Individual Retirement Accounts Unmasked & Wealth Building

Learn all that you need to know about IRA’s so that you can maximize the use of them and Build Wealth more efficiently so that you can do more of what you desire during your retirement years…

 

CAUTION: 30-minute read

 

Nasdaq Historical Returns

The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies.

Russell 2000 Historical Returns

The Russell 2000 Index is a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index. The Russell 2000 is managed by London’s FTSE Russell Group, widely regarded as a bellwether of the U.S. economy because of its focus on smaller companies in the U.S. market.

S & P 500 Historical Returns

The S&P 500 Index is a basket of 500 of the largest companies of both the New York Stock Exchange (NYSE) and the NASDAQ.  The Standard and Poor’s 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.

Dow Jones Historical Returns

The Dow Jones Industrial Average (DJIA) is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange (NYSE) and Nasdaq. The Dow Jones is named after Charles Dow, who created the index in 1896 along with his business partner, Edward Jones. Also referred to as the Dow 30, the index is considered to be a gauge of the broader U.S. economy.

New York Stock Exchange

The New York Stock Exchange (NYSE) is a New York City-based public marketplace for trading stock. It is the largest stock exchange in the world based on market capitalization of its listed securities and dates back to 1792.

 

MarketWatch–Learn what is happening in the markets today…

 

IRAs are an important tool for building wealth for those who are employed and particularly those who lack an employer sponsored plan where they work.  Just what are the rules and guidelines as it relates to IRA’s, and how can you use them to maximize your retirement accounts if you now qualify for the utilization of them as you build your retirement nest egg?

 

It is important that you unmask and learn all that you can about IRAs and how you can use them for creating wealth for you and your loved ones in all ways possible, proactively when possible.  Improving your wealth in ways that could be of significant benefit to you and your family can be made easier if you unmask or learn all that you can about IRAs proactively as opposed to after the fact (after your earned income years come to an end).

 

You want to ensure that you look at IRAs and determine if they can be of value to you as you build wealth and not allow blind spots to cause you to miss out on important facets of IRA utilization that you could possibly miss out on and make your retirement years less enjoyable!

 

Over the years TheWealthIncreaser.com has discussed many financial matters with consumers. No topic seems to be as misunderstood or improperly grasped by consumers on a consistent basis than that of the topic of IRAs.

 

It is important that you simplify your understanding of IRA’s—and particularly as it relates to taxation—so that you can make an informed and well thought out decision—if you are considering IRAs in your financial portfolio for retirement or other purposes.

 

IRA Basics

With a traditional IRA—you get a tax benefit up front in the form of a tax deduction on your personal tax return.

 

You would pay taxes on your distributions at “ordinary income” tax rates upon withdrawal and if done before age 59.5 and no exception applied–a 10% early withdrawal penalty would also apply.  With a ROTH IRA you get no tax deduction up front, however “all contributions” and “qualified” distributions are tax free.

 

Qualified distributions are distributions after age 59.5 or those that are made due to an exception or other guidelines that are outlined in the tax code.

 

If you own—or anticipate owning a Traditional IRA or a ROTH IRA, and you make a “non-qualified” distribution, you may have to pay federal income taxes on withdrawals—and in some cases be socked with a 10% penalty on top of the income tax bill.

 

In this discussion TheWealthIncreaser.com will look at a number of ways that you can utilize a ROTH IRA or a Traditional IRA to build wealth more effectively.

 

The goal of this discussion is to keep conciseness–and to the point actions at the center, however conciseness and to the point on IRAs can be difficult.  Key points will be reiterated (repeated) in an attempt to enhance your understanding.

 

Broad Stock Market History Charts

 

Nasdaq

Dow Jones Industrial

S & P 500

Russell 2000

 

Key Points that you need to know about IRA’s 

 

Important questions that you need to ask yourself include:

 

*Do I even qualify

 

You qualify if you have “earned income” and that income doesn’t exceed certain thresholds that are established by law.  The amount of the contribution limit and the thresholds are adjusted upward annually, generally speaking.

 

You can fund an IRA if you have a 401 (k) plan or other retirement plan through your employer. Having a workplace retirement account could make you “ineligible to deduct traditional IRA contributions” on your taxes annually.  Funding a 401 (k) could help you reduce your taxable income so that you can directly fund a Roth IRA.  Many employers also offer an employee match with 401k plans so you want to give the match option considerable attention.

 

Single Limits

 

The IRA contribution limits are the combined maximum you can contribute annually across all personal IRAs. This means if you have a Traditional IRA and/or a Roth IRA, you “cannot” contribute more than this limit across both accounts in a year.

 

You also cannot contribute more to your IRAs than the income you earn each year! 

 

If your income is lower than the contribution limit, your annual IRA contribution may be limited to your earned income.  For example, if your earned income is $5,500, your maximum contribution limit is $5,500 total–whether you contribute to a traditional, ROTH or both.

