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Financial Transparency: Long-Term Financial Planning Tips for Couples
Financial Planning Tips for Couples: Build a Stronger Financial Future – Together
Openness is key to a strong and thriving relationship, especially when it comes to finances. When couples are transparent about their financial status, goals, and future plans, they build trust and foster better communication, both in their relationship and in their long-term financial planning. If you’re unsure how to approach money matters with your partner, this guide will highlight the importance of financial transparency and offer valuable financial planning tips for couples.
The Importance of Financial Transparency in a Romantic Relationship
Talking openly about money is often one of the toughest parts of a relationship, yet it’s one of the most important. Financial transparency means more than just revealing your account balances—it includes conversations about your financial mindset, goals, spending patterns, debts, and future plans. Here’s why it matters:
- Builds Trust. Honest conversations about money build trust and understanding between partners. When you’re open about your financial situation, it reduces the chances of misunderstandings, arguments, and hidden financial surprises down the road.
- Creates Unified Goals. Financial transparency allows couples to set joint financial goals and work together to achieve them. Whether it’s buying a house, saving for retirement, or funding your children’s education, shared goals give your financial planning purpose and direction.
- Facilitates Planning. Transparent discussions enable better financial planning. Couples can allocate resources strategically, make informed decisions, and adjust their plans as circumstances change.
- Reduces Stress. Money is a common source of stress in relationships. Open communication about finances can help alleviate this stress by allowing both partners to understand the bigger picture and share the responsibilities.
Related: Mid-Year Retirement Planning Checklist
Thinking Forward: Long-Term Financial Planning Tips for Couples
In addition to transparency and a commitment to open and honest communication, these financial planning tips for couples can help you prepare a joint roadmap for your shared future:
- Initiate Honest Conversations. Start by sitting down and discussing your individual financial situations openly. Share your income, savings, debts, and credit scores – this will lay the foundation for productive financial planning discussions.
- Define Shared Goals. Identify your shared short-term and long-term financial goals. Whether it’s buying a home, traveling, or retiring comfortably, having common objectives gives your financial planning a clear purpose. It’s one of the financial planning tips for couples that will also help you ensure that you’re both staying on the same page.
- Create a Budget Together. Collaboratively design a budget that incorporates both partners’ incomes and expenses – and be sure it’s realistic so you can be successful in following it. Think critically about your spending habits and find areas where you can cut back to save for your goals.
- Allocate Responsibilities. Divide financial responsibilities based on each person’s strengths and preferences. One partner might be better at investing, for instance, while the other excels at managing day-to-day expenses. Establishing clear roles prevents confusion and ensures both partners are actively involved.
- Emergency Fund. This is foundational among financial planning tips for couples. Build an emergency fund that covers at least three to six months’ worth of your joint living expenses. Having this safety net ensures you’re prepared for unexpected financial challenges without derailing your long-term plans – or facing undue financial stress that can negatively impact your relationship.
- Manage Debt Together. If either partner carries debt, work together to create a strategy to pay it off efficiently. A smart strategy is to prioritize high-interest debt, like credit cards, and explore consolidation options. By working together to eliminate debt, you and your partner will be able to improve your financial stability significantly.
- Invest Wisely. A smart way to build wealth is through savvy investing. Before you begin, research investment options and consult financial professionals if needed. The key is to diversify your investments to mitigate risks and properly align your portfolio with your long-term goals.
- Save for Retirement. Both partners should begin saving for retirement as early as possible. Consider opening retirement accounts like IRAs or 401(k)s and contribute consistently. If available, take full advantage of employer match programs as that’s free money that will contribute to the magic of compounding over time.
- Regularly Review Your Finances. Set aside time together, perhaps on a monthly or quarterly basis, to review your financial progress. Discuss any changes in your circumstances or goals and adjust your plan accordingly. Get creative, too. This is one of those financial planning tips for couples that can end up being fun if you turn it into a regular date night that incorporates your favorite takeout or a movie, too.
