How Do I Correct Excess Roth IRA Contributions?

How Do I Correct Excess Roth IRA Contributions?

 

Co-written by: Scott Christensen & Katherine Li

 

Contributing to a Roth IRA is a great way to receive tax benefits for retirement savers. If you already do or are planning to take advantage of this tax savings vehicle, it is important to familiarize yourself with the rules that govern these accounts. The IRS has put in place strict limits regarding the amount that individuals can contribute to their Roth IRAs, as well as income limits for determining who qualifies.

 

If you are a single tax filer, you must have Modified Adjusted Growth Income (MAGI) under $140,000 in order to contribute to your Roth IRA. The amount you can contribute to your Roth IRA begins to phase out starting at a MAGI of $125,000; if your MAGI is greater than $140,000, you can no longer contribute to the Roth IRA. For those who file as married filing jointly, your MAGI must be under $208,000 in order to contribute. The phaseout range in this case applies to those with a MAGI between $198,000 and $208,000. The maximum IRA contribution in either case is $6,000 for those under 50 and $7,000 for those 50 and older.

 

As a result of these strict limits, it is easy for taxpayers to overcontribute. So what happens when taxpayers contribute in excess of their contribution limit?

 

For every year that your excess contribution goes uncorrected, you must pay a 6% excise tax on the excess contribution. In order to avoid the 6% tax penalty, you must remove the excess contributions in addition to any earnings or losses on that excess contribution by the tax filing deadline in April. To determine your earnings on your excess contribution, you can use the net attributable income (NIA) formula.

 

Net income = Excess contribution x (Adjusted closing balance – Adjusted opening balance) / Adjusted opening balance

 

Note: If you find that you have losses on your excess contribution, you can subtract that loss from the amount of your excess contribution that you have to withdraw.

 

Reasons for Overcontribution

 

  • You’ve contributed more than the annual amount allowed.
    • Remember that the $6,000 and $7,000 dollar maximum applies to the combined total that you can contribute to your Traditional and Roth IRAs.
  • You’ve contributed more than your earned income.
  • Your income was too high to contribute to a Roth IRA.
    • Unfortunately, single tax filers who make $140,000 or more and those who are married filing jointly who make $208,000 or more are unable to contribute to a Roth IRA.
  • Required minimum distributions (RMDs) are rolled over.
    • RMDs cannot be rolled over to a Roth IRA.
      • If it is rolled over to a Roth IRA, the amount will be treated as an excess contribution.

 

Removal of Excess Prior to Tax Filing Deadline

 

If you find that you have overcontributed prior to filing your tax return and prior to the tax filing deadline, you can remove your excess contributions before the tax filing deadline (typically April 15) and avoid the 6% excise tax. However, your earnings from your excess contribution will be taxed as ordinary income. Additionally, those who are under 59 and a half will have to pay a 10% tax for early withdrawal on earnings from excess contributions.

  • Keep in mind that it is your earnings that are subject to an ordinary income and early withdrawal tax, not the amount of your excess contribution.

 

If you find that you have overcontributed after filing your tax return, you can still avoid the 6% excise tax if you are able to remove your excess contribution and earnings and file an amended tax return by the October extended deadline (typically October 15). 

 

Recharacterization 

 

Recharacterization involves transferring your excess contribution and any earnings from your Roth IRA to a Traditional IRA. In order to avoid the 6% excise tax, you would have to complete this transfer process within the same tax year. It is also important to note that you can’t contribute more than your total allowable maximum contribution. Thus, you must make sure that you can still contribute more to your Traditional IRA prior to proceeding with recharacterization.

 

Apply the Excess Contribution to Next Year

 

You can offset your excess contribution by lowering the amount of your contribution the following year by the excess amount. For example, say that you contributed $7,000 to your Roth IRA when the maximum amount that you could contribute was $6,000. The next year, you can offset this excess amount of $1,000 by limiting your contribution to $5,000. You are, however, still subject to the 6% excise tax due to the fact that you were unable to correct the excess amount by the tax filing deadline, but you won’t have to deal with withdrawals. 

 

Withdraw the Excess the Next Year

 

If you choose to withdraw the excess the following year, you will only have to remove the amount of your excess contribution, not any earnings. However, you will be subject to a 6% excise tax for each year that your excess remains in the IRA.

