We don’t like creeps of any kind.

Creeps are, well, creepy, especially when they have to do with taxes. Are you familiar with “Tax Bracket Creep”? This is what it means:
Bracket creep is a situation where inflation pushes income into higher tax brackets. The result is an increase in income taxes but no increase in real purchasing power. This is a problem during periods of high inflation, as income tax codes typically take longer to change than the rate of inflation.
This is something many of us are dealing with right now. Now is the time to look at your retirement accounts to make sure you are contributing as much as you can pre-tax so this creep will not knock on your door.

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Do you want it now or later?

Now is the time of year when many people are assessing their retirement savings. I am being asked should I contribute to my pre-tax or post-tax plan? My question is; when do you want to pay the tax? Let’s look at a few questions that are important to your retirement savings.
Should you save to a Traditional IRA or a Roth? Also, do you contribute to the pre-tax portion of your 401(k) or to the Roth 401(k)? The question is, can you afford to wait 5 years or more for your Roth withdrawals to be tax-free? Roth contributions must be deposited at least 5 years for the withdrawals to be tax free. Maybe a combination of both works best.
When should you start taking Social Security? I never want someone to pull before Full Retirement Age due to the fact that you will take a permanent 30% cut in your Social Security. Every year past Full Retirement Age that you wait you will receive an 8% increase in your Social Security. My recommendation is to wait past Full Retirement Age if possible.

Lastly, take a hard look at your spending. Can you pay cash for your items? By this I mean, when you receive your credit card bill, can you pay it in full? If not, you need to ask with each purchase – is this a need or a want item? Controlling your spending will help lead to a comfortable retirement.

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Do you need guardrails on your income?

As the New Year starts, now is the time to look at your spending habits and determine if anything needs to change. For many people the new year brings a raise, this should not give you license to spend more. I advise my clients to increase what they are contributing to their 401k, keeping the extra money in your pocket vs. going to the IRS. Another thing to consider doing in this New Year is a monthly assessment of your spending. Retirement income guardrails are predefined thresholds triggering an increase or decrease in spending as needed. A regular assessment will help keep you within your guardrails and not running off the road.

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Some thoughts and wishes for the coming year.

We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called Opportunity, and its first chapter is New Year’s Day.

Wishing you 12 months of success, 52 weeks of laughter, 365 days of fun, 8,760 hours of joy, 525,600 minutes of good luck, and 31,536,000 seconds of happiness.

Happy Financial New Year 2024! – Forget the past sorrows and woe and step into the new year with joy and happiness. Wish You A Very Happy Financial New Year 2024! – May this new year bring new hopes, success, health, and pleasure in your life.

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Do you stress shop?

The holidays are coming and most people feel pressure to celebrate big. Most of also know how expensive things have gotten over the past year. These two comments put together equal stress for many of us. When people are stressed or bored, they often flip through their favorite streaming sites and see things they would like to have or buy for others. Here is my tip for your online shopping this holiday season: bookmark items you would like for yourself or others, then closed the page. Go back to that site in a few days and decide if that is the gift that you want to, and can afford to spend money on.

Preventing yourself from impulse shopping will make a happier holiday season for all.

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Some financial tricks that will give you a treat!

Here are a few tricks I have advised people to use that will give you the treat of more wealth in the long run.

Give up the expensive daily boutique coffee. Forgoing your $4 latte every day, for example, would save you about $120 a month. A quality coffee machine will allow you to brew a specialty coffee for yourself at home.

Ask for a lower rate on your credit card if you carry a balance. What is the worst that can happen? Things will stay the same, but most people that ask, can get a lower rate.

Ignore your raise in salary or bonus. Put that extra income directly into your pre-tax retirement savings. You got along fine without the extra income, make sure your future is better by saving that income now for the long term.

These are just a few easy tricks you can implement now to make sure you can afford all the treats of a healthy retirement.

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4th Quarter tips for your financial life.

Now is the time of year when most of us are thinking about the upcoming holidays, trips, gift buying, and spending time with family. What we need to add to this end of year list is a final look at our finances, before the year is over, to see if you can put your financial future in a bright light.

Here are a few things to look into:
Shelter money from taxes Max out your retirement plan contributions to your employer’s plan, or your individual IRA before December 31st.
Determine if the standard deduction is right for you or whether itemizing is better. You can do a thumbnail tax return to see if a few extra charitable contributions might help lower your tax burden. Another trick is to pay two years of property tax in one year to help boost your itemized deductions.
Note changes in tax brackets. The brackets used to determine your taxable income often change. Check those out just to make sure there are no surprises.

Remember, the more you can save for yourself by fully funding your retirement or being charitable, is less you will pay in tax. That makes for a Happy New Year in my book.

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It’s small, but it’s something.

Social Security will go up by 3.2% in 2024, not as large as recent years, but something none the less.
Increases are based on the CPI ( Consumer Price Index) which for the longest time was the same basket of goods, but not anymore, there are four different CPI indexes that are looked at and used to determine if there will be increases or not.

The recent increase was based on the CPI-U, prices for urban dwellers. Two everyday factors that do not carry as much weight in the CPI-U are food and fuel, items that most of us, as suburban dwellers, spend a lot of money on.

I truly wish that a broad based CPI was used consistently to reflect how the majority of Americans spend their money vs picking what best suit the narrative.
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Decline is not the same as loss.

I have been having this conversation every day with clients, a decline in the market value is not the same as a loss. This has been a worry for many investors over the past two-ish years, let me try helping you let go of some of that fear.

One big area where mutual fund share values have declined is in bond funds. When interest rates rise, bond prices go down, this is the natural see-saw, we just have not seen rate increases like this since 2007. Here is an example of how that works:

Let’s say I lend someone $5000 for 5 years at 3%, then a year later interest rates increase and I can now make that same $5000 loan but receive 5% – can you see why the 3% loan has lost its value?

Now here is the flip side; if this is a bond fund and the dividends are being reinvested, the 3% fund can buy those reinvested shares at a lower price (the value declined) and accumulate more shares per dividend paid than the 5% fund. If you are taking dividends in cash, then you are very happy about that check as it has increased, you have to teach yourself to ignore the value of the shares unless you absolutely have to sell them.

A simple explanation I heard a long time ago is: I don’t care how fat or skinny the chicken is, as long as it keep laying the eggs.

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This is a basic concept, but one that I have to repeat regularly

There is a difference between saving and investing. Saving is for funds that need to stay liquid and you may potentially use in 18-24 months. The funds should be kept in a checking account, savings account, or money market account.

Investing is for your long term future, to make sure you can retire with no worries throughout the remainder of your life.

Stay true to the basics: The beauty of age-old wisdom of investing is that it is timeless. Regardless of which year and which month you are in, the principles of investing remain the same.
So, investors are recommended to have a long-term vision of the markets and stay invested in the equity for a long term i.e., a minimum of five years to see good results.

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