What Do Your Taxes Pay For?

Taxes are one of the biggest budget items for most taxpayers, yet many have no idea what they’re getting for their money.

The average household spends more on taxes than on groceries, clothing, or healthcare. In fact, 11% of our income, on average, goes to personal income taxes, which doesn’t include sales tax, property tax, Social Security payments, or Medicare payments. So what do we get in return?¹

The accompanying chart breaks down the $6.8 trillion in federal spending for 2024 into major categories. One of the biggest categories is Social Security, which consumes 22% of the budget. Defense takes 13% of the budget, and 13% goes to Medicare.²

Are taxes one of your biggest budget items? Take steps to make sure you’re managing your overall tax bill. Please consult a tax professional for specific information regarding your individual situation.

Pieces of the Federal Pie

Over half of 2024 federal spending was used for Social Security, Medicare, defense, and Medicaid.

Source: CBO.gov, March 20, 2025. Figures represent total outlays for the 2024 fiscal year, as reported by the Congressional Budget Office.

1. ValuePenguin.com, January 10, 2024
   2. CBO.gov, March 20, 2025

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Social Security Fairness Act’s New Chapter

The Social Security Fairness Act, signed into law in December 2024, adjusts two longstanding provisions that previously reduced Social Security benefits for certain recipients: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These rules affected Social Security benefits for retirees who receive pension income from non-covered employment.¹

Who Qualifies for Increased Benefits?

This legislation is projected to result in an average monthly increase of $360 for eligible public sector workers, their spouses, and survivors.² Additionally, it may include lump-sum payments for over 2.5 million individuals to compensate for benefits missed in prior years, which could amount to several thousand dollars per recipient.

Here’s a list of some workers who may qualify:

• Police officers
• Firefighters
• Postal workers
• Public school teachers
• Federal employees covered by the Civil Service Retirement System
• Other government employees
• People whose work had been covered by a foreign social security system¹

According to the Social Security Administration (SSA), about 72 percent of state and local public employees work in Social Security-covered employment where they pay Social Security taxes and are unaffected by WEP or GPO. These individuals will not receive a benefit increase under the new law.¹

Implementation and Timeline

The Social Security Administration is currently finalizing its plan to implement these changes. December 2023 was the last month that WEP and GPO applied to benefits, meaning the rules no longer apply to benefits payable for January 2024 and later.¹

Those who have previously filed for Social Security benefits that are partially or completely offset may need to verify that the SSA has their current mailing address and direct deposit information.²

For those who have never applied for retirement, spouse’s, or surviving spouse’s benefits because of WEP or GPO, an application may be required. The application date might affect when benefits begin and the benefit amount.¹

Financial Impact

The Congressional Budget Office estimates implementation will cost $196 billion over the next 10 years.² For individual beneficiaries, the projected monthly increases may be:

• Public sector retirees: Potentially $360 by December 2025, possibly increasing to $460 by December 2033
• Spouses: Potentially $700 by December 2025, possibly increasing to $860 by December 2033
• Surviving spouses: Potentially $1,190 by December 2025, possibly increasing to $1,520 by December 2033³

1. Social Security Administration, “Social Security Fairness Act: WEP and GPO Update,” February 3, 2025
   2. USA Today, January 6, 2025
   3. Kiplinger, “Social Security Fairness Act Checklist: Six Things to Know,” February 2025

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Money that Buys Good Health is Never Ill Spent

A retired couple age 65 can expect to need about $330,000 saved to cover healthcare expenses in retirement. With healthcare expenses in the spotlight, it’s incumbent upon us to make sure our retirement strategy anticipates these costs.¹

But that’s not enough.

Remember, healthcare coverage (including Medicare) typically does not cover extended medical care. And it’s a prospect we shouldn’t overlook. About 70% of people will need extended care at some point in their lives.²

These annual costs can range widely based on geographic location and the type of care required. An assisted living facility will cost over $120,000 per year in Alaska. In Oklahoma, it would cost around $58,000 a year. When retirees were surveyed, one in five reported that extended care costs were higher than expected.^2,3

Finally, you may want to consider a Medigap policy, which may help cover some of the healthcare costs not covered by Medicare.

Making sure that you are properly insured for your medical costs may help strengthen the foundation of your retirement.

1. National Council on Aging, July 22, 2025
   2. Genworth.com, 2025
   3. EBRI.org, 2025

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Do You Owe The AMT?

