Medicare in 2024: Here’s What You Need to Know

Open enrollment starts on October 15th and ends on December 7th, 2023. During enrollment, you can compare coverage options on the Medicare website, which was updated on October 12th with the 2024 Medicare health and prescription drug plan information.

Part B Changes

Part B covers two main services: medically necessary and preventative. This can include physician fees, ambulance services, medical equipment, outpatient services, and some medications and home health services.

Monthly premiums have increased in 2024. Here’s what you should know:

  • The standard monthly premium will increase by $9.80 and will be $174.90 in 2024.
  • The annual deductible for all Medicare Part B beneficiaries will be $240 in 2024, an increase of $14 from 2023.

Income-Related Monthly Adjustment Amount (IRMAA) surcharge thresholds have increased. In 2024, surcharges apply to individuals with an income of $103,000 or more, or joint filers with an income of $206,000 or more. The Centers for Medicare & Medicaid Services website has a comprehensive breakdown of the premium adjustments for next year.

Part A Changes

Part A covers inpatient hospital stays, nursing home care, hospice care, and home health care. Most Medicare participants don’t pay a monthly premium for Part A because they have 40 or more quarters of Medicare-covered employment. However, if you haven’t reached 40 quarters of coverage yet, here are the changes to be aware of:

  • Hospital deductibles will increase to $1,632 in 2024; $32 more than last year
  • If you are hospitalized for more than 60 days, but less than 90 days, you will need to pay a coinsurance amount of $408 per day for every day over 60. The lifetime reserve day amount is $816 per day, up from $800 in 2023.
  • If you or your spouse have at least 30 quarters in coverage, you may buy into Part A at a reduced rate of $278 in 2024.
  • If you have fewer than 30 quarters, you will pay the full premium of $505 per month. This is a $1 decrease from 2023.

Medicare Parts C and D

Medicare Part C, also called Medicare Advantage, combines parts A and B, while Part D covers prescription drugs. Both of these plans are optional and covered through private insurance, so plans may vary depending on the provider. You can compare plans via the Medicare website.

  • Average premiums, benefits, and plan choices for Medicare Advantage and the Medicare Part D prescription drug program will remain stable in 2024.
  • Through the Inflation Reduction Act, people with Medicare Part D prescription drug coverage will continue to have more affordable benefits, including a $35 cost-sharing limit on a month’s supply of each covered insulin product and recommended adult vaccines at no cost.

Healthcare access and costs are always changing. If you’d like to learn more about how Medicare may affect your finances, or want more information on premium costs and coverage and how they interact with your financial plan, contact the office today.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

A Guide to Trusts for Estate Planning

A majority of Americans understand the importance of estate planning, yet an alarming percentage of adults do not have arrangements in place. According to a 2019 survey, 51% of people believe having an estate plan is necessary, but only 40% have actually implemented one.1 If you’re a part of the majority of Americans who have put off facing the future of your finances after death, it might be time to start weighing your options. Here is some helpful insight into what trusts are, who they benefit and why you may want to make them an integral part of your estate plan.

What are Trusts?

Trusts are legal documents you set in place to protect and control all of your assets. While some people may associate trusts with ultra-wealthy families, this stereotype is often untrue. Trusts are for anyone looking for an efficient way to control their assets after death or in the case of incapacitation. Additionally, trusts can help those caring for minors, children with special needs or pets make future arrangements for your dependents.

Types of Trusts

If you decide to incorporate a trust into your estate plan, the next decision to make is the type of trust(s) you wish to use. There are four main types of trusts, although these can be broken down further into smaller, more detailed trust types.

The main types of trusts include:

  • Revocable trusts
  • Irrevocable trusts
  • Living trusts
  • Will trusts

Just as they sound, revocable trusts can be altered and amended after creation, while irrevocable trusts can not. And while a living trust is established while the individual is still living, a will trust is created at or after death, based on the individual’s will.

Living Trusts in the State of California

In California, unless you have a Living Trust, your estate will go through Probate if…

  • You own any real estate valued at over $50,000.
  • Your investments, bank accounts, timeshares, real estate and personal property have a cumulative value over $150,000.