 

If you are the only breadwinner in your household and you meet the income limits, you may be eligible for a spousal IRA which are separate IRAs for you and your spouse or for the non-working spouse if they are the only one who qualifies.

Traditional Spousal IRA

A Traditional Spousal IRA allows the working spouse to make tax-deductible contributions on behalf of the non-working spouse, and the contributions grow tax-deferred, which means taxes are paid only upon withdrawal.

 

A spousal IRA is a strategy that allows a working spouse to contribute to an individual retirement account (IRA) in the name of a non-working spouse with no income or very little income. This is an exception to the provision that an individual must have earned income to contribute to an IRA.

 

Note: Your contributions may be limited to what your spouse makes if you have no income and are contributing to a spousal IRA.

 

  • Tax-Deductible Contributions: Contributions to a Traditional Spousal IRA may be tax-deductible, depending on the couple’s modified adjusted gross income (MAGI) and whether the working spouse participates in an employer-sponsored retirement plan.

 

  • Tax-Deferred GrowthInvestments in a Traditional Spousal IRA grow tax-deferred, meaning taxes are not due until withdrawals are made.

 

  • Withdrawal Rules and Taxes: Withdrawals from a Traditional Spousal IRA are generally subject to income tax. Additionally, a 10% early withdrawal penalty may apply if withdrawals are made before age 59½, with some exceptions.

 

ROTH Spousal IRA

A Roth Spousal IRA allows for non-deductible contributions, which grow tax-free and can be withdrawn tax-free under certain conditions.

  • Non-deductible Contributions: Contributions to a Roth Spousal IRA are not tax-deductible.

 

  • Tax-free growth and withdrawals: Investments in a Roth Spousal IRA grow tax-free, and qualified withdrawals are also tax-free.

 

  • Withdrawal Rules and Taxes: Qualified withdrawals from a Roth Spousal IRA are tax-free, provided that the account has been open for at least five years, and the account holder is at least 59½ years old or meets other qualifying criteria.

 

If you want to save more for retirement than your IRA contribution limit allows this year, consider contributing more to your workplace retirement plan, like a 401(k) or 403(b).

 

If you don’t have access to a workplace plan, check to see if you’re eligible to open and contribute to a self-employed 401(k) or SEP IRA, each of which may allow you, as the employer, to save up to $66,000 in 2023 and $69,000 in 2024.

 

An additional $7,500 can be saved in either years 2023 and 2024 if you have a 401(k) or 403(b) plan and are age 50 or older.  However, catch-up contributions are not permitted  in SEP plans whether a 401k or IRA.

 

Traditional IRA income limits for 2023 and 2024

Unlike with a Roth IRA, there’s no income limit for those who can contribute to a traditional IRA!  However, your deduction may be limited or disallowed if you contribute to a retirement plan on your job.

 

Your income (as well as your spouse’s) affects “whether you can deduct your traditional IRA contributions” from your taxable income for the year!

 

If you and your spouse do not have access to a workplace retirement savings plan, then you can deduct the full amount of your IRA contributions, up to the contribution limit!

 

If you and/or your spouse are covered by a workplace plan, your eligible deduction limit may be decreased based on your tax-filing status and modified adjusted gross income (MAGI).

 

Your Modified Adjusted Gross Income is how much you earn each year considering certain adjustments.  It’s a smart idea to consult a tax professional if you have any questions about how much of your IRA contributions you can deduct if you still have questions after reading this article.

 

And remember, even if you cannot deduct any of your traditional IRA contributions, the money you invest in a traditional IRA may benefit from compounding and “can grow tax-deferred” until you withdraw it.

 

And you won’t have to pay income taxes on any contributions you previously did not deduct from your taxes!

 

The tables below can help you figure out how much of your traditional IRA contribution you may be able to deduct based on your income, tax-filing status, and your and your spouse’s access to a workplace retirement plan.

 

The key point is that even if you have a plan at work you and/or your spouse may still be able to contribute to a Traditional IRA and deduct the contribution (up to a limit) annually even if you are covered by a plan at work if you meet the annual IRA income limits based on your MAGI.

 

If you are not covered by a plan you (and possibly your spouse) can contribute up to the contribution limit for that year.  If you are married and you or your spouse have a plan at work, your contribution deduction would be limited if your income was greater than $220,000 to $240,000 for tax year 2024 and would phase out all together at income over $240,000.

 

Keep in mind you can still contribute up to the annual limit, however you could not deduct the contribution on your tax return.  Additionally, when you are taxed, the “contributions that were not deductible would not be taxable” however, the earnings would be taxed at your ordinary income rate.

 

If you or your spouse were covered by a plan at work, your annual earning limits would be lower as far as deducting your contributions ($123,000 to 143,000) then phaseout for tax year 2024.