American educational reformer Horace Mann called education “the great equalizer.” In football, it’s been said that turnovers are the great equalizer. In taxes, there’s also an equalizer of sorts; it’s called the alternative minimum tax, or AMT. Instituted in 1969, it was intended to ensure that the very rich didn’t pay a lower effective tax rate than everyone else.¹

In recent years, however, the “very rich” weren’t the only ones who needed to be concerned about the AMT. Because the AMT was not indexed for inflation until 2013, millions of middle-class Americans were being forced to pay it. Thanks to the Tax Cuts and Jobs Act of 2017, that number is falling, once again. Per the most recent data available, only 0.1% of taxpayers pay the AMT.^1,2

What Is The AMT, Exactly?

It may be easiest to think of the AMT as a separate tax system with a unique set of rules for deductions, which are more restrictive than those in the traditional tax system.

The only way to know for sure if you qualify for the AMT is to fill out Form 6251 from the Internal Revenue Service. It may be worth doing just to be sure, especially if you are a high-income earner who can claim sizable tax breaks.

If you should have paid the AMT and the IRS discovers that you didn’t, you may owe back taxes and could also have to pay interest and/or penalties.

The AMT Language

Because the AMT system has complicated rules and provisions, it’s a good idea to consider consulting legal or tax professionals for specific information regarding your individual situation. And remember, the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.

If you want to avoid any potential surprises at tax time, it may make sense to know where you stand when it comes to the AMT. The time and energy you spend today may be worth the investment.

Where Does All That Money Go?

Here’s a breakdown of how the federal government spends its revenues.

Source: CBO.gov, March 20, 2025. Figures represent total outlays for the 2024 fiscal year, as reported by the Congressional Budget Office.

1. Investopedia.com, February 26, 2025
   2. TaxPolicyCenter.org, August 12, 2025

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

TIPS for Inflation

In February 2018, Jerome Powell was appointed as Chair of the Board of Governors of the Federal Reserve System. He became the 16th chair to take over the helm of the world’s most influential central bank. Among other duties, he and the Fed governors are tasked with adjusting short-term interest rates to help control inflation in an effort to promote overall economic growth.¹

Until 2021, inflation had remained relatively low, which had allowed the Fed to maintain an accommodative monetary policy. After the COVID-19 pandemic, the Fed increased short-term interest rates to combat high levels of inflation. More recently, the Fed has indicated that it will be keeping its eye on inflation to inform its monetary policy.

A Few TIPS

Unlike conventional U.S. Treasury bonds, the principal amount of Treasury Inflation-Protected Securities, or “TIPS,” is adjusted when there are changes in the Consumer Price Index (CPI), which measures changes in inflation. When the CPI increases, a TIPS’s principal increases. If the CPI falls, the principal is reduced.

The relationship between TIPS and the CPI can affect the amount of interest you are paid every six months, as well as the amount you are paid when your TIPS matures.²

Remember, TIPS pay a fixed rate of interest. Since the fixed rate is applied to the adjusted principal, interest payments can vary from one period to the next. TIPS help manage inflation risk to your portfolio as the principal is adjusted semiannually for inflation based on the Consumer Price Index— while providing a real rate of return guaranteed by the U.S. Government.

When TIPS mature, the bondholder will receive either the adjusted principal or the original principal, whichever is greater.^2,3

If you are concerned about inflation – and expect short-term interest rates may increase – TIPS are an investment that may be worth considering. A close review of your overall strategy might also reveal other investment choices that may be appropriate in an environment of changing interest rates.

Inflation in Perspective

For the 20-year period ended 2024, the Consumer Price Index averaged a 2.6% inflation rate. While inflation peaked at 8% in 2022, it cooled to a 2.9% average in 2024.

Source: USInflationCalculator.com, 2025

1. Investopedia.com, May 2, 2025
   2. The interest income from a Treasury Inflation-Protected Security (TIPS) is exempt from state and local taxes. However, according to current tax law, it is subjected to federal income tax. Adjustments in principal are taxed as interest in the year the adjustment occurs even though the principal adjustment is not received by the bondholder until maturity. Individuals should consider their ability to pay the current taxes before investing.
   3. Investopedia.com, June 7, 2024

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

A Brief History of Estate Taxes

Federal estate taxes have been a source of funding for the federal government almost since the U.S. was founded.

