National Savings Day, celebrated October 12, is a reminder of how important it is to build a solid financial foundation. For High Earners Not Rich Yet (HENRYs), the path to financial security can seem both promising and challenging. Despite earning a high income, many HENRYs find themselves struggling to save due to high living costs, student loans, and lifestyle inflation. Here’s how you can approach your finances with a savings mindset and take your savings one step at a time.

Understanding the HENRY Lifestyle

Most HENRYs are 25 to 45 years old and have a household income of between $100,000 and $250,000 per year. Regardless of their actual income, HENRYs usually feel they are middle-class, not rich. Some are saddled with student debt. Some live in expensive urban areas. Some just want to maintain the lifestyle they earn.

Step 1: Assess Your Financial Situation

First, it’s a good idea to establish a comprehensive financial baseline. Sit down and write out your sources of income, your monthly obligations, your debts, and how much you save each month. A picture of where every dollar goes can be a powerful motivator for taking charge of your finances.

Step 2: Set Clear Savings Goals

When you have a clear long-term goal in mind, this can give you the will to stay the course on your short- and mid-term savings goals.

First, have three to six months’ worth of living expenses saved up in an emergency fund. This money is set aside for you in case something goes wrong.

Next, maximize your contributions to a 401(k) or IRA. This will also allow you to take advantage of any matching contributions from your employer.

Finally, consider those big-ticket items such as purchasing a house – or even a car – and plan to save a hefty down payment rather than having to borrow money at a higher interest rate.

Step 3: Automate Your Savings

The best way to make saving consistent is to automate it. To do this, have set amounts automatically transferred from your checking account into your savings account.

Step 4: Control Lifestyle Inflation

As you make more money, the temptation to spend a proportionate amount grows. Inflation in your lifestyle works against creating a nest egg. Separate needs from wants; carefully research larger expenses and make fewer impulse buys.

Step 5: Invest Wisely

Being able to save is something, but it can fall short of securing your family’s financial future. Investing helps your funds grow beyond the threat of inflation.

A diversified portfolio spread across vehicles like stocks, bonds and real estate will help to mitigate risk. A financial professional can work with you to develop a strategy that aligns with your investment timeline and level of risk aversion.

Step 6: Review and Adjust Regularly

Financial planning is not something you do just once. Your plan needs to evolve on a regular basis so you can continue to meet your goals.

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This article was prepared by WriterAccess.

LPL Tracking #609862

Medicare is complex with many different moving parts involved. First and foremost, it is always beneficial to gain a solid understanding of your options. There are two main types of Medicare:

·       Original Medicare

·       Medicare Advantage (also called Part C)—Medicare Advantage is a Medicare-approved plan from a private company offering a replacement option for Original Medicare for your health and drug coverage.

·       There are also other types of Medicare health plans for interested parties.

Confucious once said, “To know what you know and what you do not know, that is true knowledge.” These are wise words to take to heart, especially when applied to navigating Medicare without being surprised by unexpected pitfalls.

Here are five tips to help you plan and prepare so you do not get caught off guard by the nuances of Medicare.

1.     Be aware of avoidable late fees or delays

Have you ever noticed that one or two couples always arrive late at a dinner party? Some people have a tendency of being late. The same is true when it comes to signing up for Medicare. Generally, if you are age 65 or older and receive Social Security benefits, you will automatically be enrolled in Part A. The nuance here, however, is if you don’t sign up for Part A (if you have to buy Part A, and you don’t when you are first eligible for Medicare) and Part B within your eligibility window, your enrollment could get delayed, and you could be subject to a late enrollment penalty.

2.     Know what is covered and what is not

Not everything is covered by Medicare. Services that aren’t covered by Part A or Part B will have to be paid for by yourself unless:

• You have a Medicare Advantage or Medicare Cost Plan covering the services.

• You have other coverage, such as, Medicaid.

It is critical to understand that Original Medicare doesn’t cover everything. Several of these services that are not covered include:

• Cosmetic surgery.

• Hearing aids and exams to fit them.

• Long-term care.

• Routine physical exams.

• Massage therapy.

• Eye exams (for prescription glasses).

• Covered items or services you get from an opt-out doctor or other provider (unless it is an emergency).

• Most dental care, such as routine cleanings, tooth extractions, fillings, and dentures. Although, in some cases, Original Medicare may cover some dental services related to specific medical procedures, such as organ transplants, cancer-related treatments, or heart valve repair or replacement.

