Time in the markets is what matters – not trying to time the market.

Those of us that are money managers know this, but lay people don’t always realize how true this is.
While talking to someone yesterday this came up in conversation. This person recently inherited a large sum of money from a relative that worked a blue-collar job. What this relative did was regularly save from every paycheck to invest in what they deemed to be quality companies. Initially they invested in individual stocks as mutual funds were not widely available. As the investing world changed and became more assessable, they bought mutual funds. They point this relative made to the person I was talking to was “time in the market is what matters, not trying to time the market”.

This is a statement that I have lived by in the almost 40 years I have been managing money for my clients. It may sound trite, but it has been proven to be true many times over.


I thought Social Security was a tax – why would I have to pay taxes on my Social Security?

Taxes are the bane of our existence, and they may be applied to income that were never thought would be taxed. Yes, Social Security is a tax we pay while we are working, depending on your income in retirement, you may pay tax on the Social Security income you receive.

Here is how the potential tax plays out:

For individuals, up to 50% of benefits are taxed on a “combined income” between $25,000 and $34,000.
Up to 85% of benefits are taxed
For individuals with combined income of more than $34,000.
For married filers, a combined income of $32,000 to $44,000 triggers tax on up to 50% of Social Security benefits.
Up to 85% of benefits are taxed for married filers with a combined income of more than $44,000.

For purposes of this calculation, “combined income” is considered to be your adjusted gross income plus your nontaxable interest and half of your Social Security benefits.


Rich or poor? Your habits decide which you will be.

I read an article on MSN Money that I found interesting, let me share some of the points, you can determine how true they are or are not.

The rich carefully monitor their credit. They know if they have good credit and they know what their credit score is. 72% of the wealthy knew their credit score vs. 5% of the poor.

Poor people like to play the lottery. 77% of the poor admitted to playing the lottery regularly vs. 6% of the rich. But it’s not just the lottery they gamble their money on…..
52% of the poor admitted that they gamble on sports at least once a week vs. 16% of the wealthy.

Parents who are success mentors, raise wealthy kids. 75% of the rich learned good daily success habits from their parents. 94% of the poor admitted that they learned bad habits from their parents.

How do the rich and the poor think when it comes to wealth and poverty? 79% of the poor believe wealth is the result of random good luck. 92% of the rich believe you create your own luck.

62% of the rich floss regularly vs. 16% for the poor.

If you want to change your financial circumstances, you must change. You must grow into the person you need to be in order for financial success to visit you.


When do you want to pay your taxes?

We are almost at the end of tax season, now is the time to decide when you want to pay your taxes on your retirement savings.
If you are making IRA contributions, you have a decision to make. Pay now or pay later, Traditional IRA or Roth, which is better for you?
The difference between a traditional IRA and Roth IRA comes down to one thing: When you pay taxes. With a traditional IRA, you can possibly deduct your contributions from your taxable income, but you’ll pay taxes when you take withdrawals in retirement.

With a Roth IRA, you contribute after-tax money and can take tax-free withdrawals in retirement. The ability to have your money grow tax-free is a blessing from the IRS, and it’s arguably one of the best retirement savings hacks available.

You can make a 2022 contribution up until 4/18/23, make your choice now.


You still have time!

Many of us are in the midst of completing our taxes for 2022. If you have not filed yours yet and have not fully funding your IRA or Roth, you still have time. If you are single and have a company retirement plan but make less than $73,000, you can still make an IRA or Roth contribution of $6500 if under age 50, or $7500 if over age 50. If you are married and file jointly, the income phase-out starts at $116,000.

If you contribute to an IRA, you will pay less in tax now, to a Roth, you will pay no tax at withdrawal if the funds are in the account for five years or more.


Secure your financial future now. . .while time is on your side!

A client recently asked what he could say to his son to get him to start securing his financial future. My reply to him was “he is young and has a lot of time to save, this is the biggest assets he has right now”. His son has just started his first real job, so I of course want to know if there is a 401(k) for him to take advantage of. I told him to explain to his son that every dollar he puts into the 401(k) for his retirement is a dollar that does not go to the Federal government for taxes. This kid has about 40 years to save for himself, that is an asset he will not be able to get back, but right now he can take advantage of.


I cannot tell you how much cash to have.

Cash reserves are important. That being said, I cannot tell you how much of a reserve the proper amount is for you. First let’s address what I mean by cash reserves.

Cash reserves refer to the money an individual keeps on hand to meet emergency funding needs.
Short-term, highly liquid investments, such as money market funds and short-term CD’s, can also be called cash reserves.
Cash reserves are useful when money is needed right away for a large purchase or to cover unexpected payments.

Everyone has a different level of comfort, I know some people that are happy if they have $5000 in cash reserves and others who don’t feel comfortable unless they have at least $200,000 in reserves.

Where ever you fit in this range, please make sure you have your reserves in place. I call it “toe of the sock” money, the place you go to only if it really is an emergency.


Let me help you avoid these red flags.

Congrats!! You have made it to retirement, now life will be free and easy – if only the IRS would stay out of your business. Most people worry about the IRS in their working years, not in retirement. Here are a few Red Flags to avoid:

Claiming Large Charitable Write-Offs
We all know that charitable contributions are a great write-off and help you feel all warm and fuzzy inside. However, if you’re charitable deductions are disproportionately large compared with your income, it raises a red flag.
That’s because the IRS knows what the average charitable donation is for people at your income level. Also, if you don’t get a written appraisal for donations of property valued at more than $5,000, or if you fail to file IRS Form 8283 for noncash donations over $500, you become an even bigger audit target.
Running a Business
Many people like to turn their hobbies into a side-hustle in retirement, but you need to be careful. Schedule C is a treasure trove of tax deductions for self-employed people. But it’s also a gold mine for IRS agents.

Not Taking Required Minimum Distributions
Most people know that the age to take their Required Minimum Distribution has been pushed back to age 73, but if your need to take a RMD, make sure you take the proper amount or you will pay a penalty. Those who fail to take the proper amount can be hit with a penalty of as much as 25% of the shortfall (50% for years prior to 2023).

There are many more red flags out there – these you should be able to avoid.


A Social Security Question

We host a radio call in program and last week we were asked this question:
“Will my IRA withdrawal reduce my Social Security check”?

Here is the answer straight from the Social Security site:
Social Security does not count pension payments, annuities, or the interest or dividends from your savings and investments as earnings. They do not lower your Social Security retirement benefits. This also includes Required Minimum Withdrawals from IRA accounts.

Now, you can breathe easy.


You don’t want to be average!

When it comes to retirement savings, you do not want to be part of the national average. Here are a few stats I found:

Few Americans have saved more than $200,000: 4% have between $200,000 and $350,000, 4% more have $350,001 to $500,000 and a little more than 5% have more than $500,000.

It does not matter what your company match is, too many people only save to the match percentage. This is what you need to do:

If you start saving at 30, you might want to save 18% annually for retirement; or, if you start saving at 35, you should save 23%, according to Fidelity.

The majority of the population is setting aside less than 10%, 13% are saving between 1% and 3%, 18% are at 3% to 5%, and 21% are putting between 5% and 10% in their retirement accounts.

Additionally, 18% of respondents said they could not afford to put any of their income toward retirement.

With the majority of Americans investing under 10% of their income toward retirement, many are planning to supplement their savings with Social Security.

Please, take your retirement seriously and save like your life depends on it, because it does.