In 1797, Congress instituted a system of federal stamps that were required on all wills offered for probate when property (land, homes) was transferred from one generation to the next. The revenue from these stamps was used to build the Navy for an undeclared war with France, which had begun in 1794. When the crisis ended in 1802, the tax was repealed.¹

Estate taxes returned during the build-up to the Civil War. The Revenue Act of 1862 included an inheritance tax, which applied to transfers of personal assets. In 1864, Congress amended the Revenue Act, added a tax on transfers of real estate, and increased the rates for inheritance taxes. As before, once the war ended, the Act was repealed.¹

In 1898, a federal legacy tax was proposed to raise revenue for the Spanish-American War. This served as a precursor to modern estate taxes. It instituted tax rates that were graduated by the size of the estate. The end of the war came in 1902, and the legacy tax was repealed later that same year.¹

In 1913, however, the 16th Amendment to the Constitution was ratified – the one that gives Congress the right to “lay and collect taxes on incomes, from whatever source derived.” This amendment paved the way for the Revenue Act of 1916, which established an estate tax that in one way or another, has been part of U.S. history since then.¹

In 2010, the estate tax expired – briefly. But in December 2010, Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The new law retroactively imposed tax legislation on all estates settled in 2010.²

In 2012, the American Tax Relief Act made the estate tax a permanent part of the tax code.³

As part of the 2017 Tax Cuts and Jobs Act, estate tax rules were adjusted again. The estate tax exemption was raised to $11.2 million, a doubling of the $5.6 million that previously existed. Married couples were able to pass as much as $22.4 million to their heirs. As of 2024, that rate has risen to $13.61 million per individual (and $27.22 million for married couples). The Act is set to expire in 2025. If you’re uncertain about your estate strategy, it may be a good time to review the approach you currently have in place.⁴

Estate Taxes and Overall Federal Revenues

Estate taxes typically account for about one percent of total federal revenue.⁵

Chart Source: USASpending.gov, 2024

Exemption through the Years

Federal estate taxes exempt a share of estates from federal estate taxes. For the 2024 tax year, if an estate is worth less than $13.61 million, no federal estate taxes may apply.⁴

Chart Source: IRS.gov, 2024

1. IRS.gov, 2024
   2. Congress.gov, 2024
   3. Congress.gov, 2024
   4. Investopedia.com, November 17, 2023
   5. USASpending.gov, 2024

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Should You Borrow from Your 401(k)?

The average credit card balance is $6,371 as of July 2025. With the average credit card annual percentage rate sitting at 25.34%, it represents an expensive way to fund spending.^1,2

Which leads many individuals to ask, “Does it make sense to borrow from my 401(k) to pay off debt or to make a major purchase?”³

Borrowing from Your 401(k)

• No Credit Check—If you have trouble getting credit, borrowing from a 401(k) requires no credit check; so as long as your 401(k) permits loans, you should be able to borrow.
• More Convenient—Borrowing from your 401(k) usually requires less paperwork and is quicker than the alternative.
• Competitive Interest Rates—While the rate you pay depends upon the terms your 401(k) sets out, the rate is typically lower than the rate you will pay on personal loans or through a credit card. Plus, the interest you pay will be to yourself rather than to a finance company.

Disadvantages of 401(k) Loans

• Opportunity Cost—The money you borrow will not benefit from the potentially higher returns of your 401(k) investments. Additionally, many people who take loans also stop contributing. This means the further loss of potential earnings and any matching contributions.
• Risk of Job Loss—A 401(k) loan not paid is deemed a distribution, subject to income taxes and a 10% penalty tax if you are under age 59½. Generally, should you switch jobs or get laid off, you must repay a plan loan within five years and must make payments at least quarterly.⁴
• Red Flag Alert—Borrowing from retirement savings to fund current expenditures could be a red flag. It may be a sign of overspending. You may save money by paying off your high-interest credit-card balances, but if these balances get run up again, you may have done yourself more harm.

Most financial experts caution against borrowing from your 401(k), but they also concede that a loan may be a more appropriate alternative to an outright distribution if the funds are absolutely needed.

1. Bankrate.com, July 16, 2025
   2. Forbes.com, August 25, 2025
   3. Once you reach age 73 you must begin taking required minimum distributions from your 401(k) or other defined-contribution plans in most circumstances. Withdrawals from your 401(k) or other defined-contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
   4. IRS.gov, 2025

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Financial Strategies for Women

Key Takeaways

• Despite sharing money management duties, only 16% of women feel very confident in their ability to retire comfortably.
• Compound interest may be one of the greatest secrets of smart investing. And time is the key to making the most of it.
• If you have left your long-term financial strategy to chance, now is the time to pick up the reins and retake control.

Nearly 70% of women identify as their household’s primary investment decision-maker, yet only 16% of women feel very confident in their ability to fully retire with a comfortable lifestyle.^1,2

Although more women are providing for their families, when it comes to preparing for retirement, they may be leaving their future to chance.

