What The SECURE Act Means For You

What The SECURE Act Means For You

 

You may have heard about the significant tax and retirement reforms recently signed into law under the catchy name Setting Every Community Up for Retirement Enhancement (SECURE) Act. These sweeping changes were drafted to promote increased retirement savings by expanding access to retirement savings vehicles, broadening options available inside retirement plans, and incentivizing employers to open retirement savings plans for their employees.

Some of these changes have a much wider impact than others, but here is a summary of the key takeaways and provisions of the SECURE Act most likely to affect you.

The age to begin required minimum distributions (RMDs) increased from 70 1/2 to 72. The later RMD age of 72 will only apply to those turning 70 1/2 in 2020 or later. Anyone who turned 70 1/2 in 2019 will still be subject to the original RMD rules. While not a huge delay, individuals could benefit from an extra year and a half of compounding returns if they choose not to withdraw funds from their Traditional IRA. It can also provide additional time to make strategic Roth conversions while in a lower tax bracket. It is important to point out that the Qualified Charitable Distribution age has not changed, so QCDs can still be made starting at age 70 1/2.

The maximum age to contribute to a Traditional IRA has been removed. You may now contribute to a Traditional IRA even if you are over 70 1/2. This is a great benefit to those continuing to work into their 70s, as contributions to a Traditional IRA are tax-deductible. After your RMDs have started, continued contributions allow for an offset of the taxable income realized from these required IRA distributions.

The Stretch IRA rule, allowing non-spouse beneficiaries to “stretch” distributions from an Inherited IRA over the course of their lifetime, has been eliminated. This provision, enacted as the funding offset for the bill, requires that non-spouse beneficiaries distribute all assets from an Inherited IRA within 10 years of the account owner’s passing. Spouses, chronically ill or disabled beneficiaries, and non-spouse beneficiaries not more than 10 years younger than the IRA owner will still qualify to make stretch distributions. Minor children will also qualify for stretch distributions, but only until they reach the age of majority for their state (at which time they would be subject to the 10-year payout rule). These new rules only apply to inherited IRAs whose account owner passed away in 2020 or later.

This change will have the most significant impact on adult children inheriting IRAs, who now will have to recognize income over a 10-year period instead of over their lifetime. For those still in their prime working years, this may mean taking distributions at more unfavorable tax rates. Trusts named as IRA beneficiaries also face their own set of challenges under the new law. Many are now questioning whether they should start converting Traditional IRA assets to a Roth IRA, or significantly increase conversions already in play. Unfortunately, there’s not a one-size-fits-all answer to this question. It’s highly dependent on a number of factors, including current tax brackets, potential tax brackets of future beneficiaries, and intentions for the inherited assets. We’ll explore this and additional estate planning concerns and strategies in more depth in future articles.

Here are a few other changes that are worth mentioning:

  • Penalty-free withdrawals of up to $5,000 can be made from 401(k)s or retirement accounts for the birth or adoption of a child.
  • 529 accounts can now be used to pay back qualified student loans with a lifetime limit of $10,000 per person.
  • Tax credits given to small businesses for establishing a retirement plan have been increased.
  • A new tax credit will be given to small businesses adopting auto-enrollment provisions into their retirement plans.
  • Liability protection is provided for employers offering annuities within an employer-sponsored retirement plan.

If you have questions or concerns about how the SECURE Act impacts you, please reach out to your financial advisor or contact us for assistance.

 

 

 

What Are Your Financial New Year & New Decade Resolutions?

What Are Your Financial New Year & New Decade Resolutions?

 

It’s the start of a new year, a new decade even. For a lot of us it means setting new intentions or revisiting goals that may have been forgotten. It also means having to fight for a treadmill at the gym (at least for the next month or so). As you think about the year ahead, what resolutions or intentions are you setting in your financial life?

Here are a few tips on the best way to create and stick to a resolution, according to science:

The more specific the better.

Saying you will save more is too vague to be able to gauge your success. Most likely you’ll lose track of your progress and abandon this resolution at some point in the year. Try creating goals with specific metrics you can track, like “I will increase my contribution to my 401(k) from 5% of salary to 8%.” Or if you’re saving for a specific goal, like a down payment, determine a specific amount to set aside per month.

Set yourself up for success.

