadline for each goal to create a sense of urgency.

Step 4: Seek Professional Advice

Consider consulting a financial advisor, especially for complex goals like retirement planning or investment strategies. Advisors can provide tailored guidance and valuable insights to help you make informed decisions. Don’t hesitate to ask for help; their knowledge can greatly enhance your financial well-being.

Step 5: Stay Disciplined and Motivated

To achieve your goals, discipline is crucial. Regularly check your progress and celebrate milestones. Keep your ultimate dreams at the forefront of your mind. This personal financial journey requires consistency and enthusiasm.

 

Short-Term Financial Goal Ideas

• Create and Stick to a Budget

Establishing a budget is a foundational step in financial planning. Track your income and expenses to understand your financial habits and use budgeting tools to categorize your spending. Identify areas to cut back and allocate funds toward savings or debt repayment.

• Build an Emergency Fund

An emergency fund is important for financial stability. Start small with a goal of $500 to $1,000, and gradually expand it to cover three to six months of living expenses, or more depending on your situation. Consider automated savings transfers to this dedicated account, helping you prepare for unexpected financial shocks.

 

Mid-term Financial Goal Ideas

• Save for Major Life Events

Consider significant life events like buying a home or funding a child’s education. Start by estimating the total amount needed and set a timeline for achieving it, breaking it down into monthly savings targets.

• Pay Off Student Loans

If you have student loans, strategize to pay them off effectively. Explore refinancing options to help secure a lower interest rate while considering the potential loss of federal loan benefits.

 

Long-Term Financial Goal Ideas

• Save for Retirement

Financial professionals recommend that you work toward a comfortable retirement by saving 10-15% of your income in tax-advantaged retirement accounts, or more if possible. As you get closer to retirement, you should work with an advisor to create a customized retirement income plan based on your personal retirement lifestyle goals. Estimate your desired annual expenses to help gauge how much you will need.

• Plan for Major Life Transitions

Consider potential long-term goals, such as caring for aging parents or planning for long-term care. Early planning and dedicated savings can help alleviate future financial pressure.

 

The Importance of Ongoing Financial Planning

Remember, achieving financial goals is not always a linear process. Life can throw unexpected challenges your way. It’s beneficial to remain flexible and adjust your goals as needed. Embrace the new year as an opportunity to shape your financial future, and take proactive steps toward achieving your dreams.

 

Call us and let’s talk about your goals for 2025! Give us a call today! You can reach Bay Trust Financial at 813.820.0069.

 

 

Sources:

1. https://www.investopedia.com/articles/personal-finance/100516/setting-financial-goals/
2. https://www.cnbc.com/select/financial-new-years-resolutions/
3. https://beewiseapp.com/en/setting-financial-goals-a-step-by-step-guide/

Newsletter Written By Affiliate

All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.

It’s back to school season—a perfect time to think about your children’s future. Parents and grandparents should start planning for college costs as early as possible.

Most Americans would do almost anything for their children and grandchildren, and sending them to college is a top priority for many. According to studies, more than 50% of parents are willing to go into debt to fund their child’s college education, and at least 95% of parent expect to cover at least half the costs.

The trouble is, college debt is extremely high—currently $1.77 trillion in the U.S. The average student loan debt amount is now $37,338 according to recent data.

Why is college debt so high? Well, for one thing, the average in-state tuition cost at public four-year institutions is $11,260 for the 2023-24 school year—and that’s per semester. That is about three times as high as it was in 1989-90, according to the College Board.

And on top of that, interest rates have risen. For the 2024-25 school year, federal parent PLUS loans will be at their highest point in more three decades, at a whopping fixed interest rate of 9.08% plus fees.

So, what is a loving parent or relative to do? Here are some of your options.

1) 529 Plans

A 529 plan, technically known as a “qualified tuition program” under Section 529 of the Internal Revenue Code, is an education savings plan off­ered by all 50 states and the District of Columbia. There are generally two types—prepaid tuition which allows you to lock in today’s tuition rates for the future college attendee, and the more popular 529 savings plan.

Keep in mind that you aren’t restricted to your own state’s plan. You can invest funds in any state’s plan, and your student can attend college in any state. Each state’s 529 plan is unique, with a diff­erent combination of sales channels, investment off­erings and fees. It can pay to shop around when choosing a plan because even if your state off­ers a tax deduction or credit for contributing to your state’s plan, that benefit might not stack up against the performance or lower cost of another state’s plan.

PROS   As of 2023, if a 529 plan is owned by a grandparent, aunt, uncle or other person, it is virtually invisible on the FAFSA’s calculations for both assets and won’t count as student income later if used for qualified expenses.   Although contributions to a 529 plan aren’t tax deductible on your federal tax return, the earnings grow tax-free when withdrawn and used for qualified education expenses.   Many states o­ffer state income tax deductions for contributions if you choose to invest in your state’s plan. (Your child can still attend college anywhere.)   There are no income limits on 529 plan contributions, so they’re available to everyone. Plans vary, but most have high total contribution limits—usually in the $235,000 to $529,000 range.

CONS   If owned by a parent or student, a 529 plan is counted as an asset on the student’s FAFSA (free application for federal student aid), although only a percentage of the total account is calculated.   There are limited investment options available with 529 plans, and only one investment change per year is permitted. Some plans have high costs and fees.   If your child, you or any family member does not want to attend college, and if 529 plan money is withdrawn and not used for education expenses, the account’s earnings are subject to both income tax as well as a 10 percent penalty tax, and you may have to pay back any state income tax deduction amounts as well. (There are exceptions to 529 plan penalties if your student receives scholarships.)

