Secure 2.0 Updates: Changes to Know for Retirement
As part of the fiscal 2023 spending package, Congress passed SECURE 2.0 to incentivize retirement savings. These changes could create opportunities for your retirement savings strategy. We will do a brief overview highlighting the key changes you need to know about, including tax credits, required minimum distributions, catch-up and self-correction, contributions, and rollovers.
Brian Bohnsack, Senior Vice President, and Mike Rogers, President of 360 Financial, will guide you through the changes and how they impact you and your retirement.
Retirement planning for self-employed people may seem very overwhelming. When you have a full-time job, your retirement planning is in the form of a 401(k). But when you’re self-employed, the path is less cut and dry. However, with proper planning, you can retire just as early as someone with a 401(k).
This article explains how to plan for retirement if you’re self-employed.
You don’t have an employer offering a 401(k), but saving for retirement is essential. You don’t want to work forever, and you won’t be able to keep working as you age. Saving now is key to help you retire, relax, and afford a home care facility in your future. Think of saving for retirement as self-care for your future self. Planning for retirement when you’re self-employed starts with knowing your options.
Retirement Options for Self-Employed People
The freedom of self-employment offers options. Just like you can choose how to run your business, you also have to choose what retirement account you want to open.
Traditional or Roth IRA:
IRAs are a great option if you’re just starting out and have no employees. If you just left a full-time job, choose an IRA, because you can roll your old 401K into a Traditional or Roth IRA. Both types of IRAs offer tax benefits. The contribution limit is $6,500 in 2023.
One-Participant 401(k) i.e. Solo 401(k):
This is another great option for self-employed people who have no employees, and these can also cover your spouse. These plans have the same rules and requirements as any other 401(k) plan. The contribution limit in
2023 is $22,500, but if you’re over 50, you can contribute $30,000.
SEP IRA:
If you have an established business with no or a few employees, the SEP IRA is a great choice. If you have employees, you will have to contribute the same percentage for each employee—including yourself. You’ll be treated as an employee in this case. You also have to give contributions to every eligible employee, but the burden of making contributions is entirely on you. In 2023, you can contribute the lesser of $66,000 or up to 25% of compensation or net earnings. You do have a limit of $330,000.
SIMPLE IRA:
If you have a large business with up to 100 employees, we recommend the SIMPLE IRA. This retirement plan allows employees to contribute as well. This is an easy account to open, but you make mandatory contributions to employee accounts. This may be costly if you have a lot of employees. You can contribute up to $15,500 in 2023.
Profit-Sharing Plan:
If you have a lot of employees, we recommend a Profit-Sharing Plan. This allows you to contribute what you want to employees. However, only you will contribute to this plan, not your employees. If you have a profit-sharing plan, you can also have other retirement plans.
Money Purchase Plan:
Another option is the Money Purchase Plan. This is a good option if you have a lot of employees. This plan allows you to grow big accounts, but you do have contribution requirements you have to follow. You’ll have to contribute certain percentages of employee’s salaries, but this may mean highly compensated employees get a lot more.
As you can see, you have a variety of options when it comes to planning for retirement. We recommend researching your options, and focusing on what type of plan is best for you at this stage in your career. You can always open a different type of account down the road.
If you do decide to work on your personal financial plan alone, here’s what you can expect.
What retirement plan works best for someone who is self-employed?
There’s no one-size-fits-all for self-employed retirement planning. It truly depends on you and your business.
Generally, if you have no or few employees, we recommend:
> A Traditional or Roth IRA
> One-Participant 401(k) i.e. Solo 401(k)
> SEP IRA
If you have a business with employees to consider, choose from:
> SIMPLE IRA
> Profit-Sharing Plan
> Money Purchase Plan
Again, it all depends on your circumstance. If the choice isn’t clear as you research these options, you can always work with a financial planner or advisor to help you.
Can a self-employed person have a 401(k)?
Yes. Although you won’t have an employer-sponsored 401(k), you can still have a 401(k).
How can I open a 401(k) without an employer?
Open up a One-Participant 401(k) i.e. Solo 401(k). You can also share this account with your spouse. It will work similarly to any other 401(k).