3.     Avoiding HSA and other tax penalties

A health savings account (HSA) is a beneficial tool to have in your financial strategy belt. However, it is helpful to know that you are not eligible to make contributions to an HSA after you have Medicare. Being aware of this can help mitigate the risk of being subject to the “tax penalty.” It would help if you made your last HSA contribution the month before your Part A coverage begins. Pay attention to potential tax penalties for any other aspects of Medicare as well and, reach out to a qualified tax advisor to discuss your specific situation.

4.     Do research on ACOs

An ACO (Accountable Care Organization) consists of a group of hospitals, doctors, and other health care providers that have teamed up voluntarily to coordinate your health care. It is a part of Original Medicare and not a separate plan. ACOs are designed to hold providers accountable for the healthcare of their patients, guiding them through the complex healthcare landscape and working to help them save money by recognizing unnecessary tests and procedures. ACOs are not for everybody and its advisable to discuss the financial implications with your financial professional.

Several advantages and disadvantages of an ACO may include:

Advantages:

• Potentially more efficient coordination of care.

• Improved preventive care.

• Potential cost savings benefits.

Disadvantages

• The possibility of implementation challenges.

• Enlisting the help of providers that aren’t a good fit.

• The potential for misdirected incentives amongst the providers.

• Unexpected expensive or low-quality post-acute care.

5.     There is no shame in asking for help

Part of helping yourself move forward in the pursuit of your goals is seeking the help of a mentor or someone who has more knowledge than you. When it comes to your finances and how programs like Medicare could impact them, consider consulting a financial professional to determine how your decisions might affect your present and future goals and strategies.

Sources:

Medicare and You Handbook 2024

The Pros and Cons of Accountable Care Organizations | Med USA (medusarcm.com)

Top 5 Risks in Accountable Care Organization Models – CPA & Advisory Professional Insights (kaufmanrossin.com)

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

The Medicare website (medicare.gov) can be a valuable resource.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by LPL Marketing Solutions.

LPL Tracking #600255

Do you know who in your business is considered a fiduciary of a company’s 401(k) plan?

Under ERISA guidelines, fiduciaries are anyone with discretionary authority or control over the management of the plan or its assets. This includes individuals with the following roles or titles:

• Plan Sponsors – Commonly the CEO, CFO, or Business Owner

• Plan Administrators – Typically a Benefits Manager, HR Director, or Controller

• Investment Committee Members – Often senior leadership such as Executive Officers or Finance Committee Members

• Trustees of the Plan – Usually Board Members or specially designated Trust Officers

As a fiduciary overseeing your company’s 401(k) or other employer-sponsored retirement plan, you carry significant responsibilities that directly impact the financial wellness of your employees and the compliance of your plan. Ensuring that you follow fiduciary best practices is essential for managing risk, optimizing plan performance, and safeguarding against costly errors or litigation.

With over a decade of experience in plan administration and ERISA compliance, I’ve seen firsthand the complexities and challenges fiduciaries face. Whether it’s making investment decisions, monitoring service providers, or ensuring that you meet regulatory obligations, each decision you make must align with the best interests of your plan participants.

Below is a comprehensive checklist designed to help you stay on track with your fiduciary duties. By following these steps, you can address risk, manage compliance, and provide a high-quality retirement plan for your employees.

Fiduciary Checklist

1. Basic Fiduciary Duties

• Plan Governance: Are you acting in accordance with the documents and instruments governing the plan? 

• Written Procedures: Do you have written procedures for key fiduciary decisions, such as selecting investments or hiring service providers?

• Investment Oversight: Have you established an Investment Policy Statement (IPS) to guide your investment decisions and monitor plan performance?

Your responsibility as a fiduciary means that you must always act in the best interest of your participants and beneficiaries. This includes developing a well-documented, prudent process for decision-making and ensuring that these processes are consistently followed.

2. Investment Oversight

• Responsibility: Do you clearly know who is responsible for making investment decisions within your plan?

• Policy Documentation: Is your IPS updated, and does it outline the plan’s investment processes and requirements?

• Fiduciary Records: Are you documenting all meetings, discussions, and decisions related to plan investments to demonstrate your adherence to a prudent process?

Your 401(k) plan’s investments should not only meet performance benchmarks but should also comply with fiduciary standards. A robust IPS and thorough documentation are critical for protecting both your plan and yourself from future scrutiny.

