When most investors/retirees think of Required Minimum Distributions (RMDs), they think of turning 70 ½ and having to take mandatory distributions from an IRA. The federal government allows savers to make tax deductible contributions (with tax deferred growth) to IRAs/401(k)s/qualified retirement plans throughout their working lives, but the party ends when folks turn 70 ½. Uncle Sam eventually gets his cut. There’s one feature of RMDs, however, that is less widely known. That is, if the account owner passes away and there is still a balance in the qualified retirement account, it is the responsibility of the beneficiary to take the required distributions, whether that be the spouse, a child, a charity, a trust, and so on. Not taking the required distributions can result in a 50% excise tax penalty on the amount not withdrawn, so it’s important to understand these rules. We’ll break them down more clearly for you, below. [+] Read More

Republicans on Capitol Hill are currently working to make major changes to the tax code, but one tax rule does not seem likely to change anytime soon: required minimum distributions (RMDs). For most of our lives, investors have the benefit of saving into IRAs, 401(k)s, 403(b)s, etc. with tax-deductible contributions and tax-free growth, but eventually the day comes when Uncle Sam gets his cut. That starting point when the IRS requires you to withdraw from your IRA or other retirement account for is by April 1 of the year following the calendar year in which you reach age 70½ (which is 6 months after your 70th birthday). For example, if you are retired and you turned 70 on June 30, 2017, then December 30, 2017 marks the day you reach 70 ½. That means you must take your first RMD for 2017 by April 1, 2018. Every year thereafter, you have until December 31 to get it done. [+] Read More

The traditional arch of a person’s financial life is generally to work, save, retire, collect Social Security and/or pension, and make withdrawals from IRAs/investment accounts to supplement retirement income. It’s a traditional arch, but it is also a steadfast one. However, did you know that you could actually continue working and collect Social Security at the same time? There are rules and stipulations for doing so, which we will get into below, but the short answer is that you can! This is good news, particularly given that an increasing percentage of people are choosing to work later into life, for a variety of reasons but mostly because they enjoy working and want to stay involved: [+] Read More

What does it take to be a top income earner in the United States? We found some data recently that breaks it down, telling us just how much you’d need to earn in order to give you a place at the top. Here are some of the numbers by age. In other words, you’d need to earn this much each year to be a top 1% earner in the US:1 Age 35: $291,000 Age 45: $458,000 Age 55: $453,000 Age 64: $473,000 Having a high income may seem like it’s an automatic for also having financial security, but it isn’t. High earners still need an investment plan. Making a lot of money also often means having high living expenses, which makes management all the more important. Case in point: multi-millionaires who find themselves bankrupt far too early in retirement – and sometimes even before they retire. We’re going to pick on professional athletes here, for two reasons: 1) they often qualify to be top 1% earners in their active years; and, 2) there are numerous instances where financial mismanagement led to bad outcomes. [+] Read More

After campaigning hard for the importance of tax reform, President Trump and his advisors released an early stage tax code change framework on Wednesday, September 27. From his podium in Indianapolis, IN, Trump explained that his framework would cut taxes for businesses and individuals and potentially deliver a “middle class miracle.”[1] As he put it, “…we will cut taxes for the everyday, hardworking Americans…”[2] While the House and Senate will still have significant work to do to in order to finalize the tax plan and craft new legislation, the initial review of Trump’s framework has some substantial changes to the current tax law, which could represent the largest tax reform change passed in 30 years.[3] [+] Read More

Just about every sports fan knows the joy of rooting for your favorite team when things are going well, when the wins pile up. But the opposite can also be true – in those years when your team is “rebuilding” (which is really a euphemism for losing all the time), it’s easy to jump ship and wait it out elsewhere. If you think sports fans are fickle or “fair weather,” investors arguably take it to an entirely new level. The research firm DALBAR tracked how often investors “switch teams,” or how often they move from mutual fund to mutual fund and/or strategy to strategy. They collected some fascinating data in the research process, and we’ll dig into their findings below. [+] Read More

The conventional wisdom is that once a person retires, they should pare back exposure to stocks and focus instead on a more balanced, conservative approach. Perhaps the most-used description for this type of retirement strategy is “capital preservation.” But what if, somewhat contrary to intuition, capital preservation actually meant that investors needed to maintain a significant allocation to stocks? This is where retirees may have the tendency to mix-up their investment needs vs. wants. Retirees tend to want steady, conservative returns, which makes the argument for allocating more to bonds and cash. But what retirees may actually need is long-term growth to account for cash flow needs and rising expenses over time, which makes the case for allocating more to growth assets, like stocks. [+] Read More

Part of being an astute investor involves hours of analyzing the capital markets, actively researching the companies and strategies you invest in, and staying up to speed on current events. That’s plenty of work on its own. But there is another aspect to smart investing that generally receives less attention but is arguably equally important. It involves studying ourselves – our behaviors and tendencies as investors, how and why we make investment decisions, and how those decisions may impact our returns over time. Most of this research falls within the field of Behavioral Finance, which challenges the assumption that “individuals act rationally and consider all available information in the decision-making process.”1 Investors rarely do those things, and that’s why studying behavioral finance can be so beneficial. The general thinking is that the more we understand the decision-making process, the better equipped we can be to help investors avoid common mistakes while simultaneously establishing guidelines for a disciplined investment process. [+] Read More

With all the hoopla about health care over the last several months, you may have heard the term “Health Savings Account” tossed around here and there. In short, Health Savings Accounts (HSAs) are tax-exempt accounts available for people in certain high-deductible health plans. Since people with high deductible health plans by definition incur significant out-of-pocket expenses before the insurance kicks-in, HSAs allow them to plan ahead by socking away money in a tax advantaged way.2 Think of it as having a savings account for your medical needs. As we will cover below, however, HSAs are not for everyone, and there are other features you should understand if you’re exploring them as part of your plan. Here are five of those features: [+] Read More