 

2) Roth IRAs

If a 529 plan doesn’t work for your family for some reason, a Roth IRA (individual retirement account) may be an option to consider. You can withdraw money from Roth IRA accounts to be used for college expenses for you, your spouse, children or grandchildren as long as the account has been in place for five years. If the account owner is under age 59-1/2, the only tax liability for college expenses will be on any withdrawn earnings—if over 59-1/2, the entire withdrawal amount is tax- and penalty-free for any purpose as long as you’ve owned the account for five years.

PROS   There is a lot of flexibility with a Roth—you can invest in nearly any type of account you want to within a Roth IRA wrapper.   If your child doesn’t choose to go to college, the money can be used for any purpose, including retirement, with no mandated withdrawals or RMDs (required minimum distributions) or taxes due. Inherited Roth IRA accounts are also tax-free.

CONS   One of the difficulties with Roth IRAs is that high earners can’t open them, and the yearly limit in 2024 for contributions is only $7,000 ($8,000 per year for those 50 or older). In some cases, what’s called a “backdoor Roth” might be indicated for high earners, where they can legally convert taxable IRA funds into Roth IRA accounts and pay taxes on the money converted, but these are complex and strict IRS rules apply.   While a Roth IRA does not show up as an asset for financial aid calculations, amounts withdrawn and used for college expenses are considered income for the next school year, and therefore may reduce the amount of student financial aid that’s available.

 

3) Life Insurance

Permanent life insurance policies, such as whole or universal life, include both a death benefit and a savings/cash account component which you can borrow against to pay for college.

PROS   Many permanent cash value policies regularly credit the policy with interest in a guaranteed* amount specified in the policy terms (*guaranteed by the claims-paying strength of the issuing insurance company.)   Money borrowed from the cash value in a life insurance policy is not taxable in most cases. Interest credited to a life policy grows tax-deferred, but the credited interest portion is taxable if that part of the money is borrowed for any purpose, including college.   If the insured dies, the death benefit plus remaining cash value is almost always tax-free when left to individually-named beneficiaries.   Buying a flexible, permanent policy for a child at a young age when they are healthy can ensure that they are insurable even if there’s an unexpected future adverse event; for instance, if they develop a severe illness later.

CONS   While a life insurance policy does not show up in financial aid calculations as an asset, amounts borrowed to pay for college are considered as income on the next year’s FAFSA, potentially reducing the amount of student financial aid available.   Life insurance policies can be costly for those who are older or in poor health. If you are using life insurance to pay for college, consider buying the policy when the child is a healthy toddler—with them as the insured to keep the cost of insurance low.   If you borrow money from the cash portion of a permanent life insurance policy, interest is charged by the insurance company on the amount borrowed until you pay the money back—in essence, you are paying “yourself” back—and regular premium payments must be made to keep the policy in force. It is advisable to work with a qualified professional to examine the structure of any policy so that you understand its terms.

 

4) Annuities

Annuities are another option to consider.

PROS   Annuities can offer a tax-advantaged option for college costs in some cases because annuity policy growth is not taxed until funds are withdrawn.   You could purchase a fixed annuity with a short payout schedule to make payments to cover tuition, but you may have to contribute a significant amount to achieve the payout needed. Another way to potentially make an annuity work is to start early when your child is young and purchase a deferred annuity policy which guarantees* a high credited interest rate (*guaranteed by the claims-paying strength of the issuing insurance company).

CONS   While an annuity does not show up on the FAFSA as an asset, annuity amounts paid out are considered income the next year, which can reduce your student’s chances of receiving financial aid. So rather than taking annuity payments while attending college, optionally you could take out student loans, allowing your annuity to continue to grow, then use the annuity to pay off­ the loans after graduation depending on interest rates, crediting rates, and whether or not it saves you money in the long run.

 

How College Savings Can Impact Financial Aid Eligibility

Working with a qualified financial and tax professional is advised when planning for college costs. Legislation is always changing for parents and grandparents looking to get a jump-start in funding their child or grandchild’s education. For example, due to the FAFSA Simplification Act of 2020, in July of 2023 the EFC (expected family contribution) was replaced by the SAI (student aid index).

Where the EFC bottomed out at $0, the SAI goes as low as -$1,500, meaning students can qualify for more need-based financial aid. SAI also simplifies the FAFSA form itself, drastically reducing the number of questions. Where possible, the new law mandates data received directly from the IRS be used to calculate the SAI and federal Pell Grant eligibility.

Where the new SAI may truly be a boon to students who need more aid is through 529 plans owned by extended family members. As of July 2023, 529 accounts owned by grandparents, aunts, uncles or others are not counted as assets, nor are qualified distributions taken from them counted as income. Therefore, they no longer have significant impact on eligibility for financial aid.

FAFSA (free application for federal student aid) and the CSS (college scholarship service)

While it is true that life insurance, annuities and 529 plans owned by anyone other than parents or students are not counted as assets on the FAFSA, they may be counted on the CSS (College Scholarship Service) profile, another aid form used for aid by about 240 colleges in addition to the FAFSA. The CSS profile is extremely complex and steps are being taken to simplify it, but changes to the form have not been finalized.

More Resources

Federal Student Aid Estimator https://studentaid.gov/aid-estimator/

FAFSA https://studentaid.gov

 

If you have any questions or would like to discuss your family’s financial goals, please call us! Don’t put it off—give us a call! You can reach Bay Trust Financial at 813.820.0069.

 

This article is for general information purposes only and should not be relied upon for financial or tax advice. In every case, it is recommended that you work with financial, tax and legal professionals to determine what might be best for you and your family based on your unique situation and circumstances.