3. Service Provider Oversight

• Periodic Review: Do you regularly review your service providers to ensure they are meeting their performance standards?

• Fee Review: Have you assessed the reasonableness of service provider fees, and do you document any fee negotiations or conflicts of interest?

• ERISA Compliance: Are you familiar with Section 408(b)(2) of ERISA, which requires you to determine whether plan fees are reasonable in light of the services provided?

Regularly reviewing service providers is crucial for ensuring your plan participants receive the best value and service. Document these reviews thoroughly, as they provide important evidence that you are acting in the best interest of the plan.

4. Fiduciary Liability

• Process Documentation: Are you maintaining a well-documented fiduciary process, including showing that decisions were prudently made and acted upon?

• Legal Counsel: Have you consulted with legal counsel to ensure compliance with ERISA and other retirement plan regulations?

• Liability Management: Have you obtained fiduciary liability insurance to help protect against litigation costs and hired a 3(38) Investment Fiduciary for the plan?

Fiduciary liability is a serious concern. By keeping thorough records, seeking expert advice when necessary, ensuring that you have the appropriate liability insurance, and hiring a 3(38) Investment Fiduciary, you can help mitigate these risks.

5. Plan Administrator Responsibilities

• Compliance Calendar: Do you have a compliance calendar to track key deadlines, such as filing Form 5500 and nondiscrimination testing?

• Plan Documents: Have you reviewed your plan documents to ensure they reflect current practices and recent regulatory updates?

• Benchmarking: Do you periodically benchmark your plan’s fees and services against industry standards to ensure they remain reasonable?

Effective administration is the backbone of a successful retirement plan. Keeping your plan compliant and well-documented helps ensure that you are meeting your fiduciary obligations and protecting both the plan and its participants.

6. Employee Support and Education 

• Participant Communication: Are you providing ongoing communications about the plan’s investment options, features, and any regulatory changes?

• Educational Programs: Do you offer educational meetings or materials to help employees make informed decisions about their retirement savings?

• Automatic Enrollment: Have you implemented automatic enrollment with a qualified default investment alternative (QDIA) to simplify participation for your employees?

A well-designed plan also supports your employees’ financial literacy and encourages participation. Providing educational resources and clear communications helps participants make the most of their retirement savings.

Feeling Overwhelmed by Responsibility?

If you’re uncertain about your fiduciary responsibilities or feel behind on these tasks, you’re not alone. Managing a retirement plan is complex, and mistakes can be costly. At Gatewood Wealth Solutions, we specialize in providing ERISA 3(38) Investment Manager services. A 3(38) Investment Fiduciary takes on the responsibility for plan investments and helps ensure your plan operates in compliance with all regulatory requirements.

As a Certified Plan Fiduciary Advisor (CPFA®) with years of experience in retirement plan management, I can help you navigate these responsibilities and help ensure that your plan is positioned for success. Whether you need assistance with investment oversight, compliance, or participant education, our team is here to support you.

Let’s schedule a time to discuss how we can assist you in managing your plan and protecting your business. Reach out today for a complimentary consultation.

Important Disclosures:

This information was developed as a general guide to educate plan sponsors but is not intended as authoritative guidance or tax or legal advice.  Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.  In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC

The 401(k) plan is an excellent way for HENRYs, high earners not rich yet, to save for retirement. Hitting the maximum contribution limit is a goal many work toward to reap the benefits of this tax-deferred saving strategy fully.

But what happens after you have maxed out your 401(k) contributions? What are your other options for saving for an independent and comfortable retirement? This article provides additional investment strategies for HENRYs seeking to elevate their retirement savings outside their 401(k) plan.

Additional retirement savings strategies

IRAs

One of the most common options when you’ve maxed out your 401(k) is contributing to an Individual Retirement Account (IRA). An IRA offers similar tax benefits to 401(k), where your contributions grow tax-deferred.

Roth IRA

The Roth IRA differs significantly from traditional IRAs and employer-sponsored 401(k)s, which are funded with after-tax dollars. The benefit of a Roth IRA comes at retirement, as you are able to withdraw funds, both contributions and accumulation, without incurring additional taxes, which is beneficial if you anticipate being in a higher tax bracket upon retirement.

To qualify for a Roth IRA, your income must fall within certain limits, which are adjusted annually. HENRYS must talk to a financial professional to determine if they can invest in a Roth IRA based on their income.

