• Health Insurance Before and After Retirement

    Most employees depend on their employers for health insurance today. It is possible to go into the open market and buy an individual health insurance policy under the Affordable Care Act, but these policies tend to be expensive. Premium subsidies are available, but only if you meet asset and income limitations. Of the insurance options available to working people under age 65, their own employer plan—or a spouse’s plan if available—is likely to be the best choice.

    If a client retires before age 65, they will have to find different insurance to take effect immediately after the employer insurance ends. If the client’s former employer offers retiree insurance to tide them over to Medicare age, great. Or, if the spouse is still working, the client may be able to get on the spouse’s plan. If neither of these options is available, the client may go onto COBRA, which will keep the employer insurance in force at full cost to the client. As a last resort the client will need to go into the open market and buy an individual policy to last until Medicare starts at 65. The cost of this pre-65 insurance will, of course, need to be figured into the post-retirement budget, and the client would need to be confident about covering the costs before making the decision to retire.

    Once a client turns 65, the Medicare option becomes available. If a retiree has an ACA plan, they will leap at the chance to get into Medicare in order to lower their costs. If they have a retiree plan, they will be forced to have Medicare, either because the retiree plan ends at 65 or shifts to secondary payer status (serving as supplemental insurance) with Medicare as the primary payer. If they are on a spouse’s plan, and if the plan covers 20 or more employees, they may be able to stay on the spouse’s plan. But take note: Some plans specify that dependent spouses must enroll in Medicare upon turning 65. So if a client turns 65 while on a spouse’s plan they will need to check with the plan to see if Medicare enrollment is a requirement. (An over-20 plan can’t require an employee to enroll in Medicare, but it can require it of a dependent spouse.)

    Related: Original Medicare vs. Medicare Advantage

    Once Medicare becomes an option, by virtue of the client turning 65, health insurance should be reevaluated. Even if a client is still working and staying on an over-20 employer plan, or retired and staying on a spouse’s plan, the existing plan should be compared to Medicare, either traditional A and B with a drug plan and supplemental insurance, or a Medicare Advantage plan. Overall, employer insurance isn’t what it used to be: deductibles are up, cost-sharing is up, and certain specialist services may be hard to get. Clients should not assume that their employer insurance is better than Medicare paired with a good supplemental policy. It may be, but they don’t know that until they’ve compared benefits and potential out-of-pocket costs of both plans under their expected health care usage.

    And that’s another thing that might change along with the passing of the client’s 65th birthday: they may need more health care services as they age. Employer plans are designed for younger, healthier populations. Deductibles can be high because employees don’t expect to get sick; in fact high deductibles are welcome if they keep premiums low. But high deductibles can be devastating for people who do get sick, or who contract conditions requiring expensive prescription drugs. Then you want a plan designed for more frequent and expensive health care usage. That’s Medicare, along with a supplemental policy and prescription drug plan or a Medicare Advantage plan.

    Source: Horsesmouth, LLC
    Horsesmouth, LLC is not affiliated with Lane Hipple or any of its affiliates.

  • Rebalancing Your Portfolio

    Why Now Is a Good Time to Check Your Asset Mix

    Rebalancing Your Portfolio to Align with Your Investment Goals

    Market fluctuations, economic shifts, and personal financial changes can all impact an investment portfolio over time. What once aligned with financial goals and risk tolerance may have drifted due to market movements. Rebalancing is a chance to check your asset mix. It involves adjusting the allocation of assets to maintain an intended level of risk and diversification. Check your asset mix periodically to help in keeping investments aligned with long-term objectives.

    Understanding Portfolio Rebalancing: Check Your Asset Mix

    Rebalancing is the process of realigning a portfolio’s asset allocation by buying or selling investments. It helps bring the portfolio back to its original or target allocation. Over time, different asset classes grow at varying rates, which can shift the overall balance. For example, if stocks have outperformed bonds, a portfolio may become more stock-heavy than initially planned, exposing it to higher risk levels than intended.

    Rebalancing involves selling assets that have grown beyond their target proportion and reinvesting in areas that have lagged. This practice helps maintain the risk-return balance originally designed for the portfolio.

    Why Now Might Be a Good Time to Rebalance

    Several factors may make it timely to check your asset mix:

    1. Market Shifts Have Altered Portfolio Allocation

    Recent market fluctuations may have caused a portfolio to drift from its intended allocation. A strong performance in certain sectors or asset classes can lead to an overweight position, increasing exposure to market volatility. Rebalancing helps restore the original asset mix.

    2. Changes in Financial Goals or Risk Tolerance

    Personal financial situations evolve over time. Career changes, approaching retirement, or shifts in financial priorities may call for a different investment approach. A portfolio that once aligned with a higher risk tolerance may now need adjustments to reduce exposure to volatile assets.