 

Sources:

https://www.cnbc.com/2019/06/04/most-parents-would-go-into-debt-for-the-sake-of-a-childs-college-fund.html

https://www.investmentnews.com/industry-news/news/how-much-are-parents-willing-to-cover-for-their-kids-college-252891

https://educationdata.org/average-student-loan-debt#

https://www.lendingtree.com/student/student-loan-debt-statistics/

https://research.collegeboard.org/trends/college-pricing/highlights#

https://www.usatoday.com/story/money/personalfinance/2024/05/28/parent-plus-loan-rate-2024-25-soars/73824155007

https://www.greenbushfinancial.com/all-blogs/grandparent-529-college-savings#

https://www.schwab.com/ira/roth-ira/contribution-limits#

https://www.investopedia.com/terms/b/backdoor-roth-ira.asp

https://www.edvisors.com/student-loans/parent-student-loans/introduction-to-federal-student-loans-parent-plus-loans/

https://unicreds.com/blog/student-aid-index

https://studentaid.gov/help-center/answers/article/fafsa-simplification-act

https://www.savingforcollege.com/intro-to-529s/does-a-529-plan-affect-financial-aid#

https://www.plansponsor.com/secure-2-0-reforms-529-and-able-accounts/

https://www.ncan.org/news/590316/Changes-to-the-2022-23-CSS-Profile-Heres-What-You-Need-to-Know.ht

 

 

Money can be a major obstacle for couples. Here are a few ways to overcome it.

Do you remember when you first met your partner? So many things about them might have captivated you. Maybe it was their eyes, their hair or their smile. Maybe you started talking and you fell in love with their outlook on life, their fun-loving attitude or their sense of humor. We’re willing to bet, however, it wasn’t your aligned financial philosophies that initially drew you to each other, even if financial stability was high on your list of priorities for potential partners.

At the same time, maybe that should be something you look for in your other half. Nearly 50% of Americans say they argue with their significant other about money, while 41% of Gen Xers and 29% of baby boomers attribute their divorce to financial disagreements ^[1]. One of our goals is to give you the stability that can eliminate financial stress, trimming your worries when it comes to your happily ever after. Here are six tips for couples looking to achieve their financial goals together!

1. Communicate Effectively

Of course, communication is the key to a healthy relationship. It’s no secret. In fact, you’ve probably heard this old adage your entire life, but hearing it is different from comprehending it and acting upon it. Additionally, while it’s important when sharing your needs and overcoming conflict, it’s just as important to have open, honest, confident communication about your finances. In our experience, the majority of the battle is normalizing the conversation. Remember, you’re not just combining finances; you’re combining your entire lives, so this discussion shouldn’t be taboo. To make it easier, it can be a good idea to start with simple topics. Go over things like income, how you feel about different retirement accounts, your experience investing or how comfortable you feel with risk. You can then let the conversation naturally evolve to encompass more complex topics, or you can tackle new problems as they arise. It’s key to consider that you’re equal partners, both in life and in money, and it’s crucial to have these discussions before and during a serious relationship.

2. Choose a Strategy

Once you’ve broken the barrier to financial discussion, it can be helpful to choose a strategy for how you’ll combine your finances. Some couples, for example, find it easiest to simply combine all their assets, giving meaning to the phrase, “What’s mine is yours.” Others, however, may feel more comfortable keeping their assets separate and handling their own personal expenses. Most commonly, a couple will land somewhere in the middle with a few select combined accounts and some solo accounts. This can help each person maintain some of their individuality and independence while also offering some guidance as to who’s responsible for different financial obligations. Spend some time discussing these options with your partner, and be completely open and honest to foster healthy communication in the present and future.

3. Set Measurable, Realistic Goals

Identify goals that are important to both of you, especially if you want to achieve them together. Whether those are short- term goals or long-term, this gives you something to work toward, unifying your vision and objectives to keep you on the same page. It can also help you maintain control over your financial decisions and your priorities. Ensuring those goals are measurable and realistic is also important. In addition to the satisfaction that comes with watching yourself climb toward your objectives, reaching measurable milestones can be motivating, pushing you and your partner to continue saving and spending with the future in mind.

4. Budget Effectively

As a couple, you’re a team. That means working together to reach common goals. There’s also power in finding financial strength together, so constructing a budget, controlling your spending, and expressing your thoughts freely can help you grow as a duo. When building that budget, it’s important to start by having a conversation about your priorities. Lay them out clearly, and work together to determine which expenses are “needs” and which expenses are “wants.” You’ll probably want to prioritize essentials, like food, your home, your transportation, and other necessary living expenses. You may want to move on to outstanding debt, determining how much you can realistically pay down in a given period. As partners, you should also hold each other accountable, knowing that sticking to the budget is what’s better for both. Then, know you can tweak your budget as your circumstances change and evolve.

5. Choose the Right Financial Partner

The right financial partner or professional can help you develop and work toward your goals. Oftentimes, this means finding someone who understands your current circumstances, is able to read you and your partner as people, and is willing to work in your best interests. This can be tricky, but remember, this is your livelihood we’re talking about. It’s more than understandable if you’re skeptical when choosing someone to control your assets. Additionally, if you think it’s the right time to start working with a professional, ask many questions to determine if they’re the right person to help you achieve your goals. While you may feel like you’re on the hot seat as they ask about your saving and spending, it’s just as much of an opportunity for you to assess how effective or helpful they will be in the construction of your plan or portfolio.

6. Develop an Actionable Plan

Once you understand your cashflow, habits, budget and goals as a couple, it’s time to develop a plan that offers specific direction and sets you into motion. Oftentimes, this is the blueprint for your future, giving both you and your partner rules to adhere to. It should also be comprehensive, meaning that it accounts for each aspect of your life. Determine how you’ll utilize specific retirement accounts, as well as if you’re comfortable having your money exposed to market risk. You can also explore options for insurance policies, which can be crucial if you want to protect your loved ones in the event of the worst. Furthermore, revisit your plan on a regular basis. Maybe your risk tolerance has changed, you feel you can contribute more to your savings vehicles, your beneficiaries have changed, you need different levels of insurance coverage, or you’re ready to graduate into retirement. Your plan plays a key role in achieving both your short- and long-term goals, and having one that you believe in can make all the difference.