 

These rules can be confusing to navigate which is why we recommend involving your tax accountant or trusted advisor in these situations. We are happy to connect you with a Merriman advisor to discuss your situation.

 

 

Sources:

https://www08.wellsfargomedia.com/assets/pdf/personal/goals-retirement/taxes-and-retirement-planning/correct-excess-IRA-contributions.pdf

https://www.nerdwallet.com/article/investing/excess-contribution-to-ira

https://investor.vanguard.com/ira/excess-contribution

https://www.fool.com/retirement/plans/roth-ira/excess-contribution/

 

Disclosure: The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such. Advisory services are only offered to clients or prospective clients where Merriman and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Merriman unless a client service agreement is in place.

 

Fall Items to Check Off Your List

Fall Items to Check Off Your List

 

With fall fast approaching, it’s time to take care of a few things before year end that can also set you up for the start of next year.

    • Retirement contributions and withdrawals – Just as it’s important to make the necessary contributions to your retirement plan based on your financial plan, you must also take your required minimum distribution (RMD) by December 31 to avoid any penalties if above age 72 or own an inherited IRA. The Merriman Client Services team is hard at work making sure these are all completed for clients. Contributions: The deadline for 2021 Roth IRA and Traditional IRA contributions is April 15, 2022.

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Buying a Car: Does It Make Sense to Use Rideshare Instead?

Buying a Car: Does It Make Sense to Use Rideshare Instead?

 

The decision to buy a car today is different than it was a decade ago because of today’s rideshare options. If you’re in the market for a new car, there’s more to think about than shopping for the lowest price or best interest rate. Have you compared the cost of your car to the cost of using rideshare options? We have, and we’d like to share our thoughts.

Cost. Let’s compare some estimated costs of buying a car or using rideshare:

Using rideshare may cost about $7,500 less over a 10-year period—which is not a trivial amount. Keep in mind, this excludes other expenses people often pay when owning a car, such as parking fees or toll fares. For many people, owning a car is probably more expensive than our estimate. However, we’ve kept things simple here, so our cost estimates may differ from your actual costs for both owning a car and using rideshare. In addition to cost, there are other factors to consider.

Lifestyle. Your lifestyle probably also plays a part in your decision to own a car or use rideshare. Let’s meet two different couples who said just that and examine some aspects of their lifestyles:

Judy and Joe are both 35, have two kids ages 8 and 10, and a dog. They live in a house and have two cars parked in their garage.

Kim and Kyle are both 32, don’t have kids, and have two cats. They live in a condo and have two cars, which they both pay to park in their building’s garage.

Location. Location determines a big part of our lifestyles. If you live in a metropolitan area, you’ve probably spent a lot of time considering where you live, where you work, and what your commute is like. Wherever you live, do you commute to work by car? Is having your car a “must”? Here’s what Judy and Joe’s and Kim and Kyle’s locations look like:

Judy and Joe live in Redmond, and both commute to Seattle for work. Their morning commute consists of a 10-minute drive to their nearest park-and-ride, followed by a 40-minute bus ride into Seattle.

Kim and Kyle’s condo is located in downtown Seattle, and they both commute to work on foot. Their daily commute is about a 20-minute walk each way, but they’ll bus or Uber if it’s raining.

Judy and Joe agree that they only need one car to get to the park-and-ride while commuting to work. Kim and Kyle realize that they don’t need their cars in order to get to work and could save a lot of money if they downsize to one or none, especially considering they pay for parking in their building. These instances illustrate the importance of considering location when deciding between owning a car and using rideshare. Likewise, your activity choices also play an important role.

Activities. Activities and hobbies dictate a huge portion of our lifestyle choices. Do you have kids or do your favorite activities involve a lot of driving? If you love the outdoors, could you still get to those hikes you’ve been dying to do without a car? Some recreational activities may be limited when you don’t own a car, so it’s important to consider this when determining if utilizing rideshare options is not only economical but also practical. Here are some of the activities Judy and Joe and Kim and Kyle participate in:

Judy and Joe’s weeknights are spent shuttling kids to and from various sports practices. Once home, they typically enjoy a homecooked meal together. On the weekends, the kids generally compete in sporting events. Occasionally, they also get out of town for a family camping trip in the mountains.

