651-337-1919

How Much Money Do I Need To Retire?

ST. CROIX INSIGHTS

How Much Money Do I Need to Retire? That’s the $64,000 Question.

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
Retirement Savings

The phrase “$64,000 question” originated from a 1950s game show where contestants answered a series of questions to win the grand prize of—yep—$64,000. In many ways, meeting with a certified financial planner (CFP®) like me feels similar. Instead of game show trivia, we go through a series of important retirement questions—except this time, the stakes are your financial future.

Retirement Questions to Ask

To build a solid retirement plan, I’ll need to ask you a variety of questions, including:

  • Where do you want to retire?
  • What kind of lifestyle do you envision?
  • Travel goals: Where, how often, and what type of travel do you prefer?
  • Family considerations: Do you plan to spoil your grandkids?
  • Healthcare: How will you handle medical expenses and long-term care costs?
  • Income sources: Will you have Social Security, pensions, or rental income?
  • Investments: Can your portfolio keep pace with that pesky “I” word—inflation?
  • Withdrawal strategy: Do you want to live only off your investment earnings, or are you comfortable dipping into your principal?
  • Longevity: Can your savings sustain you for 25, 30, or even 40 years in retirement? (Many people underestimate this possibility, but it’s more common than you think.)
  • Legacy planning: Do you want to leave money for your children or a favorite charity?
  • Taxes: Let’s not forget about our favorite relative—Uncle Sam. How will taxes impact your retirement withdrawals and overall financial picture?

And the list goes on…

Oh, how simple it would be if we could just answer these questions correctly and poof—win $64,000 toward our retirement! But unlike a game show, there’s no single right answer. Retirement planning isn’t about picking the perfect number; it’s about adjusting to an evolving target based on your goals, circumstances, and market conditions.

Navigating Your Retirement Savings

If you have a significant other, agreeing on a number of factors listed above helps to provide the clarity you’ll need to get the process started.

During the financial planning process, some people realize that their budget can’t quite support their “dream retirement lifestyle.” But that doesn’t mean retirement is out of reach—it just means making a few adjustments.

For example, maybe you had your heart set on luxury vacations at a JW Marriott, but instead, you opt for a Courtyard by Marriott. In the grand scheme of things, are you really giving up much? Maybe you dream of a beachfront home but instead choose a place just a block or two away—you’ve still got the ocean, and you just saved yourself a fortune.

Retirement planning is about redesigning and retooling to achieve a fulfilling life with the resources you have. It takes time, energy, and thoughtful strategy to put the right plan in place. But that’s the best part of what I do—helping people navigate that moving target and turn their retirement dreams into reality. Contact us today for a free no-obligation consultation.

 

The phrase “$64,000 question” originated from a 1950s game show where contestants answered a series of questions to win the grand prize of—yep—$64,000. In many ways, meeting with a certified financial planner (CFP®) like me feels similar. Instead of game show trivia, we go through a series of important retirement questions—except this time, the stakes are your financial future.

Retirement Questions to Ask

To build a solid retirement plan, I’ll need to ask you a variety of questions, including:

  • Where do you want to retire?
  • What kind of lifestyle do you envision?
  • Travel goals: Where, how often, and what type of travel do you prefer?
  • Family considerations: Do you plan to spoil your grandkids?
  • Healthcare: How will you handle medical expenses and long-term care costs?
  • Income sources: Will you have Social Security, pensions, or rental income?
  • Investments: Can your portfolio keep pace with that pesky “I” word—inflation?
  • Withdrawal strategy: Do you want to live only off your investment earnings, or are you comfortable dipping into your principal?
  • Longevity: Can your savings sustain you for 25, 30, or even 40 years in retirement? (Many people underestimate this possibility, but it’s more common than you think.)
  • Legacy planning: Do you want to leave money for your children or a favorite charity?
  • Taxes: Let’s not forget about our favorite relative—Uncle Sam. How will taxes impact your retirement withdrawals and overall financial picture?

And the list goes on…

Oh, how simple it would be if we could just answer these questions correctly and poof—win $64,000 toward our retirement! But unlike a game show, there’s no single right answer. Retirement planning isn’t about picking the perfect number; it’s about adjusting to an evolving target based on your goals, circumstances, and market conditions.

Navigating Your Retirement Savings

If you have a significant other, agreeing on a number of factors listed above helps to provide the clarity you’ll need to get the process started.