Health Savings Account (HSA)

An HSA is another great supplemental retirement saving strategy. These accounts are used with high-deductible health plans, giving individuals the advantage of triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. After age 65, non-medical withdrawals are taxed at the regular income tax rate, turning the HSA into a supplemental retirement income account.

Taxable brokerage account

Investing in a taxable account is another saving strategy when you’ve maxed out your 401(k). Although these accounts don’t offer the same tax benefits as 401(k)s and IRAs, they provide increased flexibility in withdrawal times and without penalties. A balanced mix of stocks, bonds, and mutual funds in brokerage accounts can offer substantial accumulation over time.

Alternative investments

Suppose you have already maxed out your 401(k) and these above savings strategies. In that case, it may be time to consider alternative investment strategies, like buying a rental property or investing in real estate investment trusts (REITs) or private investments.

These alternative investments can provide a steady source of income and potential appreciation. However, HENRYs must conduct due diligence by consulting financial and tax professionals to ensure these strategies are appropriate for your situation as they come with risks.

Maxing out your 401(k) is a significant achievement toward securing an independent financial future. However, several other investment strategies offer tax advantages and asset accumulation potential so you can continue investing toward your retirement savings goal.

Whether you invest in an IRA, HSA, a taxable brokerage account, real estate, or private investments, the key is maintaining a diversified portfolio to spread risk and increase growth and asset accumulation opportunities. Consider enlisting the help of a financial professional to help navigate these decisions in line with your specific circumstances and objectives.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risks including possible loss of principal.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #597501

Sources:

https://www.investopedia.com/ask/answers/111015/can-you-have-both-401k-and-ira.asp#:~:text=Yes%2C%20you%20can%20have%20both%20accounts%20and%20many%20people%20do,and%20IRA%20each%20tax%20year. 

https://www.bankrate.com/retirement/using-your-hsa-as-a-retirement-plan/#:~:text=If%20you’re%20looking%20to,(k)s%20or%20IRAs

Micah Alsobrook, CPFA®, MBA

Retirement Plan Consultant

Introduction

As competition for talent intensifies in 2024, retirement plan benefits like 401(k) plans are increasingly considered a critical part of employee retention strategies. While salaries and other perks may initially attract employees, retirement plans that align with their long-term financial needs can potentially foster loyalty and engagement.

The SECURE 2.0 Act introduces several key updates to 401(k) plans, aiming to expand access to retirement savings and provide more flexibility for a diverse workforce. This article outlines some of these changes and how they could influence employee retention.

1. Automatic Enrollment: Encouraging Early Participation

Under SECURE 2.0, many new 401(k) plans are required to automatically enroll eligible employees at a contribution rate between 3% and 10%. This provision helps employees begin saving for retirement without needing to take action upon eligibility.

Potential Impact on Retention: Research suggests that automatic enrollment increases plan participation. While this feature may demonstrate a company’s commitment to employees’ long-term financial health, the ultimate impact on retention would depend on various factors, including overall benefit packages and job satisfaction.

2. Minimum Distribution Age: Adjusting for Older Workers

The SECURE 2.0 Act increases the required minimum distribution (RMD) age, allowing individuals to delay withdrawals from their retirement accounts. The age increases from 72 to 73 in 2023 and will further rise to 75 by 2033.

Potential Impact on Retention: For older employees who may continue working past traditional retirement age, this provision may offer more flexibility in managing their retirement funds. However, the extent to which this flexibility influences retention may vary based on individual financial circumstances and career goals.

3. Part-Time Employee Eligibility: Expanding Access

Starting in 2025, part-time employees will become eligible to participate in 401(k) plans after two consecutive years of service, down from the previous three-year requirement under the SECURE Act of 2019.

Potential Impact on Retention: Providing access to retirement benefits for part-time employees may encourage participation, but the overall effect on employee retention will likely depend on how these benefits are integrated with other factors such as wage structure and job stability.

4. Emergency Access to Funds

Beginning in 2024, employees will have the option to make penalty-free withdrawals of up to $1,000 annually from their retirement accounts for emergencies. This feature could provide financial relief during difficult times.

Potential Impact on Retention: While this provision may reduce financial stress for employees, its direct influence on retention is uncertain. Offering access to emergency funds may support employees in times of need, but broader financial well-being initiatives and job satisfaction will likely play a larger role in long-term retention.