We believe that money should never hinder your relationship. If you have any questions about how you can effectively combine and develop a plan for your finances as a couple, give us a call today!

 

Sources:

1. https://www.marketwatch.com/story/this-common-behavior-is-the-no-1-predictor-of-whether-youll-get-divorced-2018-01-10

The end of the year is upon us. Here are some tasks to check off before 2024 arrives!

It’s that special time of the year when the holiday spirit is in the air, good friends are always near, and family time fills up our schedules. It’s also the perfect time to take financial inventory and reassess your plan to see if it still aligns with your goals. You may need to make tweaks, as your circumstances have almost certainly changed. Maybe that’s because of a major life event or an unexpected expense, which most people experience or incur over the course of a year. It’s only normal, but it can be helpful to ensure that you’re still on track toward the future you idealized. Here are a few things you can do to prepare for the turn of the calendar!

1. Review Your Financial Plan

Your financial plan is never meant to be a “set-it-and-forget-it” type of document. Just like the economic landscape, it’s supposed to change, and the end of the year can be the perfect time to make necessary adjustments that get you back on track toward your goals. Sometimes, those changes can even be for the better or because you had a successful year. For example, maybe you are quickly approaching or have already surpassed a goal you set at the beginning of the year. You can recalibrate your approach for both the short and long term to keep yourself motivated. If you find that you’ve suffered an unfortunate setback, that’s also okay. Your plan is a great place to start when trying to get back on track toward your ideal destination.

2. Adjust Your Monthly Budget

As we near the end of the calendar year, you may have a better idea of your current income and expenditures. Sometimes, that can help you create a more accurate budget, especially if that budget aligns with your financial plan. Additionally, you might have received a nice annual bonus or raise, giving you some more leeway or freedom in your budget, or giving you extra funds to save or create an emergency fund. On the other hand, maybe you had a baby or accrued unforeseen home, auto or medical bills, forcing you to take a moment and reprioritize. Whether you believe you’ve taken a step forward or a step back, mapping out your expenditures and tweaking your budget accordingly can be helpful as we head into 2024.

3. Review Your Investments

How did your investments perform this year? If you can’t answer that question, it’s probably a good idea to look, especially if you plan on using that money in retirement. Remember, the years leading up to retirement and the first few years of retirement are the most dangerous times to experience market volatility, as you likely take those losses when your asset totals are the highest. It can also be helpful to further diversify your portfolio or build a new asset allocation that aligns better with your goals. Though diversification certainly doesn’t promise either growth or protection, different asset classes can offer different features, potentially giving you the opportunity to achieve protection through varying and potentially less volatile investment or saving vehicles.

4. Recalibrate Your Retirement Account Contributions ^[1,2,3,4]

No matter which stage of your career you’re currently at, it’s important to know how much of your income you can contribute to your various retirement accounts, such as 401(k)s, IRAs, 403(b)s, 457 plans, SEP IRAs and SIMPLE IRAs. For example, in 2023, the contribution limit for traditional and Roth IRA accounts is $6,500. That amount will increase to $7,000 for the 2024 tax year. If you’re older than 50, you can also make catch-up contributions up to $1,000. The contribution limit for a 401(k) participant is $22,500 for the 2023 tax year; however, that will rise to $23,000 in 2024. Catch up contributions of up to $7,500 can also be made to 401(k) accounts for those 50 and older. NOTE: These limits are imposed on individuals, not accounts, so the limits are on total contributions to all of your different employer-sponsored accounts or IRAs. It’s also important to remember that you can contribute to your IRA for 2023 until Tax Day of 2024, which is on Monday, Apr. 15. 401(k) contributions, however, must be made by the end of the year.

5. Take Your RMDs ^[5,6]

If you must begin taking RMDs in 2023 or you’ve already begun taking RMDs, those funds must be withdrawn by the end of the calendar year to avoid incurring a 25% excise tax. That makes right now the perfect time to ensure that you’ve withdrawn an adequate amount, as there is still time to pull from your qualified retirement accounts. It can also be beneficial to speak to your financial advisor who can help you calculate your RMDs, as they’re typically determined by your expected lifespan and asset total. To see when you must begin taking RMDs, please refer to the chart below!

Date of Birth	RMD Age
June 30, 1949, or Before	70 ½
July 1, 1959, to Dec. 31, 1950	72
Jan. 1, 1951, to Dec. 31, 1959	73
Jan. 1, 1960, or After	75

 

6. Spend Money Left in Your FSA ^[7,8]

Flexible savings accounts, or FSAs, are accounts funded by pre-tax money that allow you to use tax-free funds to pay for qualifying health expenses. They can be extremely helpful for those looking for tax advantages for services that are not covered by their health care plan, including deductibles and co-pays. While you may have a grace period provided by your employer, with most FSAs you must spend the money for qualifying health expenses by the end of the year or risk losing it. Some expenses that traditionally qualify include general wellness appointments, annual physicals, visits to specialists, dental cleanings, eyeglasses or in-home care equipment.

Similar to FSAs, HSAs, or health savings accounts, can be used for medical expenses, but the accounts are permanent and stay with the owner. HSAs are tax-deductible and can grow and build up tax-free to cover a long list of medical, health, dental and vision expenses, usually in retirement. In order to open and begin contributing to an HSA, you must purchase a high-deductible health plan that qualifies, or be offered an HDHP through your employer. You cannot contribute to an HSA when you are over the age of 65.

