Each week we will post a new topic that will touch upon a specific item discussed in our radio show


 February 21st – Tax tips for retirees: 3 things to know about how investments are taxed.

We all must pay them, but there are ways to minimize your tax burden. Here are 3 ways to know where those taxes are generated, so you might be able to lighten your load at tax time.

1. Turnover inside your mutual fund accounts

Mutual fund investors are probably familiar with capital gains taxes when they sell a fund. But did you know you can have a capital gain even if you don’t sell? It’s called turnover, and it can increase the taxes due on non-qualified investments.

Inside the mutual fund are dozens – if not hundreds – of individual holdings. When the fund managers sell those holdings inside of a fund, the owner is responsible for the capital gains tax. Even in down years, if a fund sold a stock for a gain, the owner can have a tax bill, even though the mutual fund went down in value. Knowing what the turnover rate is can help predict the amount of taxes due, and looking for mutual funds with a lower turnover rate can have a big effect on the tax bill.

2. Dividend reinvestments

Similar to the turnover of a fund, a dividend paid by a stock can create a tax bill. Dividend reinvestment plans are a popular tool for investors who don’t need the income and wish to reinvest in the fund. But when that stock pays the dividend, the IRS doesn’t care if you put that money in your checking account or back into the mutual fund. You’re responsible for the taxes due on those DRIPs, which can erode your overall return.

3. Roth or Traditional IRA

A traditional IRA is not taxed until you take the money out, so turnover and drips don’t affect these types of accounts. But you may be able to reduce the amount paid in taxes over the life of the holding by converting a traditional to a Roth. Here’s how that works:

When the traditional IRA is converted to Roth, that means a tax bill for the amount of conversion is due next April 15. A $10,000 conversion will be taxed the same as if you earned an additional $10,000. But after conversion the $10,000 will grow tax free, and if you are not going to use that money for a long time -say, 15 or more years- giving the account plenty of time to grow in the market, you could possibly reduce taxes over your lifetime by paying a larger tax bill now.

-Aaron Ulrich, Wealth Advisor

February 13th –  Inflation: Friend or Foe? It depends when you are asking.

Seemingly lost in the chaos of stock market volatility this week, a report from the Bureau of Labor Statistics says that inflation, as measured by the Consumer Price Index, had risen 0.5% in January, which was higher than analyst estimates of 0.3%. The CPI rose 2.1% over the last 12 months.

Which begs the question: Is that good? Well, it depends.

Are you still working? Inflation can help get you that raise you’ve been hoping for. Selling a house soon? Inflation can help you get a top dollar offer.

But if you are retired, that 2.1% can be a problem. It could represent a 2.1% increase in how much you spend at the grocery, or how much a tank of gas costs. It could mean you need to take 2.1% more out of your retirement accounts this year to maintain your lifestyle.

Inflation means prices are going up, which is a good thing. If we did not have confidence that prices would go up in the future, we would be incentivized to wait to spend money. Think about it: Would you spend money today if you thought you could get the item cheaper tomorrow?

The 2.1% increase in inflation last year was right in line with what we typically expect inflation to be. When putting together a retirement income plan, we often use an even higher projection of 3.4% per year. Inflation is a critical variable in long-term planning, and here’s why.

At a 2% annual growth rate, money will increase by 50% in approximately 30 years. At 3.5%, it will double.

A $100,000 account would grow to $200,000 in 30 years at 3.5%. But inversely, a family spending $100,000 per year would need to spend $200,000 to maintain that lifestyle. That little bitty 1.5% difference in inflation can make an enormous difference in your life and how much money you spend.

Is that good or bad? Well, that depends on what your plan is to grow your money in retirement. 

Inflation can erode your purchasing power – Don’t let it erode your confidence too!


-Aaron Ulrich, Wealth Advisor

February 9th – Three Questions to Ask Yourself BEFORE Changing Your Investment Plan

Market volatility returns. What do we do now?

Before you react, we suggest you evaluate. Here are three questions to ask before you make changes to any investment.

1.      Has your time frame changed?

When will you need the money from this account? If the time frame has not changed from when the account was established, then we probably are not going to recommend a change to your investments right now.