5. Small Financial Incentives for Participation

The SECURE 2.0 Act allows employers to offer small financial incentives, such as gift cards or bonuses, to encourage employee participation in retirement plans.

Potential Impact on Retention: These incentives could potentially drive greater engagement with retirement savings, though whether they significantly influence retention remains to be seen. Incentives may create short-term interest, but sustained retention may depend on broader organizational culture and benefits.

6. Roth Matching Contributions

Starting in 2024, employers can offer matching contributions to employees’ 401(k) accounts on a Roth (after-tax) basis. Previously, matching contributions were only allowed on a pre-tax basis.

Potential Impact on Retention: Offering Roth matching contributions provides employees with additional tax-planning flexibility. This option may be appealing to certain employees, particularly younger workers, but the overall effect on retention will depend on individual preferences and financial planning strategies.

7. Student Loan Matching Contributions

Beginning in 2024, employers can match employees’ student loan payments with contributions to their 401(k) plans, even if the employee is not directly contributing to the 401(k).

Potential Impact on Retention: This provision may be attractive to employees burdened by student debt, particularly younger employees who might otherwise prioritize debt repayment over retirement savings. While it could be a helpful tool in employee retention efforts, its effectiveness will vary based on individual circumstances and broader compensation strategies.

8. Catch-Up Contributions for High Earners

SECURE 2.0 mandates that employees aged 50 and older who earn more than $145,000 annually must make catch-up contributions on a Roth basis starting in 2024.

Potential Impact on Retention: High earners and older employees may find this change useful for tax planning, but the overall impact on retention is unclear. This provision primarily affects higher-income individuals, and other retirement plan features are likely to play a larger role in retention decisions.

9. Expanded Catch-Up Contributions for Older Workers

Beginning in 2025, employees aged 60 to 63 will be eligible to make larger catch-up contributions to their retirement plans. The limit will increase to the greater of $10,000 or 150% of the regular catch-up contribution amount.

Potential Impact on Retention: This may provide added value for older employees looking to maximize their retirement savings in the final years of their careers. Whether this provision directly influences retention may depend on how employers communicate the benefit and integrate it into broader compensation strategies.

10. Long-Term Care Insurance Funding

Starting in 2024, SECURE 2.0 allows employees to use up to $2,500 annually from their retirement savings to pay for long-term care insurance premiums without incurring a 10% penalty for early withdrawals.

Potential Impact on Retention: This feature addresses a growing concern for older employees and may offer some peace of mind. Its role in retention is likely to be tied to how it complements other retirement planning options and employee support initiatives.

Conclusion: Monitoring the Long-Term Effects

While the provisions introduced by SECURE 2.0 offer new opportunities for both employers and employees, their ultimate impact on employee retention will depend on how they are implemented and communicated within the broader context of total compensation and job satisfaction. Employers seeking to align their 401(k) offerings with retention goals may benefit from ongoing reviews of plan performance and employee feedback.

At Gatewood Wealth Solutions, we specialize in helping employers navigate the evolving landscape of 401(k) plans, including the latest SECURE 2.0 updates. If you have any questions or need guidance on implementing these changes, our team is ready to assist. Feel free to reach out—we’re here to ensure your retirement plan is optimized for both compliance and employee engagement.

Micah Alsobrook, CPFA®, MBA, is a Retirement Plan Consultant at Gatewood Wealth Solutions. He specializes in helping employers optimize their 401(k) plans to reduce liability, improve employee satisfaction, and stay compliant with evolving regulations.

—

This material is being provided as a general template for plan sponsor review. Plan sponsors should seek legal guidance in developing a document specific to their plan. In no way does advisor assure that, by using this template, plan sponsor will be in compliance with ERISA regulations.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC

LPL Tracking #626475

Most people looking forward to retirement anticipate years of relaxation and fulfillment after decades of hard work. But the reality of retirement is often far different. For many people, retirement may bring financial stress, uncertainty, and the fear of outliving their savings. It’s crucial to understand the current state of retirement preparedness to secure your own comfortable future.

The Stark Reality of Retirement Preparedness

According to the Economic Policy Institute, nearly half of all working-age families don’t have anything saved in retirement accounts.1 Meanwhile, the median retirement account balance for all working-age families is only $5,000. This isn’t nearly enough to sustain even a modest lifestyle in retirement.