- Stay Flexible. Life is unpredictable – just like relationships – and financial plans might need to be adjusted over time. Be open to revisiting and modifying your strategy as circumstances change.
- Maintain Open Conversation. Using these financial planning tips for couples is helpful, yet they can’t be one-time endeavors. Regularly discuss your financial status, goals, and concerns. Ongoing communication is key to ensuring you’re both on the same page and working toward a shared future.
Long-Term Financial Planning for Couples: Do You Need Professional Guidance?
Financial transparency is essential for a strong partnership, allowing couples to work through the intricacies of long-term financial planning together. By having open discussions, setting mutual goals, and managing your finances collaboratively, you can build a solid foundation for a stable and rewarding future. Keep in mind that reaching your financial objectives is a continuous process. Applying financial planning tips for couples and maintaining honest communication will help you navigate any obstacles that arise along the way.
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.
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SSA Sign-in Process to Change Soon
In today’s digital age, managing your Social Security benefits has never been easier, thanks to the Social Security Administration’s (SSA) online services. Starting in September, they are transitioning to a new login system. Everyone who set up their Social Security accounts before September 2021 will need to log in with their username and password and follow the prompts to switch to a Login.gov account. People who already have a Login.gov account do not need to take any action.
The Importance of Establishing an Online Account with the Social Security Administration
Establishing an online account with the SSA offers numerous advantages that can simplify your financial planning and provide peace of mind. Here’s why it’s essential:
1. Convenience and Accessibility
Creating an online account allows you to access your Social Security information anytime, anywhere. Whether you’re at home, at work, or on the go, you can log in to view your benefits, update your information, and manage your account without needing to visit an SSA office.
2. Real-Time Information
With an online account, you can view your Social Security Statement, which provides a detailed record of your earnings history and an estimate of your future benefits. This real-time access helps you stay informed about your financial status and plan for retirement more effectively.
3. Enhanced Security
Having a Social Security account can also prevent fraud and identity theft, as only one account can be set up for each Social Security number. Once a person sets up their own Social Security account, it would be impossible for an imposter to set one up with the same number.
4. Efficient Management of Benefits
If you are already receiving benefits, an online account allows you to manage them efficiently. You can use it to access your benefit verification letter for loan applications or other purposes, update your direct deposit information, change your address, and even request a replacement Social Security card if needed. This streamlined process saves time and reduces the hassle of paperwork.
5. Access to Additional Services
Beyond managing your benefits, an online account provides access to a range of other services. You can apply for retirement, disability, and Medicare benefits online, check the status of your application, and receive important updates and notifications from the SSA.
6. Educational Resources
The SSA’s online portal offers a wealth of educational resources to help you understand your benefits and make informed decisions. From retirement planning tools to information on disability and survivor benefits, these resources are invaluable for anyone looking to maximize their Social Security benefits.
Related: Social Security for Divorced Individuals
7. Environmental Benefits
By opting for online services, you contribute to environmental sustainability. Reducing the need for paper statements and forms helps decrease paper waste and supports eco-friendly practices.
Conclusion
Establishing an online account with the Social Security Administration is a smart move for anyone looking to manage their benefits efficiently and securely. The convenience, real-time access, enhanced security, and additional services make it an indispensable tool for financial planning. Take control of your Social Security benefits today by setting up your online account and enjoy the peace of mind that comes with having your information at your fingertips.
my Social Security accounts are free, secure, and provide personalized tools for everyone, whether receiving benefits or not. People can use their account to request a replacement Social Security card, check the status of an application, estimate future benefits, or manage the benefits they already receive. For more information visit Create an Account | my Social Security | SSA.
For more information about Login.gov, including their 24/7 customer phone and chat support, visit Help | Login.gov.
Read the SSA press release here.
