When Retirement Isn’t Your Choice

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If you’re nearing retirement age and know you’re not financially prepared for retirement, your solution may be to work longer. While forgoing an early retirement can be prudent, your career might not last as long as you’d like it to. According to the Center for Retirement Research, 37% of retirees had to stop working sooner than they anticipated. And, the longer they planned to work, the less likely they were to reach their goals. The truth is that retirement isn’t always voluntary. There are many reasons why Americans end up retiring earlier than they planned, such as job loss, health issues, and unexpected caregiving responsibilities.

According to the Employee Benefit Research Institute, almost a third of American workers predict that they will work until age 70 or older, but only 7% of people surveyed actually ended up working until age 70. This can be an issue because older workers tend to have a harder time getting hired, and when they do, they often have to work for a lower salary. Spending what would normally be your highest earning years unemployed can be especially detrimental to your retirement plan, especially if you’ve waited to prepare for retirement until your 50’s.

Your mind might be ready to work into your 70’s, but your body might not be. Workers are sometimes forced to retirement earlier than they planned because of health issues. No matter how healthy you are now, anything could happen in the next few years. And, your job may be taking a toll on your health if it is physically demanding, or requires you to sit for long periods of time or lose sleep.

Even if your health remains perfect as you age, you might have a family member who requires your care. Caring for aging parents, a spouse, or grandchild can make you need to catch a retirement curveball if they require enough of your time and attention that you leave your job. Unfortunately, caring for your loved ones can be a time consuming but unpaid job that might disrupt your retirement plans.

If you get hit with a retirement curveball, a financial advisor can asses your situation and help you create a plan. Don’t assume you’ll be able to work for as long as you want – unexpected job loss, health issues, and unexpected caregiving responsibilities happen all too often. To prepare for the unexpected, contact the professionals at Peak Financial Freedom Group. We can help you create a comprehensive retirement plan that may help you if you have to stop working earlier than you expected to. Click here to schedule your no cost, no obligation financial review to learn how prepared for retirement you are now and how you can protect yourself from the unexpected.

How the Rules of Homeownership Have Changed

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Are you thinking about downsizing in retirement? Maybe you plan to make your vacation home your primary residence once there’s no office to commute to everyday. Or, maybe you’re considering buying a property to rent out to generate income in retirement. Either way, if you’re thinking about buying a house you should probably take some time to learn how it will impact your tax situation. It may have been a while since you bought a home, and the rules of homeownership have changed in the past few years thanks to tax reform.

If you itemize your taxes, then you have the opportunity to deduct your mortgage interest. This is a way to help make homeownership more affordable. Around 21% of taxpayers claim this deduction, saving them an average of $1,950 in 2016. But the following year, tax reform almost doubled the standard deduction to $12,000 for single filers and $24,000 for married couples filing jointly, thus reducing the number of people who chose to itemize. If you used to itemize but now take the standard deduction, keep in mind that you can no longer deduct your mortgage interest on your current home, or any new home you might buy.

As an experienced home owner, you likely know that property taxes are a cost to consider and plan for. Tax reform capped the state and local tax deduction at $10,000. This now means you can deduct up to $10,000 in total, not per property. Therefore, this could make owning multiple homes more costly, especially in states and cities with high taxes. Also, you can no longer deduct mortgage interest on second homes bought after the new law took effect, which is one thing to consider if you are thinking about buying a second home.

You may not be able to deduct all of your mortgage because the mortgage interest deduction is now capped at $750,000 instead of $1 million for new mortgages. Home equity loans are also no longer deductible, so be sure to review and plan carefully before committing to such an illiquid asset.

These homeownership rule changes could also impact your ability to sell your home, especially if it is worth over $750,000 or comes with high property taxes. This could ultimately change your decision to downsize in retirement, invest in a rental property, or buy a vacation home.

Buying a second home and moving in retirement are big decisions. If you need help navigating the new tax code when deciding how second homeownership will affect your overall retirement plan, contact the professionals at Peak Financial Freedom Group. We can help you create a comprehensive retirement plan that helps to minimize your tax burden, so click here to schedule your no cost, no obligation financial review.

Exploring Alternative Investments

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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.

Saving for Retirement While Reducing Your Taxes

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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.