The Social Security Administration also reports that about half of all married couples (and seven in 10 single retirees) receive at least half of their income from Social Security.2 But with more people claiming benefits and fewer workers earning them, the long-term future of these benefits is uncertain. This means that for those without a backup plan, placing all one’s eggs in the Social Security basket can be risky.

Meanwhile, people are living longer than ever. This is a positive trend in the abstract, but it means that retirement savings also need to last longer. Many financial experts recommend planning for 20 to 30 years of retirement; but if you retire at 60 or 65, 20 years may not be enough.

Avoid Becoming a Statistic

Start Saving Early

You can’t overestimate the power of compound interest. The earlier you start saving, the more your money can grow over time. Even small contributions can accumulate significantly over decades as long as you stay consistent.

Maximize Retirement Accounts

Take full advantage of tax-advantaged retirement accounts like 401(k)s and IRAs. Be sure to contribute enough to get any employer match, since this is essentially free money.

Diversify Your Investments

Diversifying your investments can help manage risk and improve returns. Consider a mix of stocks, bonds, and other assets tailored to your risk tolerance and time horizon. As you get closer to your target retirement date, you’ll want to gradually shift to more conservative investments to protect your savings from market volatility.

Create a Retirement Budget:

Estimate your retirement expenses, including housing, healthcare, travel, and leisure. Compare this with your projected income from savings, Social Security, and other sources. Adjust your savings goals and investment strategy as needed to bridge any gaps.

Seek Professional Advice:

A financial professional can provide personalized guidance and help you create a comprehensive retirement plan. This person can assist you with investment strategies and tax planning, and address that you stay on track to meet your goals.

In Closing

Retirement should be a time for you to relax and enjoy time with loved ones, not spend sleepless nights worrying about your finances. While the statistics on retirement preparedness are sobering, taking proactive steps now can help you avoid financial strain. Secure your future today, so you can enjoy the retirement you deserve tomorrow.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #600792

Footnotes:

1 “The State of American Retirement,” Economic Policy Institute, https://www.epi.org/publication/retirement-in-america/

2 ”The Importance of Social Security Benefits to the Income of the Aged Population,” Social Security Administration, https://www.ssa.gov/policy/docs/ssb/v77n2/v77n2p1.html

A 529 is a tax-advantaged savings plan that gives you incentives to save money to pay for college or other higher education expenses. Pursuing your savings goal may mean the difference between a dorm with central air conditioning or experiencing sweltering summers. Here are some points to keep in mind when navigating your 529 plan.

1. Types of 529 Plans

There are two types of 529 plans, which are college savings plans and prepaid tuition plans.

College Savings Plans

These let you save funds in an investment account that has the potential to grow tax-free until you use them for most qualified education expenses incurred when attending a college or university that has accreditation.

Prepaid Tuition Plans

These let you lock in tuition at today’s rates at in-state public universities. Some private and out-of-state colleges also offer guaranteed admission.

2. Tax Advantages

Contributions to a 529 plan enjoy tax-free growth and withdrawals for qualified expenses are also totally tax-free. If your state allows them, tax deductions or credits might be available when you contribute to a 529 plan, so check your state’s rules.

3. Contribution Limits

Incremental post-birth contribution limits vary by state but may be large, up to $300,000 per beneficiary and beyond. Contributions to a 529 plan fall within the annual gift tax exclusion ($18,000 in 2024 per beneficiary)1, and you may make larger contributions (up to $85,000) in a year and elect to treat them as though they were made over five years for lower gift taxes.

4. Investment Options

College savings have a variety of investment mixes, including age-based portfolios that get more conservative when the beneficiary nears college age. Check portfolio performance regularly and adjust as appropriate to the risk tolerance and investment goals.

5. Qualified Expenses

Qualified expenses consist of tuition and fees, course materials (including books, supplies, and equipment), and the expenses of transporting the student to and from the institution. Room and board are qualified expenses if the beneficiary is enrolled at least half-time.

Additionally, K-12 tuition of up to $10,000 a year may be paid at private, public or religiously associated schools. Finally, a 529 account may pay up to $10,000 (over the lifetime of the policy) to repay the designated beneficiary’s or their siblings’ student loans.

6. Changing Beneficiaries

If you have other qualifying family members in mind for the 529 plan, you may make a change to the plan’s beneficiary at any time without penalty. Alternatively, if you want to keep the account open for a future child, you are allowed to change the beneficiary to yourself.

