FEATURED POST

Nick L.

Mapping Out Your Future with a Financial Plan
Just like a map or a GPS is needed for someone driving a car on a long trip, a financial plan is useful for anyone wondering about their financial future.  A financial plan lets us know if we are heading in the right direction, for example north instead of south.  Much like a long journey, life will have many twists, turns and a few unexpected bumps in the road.  However, with a well-planned route, we can have a clear idea of whether we are heading in the direction of our destination. What is a Financial Plan? A financial plan is a document that evaluates cash flow, assets, goals, and brings the information together in a document that predicts how much money and income you will have in the future. This document will be used to determine if your current strategy will accomplish your goals, or if you need a different one. Who can benefit from a financial plan? Financial plans are useful for people of all ages. A financial plan looks at money that is coming in (wages for most people), assets that you have saved so far, and what you are currently saving. This along with other factors helps to plan a path for your financial future.  This could be saving for a large purchase, paying off debt, or saving for the future (children’s education or retirement).  Financial plans are also helpful for people already in retirement as they can be used to help identify a strategy for creating retirement income, spending down assets, or planning to leave them to heirs. To prepare a financial plan your financial planner will need to gather some information from you. You will likely need to bring the following: Recent paystubs Last year’s tax return Statements for any retirement or investment accounts that you have Information on any pensions that you may have Social Security Statements (get yours at ssa.gov/myaccount ) More complex plans may require information about insurance and/or legal work Your planner will ask some questions to get to know you and find out what is important to you. A good planner will be interested in not just how much money you have, but also in what you would like to accomplish with your money. This conversation along with the data you bring to your appointment will help your planner to craft a financial plan that is specific to your goals. Your planning process will likely consist of several meetings. Costs are generally dependent on the complexity of your plan, and it is even possible that your advisor will provide some basic planning at no cost. Life will continue to change over time, for this reason it is important to revisit your financial plan with your advisor every so often to account for any detours or bumps along the road of life.  Financial plans are working documents that need to be adjusted as circumstances change. You should expect to update your financial plan several times during your working years. Generally, this will be every few years or when a major life change occurs. If you would like to find out more about having your personal financial plan prepared, contact us to set up your no obligation consultation today. Kate Pederson Investment Advisor Representative & Tax Preparer  Kate joined Advisors Management Group in December 2017. Prior to joining the firm, she worked in manufacturing and healthcare during her career as a financial analyst. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.
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Category: Retirement Savings

13 Oct 2022

Nick L.