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Mid-Year Retirement Planning Checklist
Revisit, Revise, and Strengthen Your Financial Plan for the Remainder of 2024
Planning for retirement demands a lot from us – and it’s not a one-time job. Whether it be our time, energy, or financial resources, our retirement needs are always evolving, and we must nurture our savings consistently over the years. If you’ve been taking a more hand-off, set-and-forget approach recently, the middle of the calendar year offers a timely opportunity to reflect, reassess, and make any necessary changes so that you can strengthen your financial foundation for the next six months and beyond. If you’re unsure where to start, try using this mid-year retirement planning checklist to kickstart the process.
Mid-Year Retirement Planning Step #1. Know Where You Stand
The first step of this retirement planning checklist isn’t focused specifically on retirement. That’s because, before you can strengthen your retirement plans, you must first gain a clear understanding of your overall financial situation. This can be a great source of anxiety, especially if you haven’t closely examined your finances in a while. However, you’ll feel better once you know exactly where you stand. Begin by collecting all relevant documents pertaining to your bank accounts, outstanding loans, debts, and any other elements contributing to your financial landscape. This will help you to compile a detailed list of your assets and liabilities, forming the cornerstone for subsequent steps in our retirement planning checklist.
Mid-Year Retirement Planning Step #2. Clarify Your Retirement Goals
Now that you know where you’re starting from, it’s time to determine your desired destination. That means you’ll need to clearly outline your retirement goals. Ask yourself questions such as when you plan to retire, what type of lifestyle you envision, and which activities you want to pursue. Establishing specific and measurable goals will help tailor your savings and investment strategies to meet your unique retirement objectives.
Mid-Year Retirement Planning Step #3. Review and Adjust Your Budget
If the first two steps were about determining where you’re beginning and ending, this step is dedicated to constructing a roadmap that will lead you to your final destination – your dream retirement! Regardless of how financially secure you believe yourself to be, adhering to a budget is imperative to remain on the right path to achieving your objectives. If you find yourself uncertain about where to begin or concerned about staying disciplined, there are numerous helpful apps and online resources available to assist you through each stage of the process.
Mid-Year Retirement Planning Step #4. Maximize Account Contributions
Now that you’re on your way, be sure that you’re taking advantage of any employer-sponsored retirement plans, such as 401(k)s or 403(b)s, by contributing the maximum amount allowed. These contributions not only reduce your taxable income but also grow tax-deferred until withdrawal. If you’re self-employed or your employer doesn’t offer a retirement plan, consider opening an Individual Retirement Account (IRA) and contributing regularly. Even if you think you have your contributions set, use this step in the retirement planning checklist to assess whether you can contribute more to max-out your options.
Mid-Year Retirement Planning Step #5. Rebalance Your Portfolio
While investing is one of the best ways to build wealth, it doesn’t come without risk. Take some time now to diversify your investment portfolio to mitigate risk. Consider a mix of stocks, bonds, and other assets that align with your risk tolerance and retirement timeline. Don’t forget to periodically rebalance your portfolio to maintain an optimal asset allocation and adjust it as needed based on changing market conditions and your risk profile. A financial advisor can be helpful as you navigate this step in the retirement planning checklist.
Related: New Year, New Goals: Planning Your Money Moves for 2024
Mid-Year Retirement Planning Step #6. Fortify Your Emergency Fund
No matter how prepared you are, there’s always the chance that something unexpected could happen, leaving you with a bill that you weren’t ready to pay. To help protect your retirement savings, it’s important that you have a solid emergency fund set aside. Generally, you want to aim to have at least three to six months’ worth of living expenses set aside in a liquid and easily accessible account. This fund will serve as a financial safety net, preventing you from dipping into your retirement savings in times of unexpected expenses.
Mid-Year Retirement Planning Step #7. Plan for Healthcare Costs
Health expenses often increase in retirement, making them one of the biggest threats to retirees’ financial security, so it’s crucial to plan for healthcare costs. Review your current health insurance coverage and consider supplemental insurance, such as long-term care insurance, to provide additional protection. If you’re not yet eligible for Medicare, use this step in the retirement planning checklist to explore other healthcare options to bridge the gap.