IRA for Self-Employed People
An IRA is a popular choice among self-employed people. You’ll enjoy tax benefits with every type of IRA, but what tax benefits you will reap depends on what type you choose. For example, with a Roth IRA, you reap tax benefits when you withdraw the money in your retirement. With a Traditional IRA, you’ll get the tax breaks when you put it in.
Overall, IRAs are great because they have less restrictions when you want to take the money out early. You’ll also have less restrictions when you retire. Also, if you’re a disciplined saver, you’ll often be able to have more money in retirement than other types of accounts.
If you have a few employees, you can open up a SEP IRA. If you have more employees, open up a SIMPLE IRA.
Well-Positioned Retirement Plans For High-Income Self Employed People
If you earn more money, we highly recommend a SEP IRA. With this type of account, your annual contribution cannot exceed the lesser of 25% of your total compensation or $66,000 in 2023. Obviously, you can contribute a lot more per year than someone with a Traditional or Roth IRA—they can only contribute $6,500 in 2023.
If you have employees, we recommend the Profit-Sharing Plan. This is because you can contribute what you want to your employees, and that doesn’t have to be equal to yourself. If you want to save a great amount for yourself, you have more freedom to do so with this plan.
Retirement Plans Better Suited for Self-Employed People with Employees
If you have employees, certain types of plans won’t be ideal for you. Here are the options we recommend choosing from:
> SIMPLE IRA
> Profit-Sharing Plan
> Money Purchase Plan
All of these retirement accounts will help you save for your own retirement, along with your employees.
Best Retirement Plan for S Corp Owners
If you have an S Corp, we recommend choosing between:
> Traditional or Roth IRA
> SEP IRA
> SIMPLE IRA
> One-Participant 401(k) i.e. Solo 401(k)
How Do I Set Up a Self-Employed Retirement Plan?
Choose what type of account you want, then you’ll open an account with a brokerage like Vanguard or Ameritrade. If you’re not sure what type of account to do or you want help throughout the process, work with a financial planner or advisor. They will help you with tax planning.
Key Takeaways:
You can plan for retirement as a self-employed person.
You have options, but getting started as early as possible is key.
The plan that is best for you depends on your current circumstance.
If you need expert advice and guidance, work with a financial advisor.
Plan for Retirement with 360 Financial
At 360 Financial, your retirement planning is our priority. We want you to be as financially comfortable as possible throughout retirement. We’ll help you make your money work for you as you age.
About the Author
Mike Rogers
Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This unique, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.
In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”
At 360 Financial, our clients come first. You deserve personalized attention from an advisor at our firm. You’ll be happier and more confident to know that your needs always come first. Book a 15-minute introductory call with us today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The financial planning process documents your financial goals and the long-term strategy you will follow to achieve these goals. The plan is comprehensive but highly specific to your needs, obstacles, and goals. The financial planning process also includes implementing your plan, monitoring your financial progress, and making updates as needed.
A financial planner can help you every step of the way. They help you make a plan to reach your financial goals, including:
Now that you understand what the financial planning process is, we’ll break down the process into steps.
What Are the Steps in the Financial Planning Process?
The financial planning process consists of six steps:
1 – Understanding your financial circumstances.
Your financial plan will be specific to you, so your financial planner will make sure they completely understand your financial circumstance. They’ll also try to understand your personal circumstances. This step ensures your financial plan is comprehensive and specific to your needs.
2 – Identifying goals.
Your financial planner will want to understand your top financial goals. Whether buying a house, saving for retirement, or creating a college fund, you will explain your financial goals.
3 – Analyzing your current course of action.
You’ll also explain what you’re currently doing with regard to your financial goals. Knowing where you’re starting from helps your financial planner create a more realistic plan to help you reach your goals.
Now that your financial planner knows all about your goals and situation, they will begin to create and record financial planning recommendations. They’ll present their recommendations to you, giving you options. At this point, it’s important you pick a plan that you’re comfortable and happy with.
5 – Implementing the financial plan.
Once you pick the plan you’re comfortable with, you’ll have to begin implementing it.
6 – Monitoring progress and updating.
As you implement your financial plan, you’ll monitor your progress. Then you can report back to your financial planner, and if something isn’t working, your financial planner will change it. On the flip side, if some aspects of your plan are working better than expected, your financial planner may adjust your plan to include more of the successful strategy.