Probate is the State settling your estate with or without a Will, unless you have a Living Trust. The Probate process takes approximately one year prior to arrive at the release of your assets and moment that your beneficiaries receive their inheritance. Probate costs between 6-10% of the gross value of your estate including statutory fees set by the state. A Will is considered a letter to the probate court stating your wishes and will not avoid Probate Court. 

In the event that you become incapacitated, a Living Trust will allow the people you chose, not the court, to make your financial and health decisions.

Gift/Estate Tax Exemption for Trusts

The gift and estate tax exemption is the amount you can transfer during your life or at your death without incurring gift or estate tax. For 2024, the gift and estate tax exemption is $13.61 million ($27.22 million per married couple). Lifetime gifts that do not qualify for the annual exclusion described above will reduce the amount of gift and estate tax exemption available at death. Importantly, unless further legislation is enacted, the current gift and estate tax exemption amount will be reduced by approximately one-half at the end of 2025 ($5 million adjusted for inflation).

Top Three Benefits of Establishing Trusts

Benefit #1: Tax Efficiency

For some couples, establishing a revocable trust may help in minimizing estate tax burdens. Federal estate taxes will only be triggered if an individual’s accumulated assets equal $13.61 million or more, or a combined total of $27.22 million for couples, as of 2024. Couples with a high accumulation of wealth and assets may want with their legal and financial professionals to create trusts that help shelter the remaining spouse from estate tax burdens after the passing of their loved one.

In December 2019, the government passed the SECURE Act, which affected certain aspects of retirement savings, distributions, withdrawals and estate planning. Previously, non-spousal beneficiaries of the deceased’s IRA could stretch distributions out over the rest of their estimated lifespan. But with recent changes enacted, the account must be distributed over a 10-year span. Exceptions include those who are disabled or chronically ill, less than 10 years younger than the deceased or under the age of 18.

As far as tax efficiency, this shorter distribution period can mean a greater tax burden to your beneficiaries, with higher yearly withdrawals required to meet the 10-year requirement. If you previously made a trust the beneficiary of your IRA, you may want to revisit the terms of the trust with your wealth advisor to make sure it’s still relevant and effective with these recent changes. With certain types of trusts, this setup could potentially help non-spousal beneficiaries (such as children or grandchildren) bypass the 10-year rule, thus creating more tax-beneficial distributions.

Benefit #2: Avoid Probate

If your loved ones are left with only a will after your passing, the will must be sent through the state’s probate process. This means the contents of the will become public record, and your heirs may be delayed in receiving their inheritance. Additionally, probate can be an expensive and burdensome process to put on your beneficiaries. In establishing a trust, you can help your loved ones avoid the probate process. This can mean more privacy and less delay in fulfilling your final wishes.

Benefit #3: Protect Your Estate

What’s a more obvious reason why someone would want to set up a trust? To control what happens to their things after they die. Simply put, trusts can help protect your estate. When done right, a trust can determine who gets what and how things are cared for once you’re gone. Neglecting to provide instructions like these means your biggest assets could end up in the wrong hands. Instead, creating a trust allows you to pass along what you have to who you want, including your children, grandchildren and charitable organizations.

Disadvantages of Establishing Trusts

While there’s potential to greatly benefit from having trusts as a part of your estate plan, there are a few considerations to make before establishing a trust. Most of the advantages listed above are only effective if a trust has been established correctly. And these are often complex documents, especially when compared to the simplicity of a will.

any number of small errors could negate the benefits your beneficiaries were intended to receive. Because of this, it is recommended that you seek legal help if you decide to establish a trust. A professional can help you understand your options and work to maximize the benefits. This, however, means that establishing a trust can come with an upfront cost, as well as ongoing costs for maintenance, revisions and re-titling of assets.

Whether you’ve been trying to make estate planning a priority or it’s been at the bottom of your to-do list, you may want consider if establishing a trust could benefit you, your estate and your loved ones. When done right, you may be able to avoid costly and slow probate processes and protect your dependents in the event of an unexpected death.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

The 2024 Cost-of-Living Adjustment

If you’re one of the approximately 70 million retired Americans collecting Social Security benefits, you’ll see an 3.2% Cost-of-Living Adjustment (COLA) increase in 2024. Supplemental Security Income (SSI) beneficiaries will see increased payments starting December 29th, 2023.