Retirement Myths and Realities

As financial planners, we hear all kinds of thoughts that people have about retirement. The fact is that no two people are the same and neither are two retirement scenarios. Your neighbor may plan on spending a whole winter in warm weather and you may prefer to stay near your children and grandchildren. There isn’t a right or wrong way to do retirement, but it is important to plan properly to make your ideal retirement happen. Let’s break down some of the common misunderstandings about retirement. Myth # 1 - I need $1,000,000 to retire You may need 1 million, 2 million, 10 million or perhaps you can retire on far less. It really is relative to what you need monthly to make your world go around. Let’s reframe this scenario and completely take a dollar amount out of the equation. You will need a certain amount per month to pay all your bills and pay for the extras you desire. If the mix of income, market growth, inflation, and distributions you have will provide what you need per month, you may be able to retire. Let’s say Jeff and Sharon are 65 and 67. They do not have a million dollars saved. They own their home and have paid off their mortgage and have no debt. They have normal bills such as utilities, insurance, home maintenance, and taxes. Additionally, they spend money on gas, groceries, gifts and other discretionary spending. Both Jeff and Sharon receive Social Security and Sharon has a teacher’s pension. These 3 sources of income pay for most of their expenses, but they do have other expenses that it doesn’t cover. They both have IRAs, and they have some money in accounts at their local bank. They withdraw a small amount from their IRAs to cover expenses that Social Security and pension does not cover. They work with their advisor to make sure they do not take too much money out of their IRAs, putting their portfolio in danger of running dry. Since their IRAs are invested, they see modest long-term growth that will allow them to increase their draw in the future as inflation increases their income need. This works well for them. A solid financial plan and an experienced advisor will help you to determine what you need to save, how much you need to accumulate and help you manage investments and plan out how to start to spend your money. Myth # 2 - I don’t have enough money saved to hire an advisor While there are some firms that require a certain level of wealth, many, like ours do not. We believe that having an advisor at all levels of wealth will put you on the right path to accomplishing your goals. If you wait until you feel your portfolio is large enough, you may not have enough time to change the path of your strategy. It is far better to seek help earlier in the game so that you can determine what is appropriate for your situation and what you will need to do to get there. Myth # 3 - My employer manages my 401k Nope, nope, nope…this is absolutely false. In fact, your employer cannot manage your 401k. Your employer is responsible for choosing suitable options for employees to invest in and getting the contributions into the plan, but they are not choosing what you personally are investing in or managing it for you. You will decide how much you’d like to contribute and what to invest in. There may be an investment person that will help you fill out the paperwork to enroll, but they won’t automatically make changes to your account through the years. Because a 401k plan sponsor (your employer) has a fiduciary responsibility to provide a suitable plan, many have included Target Date Funds or Lifestyle Funds to help investors select something suitable, but these are not personalized portfolios. Some financial advisors will help their clients oversee their retirement plans and adjust their strategy as they get closer to retirement. Some people may even decide to move a portion of their investments to IRAs as retirement approaches for a more hands-on approach to management. Myth # 4 - I should contribute all my savings in my pre-tax 401k to save on my taxes It is by no means wrong to save as much as you can afford in your pre-tax 401k, but it may not be the most tax efficient way to do things. In fact, you may want to include investments that are not in your 401k plan. Having different “buckets” of money that will be taxed differently will allow you to control tax in retirement and gives added flexibility to a retirement plan. You will however want to make sure that you continue to save enough in your 401k that you pick up any match that you are eligible for. Roth-401k - Many employers are offering Roth 401k as a supplement to the traditional pre-tax 401k. With Roth 401k you can use after tax dollars to fund the same employer sponsored plan. You won’t get a tax break this year, but you can take it out later without paying tax. Roth IRA - These work in a similar way as a Roth 401k; however, they are outside your employer’s plan. This puts you in the driver's seat when it comes to choosing the investments and allows for professional management. Again, you won’t get a tax break in the year you save it, but if you follow Roth IRA rules, you will be able to take it out tax free later. Please note that Roth IRAs are subject to income thresholds. Be sure to verify with your financial advisor or tax preparer that you are eligible to contribute. Brokerage - Retirement savings do not need to be in a retirement account at all. You can use accounts such as brokerage accounts or even bank accounts that are funded with after tax money to fund your retirement. You will owe tax when dividends and interest are paid on investments and when investments are sold at a gain. It is possible to control taxes by offsetting capital gains with losses as well. Brokerage accounts do not have the age restrictions on them like retirement accounts do; this allows you flexibility with retirement age and can be very useful if you are planning to retire before age 59.5. When you diversify your savings strategy, you also diversify your tax strategy which can pay off when it is time to start your spending strategy. Retirement Reality When considering what is fact and what is fiction when it comes to your retirement, it is important to know what facts apply to you. The perfect retirement is as individualized as you are. Working together with a trusted professional will help you to determine how you need to save, grow, and distribute the money you will need for your retirement. Rebecca Agamaite Investment Advisor Representative  Rebecca joined the firm in 2011 as an Investment Advisor Representative. In this role, she works with clients to manage their investment assets and help them obtain their financial objectives. Rebecca brings a great deal of experience to the team having worked for several years at Marshall & IIsley Bank and MetLife. She earned a Masters of Business Administration degree (with an emphasis on finance) from Concordia University. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

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16 Aug 2021

Advisors Management Group

Roth IRAs and High-Income Households

Roth IRA contributions are not tax-deductible, so there is no tax benefit for the year of contribution.  The tax benefit comes when you take a distribution.  If you follow the IRS rules, distributions from Roth IRAs are generally tax-free.  Typically, you have to be 59 ½ or older and the account has to have been established for at least five years. Although, there are special rules in the case of death, disability, and conversions. Not everyone can contribute to a Roth IRA.  First, you must have earned income, basically income from a job or self-employment.  Secondly, there are income limits for contributing to Roth IRAs.  In 2021, if your filing status is married filing joint or qualified widow(er) and your modified adjusted gross income falls between $198,000 and $208,000, you can still contribute to a Roth IRA, but the contribution is limited.  If your income is above $208,000, you cannot contribute to a Roth IRA.  For single or head of household filers, the phase-out range is $125,000 to $140,000.  If you are above $140,000, then you cannot contribute to a Roth IRA.  These income ranges can change each year. It is best to consult with a tax professional or an investment advisor to understand if you are eligible to contribute to a Roth IRA and how much. Backdoor Roth IRA If your income is too high and you do not qualify to make a Roth IRA contribution, there may still be a way to contribute to one. The strategy uses current tax law, and the term is coined, “backdoor” Roth IRA contribution.  First, you make a non-deductible Traditional IRA contribution. This can be done even at high-income levels.  Next, you immediately convert that traditional IRA to a Roth IRA; there is no income limitation for these types of Roth IRA conversions. A Few Words of Caution Even though the backdoor Roth IRA process seems simple, there are several things to be aware of when completing one.  The first thing is the timing of the traditional IRA contribution and the conversion to the Roth IRA is important. If done appropriately there may be no tax due on this transaction. Also, delays in the process could cause gains in the traditional IRA to be taxable upon conversion. In addition, if you already have other traditional IRAs, this strategy may not work for you as it can cause unwelcome tax surprises down the road.  Finally, this transaction will generate a 1099-R and will need to be reported on your tax return.  Due to the complexity of this strategy, we recommend consulting a tax professional and investment advisor before starting this process. If you would like to learn more about this strategy to see if it is right for you, please contact one of our team members. Rebecca Agamaite, MBA Client Experience Manager, Investment Advisor Representative Rebecca joined the Advisors Management Group in 2011 as an Investment Advisor Representative. Rebecca brings a great deal of experience to the team having worked for several years at Marshall & IIsley Bank and MetLife.  Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