7. Review Your Workplace Benefits and Beneficiaries

Most benefits plans change on a year-to-year basis, and those changes are typically outlined by your human resources department during the open enrollment period. If your employer provides benefits packages, be sure to go through your benefits guide to know exactly what you’re entitled to and how you can leverage those perks to your advantage. For example, you may be able to select from different health care packages, or you might be able to opt into an HSA or FSA. It’s also important to review beneficiaries who are on your plan, as their needs may differ on a year-to-year basis.

8. Talk to Your Financial Professional or Advisor

Your financial professional, planner or advisor is meant to be your personal advocate and consultant when it comes to your financial and lifestyle goals. That means they can help you determine whether you’re on track to reach your goals. If not, they can work with you to set more reasonable expectations, but if you find yourself on the right track, they can help you further purpose your money for both the short- and long-term future. Additionally, your advisor should soon be calling to set up an annual meeting with you to discuss updated options, new regulations, developments in the marketplace and more. As we close out the year, now is the perfect time to have that meeting and prepare for new circumstances and the new year.

If you have any questions about your year-end financial to-do list and how you can prepare for the year ahead, please give us a call today! You can reach Drew Capital Group in Tampa at 813.820.0069.

 

Sources:

1. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
2. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits
3. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions
4. https://www.thinkadvisor.com/2023/09/27/smaller-401k-ira-contribution-limit-increases-expected-in-2024/
5. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
6. https://www.orba.com/what-is-your-required-minimum-distribution-age/
7. https://www.goodrx.com/insurance/fsa-hsa/hsa-fsa-roll-over
8. https://www.investopedia.com/articles/personal-finance/082914/rules-having-health-savings-account-hsa.asp

 

All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.

Advisory Services Network, LLC does not provide tax advice.  The tax information contained herein is general and is not exhaustive by nature.  Federal and state laws are complex and constantly changing.  You should always consult your own legal or tax professional for information concerning your individual situation.

 

 

What does financial flexibility mean to you? It could give you the opportunity to pursue personal goals and milestones while shouldering less of a financial burden.

We truly believe that financial flexibility is achievable for everyone, no matter their income level, present outlook or future objectives. But what opportunities does financial flexibility typically unlock, and how do those change as you age and progress through both your life and your career? Here are a few phases and milestones as well as the possibilities that may be available as you work toward your financial independence.

20s

In your 20s, it can be difficult to earn a salary that opens the door to financial flexibility. For those living paycheck-to-paycheck, it can be a good idea to develop a budget and stick to it as closely as possible. Obviously, emergencies will arise, potentially in the form of auto repairs, home repairs or medical bills, but your budget should account for emergency saving, and it can be beneficial to contribute to that rainy-day fund during months without surprise expenses. Then, while living within your means in your 20s, you can focus on building your career, perfecting your craft and working toward a salary that gives you more financial flexibility than you might have had upon graduating from college. If you are lucky enough for your earnings to outpace your expenses this early in your career, you can begin paying down high-interest debt, make a down payment on a home or consider starting a family. It’s also important to remember, saving any amount can be better than saving nothing, even if you aren’t growing your savings at a lucrative pace.

30s

By your 30s, you might be a bit more settled, either with a family or an estimation of when you’ll begin your family. You may also have a better idea of who you are, your goals, your dreams, your passions and your desired lifestyle. Financial flexibility in this stage can allow you to indulge in those dreams, potentially with grander vacations, elimination of hand-cuffing debt, continued repayment or payoff of your home loan and car, and the ability to provide for your loved ones. You can also consider an estate plan or a life insurance policy to protect those who might rely on you, giving both you and your beneficiaries some peace of mind should something happen to you.

40s

Once you reach your 40s, you might have a better idea of the life you’ve built, the family you’ve raised, and the expenses you typically accrue on a monthly or annual basis. If you do have more certainty in your estimated expenses, it’s possible that you can stick to your budget more easily. Though there’s no such thing as “excess” when it comes to saving, financial flexibility in your 40s could allow you to travel or begin a search for a second home or a vacation home. This is provided that you have the flexibility to explore these options, of course, and we’d always recommend speaking to us prior to making any major financial decisions, but surplus in your 40s could give you the opportunity to indulge in some of life’s luxuries while you’re still young and able-bodied.

50s

Though you should begin saving as early as possible, your 50s could be the perfect time to sock extra money away for retirement if your earnings outpace your expenditures. You should also be prepared to move on to a fixed income and protect yourself from market volatility. Additionally, it can be a good idea to reassess your estate plan and your life insurance policies, making necessary tweaks that may better suit the needs of you and your heirs. Moreover, if you’ve shored up all aspects of your financial and retirement plans, you may have some flexibility to spend on things like vacations, charities, vow renewals or other recreational expenditures.

60s

In your 60s, you may be on the cusp of retirement or already in retirement. That’s why this could be a good time to do your final pre-retirement planning, which could include the creation of income streams to keep you afloat while you wait until your full retirement age. You may also be in a comfortable position to begin looking at vacation homes, pursuing your various hobbies, checking off bucket list items or even enjoying a little bit of downtime. If you have grandchildren, you can begin exploring options that help save for further education, such as 529 plans or permanent life insurance policies.

70s

Having passed your full retirement age or beyond, you should have the monetary means to match your ample free time. The world is your oyster, and with sufficient retirement funds, you can plan fun things depending on your hobbies and passions. If you enjoy travelling, it could be a great time to take that once-in-a-lifetime trip because you no longer have to request time off work. You might also be able to tack onto a collection you’ve been building for decades. Maybe retirement simply means more time to spend with friends and family, and now that your time and your finances are flexible, you can develop those relationships without any inhibiting factors.