    3. Interest Rate and Economic Changes

    Interest rate movements and economic conditions can affect different asset classes in various ways. Bonds, equities, and alternative investments may respond differently to policy shifts. Reviewing allocations in light of economic changes can help maintain an approach suited to current conditions.

    4. Tax-Efficient Strategies

    Rebalancing can also be part of a tax-conscious investment approach. Selling certain assets may result in taxable gains, but strategic rebalancing—such as tax-loss harvesting or adjusting investments in tax-advantaged accounts—can help manage tax implications.

    Related: How to Prepare for Tax Season: Early Moves to Make This Year

    5. Maintaining Diversification

    A well-diversified portfolio spreads investments across asset classes to balance risk. Over time, some investments may become overrepresented, reducing overall diversification. Rebalancing helps maintain a mix that aligns with long-term strategies.

    How to Approach Rebalancing

    When it’s time to rebalance your portfolio, there are several strategies to help you check your asset mix:

    1. Review Asset Allocation

    Compare current asset allocations to the original targets. If certain assets have grown disproportionately, determine whether adjustments are needed.

    2. Set a Rebalancing Schedule

    Rather than reacting to short-term market movements, setting a periodic review—such as quarterly, semi-annually, or annually—can help keep a portfolio on track. Some investors also choose to rebalance when allocations shift beyond a specific percentage threshold.

    3. Consider Costs and Taxes

    Rebalancing may involve transaction costs and tax implications. Reviewing strategies like tax-efficient fund placement, tax-loss harvesting, and making adjustments within tax-advantaged accounts can help reduce potential costs.

    4. Use Dividends and New Contributions

    Instead of selling assets, another way to rebalance is by directing dividends, interest, and new contributions toward underweighted asset classes. This gradual approach can help maintain the intended allocation without incurring unnecessary transaction fees.

    5. Evaluate Investment Choices

    Rebalancing presents an opportunity to reassess investments. Some holdings may no longer align with financial goals or market conditions, making it a good time to review whether adjustments are needed.

    Make Sure Your Portfolio is Working for You

    Rebalancing plays an important role in maintaining a portfolio that aligns with financial objectives and risk tolerance. Market changes, personal financial shifts, and evolving economic conditions can all affect an asset mix over time. Periodic reviews and adjustments can help maintain an investment approach that reflects long-term goals. By considering allocation shifts, tax implications, and diversification, investors can keep their portfolios structured in a way that aligns with their financial strategies.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

  • Social Security Announces Expedited Retroactive Payments and Higher Monthly Benefits for Millions

    Actions Support the Social Security Fairness Act

    Written by Mark Hinkle, Social Security Press Officer

    Today, the Social Security Administration announced it is immediately beginning to pay retroactive benefits and will increase monthly benefit payments to people whose benefits have been affected by the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These provisions reduced or eliminated the Social Security benefits for over 3.2 million people who receive a pension based on work that was not covered by Social Security (a “non-covered pension”) because they did not pay Social Security taxes. The Social Security Fairness Act ends WEP and GPO.

    “Social Security’s aggressive schedule to start issuing retroactive payments in February and increase monthly benefit payments beginning in April supports President Trump’s priority to implement the Social Security Fairness Act as quickly as possible,” said Lee Dudek, Acting Commissioner of Social Security. “The agency’s original estimate of taking a year or more now will only apply to complex cases that cannot be processed by automation. The American people deserve to get their due benefits as quickly as possible.”

    People who will benefit from the new law include some teachers, firefighters, and police officers in many states; federal employees covered by the Civil Service Retirement System; and people whose work had been covered by a foreign social security system.

    Many beneficiaries will be due a retroactive payment because the WEP and GPO offset no longer apply as of January 2024. Most people will receive their one-time retroactive payment by the end of March, which will be deposited into their bank account on record with Social Security.

    Many of these people will also receive higher monthly benefits, which will first be reflected in the benefit payment they receive in April. Depending on factors such as the type of Social Security benefit received and the amount of the person’s pension, the change in payment amount will vary from person to person.

    Will I receive retroactive payments?

    Anyone whose monthly benefit is adjusted, or who will get a retroactive payment, will receive a mailed notice from Social Security explaining the benefit change or retroactive payment. Most people will receive their retroactive payment two to three weeks before they receive their notice in the mail, because the President understands how important it is to pay people what they are due right away. Social Security is expediting retroactive payments using automation and will continue to handle many complex cases that must be done manually, on an individual case-by-case basis. Those complex cases will take additional time to update the beneficiary record and pay the correct benefits.

