An Overlooked Strategy for Your IRA 

ST. CROIX INSIGHTS

An Overlooked Strategy for Your IRA

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Perhaps the most overlooked strategy for your IRA is to insure your retirement account. Yes, I said it, life insurance. It’s an overlooked financial tool that helps solve a host of financial concerns and helps protect everything you’ve worked so hard for over the years. Life insurance proceeds are income tax free when structured correctly!  Life insurance can help pay estate and income taxes on your overall estate, including your retirement accounts.

$64,000 Question 

Here’s the $64,000 question: When you believe life insurance is a waste of money, at the end of the day, which would you rather pay – taxes or life insurance premiums?

Chances are we’ve all made a deal with Uncle Sam, and chances are, he owns half of your retirement account value. Let me prove it to you.

Who designed 401ks, 403(b)s, SEPs, Simple IRA Accounts, IRAs? Congress. And who enforces those provisions? The IRS. They set the rules and upon you contributing to these types of retirement plans, you’ve made a deal with the government. Still not convinced, give me a call and I’d be happy to discuss this in detail.

Life Insurance Retirement Planning

A Point of Clarity

Just to be clear, I’m not saying you shouldn’t utilize these types of retirement planning strategies. However, when you do, you need to be clear about the rules and how to make the most of these strategies. So you’ve spent years saving for your retirement, which is outstanding, but at some point, two things are going to happen:

  • You live a long time, distributing funds from your retirement accounts prior to your death (best option) or
  • You die prematurely with funds still inside your retirement accounts.

Ok, so what? Well, these are pre-taxed accounts that in retirement will be taxed as you distribute funds (70 ½ being the magical age at which you have to start taking required mandatory distributions) and Uncle Sam’s going to tax those distributions at ordinary income tax rates. But, let’s say you die. At that point IRAs, 401ks 403bs, SEPs, and Simple IRA accounts will be taxed as ordinary income for your beneficiaries, plus they may be subject to an estate tax on top of this.

When you factor state and federal tax rates plus potential estate taxes we may be subject to, it’s easy to see how our beneficiaries may not receive that which we have set aside for them.

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Ask yourself- can my portfolio support my lifestyle in my retirement? 

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What Does Saving Money Really Mean to You?

ST. CROIX INSIGHTS

What Does Saving Money Really Mean to You?

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

I thought I was saving money for retirement. It turns out there is another side of the coin.

 

My Aunt Hank

My Aunt Hank, one of my all-time favorites, used to wear electrical tape around her shoes because she couldn’t afford to purchase new shoes. When I took her grocery shopping she would ask for a 6-pack of pop because she couldn’t afford a twelve pack of Coco-Cola (or so she said – I knew better!). Or stealing the sugar from the restaurant and bringing a few packets home for coffee in the morning. Now that’s a real life example of saving money at its core. How many of you would do that? Today, our shoes get a little dirty and we’re on amazon.com buying new ones.

 

Hudson Retirement Saving Strategies

Retirement & Taxes 

I bet we all have a host of ways we try to save money, day-in and day-out, and my guess is you’re pretty successful at it.  At the same time, I bet you’ve overlooked a major expense that we’re all going to face when we retire: taxes. You’ve saved all these years into your IRA, 401k, 403b, SEP or Simple IRA plan but haven’t considered helping prevent your retirement accounts from being consumed by taxes. Uncle Sam is the uncle who shows up and never leaves. If you’re not careful, he’ll eat you out of house and home.

 

With the exception of a Roth IRA, contributions are contributed on a pre-tax basis and upon distribution, these types of accounts (IRA, 401k, 403b, SEP, Simple IRA) are taxed at the ordinary income rate. The tradeoff is tax-free growth since taxes are paid upon distribution at retirement.

 

A Bigger Trade Off

But, here’s the bigger trade off. What happens to your retirement accounts when you die? Heirs potentially encounter not only income taxes on the account, but also potentially estate taxes. You need to add it all up – all of your retirement accounts, your home, your investments, and even your business to determine your federal estate tax rate. I also failed to mention any State taxes which you may need to include. It doesn’t take long before over 50% of your retirement accounts could be eroded by taxes. Chances are you haven’t worked all these years just to pay taxes, have you? I’m all for paying my fair share, and my fair share alone. I would rather see my family and favorite charities benefit from the fruits of my labor and planning.

Also, sign up for our eNewsletter blog that includes timely financial matters, news, and planning strategies that you can implement today.

Ask yourself- can my portfolio support my lifestyle in my retirement? 

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4 Questions to Ask Yourself Before Deciding Where to Retire

ST. CROIX INSIGHTS

 

4 Questions to Ask Yourself Before Deciding Where to Retire

BY BRETT ANDERSON

Deciding Where to Retire?

Deciding where to retire? I’ve not kept it a secret – during January, February and March since most of my clients are heading south as they retire, that’s probably where you will start finding me. I can work from anywhere as technology continues to improve every day. As I’ve slowly aged, I’m not a fan of the cold and let’s not even talk about the snow; however, the winter of 2015-2016 wasn’t too bad.

As a Certified Financial Planner™ (CFP®) I have an obligation – yes, an obligation- to research the “best” places to retire. I continued my search this February and researched the Gulf Coast of Florida, Sanibel, Marco Island, Naples, Tampa, and Orlando areas. Personally, I like that I can enjoy the outdoors year-round in a warmer climate. Walking on the beach and shelling are two of my favorite activities; however, I’m not sure what to do with all the shells I’ve collected! I keep thinking about what I would do if I moved south either semi-permanently or permanently. Maybe a tourism board will hire me in my retirement years to sell others on the benefits of the sunshine in the winter months?

Where to Retire

4 Retirement Questions to Ask Yourself

The four major questions I hear clients ask themselves when deciding whether to relocate include:

  1. Where are our children, or more importantly, where are the grandchildren located?
  2. How’s our health, and can we easily get around?
  3. Can I afford to relocate or purchase a second home?
  4. What type of taxes will I pay when I retire?

For some, they are going to retire and stay right where they are, which is just fine. Maybe it’s the home they’ve lived in for the last 20 years and it’s paid off- great! Sometimes it might make sense to just get away for a few months, and in that case, you can simply rent a place for $3,000 to $5,000 a month depending upon where you go. There are definitely pros and cons to owning verses renting.

Others will decide to purchase an additional home. My recommendation before you retire is to also have your second home paid off. It will put less stress on your financial resources, and if you’ve read my blog Keeping Yourself Poor, I’m not a fan of a mortgage.

Consider down-sizing in your second home, as it could save you a lot of money and would be another way for you to reach your goals.

Now, let’s discuss the dreaded T word!  Federal taxes. It doesn’t matter where you live, it is what it is. However, state taxes and rates vary from state to state. Some states have no income tax, some do not tax Social Security payments, and some do not have an estate tax. Be sure and explore your options, and depending upon your circumstances, one state versus another could be more beneficial to help you meet your retirement and financial goals.

Deciding on where to retire and enjoy your retirement years isn’t always a quick and easy decision. If you’d like to explore your options, let’s talk.

For more insight on retirement planning, check out our previous post: The $64,000 Question…How Much Money Do I Need To Retire?

Also, sign up for our eNewsletter blog that includes timely financial matters, news, and planning strategies that you can implement today.

Ask yourself- can my portfolio support my lifestyle in my retirement? 

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