Month: April 2019

The Power of Nostalgia

You might think that the more recent an event, the easier it would be to remember it. And you might think that things that happened to you a long time ago would be harder to recall, but the human brain and memory are actually more complex. There is what psychologists call a “reminiscence bump,” which is the tendency for older adults to more easily recall events from their adolescence and early adulthood. It turns out that in studies where people are asked to produce memories, a disproportionate amount tend to be from this time in their life.

There are many reasons for this: There are many “firsts” during that period of time, like a first graduation, job, and first experiences like falling in love and losing a loved one.  And, this is generally the period where people develop their sense of self, form their beliefs, and make important decisions that affect them for the rest of their lives. Because of this, it could be the case that the reminiscence bump can be used to help to keep you young.

In a landmark “Counterclockwise” study at Harvard University, a group of men in their 70s were taken to a retreat locale that was a sort of time machine back to 1959: The participants listened to Perry Como, watched Ed Sullivan, read magazines from the 50’s, and were not allowed to speak about anything that took place after 1959. If you’re a nostalgic person you may think this just seemed like a fun way to spend a week, but the point of the study was to measure the physical effects of the surroundings on the older participants.

Believe it or not, reliving aspects of the time when the participants were younger seemed to make them younger. There was measurable improvement in their physical strength, manual dexterity, memory, cognition, hearing, and vision. Outside observers even said the participants looked younger when shown before and after pictures. Talk about age just being a number! You could say it pays to be old fashioned.

Transitioning into retirement is no small task, but it can be a good time to reconnect with one’s self after a busy career, go back to one’s roots, and pursue what makes us happy – be that golf or watching reruns of Leave it to Beaver and listening to the Beatles. Here at Peak Financial Freedom Group, we can help you create a comprehensive retirement plan that takes your unique retirement goals into account. Click here to schedule your no cost, no obligation financial review today.

Aging in Place

Many homeowners age 50 and older say that they want to “age in place,” but the reality is that many homes were not built to accommodate the needs of older people. If you want to remain in your house during your golden years, you may need to do some home remodeling. Fortunately, there are modifications you can make to your home to accommodate yourself as you age. And, they will be easier to make before you actually need them. Features like no-step entries and a first floor bedroom and full bathroom can keep you in your home as you age.

Bathrooms can be remodeled to accommodate wheelchairs with curbless showers with grab bars and high-seat toilets. Narrow doorways can be widened to accommodate wheelchairs. The sidewalk and steps leading to the front door can be replaced with a ramp for wheelchairs. If you or your spouse are not using wheelchairs, replacing deep-pile carpet with low-pile carpet or installing no slip flooring to prevent falls can help to make your home safer as you age.

If you’re caring for aging parents, you may have noticed that one thing that makes staying in your home as you age difficult is all the upkeep: To reduce maintenance, you can install quartz countertops which are stain resistant and never need sealing, and LED lights which last longer. Replacing fixed shelves with roll-out shelves means no need to bend over, and retrofitting upper cabinets with pull-down shelving units means avoiding lifting heavy items.

Small changes like adding lights to the front of our home and along the sidewalk to you can see at night and a bench by the front door so you can rest can make a difference. If you’re thinking of remaining in your home in your golden years, it could be beneficial to consider the necessary alternations before they become necessary. Features like no-step entries and first floor bedrooms can make your home more livable as you age.

If you’re thinking of how to change your home to fit your needs as you age, you understand the importance of planning. Just like your house, your financial plan needs to be ready for when you retire. The professionals at Peak Financial Freedom Group can help you create a comprehensive retirement plan that takes your unique needs into account. Click here to schedule you no cost, no obligation financial review today.

Estate Planning for Your Loved Ones

An estate plan is like a car; it requires regular maintenance, and may need parts replaced as it ages. Some experts recommend reviewing your estate plan every three years, or after a major life event. You may need to update your estate plan to reflect the changes to the tax code, as well as life events like the death or birth of a beneficiary. You also should consider if your beneficiaries are prepared to receive money, or if they still are, even if they were when you originally laid out an estate plan.

One of the changes to the tax code to note this year it that there is no longer federal tax on estates valued between $5.6 million and $11.2 million for singles, and on estates worth up to $22.4 million for married couples. This could mean the opportunity to pass on more of your wealth to your heirs, but with that opportunity comes a responsibility to make sure they are fit to receive your wealth.