Mid-Year Retirement Planning Step #8. Get Serious About Your Debt
High-interest debt can erode your retirement savings, so strive to enter retirement debt-free or with minimal debt. To achieve this, develop a plan to pay off outstanding debts, focusing on high-interest debts first. This will free up additional funds for retirement savings and ensure a more stable financial future.
Mid-Year Retirement Planning Step #9. Choose a Social Security Benefits Strategy
Social Security benefits can significantly boost your income in retirement, especially when you get strategic about how you claim them to begin with. For instance, delaying the start of your benefits can lead to higher monthly payments. So, take some time to familiarize yourself with Social Security benefits and strategize the optimal time to claim them based on your financial situation. You’ll want to consider factors such as your health, life expectancy, and overall financial situation when deciding.
Mid-Year Retirement Planning Step #10. Reassess Your Estate Plans
Estate planning helps you make certain that your assets are distributed according to your wishes, minimizing potential complications for your loved ones. Don’t forget to update or create essential estate planning documents at this point in your retirement planning checklist. This includes wills, trusts, and powers of attorney. Life changes quickly at times, so it’s important that you regularly review and designate beneficiaries for your retirement accounts and life insurance policies.
Remaining Hands-On with Your Retirement Plan Throughout the Years
Retirement planning is a continuous process that requires careful consideration and adjustment. By taking time mid-year to use a comprehensive checklist, you lay the groundwork for an enjoyable retirement. If this list gives you anxiety and you would like assistance, reach out to us at Lane Hipple. This checklist is part of our Client Review process, and we are happy to review it alongside you. Remember, the key to successful retirement planning is proactive and informed decision-making.
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.
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The Top 5 Funding Reminders for Roth IRAs
By: Denise Appleby, MJ, CISP, CRC, CRPS, CRSP, APA
The rules of Roth IRAs create multiple tax-saving opportunities for Roth funding.
Many consider Roth IRAs a gold standard for retirement savings because they provide a source of tax-free income during retirement. This tax-free benefit includes tax-deferred earnings, which are tax-free for those eligible for qualified distributions. Taxpayers who choose to fund Roth IRAs instead of traditional IRAs pay taxes upfront in exchange for this benefit. However, the promise of tax-free income is only one of the factors that must be considered, and taxpayers who choose Roth must also consider various strategies and operational requirements. The following reminders are a good start.
1. After-tax 401(k) contributions: an opportunity for tax-free conversions
Once a plan participant is eligible to make withdrawals from their 401(k) or other type of employer plan account (401(k)), eligible amounts may be rolled over to an IRA or another eligible retirement plan. For those who want to continue tax deferral until they are ready to take distributions, a traditional IRA is a common choice for rolling over assets from 401(k)s. However, if the 401(k) account includes after-tax amounts, that after-tax balance is an opportunity for a tax-free conversion.
Unlike a conversion of pre-tax amounts, for which a suitability assessment is often recommended because it is taxable when converted, the conversion of an after-tax amount is tax-free. Therefore, no suitability assessment is needed. Further, any earnings on the after-tax amount would eventually become tax-free in a Roth IRA when you are eligible for a qualified distribution—a contrast with earnings that accrue in a traditional IRA, which would be taxable when distributed.
Essential Tip: If you want to roll over their 401(k) account to an IRA, and that 401(k) includes an after-tax amount, instruct the plan administrator to split the distribution and send the after-tax amount to your Roth IRA. Doing so helps to ensure that the after-tax amount is not sent to your traditional IRA.
2. Micro conversions for tax management
Roth conversions are included in income, with any pre-tax amount being taxable for the year the conversion occurs. However, converting small amounts over time can mitigate the tax impact. For example, an individual who wants to convert $500,000 could make $50,000 yearly conversions over ten years instead of converting the entire $500,000 all at once. This strategy is commonly referred to as micro-conversions.