Many people find financial planning easier when they work with a financial planner. Your financial planner will take the stress of making decisions off your shoulders, and they will only recommend their tried and true strategies.
Financial planners are professionals, and they can make the entire process easier for you.
What Are the Steps in Personal Financial Planning?
If you plan to work on your personal financial plan without hiring a financial planner, you’ll have to dedicate far more time to research, building strategies, and making decisions.
Here’s what the financial planning process looks like:
Set your financial goals.
Come to an understanding of what your current financial situation is.
Build financial strategies, including alternatives so you have options.
Choose your financial plan.
Implement your financial plan.
Monitor progress.
Do research to update your current plan to meet your goals.
As you can see, when you do this process all on your own, it is much more involved than when you work with a financial planner. Many people prefer to work with a financial planner because they have to dedicate much less time to the process, and they typically get better results.
Key Takeaways
The financial planning process includes setting your goals, implementing your plan, monitoring your progress, and updating your plan.
A financial planner can make the entire process far easier for you. Doing the entire process alone can be far more work than you have time for.
It pays off to hire an expert who knows how to help you pursue your goals.
Financial Planning and Wealth Management Services at 360
At 360 Financial, we care about your happiness and future. We’ll help you pursue your most important financial goals so you remain comfortable and confident in your future. We are financial advisors, wealth managers, and financial planners with years of experience helping our clients achieve their goals with a big-picture plan. We also help you with wealth management, estate planning, and retirement planning.
About the Author
Mike Rogers, AIF®
Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This unique, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.
In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”
At 360 Financial, our clients come first. You deserve personalized attention from an advisor at our firm. You’ll be happier and more confident to know that your needs always come first. Book a 15-minute introductory call with us today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Inflation is increasing, costs are rising, and financial insecurity is a huge concern for many people across the globe. Now is the perfect time to get serious about managing your finances and reaching your financial goals—and a financial advisor can help you along the way. Today, we’ll be explaining how to choose a good financial advisor.
If you have a financial goal but are unsure what steps to take, a financial advisor can help you create an actionable, achievable plan. When you follow their plan, you can meet your major financial goals, such as:
Buying a house
Investing
Retirement planning
Saving for your child’s college education
Whatever financial goals you have, your financial advisor will help you create a plan to reach those goals—but they will also assist you along the way.
What does a financial planner do to help their clients?
When you work with a financial advisor, you won’t be following their financial plan on your own. Your financial advisor will provide more hands-on services to help you execute your plan.
These services include:
Managing your investments
Acting as your stock broker
Advising and arranging insurance coverage
Strategizing estate planning
Making financial decisions
A financial advisor is perfect for you if you want help implementing your financial plan.
Wealth Management vs. Financial Planning
It’s common to wonder if financial planning overlaps with wealth management. Here’s how to differentiate the two services: While financial planners consider every aspect of your finances—from insurance to everyday expenses—wealth managers typically only focus on assets, investments, will and trust services, and estate planning.
Costs of Working with a Financial Advisor
Every financial advisor is different—and so is how they charge for their services.
Financial advisors charge for their services in a few ways:
Flat hourly rate (typically between $100 and $400 per hour)
Flat annual fee (ranging between $2,000 and $7,500 per year)
Commission on investments or products, which will be a certain percentage
A certain percentage of your portfolio (often 0.25% to 1% per year)
It all depends on the financial advisor you choose, so be sure to ask this question while you are vetting your options.
Benefits of a Good Financial Advisor
A good financial advisor helps you build wealth by:
Keeping you on track and reminding you of your financial goals
Making financial decisions that are in your best interest (so you don’t have to)
Providing guidance and assistance along your financial journey
And most importantly, a good financial advisor is trustworthy, giving you peace of mind on a daily basis. You’ll no longer be working towards a prosperous future on your own but with the help of an expert.
Looking at a Financial Advisor’s Credentials
If you’re looking for a financial advisor, make sure they hold a FINRA Series 65 license. This license is the most important credential that distinguishes a financial advisor from a financial planner.