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13 Jan 2021

Advisors Management Group

IRS Announces 2021 Retirement Plan Contribution Limits For 401(k)s And More

How much can you save for retirement in 2021 in tax-advantaged accounts? How does $58,000 sound? The Treasury Department has announced inflation-adjusted figures for retirement account savings for 2021.  The basic salary deferral amount for 401(k) and similar workplace plans remains flat at $19,500; the $6,500 catch-up amount if you’re 50 or older also remains the same; but the overall limit for these plans goes up from $57,000 to $58,000 in 2021. That helps workers whose employers allow special after-tax salary deferrals, and self-employed folks who can save to the limit in solo or individual 401(k)s or SEP retirement plans.  For the rest of us, IRA contribution limits are flat. The amount you can contribute to an Individual Retirement Account stays the same for 2021: $6,000, with a $1,000 catch-up limit if you’re 50 or older. There’s a little good news for IRA savers. You can earn a little more and get to deduct your IRA contributions. Plus, the phase-out income limits for contributing to a Roth IRA are bumped up. And the income limits to claim the saver’s credit, an extra incentive to start and keep saving, has gone up. We outline the numbers below; see IRS Notice 2020-79 for technical guidance. For more on 2021 tax numbers: Forbes contributor Kelly Phillips Erb has all the details on 2021 tax brackets, standard deduction amounts and more. We have all the details on the new higher 2021 estate and gift tax limits too.  401(k)s The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is $19,500 for 2021—for the second year in a row. Note, you can make changes to your 401(k) election at any time during the year, not just during open enrollment season when most employers send you a reminder to update your elections for the next plan year. The 401(k) Catch-Up The catch-up contribution limit for employees age 50 or older in these plans also remains steady: it’s $6,500 for 2021. Even if you don’t turn 50 until December 31, 2021, you can make the additional $6,500 catch-up contribution for the year. SEP IRAs and Solo 401(k)s For the self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) goes up from $57,000 in 2020 to $58,000 in 2021. That’s based on the amount they can contribute as an employer, as a percentage of their salary; the compensation limit used in the savings calculation also goes up from $285,000 in 2020 to $290,000 in 2021.  Aftertax 401(k) contributions If your employer allows aftertax contributions to your 401(k), you also get the advantage of the new $58,000 limit for 2021. It’s an overall cap, including your $19,500 (pretax or Roth in any combination) salary deferrals plus any employer contributions (but not catch-up contributions). The SIMPLE The contribution limit for SIMPLE retirement accounts is unchanged at $13,500 for 2021. The SIMPLE catch-up limit is still $3,000. Defined Benefit Plans  The limitation on the annual benefit of a defined benefit plan is unchanged at $230,000 for 2021. These are powerful pension plans (an individual version of the kind that used to be more common in the corporate world before 401(k)s took over) for high-earning self-employed folks. Individual Retirement Accounts The limit on annual contributions to an Individual Retirement Account (pretax or Roth or a combination) remains at $6,000 for 2021. The catch-up contribution limit, which is not subject to inflation adjustments, remains at $1,000. (Remember that 2021 IRA contributions can be made until April 15, 2022.) Deductible IRA Phase-Outs You can earn a little more in 2021 and get to deduct your contributions to a traditional pretax IRA. Note: Even if you earn too much to get a deduction for contributing to an IRA, you can still contribute—it’s just nondeductible. In 2021, the deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $66,000 and $76,000, up from $65,000 and $75,000 in 2020. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $105,000 to $125,000 for 2021, up from $104,000 to $124,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $198,000 and $208,000 in 2021, up from $196,000 and $206,000 in 2020. Roth IRA Phase-Outs The inflation adjustment helps Roth IRA savers too. In 2021, the AGI phase-out range for taxpayers making contributions to a Roth IRA is $198,000 to $208,000 for married couples filing jointly, up from $196,000 to $206,000 in 2020. For singles and heads of household, the income phase-out range is $125,000 to $140,000, up from $124,000 to $139,000 in 2020. If you earn too much to open a Roth IRA, you can open a nondeductible IRA and convert it to a Roth IRA as Congress lifted any income restrictions for Roth IRA conversions. To learn more about the backdoor Roth, see Congress Blesses Roth IRAs For Everyone, Even The Well-Paid. Saver’s Credit The income limit for the saver’s credit for low- and moderate-income workers is $66,000 for married couples filing jointly for 2021, up from $65,000; $49,500 for heads of household, up from $48,750; and $33,000 for singles and married filing separately, up from $32,500. QLACs The dollar limit on the amount of your IRA or 401(k) you can invest in a qualified longevity annuity contract is still $135,000 for 2021.   Sourec: Forbes

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