This strategy can also be used to stay within a tax bracket in cases where a conversion could cause some of the individual’s income to be taxed at a higher tax bracket.
Ideally, you would consult with your tax advisor to project the tax impact of the conversion and help them determine how much would be an ideal amount to convert each year.
3. Tax withholding is not conversion
If you want to have taxes withheld from the requested conversion amount, the withholding tax is not included in the conversion. As a result, the amount withheld for taxes will be subject to the (10% additional tax) 10% early distribution penalty unless an exception applies.
Example 1: 45-year-old Sean’s Traditional Number 12345 had a balance of $100,000—all of which is pre-tax amounts. He instructed his IRA custodian to convert Traditional IRA Number 12345 to his Roth IRA Number 67890 and withhold 20% for federal taxes. Based on his instructions:
- $20,000 was sent to the IRS for federal tax withholding.
- $80,000 was deposited to Roth IRA #64890 as a Roth conversion.
The result:
- $100,000 is included in Sean’s income for the year.
- $100,000 is taxable.
- $80,000 is not subject to the 10% early distribution penalty.
- $20,000 is subject to the 10% early distribution penalty because it is not part of the Roth conversion.
If Sean had funds in a regular savings account (not a tax-deferred account), he could pay the income tax from that account instead of his traditional IRA.
Consideration: An analysis should be done to determine if it makes good tax sense for Sean to perform a Roth conversion if it requires paying the income tax from his IRA.
4. Roth conversion amounts must be rollover eligible
A Roth IRA conversion is a two-part transaction:
- A distribution from the traditional IRA, and
- A rollover to the Roth IRA- which is treated as a conversion.
Consequently, like a rollover, only eligible amounts can be included in the amount credited to the Roth IRA.
An example of an amount that is not eligible to be rolled over is a required minimum distribution (RMD). If you are at least 73 this year, you must take RMDs due from your traditional IRA before any Roth conversion.
Reminder: If the funds are in an employer plan and you are still employed by the plan sponsor, you should check with the plan administrator to determine if you must take an RMD for the year.
5. Let conversion amounts sit and stay for at least 5-years
A Roth IRA conversion is not subject to the 10% early distribution penalty, regardless of the age at which it occurs. However, distribution from a Roth conversion amount is subject to the 10% early distribution penalty if it occurs before it has aged in the Roth IRA for at least five years.
Example 2: Using the facts from Sean’s example above, assume that the conversion was done in 2024. If Sean withdraws any amount from that $80,000 conversion before January 1, 2029, it would be subject to the 10% early distribution penalty unless he qualifies for an exception.
Reminder: The 10% early distribution penalty does not apply if you are at least age 59 ½ when the distribution is made or if the distribution qualifies for an exception to the penalty.
Note: Under the ordering rules, any regular Roth IRA contribution or conversions done in previous years would be drawn before Sean’s 2024 Roth conversion.
Disclaimer
The tips provided in this article are generally operational in nature. The decision of which to choose—Roth IRAs vs. traditional—is more complex and requires a suitability analysis. However, using some of the strategies mentioned in this article can lessen any immediate tax effect. Except for the tax-free conversion of after-tax funds from a 401(k), the assistance of a tax professional should be engaged to help determine suitability.
Original Post by Horsesmouth, LLC.: https://www.savvyira.com/article.aspx?a=99588
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Your Financial Reset Checklist: Moves to Make as We Approach Mid-Year
Strategic Adjustments for Enhanced Financial Health: A Mid-Year Review Guide
As we approach the midpoint of the year, it’s an ideal time to review and potentially reset your financial strategies. This period allows you to assess your progress towards your annual goals, adjust your budgets, and fine-tune your investment strategies, too. Here’s a practical mid-year financial reset checklist to guide you through your mid-year financial review.