They may also hold other credentials, including:
Certified Financial Planner (CFP)
Chartered Financial Analyst (CFA)
Chartered Financial Consultant (ChFC)
Certified Investment Management Analyst (CIMA)
All of these extra credentials give financial providers more expertise and knowledge to help you create and execute your financial goals.
Common Questions About Working with a Financial Advisor
What should I look for when interviewing a financial advisor?
When you’re interviewing financial advisors, look for an advisor that is a fiduciary. Legally, fiduciaries are required to put the financial interests of their clients above their own—but not all financial advisors are fiduciaries. Nonfiduciaries are not required to give you the same level of financial loyalty that fiduciaries are.
Always choose a fiduciary over a nonfiduciary.
What is most important about choosing a financial advisor?
Aside from looking at credentials and choosing a fiduciary, specialties are another important aspect of financial advisors. When you know your financial goals, you can pick a financial advisor who specializes in your financial realm. For example, if your main goal is to improve your investments, you can find a financial advisor who has focused on investments throughout their career.
Look for financial advisors who have specialties that align with your goals.
How do you know if a financial advisor is trustworthy?
Here are some signs that help you know if a financial advisor is trustworthy:
The financial advisor knows your goals, remembers them, and prioritizes them
The advisor speaks openly about financial risk, and educates you about it
You clearly understand the fees that you would pay if you choose this financial advisor
Your advisor wants to meet regularly to discuss your portfolio
Important Questions to Ask Every Financial Advisor You Meet
To help you find the right financial advisor for you, here are some questions to ask:
Are you a fiduciary?
What are your certifications and qualifications?
Do you have any specialties?
What is your investment philosophy?
What are the fees and costs of working with you?
How regularly do you meet with your clients?
What makes your client experience unique?
On top of these questions, don’t hesitate to ask personal questions that will help you get to know the personality of your advisor. A personality alignment is just as important as a professional alignment, so you can ask about their values and their hobbies.
Working with a Major Bank or Wealth Management Firm vs. a Smaller Independent Firm
You can have luck working with a major bank or wealth management firm, but we recommend working with a smaller independent firm. At a smaller firm, you won’t be just another number, but a priority, and your advisor will take more time to get to know you, your goals, and your dreams.
At 360 Financial, part of our philosophy is to treat our clients like family. Your financial advisor will take the extra time to get to know you on a deeper level so that your financial plan meets your needs.
Why You No Longer Need to Find Your Advisor Locally
In the past, your only option was to find an advisor locally. Now, thanks to advancements in technology, you can work with any advisor across the country remotely. Sticking to local advisors can be very limiting, so we recommend considering remote options.
Work with Your Financial Advisor Online
The best fit for you may be just a Zoom call away at 360 Financial. We’re more than happy to work with you remotely. We connect with families all across the United States, and we’d be happy to add you to our financial family.
Key Takeaways
A financial advisor creates your plan and implements it, advising you along the way.
Look for a financial advisor that has a FINRA Series 65 license.
Look for a financial advisor that is a fiduciary.
Ask the right questions to find a financial advisor you trust.
Financial Planning and Wealth Management Services 360 Financial Offers All Clients
We’re here to help you with your big picture planning. Financial planning is not one-size-fits-all, and you need an advisor that is in tune with your goals and needs—which is what we specialize in at 360 Financial.
We focus on tax strategies, income planning, legacy planning, risk management, investment planning, and estate planning. 360’s financial advisors consider your entire financial picture when creating a plan for you.
Schedule a Call
At 360 Financial, we believe that every client deserves personalized attention from our team of experts. You can be confident in knowing that your financial needs are our first priority.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
While there’s no magic formula to making money and growing your wealth, there are certain things you can do to stack the odds in your favor.
Starting at a young age is key because you’re more likely to develop good habits – which can make all the difference in achieving future financial success. For people in their late teens and twenties, this is the time to learn about finance and start saving for your financial future. The younger you are, the more time your savings and investments have to grow.
This article will give you tips on how to start saving, investing, and managing your money.
Why is Financial Planning Important at a Young Age?
The most valuable thing in life is time, and when you’re young, you have it.
The younger you are, the more time you have to make money. You also have more time to let your money grow through either investments or savings. Also, you have more time to take risks—which increases your rewards—and more time to make financial mistakes and learn from them.