80s and Beyond

In this phase of life, it may be critical to consider the possibility of needing long-term care. Roughly 70% of Americans over the age of 65 will need some type of long-term care ^[1], so while it’s nothing to be ashamed of, it can be a good idea to be prepared. Still, however, you don’t have to stop living your life, even if your hobbies change. You may discover that you enjoy pastimes that cause less physical stress, such as attending art or theater shows. You should also continue reviewing your legacy plan and making changes such as for estate taxes and lessen the workload of your beneficiaries or protect them from expensive probate courts.

Financial flexibility may look different for everyone, but universally, it can be the key to unlocking the comfortability to achieve your dreams. To see how we can help you design a plan to become financially flexible and bring those dreams to life, please give us a call! You can reach Drew Capital Group in Tampa at 813.820.0069.

 

 

This article is not to be construed as financial advice. It is provided for informational purposes only and it should not be relied upon. It is recommended that you check with your financial advisor, tax professional and legal professionals when making any investment or any change to your retirement plan. Your investments, insurance and savings vehicles should match your risk tolerance and be suitable as well as what’s best for your personal financial situation.

Sources:

1. https://www.singlecare.com/blog/news/long-term-care-statistics/

The end of the year is upon us. Here are some tasks to check off before 2023 arrives!

 

As the year wraps up, it can be a great time to take financial inventory. Your circumstances are constantly changing and evolving, and the proper financial plan is not meant to be a set-it-and-forget-it thing. With the end of the year presenting the perfect chance to revisit your goals, here are a few areas you may want to check in on before we flip the calendar to 2023.

1. Review Your Financial Plan

The proper holistic financial plan isn’t just about your investments or your retirement. It also accounts for budgeting to achieve long- and short-term goals, making sure you have adequate insurance to hedge against financial risks, planning for wealth transfer to your heirs and/or charities, looking ahead with a plan to mitigate taxes—really every aspect of your financial life. As the year comes to a close, it can be a great idea to reassess your financial circumstances and make necessary adjustments to your financial plan. Maybe your goals have changed. Maybe you’re on a fast-track toward goals you expected to take longer to reach, so you can move some dates up. Remember, it’s always important to make sure that your beneficiaries are up to date annually on all of your accounts, investments and insurance policies. This time of year, while it’s in the front of your mind, you can use the tools and resources at your disposal to update and to reinvent your financial plan to more closely match your situation.

2. Adjust Your Monthly Budget

A budget is an important part of any financial plan, and having one can be a great way to keep track of where your money comes from and where it goes. Now that we’re in the final month of the year, you may be in a good position with a clear vision as you revisit your budget and adjust as needed. Maybe you received a nice annual bonus or raise, or maybe you’ve recently had a baby and haven’t had a chance to fine-tune your budget through the sleepless nights. No matter your circumstances or the new milestones and stages of life you reached in the past 12 months, it can be a really good idea to take a look at how your income keeps up with your expenditures and tweak accordingly.

3. Review Your Investments

It’s important to understand that diversifying with different asset classes can help protect your portfolio from market volatility, which is especially important as you get closer to retirement. Most traditional retirement accounts like 401(k)s have funds invested in the market, so they are not protected from market risk. This may be perfectly fine when you’re young, but as we saw with the high inflation, higher interest rates and increased volatility of 2022, it can cause panic for retirees, pre-retirees and people who are risk averse. Be sure that your overall portfolio positions you with a level of risk you’re able to tolerate, and that your retirement is protected.

4. Recalibrate Your Retirement Account Contributions ^[1,2,3]

Your retirement accounts may be your greatest assets when it comes to funding a comfortable and stable lifestyle in retirement. As you traverse your career and attempt to carve out a lifestyle that will be sustainable once you get the chance to quit working and chase your retirement dreams, it’s important to know how much you’re allowed to contribute to your various accounts. For example, in 2022, the contribution limit is $6,000 for traditional and Roth IRA accounts, and it is $20,500 for 401(k)s. In 2023, those limits will increase to $6,500 and $22,500, respectively. If you’re 50 or older, you’ll also be able to make catch-up contributions of up to $1,000 to your IRA and $7,500 to your 401(k) as soon as the new year hits.

5. Take Your RMDs ^[4]

Unfortunately, your retirement accounts cannot be left to grow tax-deferred forever. If you turned 70 after July 1, 2019, you must begin taking annual required minimum distributions, or RMDs, starting at age 72. The amount you must withdraw is typically calculated using life expectancy as determined by the IRS. Failure to adequately withdraw funds will result in a 50% excise tax, which is considerably higher than even the highest federal income tax withholding rate. Luckily, accounts growing tax-free, such as Roth IRAs and Roth 401(k)s do not have RMDs, but the deadline to withdraw the minimum amount from tax-deferred accounts is Dec. 31. If you’ve reached the age at which you must take the distributions, it can be beneficial to ensure that you’ve withdrawn the proper minimum amount from the right accounts to avoid a hefty penalty.

6. Spend Money Left in Your FSA ^[5]

Health savings accounts (HSAs) and flexible spending accounts (FSAs) offer a chance for those with employer benefits to cut medical costs by contributing pre-tax dollars that are allowed to be used for qualifying expenses. Unlike HSAs, however, FSAs do not typically allow you to roll your excess funds into the next year. You may have a grace period provided by your employer, but even the grace period often comes with a limit as to how much can roll over. Some ideas to avoid losing funds left in your FSA include booking general wellness appointments like visits to the eye doctor, annual physicals and dental cleanings.

7. Talk to Your Financial Professional or Advisor

The job of a financial professional, planner or advisor is to offer complete and personalized service for your holistic plan. That means assisting you with your unique circumstances and goals, helping you set realistic and reachable objectives while inspiring you to stretch farther and drive harder toward your ideal portrait of a comfortable lifestyle. Whether you’re looking to check off all of these boxes as the year ends or start 2023 with fresh goals, we can help!

If you have any questions about your end-of-year financial checklist, please give us a call. You can reach Drew Capital Management in Tampa, Florida at (813) 820-0069.