Ask yourself how likely you are to meet the resolution you set. If the percentage is below 75%, consider making the goal more achievable. If you want to pay off all your debt by the end of the year, you may get discouraged if an emergency expense comes up and you aren’t able to meet your goal despite your best effort. Instead, try setting an amount to put towards your student, car, or home loan that you feel confident you can maintain throughout the year.

Knowledge is power.

Many people draw a blank when asked how much they spend each month. Trying to budget without knowing what current spending looks like is a bit like trying to lose weight without actually tracking your weight. Reviewing your spending each month and understanding where your money is going will make you a more conscientious consumer. There are many great free online budgeting solutions that you can start using now.

Reward yourself.

Associations are powerful. We avoid things we don’t want to do and, in the process, those tasks can start to pile up and feel more burdensome to even start. Take some of the doom and gloom out of working on your finances by making the process more enjoyable. Have a special treat or drink while you budget. Play some of your favorite music while you review your retirement account. Tackling your finances in smaller, more frequent chunks of time will also make the process more palatable.

Ask for help.

Sometimes we get stuck, and that’s okay. If you have a financial advisor, leverage them as a resource to get guidance when needed. Often, we just need a little nudge in the right direction to get back on track.

 

 

Happy New Year!

Happy New Year!

 

2019 was a year of highs and lows, mixed economic numbers, political maneuverings, and ongoing recession worries. In other words, a fairly ordinary year in the late stage of an economic expansion.

We don’t yet know what 2020 will bring for the economy, for markets, or for our own lives. We can’t control what happens in markets or what happens in DC. But, we can control some things.

As we usher in a new year with great expectations, let’s take a moment to recommit to the factors we can control:

Harnessing the Power of Our Dreams

We know you don’t want to grow and protect your wealth just to have a big portfolio. Money is a tool that you can use to reach your aspirations, retire in comfort, create change in the world, and leave a legacy of love. It’s the desire to see you achieve your dreams that drives us to work tirelessly on behalf of our clients. Remembering your goals and keeping them close at hand will help you commit and achieve them.

Building Better Financial Behaviors

Too many investors focus on markets when they should focus on themselves, their hopes, their goals, and their dreams. Identifying the choices in our control isn’t just a good financial lesson, it’s a great life lesson, dating back to ancient Greece, when the Stoic philosopher Epictetus said:

“The chief task in life is simply this: to identify and separate matters so that I can say clearly to myself which are externals not under my control, and which have to do with the choices I actually control.”

Time in the Market, Not Timing the Market

The best day to invest in the market is the day after you get paid. The most potent factor you have as an investor is time. Markets are unpredictable, and those who jump in and out based on emotion or “gut feelings” about tops and bottoms typically do worst of all.

May you and your family enjoy all the warmth this season has to offer and a new year filled with love and success!

Reason #3 Why Clients Hire Merriman: We Help You Get Your Time Back

Reason #3 Why Clients Hire Merriman: We Help You Get Your Time Back

 

At Merriman Wealth Management, there’s nothing we love more than taking on the burden of financial planning so our clients can get back to spending their time and energy doing the things they love.

Over the past few years, we’ve been asking our clients—to hear it in their own words—about the value they gain from working with us. We’ve compiled the top ten reasons why clients hire us and we will be showcasing these responses in this ten-part blog installment. Here is part three, out of ten.

Reason #3: “Merriman saves me time.”  

At Merriman, we work to help you invest wisely, live fully, and keep time on your side.

If you could adequately choose investments, decide on a savings plan, and develop a strategy for your family, would you be able to make these hard decisions without ever second guessing yourself? How much research would it take to feel confident you are making the right choice? The amount of research you’d need to do in order to make a single financial decision could eat into the time you spend with your family or traveling the world.

Living fully means living your life, and working alongside a financial advisor means you don’t need to spend hours understanding financial markets or researching saving strategies. This frees you up for more living!

Markets shift. Times change. And Wealth Advisors and Certified Financial Planners give you the information you need so you can feel confident in your financial decisions. We also hold you accountable, which in the long run saves you time and increases your chances of reaching your financial goals, more so than if you were working toward these goals on your own. We all need accountability. Even financial advisors need advisors!

Merriman Wealth Advisors do more than simply invest your money. Even when life gets busy and you don’t feel like you have the time, we keep you on track with your financial goals.

To learn more about how we can help you unlock financial freedom or to schedule a discovery meeting, contact us via our website or call 206-285-8877.