Another reason it’s important to plan financially at a young age: Now is the time that you are building your habits. If you build habits that allow you to succeed financially now, you will carry those with you throughout the rest of your life.
Top 5 Financial Planning Tips for Young Adults
Here are our tips to help you plan financially:
1. Earning more at a younger age
Earning more money is the first step to financial freedom. You can’t save, manage, or invest money if you don’t have it. That’s why it’s so important to start earning more right away. While your mind might jump to side hustles, we urge you to try to work smarter, not harder. After all, no one wants to be constantly overworking themselves.
While side hustles can be great, first, it’s important to find a full-time income that adequately pays you for your skills. It’s important to know your worth by performing market research, so you can ask for enough and not under-sell yourself. Even after you get a job, it may pay off to keep yourself on the market. Wage growth for job switchers is 47% higher than for those who stay in their current job. This is because you have negotiating power when you’re switching jobs.
If you’re struggling to find a full-time job that pays enough, consider becoming self-employed. While it’s not the right path for everyone, it can potentially help you earn more.
2. Budgeting and managing your money
Once you start earning money, you need to budget and manage it — otherwise, you’ll spend it all too fast. You’ve probably heard the saying, “You can’t manage what you don’t measure.” When it comes to your money, that’s especially true.
When you know where all your money is going, it becomes easier to make decisions about how you want to spend and save. The first step is to simply record and analyze how you’re currently spending money, and where you can make changes.
After you analyze where your money is going, now it’s time to create a budget. A budget is a detailed plan for how much money will be coming in and going out over a given period of time.
Remember: A budget is a plan, and it won’t always be executed perfectly. Give yourself grace when you make mistakes, but continue to track your spending so you can avoid those mistakes next month.
3. Investing as a young adult
When you start budgeting and managing your money, you will begin allotting some towards savings. But letting ALL of your savings sit in a bank account isn’t the best way to grow your money. While savings are undoubtedly essential, we also recommend investing a certain percentage of your income monthly.
Investing is more of a risk, but it has a much higher reward than saving. And because you’re young, those risks are easier to take because you usually won’t be needing your money for decades—giving it time to grow again, even if you lose some along the way. You’ll keep your money in your investment account for the long-term and ride out any short-term downdrafts.
Investing your money will likely yield high returns, and it’s best to get started as a young adult.
4. Saving for a financially-free lifestyle
As we mentioned previously, saving is extremely important. Your main goal should be cutting your spending in unnecessary areas and allotting a certain amount of money each month into your savings.
Now is the time to save for financial freedom. This means you’ll have the money you need to live the life you want to live. Ideally, this means you create enough income, so you don’t have to work after you retire.
When you’re old, you won’t want to be spending your days working. You want to work and save now so that you can enjoy your older years in peace. But the best thing about savings, unlike investments, is that if you have an emergency, you can use these funds to help you.
We recommend starting an emergency fund first, which is a savings account that is meant to be used during a crisis. After that, start building a savings fund that you ideally won’t touch until retirement.
5. Building your wealth and protecting it
Building your wealth is a process that involves making, managing, investing, and saving money. You also have to protect your wealth as you grow up from avoidable losses and risks. Protecting your wealth means getting great insurance and working with a financial advisor.
All of which can take stress and tasks off your shoulders. Plus, a financial advisor is an expert who can get you better results than if you manage your money on your own.
How To Do a Financial Plan in Your 20s
When you create a financial plan, whether with a financial advisor or on your own, there is a process to follow. Here are the steps:
Set your financial goals
Understand what your current financial situation is
Analyze your current course of action
Research financial strategies to help you reach your goals
Build financial strategies, including alternatives, so you have options
Choose your financial plan
Implement your financial plan
Monitor progress
Do research to update your current plan to meet your goals
However, when you work with a financial advisor, they will take on the majority of the grunt work, help you make decisions, and monitor your progress.
Managing an Inheritance
With more money comes more responsibility. While you have a great opportunity to build upon your wealth by managing your inheritance properly, there’s also a great risk of overspending and causing your inheritance to vanish quickly.
If you have received an inheritance, we highly recommend working with a financial advisor. They can help you properly invest your money so that it grows.