Kim and Kyle spend their weeknights going to the gym. This is often followed by dinner at a friend’s house or a local restaurant. During the weekend, they like to hike, visit Kim’s family on Bainbridge Island, and kayak as often as Seattle’s weather permits.

Judy and Joe agree they likely still need two cars to get the kids to their conflicting practices. They’ve decided to experiment by driving only one of their cars for a couple weeks in conjunction with ridesharing as needed to see if life with one car would work for them. Kim and Kyle agree that they still need one car for their weekend trips and for hauling their kayaks around town. As we can see, our activity choices are also an important consideration in deciding whether to own a car or use rideshare.

Bottom line. Having a car for the sake of convenience may unnecessarily be costing you money. Using rideshare might save you money; however, it may be more practical for you to own a car if you’d like to maintain a certain lifestyle. We encourage you to evaluate your situation.

If you’d like to speak with a financial advisor about your current transportation situation, we can help you determine if it makes more sense for you to own a car or utilize the various rideshare options available today. Please reach out to us. We are here to help you!

 

Sources: 

*https://bettermoneyhabits.bankofamerica.com/en/auto/cost-of-owning-a-car

** https://www.zipcar.com/pricing

***https://www.ridester.com/uber-rates-cost/

Disclosure: The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such.

The 5 Biggest Financial Planning Mistakes Made by Tech Professionals | Recap

The 5 Biggest Financial Planning Mistakes Made by Tech Professionals | Recap

 

I love working with the tech community. I started my career at Microsoft and have since been inspired by the creative and innovative minds of folks working at tech companies large and small. I also enjoy working with tech employees, because as a personal finance nerd, I get to help people navigate the plethora of benefits available that are often only available at tech companies. Between RSUs, ESPP, Non-Qualified or Incentive Stock Options, Mega Backdoor Roth 401(k)s, Deferred Compensation, Legal Services, and even Pet Insurance, it is the benefits equivalent of picking from a menu of a Michelin three-star-rated restaurant.

 

Through my own experience as a tech employee and my experiences now as an advisor working with tech professionals, I’ve identified some of the biggest financial planning mistakes that can hold the tech community back from achieving financial independence and success.

 

Mistake #1 – Not Optimizing Benefits

 

We all are familiar with the paradox of choice. Most people, when faced with a long list of complicated benefits that even some financial professionals struggle to understand, will focus on the areas that are familiar and disregard the rest. Who wants to spend their free time reading about ESPP taxation or the mechanics of Roth Conversions on after-tax 401(k) contributions? Chances are that if you work for a growing tech company, you have very little free time to begin with.

 

While it may not be the most enjoyable use of your evenings or weekends, I can’t emphasize enough how valuable it is to invest the time to learn how to optimize your benefits now. Choosing to invest additional savings in your Mega Backdoor Roth 401(k) over a taxable brokerage account may shave a couple of years off your retirement date. Maximizing HSA contributions and investing the growing account balance can provide for a substantial amount of money to pay for high healthcare costs if you retire before you are Medicare eligible (age 65). Making strategic Roth Conversions during lower income years, such as in early retirement or during breaks from paid employment, can save hundreds of thousands of dollars in future taxes over the course of your lifetime. The list goes on, trust me.

 

If I don’t exercise for a week, or even a month, I probably won’t notice a significant difference in my overall health. If I keep telling myself that I’ll start a workout routine, but years go by without investing my time and energy into making the plan a reality, my physical fitness will take a toll, and I will also lose out on all the amazing benefits that exercising regularly provides. I may look back with regret at some point later in life that maybe certain health issues could have been minimized or prevented if I had spent the time to prioritize what is truly important. It is critical to think beyond how something may impact us in the short term and recognize the long-term impacts of choosing to continue to put something on the back burner. Ask yourself, what impact will this have on my life if I wait a year to prioritize my personal finances? What effect will it have on my life if I wait ten years to prioritize my personal finances? Chances are that impact is even greater than you think.