If You Have an IRA Don’t Forget About This Important Deadline

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Most people know that April 15th is Tax Day, but they may not know that it is also the deadline to contribute to an IRA. Even if you file for a tax extension, you must send your IRA contribution by April 15th. Contributing to an IRA is one good way to save for retirement, so make sure your contribution isn’t forgotten in the busy period leading up to Tax Day.

You can contribute up to $5,500 a year to your IRA for 2018 if you are under 50. If you are over 50, you can contribute an additional $1,000. You can no longer contribute to a traditional IRA after you turn 70 ½, but you can contribute to a Roth IRA for as long as you live. Due to a unique set of circumstances, you might be wondering if now is the time to convert to a Roth IRA.

If you make more than $199,000, you cannot contribute to a Roth IRA. You can contribute to a traditional IRA no matter how high your income is. However, there are limits as to what you can deduct from your taxes: If you have a retirement plan through your employer and your income is over $73,000 as a single person, or over $121,000 as a married person filing jointly, you cannot take a deduction if you contribute to a traditional IRA.

In general, you must earn income in order to contribute to an IRA, but you can contribute on behalf of a nonworking spouse. The working spouse can contribute the maximum amount to both his or her IRA and the nonworking spouse’s IRA. If you want to take advantage of this, you must do so before April 15th.

Note that you still have to make an IRA contribution by April 15th even if you file for a tax extension, unless you are contributing to a SEP-IRA in which case you must contribute by your tax filing due date. As with a tax return, you must mail the contribution by April 15th and it’s immaterial as to when it arrives at your financial institution. Make sure to clearly indicate to which year your contribution applies, especially if you are sending your contribution between January 1st and April 15th.

At Peak Financial Freedom Group, we want to make saving for retirement as easy as possible. With so many nuances to the rules regarding retirement accounts, it helps to have a team of professionals at your side. Click here to schedule you no cost, no obligation financial review today.

Retirement Strategies for High-Income Earners

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For the high-income earners and savers, retirement planning can look different – and more complicated than for others. Maybe you don’t just want to get by in retirement – maybe you want to travel and pursue passions – as well as leave behind a legacy to your loved ones. Reaching these goals requires strategy and planning. Saving in the years leading up to retirement, considering a Roth IRA, and deciding on the best time to start taking Social Security can be important parts of a strong retirement plan.

Building a cash stockpile in the years leading up to retirement can be a good strategy to help survive volatile markets. A stockpile can help you ride out the storm so that investments have the time to rebound. Also, a period of dedicated saving before retirement can help you adjust to a lower-cost lifestyle after you retire. And, living more off of cash in retirement might put you in a lower income tax bracket. In addition to lowering your tax burden, this can make a Roth IRA conversion a good option.

Converting a traditional IRA to a Roth can be a good strategy for those who have saved a significant amount in their retirement accounts. You can pay tax on the conversion to roll over a traditional IRA into a Roth, and then enjoy tax-free withdrawals later on. This strategy can make sense for those who are focused on their legacy, because Roth IRAs pass on tax-free income. The best times to convert are years where your income tax bracket is lower than usual, and before tax rates increase. You can convert in parts if you don’t want to cause your taxes to spike because of a large lump-sum conversion. Keep in mind that conversions are now irreversible.

Whether you should wait to take Social Security or not depends on individual circumstances. You will receive 75% of your full benefits if you take them at 62, 100% if you take then at your full retirement age, which is 65-67 depending on when you were born, and 132% if you wait until 70. Retirement goals, life expectancies, and tax burdens are all factors to consider. One thing to consider is that taking benefits earlier will allow you to defer distributions from other investments, which can help you contribute to a legacy.

Saving in the years leading up to retirement, converting to a Roth IRA, and deciding when the best time to start taking Social Security is can be important aspects of retirement planning for high-income earners and savers. Strategizing and planning now could make for a great retirement later on.

The professionals at Peak Financial Freedom Group can help you come up with a retirement plan to make the most of what you’ve earned. We will work with you to create a comprehensive plan that takes your retirement and legacy goals into account. Click here to schedule your complimentary review.

Creating a Retirement Game Plan

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Whether your team won or lost this Sunday, we can all agree that it’s no easy feat to make it to the big game at the end of the season. This game is the culmination of the both teams’ practicing, strategizing, and collaboration all season long. Creating a game plan for football is a lot like creating a retirement plan: You have to know when to protect your lead and when to be aggressive, how to adapt to new challenges, and recognize the importance of good coaching when planning for your future.