During the financial planning process, some people realize that their budget can’t quite support their “dream retirement lifestyle.” But that doesn’t mean retirement is out of reach—it just means making a few adjustments.

For example, maybe you had your heart set on luxury vacations at a JW Marriott, but instead, you opt for a Courtyard by Marriott. In the grand scheme of things, are you really giving up much? Maybe you dream of a beachfront home but instead choose a place just a block or two away—you’ve still got the ocean, and you just saved yourself a fortune.

Retirement planning is about redesigning and retooling to achieve a fulfilling life with the resources you have. It takes time, energy, and thoughtful strategy to put the right plan in place. But that’s the best part of what I do—helping people navigate that moving target and turn their retirement dreams into reality. Contact us today for a free no-obligation consultation.

Myths vs. Reality: Preparing for Life’s Long-Term Care Challenges

ST. CROIX INSIGHTS

Myths vs. Reality: Preparing for Life’s Long-Term Care Challenges

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
Happy senior woman with her adult daughter at home receiving long-term care

When it comes to planning for long-term care, many people rely on common assumptions like, “It won’t happen to me,” “I have medical insurance,” or “Medicare has me covered.” Unfortunately, these beliefs can lead to financial stress and strain on loved ones. A long-term care event doesn’t just happen to one person; it can significantly impact your family—emotionally and financially. Let’s address some of the most common assumptions people have and explore how long-term care planning, including life insurance with long-term care benefits, can protect your future.

Myth #1: “It won’t happen to me.”

It’s natural to feel optimistic about your health, especially with advancements in medical technology, but the statistics tell a different story. According to the U.S. Department of Health and Human Services, nearly 70% of people aged 65 and older will need some form of long-term care during their lifetime. Long-term care isn’t just for those in their later years—younger adults can require care due to accidents or illnesses as well.

Solution: Planning ahead ensures you’re prepared, even if the unexpected occurs. Options like hybrid life insurance policies can provide both a death benefit and coverage for long-term care needs.

Myth #2: “Medicare or Medicaid has me covered.”

Medical insurance covers all this—or does it?

It’s no surprise that Americans often misunderstand aspects of our healthcare system (it’s not the most intuitive), especially when it comes to long-term care. Lincoln Financial Group conducted an in-depth study on LTC surveying over 1,000 adult Americans. 73% of the people surveyed say they will rely on Medicare, health insurance, or Medicaid if they need to hire help for long-term care. However, Medicare does not cover most expenses related to long-term care services and support. And Medicaid is only available to those with limited assets and income.

Solution: Private long-term care insurance or life insurance with long-term care riders fills the gaps Medicare and Medicaid cannot cover. These policies provide flexibility and allow you to maintain control over your care choices.

Myth #3: “That’s what my savings are for.”

Very few people tell me this. Most of us save our retirement dollars for enjoyment, not our future care.

While it’s wise to save for the future, relying solely on your savings to fund long-term care can quickly deplete your assets. The average cost of a private room in a nursing home is over $100,000 per year, and in-home care services can also add up quickly. Additionally, people are living longer. Your funds need to go much further than they did 10, 20 years ago. Without proper planning, you risk jeopardizing your financial security.

Solution: A comprehensive plan that includes long-term care insurance or a life insurance policy with a long-term care benefit ensures your savings can be preserved for other priorities like retirement or leaving a legacy.

Myth #4: “My family will be able to take care of me.”

While it’s comforting to think your loved ones will step in, caregiving can place significant emotional, physical, and financial burdens on family members. Not to mention that wages are not keeping up with inflation. Many American families report they are struggling financially.

On a personal note, my sister and I hired help with my mom. In no way could we have taken full-time care of her. We needed help. My sister and I would be the first to tell you how mentally and physically draining it is on caretakers.

According to an article by CNBC, approximately 35% of households earning less than $50,000 per year live paycheck to paycheck. Even in higher-income households making $150,000, 20% of households also report they are living paycheck to paycheck. Where are these families going to come up with the extra funds to take care of aging loved ones? For families that do have the financial means to provide care, many caregivers face burnout, and balancing care with work or other responsibilities can be overwhelming.

Solution: Long-term care insurance provides the resources needed to hire professional caregivers, alleviating stress on family members. It also ensures you receive the level of care you deserve without disrupting your family’s lives.

