I love Roth’s and so should you – Four keys for Roth accounts.

ST. CROIX INSIGHTS

I love Roth’s and so should you – Four keys for Roth accounts.

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

ROTH Account

One of most powerful financial tools that Congress created was the Roth IRA/401(k) Roth accounts. If you had a $1 million in a Traditional IRA and $1 million in a Roth IRA, which one would be worth more?

The answer is the Roth IRA as these accounts are not taxed upon the distribution of the funds if you follow these four keys:

  1. Rules….no one likes them but with each type of retirement account you fund, you make a deal with our government. Yet, I contend the Roth IRA rules are extremely favorable. Favorable doesn’t mean simple. There are tons of rules to comply with to avoid taxes or penalties with Roth accounts.
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  3. Many of you have been told you CAN’T fund a Roth account because your income is too high. In technical terms, your Adjusted Gross Income (AGI) based on your 1040 falls about the funding thresholds. But that’s not the entire story. You can fund a Roth IRA accounts even if your AGI is high. The best strategy is funding a non-deductible IRA and right away do an IRA Conversion to a Roth IRA account. Simple, done. You funded a Roth IRA account. Now it’s a little more complicated if you have IRA accounts with account balances and that’s where we need calculation a tax rate on the conversion.
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  5. Another big misconception is around your employer’s 401(k) Roth option. Many believe if your AGI is too high you still cannot contribute to your employers. Employer 401k plans DO NOT have income limitations around funding a Roth or Traditional account.
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  7. These accounts do not have Required Minimum Distribution (RMD) levels. Yet 401(k) Roth accounts do at age 70 ½ unless you are still working for the company.

Roth accounts are powerful financial tools when you follow the four keys.

St. Croix Advisors, LLC is an investment advisory firm. We seek to help our clients achieve financial simplicity. Before implementing financial ideas, you read, work with a Certified Financial Planner (CFP) or CPA for advice or recommendations that fit your own financial situation. The content is developed from sources believed to be providing accurate information.

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Financial Freedom – what it means to me

ST. CROIX INSIGHTS

Financial Freedom – what it means to me.

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Everyone’s definition of financial freedom varies based on their background, upbringing and life experiences. It seems today on TV, social media and movies, we have all types of expectations set forth for us to live up to. Yet, what is real life these days? From what I see – most of it isn’t real.

Almost every day, I ask someone what financial freedom means to them. Most reply with a dollar amount so they don’t have to worry about money or expenses and they can financially handle whatever life brings their way.

I’m no different. I believe financial freedom is being debt free and having an asset base provide enough monthly cash to support my lifestyle. That’s it. Basic. What that framework, it’s easy to understand and figure out what your number should be.

There are three steps to help achieve this type of financial freedom:

1. Don’t purchase what you can’t afford. Sounds easy but it’s not. For example, do you purchase a new car at 100,000 miles or do you drive it in the ground? Drive it in the ground. At 100,000 miles you’ve barely went through two sets of tires. And that dream home you desire – “right size” it. Don’t over buy.

2. Pay yourself first. Sounds easy but it’s not. For those in your working years, target 15 – 20 percent of your gross Income. Yes it’s a lot, but that is what’s required to achieve financial freedom. Numbers don’t lie.

3. Pay attention to the tax man. Remember that our money belongs to the government and if we don’t understand the rules, they keep more of it. That’s not ideal if they keep more of your hard earned money.

Financial Freedom doesn’t happen overnight. You and I have to work for it. You know that saying, “Freedom isn’t free.”

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When kids have to help their parents financially

ST. CROIX INSIGHTS

When kids have to help their parents financially

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

It’s not surprising; it’s something I hear on a regular basis. Just change the dollar amount for how much your household makes. I bet most of us can relate especially when you have a couple of kids, mortgage, car payment, are saving for retirement, etc.

As baby boomers enter their golden years, some are discovering new financial challenges including running out of money. I have to tell you this isn’t an easy situation or conversation to have with anyone.

Being in the financial world for such a long time, I have seen first-hand how someone can run out of money. It’s easier than you’d think. Here are a few ways it happens:

1. They didn’t save enough in the first place. When we are 20, we believe we have our entire lives ahead of us. But before we know it we are 70! Overtime you realize you didn’t save enough money, Social Security isn’t enough and other retirement savings won’t make it. I see kids financially supporting their parents all the time. It might be a couple of hundred a month, but as you work to help your parents, you have to make sure you don’t neglect your overall retirement goals and savings needs.

2. A sickness or illness wiped them out. Chances are they have insurance but it can and does fall short for all of our needs and they are now faced with a mountain of medical bills. Then you are left wondering what to do and how can Medicaid help.

