3 Tips for the Second Half of 2022

With half the year behind us, now is a great time to consider what the remainder of 2022 may hold. However, with inflation and economic uncertainty causing many of us to delay or cancel vacations, large purchases, and more, it can be challenging to know where to start.

Here are a few tips to help make the rest of the year as smooth as possible:

Deflate Inflation – Travel-related costs have skyrocketed, causing many to delay or cancel vacation plans. But are you overreacting to current headlines? Let’s talk if you’re wavering on a scheduled trip.

Embrace Uncertainty – If you’ve delayed a major purchase lately, you’re not alone. Economic uncertainty has caused many to rethink their expenditures. When your net worth declines, the “wealth effect” tells consumers to rein in spending. But our portfolio strategy takes into account periods of market volatility.

Practice Patience – The need to take action can push even the most seasoned investors into questionable territory. Instead, try to take a long view of the markets. Remaining patient and taking a break from watching the markets closely may help weather the storm.

Let us know if you ever want to chat about your future goals or current economic conditions. We’re always ready to help.

Qualifying For Medicare Under Age 65

When you are under 65, you become eligible for Medicare if:

1. You have received Social Security Disability Insurance (SSDI) checks for at least 24 months
2. Or, you have been diagnosed with End-Stage Renal Disease (ESRD)

Eligibility for Medicare due to a disability

You may qualify for Medicare due to a disability if you have been receiving SSDI checks for more than 24 months, also known as the two-year waiting period. The two-year waiting period begins the first month you receive an SSDI check. You will be automatically enrolled in Medicare at the beginning of the 25th month that you receive an SSDI check.

If you receive SSDI because you have Amyotrophic Lateral Sclerosis, or ALS, Medicare automatically begins the first month that your SSDI benefits start. You do not have the two-year waiting period.

Social Security—not Medicare—makes the determination of whether you qualify for SSDI checks and administers the program that provides the checks. For more information on the Social Security Disability Insurance program, it is recommended that you contact your local Social Security Administration (SSA) office.

Note: Railroad workers should contact the Railroad Retirement Board for information about disability annuity and Medicare eligibility.

Eligibility for ESRD Medicare

You may qualify for ESRD Medicare if you have been diagnosed with kidney failure and you:

• Are getting dialysis treatments or have had a kidney transplant
• And:
  • You are eligible to receive SSDI
  • You are eligible to receive Railroad Retirement benefits
  • Or, you, a spouse, or a parent have paid Medicare taxes for a sufficient amount of time as specified by the Social Security Administration

If you are under 65 and have ESRD, when your Medicare benefits begin depends on your specific circumstances, including when you apply for Medicare, whether you receive dialysis at home or at a facility, and whether you get a kidney transplant. If you are eligible for ESRD Medicare, you can enroll in Parts A and B together at any time. Part A will be retroactive up to 12 months, but it cannot start earlier than the first month you were eligible for ESRD Medicare.

Note: If you are a railroad worker with ESRD, you must contact Social Security—not the Railroad Retirement Board—to find out if you are eligible for Medicare.

Because Social Security and Medicare eligibility rules are complex, it is recommended that you call Social Security at 800-772-1213 to get the most accurate information regarding your particular situation.

Consider Keeping Your Life Insurance When You Retire

Do you need a life insurance policy in retirement?
One school of thought questions this decision. Perhaps your kids have grown, and the need to help protect the household against the loss of an income-earner has passed.

If you are thinking about dropping your coverage for either or both of those reasons, you may want to ask yourself a few additional questions before moving forward.

Remember that several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Does your policy have a cash value?
If you have a whole life policy, it may have built a cash value over time. Whole life insurance is designed to remain in force for your whole life, as long as you remain current with your premiums. Before surrendering a whole-life policy, be certain you understand the policy’s features and limitations.

This article is for informational purposes only and is not a replacement for real-life advice, so you may want to consider asking for guidance from a financial professional before modifying your life insurance strategy. Life insurance is not insured by the FDIC (Federal Deposit Insurance Corporation). It is not insured by any federal government agency, bank, or savings association.