How Life Insurance Can Help

When planning for LTC needs, traditional long-term care insurance is an option, but life insurance with LTC benefits may offer a more economical and versatile solution. While you may never need long-term care, the certainty of death makes a life insurance policy a practical choice, as it addresses both possibilities.

Your life insurance options include a hybrid life insurance policy or a life insurance policy with an LTC rider. Both allow you to use a portion of your policy’s death benefit to cover long-term care expenses and, if you don’t end up needing care, your beneficiaries still receive death benefit proceeds, ensuring your investment isn’t wasted.

  • Hybrid Policies: These are primarily designed to provide long-term care benefits, with life insurance coverage as a secondary feature. They are often chosen by individuals whose main concern is funding potential LTC needs.
  • Life Policies with LTC Riders: These are primarily life insurance policies that include an optional LTC rider, offering LTC benefits in addition to death and cash value benefits. The focus is on providing comprehensive financial protection for various needs.

Eligibility requirements to be able to use funds with hybrid policies or policies with an LTC rider are less stringent compared to Medicare and Medicaid.

  • Hybrid/LTC Riders: Triggered when you are unable to perform two or more Activities of Daily Living (ADLs) or have a severe cognitive impairment. Requires a medical professional’s certification.
  • Medicare: Covers only short-term care after hospitalization, for a maximum of 100 days. You must show improvement during rehabilitation for coverage to continue.
  • Medicaid: Must meet income and asset limits to qualify. Benefits are often only available for low-income individuals or those who have “spent down” their assets.

Taking the First Step

At St. Croix Advisors, we understand that planning for long-term care and life insurance is an act of love—for yourself and your family. With our experience, we can help you address common misconceptions and develop a personalized strategy that safeguards your health, wealth, and peace of mind. Let us guide you in exploring options tailored to your unique needs and goals. Reach out today.

 

When it comes to planning for long-term care, many people rely on common assumptions like, “It won’t happen to me,” “I have medical insurance,” or “Medicare has me covered.” Unfortunately, these beliefs can lead to financial stress and strain on loved ones. A long-term care event doesn’t just happen to one person; it can significantly impact your family—emotionally and financially. Let’s address some of the most common assumptions people have and explore how long-term care planning, including life insurance with long-term care benefits, can protect your future.

Myth #1: “It won’t happen to me.”

It’s natural to feel optimistic about your health, especially with advancements in medical technology, but the statistics tell a different story. According to the U.S. Department of Health and Human Services, nearly 70% of people aged 65 and older will need some form of long-term care during their lifetime. Long-term care isn’t just for those in their later years—younger adults can require care due to accidents or illnesses as well.

Solution: Planning ahead ensures you’re prepared, even if the unexpected occurs. Options like hybrid life insurance policies can provide both a death benefit and coverage for long-term care needs.

Myth #2: “Medicare or Medicaid has me covered.”

Medical insurance covers all this—or does it?

It’s no surprise that Americans often misunderstand aspects of our healthcare system (it’s not the most intuitive), especially when it comes to long-term care. Lincoln Financial Group conducted an in-depth study on LTC surveying over 1,000 adult Americans. 73% of the people surveyed say they will rely on Medicare, health insurance, or Medicaid if they need to hire help for long-term care. However, Medicare does not cover most expenses related to long-term care services and support. And Medicaid is only available to those with limited assets and income.

Solution: Private long-term care insurance or life insurance with long-term care riders fills the gaps Medicare and Medicaid cannot cover. These policies provide flexibility and allow you to maintain control over your care choices.

Myth #3: “That’s what my savings are for.”

Very few people tell me this. Most of us save our retirement dollars for enjoyment, not our future care.

While it’s wise to save for the future, relying solely on your savings to fund long-term care can quickly deplete your assets. The average cost of a private room in a nursing home is over $100,000 per year, and in-home care services can also add up quickly. Additionally, people are living longer. Your funds need to go much further than they did 10, 20 years ago. Without proper planning, you risk jeopardizing your financial security.

Solution: A comprehensive plan that includes long-term care insurance or a life insurance policy with a long-term care benefit ensures your savings can be preserved for other priorities like retirement or leaving a legacy.

Myth #4: “My family will be able to take care of me.”

While it’s comforting to think your loved ones will step in, caregiving can place significant emotional, physical, and financial burdens on family members. Not to mention that wages are not keeping up with inflation. Many American families report they are struggling financially.