    Social Security urges beneficiaries to wait until April to ask about the status of their retroactive payment, since these retroactive payments will process incrementally into March. Since the new monthly payment amount will begin with the April payment, beneficiaries should wait until after receiving their April payment, before contacting Social Security with questions about their monthly benefit amount.

    Visit the agency’s Social Security Fairness Act webpage to learn more and stay up to date on its progress. Visitors can subscribe to be alerted when the webpage is updated.

  • More SECURE Act 2.0 Changes: What 2025 Brings to Retirement Planning

    Navigating the Latest Updates to Retirement Rules for a Smarter 2025 Plan

    The SECURE Act 2.0 has introduced several significant updates to the rules governing retirement savings, many of which will take effect in 2025. These changes are designed to increase savings flexibility, offer new opportunities for long-term growth, and address the evolving needs of today’s savers. Here’s a breakdown of the key provisions and what they mean for your financial planning.

    1. RMD Age Adjustments

    Starting in 2025, Required Minimum Distributions (RMDs) will begin at age 75 for individuals born in 1960 or later.

    • This change delays when retirees must begin withdrawing from tax-deferred accounts.
    • Consider how deferring RMDs could impact your tax strategy, especially if future withdrawals might push you into a higher tax bracket.

    2. Higher Catch-Up Contributions for Ages 60-63

    For those nearing retirement, catch-up contributions are getting a boost:

    • Workers aged 60-63 can contribute an extra $10,000 (or 150% of the current catch-up limit, whichever is higher) to employer retirement plans.
    • High earners (over $145,000) must allocate these contributions to Roth accounts, which are taxed upfront but grow tax-free.

    3. Roth Matching Contributions

    Employers will soon be able to offer Roth matching contributions:

    • Employees can now direct matching funds into Roth accounts for tax-free growth and withdrawals in retirement.
    • Evaluate whether Roth contributions fit your overall tax diversification strategy.

    4. Auto-Enrollment in Workplace Retirement Plans

    Beginning in 2025, new employer-sponsored plans must include:

    • Automatic enrollment at a minimum contribution rate of 3%.
    • Automatic annual increases of 1%, up to 10-15%.
    • Employees can adjust contribution levels or opt out entirely, offering flexibility while encouraging participation.

    5. 529 Plan Rollovers to Roth IRAs

    Unused education savings in 529 plans can now be repurposed:

    • Up to $35,000 (lifetime cap) can be rolled over into a Roth IRA for the plan beneficiary.
    • The 529 account must be open for at least 15 years, and Roth contribution limits apply.
    • This option provides an opportunity to extend the value of unused education funds into retirement savings.

    Related: Navigating College Savings: Exploring 529 Plans and Coverdell ESAs

    6. Emergency Savings Accounts Linked to Retirement Plans

    Employers can help employees save for emergencies while still contributing to retirement:

    • Emergency savings accounts will allow after-tax contributions of up to $2,500 annually.
    • Funds can be withdrawn penalty-free, helping employees handle short-term needs while preserving long-term savings goals.

    7. Student Loan Matching Contributions

    For workers focused on paying off student loans, a new option offers retirement savings benefits:

    • Starting in 2025, employers can match student loan payments with contributions to an employee’s retirement account.
    • This helps workers manage debt while still building a foundation for retirement savings.

    Key Takeaways for Your Retirement Strategy

    These updates reflect an evolving approach to retirement planning. Consider:

    • Reviewing your RMD strategy to align with the new age requirements.
    • Exploring whether enhanced catch-up contributions or Roth options align with your goals.
    • Taking advantage of workplace plan features like auto-enrollment and emergency savings accounts.
    • Making adjustments to your tax planning, especially for high-income earners required to use Roth accounts for catch-up contributions.

    Staying on Top of Changes

    The SECURE Act 2.0 offers new opportunities, but it’s important to assess how these updates fit into your overall financial strategy. Regularly reviewing your plan and discussing these changes with a financial professional can help you stay aligned with your goals as retirement approaches.

    SECURE Act 2.0 Changes: Final Thoughts

    The updates taking effect in 2025 are designed to provide savers with greater flexibility and new tools to enhance their retirement plans. Whether you’re nearing retirement or still in the accumulation phase, understanding how these changes could impact your strategy is key to making informed decisions.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

  • How to Prepare for Tax Season: Early Moves to Make This Year

    Early Steps to Simplify Filing and Align Your Tax Strategy

    Tax season just began January 27th, but starting early can help streamline the process and reduce stress when deadlines approach. By organizing your financial information and planning ahead, you can identify opportunities to align your tax strategy with your overall financial goals. In this article, we’ll discuss tax season preparation and share some early moves to consider as you prepare for tax season this year.