The most obvious case of when an heir is not ready to inherit money is if they are a child: Children under 18 years old cannot sign legal contracts, and insurance companies, financial companies, and the court system will not release large sums of money to children in their own names. Without some preparation, the court system can take custody of your child heir’s funds, and there could be little control over how the money is used. This is why it’s important to update your estate plan after the birth of a new heir.

There are of course reasons why children are not given direct access to their inheritance; the part of the brain responsible for decision-making doesn’t fully develop until around age 25. It’s also possible that someone over 18 is not fit to receive a large sum of money if they, for example, have a substance abuse or gambling problem, a disability, or are being sued or going through a divorce.

Setting up a trust can help by appointing a trustee to oversee that the funds are being used properly. A trust can also help to protect the assets from lawsuits, bankruptcies and divorces. If you have reservations about your heir’s ability to handle their own inheritance, including a trust in your estate plan could make sense. Estate planning can be an important part of a retirement plan and setting up a trust can be a significant estate planning step.

You’ve worked hard to earn what you have, and should feel confident about the plan for your legacy. The professionals at Peak Financial Freedom Group can help you with estate and legacy planning, so click here to schedule your no cost, no obligation financial review.

Exploring Alternative Investments

We’re living – and retiring – in unique times, and some retirement strategies reflect this. Many of those nearing retirement are on their own, as companies typically don’t fund pensions now. As Americans live longer, nest eggs need to stretch further. In a time of low interest rates, some high net worth individuals are exploring alternative investments to help grow their wealth.

Alternative investments are geared towards high net worth individuals with investment experience because of their high minimum investment requirements. Examples of alternative investments include private equity, hedge funds, managed future, real estate, commodities and derivatives contracts. Compared to mainstream investments like stocks and bonds, alternative investments have low liquidity, and may be more difficult to value. The risk and return vary widely among different types of alternative investments.

Because interest rates are at a historical low, some are looking to alternative investments to grow wealth more aggressively. Real estate tends to be a popular alternative investment because of the option for renting out the property while waiting for its value to appreciate. Some look to gold in times of crisis because it can be an effective inflation hedge. One option is to hold gold bars, coins, and jewelry, and another Is to invest in gold exchange-traded funds or gold futures and options. Private equity seeks long-term appreciation from the growth of private companies, as opposed to public markets.

An alternative investment could bring balance to your retirement portfolio by helping you diversify and hedge against downside. Potentially higher income levels could make alternative investments a good strategy for high net worth individuals who have less to worry about during periods of market volatility. After all, you don’t want to let market volatility ruin your retirement. However, alternative investments also tend to be more complicated and less transparent, requiring a certain amount of investment know-how to make the best use of them.

For high net worth individuals, alternative investments could help to grow wealth. In a time when pensions are not the norm, and interest rates are low, it may be time to consider alternative investments. If you’re looking to diversity your retirement portfolio, contact the professionals at Peak Financial Freedom Group. Click here to schedule your no cost, no obligation financial review today to take the first step towards a comprehensive retirement plan.

Spring Cleaning Your Retirement Accounts

By the time you’re ready to retire, you’ve probably had a number of jobs over the course of your working life. In fact, according to the Bureau of Labor Statistics, Americans hold an average of 12 different jobs by age 50. This means that it’s likely you also have more than one 401(k) account, leaving you with a few options for spring cleaning your retirement accounts; rolling over your old 401(k)s into your IRA or 401(k) at your current job, leaving it where it is, or cashing out. If you’re looking to spring clean your finances, you might want to address your old 401(k)s.

If you left a job and had less than $5,000 in your 401(k) account, you may not have been allowed to keep it in that account. But, if you weren’t prompted to move it, you may have forgotten about relatively small sums to money in different accounts. This can become an issue when people don’t know how much they’re paying in fees in their 401(k) account. Even a small difference in fees can add up over time to significant amounts of money. You can compare the fees between multiple accounts to determine whether or not to consolidate funds.

You may want to rollover funds from old 401(k)s to make it easier to manage your money. For example, if your contracts at your old company are no longer current, or your investment portal changes, it can mean more paperwork to keep track of. You’ll need to assign beneficiaries to all your retirement accounts, and remember to update all of them in the event of divorce, death, or another life-changing event. If you are no longer able to directly handle your financial affairs as you get older, reducing financial clutter can make it easier if you’re thinking about how to pass on a retirement account.