On a personal note, my sister and I hired help with my mom. In no way could we have taken full-time care of her. We needed help. My sister and I would be the first to tell you how mentally and physically draining it is on caretakers.

According to an article by CNBC, approximately 35% of households earning less than $50,000 per year live paycheck to paycheck. Even in higher-income households making $150,000, 20% of households also report they are living paycheck to paycheck. Where are these families going to come up with the extra funds to take care of aging loved ones? For families that do have the financial means to provide care, many caregivers face burnout, and balancing care with work or other responsibilities can be overwhelming.

Solution: Long-term care insurance provides the resources needed to hire professional caregivers, alleviating stress on family members. It also ensures you receive the level of care you deserve without disrupting your family’s lives.

How Life Insurance Can Help

When planning for LTC needs, traditional long-term care insurance is an option, but life insurance with LTC benefits may offer a more economical and versatile solution. While you may never need long-term care, the certainty of death makes a life insurance policy a practical choice, as it addresses both possibilities.

Your life insurance options include a hybrid life insurance policy or a life insurance policy with an LTC rider. Both allow you to use a portion of your policy’s death benefit to cover long-term care expenses and, if you don’t end up needing care, your beneficiaries still receive death benefit proceeds, ensuring your investment isn’t wasted.

  • Hybrid Policies: These are primarily designed to provide long-term care benefits, with life insurance coverage as a secondary feature. They are often chosen by individuals whose main concern is funding potential LTC needs.
  • Life Policies with LTC Riders: These are primarily life insurance policies that include an optional LTC rider, offering LTC benefits in addition to death and cash value benefits. The focus is on providing comprehensive financial protection for various needs.

Eligibility requirements to be able to use funds with hybrid policies or policies with an LTC rider are less stringent compared to Medicare and Medicaid.

  • Hybrid/LTC Riders: Triggered when you are unable to perform two or more Activities of Daily Living (ADLs) or have a severe cognitive impairment. Requires a medical professional’s certification.
  • Medicare: Covers only short-term care after hospitalization, for a maximum of 100 days. You must show improvement during rehabilitation for coverage to continue.
  • Medicaid: Must meet income and asset limits to qualify. Benefits are often only available for low-income individuals or those who have “spent down” their assets.

Taking the First Step

At St. Croix Advisors, we understand that planning for long-term care and life insurance is an act of love—for yourself and your family. With our experience, we can help you address common misconceptions and develop a personalized strategy that safeguards your health, wealth, and peace of mind. Let us guide you in exploring options tailored to your unique needs and goals. Reach out today.

Roth IRA vs. Traditional IRA: What’s the Difference?

ST. CROIX INSIGHTS

Roth IRA vs. Traditional IRA: What’s the Difference?

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
Roth IRA vs. Traditional IRA

First off, pay now or pay later—that is the question. Ordinarily, when we discuss the difference, most individuals generally point out the fact that they’ll be in a lower tax bracket come retirement. However, I’m 99% confident that this is probably not the case for most of us.

Remember, our government needs and wants your money. In short, a host of factors will ultimately decide your tax rate at retirement, the two biggest of which are health and lifestyle in your golden years.

Although we can run the math a thousand ways, the biggest question to ask is: Do you want all of your income in retirement taxed? The answer is often no.

Here’s a list of some of the differences between two of the most common retirement accounts: the Roth IRA and the Traditional IRA account. If you have specific questions, please don’t hesitate to contact us.