2.      Have your goals changed?

Let’s make sure we have a clear understanding of what this money is for. Many times, lack of a clear goal can create uncertainty. So be sure you have a clearly defined goal for this account, and if that goal has not changed, then your investment allocation probably should not change.

3.      Has your risk tolerance changed?

This one is the hardest to answer. As you’ve aged, maybe you’ve developed a lower risk tolerance, meaning that market downturns are more unsettling to you than in the past. If that’s the case, then maybe it IS time to make some changes, and move your accounts to an allocation that can help protect your principal.

We can walk you through these questions and determine if now is the right time to make changes.

Give us a call, we’re here to help.

-Aaron Ulrich, Wealth Advisor

February 6th, 2018 – How do I even START planning for retirement?

 For most of us, our days tend to blend together. We wake up after fighting the universal urge to hit the snooze button, get a quick shower in before getting dressed, and head out the door with a cup of coffee in our hands. One car ride later, and we’re facing the daily grind for 8 hours or more. Once that’s over, we can count on a long commute back home to eat a quick dinner, maybe try and pretend we’ll catch up on some chores, and then back to bed only to wake up and start it all again tomorrow. It’s a rinse-and-repeat most of us do for decades until we finally ask ourselves:

Can I retire?

After spending decades wrapped up in our nine-to-five schedule, the prospect of finally being able to kick back and relax has an undeniable appeal. But the prospect of figuring out how, or if it’s even possible, is a daunting one. But it doesn’t have to be—if you know what the right questions to answer are. This week, I want to give you a simple guideline on what my experience and planning style has me focusing on for my clients and friends. One of the biggest focuses your plan needs to have is in one word: INCOME.

When I think of retirement, the first thing that comes to mind is INCOME.  Where is my income going to come from when I stop working? Can investments replace that paycheck I’m used to getting? Where do I even start on figuring out how much income I need in retirement?

Firstly, we need to figure out where your retirement income can come from. There used to be 3 main sources of income in retirement: pensions, Social Security Income, and personal savings.  With only 13% of the population still having pensions, most of us must rely on Social Security Income and our personal savings.  We’ve spent the last 30 to 40 years of our life building a nest egg to retire on, but how do we take income from it? Here are 2 questions you need to ask yourself when creating your income plan:

  1. How much money do we need to support our lifestyle?
    Our lifestyle is something that we have grown accustomed to—and usually not something we’re wanting to lessen. I know that when I retire, I don’t want to go from spending time at the lake to sitting at home and wishing I had planned things out better.  Knowing how much we spend per month to do the things we love in retirement gives us our “number”, meaning how much income we need.  This breaks down to an easy equation:

Lifestyle Expenses – Social Security Income – Pension (if you have one) = Income Gap

The “Income gap” is how much we need to take from our personal savings to fund our lifestyle.

  1. Can my income fluctuate, or does it need to be steady from month-to-month?
    This is completely a personal preference.  Some people I meet with want a steady and reliable paycheck from month to month.  On the other hand, some people are fine with an income that might change from month to month.  This is dependent entirely on your own goals, and your “number”, but once you answer this question you can determine what type of investments you need to create your income plan.

During the planning process, there is much more we must take into consideration such as future medical expenses, inflation, losing a spouse (and their income), and market fluctuation. These questions are all equally important, but the main two we’ve discussed are the most important ones to answer as you start thinking about taking your first steps into making your retirement dreams a reality.

-Troy Bolton, Wealth Advisor


February 2nd, 2018 – All-Time High. Will it go higher, or is the bull run over?