 

 

Mistake #2 – Building and Maintaining Concentrated Stock Positions

 

I consider a concentrated position to be any investment that comprises over a quarter of your investable assets. It can be easy to accumulate a concentrated stock position in the same company that is responsible for your paycheck. If you receive stock as part of your compensation, without a disciplined plan to sell shares on an ongoing basis, you will continue to accumulate more and more company stock. Over the past several years, countless families have become wealthy because of the stock compensation they’ve received and its seemingly never-ending climb in price. While the strategy of holding onto RSUs and ESPP over the recent past has worked out incredibly well, we know that continuing to maintain a concentrated stock position is incredibly risky if you want to ensure you maintain your newly built wealth.

 

There are two explanations for not reducing a concentrated position that I hear most often: (1) My company has outperformed the rest of the market several years in a row. If I believe in my company and our growth prospects for the future, why would I sell? (2) If I sell my company stock now, I’ll have to pay a significant amount of tax on the gain. Let’s debunk each of these as reasons not to diversify:

 

(1) Typically, returns of a single stock position are intensely more volatile than the returns of a market index. This can work out in your favor, or it can work to your detriment. Historically, about 12% of stocks result in a 100% loss.[1] In addition, approximately 40% of stocks end up with negative lifetime returns, and the median stock underperformed the market by greater than 50%.1 This means that a few star performers drive the positive average returns of the market. The odds of randomly picking one of these extreme winners is 1 in 15.1 If you’ve been lucky enough to hold one of these outperformers, I encourage some humility around acknowledging that maybe being in the right place at the right time has attributed to your rapid accumulation of wealth.

 

Companies that achieve such success and become the largest company in their sector may become subject to what is called the winner’s curse. Since the 1970s, data shows that sector leaders underperform their sector by 30% in the five years after becoming the largest company in that sector.1 Over a long time horizon, you are probably more likely to obtain positive investment returns by ensuring you hold the future Microsofts and Amazons of the world through broad diversification, not concentration.

 

(2) I hate to tell you this, but unless you hold onto an investment until you die, you will have to pay tax on the growth at some point. I encourage people to think of paying long-term capital gains taxes as a good thing, because it means your investments went up and you made money. A surprisingly small fluctuation in stock price can wipe out any benefit of delaying the recognition of capital gains tax. As advisors like to say, “Don’t let the tax tail wag the dog.”

 

 

Mistake #3 – Burning Out

 

There has been a significant decline in Americans’ use of vacation time. Twenty years ago, the average American took almost three weeks of vacation per year. As of 2016, Americans average only about 16 days of vacation per year, almost a full week less. You might think that improvements in technology over this 20-year timeframe would allow us to be more productive and therefore take more time off. It seems that the curse of this increased productivity is a greater reluctance to disconnect from work and give ourselves the permission to unplug.

 

Taking more time off has a positive impact on your physical and mental wellbeing. For those that need more convincing to submit a PTO request, research has found that those who take vacations are more likely to get promoted than those who underutilize their available time off. Taking steps to prevent burnout can not only lengthen your career and make it more sustainable, but it can also get you an increase in title and a pay increase. If that isn’t a compelling argument for taking a vacation, then I don’t know what is. At Merriman, we want to help you achieve your definition of living fully, whether to you that means taking time off for an epic adventure or maybe you have a larger goal of making work optional.

 

 

Mistake #4 – Poor Risk Management

 

Here are some fun facts for your next socially distant dinner party. If you are a 40-year-old male and you were in a room with one hundred other 40-year-old men, statistically speaking, two of those men will pass away before they reach their 50th birthdays. Another seven will have passed away before they reach their 60th birthdays, and another thirteen won’t make it to their 70th birthday. Close to a quarter of forty-year-old men will die before age 70. Do I have your attention now?

 

I don’t bring these grim statistics up to scare you. I bring them up because I’ve seen first-hand how a failure to plan for risk and the realities of life can cause significant financial harm during an already emotionally devastating time. Nobody enjoys talking about death and disability, but it is a fact of life that we will all pass on at some point. It is only fair to the people we love that we at least protect them financially.

 

Estate Planning and Insurance Planning are often the two most overlooked areas in a financial plan for folks that have not worked with an advisor. Financial advisors will also tell you this is often where we see our clients procrastinate the most. There are many things in life that feel urgent but are not actually important. We put off the important items, like drafting an Estate Plan, to answer our emails and do other tasks that have more of an immediate pull on our time and energy. There will always be those items to complete that feel pressing, but try to think through the consequences of not completing your will or obtaining life insurance if, in fact, your time has actually run out.