1. Review Your Budget
Start with a thorough review of your current budget:
- Examine Spending Habits: Compare your planned expenses against actual spending. Look for areas where you’ve overspent and identify categories where you can cut back.
- Adjust Budgets: Based on your spending review, make the necessary adjustments to your budgets for the rest of the year. Consider any changes in your income or expenses since the beginning of the year.
2. Evaluate Your Emergency Fund
An emergency fund is crucial for financial security, providing a buffer against unexpected expenses:
- Assess Fund Adequacy: If you don’t have one already, work toward an emergency fund that covers at least three to six months of living expenses. If you aren’t near your goal yet, plan how you can bolster this fund in the second half of the year.
- Replenish If Needed: If you’ve had to dip into your emergency fund, it’s alright! That’s why you have it. However, now you need to make a plan to replenish it. Prioritize this to avoid potential financial strain going forward.
3. Reassess Your Financial Goals
Mid-year is a perfect time to reassess and refine your financial goals:
- Goal Progress: Evaluate how close you are to achieving the goals you set at the beginning of the year. This could be saving for a down payment, paying off debt, building a plan to pay for healthcare in retirement, or investing more of your retirement savings.
- Adjust Goals as Necessary: Life circumstances change, and so may your financial goals. Adjust your strategies to better align with your current situation and future aspirations.
If you neglected to set goals at the start of the year, it’s not too late! There is nothing magical about January 1, so get started setting your goals now with the S.M.A.R.T. goals framework.
Related: New Year, New Goals: Planning Your Money Moves for 2024
4. Check Credit Reports
Regular checks on your credit report can help you catch and rectify any inaccuracies that might affect your financial health, not to mention helping you spot identity theft:
- Request Credit Reports: You can obtain a free credit report from each of the three major credit bureaus once per year at AnnualCreditReport.com.
- Review for Accuracy: Look for any discrepancies or fraudulent activities. Promptly report any errors to the credit bureau for correction.
5. Review Insurance Coverages
Insurance needs can evolve, so it’s important to periodically review your policies:
- Assess Coverage Needs: Consider changes in your life that might affect your insurance needs, such as buying a new home, changing marital status, or adding a family member.
- Shop for Better Rates: Compare your current policies with what’s available on the market to see if you can find better rates or more comprehensive coverage for the same price.
6. Optimize Your Investments
Market conditions change, and so should your investment strategies:
- Portfolio Review: Assess the performance of your investments and consider rebalancing if your asset allocation has drifted from your target, which happens to many investors over time.
- Tax-Saving Strategies: Consider tax implications of any buy or sell actions in your portfolio and explore opportunities like tax-loss harvesting to offset gains.
7. Plan for Tax Liabilities
You may be breathing a sigh of relief with tax season behind you, but working all year round to understand your potential tax liabilities can help you manage your finances more effectively:
- Estimate Taxes: Use your current earnings and expenses to estimate your tax liability for the year.
- Adjust Withholdings: If you anticipate a major tax bill or a significant refund, adjust your tax withholdings accordingly to better manage your cash flow.
8. Reflect on Your Financial Well-Being
This step is a subjective addition to your mid-year financial reset checklist because financial well-being means different things to different people. So, decide what it means to you and take a moment to reflect on how you’re feeling about your finances:
- Financial Stress Test: Consider how you would handle a financial emergency. Do you feel confident about your financial situation?
- Educational Opportunities: Look for ways to improve your financial literacy. Engaging with financial news, books, or seminars can provide valuable insights and enhance your financial decision-making skills.
Concluding Thoughts on Using a Mid-Year Financial Review Checklist
A mid-year financial review checklist is a practical tool that can help you take proactive steps to stay on track with your financial objectives. This checklist serves as a guide to help you assess various aspects of your finances, from budgeting and savings to investments and taxes. By taking the time to review and adjust your financial plan now, you can improve your financial health and approach the rest of the year with a solid strategy in place.
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.