 

Sources:

1. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
2. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits
3. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions
4. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
5. https://www.goodrx.com/insurance/fsa-hsa/hsa-fsa-roll-over

 

This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.

 

Life Insurance

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Taxes

Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation.

College is an investment in your child and your family, but it can come at a hefty price. Here are some tips to save!

 

College and other forms of higher education have always been a vital part of planning a career. The foundation of any resume, a recent study interviewing 500 professional recruiters showed that all 500 look for candidates with a college degree ^[1]. Some common rebuttals to the argument for college might start with names like Zuckerberg, Jobs, Gates and Oprah Winfrey, all who dropped out school. Those four have incredible stories, but they’re the exception, not the rule.

The average college graduate with a bachelor’s degree has a lifetime earnings of $2.8 million while a person who achieved a high school diploma earns an average of $1.6 million over their career^[2]. At the same time, that average increase in lifetime earnings can come at a steep price, and that price is only rising. Tuition has climbed 211% for in-state universities over the last 20 years ^[3], escalating panic in students and their families who are forced to shoulder the burden. Without a plan to tackle them, loans can hang over a student’s head for decades. To alleviate some of that stress, here are a few tips for saving for and funding your child’s college education:

1. Assess early options

Many high schools around the United States offer Advanced Placement (AP) and dual-enrollment classes. By taking these higher-level courses while still in high school, students can be awarded college credits early, potentially at an even lower cost. AP classes are generally more difficult classes targeting more specific areas of study within a subject. They’re widely accepted and acknowledged throughout U.S. colleges, and they are free to students who elect to take the challenge. End-of-year tests for AP classes do cost $96 per exam ^[4] in the U.S., but colleges may award credits based on scores that would be evident of the student mastering the material.

Dual-enrollment classes, on the other hand, function as a partnership between high schools and colleges. A dual-enrollment class holds high school students to the college-level standard and curriculum. The students then pay per credit at the partnered college’s rate and receive those credits upon class completion as if they were taking those courses on the college campus. Both types of classes can save students and parents valuable time and money in their pursuit of higher education.

2. Familiarize yourself with the aid process

There are many types of student aid, and amounts can vary based on a plethora of factors. The most obvious form of assistance provided to students is scholarship money. It can be awarded based on test scores, academic results, athletics or extracurricular activities, and amounts can fluctuate based on a student’s choice of school. There are also opportunities for privately-funded scholarships that can be awarded by foundations, religious groups or other organizations on a need or merit-based basis. Students can typically find these opportunities online and apply if they meet predetermined criteria.

Students should also fill out the Free Application for Federal Student Aid, otherwise known as the FAFSA ^[5]. The FAFSA uses a student’s information to determine how much aid they might qualify for, including money from grants or state-funded assistance. It can also determine how much a student could qualify for in loans if those become necessary.

3. Familiarize yourself with current legislation

Legislation is always changing for parents looking to get a jump-start in funding their child’s education. For example, the FAFSA Simplification Act of 2020 opened new doors for students trying to qualify for need-based assistance. Prior to the FAFSA Simplification Act of 2020, the FAFSA calculated the expected family contribution, or the EFC. The EFC estimated the amount family members would be able to contribute to a student’s education based on income, assets and other benefits. EFC has now been replaced by student aid index, or SAI. Where EFC bottomed out at $0, SAI can go as low as -$1,500, meaning students can qualify for more need-based aid ^[6]. SAI also simplifies the form itself, cutting down the number of questions and the factors that figure into assistance a student might receive from family.

Where this could truly be a boon to students who need more aid is through family members whose contributions were accounted for in the EFC but are not accounted for in the SAI. The popular 529 plan, which provides tax-advantaged savings for designated beneficiaries, is often used by grandparents to help their grandchildren pay for college. Funds from a 529 plan no longer factor into the expected contributions from family members meaning that they will not have negative implications for the FAFSA’s estimation of how much aid a student requires ^[7].

4. Research schools prior to selection

Cost can differ by school selection, and though some students have their hearts set on a specific university, financials could play a large role in deciding on the best fit for your child. For example, students who do not expect to receive much aid from family or scholarship opportunities can opt for community college. Community colleges generally offer favorable per-credit prices for in-state students. The average cost per credit hour at a two-year community college is $141 while a public, four-year university costs $390 per credit hour on average ^[8].

After two years at a community college, students can usually transfer their credits to a university to finish a four-year degree. Wide-ranging opinions also exist about college selection ^[9]. Some researchers and surveys suggest that attending a prestigious college could be nothing more than a status symbol. Employers can look for many qualifications such as experience, extracurriculars, ability or the simple fact that a candidate attended any college. At the end of the day, the right choice of school will be different for each student.

If you have any questions about saving or planning to help your family, please give us a call! You can reach Drew Capital Group Private Wealth Management in Tampa, Florida by calling (813) 820-0069.

 

This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

 

Sources:

1. https://www.ellucian.com/assets/en/white-paper/credential-clout-survey.pdf
2. https://www.forbes.com/sites/michaeltnietzel/2021/10/11/new-study-college-degree-carries-big-earnings-premium-but-other-factors-matter-too/?sh=6fd5ad4035cd
3. https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities
4. https://apcentral.collegeboard.org/exam-administration-ordering-scores/ordering-fees/ordering-exam-materials/help/cost-of-exam
5. https://studentaid.gov/
6. https://unicreds.com/blog/student-aid-index
7. https://www.usnews.com/education/best-colleges/paying-for-college/articles/tips-for-grandparents-using-a-529-plan-to-save-for-college
8. https://educationdata.org/cost-of-a-college-class-or-credit-hour
9. https://www.nbcnews.com/business/business-news/does-it-even-matter-where-you-go-college-here-s-n982851

Gas prices are on the rise. Here are some ways to save a little bit of money.

