There will most certainly be a lot of articles written this year with a play on words relating to vision. Optometrists refer to 20/20 vision as a reference point for an individual’s visual acuity, acuity meaning “clarity or sharpness” of vision.   

With that in mind, here are three simple tasks to help you gain clarity on aspects of your financial well-being and help you sharpen your vision for the year ahead…. 2020.   

1. Log-in to the Social Security website to see how projected monthly retirement benefits are looking. Part of our on-going service is utilizing financial planning software to look at the potential outcomes of different Social Security claiming strategies for our clients. Deciding when to take Social Security benefits is one of the most important decisions someone will make regarding their retirement planning.   

Here are some key points to consider when making the decision to turn-on the Social Security spicket for cash flow in retirement:   

  • The impact delaying benefits may have on the investment portfolio. It is counterintuitive, but in some cases, delaying benefits may actually increase your net worth in retirement. Of course, this depends on the actual Social Security benefit, investable assets at the time of retirement, cash flow needs in retirement, rates of return, and several other factors. Looking at multiple scenarios with different assumptions can help crystalize the scenario that bests suits our clients as individuals.   
  • If the primary wage-earner can wait until age 70, the result for a younger spouse could be significant if the younger spouse has a much lower wage base for retirement for collecting their own benefit or receiving widow/widower benefits.  
  • Earnings during retirement years from IRA distributions or continuing to work could adversely affect Medicare premiums and income taxes. Begin looking at cash flow needs in retirement now. If the majority of cash flow is coming from income taxable investments (versus Roth IRAs or dividends for example), claiming Social Security before full retirement age can have adverse tax consequences and could impact Medicare premiums as well.  

2. Another simple thing to do as we begin the new year is to review beneficiary designations on bank accounts, investment accounts, retirement plans such as 401(k)s, 403(b)s, and beneficiary designations on life insurance policies. Consider making all of your assets (such as bank accounts, direct mutual fund accounts, etc. as well as your home) beneficiary-driven versus titled individually. It’s not something we like to think about, but we are not on the planet forever. Think of your vision as well for when you are no longer here and what you would like to see happen with your assets to maximize the benefit your loved ones or charities will receive.   

3. Finally, to fully bring your finances into 20/20 focus for the new year, review monthly savings and investing as a percentage of income. Perhaps it is time to increase savings in investments outside of your company sponsored plan. One of the biggest mistakes I see individuals make during their wealth accumulation years is disproportionately allocating investment dollars into assets they cannot access until 59-1/2 (like IRAs and 401(k)s), versus systematically investing money in more liquid assets that can be accessed before 59-1/2. An investment asset like this can assist greatly in retirement by generating tax-free yield from municipal bond funds or dividend yield from stocks or mutual funds. It is a nice adjunct to your IRA or 401(k) for distributions needed for cash-flow in retirement or even before retirement. See sub-heading #1 above…. This can also help with keeping income-taxable cash flow in line during retirement.   

For example, think about having $100,000 before retirement in an account with a hypothetical 4% tax-free yield from a municipal bond. That is $4,000 in tax-free income that could potentially be used for a vacation or home improvement year after year. 

I encourage you to find an hour or two to focus on your finances. Having 20/20 financial clarity is an achievable goal, and we are here to help you do so. Give us a call and we can create an Rx to remedy the delta between your vision for the future and where you are today.   

Most Sincerely,

There will most certainly be a lot of articles written this year with a play on words relating to vision. Optometrists refer to 20/20 vision as a reference point for an individual’s visual acuity, acuity meaning “clarity or sharpness” of vision.   

With that in mind, here are three simple tasks to help you gain clarity on aspects of your financial well-being and help you sharpen your vision for the year ahead…. 2020.   

  1.  Log-in to the Social Security website to see how projected monthly retirement benefits are looking. Part of our on-going service is utilizing financial planning software to look at the potential outcomes of different Social Security claiming strategies for our clients. Deciding when to take Social Security benefits is one of the most important decisions someone will make regarding their retirement planning.   

Here are some key points to consider when making the decision to turn-on the Social Security spicket for cash flow in retirement:   

  • The impact delaying benefits may have on the investment portfolio. It is counterintuitive, but in some cases, delaying benefits may actually increase your net worth in retirement. Of course, this depends on the actual Social Security benefit, investable assets at the time of retirement, cash flow needs in retirement, rates of return, and several other factors. Looking at multiple scenarios with different assumptions can help crystalize the scenario that bests suits our clients as individuals.   
  • If the primary wage-earner can wait until age 70, the result for a younger spouse could be significant if the younger spouse has a much lower wage base for retirement for collecting their own benefit or receiving widow/widower benefits.  
  • Earnings during retirement years from IRA distributions or continuing to work could adversely affect Medicare premiums and income taxes. Begin looking at cash flow needs in retirement now. If the majority of cash flow is coming from income taxable investments (versus Roth IRAs or dividends for example), claiming Social Security before full retirement age can have adverse tax consequences and could impact Medicare premiums as well.
  • 2. Another simple thing to do as we begin the new year is to review beneficiary designations on bank accounts, investment accounts, retirement plans such as 401(k)s, 403(b)s, and beneficiary designations on life insurance policies. Consider making all of your assets (such as bank accounts, direct mutual fund accounts, etc. as well as your home) beneficiary-driven versus titled individually. It’s not something we like to think about, but we are not on the planet forever. Think of your vision as well for when you are no longer here and what you would like to see happen with your assets to maximize the benefit your loved ones or charities will receive.  
  1. Finally, to fully bring your finances into 20/20 focus for the new year, review monthly savings and investing as a percentage of income. Perhaps it is time to increase savings in investments outside of your company sponsored plan. One of the biggest mistakes I see individuals make during their wealth accumulation years is disproportionately allocating investment dollars into assets they cannot access until 59-1/2 (like IRAs and 401(k)s), versus systematically investing money in more liquid assets that can be accessed before 59-1/2. An investment asset like this can assist greatly in retirement by generating tax-free yield from municipal bond funds or dividend yield from stocks or mutual funds. It is a nice adjunct to your IRA or 401(k) for distributions needed for cash-flow in retirement or even before retirement. See sub-heading #1 above…. This can also help with keeping income-taxable cash flow in line during retirement.   

For example, think about having $100,000 before retirement in an account with a hypothetical 4% tax-free yield from a municipal bond. That is $4,000 in tax-free income that could potentially be used for a vacation or home improvement year after year. 

I encourage you to find an hour or two to focus on your finances. Having 20/20 financial clarity is an achievable goal, and we are here to help you do so. Give us a call and we can create an Rx to remedy the delta between your vision for the future and where you are today.   

Most Sincerely,