Do you anticipate paying estate taxes?
If the value of your estate exceeds federal or state estate tax thresholds, you may owe estate taxes. Life insurance proceeds may help your heirs manage the tax situation, and could prevent the need to sell other assets. Estate tax laws are constantly changing, so you may want to consider speaking with a legal professional, who can provide information on potential legislative changes.

Are you carrying a mortgage?
If you borrowed to purchase your home or have refinanced and are carrying a mortgage, the proceeds for a life insurance policy may help your heirs manage the mortgage payments.

How SECURE 2.0 Might Change Retirement

The SECURE Act of 2019 represented the biggest update to retirement law in over a decade. Now, Congress is deliberating on what “SECURE 2.0” legislation might entail.

In March, the House passed the Securing a Strong Retirement Act with a bipartisan 414-5 vote. The Senate is still weighing numerous proposals for their version, the Rise & Shine Act.

Proposals under consideration include:

• Raising the Required Minimum Distribution (RMD) age to 73
  (eventually 75)
• Increasing catch-up contributions to $10,000
• Creating Roth versions of SIMPLE and SEP IRAs

Reconciling these bills will take time, but it’s clear that SECURE 2.0 could bring about another raft of significant changes for business owners and
employees. As always, I’m keeping an eye out for what you need to know
and will be in touch as events develop.

Immediate vs. Deferred Annuities

Despite not being as well known as some other retirement tools, annuities account for 7% of all assets earmarked for retirement. With about $2.5 trillion in assets, annuities hold more funds than Roth IRAs.¹

An annuity is a contract with an insurance company. In exchange for a premium or a series of premiums, the insurance company agrees to make regular payments to the contract holder. The funds held in an annuity contract accumulate tax deferred.

For individuals interested in accumulating retirement assets, annuities can be attractive because they are not subject to contribution limits, unlike most other tax-deferred vehicles. In other words, retirement-minded individuals can set aside as much money as they would like into an annuity.

Two Phases

Annuity contracts pass through two distinct phases: accumulation and payout. During the accumulation phase, the funds accumulate until the annuity contract reaches its payout date. At that time, the total will either be paid out as a lump sum or as a series of payments over a period that can stretch as long as the account holder’s life.

The funds attributed to the initial premium will not be taxed, but any earnings on those funds will be taxed as regular income.

Immediate Annuity

As its name implies, an immediate annuity is structured to provide current income. After paying the initial premium, an individual receives regular income, which can be deferred up to twelve months. The funds remaining in the contract accumulate on a tax-deferred basis. And only that portion of each payment attributable to interest is subject to taxes; the rest is treated as a return of principal.

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your tax strategy.

Deferred Annuity

It is also possible to purchase an annuity contract that defers payout until a specific date in the future. The premiums you pay to a deferred annuity accumulate and earn interest during the accumulation phase. The annuity holder determines the amount of payments and when the payouts begin, which is usually in retirement. With a deferred annuity, the earnings credited to your contract are taxed when they are withdrawn.

Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies). The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities are not guaranteed by the FDIC or any other government agency.

Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy a variable annuity contract. The prospectus is available from the insurance company or from your financial professional. Variable annuity subaccounts will fluctuate in value based on market conditions and may be worth more or less than the original amount invested if the annuity is surrendered.

For retirement-minded investors, annuities have some attractive features that may be worth exploring. Annuities also have certain limitations and expenses that need to be considered before committing to a contract.

 3 Shrewd Maneuvers in a Down Market

It’s natural to think “defense” during a bearish market season. But why not mix in some “offense” with your defense? Here are three moves we can discuss together that may be helpful during the current market downturn.

1. Invest Your Excess Cash: If you have excess cash earmarked for a long-term goal (retirement or college, for example), a downturn may present an opportunity. Over the last three years, the Standard & Poor’s 500 compounded annual growth rate was 9%. Even with all the pandemic-related volatility, that’s still shy of its historical average.¹

2. Consider Series I Savings Bonds: With inflation at 40-year highs, you might consider some fresh ideas for investing. I Bonds pay a rate of return plus inflation protection and are backed by the U.S. government. You can visit TreasuryDirect.gov to open a free account (as always, reach out if you have any questions).