Financial Advisor for Young Adults
The prospect of working with a financial advisor may seem intimidating, but it really isn’t. The important thing to remember is that a good financial advisor wants to help YOU succeed and meet your financial goals. Many advisors work with young adults, and most have pricing that scales with you.
Overall, when you’re looking for a financial advisor or financial planner, it’s essential to find someone you trust. You want to feel comfortable with them and talk openly and honestly with them. Avoid any advisors who make you feel intimidated.
Key Takeaways
The younger you are, the more time you have to earn and build your wealth.
When you’re young, your habits are important and carry with you for the rest of your life. Now is the time to create financially healthy habits.
Budget, manage, invest, and save your money.
If you need expert advice and guidance, work with a financial advisor.
Next Steps
At 360 Financial, we want you to be confident that you have a financially comfortable future. We’ll help you create a plan, execute it, and monitor your progress so that you can be financially free in the future.
About the Author
Mike Rogers
Mike Rogers is the founder and president of Minnesota-based wealth management firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This unique, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.
In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”
At360 Financial, our clients come first. You deserve personalized attention from an advisor at our firm. You’ll be happier and more confident to know that your needs always come first. Book a 15-minute introductory call with us today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
As the year begins, probably the last thing on your mind is filing your taxes in spring. But if you start assembling the necessary documents and information now, you’ll experience less stress and be in a far better position come April. Luckily, tax day is a few days later than usual in 2023—since April 15 falls on a weekend, and the following Monday is a holiday, the deadline for filing this year’s taxes is April 18. So even if you don’t get a refund, you’ll at least have a later deadline!
Gather your tax documents and information
Preparation is the key to keeping any tax-filing stressors at bay, so you’ll want to check your inbox and mailbox regularly in the coming weeks. As employers are obligated to issue W-2s by January 31, you may be receiving important tax documents within a few weeks. Also be on the lookout for other important documents you’ll need for filing your taxes, such as 1099 forms reporting any investment income and 5498 forms noting contributions and rollovers to individual retirement accounts. If you expect to be receiving multiple tax documents, consider having a large envelope or basket that you can keep the documents in as they arrive in the mail and creating a system for storing the ones you receive digitally. This way nothing will get misplaced before you file your taxes. You will also need the social security numbers for yourself, your spouse, and any dependents, so make sure you know these or have them noted in a safe place. If you plan to use a preparer for your 2022 taxes, be aware that some will ask you to provide them with the necessary documentation by a certain date so they can meet the April 18 filing deadline.
Document your credits and deductions
Deductions can lower your taxes since they reduce your taxable income, so claim as many as you legally can. Gather documentation for any donations, expenses for medical care, mortgage interest, retirement account contributions, and local and state taxes you paid in 2022. Store these documents with your other tax documents. You will also want to organize your documentation for any tax credits you plan to claim, such as the child tax credit, the child and dependent care tax credit, credits for tuition paid for education, the “savers credit” for contributions to a 401(k) or IRA, and credits for any energy-saving home improvements you made in 2022.
Review your estimated tax payments
If you are a freelancer or own your own business, you may have made quarterly estimated tax payments on your earnings to the IRS during the year, which you will have to note when you file your taxes. To help make the process smoother, make sure you know how much these payments were in advance. You can check by looking back over your bank or credit card statements from this year.
Look ahead
If you really want to be an overachiever, once you’ve gathered all the documentation necessary for filing your 2022 taxes, you can start getting organized for 2023! Put a system together now for saving next
year’s pertinent receipts and information so you’ll have them at the ready when you need to file your taxes in 2024.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
It does not matter how much money you have today; you still must know the details of what you are worth. Understanding your financial situation can help you develop a retirement plan, pay down debt, draft a comprehensive estate plan and live with financial independence.
To figure out your net worth, you should calculate the amount by which your assets (what you own) exceed your liabilities (what you owe). If your assets are greater than your liabilities, you have a positive net worth and vice versa.i
Doing this can provide you with valuable insight into what you can do to continue the plan toward financial confidence, or maybe it is an eye-opener to overspending. This knowledge may allow you to see where you can adjust toward more beneficial financial decision-making.
What are assets?
