I rollover over my 401(k) to an IRA, why did I get a 1099?

This is a question I have gotten from a number of my clients this year. A 1099 is the tax form sent out by investment companies for taxable gains and income. We all know that if you roll your 401(k) to an IRA, this is a non-taxable event. The 1099 that my clients have been receiving is a 1099-R, indicating that the funds were rolled over and this is a non-taxable event. Please, do not panic if you have processed a rollover and get a 1099.


Are you planning on retiring in the next year or two? Here are some things you should do to be prepared

1. Look at your spending. Many people think that all they will need to pull from their investments in retirement is 4% of what they have accumulated. Does this apply to you? In my experience, the 4% rule does not work for everyone. We look at many different expenses of everyday life, plus inflation when planning the withdrawal stage for my clients.

2. What does your portfolio look like? What I am asking is; what is your mix between cash, equity funds, and income funds? Do you have quality funds that will stand the test of time and your changing income needs?

3. Plan for taxes and inflation. These two items will potentially take the biggest bite out of your retirement nest egg. Taxes tend to be the biggest unknown when planning for retirement because as our leaders change, often the taxes change. As far as inflation goes, depending on the CPI used at any given time to calculate inflation, we have no idea if rates will go up or down.

4. Take control of your retirement. You can control the outflow of funds and make sure you have regular reviews with your CFP professional to make sure you stay on track.


Will these changes impact you?

Social Security is often talked about as a major component of retirement. Here are a few changes that are in the works, will they help or hurt you?
The COLA for 2024 will be 3.2% — a decline of two-thirds from this year’s adjustment but still above the 2.6% average over the past couple of decades.
The maximum amount of earnings subject to the Social Security payroll tax will increase to $168,600 in 2024 from $160,200 in 2023.
The maximum Social Security benefit for a worker retiring at full retirement age will rise to $3,822 in 2024 from $3,627 in 2023.
If you also continue to work after filing for Social Security retirement benefits, you might be subject to an earnings test if you earn a certain amount of money. In 2024, the earnings exempt from the retirement earnings test will increase to $22,320 from $21,240 in 2023, according to the Social Security Administration. For every $2 in earnings above that limit, $1 in benefits will be withheld. These earnings rules no longer apply once you hit full retirement age. *
Most of these changes are good, please consider them all when filing for Social Security.

*Material sourced from MSN article 1/31/24


End of January To-Do’s

I know the year has just started, but you want to make sure it starts off in the right direction. Here are some To-Do’s for you to consider implementing before the month is over.
Save More for Retirement
This year you can save more in your workplace 401(k) retirement savings account. The maximum contribution has increased from $18,500 in 2018 to $19,000, so consider increasing the amount you are contributing, making sure you’re saving at least enough to get your employer match.
Consider Rebalancing Your Portfolio
To bring your portfolio back into balance, you may need to shift money from your winning investments into those that are lagging. That will probably require you to take profits in your highest-flying stock funds, which could be a timely move.
Stick to a Budget
Creating a budget is much easier than sticking to a budget, and as a result many attempts at curbing spending fall flat. Set yourself up for success by adding a budget to your financial to-do list this month.
Consider Professional Financial Advice
A financial adviser can help you make sure your finances on track and being managed correctly. But remember that not all financial advisers are created equal.
There are two types: Those who are required to give advice that is in your best interest, and those who are held to a less rigorous standard of being required to recommend “suitable” products and strategies. The former is called a fiduciary and is the preferable way to go to avoid potential conflicts of interest.


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.


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.


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.


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.


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.


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.