3. Take a Look at Taxes: Each year, taxpayers can deduct up to $3,000 in realized losses. If your losses exceed $3,000, you may be able to carry them forward into future years. Make sure to speak with your tax professional before making any decisions.

I’m confident we’ll see a brighter economic picture before too long. In the meantime, it’s a shrewd move to find ways to better your position, and I’m always available to help you think it through.

Rightsizing for Retirement

How to Keep Your Identity Safe

In case you didn’t know, June is National Internet Safety Month. With nearly 4 billion people on social media worldwide, plus the risks of using online brokerage and bank accounts, the need for digital security has never been higher.

While tech is becoming more secure in response to threats, there are some habits you can adopt to safeguard your digital life.

Stop – First, take a moment to evaluate your current security measures. Do you use two-factor authorization (2FA) whenever possible? What about a password manager? Do your research and put these measures in place.

Think – Before clicking a link or posting on social media, consider the information you may be accessing or sharing. A hacker can use minor details to target you or your loved ones.

Connect – Don’t go on auto-pilot: monitor your online accounts and devices. Make sure to change your passwords periodically, especially if you get an alert about unusual account activity.

By staying alert to these details, you can browse the web with a little more peace of mind.

Searching for the Goldilocks Economy

At the risk of slowing economic growth, the Fed has driven short-term rates higher to rein in inflation. But it’s a tricky proposition.

Raise rates too much, and you may trigger a recession. Don’t raise rates enough, and you won’t be able to restore price stability. The Fed is looking for a Goldilocks moment when its monetary policy is “just right” to create a soft landing for the economy.

You may not have noticed, but early evidence shows inflation is starting to slow. I’m confident the Fed sees it, too. However, most people judge inflation by prices at the gas station and the grocery store, so inflation is genuine and painful until those prices trend lower.

But I remain an optimist. History shows that economies and markets move in cycles, so I believe the current trend is healthy in the long term. I also think smart economists at the Fed are making difficult decisions following an extraordinary couple of years.

Our best days are ahead. I’m excited for the second half of 2022 and expect things will look pretty different by year’s end.

Orchestrating Your Retirement Accounts

An orchestra is merely a collection of instruments, each creating a unique sound. It is only when a conductor leads them that they produce the beautiful music imagined by the composer.

The same can be said about your retirement strategy.

The typical retirement strategy is built on the pillars of your 401(k) plan, your Traditional IRA, and taxable savings. Getting the instruments of your retirement to work in concert has the potential to help you realize the retirement you imagine.¹

Hierarchy of Savings

Maximizing the effectiveness of your retirement strategy begins with understanding the hierarchy of savings.

If you’re like most Americans, the amount you can save for retirement is not unlimited. Consequently, you may want to make sure that your savings are directed to the highest priority retirement funding options first. For many, that hierarchy begins with the 401(k), is followed by a Traditional IRA and, after that, put toward taxable savings.

You will then want to consider how to invest each of these savings pools. One strategy is to simply mirror your desired asset allocation in all retirement accounts.²

Another approach is to put the income-generating portion of the allocation, such as bonds, into tax-deferred accounts, while using taxable accounts to invest in assets whose gains come from capital appreciation, like stocks.³

Withdrawal Strategy

When it comes to living off your savings, you’ll want to coordinate your withdrawals. One school of thought recommends that you tap your taxable accounts first so that your tax-deferred savings will be afforded more time for potential growth.

Another school of thought suggests taking distributions first from your poorer performing retirement accounts, since this money is not working as hard for you.

Finally, because many individuals have both traditional and Roth IRA accounts, your expectations about future tax rates may affect what account you withdraw from first. (If you think tax rates are going higher, then you might want to withdraw from the traditional before the Roth). If you’re uncertain, you may want to consider withdrawing from the traditional up to the lowest tax bracket, then withdrawing from the Roth after that.⁴

In any case, each person’s circumstances are unique and any strategy ought to reflect your particular risk tolerance, time horizon, and goals.