The Difference Between a Roth IRA and Traditional IRA

Roth IRA

  • Eligibility: Individuals must have taxable compensation, or a spouse with earned income if filing jointly. Contributions are not subject to age requirements.
  • Tax Treatment: Contributions are not tax-deductible and are subject to modified adjusted gross income (MAGI) limitations.
  • Contribution Limits for 2024 and 2025:
    • Individuals under age 50 can contribute up to $7,000.
    • Individuals aged 50 and older can contribute up to $8,000, including a $1,000 catch-up contribution.
    • Note: The total contribution to all IRAs (Roth and Traditional) cannot exceed these limits.
  • Income Limits for 2024:
    • Single Filers:
      • Full contribution allowed if MAGI is less than $146,000.
      • Contribution limit phases out between $146,000 and $161,000.
      • No contribution allowed if MAGI is $161,000 or more. Time to consider Backdoor Roth.
    • Married Filing Jointly:
      • Full contribution allowed if MAGI is less than $230,000.
      • Contribution limit phases out between $230,000 and $240,000.
      • No contribution allowed if MAGI is $240,000 or more. Time to consider Backdoor Roth.
  • Income Limits for 2025:
    • Single Filers:
      • Full contribution allowed if MAGI is less than $150,000.
      • Contribution limit phases out between $150,000 and $165,000.
      • No contribution allowed if MAGI is $165,000 or more. Time to consider Backdoor Roth.
    • Married Filing Jointly:
      • Full contribution allowed if MAGI is less than $236,000.
      • Contribution limit phases out between $236,000 and $246,000.
  • No contribution allowed if MAGI is $246,000 or more. Time to consider Backdoor Roth.
  • Distributions:
  • Best Practices:
    • To maximize tax benefits, keep funds in the account for at least five years and wait until age 59½ before taking distributions.
    • Withdrawals before meeting these criteria may incur a 10% tax on earnings.

Note: Be aware of the 5-year tax rule for Roth plans.

Once you open a Roth IRA, you need to wait five years after your first contribution to withdraw funds tax-free. January 1 of the first year you contribute begins the five-year countdown. For example, if you make your first contribution on March 1, 2025 the five-taxable-year period starts January 1, 2025 and ends December 31, 2030.

Failing to meet the five-year rule means earnings could be subject to income taxes and possibly a 10% early withdrawal penalty if other qualifying criteria (like age 59½) aren’t met.

This rule applies for conversions as well. If you convert funds from a Traditional IRA to a Roth IRA, a separate five-year period applies for the converted amount. Each conversion has its own five-year clock, starting on January 1 of the year the conversion is made.

Traditional IRA

  • Eligibility: Individuals must have earned income, or a spouse with earned income if filing jointly.
  • Tax Treatment:
    • Contributions are generally tax-deductible.
    • Deductibility phases out if the contributor or spouse participates in an employer-sponsored retirement plan and the household income exceeds IRS thresholds.
  • Contribution Limits for 2024 and 2025:
    • Individuals under age 50 can contribute up to $7,000.
    • Individuals aged 50 and older can contribute up to $8,000, including a $1,000 catch-up contribution.
  • Distributions:
    • Withdrawals before age 59½ are subject to a 10% early withdrawal penalty unless meeting specific exceptions, such as death, disability, qualifying education expenses, medical expenses, or first-time home purchases.
    • Required minimum distributions (RMDs) must begin at age 73, regardless of whether you need the funds, potentially impacting your tax situation.

Choosing Between a Roth and Traditional IRA

Deciding between a Roth IRA and a Traditional IRA depends on your current financial situation, expected tax rate in retirement, and long-term goals. Consulting with a skilled financial planner can help you make the best decisions for your situation. Call St. Croix Advisors at (651) 337-1919 or (877) 393-1919 or email info@stcroixadvisors.com for more information.

How You and Your Adult Child Can Leverage an HSA and Roth IRA

ST. CROIX INSIGHTS

How You and Your Adult Child Can Leverage an HSA and Roth IRA

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

college age child with parent reviewing finances

How you and your adult child between ages 19 and 26 years old could leverage this planning idea for HSAs and Roth IRAs. A one-two punch!

You likely already know that The Affordable Care Act allows children to stay on their parent’s health insurance plan until age 26. What you might not realize is that this can open up opportunities for your adult child—or even you—to contribute to a Health Savings Account (HSA) in their name, offering substantial tax advantages. Let’s get into this incredibly overlooked area of planning!

What are the advantages of Health Savings Accounts?

HSAs offer a triple-tax advantage, making them one of the most powerful tools for managing healthcare costs and saving for the future.

  • Your contributions are 100% tax-deductible since they are deducted from your gross income.
  • All interest earned in the HSA is 100% tax-deferred unless used for non-eligible medical expenses.
  • Withdrawals from your HSA are 100% tax-free for eligible medical expenses.
  • HSA funds roll over year-to-year. If you use it correctly, this account can build for decades like a traditional retirement account. Save your medical receipts and pay out of pocket for your medical expenses; that part is key here.

Contributing to a HSA

If you want to contribute to your child’s HSA, this doesn’t mean you need to choose between yourself and your child. They can continue to contribute to their own HSA as well. Additionally, if your child wants to contribute to their own HSA, this doesn’t mean you have to stop your contributions.