You can roll over your old 401(k) into a traditional or Roth IRA. The transfer to a traditional IRA is simple, as both contributions were made pre-tax. But, if you roll it over into a Roth IRA you must pay tax on the funds and may have to increase withholding or pay estimated taxes to account for the liability. If your 401(k) was a Roth account, you will not pay tax on the funds you rolled over into a Roth IRA.

If your finances need some spring cleaning and you’re unsure of which option for your old 401(k) is best, contact the professionals at Peak Financial Freedom Group. We can help you create a retirement plan that help you make the most of what you’ve earned. Click here to schedule your no cost, no obligation financial review today.

Caring for Aging Parents

Baby Boomers are sometimes referred to as the “Sandwich Generation,” because many spend time and money care for both their children and aging parents. In fact, according to the Pew Research Center, one in eight middle-aged Americans cares for at least one child and parent in their house. Aging parents who require expensive medical care and ongoing long-term care can become a financial burden, especially as Americans continue to live longer. There are ways to use these costs to lower your taxes and help fund long-term care expenses.

If you care for a parent and provide more than half of their support, you can no longer claim the $4,050 personal exemption for your parent. But, you can still claim them as a dependent if they do not file jointly with a spouse, you paid more than half of their support for the calendar year, they lived with you all year or are a qualified relative, and their gross income was less than $4,150.

You can also deduct what you paid for a loved one’s unreimbursed medical costs if it exceeds 7.5% of your adjusted gross income. The threshold used to be 10%, but for the 2018 tax year has been reduced to 7.5%. These costs can include dental treatments, health insurance premiums, transportation to medical appointments, and qualified long-term care services. Long-term care insurance is expensive, and there are long-term care myths, but most policies are tax-qualified so if you itemize consider deducting premiums. The amount you can deduct rises with age: Those 40 and under can deduct up to $420, and those 71 and over can deduct up to $5,200.

You can count long-term care services as medical expenses if they were required for a chronically ill person and prescribed by a licensed health-care practitioner. For example, if your loved one requires care because of a specific medical condition such as Alzheimer’s, these expenses can qualify. But, general household services cannot be deducted, even if they are performed by the same employee giving personal care services needed because of a chronic condition.  If you hire an in-home caregiver and want this deduction, you should get a letter from your loved one’s doctor documenting that the care is necessary.

If you’re not sure if taking the standard deduction or itemizing and taking these deductions is better for you, consult the professionals at Peak Financial Freedom Group. Taxes can constitute your biggest expense in retirement, and we want to try and help you minimize them. Click here to visit us online and schedule you no cost, no obligation financial review today.

Do You Need to File a Tax Extension?

Doing your taxes might be complicated, but thankfully filing for an extension can help give you some more time to prepare. There are many decisions to be made when preparing your taxes, such as whether you should itemize or take the standard deduction, and finding out how new changes to the tax code affect you.

If you need more time to figure these things out, simply fill out an IRS Form 4868. This is the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, and you can submit it either in paper form, online, or through a tax software program. It’s free and most people who request an extension are granted one. If you’re granted an extension, the new deadline is October 15th. Americans living abroad automatically have a six month extension.

While it’s easy to get more time to file your taxes, this doesn’t mean you get more time to pay your taxes. You still have to estimate how much you owe in taxes, and pay that full amount by April 15th. April 15th is also the last day to contribute money to an IRA, so if you have an IRA don’t forget about this important deadline. If you don’t send a payment by April 15th, you could get hit with a penalty, even if you didn’t realize you owed the IRS money. For the 2018 tax year, if you fail to pay less than 80% of what you owe in taxes, you will owe an additional penalty of 5% of the amount you owe per year, compounded daily. You would normally incur the penalty if you failed to pay 90% of what you owe, but because of the changes to the tax code, the IRS is being more lenient for the 2018 tax year only.

Note that the penalty for failing to file your taxes is much more severe than the penalty for failing to pay. The penalty for failing to file or request an extension is 5% of the unpaid amount per month, up to 25%. So, even if you cannot pay your taxes by the deadline, you should definitely still file or file for an extension to avoid this steep penalty.

Doing your taxes can be stressful, and tax minimization strategies can be complicated. If you need more time to consult a professional as to what deductions you’re qualified to take, whether you should itemize or take the standard deduction, or how the changes to the tax code affect you, contact the professionals as Peak Financial Freedom Group. Click here to schedule your no cost, no obligation financial review.