3. They got suckered. This one is becoming all too common. It happens a few ways. First, older folks are lonely and seek companionship, someone to hang out with. They develop a friendship online or with someone locally. Over time, the friendship builds and it turns out this new “friend” needs financial help. And before you know it, all their accounts are cleaned out. Yes, this happens. They actually “give” all their money away. Make sure you receive duplicate financial statements each month so you can monitor account activity of your parents. Secondly, people fall for some phone or internet scam. It seems like common sense to now fall for this….but it’s not. Pay $5,000 and we’ll send you winnings of $1 million. Or you owe the IRS and if you don’t pay with bitcoin or gift cards you are going to jail.

It can be very hard to sit on the sidelines and watch your parents suffer. I know my clients don’t want their parents to suffer but it’s not always as easy just to give someone money. Sometimes that doesn’t solve the underlying problems.

If you like to talk about how to best help and support your family members, let’s talk.

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2018 Employee Benefit Open Enrollment

ST. CROIX INSIGHTS

2018 Employee Benefit Open Enrollment

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

It’s hard to believe 2017 is coming to an end open enrollment is just around the corner. It’s easy to take your employer benefits for granted. But let’s not! Let’s make sure you have fully taking advantage of the benefits your employer offers. After all, you are working hard for them each day.

Here are a few key items to evaluate this year during your open enrollment period:

  • Join the 1% club. Increase your 401(k) savings each year by 1%. It’s easy, and you won’t miss the money.
  • Ask the question, will you have too much money in pre-tax retirement? This means when you retire will all of your income be taxable in your retirement years? Funding a Roth IRA is a great option for tax-free income in your retirement years.
  • Review your medical coverage. Have you or a family member’s health status changed? Will you require medical care outside of your primary network? Are you saving enough into your HSA account to cover items not covered by your plan and out of pocket expenses?
  • Examine your disability insurance. Chances are your largest asset is your ability to produce income. Are you fully insured in the event you develop a sickness or illness? Will your benefits be taxable? Read the policy, so you are informed.
  • Are there any new benefits? What benefits have you overlooked all these years and now maybe you should have them? Companies offer a host of benefits as your life changes, so will your needs. Keep up-to-date. Often having the proper amount of life insurance is an overlooked benefit until it’s too late.

If you need help analyzing your employee benefits, let’s schedule a time to meet to make sure they are properly incorporated into your financial planning.

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Covering Health Care Costs When Retired

ST. CROIX INSIGHTS

Covering Health Care Costs When Retired

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

If you’re like many Americans, you’re eyeing retirement with apprehension. When my clients come to me, no matter the reason or the stage of life, there are always two questions that they ask me. “Will there be enough money?” and “Will everything be okay?”

As with any other situation in your life, planning and being prepared ahead of time is key for retirement planning. Making sure you cover your bases and manage potential factors before they arise is key. And one factor that weighs in is the cost of health care coverage.
The rising costs of health care (especially as we age) is enough to strike fear in the hearts of many approaching retirement. Health care costs can eat up a sizable chunk of retirement savings, especially given the hit that many retirement accounts took in the last decade.

“I know and can prove that if you pay attention to your money, you actually have more money than you think. ”

Outliving one’s retirement assets is becoming a real fear for those approaching retirement, as people are living longer and being forced to spend diminished retirement income on rising health care expenses.

You shouldn’t be forced to spend your retirement worrying about whether or not you’ll be able to qualify for Medicaid or if your retirement nest egg will run out too soon. You should be enjoying these golden years of your life. This can be accomplished through the peace of mind that sound financial planning provides and you have many options for health care coverage as well as retirement savings and investing.

If you’re like the 62% of Americans in pre-retirement age (50-64) who are not at all confident that you will have enough savings to weather their health care costs in retirement, I encourage you to contact St. Croix Advisors today to get a financial plan in place. Don’t waste another second of your life worrying about the future that you could be looking forward to.

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Saving for College or Saving for Retirement

ST. CROIX INSIGHTS

Saving for College or Saving for Retirement

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Often, clients are willing to forego saving for retirement (under the guise of postponing it) in favor of saving for and financing their children’s higher education. This is a dangerous game to play and one that is not recommended.

With advancements in health care and increased lifespans, coupled with decreasing home and investment values that could occur at the wrong time, outliving your retirement is a very real possibility without proper planning.

I understand that for many families, you may not be able to save for both retirement and college simultaneously. However, you should not put your future (in terms of your retirement) on the line to cover college expenses for your children. I hear your arguments, and yes, children are the future, but just don’t do it.

“Why?” you might ask.For starters, you can get loans to cover college expenses. You cannot get loans to cover your retirement expenses. Additionally, when you’re funding your retirement savings, those financial tools may be more tax friendly AND still allow access to that money down the road. For college savings, it is very specifically for college expenses only.

The best plan? Continue saving for retirement. In fact, save as much as you can for retirement.

Then, when the kiddos start coming along, start saving for their educations as early as possible (i.e. when they’re babies), so the amount may build incrementally as they grow up.

If your kids are older now and you’re already staring down the gauntlet of college expenses, thinking that you should have started sooner, don’t fret, there are still plenty of options available to you. Contact me today for more information on formulating a plan for your situation.

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