Assets include real estate, bank accounts, investment instruments, retirement funds, brokerage accounts, and personal items like your car, boat, airplane, jewelry, or other collectibles. Remember to include those intangible assets you might own, like patents, intellectual property, trademarks, etc.ii
What are liabilities?
Liabilities include mortgages, credit card debt, student loans, medical bills, personal loans, settlements against you in court, etc. This may also include money you might owe to someone or an organization.iii
Because we have so many different assets of varying values, assigning accurate values to your assets can become difficult. It is essential not to inflate your net worth, thus making it more challenging to prepare a strategy that you will be able to follow.
One way to determine the value of what you own is by comparing your assets to similar assets in your area that are for sale or that have been recently sold.
Over the years, your net worth will fluctuate. The immediate increases and decreases are less significant than the trend that develops over time. It is the trend that you want to learn how to expose and observe. As you grow older and earn more income from work and investments, build equity in your home, increase your assets and pay down your debt, your net worth can potentially grow, but it requires discipline, budgeting, and planning. It is never too early to get the guidance you need from an experienced financial professional.
The following tips may help you take your first steps toward addressing your financial goals and needs:
Pay down debt
Spend carefully
Sell unused or unwanted assets
Recover outstanding payments
Save and invest wisely
Work with a financial professional to develop a financial strategy.
Monitor your progress regularly.iv
Part of knowing what you are worth today is being able to build a customized financial strategy that works for your goals at your level of risk. A financial professional can help you make smart decisions by thoroughly understanding your financial situation. Consult a financial professional today.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Financial Marketing Solutions.
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i What Is Net Worth? – Forbes Advisor ii Assets vs. Liabilities: Examples of Assets and Liabilities – 2022 – MasterClass iii Assets vs Liabilities | Top 9 Differences (with Infographics) (wallstreetmojo.com) iv Get money smart. 25 tips to improve your financial well-being | Consumer Financial Protection Bureau (consumerfinance.gov)
Whether you’re just starting your career or are planning to retire this year, it’s never too soon or too late to start preparing for your retirement. What this entails may be different from person to person, but there are a few essential tips everyone should keep in mind when saving up for their eventual retirement.
Start early
Saving for retirement isn’t something that most of us can do overnight. It takes time to build up the necessary funds, so it’s best to start saving sooner rather than later. While you don’t necessarily have to start saving in your twenties, you should seriously start investing into your retirement funds in your thirties and forties. This will give you time to add to and subsequently grow your 401(k), IRA, Roth IRA, or other high-yield savings accounts. With that being said, it’s also never too late to start saving for retirement. You might just have to be more aggressive with your savings to build up a fund that can prepare you for your next steps into retirement.
Save, save, save
While there’s no one right number for how much you’ll need to save for retirement, it’s generally estimated that retirees need between 70 and 90 percent of their preretirement annual income, which will be a combination of savings and social security. To help you reach this goal, you’ll want to save around 15 percent of your gross annual income every year. There’s always some flexibility to this number, but there’s also no such thing as saving too much. If you work for a business that offers a 401(k) company match, try meeting at least the minimum requirements of that match. This is additional money that you’ll be able to use when it does come time to retire. If you’re company doesn’t offer this benefit or if you’re self-employed, you can always open your own 401(k) or IRA retirement account that you can add to every month.
Know what to expect from retirement
It may not be easy to picture, but it can help in your quest to save for retirement if you have an idea of the kind of lifestyle you’ll want to live when you hit retirement age. Are you going to be moving states, traveling, or taking a part-time job? You’ll also have the expenses associated with the cost of living, such as housing, food, and healthcare, as well as taxes on Social Security and withdrawals from your retirement accounts. All this can impact the amount you’ll spend each month while in retirement, thus impacting the amount you’ll need to save before retiring. Even if you don’t yet know what retirement will look like for you, keep it in the back of your mind so you can adjust your savings and investments the closer you get to retirement age.
Account for inflation
No matter what general suggestions you follow, it’s always a good idea to save more than you think you may need. The cost of living tends to increase by at least 2 percent each year, though that can vary
greatly depending on the state of the economy. By saving more, you’ll help to protect your future self and ensure your financial security so you can enjoy all that comes with retirement.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
This article was prepared by ReminderMedia.
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