Women and College

The reason behind this disparity doesn’t seem to be a lack of education or independence. Today, women are more likely to go to college than men. So what keeps them from taking charge of their long-term financial picture?³

One reason may be a lack of confidence. One study found that only 48% of women feel confident about their finances. Women may shy away from discussing money because they don’t want to appear uneducated or naive and hesitate to ask questions as a result.⁴

Insider Language

Since Wall Street traditionally has been a male-dominated field, women whose expertise lies in other areas may feel uneasy amidst complex calculations and long-term financial projections. Just the jargon of personal finance can be intimidating: 401(k), 403(b), fixed, variable. To someone inexperienced in the field of personal finance, it may seem like an entirely different language.⁵

But women need to keep one eye looking toward retirement since they may live longer and could potentially face higher healthcare expenses than men.

If you have left your long-term financial strategy to chance, now is the time to pick up the reins and retake control. Consider talking with a financial professional about your goals and ambitions for retirement. Don’t be afraid to ask for clarification if the conversation turns to something unfamiliar. No one was born knowing the ins and outs of compound interest, but it’s important to understand in order to make informed decisions.

Compound Interest: What’s the Hype?

Compound interest may be one of the greatest secrets of smart investing. And time is the key to making the most of it. If you invested $250,000 in an account earning 6%, at the end of 20 years your account would be worth $801,784. However, if you waited 10 years, then started your investment program, you would end up with only $447,712.

This is a hypothetical example used for illustrative purposes only. It does not represent any specific investment or combination of investments.

1. InvestmentNews.com, February 18, 2025
   2. TransAmericaCenter.org, October 2024
   3. Statista.com, 2025
   4. Bankrate.com, March 25, 2025
   5. Distributions from 401(k), 403(b), and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 73, you must begin taking required minimum distributions.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Mortgages in Retirement

Mortgages in Retirement

Anyone who has gone through the process of mapping out their retirement knows there can be a lot to keep in mind. Saving, investing, anticipating medical costs, and making sure you have enough tucked away for years to come is just the start. One question many people overlook is: “Should I pay off my mortgage before I retire?” The answer is more complicated than you may think.

Maintaining a Mortgage in Retirement

Opportunity Cost

Imagine you have $300,000 set aside to pay off your mortgage. But rather than using those funds to pay off your mortgage, you instead invest that money. Sure, it’s tempting to stop making a monthly payment, but what if that $300,000 earned a hypothetical 6% for the next five years? You would have a little more than $400,000. Yes, your house may appreciate in value over the same period of time, but you should consider all your choices for that lump-sum of money.¹

Eradicate (Other) Debt

Before you pay down your mortgage, any extra cash might be better suited to paying off other kinds of debt that carry higher interest rates, especially non-deductible debt, such as credit card balances.²

Make Your Mortgage Work

Some homeowners benefit from a mortgage interest deduction on their taxes. Here’s how it works: the amount you pay in mortgage interest is deducted from your gross income, which reduces your federal income tax burden. But remember, the further along you are toward paying off your mortgage, the less interest you’re paying. If you’re unsure if you’ll be able to take advantage of this mortgage benefit, it’s best to consult your financial professional.³

Retire Your Mortgage

Don’t Throw Your Money Away

Your monthly mortgage payment may be a large part of your available capital, especially in retirement. Eliminating unnecessary subsidies can significantly reduce the amount of cash you need to meet monthly expenses.

Uninteresting Interest

Depending on the length of your mortgage term and the size of your debt, you may be paying a substantial amount in interest.

“Paying off your mortgage early can free up money for other uses.”

True, you may lose the mortgage interest tax deduction, but remember, as you get closer to paying off your loan, more of each monthly payment goes to principal and less to interest. In other words, the amount you can deduct from taxes decreases.⁴

Home Is Where the Heart Is

There’s a value to your home beyond money. It’s where you raised your children, made fond memories, and you may want it to remain in the family. Paying off the mortgage may help make your home part of your legacy. After all, some things you just can’t put a price on.

1. This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments. Investments seeking to achieve a higher rate of return also involve higher risks. You should consider your risk tolerance before committing to any investment strategy.
   2. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
   3. IRS.gov, 2025. The mortgage interest deductibility is limited to mortgages up to $750,000 ($375,000 if married filing separately) in principal value. This article is for informational purposes only, and is not a replacement for real-life advice. Please consult a tax, legal and accounting professional before modifying your tax strategy.
   4. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.