The surge in gas prices swooped in just in time to dampen the mood in 2022. With the Russian invasion of Ukraine continuing to impact oil prices all around the world, the best solution might be to embrace the climb and start brainstorming some small life changes we can make to compensate.

According to AAA, the United States hit its highest average price per gallon Mar. 11 at $4.33 ^[1]. By adjusting, it’s possible to save hundreds, or even thousands, each month ^[2], and that money could go right back into your pocket. Fewer trips to the pump mean more money in your wallet, which means more money that you can spend, save or invest in your future. Here are seven tips to save money on gas as the prices rise:

1. Use public transportation

This option might depend upon your geographic location and living situation, but you may be able to save on gas by taking public transportation. It may not be an option in widely-sprawling metro areas or cities without public transportation systems, but in major cities like New York, San Francisco, Boston, Philadelphia or Seattle, one household could save $10,000 or more each year by opting to use public transit ^[2]. That total could depend upon other factors, like the type of car you drive, insurance and parking, but gas and rising prices certainly figure into your possible savings.

2. Start carpooling

For those who have longer work commutes or don’t live in cities with public transit systems, carpooling can be a great option. By finding a work friend who lives nearby and makes a similar commute, you might be able to cut your gas expenditure in half. Those savings can multiply if you decide to invite more people into your car pool, and it might even be a great option for those looking for more social outlets. Carpooling can also help the environment by reducing emissions, and it saves you time by cutting traffic and giving you access to the glorious high occupancy vehicle lane.

3. Download price-viewing apps

Gas prices fluctuate based on location and company. Don’t you hate it when you get gas, then drive one mile down the road and see prices 30 cents cheaper than the price you just paid? Luckily, there is an easy fix for that problem. Phone apps, like GasBuddy ^[3], list prices for nearly every filling station in your immediate area. Users update the information to ensure that the prices you see are accurate, and you can pinpoint the cheapest gas with just a few taps. Simply checking nearby gas prices or rates in a specific city or zip code is free, but GasBuddy also offers premium, fee-based options that can help users rack up even more savings.

4. Become a member of wholesale stores

Wholesale stores, like Costco, may feature lower gas prices depending on your area. Granted, a membership to Costco might cost you $60 annually ^[4], but we can do some quick math to see just how that membership fee has the potential to pay for itself. Prior to the pandemic, the average American filled their gas tank roughly once per week ^[5]. According to GasBuddy searches, in large metro areas like Los Angeles, Costco’s average price per gallon might be somewhere between 25 cents and 50 cents per gallon less than the average price in the area ^[6]. If you fill up your 12-gallon tank once per week, the lower end of the scale results in a savings of $3 per full tank. That may not sound like much, but for one person, the $60 annual membership fee is covered in 20 weeks, or less than half a year. Furthermore, Costco’s most basic package, the Gold Star membership, includes a second membership at no additional cost for someone over the age of 18 living in your household. Let’s say, for example, your spouse also fills their 12-gallon tank once per week. The membership would be paid for in just 10 weeks, and you could still get cheaper gas for the rest of the year.

5. Work from home

This isn’t an option for everyone, but it’s no secret that the best way to save gas is by simply not using it. According to the Pew Research Center, 59% of workers in the United States who are able to work from home are taking advantage of that opportunity ^[7]. The reevaluation of work circumstances truly kicked into gear during the pandemic, but even as the spread of the virus wanes, it can be a great option for those still looking to cut down costs at the gas station.

6. Pay cash

Not all gas stations offer savings for paying with cash, but some do. In our transition to a cashless world, you might not carry cash as often as you used to, but a quick stop at your local ATM on your way to fill up might prove to be beneficial. Apps like GasBuddy may be able to show whether or not a gas station provides a discounted rate for customers who pay with cash ^[8]. Another easy way to tell if a station takes cash is if a sign clearly states that the rate per gallon is for cash payments. Some stations even have signs that flash between two prices, showing the price per gallon for payments with card versus the price per gallon for payments with cash.

7. Find alternatives to long-distance hobbies

We would never advise that you give up your hobbies, but if you’re concerned about surging gas prices, staying home can be a good option. Weekend vacations or one-day getaways can easily be turned into staycations, and in 2022, there are so many great options for at-home activities. You can rent a recent movie, listen to music, play board games, grill out, invite friends over for a gathering, work out or play with your pets. The pandemic also opened the door for events like virtual happy hours and video hangouts, so if you just can’t reach your friends and family because of distance, you can still see them and interact with them extremely easily, all without spending a nickel on fuel.

If you have any questions about this article or how to protect your retirement plan during times of high inflation, please give us a call! You can reach Drew Capital Group Private Wealth Management in Tampa, Florida by calling (813) 820-0069.

 

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

This site may contain links to articles or other information that may be contained on a third-party website. Advisory Services Network, LLC is not responsible for and does not control, adopt, or endorse any content contained on any third party website.

 

Sources

1. https://gasprices.aaa.com/
2. https://www.moneycrashers.com/benefits-public-transportation-travel-for-less/
3. https://www.gasbuddy.com/home
4. https://www.costco.com/join-costco.html
5. https://www.reviews.com/insurance/car/drivers-fueling-behavior-after-covid/#:~:text=Over%2082%25%20of%20US%20drivers,decrease%20in%20consumer%20gas%20purchases
6. https://www.gasbuddy.com/home?search=los%20angeles&fuel=1&brandId=38&maxAge=0&method=all
7. https://www.pewresearch.org/social-trends/2022/02/16/covid-19-pandemic-continues-to-reshape-work-in-america/
8. https://www.tmj4.com/news/local-news/if-discount-is-offered-using-cash-and-not-plastic-can-help-you-save-at-the-pump