The taxable maximum, or maximum amount of earnings subject to the Social Security tax, is also increasing. In 2024, the new maximum will be $168,600.

If you receive benefits, you’ll receive a notification of the new amounts either by mail or online through my Social Security in December. You can also sign up for text or email notifications for new messages from Social Security, rather than waiting for a letter in the mail.

The goal of COLA is to help Social Security and SSI keep up with inflation. Increases are based on percentage increases in the Consumer Price Index. You can learn more through the Social Security Administration’s website.

Social Security Basics

Even if retirement is a few years away, you can still benefit from the resources and information provided by the Social Security Administration. Understanding how you benefit may help you as you plan your retirement finances. If you still have questions about Social Security, here are a few facts to consider:

  • Social Security is more than just retirement income. It also provides life insurance and survivor benefits.
  • The amount of Social Security you receive depends on your lifetime work credits. You’ll need a total of 40 lifetime credits to collect benefits. The most you can earn per year is four, meaning you will have to work for at least 10 years to start collecting benefits.
  • Your full retirement age varies based on your birth year. People born in 1954 or earlier can start collecting at 66, whereas people born in 1960 or later can start at 67.
  • You can start receiving social security as early as 62, but you’ll receive reduced benefits. The reduction depends on how many months away you are from retirement age. The Social Security Administration has a benefits planner that estimates what your reduced benefit percentage could be.
  • In contrast, waiting to collect benefits can increase your monthly benefit, particularly if you wait until 70.
  • When you’re ready to apply, you can complete an easy online application. You can apply for Social Security and Medicare separately if desired.
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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Shopping with a Purpose

What if your holiday shopping could amount to more than just a heftier than usual credit card bill in January?

If you had the chance to gain something more than checking names off your list, would you take it? This year, Christmas shop with a purpose. The purpose being your children and your grandchildren… shopping to earn cash back rewards towards their college savings.

Shopping with UPromise, you have that opportunity. If you’re not familiar with UPromise, take a look at their website to learn more and get informed. You can earn up to 5% back your online shopping once you become a member. Ask other family members to join in for the children this Christmas and in future to support a gift that truly keeps giving.

Take it to the next level and tie in 529 plans.

A 529 is a tax-advantaged savings plan. 529 Plans were designed to encourage saving for college, but the benefit doesn’t stop there.

The benefits of a 529 Plan.

  • With a 529 savings account, earnings are not subject to federal or state tax when used for qualified higher education expenses, include, but are not limited to;
    • Tuition and mandatory fees.
    • Computers, books, supplies.
    • Room and board when enrolled at least half-time.
    • Some qualified loan repayment.
  • Many states offer tax credits or deductions on contributions.
    • California Residents: While contributions are not deductible for California income tax purposes, earnings accrue free of state income tax.
  • There are no age restrictions. Meaning you can fund your grandchild’s education or your own continued studies in retirement.
  • Funds can be used for tuition K-12, college, university, or any eligible higher education institution.

You can link your UPromise credits to your State 529 plan of choice. Let your contributions then grow tax free. Considering continuing your education yourself in your retirement? 529 plans can also benefit you in this situation.

Contact the team at LBDIAS to discuss opening a my529® account and how it may work within your financial plan strategy.  Contact us by phone 714-541-4180, email [email protected] or at your next scheduled financial plan meeting.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

If You Had A Million Dollars

It’s fairly often that clients will describe their goals to me, their Wealth Advisor, in some variation of the following… “I’d like to have a million dollars saved for retirement/saved for a rainy day/in my back account.” You’re probably thinking “I can relate to that”… Who wouldn’t want a million dollars?

Years of experience in the field of financial advisory have made me wary of the goal however. Not because of the goal itself but because there is often a lack of reason or inspiration behind it- two things vital to the success of a goal. Standing alone, the want for a million dollars could be a universal goal, which would explain why many won’t achieve it. Universal goals like health and happiness often tend to elude goal seekers too.