Even if a team is losing by the end of the second quarter, they still have time to catch-up and win the game. At half time the coach may adjust the game plan based on how the game is going. Similarly, planning for retirement isn’t a one-time event – it’s an ongoing process. Changes in health, market volatility, the birth of a new grandchild, and new personal retirement goals are just some of the events that could make you want to reevaluate your retirement plan. A good coach considers what can happen ahead of time, and is prepared with a plan.

The best football teams aren’t always the ones whose athletes run the fastest or throw the furthest; it’s the teams that can read what they’re up against and respond to short-term challenges while keeping their long-term goals in mind that succeed. And, that’s why it’s so important to have a coach with experience and the expertise to help the team achieve its full potential. Or, in your case, it’s the importance of having a trusted financial professional to help guide you to and through a safe, secure, and enjoyable life in retirement.

Good coaching can be just as critical in retirement planning as it in football. Finding a balance between conservative and aggressive investing plans and creating a plan that can respond to change is difficult. This is where your trusted financial advisor can step in and help you call the plays. Assessing what constitutes a touchdown in your retirement, whether it is travel, leaving a legacy, or surviving volatile markets, is the first step in creating a retirement game plan.

If you need a timeout to help create or assess your retirement game plan, let the professionals at Peak Financial Freedom Group help. The best teams are ones in which the players and coach are on the same page, so click here to schedule your no cost, no obligation financial review.

Why Can’t You Rely Solely on Social Security in Retirement?

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Social Security is only designed to replace a part of a retiree’s income, and the buying power of its benefits has decreased by a third since 2000, according to a report by the Senior Citizen’s League. The cost-of-living adjustments (COLA) used to determine Social Security benefits don’t always accurately reflect seniors’ rising living expenses. And, the services retirees spend the most money on – housing and medical – have increased significantly. On top of all this, inflation can erode your savings. Since inflation rates change every year, it’s hard to estimate exactly how much income you will receive after retirement. But one thing’s for sure, you can’t solely rely on Social Security in retirement.

The best defense is relying as little as possible on Social Security. One way to help try and accomplish this is by delaying benefits: If you start receiving benefits at the earliest possible age of 62, you will receive reduced benefits. If you wait until your full retirement age, which ranges from 65 to 67 depending on the year you were born, you will receive full benefits. If you wait until 70, you receive full benefits plus an additional 32 percent. Also, one spouse can file for benefits when they are of full retirement age, and suspend payments until 70. If they are old enough to receive Social Security, the other spouse can then file for a spousal benefit. This benefit is half of the other spouse’s benefit. However, it’s always important to note that your situation is unique, you have your own personal goals, and so you must have a custom Social Security strategy that works best for you.

If you’re less comfortable relying on a lump sum nest egg rather than a steady stream of cash, an annuity could be a viable option to consider. An annuity can help provide an annual income for as long as you live, and can be transferred to a spouse when you die. It may be a good option if you think you could outlive your savings, or if your spouse will live for a long time after you pass. There are many different types of annuities, so work with a qualified financial professional to make sure you are looking at the ones best suited to your goals and unique financial situation.

Luckily, most say that the immediate existence of Social Security is not in jeopardy, as long as those over 60 remain an active voting block. Proposed legislation tends to exclude those already receiving benefits from being subject to policy changes. While Social Security can help cover expenses in your retirement, it won’t fund your pre-retirement lifestyle: The average monthly payout is about $1,372, and the maximum is about $2,788, to put it into perspective.

While the existence of Social Security isn’t in question, its actual purchasing power relative to major costs in retirement is. You may not know exactly how much income you will need after retirement, or for how many years you’ll need it. Knowing when to file and how to claim your Social Security benefits is crucial, along with determining whether additional streams of guaranteed income, such as an annuity, is right for you in planning for your retirement.

We want to help you create a solid plan for your retirement. It can be hard to know the ins and out of Social Security benefits and how to create alternative sources of income in retirement on your own. That’s why we’re here to help. Click here to schedule your no cost, no obligation financial review.

Are You Turning One of These Ages in 2019?

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If you’re turning one of these ages in 2019, take note of what makes them important. Some ages, such as 65, the age at which you qualify for Medicare, require you to apply before your birthday, so it’s important to pay close attention so you don’t miss an important deadline!