How to Pass on a Retirement Account

Estate planning is complicated: The fair decision may not actually be the most practical one. What does this mean? It means that even if you divide up your estate equally between your beneficiaries, they could get hit with unequal tax burdens. So, good estate planning requires more than just good intentions. If you plan on leaving a legacy, you should take each of your beneficiary’s finances into account when dividing up your assets.

Estate planning is so crucial because when a beneficiary inherits an investment account, they also inherit income tax liability. When someone inherits an IRA, they will owe federal and possibly also state taxes on the funds for as long as they make withdrawals. When someone inherits a taxable investment account, they pay taxes annually on interest and dividends in addition to capital gains. When it is passed on, unrealized gains are eliminated for the beneficiary, allowing the beneficiary to inherit the account with no income tax liability.

These facts matter even more if the beneficiaries are in different tax burdens. For example, if one beneficiary is in the 35% tax bracket, and another is in the 10% bracket, the first could end up with tens of thousands less than the second if they inherit equal amounts from an IRA because of their different tax burdens. To minimize taxes, the first beneficiary could inherit assets from taxable accounts, and the second could inherit IRA funds. On face value, these might be unequal amounts, but when each beneficiary’s tax burden is taken into account, the overall tax burden and the difference between what each end up with could be significantly reduced.

If you want to take on the tax burden instead of leaving it to your heirs, you can convert to a Roth IRA during your lifetime. Considering the relatively low tax rates and recent market volatility, you might be considering if now is the time to convert to a Roth IRA. That way, funds can continue to grow tax free in the account, even after it is passed onto a beneficiary.

Discussing how you will distribute assets with your beneficiaries can help avoid conflict between them if it appears that one is receiving more than the other. Explaining the complexities of tax burdens and taxable accounts versus tax advantaged accounts can be a good idea if you’re distributing your inheritance unequally.

Most importantly, be smart about your estate planning so that what you’ve earned gets passed on to the people who are important to you. The best plan isn’t always the simplest, so consult the professionals at Peak Financial Freedom Group. We can help you divide your retirement accounts and assets among your beneficiaries. Click here to visit us online and schedule you no cost, no obligation financial review today.

Saving for Retirement While Reducing Your Taxes

This tax season will be the first time Americans are filing under the new tax code, adding complexity, and possibly stress, to the already complex and stressful filing process. But, like with most things in life, a little preparation goes a long way. As you prepare for retirement, you’ll want to think about ways to decrease your tax burden and save money for the future. Maxing out your retirement account contributions, saving in a Health Savings Account, and taking advantage of deductions are some ways to help lower your tax bill.

You can lower you tax bill and save for retirement by maxing out your traditional 401(k) or IRA. The 401(k) contribution limit was raised to $18,500 for 2018, and to $19,000 for 2019. Those over 50 can contribute an additional $6,000. The limit for combined employer and employee contribution is $55,000. You can contribute up to $5,500 to an IRA for 2018, and up to $6,000 for 2019. Those over 50 can contribute an additional $1,000. If you haven’t maxed out your contribution yet, you can still do so by April 15th. So, if you have an IRA don’t forget about this important deadline.

You can use a Health Savings Account to help you save for the rising cost of healthcare in retirement, and there are benefits to pairing your IRA with a Health Savings Account. Your money is not taxed when it goes into or comes out of a Health Savings Account if you withdraw it to pay for qualified medical expenses not covered by insurance. You can let the funds grow in the account tax-free for as long as you want. If you wait until you are 65, you can spend the funds on anything you want without incurring a 10% penalty normally incurred for spending on something other than a qualified medical expense.

If you’re nearing the age where you’re thinking of selling your home, you know what a valuable asset it is. There are a few ways to use your home to decrease your tax burden: You can take a standard deduction for home-business expenses instead of calculating each individual expense. You can take a $5 deduction for every square foot of office space, up to 300 square feet. If you installed alternative energy equipment such as solar panels, geothermal pumps, and wind turbines on your property, you can take a tax credit worth 30% of what you spent on the equipment and installation.

At Peak Financial Freedom Group, we understand the value of the money you’ve worked so hard to earn. Let us help you create a comprehensive retirement plan that makes saving for retirement easier by taking your tax burden into account. Click here to schedule your no cost, no obligation financial review.

Peak Financial Freedom Group
2520 Douglas Boulevard, Suite 110
Roseville, CA 95661


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