I hope everyone is staying safe and healthy.
Many retirees expect their taxes to decline in retirement. Unfortunately, that belief often turns out to be a myth. We can increase the value of our investments by reducing the taxes we pay when we withdraw funds from our retirement accounts. This week’s first article helps explain why your tax bill can be higher in retirement. It also discusses some ways tax planning can help. If you lower your tax bill, you will have more money either today or in the future. Improving the tax efficiency of your investments is an important element of a comprehensive financial plan. If you would like to learn more about the topic of this week’s first article, please schedule a free call.
Overall, companies have reported better-than-expected earnings so far this quarter. This has benefited the market’s performance. If you dig a little deeper, you will see some bifurcation in market returns. Some companies are benefiting from the pandemic. Others are hampered by it. The first group is strongly outperforming the second. Those benefiting the most include many technology companies plus companies that regularly conduct business online. Many companies in industries such as travel and leisure have seen their performance lag. It continues to be clear that the market is not the economy. As of Thursday’s close, the S&P 500 Index is up 4.4% year-to-date. On both Wednesday and Thursday, the S&P briefly surpassed its February 19th record close. It ended the day Thursday 0.4% below its mid-February highs.
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I will not send a blog next week. I am looking forward to some much-needed quality family time. My next blog will be sent the week of August 23rd. “Ask Me Anything” sessions will resume in September.
Here are the links to this week’s articles as well as a brief description of each:
1. Debunking the Myth of Lower Taxes in Retirement. People often think their tax rate will be fall in retirement. After all, we have stopped working. Instead, we live off what we accumulated during our lifetime. Depending on your withdrawal strategy, your tax rate in retirement could even be lower in some years than others. Keep in mind that you must withdraw specified amounts from tax-deferred accounts such as 401(k)s, 403(b)s, or IRAs once you turn 72 (Required Minimum Distributions or RMDs). You don’t pay taxes on contributions to those accounts. You do pay tax when you make withdrawals. Planning strategies can reduce your tax bill. If you would like to talk about how you can lower your tax bill in retirement, use this link to schedule a free call.
2. The 3 Secrets of the Happiest Retirees (And How You Can Plan for Them). According to this article’s author, happy retirees have three things in common. Fortunately, you can try to plan for them:
· They are debt free
· They have their health (I would say “they have a healthy lifestyle.”)
· They have a purpose
3. Early Decision. Since our third son will start his senior year of high school (virtually) in a few weeks, I initially thought this article discussed applying to college. Nope. It discusses Social Security. If you want to start your benefits early, you must consider several factors. These include your health, your other income sources, and your family situation.
4. How to Get Rid of Stuff: The Survey Says … Are you over 50 and looking to get rid of some of your “stuff?” If you haven’t considered it yet, perhaps you should. According to this article, more than 60% of those over 60 say they have too much stuff. Getting rid of things is not about the money. It’s more the sense of relief that comes with getting rid of it. Doing so provides a sense of relief. If you plan to give things to your kids, think again. Odds are they won’t want much of anything.
5. How to Survive as a Retiree in a Down Market. While the market has been calmer recently, investors have experienced large ups and downs this year. Fears of an economic downturn remain. It’s not easy to watch your portfolio’s value decline or see your retirement income fall short of expectations. Selling securities in a down market to raise cash out of fear may have negative consequences. Keeping your emotions in check can help. You can also look to cut costs to help you get through a market slump. This article offers 10 ideas for retirees looking to cut costs to help get through a down market.
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.