Age 50

Once you turn 50, you can make catch-up contributions to your retirement accounts. You can contribute an extra $6,000 per year to a 401(k), 403(b), and 457 plan, $3,000 to a Simple IRA or Simple 401(k), and $1,000 to a traditional IRA.

Age 55

If you leave your job for any reason during the year you turn 55 or after, you can withdraw from your 401(k) penalty-free. This includes retirement, termination, or leaving for another job.

Age 59 ½

If you do not leave your job, retire, or are fired, you must wait until you are 59 ½ to withdraw from your IRA, 401(k), or 403(b) plans without incurring a 10% federal income tax penalty. 457 plans never incur this penalty. Distributions from traditional IRAs, 401(k)s, and other employer-sponsored are taxed as income.

Age 62

At age 62, workers can start receiving Social Security benefits, but if you are working and making over $17,040 a year, they will be reduced by $1 for every $2 earned. It’s often not ideal to start benefits at this age for this reason.

Age 65

Those aged 65 and older qualify for Medicare. You should apply three months before your birthday in order to start benefits on time. If you are already receiving Social Security benefits, you will automatically be enrolled in Medicare Part A, which covers hospital visits, and Medicare Part B, which covers doctor visits, as well as medical and preventative services and procedures.

Ages 65 to 67

Depending on what year you were born, you become eligible for your full Social Security benefits between 65 and 67. For example, those born in 1960 or later will receive full benefits at 67, while those born in 1955 will receive full benefits at 66 and 2 months.

Age 70

At age 70 you can receive more than you full Social Security benefits. This means that you receive 132% of the monthly benefit because you delayed receiving benefits. However, you gain nothing from waiting until any later than 70 to start receiving Social Security benefits.

Age 70 ½

Once you turn 70 ½ you must start taking required minimum distributions (RMDs) from your IRA, 401(k), 403(b), and or 457 plan. RMDs are calculated based on your life expectancy and amount of money in your account. If you are still working after 70 for a company you do not own more than 5% of, you can delay RMDs. You can roll over your traditional IRA or 401(k) into a Roth account, which is not subject to RMDs.

Even if you’re not turning one of these ages this year, it’s helpful to have a full picture of when benefits, RMDs, and penalties apply to you. Creating a retirement plan starts with important information, so you can avoid penalties and get the most out of your benefits.

 We’re here to celebrate all your birthdays and make sure that you are prepared for them with a strong financial plan. Don’t miss these key dates, click here to schedule a no cost, no obligation financial review and start celebrating this year’s birthday early!

How Retirement Could be Different in 2030

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As I wait for the ball in Time Square drop to kick off the start of the new year, I can’t help but think of the changes that will come in the next decade, especially with regards to my retirement. With advancing technology and changing times, it’s hard to predict how things will evolve each year. I worry if I have prepared enough for my retirement, and think about ways in which the world will change when it finally comes time for me to leave the workforce in the next few years. If we take a look at technology and think about the different ways that we are currently advancing, we can try to visualize some ways that retirement might look different in 2030 and be better prepared for the years ahead.

For starters, by 2030, your health should be better monitored. With the rise of fitness tracking devices and rumors of microchips, in 2030 they could possibly track blood pressure, take electrocardiograms and even send 911 alerts if they sense you’re having a medical emergency. Personalized medicine has also been on the rise and should be in full swing by 2030. Medical professionals could possibly provide tailored care for each person’s own unique genetic makeup. This could end up taking some of the uncertainty out of medical bills and help you better estimate the money that you will need to save.

With this, your drug store readers may become a thing of the past, virtual reality glasses becoming more popular and more easily attained, and hopefully with a lower price tag in the next few years. By 2030, your car might even drive itself and drones could drop packages right at your doorstep. If you’ve seen the news lately, you might have heard that both advancements are being tested currently. In the next decade, retirees should no longer have to worry about driving and if you forgot to stop at the pharmacy to pick up your medication, it might be as easy as summoning a drone to your doorstep.

Safety measures will also improve if keys and checks become obsolete. Mobile devices will soon be able to unlock your door and mobile pay will continue to grow. Along with your locks, the rest of your house may also soon rely on technology. Smart homes will become smarter and you may be able to control everything from lights to heat with your phone.

Whatever changes do come in 2019 and beyond, it’s important to be prepared. We are here to create a personalized plan that takes all aspects of your retirement into account. Click here to schedule your complimentary financial review and start the new year prepared.