Check out the previous installment in the series. 

 

 

Dementia – An Unpleasant Topic Everyone Should Plan For

Dementia – An Unpleasant Topic Everyone Should Plan For

 

The idea of losing ourselves to dementia is a distressing prospect that people often don’t like to consider, let alone plan for. When we think about retirement we like to imagine the fun things: grand vacations, new hobbies, travelling to visit family, and spoiling the grandkids – not the exponentially rising cost of medical care and long-term care facilities. It’s an unpleasant reality that many financial advisors don’t like to address with clients, because they don’t want to be the bearer of bad news and they don’t have any easy answers.

I might not address these difficult considerations if Alzheimer’s didn’t run in my family. I lost my father earlier this year. He no longer knew who I was before he passed away, just as his father forgot him when he was my age. As a financial planner, I think about my own finances and eventual retirement more than the average person, and along with my retirement planning, I must ask myself uncomfortable questions and plan for a future I hope not to have. I help my clients tackle these concerns too, because one in three seniors currently die with some form of dementia and there are steps we can take to ease the burden on ourselves and our families.

Developing a comprehensive plan with a financial planner is one key step that is better taken sooner rather than later. Waiting until dementia has taken hold, like my father did, can lead to uncertainty and lingering doubts during an already stressful time. A comprehensive plan will include estate planning, investment recommendations, insurance coverage, and a cash flow analysis that incorporates factors such as the rising cost of medical care. These are all important factors for anyone who plans to live into old age, whether dementia is a specific concern for you or not.  

Nearly as important as looking at the numbers is building a relationship with a financial planner you meet with regularly. The more I am able to get to know my clients and their unique situations, the better I am able to identify concerns and help make sure their wishes are carried out if they can’t advocate for themselves. Having dementia also puts people at greater risk for elder abuse, which regular meetings with a trusted financial planner can help uncover or prevent.

At Merriman, we regularly work directly with our client’s other professional advisors, such as accountants, estate planners, and insurance agents. Having a team of professionals that can work together on your behalf is valuable for everyone, but it’s vital for people who can no longer recall the specifics of their financial situation. We also help clients identify family members and other trusted individuals that we can contact in the event that they no longer seem able to make important financial decisions. Many people chose to proactively include their loved ones in financial planning meetings, so their loved ones develop a trusting relationship with their financial planner, and have the peace of mind of knowing who to call if they need help.

We at Merriman want our clients to know that families struggling with dementia have our support. If you have questions about how best to prepare yourself or your family, please don’t hesitate to contact us.

Reason #2 Why Clients Hire Merriman: We Cut Through The Noise

Reason #2 Why Clients Hire Merriman: We Cut Through The Noise

 

At Merriman Wealth Management, there’s nothing we love more than taking on the burden of financial planning so our clients can get back to spending their time and energy doing the things they love.

Over the past few years, we’ve been asking our clients—to hear it in their own words—about the value they gain from working with us. We’ve compiled the top ten reasons why clients hire us and we will be showcasing these responses in this ten-part blog installment. Here is part two, out of ten. 

Reason #2: “They’ve helped me cut through the noise.”

Financial planning comes with a myriad of components and sometimes we all need a fresh perspective to help make sense of what looks just like chaos to us.

When people don’t know where to start because there is simply too much analyze, we call this “analysis paralysis.”

Oftentimes, it’s not getting started at all that is the biggest hindrance to financial progress.

At Merriman, we take what seems to be chaos to you and make a tangible financial plan. An outsider’s perspective—like that of a Merriman advisor—can be crucial in not only getting you started on your financial journey, but also knowing which way to go first. Merriman Wealth Advisors help you discover your financial goals and work towards them. 

In thinking about analyzing decisions, Eric Jonson, Merriman Wealth Advisor and Certified Financial Planner, likes to think of it in the context of a pachinko machine. “When the ball is launched to the very top of the machine, that very first bounce can make a huge difference in where the ball ends up.”

An additional perspective is just like that first bounce. It can set you up for success and cut through the noise of the chaos. Sometimes, that third-party perspective is all that’s missing in getting started—and going in the right direction.

Our wealth advisors go beyond just the investment choices. We’re with you every step of the way.

To learn more about how we can help you unlock financial freedom or to schedule a discovery meeting, contact us via our website or call 206-285-8877.

Check out the previous installment in the series.