Building a Better Goal

These goals that never come to fruition could be caused by factor outside your control. Often though, the hold up initiates internally with the absence of a clearer definition of the goal. “I want to be healthy” is quite a bit more elusive than “I want to maintain a healthy weight of ___, enjoy an active lifestyle by doing ___ daily, and get my blood pressure down to ___.” The difference is clear. One goal is stated simply and could mean anything, the other is specific in its meaning. The specific goal is more likely to come to fruition due to its nature. The specific goal defines the plan and specific wants of the goal setter.

The same applies to finance goals. “I want to have a million dollars” isn’t as strong of a goal as “I want to establish a realistic savings and spending plan as well as smart investments in order to accumulate ___ dollars by my ___ birthday in order to fulfill my life’s dream of ___.”

Here we see the goal has been stated specifically including the initial outline of a timeline and plan and a motivating reason behind the dollar amount. Often arbitrary numerical goals don’t address what it is we really want out of life… travel, lowered stress level, debt-free living, the dream car, a boat, retirement.

Next time you get ready to say you’d like a million dollars, think a moment about what it is you’d really want to do with that money or what purpose it would serve. Therein lies your financial goal and the roadmap custom fit to you for getting there.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

2023 RMDs: What You Need To Know

BY IAN BERGER, JD, IRA EXPERT

The IRS recently announced it would waive the 50% penalty on RMDs missed in 2021 and 2022 for IRA beneficiaries subject to the 10-year payout rule who inherited in 2020 or 2021.

These waivers were announced in IRS Notice 2022-53. Although the Notice is not clear, it appears that beneficiaries are not required to take RMDs for years that the penalty waiver applies to. However, as things stand now, the grace period will end in 2023. So, even beneficiaries who benefitted from the IRS’s generosity will be subject to the 50% penalty if they don’t take their 2023 RMD by 12/31/23.

How will the 2023 RMD (and future RMDs) be calculated if the beneficiary didn’t take annual RMDs for 2021 and 2022 (for a 2020 death) or for 2022 (for a 2021 death)?

First, the 10-year payout period remains the same, meaning it will still end on 12/31 of the year of the 10-year anniversary of the original IRA owner’s death. Second, the 2023 RMD will be determined using a life expectancy as if the RMD for 2021 and 2022 were taken – even if they weren’t.

Here’s an example: Aaron died in 2020 at age 82 and left his traditional IRA to his daughter Zoey, age 55. Zoey is a non- eligible designated beneficiary, so she is subject to the 10-year payout rule. Aaron died after his RMD required beginning date. Without the recent IRS guidance, Zoey would have been subject to a 50% penalty if she didn’t receive an RMD for 2021 (the 1st year of her 10-year payout period) and a penalty if she doesn’t take her 2022 RMD (the 2nd year of her 10- year term).

Assume that Zoey doesn’t take RMDs for either 2021 or 2022. Zoey’s 10-year payout period remains the same, so she must still empty the inherited IRA 12/31/30. And, she must receive annual RMDs for years 3-9 of the 10-year period starting in 2023. The 2023 RMD will be calculated as if she did take the 2021 and 2022 RMDs. The 2021 RMD would have been the 12/31/20 balance of the inherited IRA divided by 28.7 – the life expectancy of a 56-year old under the old IRS Single Life Expectancy Table. The 2022 RMD would have been the 12/31/21 account balance divided by 29.6. The 29.6 is arrived at by “resetting” the life expectancy (determining the life expectancy of a 56-year old under the new IRS Single Life Expectancy Table (30.6) and subtracting one from that).

So, Zoey’s 2023 RMD will be the 12/31/22 IRA balance divided by 28.6, the life expectancy that would have applied for 2022, subtracted by one. For 2024, a 27.6 life expectancy will be used, and so on. The fact that Zoey chose not to take RMDs for 2021 and 2022 is simply ignored.

The scenario illustrated here is subject to change when the IRS issues final RMD regulations.

TAKE OUR RMD QUIZ

BY SARAH BRENNER, JD, DIRECTOR OF RETIREMENT EDUCATION

If you have an IRA, you should know that the funds that are in the account can’t stay there forever. The rules say that you must begin to take required minimum distributions (RMDs) from your IRA once you reach your golden years. How well do you know the RMD rules? Take our RMD Quiz and find out!