The single most popular question we get right now from clients is about the stock market—or, more precisely, how long can the current stock climate last? In other words, investors want to know…is the party over?
It’s impossible to say, and I certainly don’t have a crystal ball to predict short-term activity in the stock market. But let’s look at some facts:
Fact #1: The stock market hit all-time highs this month. The Dow Jones Industrial average topped 25,000 points in early January, then went even higher to 26,616 later in the month.
Fact #2: The S&P500 had never had a full year in which every month was up…until last year. In 2017, every month ended higher than the one before. Every. Single. Month. Talk about smooth sailing.
Fact #3: While interest rates are still at historically low levels, they’re starting to be on the rise. The Federal Reserve Board’s committee raised rates again in 2017, but it was just the fifth time since 2009. The forecast for 2018 has held steady at a projected 3 rate hikes.
Fact #4: You are 10 years older this year than you were in 2008. In that 10 years, we have had gains that may have replaced the losses. That said, are you prepared for another crash? Do you remember your experiences 10 years? How would you protect yourself now?
No one knows what the markets are going to do, or when they are going to do it. But given the facts above, I encourage all investors to take some time to think about what level of risk they are willing to take going forward.
·    Is now a time to lock in some gains?
·    Is it time to rebalance an account and re-set your allocations?
·    Is staying the course, with no change, the best option?
We have no way of knowing if the party truly is over. But now, rather than later, is the right time to ask the question.
-Aaron Ulrich, Wealth Advisor

January 28th, 2018 – We Don’t Know What We Don’t Know

We don’t know what we don’t know.

There are so many facets to retirement income planning, it’s hard to pin down just one or two that are most important. But I think it boils down to the vaguely specific statement above: We don’t know what we don’t know.

I’ll give you an example. We don’t know how inflation is going to affect the economy. Sure, we can look back and see past inflation rates. But predicting future inflation rates is just an assumption. No one knows for sure.

We don’t know what our health care costs are going to be. For some of us, those costs will be significant. Memory care facilities are springing up like dandelions in my part of town. The average cost for a two-year stay is estimated at $144,000. Not everyone will need that level of care, obviously. But if you (or maybe, more importantly, your spouse) need it, it’s likely you do everything in your power to make them comfortable and well cared for.

We don’t know what the market is going to do. That’s obvious, right. But we still get the question, “so what are you guys seeing out there?”  We always make the joke that we don’t have the crystal ball charged up. We know the market is going to go up and down, we just don’t know when. And if it does go down, how would that affect your retirement paycheck?

And then there’s the big one: We don’t know how long we are going to live. I’ve worked with clients who are convinced they won’t make it to 80. Others who are overly cautious in their spending through their early retirement years because they had a great aunt who lived to 102 and they are just certain that longevity runs in their family. Bottom line, nobody knows for sure. We must plan for the worst, hope for the best.

There are more, but this hopefully gives you an idea of the assumptions that we help our clients work through as we develop a retirement income plan. It’s not a perfect science by any stretch. But with a little thought and a lot of planning, we can help you reduce the number of questions that we just don’t know the answer to.

Is there anything that we DO know? Yes. We know that people who work with an advisor and have a plan are more likely to not worry about their finances. And isn’t that what it’s all about?

-Aaron Ulrich, Wealth Advisor

January 14th, 2018 – How Long Will $1 Million Dollars Last?

The days of picking up a pension check are now becoming an exception rather than the rule. As time passes and industry standards change, it’s now becoming more important than ever to find the best ways to self-fund your retirement goals.

The previous standard was to aim for having one million dollars in the bank. One million, most agreed, would be able to keep you comfortable during your sunset years. In the past, that one million nest egg would yield a yearly income of $40,000. But with inflation constantly on the rise, that million dollars won’t stretch so far anymore. For example: If you are currently 42, that million dollar savings will yield $19,000 per year; and if you are currently 32, that income will put you at the poverty line.

These predictions are scary, but also serve as a reminder that saving alone isn’t enough. Knowing the right tools that can grow and protect your wealth is key to making sure your retirement is a successful one. While planning is essential, you must be able to take a realistic look at your budgeting. You need to determine if you are making truly healthy choices about your spending, whether necessary (mortgage, utilities, credit cards, student loans) or discretionary (dining out, vacations, luxury toys, etc.)  When creating your budget for the first time, use this TOOL to track your spending habits. Take the last three months of transactions and account for every dollar spent.

If you feel your current retirement plan might not be able to meet your goals, there are solutions. The first being work longer, or as long as you can. Even in retirement, many find value (not just income!) in having part time employment. It provides time for socializing, keeping your mind active and engaged, and answers the, “Well, what now?” question some retirees face with an abundance of free time.

Another option is choosing the best financial vehicles for you and your family. Whether that is an annuity, investments, or life insurance, there are many avenues to explore in order to find the best fit for your retirement plans. No matter your personal goal, there are diverse ways to achieve it.


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