    1. Organize Your Financial Documents

    Gathering your financial documents early can help you avoid last-minute scrambling. Essential documents may include:

    • W-2s or 1099 forms to report income.
    • Statements for investment accounts, retirement plans, and health savings accounts.
    • Records of charitable donations or deductible expenses.
    • Receipts for major purchases that may qualify for tax deductions or credits.

    If you’ve made changes to your financial situation this year—such as selling a property, starting a new job, or adjusting your investment portfolio—make sure to collect the necessary documentation to reflect those changes.

    2. Review Your Withholding and Estimated Tax Payments

    It’s a good idea to review your tax withholding or estimated tax payments well before the end of the year. If you’ve experienced significant life changes, such as a marriage, divorce, or the birth of a child, these events could affect your tax liability. Adjusting your withholding now can help you avoid overpaying or underpaying taxes.

    For those who pay estimated taxes, check whether your payments are on track to meet your expected liability. This can help you avoid potential penalties for underpayment.

    3. Evaluate Contributions to Tax-Advantaged Accounts

    Tax-advantaged accounts, such as 401(k)s, IRAs, and health savings accounts (HSAs), offer potential benefits when it comes to tax planning. As the year progresses, consider whether you are on track to meet your contribution goals for these accounts:

    • 401(k) and IRA Contributions: Contributions to traditional accounts may reduce taxable income, while Roth accounts provide potential for tax-free growth.
    • HSA Contributions: If you’re eligible, contributing to an HSA can provide tax benefits for qualified medical expenses.

    By contributing as much as possible before deadlines, you can align your retirement and healthcare savings goals with tax planning strategies.

    Related: 2025 Key Financial Data and Reference Guides

    4. Track Potential Deductions and Credits

    Deductions and credits can play a significant role in your tax liability, so it’s helpful to track eligible expenses throughout the year. Common areas to review include:

    • Charitable donations, including cash contributions and donated goods.
    • Medical expenses, if they exceed a certain percentage of your income.
    • Education-related expenses, such as tuition payments or student loan interest.

    Keep detailed records and receipts to substantiate these claims when filing your return.

    5. Consider Tax-Loss Harvesting

    If you’ve experienced losses in your investment portfolio, tax-loss harvesting may help offset gains in other areas. By selling certain investments at a loss, you can potentially reduce taxable income while rebalancing your portfolio.

    This approach requires careful planning to avoid wash sale rules, which could disqualify the tax benefits. Consulting with a financial professional can help ensure the process aligns with your overall investment and tax strategies.

    6. Understand Changes to Tax Laws

    Tax laws can change from year to year, so part of tax season preparation is staying informed about updates. For example, new legislation may affect contribution limits, tax brackets, or deductions and credits.

    This year, be aware of any updates stemming from the SECURE Act 2.0, which introduced changes to retirement account rules, or other legislation that could impact your tax strategy.

    7. Review Your Business Finances (If Applicable)

    For small business owners or self-employed individuals, tax planning involves additional considerations. Some steps to take include:

    • Reviewing eligible business deductions, such as home office expenses or equipment purchases.
    • Ensuring proper record-keeping for income and expenses.
    • Evaluating whether quarterly estimated tax payments align with your earnings.

    Working with a tax professional can help you identify opportunities specific to your business structure.

    8. Plan for Required Minimum Distributions (RMDs)

    If you’re required to take RMDs from tax-deferred accounts, make sure to incorporate them into your tax strategy. The timing and amount of these distributions can affect your taxable income, so it’s important to plan accordingly.

    Recent updates to RMD rules, including changes to the starting age, may also influence how you approach these withdrawals.

    9. Check Your Tax Filing Status

    Your tax filing status can significantly impact your tax liability. If your circumstances have changed—such as getting married or separated—it’s essential to understand how these changes affect your filing options during tax season preparation. Choosing the most appropriate status for your situation can help ensure accurate reporting.

    10. Schedule Time with a Financial Professional

    Tax planning is a year-round effort, and working with a financial professional can help you navigate the complexities of the tax code while aligning your strategy with your financial goals. They can provide personalized guidance on topics like deductions, credits, and tax-advantaged savings.

    By starting early and addressing these areas proactively, you can approach tax season with greater clarity and confidence. Taking small, strategic steps now can make a big difference when it’s time to file.

    Tax Season Preparation: Are You Planning Ahead?

    Tax season preparation doesn’t have to be overwhelming. By organizing your financial documents, evaluating your tax strategy, and staying informed about potential changes, you can create a more efficient and informed approach to managing your taxes. Begin today to work towards a process that is more in line with your overall financial objectives.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.