Meet Gary, who is about to embark on his retirement years. This year, 2022, has been a great year for Gary. He just retired from his job, and he celebrated his 72nd birthday. He has a traditional IRA, a Roth IRA and a 401(k) plan. The sole beneficiary of all three of his retirement accounts is his wife, Linda, age 60. Can you answer the following five questions about Gary and his RMD? The correct answers can be found at the bottom of the quiz.

1. From which retirement accounts will Gary need to take RMDs for the year 2022?

A. His Traditional IRA and his Roth IRA

B. His Traditional IRA and his 401(k)

C. All three retirement accounts

 

2. What is the deadline for Gary to take his first RMD from his traditional IRA?

A. December 31, 2022

B. December 31, 2023

C. April 1, 2023

D. April 15, 2023

 

3. To calculate his first IRA RMD, Gary should use which IRS life expectancy table?

A. The Single Life Expectancy Table

B. The Uniform Life Expectancy Table

C. The Joint Life Expectancy Table

 

4. Gary can satisfy the RMD from his traditional IRA by taking it instead from either his Roth IRA or his 401(k).

A. True

B. False

 

5. If Gary fails to take his IRA RMD by the deadline, he will be subject to what penalty?

A. A 6% penalty

B. A 10% penalty

C. A 25% penalty

D. A 50% penalty

Answers: 1. B, 2. C, 3. C, 4. B, 5. D

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Preparing for Lifetime Income in Retirement

There was a time when old retirement planning models like “the 70 percent rule” were more common. This rule stated that a retiree only needed 70% of their pre-retirement income to live comfortably in retirement. These “rules” may have worked for some retirees several decades ago but can be dangerously flawed in today’s new normal retirement.

The reality is that the cost of retirement has increased significantly, to the point where some retirees may need to save above their pre-retirement income and make it last for up to 30 years. Planning for lifetime income in today’s environment generally focuses more on today’s realities instead of outdated formulas and methods.

The Biggest Retirement Risk

It’s believed that the biggest risk retirees today face is their longevity. This is based on your life expectancy and continues to expand each day. For example, an average, healthy 65-year-old has a life expectancy of 18.5 years1. This risk may be further compounded if you try to use a standard life expectancy table to calculate your retirement needs, because standardized information assumes that everything in your life will happen on time. But what if it doesn’t?

Preparing for Lifetime Income Sufficiently

While some retirees are approaching retirement with trepidation, extended longevity should be greeted with gratitude. The possibility of a longer life means more time with loved ones, time to see the world, or even time to learn new skills. To work towards outliving your retirement income, you’ll need careful and deliberate preparation. Here are some ideas to help you start:

Clearly Define Your Retirement Needs

With retirement becoming more expensive, it’s considered vital to have a clear and well-defined vision of your ideal retirement. When you have a strong vision, it’s easier to translate into specific goals that consider your income needs and timeline. This vision is likely going to change over time, so review your plan frequently so you can make adjustments when needed.

Know Your Retirement Costs

Regardless of your ideal retirement lifestyle, there’s a cost. If you’re concerned about outliving your income, try taking a more deliberate approach to calculating your costs. Consider creating a budget today that reflects your vision and factor in the estimated cost of living increases that may happen over your lifetime. Don’t forget to account for the likelihood of increased healthcare costs or potential long-term care costs.

Determine Your Risk Capacity

Depending on your goals and time to retirement, you may want to consider changing your investing strategy. While investing more conservatively can feel more secure, there are other risks like inflation or outliving your income. With the possibility of 30 years or more of retirement, you may want to consider investing for growth to help you maintain purchasing power. Consider talking to a financial professional who can offer personalized guidance that’s suited to your goals, lifestyle, timeline, and risk capacity.

Consider Downsizing Your Lifestyle

Whether out of necessity or a desire to live a simpler lifestyle, many people downsize their vision of retirement. For some, this means a smaller home, fewer or less expensive cars, and adopting a frugal lifestyle. 

