Lifecycle events bring about change. Generally when a lifecycle event brings change associated with the IRS, we take a step back. These two changes are nice ones.
When you turn 65, the IRS offers you a gift in the form of a bigger standard deduction. For 2020 returns, for example, a single 64-year-old gets a standard deduction of $12,400 (it will be $12,550 for 2021). A single 65-year-old gets $14,050 in 2020 (and $14,250 in 2021).
Generally, you must have earned income to contribute to an IRA. However, if you’re married and your spouse is still working, he or she can contribute up to $7,000 a year to an IRA that you own. (We’re assuming that since you’re reading about breaks for retirees, you’re at least 50 years old.) As long as your spouse has enough earned income to fund the contribution to your account (and any deposits to his or her own), this tax shelter’s doors remain open to you.
Don’t let these breaks go to waste.

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I cannot tell you how many people come to my office, pull out their cell phone and just log on to their financial accounts without a second thought. I know that many people do this anywhere in public. Do you remember when you could sit in a coffee shop and work? I know that many times people sitting there would do the same thing. Log in to their bank and investment accounts just to look at something. 90% of the people doing this have no protection on their devices to protect from a random passerby collecting their data. Download a VPN! Do it now! Not sure what a VPN is? It is a Virtual Private Network. It can provide a safe mode for surfing the web as it gives you privacy and data security. When used correctly, a VPN helps keep your connections secure and protects your device from prying eyes. … Even your own internet service provider (ISP) can’t access your data or track your activities.
Do it!

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One of the first questions I ask my clients as they approach retirement is, “What will you do with your time?” Often, if they do not know who they will spend their time, they will overeat and over spend, both of which may lead to an unhappy retirement, especially if your partner does not behave the same way.
How do you bridge the gap if one partner is a spender and the other is a saver? Try to attack the problem and not the person. A conversation may go as follows: “I’ve seen these credit card bills and I’m getting really scared. I’m concerned about our future together and I want to make sure that we are doing everything to make sure our financial future is safe.”
Focus on the big items such as your mortgage and house hold bills first, then agree that there will be a certain amount each partner can spend monthly without any explanation. Neither partner will feel as if every dollar must be accounted for.
Discussing your habits in a calm and rational manner can bring spenders and savers together for a happy retirement.

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Do you remember sitting outside in the summer with a double Popsicle? They had a groove down the center to break it in half. Picture yourself sitting on the porch, snapping that Popsicle in half, and giving the other half to your best friend. Didn’t it feel great to “share your wealth?” That is what gifting is all about.
Charitable gifting is a wonderful thing. You can help your community and yourself at the same time. If you gift directly from your IRA, and do this properly, it can also count toward your Required Minimum Distribution. If you make a gift with non-retirement assets you may or may not be able to take a deduction under current tax law due to the current Standard Deductions.
Gifting, in my opinion, should not be done primarily for that tax benefit. Gifting should be done because you can share your wealth. Just remember that great feeling of the sunshine on your face and your besties next to you eating that Popsicle.

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Let’s look at a conversation between Tommy & Jeff. Tommy has 5 Hot Wheels and Jeff has none. Jeff wants to play with the Hot Wheels so Tommy decides that Jeff can play with two of them for one month, but he has to give Tommy two candy bars over the course of the month, then return the cars.
Tommy owns the cars that is his equity. Equity = ownership. By lending the cars to Jeff, and charging him candy bars to be paid during the time Jeff can use the cars = income. By borrowing the cars and paying a return during the loan period, the cars end up acting like a bond. Jeff gets to use and pays interest.
Owning Hot Wheels = Equity. Borrowing Hot Wheels = income.

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I love to bake, I even had a side gig for a while baking special cakes for people. Baking is something I have also done with my Daughter, now she loves to bake also. I always like to experiment with average recipes to make them more interesting and when you do this, someone has to sample the cookies. Who gets the first cookie? Is it the person that is sitting there watching you bake? Is it the person that heard you are baking and wants a cookie? It is the chef, the person who did the work gets the first cookie.
Here is the lesson – if you work hard, you have to remember to pay yourself first. Build up a cash reserves, then start depositing into a retirement account. If you always pays yourself first, you will have security knowing you can pay your bills and have a comfortable retirement.

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I have watched kids try to build tall towers with wooden blocks. They place one block on top of another over and over trying to build a tower, which falls over each time. The kid will start again, never changing their pattern of construction. What they are missing is a wider base that will allow them to gradually build a taller tower.
In the world of investing, a solid foundation is important to success. Our foundation is cash reserves. Cash reserves are not exciting, and generally do not move very much – this is what a sound foundation looks like.
A solid foundation will allow you to build your tower high enough to reach the stars.

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Over the weekend I was asked to explain a basic financial concept to someone like they were a 5yr. old. I have decided to make this into a series. If you have a financial question or concept you do not understand, email me at nancy@financialgroup.com and I will put into terms a 5yr. old could understand.
I was asked to explain diversification, here it goes:
Let’s say you have a bag of milk chocolate M&M’s that you pour on the table. You see brown, green, and blue M&M’s, but inside they are all milk chocolate. They are all actually the same thing = no diversification. If some of the M&M’s were dark chocolate or almond, there would be diversification.
I see this in the mutual fund portfolios people bring to me. They may have 3 different funds with 3 different companies, but all of the securities within the funds are Large Cap Growth stocks. There is no diversification here. If one fund was Small Cap Value, and the other was a Bond fund, there would be diversification.
Send me you questions, I will put them into 5 yr. old language.

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We all wish for a happy and healthy New Year, especially after last year, but how have you protected your family? When was the last time you reviewed your life insurance, health insurance, & property insurance? If this pandemic has taught us anything, it is to be prepared for the unknown.
Who is dependent on you? What types of debt would you leave for others to pick up? What type of financial legacy do you wish to leave? By reviewing your protection items to make sure the benefits and beneficiaries are in line with your wishes will give everyone peace of mind.
Go out there and make it a great New Year!

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If 2020 has taught us anything, life may not always go the way we have planned. I have seen family dynamics change among my clients, some happy, some not. Here is my second tip for the New Year: Confirm your beneficiaries.
If you got married, divorces, or sadly, lost your spouse due to death, have you changed your primary beneficiary designations? Along with that, do you have contingent beneficiaries named?
Have there been births that may beg for a change in your contingent beneficiaries?
Have you checked these beneficiary designations on your retirement accounts, life insurance policies, and general investment accounts? Did you know you can add a beneficiary to your bank accounts? If not, please make sure you do so.
Having the proper beneficiary designations assures your funds will go to whom you wish and will help avoid Probate.

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