Things to note:

  • Parents must be covered under a High-Deductible Health Plan (HDHP) to contribute to an HSA.
  • When your family has HDHP coverage, you can contribute up to $8,300 ($8,550 in 2025) for your child’s too! That’s powerful!
  • A parent can gift a child money to put in their HSA—but one needs to pay attention to federal gifting limits each year.
  • An adult child cannot be claimed as a dependent on someone’s tax return (including the parents) if they want to open an HSA in their name.

Contributing to an HSA offers more than just immediate tax savings. It also allows young adults to build a healthcare nest egg, take advantage of long-term growth, and even use the funds for future medical expenses well into retirement.

Expand Their Savings with a Roth IRA

If your child is employed and earns an income, they can open a Roth IRA. This is another opportunity for you to contribute to their financial future. Parents can contribute to their child’s Roth IRA as long as the total contribution (from the child, parents, or anyone else) does not exceed the annual limit ($7,000 in 2024) or the child’s earned income. Contributions you make on behalf of your child count toward your annual gift tax exclusion limit.

Key Roth IRA Benefits:

  • Tax-free growth: Investments grow tax-free, and qualified withdrawals are also tax-free.
  • No required distributions: Unlike traditional IRAs, Roth IRAs have no required minimum distributions (RMDs), offering more flexibility in retirement planning.
  • Penalty-free early withdrawals: Contributions (but not earnings) can be withdrawn at any time, making it a flexible savings option.

By combining the tax advantages of HSAs and Roth IRAs, you can help your child build a robust financial foundation that supports both their healthcare needs and long-term retirement goals.

If you’re navigating health insurance options or want to explore how HSAs and Roth IRAs can benefit your family’s financial plan, reach out—I’m here to help!

How you and your adult child between ages 19 and 26 years old could leverage this planning idea for HSAs and Roth IRAs. A one-two punch!

You likely already know that The Affordable Care Act allows children to stay on their parent’s health insurance plan until age 26. What you might not realize is that this can open up opportunities for your adult child—or even you—to contribute to a Health Savings Account (HSA) in their name, offering substantial tax advantages. Let’s get into this incredibly overlooked area of planning!

What are the advantages of Health Savings Accounts?

HSAs offer a triple-tax advantage, making them one of the most powerful tools for managing healthcare costs and saving for the future.

  • Your contributions are 100% tax-deductible since they are deducted from your gross income.
  • All interest earned in the HSA is 100% tax-deferred unless used for non-eligible medical expenses.
  • Withdrawals from your HSA are 100% tax-free for eligible medical expenses.
  • HSA funds roll over year-to-year. If you use it correctly, this account can build for decades like a traditional retirement account. Save your medical receipts and pay out of pocket for your medical expenses; that part is key here.

Contributing to a HSA

If you want to contribute to your child’s HSA, this doesn’t mean you need to choose between yourself and your child. They can continue to contribute to their own HSA as well. Additionally, if your child wants to contribute to their own HSA, this doesn’t mean you have to stop your contributions.

Things to note:

  • Parents must be covered under a High-Deductible Health Plan (HDHP) to contribute to an HSA.
  • When your family has HDHP coverage, you can contribute up to $8,300 ($8,550 in 2025) for your child’s too! That’s powerful!
  • A parent can gift a child money to put in their HSA—but one needs to pay attention to federal gifting limits each year.
  • An adult child cannot be claimed as a dependent on someone’s tax return (including the parents) if they want to open an HSA in their name.

Contributing to an HSA offers more than just immediate tax savings. It also allows young adults to build a healthcare nest egg, take advantage of long-term growth, and even use the funds for future medical expenses well into retirement.

Expand Their Savings with a Roth IRA

If your child is employed and earns an income, they can open a Roth IRA. This is another opportunity for you to contribute to their financial future. Parents can contribute to their child’s Roth IRA as long as the total contribution (from the child, parents, or anyone else) does not exceed the annual limit ($7,000 in 2024) or the child’s earned income. Contributions you make on behalf of your child count toward your annual gift tax exclusion limit.

Key Roth IRA Benefits:

  • Tax-free growth: Investments grow tax-free, and qualified withdrawals are also tax-free.
  • No required distributions: Unlike traditional IRAs, Roth IRAs have no required minimum distributions (RMDs), offering more flexibility in retirement planning.
  • Penalty-free early withdrawals: Contributions (but not earnings) can be withdrawn at any time, making it a flexible savings option.