Today’s retirement plans should aim to be grounded in today’s realities. Your retirement vision, formed by your needs, wants, and beliefs, should be the most important benchmark when determining how much you need to save. Having a realistic plan, a strategy, and a disciplined approach is considered important to pursuing retirement success. If you need help developing your retirement strategy, talk to a financial professional.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Living the Dream: How to Plan for Your Ideal Retirement

What would you do with your time if you weren’t working 40 hours every week? Everyone has a different idea of what they want retirement to look like, whether it involves traveling the world or staying comfortable at home. The most important thing about retirement is that you have the time, money, and space to do what makes you happy. But reaching your life goals after your career comes to a close is much easier when you start to plan early. 

Here are the steps you can take now to plan for your ideal retirement later. 

Step 1: Set a Clear Vision for Your Retirement  

The first step in achieving any goal is having clarity about what you want. Ask yourself, “When it comes to my retirement, what do I want life to look like?” Consider aspects of your life such as your home, family, possessions, and experiences. Write down exactly what you picture when you think about your ideal retirement. 

Step 2: Pick Your Priorities  

When thinking about your future goals, it’s key to prioritize those that are most important to you. Think specifically about the goals that will require a certain amount of savings or investments. If you’d like to travel the world and also buy a luxury car, which one is more important to you? By setting these priorities, it’ll make it easier for you to achieve the things you want most first. 

Step 3: Use Your Goals to Inform Your Spending Needs 

Next, when planning for your ideal retirement, you’ll want to figure out your spending needs. How much money will you need to achieve your goals—think about both the big picture and the day-to-day. Do you imagine yourself living in a different city or house? How much money might you need to invest in a new property? On a smaller scale, what activities might you participate in on a regular basis? Consider expenses like social club memberships or dining at restaurants. 

Even if your budget changes over the years, it’s a good idea to continue to think about spending needs after you stop working so you can prepare for your dream retirement. 

Step 4: Starting Investing Early and Often 

It’s never too early to start saving for your future. Once you have an idea of what your spending goals look like for retirement, you can start thinking about how to invest your money now to work towards those goals. Some options for investments that can grow long-term include: 

  • Defined contribution plans—like a 401(k) or 403(b)
  • Individual retirement accounts (IRAs) 
  • High-yield savings accounts 

It’s a good idea to set aside a portion of your paycheck every month to invest in your retirement, no matter what type of investment you choose. Employer-sponsored 401(k) plans make it easy with automatic pre-tax contributions, but there are many IRAs and savings accounts that can also take post-tax contributions from your bank account on a regular schedule every month. 

Step 5: Revisit Your Goals Yearly 

Most importantly, when thinking about your dream retirement, revisit your plan on a regular basis. Keep an eye on your investments and consider contributing more every year to coincide with salary bumps. Revisit your retirement goals periodically and update them—whether you’ve decided to shoot for the moon or back off of some of your loftier goals. As you draw closer to retirement age, your goals and your ability to achieve them will become even more clear. 

If you’re confused about your ideal retirement or how to invest in order to reach your goals, a financial professional can help you gain clarity and strategize your investments. 

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

How to Make Your Money Last in Retirement

Since there is no way to know how long we will live or what our future may hold, it’s only natural to have questions and concerns about the road ahead.

No matter where you are on your journey to or in retirement, the question “Will I outlive my money?” is most likely always in the back of your mind. Thankfully, there are several ways you can increase the odds that your finances will last as long as your retirement. Here are a few options to help your money last and work in your favor during these milestone years:

Have a Retirement Spending Plan

Similar to a budget, a spending plan helps you organize your finances for activities such as traveling, shopping or other leisurely activities. Having a plan that is well thought out and robust will help you establish the details of what you’d like to be able to afford during retirement. Working with a financial planner can help you understand how to support the retirement you’ve always dreamt of- your Retirement Life By Design.

Without a proper spending plan in place overspending can and likely will occur. This is a common occurrence during the retirement years, and is similar to overspending in younger years, with the biggest difference being that many of us are unsure or unaware of how to properly plan our income during retirement.

For many income in retirement comes from a set withdrawal rate (4% is considered to be a good starting point as illustrated in our Conservative Income Model.)

Keep Earning

If you’re passionate about your career or enjoy helping others, you may benefit from waiting to retire for an extra year or two. Not only does staying involved increase your overall standard of living, but if you’re healthy enough and willing to continue working, your Social Security could end up being greater in your retirement years.