 

 

Mistake #5 – Not Hiring an Advisor

 

Yes, I get it. Hiring an advisor means paying fees. And hiring a bad advisor can be more harmful than helpful. But just like everything else in life, there can be a lot of value in employing the knowledge and resources of an expert. I don’t cut my own hair for a reason, and I wouldn’t dream of providing my own defense in any sort of lawsuit. If you have a handle on your investments, are rebalancing your portfolio like a pro, and have done extensive research on your company’s benefits and how to utilize them, then by all means, carry on, you fellow financial-planning nerd. I wish everyone fell into this category, but it is rare that I talk with someone who doesn’t need help in at least one major financial planning area.

 

If you do hire someone, be sure to hire a fee-only fiduciary advisor. You’ll need to explicitly ask this question, and if the answer is no, I suggest you run far, far away. Also, if you’re afraid of commitment, ask what the process and cost is of leaving an advisor if you aren’t seeing value from the relationship. Work with an advisory firm who isn’t going to make it difficult or expensive to end your relationship. Without any significant barriers to exiting the relationship, your advisor will be motivated to make sure you are getting great service and will want to remain a client for years to come. If you’re looking for an advisor you’re compatible with, consider perusing our advisor bios. If you’d like to discuss your situation, don’t hesitate to contact me.

 

 

 

1 Avoid Gambler’s Ruin: Bridging Concentrated Stock and Diversification

 

Disclosure: The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such.

 

 
The 5 Biggest Financial Planning Mistakes Made by Tech Professionals | Mistake #3

The 5 Biggest Financial Planning Mistakes Made by Tech Professionals | Mistake #3

 

I love working with the tech community. I started my career at Microsoft and have since been inspired by the creative and innovative minds of folks working at tech companies large and small. I also enjoy working with tech employees, because as a personal finance nerd, I get to help people navigate the plethora of benefits available that are often only available at tech companies. Between RSUs, ESPP, Non-Qualified or Incentive Stock Options, Mega Backdoor Roth 401(k)s, Deferred Compensation, Legal Services, and even Pet Insurance, it is the benefits equivalent of picking from a menu of a Michelin three-star-rated restaurant.

 

Through my own experience as a tech employee and my experiences now as an advisor working with tech professionals, I’ve identified some of the biggest financial planning mistakes that can hold the tech community back from achieving financial independence and success.

 

Mistake #3 – Burning Out

 

There has been a significant decline in Americans’ use of vacation time. Twenty years ago, the average American took almost three weeks of vacation per year. As of 2016, Americans average only about 16 days of vacation per year, almost a full week less. You might think that improvements in technology over this 20-year timeframe would allow us to be more productive and therefore take more time off. It seems that the curse of this increased productivity is a greater reluctance to disconnect from work and give ourselves the permission to unplug.

 

Taking more time off has a positive impact on your physical and mental wellbeing. For those that need more convincing to submit a PTO request, research has found that those who take vacations are more likely to get promoted than those who underutilize their available time off. Taking steps to prevent burnout can not only lengthen your career and make it more sustainable, but it can also get you an increase in title and a pay increase. If that isn’t a compelling argument for taking a vacation, then I don’t know what is. At Merriman, we want to help you achieve your definition of living fully, whether to you that means taking time off for an epic adventure or maybe you have a larger goal of making work optional. Whatever your goals, we’re here to help you!

 

Be sure to read our previous and upcoming blog posts for additional mistakes to avoid as a tech professional.

Disclosure: The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such.

Downsizing? Tips for Getting the Best Property Size

Downsizing? Tips for Getting the Best Property Size

 

Downsizing has been a rising trend among retired and almost retired Americans. But the drama last year due to the pandemic has caused younger Americans to rethink their priorities.

Decade-high unemployment figures, soaring healthcare and health insurance costs, and loneliness have forced a fifth of adults to move homes. Many have made significant decisions about their careers, lifestyles, and relationships.

Americans are rethinking what they value and how they want to spend their precious moments.

Is your monthly mortgage tab far too high? Do you think your family could be just as comfortable in a smaller place (no matter your age)?