By combining the tax advantages of HSAs and Roth IRAs, you can help your child build a robust financial foundation that supports both their healthcare needs and long-term retirement goals.

If you’re navigating health insurance options or want to explore how HSAs and Roth IRAs can benefit your family’s financial plan, reach out—I’m here to help!

The Mega-Backdoor Roth Strategy: Supercharge Your 401(k)

ST. CROIX INSIGHTS

The Mega-Backdoor Roth Strategy: Supercharge Your 401(k)

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
backdoor roth concept showing a blue door opening to U.S. dollars

Open enrollment is currently taking place at many companies. You have the opportunity to make changes to your employer-sponsored benefit plans, such as group life insurance, health insurance, and retirement contributions. Overall, it’s an important time to review your current financial circumstances and ensure your benefits align with your needs and goals.

Max Out Your Savings Potential

For the 2025 tax year, the standard maximum contribution to your 401(k) is $23,500 (or $31,000 if you’re 50 or older). But what if you want to save more? High earners, take note: the mega-backdoor Roth strategy might be the boost you’re looking for to supercharge your retirement savings.

What is the mega-backdoor Roth strategy?

While the mega-backdoor Roth strategy sounds like a football play meant to confuse your opponent, it’s actually a legal way to supercharge your retirement savings. This three-part strategy allows you to contribute up to $70,000 into your 401(k) rather than the “maximum” of $23,500.

Note: Even if your employer’s open enrollment season is over, most companies allow you to make changes to your 401(k) contributions at any time. Check with your HR department.

Here is what you need to do to take advantage of the mega-backdoor Roth:

  1. Make sure your company 401(k) plan allows for after-tax contributions.
  2. Make sure your 401(k) provider allows after-tax contributions to be converted into a Roth.
  3. Max out your allowable 401(k) contributions (in 2025, $23,500 or $31,000 if you’re 50 or older).
  4. Decide how much more of your paycheck you want to go into the 401(k) as after-tax contributions (maximum total is $70,000 or $77,500 if you’re 50 or older).
  5. Convert the after-tax contributions to Roth status.

Why consider a mega-backdoor roth?

Unless you’re retiring tomorrow, you don’t know what the taxes will be like when you’re ready to retire. Roths can be a proactive safety measure since you aren’t taxed when you withdraw from the account.

  • Tax-Free Growth: Earnings in a Roth 401(k) grow tax-free, and qualified withdrawals are also tax-free.
  • No Income Limits: Unlike a Roth IRA, there are no income restrictions on who can contribute, making this a valuable tool for high earners.
  • Future Tax Flexibility: Since tax rates in retirement are uncertain, having a tax-free source of income can provide financial security and flexibility.

It’s best to consult with a tax professional prior to taking advantage of the mega-backdoor Roth. You don’t want to accidentally contribute too much to your 401(k) and risk costly penalties from the IRS, yet chances are your 401(k) provider will catch it.

With open enrollment season in motion, it’s never been a better time to evaluate your retirement plan. Want to review your financial plan together? Reach out and let’s talk.

 

Open enrollment is currently taking place at many companies. You have the opportunity to make changes to your employer-sponsored benefit plans, such as group life insurance, health insurance, and retirement contributions. Overall, it’s an important time to review your current financial circumstances and ensure your benefits align with your needs and goals.

Max Out Your Savings Potential

For the 2025 tax year, the standard maximum contribution to your 401(k) is $23,500 (or $31,000 if you’re 50 or older). But what if you want to save more? High earners, take note: the mega-backdoor Roth strategy might be the boost you’re looking for to supercharge your retirement savings.

What is the mega-backdoor Roth strategy?

While the mega-backdoor Roth strategy sounds like a football play meant to confuse your opponent, it’s actually a legal way to supercharge your retirement savings. This three-part strategy allows you to contribute up to $70,000 into your 401(k) rather than the “maximum” of $23,500.

Note: Even if your employer’s open enrollment season is over, most companies allow you to make changes to your 401(k) contributions at any time. Check with your HR department.