This will also allow your retirement assets to have an extra year to expand and strengthen. Encouraging your wealth to last throughout your retirement is easier to manage when you’re still earning and your finances don’t need to work as hard to last.

You may also want to consider transitioning out of the workforce slowly. If you’re in a position to take on less responsibility or work part time, you may find that continuing to work is less of a chore and beneficial in the long run.

Protect Your Health

We all know that being sick can take a toll both physically and financially. Making healthier choices throughout our lifetime can work in your favor to reduce the odds of suffering from conditions such as diabetes, high blood pressure, arthritis, or other chronic illnesses, in turn lowering healthcare expenses.

As you near retirement, it’s important to take into account that spending money on a healthy lifestyle, as well as receiving regular screenings and accurate medical care, can help improve the quality of your Retirement Life By Design. Spending a sufficient amount on preventative care now, can be beneficial to lowering more costly expenses in the future.

Take Control of Your Savings

When it comes to funding your retirement; most Americans use a combination of Social Security, savings and pensions. It;s important to set yourself up for success and think outside the box since these details may not always meet your expectations. Working with a wealth advisor can help with that.

Keeping in mind the structure of your costs and the details of your income as a pre-retiree will help you maintain your wealth in the long run and throughout your retirement. Remaining in control of your finances and always being aware of how much you’re spending will allow you to focus your time and energy on the experiences that matter most to you.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Highlights of the SECURE Act 2.0

The SECURE (Setting Every Community Up for Retirement Enhancement) Act was created in 2019 (see the highlights of 2019 legislation here) and made many changes to retirement legislation. Now a second round of changes in being made with the SECURE Act 2.0.

The SECURE Act 2.0 was passed into law on December 29, 2022 and creates important changes that may impact your retirement. These changes will take place over the course of coming years. Though there are many changes that the SECURE Act 2.0 enacts, this blog will focus on three of the highlights of this legislation that may impact you.

RMDs

Effective 2023

If you were born between 1951 and 1959, your RMD begins when you turn 73. If you were born in 1960 or later, your RMD begins when you turn 75. Implementing additional tax planning strategies (e.g. Roth conversions, harvesting capital gains, accelerating taxable distributions, etc.) before RMDs commence may help us mitigate your (or your heir’s) overall tax liability in the future.

Additionally, putting a portion of your IRA into a qualified longevity annuity contract (QLAC), enables you to delay taking RMDs on that portion until the age of 85. The new limit for this option is $200,000.

The penalty for not taking an RMD will decrease from 50% of the RMD amount to 25%. The penalty will be reduced to 10% for IRA owners if the account owner withdraws the RMD amount previously not taken and submits a corrected tax return in a timely manner.

Effective 2024

RMDs are eliminated for Roth retirement plans (e.g. 401(k), 403(b), etc.). 

Increased Catch-Up Contributions

Effective 2024

If you make over $145,000 and you plan to make catch-up contributions to your employer’s retirement plan, you will now only be eligible to make catch-up contributions to a Roth account. This means there is no tax deduction.

IRAs currently have a $1,000 catch-up contribution limit for people age 50 and over. Starting in 2024, that limit will be indexed to inflation, meaning it could increase every year, based on federally determined cost-of-living increases.

Effective 2025

Starting January 1, 2025, individuals ages 60 through 63 years old will be able to make catch-up contributions up to $10,000 annually to a workplace plan, and that amount will be indexed to inflation. (The catch-up amount for people age 50 and older in 2023 is currently $7,500.)

Employer Matching 

Effective 2023

If your employer offers to match on retirement plan contributions, you may want to consider if newly allowed matches to Roth account (which are taxable as income) are better suited to your tax planning goals. Keep in mind your Roth earnings then grow tax free!

Summary

These are just a few of the ways in which the SECURE Act 2.0 impacts your retirement plan. If you have questions about your individual position or if any other changes from the new legislation are applicable to your situation, please do not hesitate to contact the team at LBDIAS and schedule a time to talk. 

If you want to learn more read, What Important Issues Should I Consider Regarding Changes Made By The SECURE Act 2.0?

Click to Download/Print Article

Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.