• 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.

  • 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.

  • 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:

    1. A distribution from the traditional IRA, and
    2. 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

  • 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.

  • Maximizing Charitable Giving: Strategies for Making an Impact

    Tips to Help You Practice Meaningful and Strategic Philanthropy

    Many people find that being philanthropic with their money brings them joy. After all, being charitable can be a meaningful experience and is a way to put your core values into practice. Recent data confirms this, as the 2023 Giving USA Foundation report has shown that 64% of Americans donated to charity in the previous year. If being philanthropic fits with your personal and financial values, here are six strategies to help you maximize your charitable giving impact.

    Charitable Giving Impact Tip #1: Identify the Causes You Care About

    With finite resources, it’s important to be intentional about where to donate your money. Making a list of non-profit organizations that you have given to in the past, and perhaps adding some new organizations whose work you care about, is a good start. Looking over your list, consider what your current priorities in life are, and choose those that are in alignment with your values. This exercise can help you to ensure that your charitable dollars are supporting not just the causes that are appealing to you for help, but the causes that are currently important to you.

    Charitable Giving Impact Tip #2: Consider Streamlining Your Giving

    Speaking of those charitable appeals, it’s likely that you receive a multitude of donation requests from worthy nonprofits throughout the year. However, philanthropy isn’t like investing, where diversification is a recommended strategy. To maximize the impact of your philanthropy, you may consider streamlining your donations to charities that are akin and most closely align with your core values. For example, if animal welfare is important to you, you may want to focus your giving on shelters or animal and wildlife protection organizations. In this way, your giving achieves a greater impact across the spectrum of the cause you care most about.

    New Year, New Goals: Planning Your Money Moves for 2024

    Charitable Giving Impact Tip #3: Involve Your Family

    Philanthropy is about more than money. It can also involve sharing your values with future generations and teaching them about meaningful ways that they can make a difference in the lives of others. Gathering your family together to actively participate in charitable giving decisions can also create a new shared tradition. While together, you’re helping to instill the spirit of giving, while offering each family member the opportunity to share with everyone the causes that are most important to them. There are a variety of ways to maximize your family’s charitable giving, including pooling money together toward a selected cause, establishing a fund that allows family members to choose how to direct their donations, or annually rotating the selection of charitable causes. When you instill the habit of giving, you are also building a values-based tradition that will positively impact both your family members and the lives of others.

    Charitable Giving Impact Tip #4: Research the Charities Carefully

    Take the time to determine the best charities that will accomplish your family’s charitable goals. Knowing the mission of each organization is the best place to start. Be sure the mission and values of your chosen nonprofits align with your giving intentions. Also ensure that the finances and management of the organization are sound. Look into what percentage of charitable donations directly support the cause or programs, as opposed to administration and overhead. There are reputable tools to help you gain this knowledge such as Charity Navigator, GuideStar, Charity Watch, and Charities Review Council.

    Charitable Giving Impact Tip #5: Maximize Your Gift

    Having determined where you want to focus your philanthropy, there are some steps you can take to maximize your giving:

    • Give directly to avoid the middleman. Some nonprofits utilize the services of professional fundraisers, paying them anywhere from 40 to 80 percent of the proceeds received. Often these solicitations are via phone, so avoid this and give directly to the charitable organization.
    • Avoid using credit cards. Nonprofits usually have to pay a credit card fee of 3 to 5 percent, which reduces the amount of your donation and thus the level of your charitable giving impact.
    • Look into employer matching gift programs. Many employers offer the opportunity to match your gift, thus increasing your charitable contribution and your impact.
    • Gifting appreciated assets that you have held for more than one year as a direct gift can provide you with tax benefits while helping the charity of your choice. You may also consider establishing a donor-advised fund (DAF) which can also provide you with tax savings.

    Note: A donor-advised fund (DAF) is a charitable investment account that you establish at a public charitable foundation for the sole purpose of supporting nonprofit organizations that you care about. They provide a flexible way to donate with either cash or securities, and they can provide many tax advantages. A DAF can prove to be a strategically beneficial tool to consider in your philanthropic efforts, though it won’t be right for every family.

    Charitable Giving Impact Tip #6: Giving Beyond Money

    Donating money isn’t the only way to practice philanthropy. Time and talent can be just as valuable to a charitable organization, and many organizations need the skills of volunteers. Whether you’re giving at the financial level that you would like to or not, volunteering can help you feel more connected to the causes you care about.

    Concluding Thoughts on Maximizing Your Charitable Gifting Impact

    Practicing philanthropy through the giving of your time, talent, or money to make an impact on the charities and causes you care about can be very meaningful for both you and the organizations of your choice. Often, it doesn’t take a lot to make a difference. Be comfortable with the level of your giving and consider some of the strategies offered here to maximize your impact and instill the value of philanthropy in your family, as well.

    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.