You are not alone. Millennials prefer better lifestyles to humongous homes. If you are about to retire and want to make the most of your golden years (paying fewer bills and being around people, not empty hallways or dusty furniture), read on. These tips will help you make the most from downsizing.

 

What is downsizing anyway?

When you move to a smaller home to cut down on the upkeep and mortgage costs, you are downsizing. This change is often associated with retirees or those who are approaching retirement age. But a growing number of younger professionals are opting for a more fulfilled life—as opposed to more square feet.

Candidates for downsizing often do not have a large retirement nest egg and have smaller families.

Although downsizing should help you cut down your costs, that’s not always the case. Soaring demand for homes due to dwindling mortgage rates has triggered a 9.5% increase in prices. Downsizing the square footage of your home may not always result in lower bills. Therefore, you should think and research before executing such a plan. These tips will help you make a more fulfilling choice.

 

Be smart when downsizing

Smart downsizing means ensuring the move results in maximum rewards for your goals. Accordingly, you need to figure out your goals first. Consider how downsizing will affect your cost of living and healthcare. After you take in the considerations and make the calculations, consult the experts and make your move.

 

Figuring out your goals

Oftentimes the goals for downsizing focus on improving your financial state and maintaining or enhancing your lifestyle.

Transamerica did a survey and found that more than 50% of retirees consider cost of living and proximity to family and friends as the most critical factors when choosing where to live. Nearly 40% considered healthcare as the most important.

Concerning financial goals, the objective is to access as much equity as possible or maximize savings on monthly mortgage payments.

As for lifestyle goals, the objective is to minimize any adverse impacts on family and ensure access to services, amenities, and quality healthcare.

What impact will downsizing have on your finances and your lifestyle?

 

Think about how downsizing will affect your expenditure

Reach out to a financial advisor for an objective review of how the move will affect your financial status. Darren Robertson, a real estate agent at Northern Virginia Homes, explains, “A cost reduction of $500 per month in a 15-year, $200,000 mortgage at 4.5% could slash four years from the term and save you $25,000 in payments.”

Downsizing can also help you cut down on living expenses. How much do you spend on groceries, travel, and other services? If changing towns is not out of the question, use this calculator by CNN to estimate how your cost of living would shift.

 

What about healthcare?

If you are about to retire or are retired, consider health costs separately.

Although most Americans 65 years and above are enrolled in Medicare, you should brace yourself for a “health cost gut punch.” Retirees in America incur healthcare costs averaging $122,000 between the age of 70 and death.

Worse still, the inequalities of healthcare services in the US are no longer a myth—the pandemic just made them more apparent.

Look for ways to boost your Health Savings Account and make the most of it. Also, consider where you can access high-quality, affordable healthcare.

 

Consult the experts

Perhaps you are not so proud of some of the moves you made when acquiring your current home. This could be your chance at redemption.

Remember, this is for the long haul. You want to clinch a great deal that is not too far away from family, friends, and opportunities.

Scope the real estate market and reach out to a couple of agents. Find out what they think about the market and about selling your home and downsizing. Also, enquire about smaller homes in the market. If you find some that you like, ask the right questions about them, keeping in mind how much you want to save.

Experienced professionals will help you identify the best options for low-priced homes in your preferred locations. They can even recommend excellent new spots based on real estate projections and trends. They will help you to:

  • Evaluate your financing options.
  • Negotiate great deals amidst stiff competition.
  • Save on taxes and offer practical ways you can cut down your costs.

 

Commit to substantial downsizing

Don’t wait until after the move to start downsizing your belongings. Start to declutter as soon as you make the decision, beginning with smaller items.

Take photos of those kindergarten crafts by the kids (who are all grown up now) and keep the memories in the Cloud. Donate or have a garage sale for old furniture and any other antiques you’ve not touched in ages.

The more you visualize yourself in a smaller space, the more likely you will make it happen.

 

In conclusion, when downsizing, the best property sizes are not always the least in square feet. They are the properties that offer an opportunity to maximize your financial and lifestyle goals. These tips will help you to make smart decisions in this area.

 

 

 Written Exclusively for Merriman.com by Madison Smith

Madison Smith is a personal and home finance expert at BestCompany.com. She works to help others make positive financial stride in their lives by providing expert insight on anything from credit card debt to home-buying tips.

 

 

Disclosure: The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such.