Here is what you need to do to take advantage of the mega-backdoor Roth:

  1. Make sure your company 401(k) plan allows for after-tax contributions.
  2. Make sure your 401(k) provider allows after-tax contributions to be converted into a Roth.
  3. Max out your allowable 401(k) contributions (in 2025, $23,500 or $31,000 if you’re 50 or older).
  4. Decide how much more of your paycheck you want to go into the 401(k) as after-tax contributions (maximum total is $70,000 or $77,500 if you’re 50 or older).
  5. Convert the after-tax contributions to Roth status.

Why consider a mega-backdoor roth?

Unless you’re retiring tomorrow, you don’t know what the taxes will be like when you’re ready to retire. Roths can be a proactive safety measure since you aren’t taxed when you withdraw from the account.

  • Tax-Free Growth: Earnings in a Roth 401(k) grow tax-free, and qualified withdrawals are also tax-free.
  • No Income Limits: Unlike a Roth IRA, there are no income restrictions on who can contribute, making this a valuable tool for high earners.
  • Future Tax Flexibility: Since tax rates in retirement are uncertain, having a tax-free source of income can provide financial security and flexibility.

It’s best to consult with a tax professional prior to taking advantage of the mega-backdoor Roth. You don’t want to accidentally contribute too much to your 401(k) and risk costly penalties from the IRS, yet chances are your 401(k) provider will catch it.

With open enrollment season in motion, it’s never been a better time to evaluate your retirement plan. Want to review your financial plan together? Reach out and let’s talk.

Born in 1959? Your Required Minimum Distribution Age Is Uncertain

ST. CROIX INSIGHTS

Born in 1959? Your Required Minimum Distribution Age Is Uncertain

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
birthday image for someone born in 1959

Required minimum distributions (RMDs) are mandatory withdrawals from certain retirement accounts, like IRAs and 401(k)s, starting at a specific age. The age was 70 ½, then 72, but the SECURE 2.0 Act, which passed in December 2022, changed this age to 73. In addition, this age will increase to 75 in 2033.

In the SECURE 2.0 Act, Congress provided the following information:

  • If born on or after January 1, 1951, and before January 1, 1960, the RMD age is 73.
  • If born on or after January 1, 1959, the RMD age is 75.

Looking at these guidelines, if you were born in 1959, you may be wondering, “Wait. Do I need to start making distributions when I’m 73 or 75?”

This drafting error means that individuals born in 1959 have two RMD ages: 73 and 75. If you fail to withdraw the RMD on time, there can be consequences. For every dollar not withdrawn, the IRS will charge a 25% penalty, known as an excise tax. Knowing this, it’s clearly important for 59ers to know when they need to start making withdrawals.

In July 2024, the following proposals were made to Congress:

  • If born before July 1, 1949, the RMD age is 70 ½.
  • If born on or after July 1, 1949, and before January 1, 1951, the RMD age is 72.
  • If born on or after January 1, 1951, and before January 1, 1960, the RMD age is 73.
  • If born on or after January 1, 1960, the RMD age is 75.

If you have questions about your Required Minimum Distributions (RMD’s) or how to calculate them, we are here to help. Contact us today.

 

Required minimum distributions (RMDs) are mandatory withdrawals from certain retirement accounts, like IRAs and 401(k)s, starting at a specific age. The age was 70 ½, then 72, but the SECURE 2.0 Act, which passed in December 2022, changed this age to 73. In addition, this age will increase to 75 in 2033.

In the SECURE 2.0 Act, Congress provided the following information:

  • If born on or after January 1, 1951, and before January 1, 1960, the RMD age is 73.
  • If born on or after January 1, 1959, the RMD age is 75.

Looking at these guidelines, if you were born in 1959, you may be wondering, “Wait. Do I need to start making distributions when I’m 73 or 75?”

This drafting error means that individuals born in 1959 have two RMD ages: 73 and 75. If you fail to withdraw the RMD on time, there can be consequences. For every dollar not withdrawn, the IRS will charge a 25% penalty, known as an excise tax. Knowing this, it’s clearly important for 59ers to know when they need to start making withdrawals.

In July 2024, the following proposals were made to Congress:

  • If born before July 1, 1949, the RMD age is 70 ½.
  • If born on or after July 1, 1949, and before January 1, 1951, the RMD age is 72.
  • If born on or after January 1, 1951, and before January 1, 1960, the RMD age is 73.
  • If born on or after January 1, 1960, the RMD age is 75.

If you have questions about your Required Minimum Distributions (RMD’s) or how to calculate them, we are here to help. Contact us today.