As you know, using any saving vehicle is only valuable as long as you understand how it works. Take the time to read the 529 plan statement and understand your investment options – and then periodically check back to be sure that your plan and investments are still in sync with what works for your needs.

Important Disclosures:

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #600725

Footnotes

1 Gift Tax

https://smartasset.com/estate-planning/gift-tax-explained-2021-exemption-and-rates

Even if you are already retired, it doesn’t mean you should stop trying to grow your savings. Inflation, unexpected medical bills, and changes to your lifestyle or family may result in the need for additional income than you initially anticipated when planning your retirement. While investing is one of the quickest ways to grow your savings, the process may look slightly different when you’re actually actively trying to balance income and savings.

Below are some investment options you might want to consider to make sure your income keeps on growing.

1. CDs

A Certificate of Deposit (CD) is a safe investment tool insured by the FDIC for up to $250,000 and offers a fixed rate of return if held to maturity. To invest in a CD, you would lend your money to a financial institution for a specified period. At the end of the timeframe, you will receive your money back along with interest. While the interest gained is often less than stock investments, it is a great way to safely earn additional money on savings you are not currently using.2

2. Treasury Bills

Treasury bills are another protected investment and are considered one of the safest options in several countries. They are backed by the full faith and credit of the United States, meaning that any funds will be honored no matter the circumstances. The only drawback is if you cash them out before they completely mature, you may lose out on some interest.2

3. High-Yield Savings Accounts

If you have money you would like to earn interest on, but want these funds to be accessible when you need them, then a high-yield savings account may be a smart option. Unlike CDs, you will be able to take out money at any opportunity, and will still earn a high interest rate. In some cases, these accounts will have higher interest rates than CDs.2

4. Fixed Annuities

A fixed annuity only carries a heavy penalty if you withdraw before age 59 1/2. So investing in them in your senior years is a good option. The insurance company that issues them will guarantee the investment, making it safer as long as the company’s financial status is sound. Interest will continue to be paid until your death, which will help you supplement your income.1

5. Money Market Accounts

A money market account is a great way to earn extra on your money without restricting its use. It is a hybrid between a savings and a checking account. It will pay the interest you would get with a savings account, but you will be allowed to access it through checks, debit cards, or both. They are considered safe and FDIC insured, like CDs or savings accounts.1

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

Fixed annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05372230

Footnotes:

1 How Can I Make My Retirement Savings Last?, Forbes, https://www.forbes.com/advisor/retirement/make-retirement-savings-last/

2 8 Safe Investments for Seniors, Yahoo Finance, https://finance.yahoo.com/news/8-safe-investments-seniors-200020846.html

If you’re someone who loves nothing more than spending a relaxing day at the beach, you likely hope your retirement plans will let you spend much more time there. By applying ‘beach day’ lessons toward your investment strategies, you’ll be well on your way toward a sunny, sandy future. Below, we discuss several strategies to make investing feel just as stress-free as a beach vacation.

Managing risk

Bodies of water aren’t without their hazards—rip tides, dangerous aquatic life, and potentially harmful UV rays. There are ways to manage or reduce these risks, but it’s important to remain conscious of them and avoid becoming complacent.

Similarly, when choosing investment strategies and vehicles, you need to know what risks are present and how to mitigate them. There is no such thing as a risk-free investment, but by doing research and talking to a financial professional, you’ll be well-prepared for any potential hazards that might try to sneak up.

Planning and preparing

Before you head to the beach, you need a plan—where to go, where to park, and what to bring to make the most of your day. The same holds true for investing. You need to know what you want to accomplish when you want to achieve it, and what resources you need to take you there. This is another area in which discussing your plans with a financial professional can give valuable insight.

Being flexible and patient

Beach conditions can quickly change with weather and tide patterns. Often, this means you must adapt plans at the last minute. Economic and market conditions can also shift quickly, requiring you to adjust your investment strategy to avoid locking in losses.

The same goes for patience. Whether you’re waiting for the perfect wave or holding onto investments during market fluctuations, patience, and persistence are both keys to success.

Learning from your experiences

Every day at the beach—and every investment—can teach something new. You’ll learn strategies that work and don’t work and when to call it quits on a certain approach. Learning from successes and failures will help improve planning and investing skills over time.

By recognizing the parallels between investing for retirement and spending a day at the beach, you can approach both with a common state of mind: careful planning, risk management, and fun along the way.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by WriterAccess.