 

Keep in mind that IRA deduction limit numbers normally change on an annual basis.

 

Traditional IRA deduction limits

2023 IRA deduction limit — You are covered by a retirement plan at work
Filing status Modified adjusted gross income (MAGI) Deduction limit
Single individuals ≤ $73,000 Full deduction up to the amount of your contribution limit
> $73,000 but < $83,000 Partial deduction (calculate)
≥ $83,000 No deduction
Married (filing joint returns) ≤ $116,000 Full deduction up to the amount of your contribution limit
> $116,000 but < $136,000 Partial deduction (calculate)
≥ $136,000 No deduction
Married (filing separately)1 < $10,000 Partial deduction
≥ $10,000 No deduction

Source: “IRA deduction limits,” Internal Revenue Service, August 29, 2023.

2023 IRA deduction limits — You are NOT covered by a retirement plan at work
Filing Status Modified adjusted gross income (MAGI) Deduction limit
Single, head of household, or qualifying widow(er) Any amount A full deduction up to the amount of your contribution limit
Married filing jointly with a spouse who is not covered by a plan at work Any amount A full deduction up to the amount of your contribution limit
Married filing jointly with a spouse who is covered by a plan at work $218,000 or less Full deduction up to the amount of your contribution limit
> $218,000 but < $228,000 A partial deduction (calculate)
≥ $228,000 or more No deduction
Married filing separately with a spouse who is covered by a plan at work < $10,000 Partial deduction
≥ $10,000 No deduction

Source: “IRA deduction limits,” Internal Revenue Service, August 29, 2023.

2024 IRA deduction limit — You are covered by a retirement plan at work
Filing status Modified adjusted gross income (MAGI) Deduction limit
Single individuals ≤ $77,000 Full deduction up to the amount of your contribution limit
> $77,000 but < $87,000 Partial deduction
≥ $87,000 No deduction
Married (filing joint returns) ≤ $123,000 Full deduction up to the amount of your contribution limit
> $123,000 but < $143,000 Partial deduction
≥ $143,000 No deduction
Married (filing separately)1 < $10,000 Partial deduction
≥ $10,000 No deduction

Source: “401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000,” Internal Revenue Service, November 1, 2023.

2024 IRA deduction limits — You are NOT covered by a retirement plan at work
Filing Status Modified adjusted gross income (MAGI) Deduction limit
Single, head of household, or qualifying widow(er) Any amount A full deduction up to the amount of your contribution limit
Married filing jointly with a spouse who is not covered by a plan at work Any amount A full deduction up to the amount of your contribution limit
Married filing jointly with a spouse who is covered by a plan at work $230,000 or less Full deduction up to the amount of your contribution limit
> $230,000 but < $240,000 A partial deduction
≥ $240,000 or more No deduction
Married filing separately with a spouse who is covered by a plan at work < $10,000 Partial deduction
≥ $10,000 No deduction

Source: “401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000,” Internal Revenue Service, November 1, 2023.

 

What happens if you contribute too much to your IRA?

If you contributed too much (more than the annual contribution limit) to your IRA, you have up until when your taxes are due to remove any excess contributions as well as any investment gains those contributions may have made.

 

Those investment gains will have to be reported on your taxes!

 

If you don’t catch your excess contributions by your tax deadline, you may have to pay a 6% tax penalty on the excess amount each year until you remove those funds from the account.

 

Key points about Traditional IRAs:

  • You can contribute up to the annual limit to a traditional IRA

 

  • Only a certain amount can be deducted annually on your taxes and that amount is based on your filing status and income range

 

  • If you have a retirement plan at work your deduction will be limited

 

  • If you don’t have a retirement plan a work you can get a full deduction up to the limit

 

  • If you are married and your spouse is covered, you are entitled to a partial deduction that phases out, and if your income is too high ($240,000 or more from year 2024 and forward) you are not eligible for a deduction (your deduction phases out)

 

  • You have up until April 15th of the tax filing season to contribute to your IRA for the previous year (i.e., 2024 contributions can be made up until April 15th of 2025–if the 15th falls on a weekend or holiday, you may have additional day(s) to contribute)

 

  • If you over-contribute to your IRA, you may have to pay additional taxes on the gains that are a result of your over contribution

 

  • An exception for withdrawal may allow you to avoid the 10% early retirement penalty.  Tuition, 1st time home buyer qualification (no personal residence ownership in past 2 years) and other exceptions are available that will possibly allow you to avoid the penalty.  Limits and technicalities may apply

 

  • You may be able to “double dip” and get the benefit of a retirement savers credit as well as the deduction on your federal tax return if you meet the income criteria and other guidelines

Unlike Roth IRAs, you can contribute up to the maximum contribution limit to a traditional IRA “regardless of your income” if your earned income is higher than that year’s contribution limit (currently $7,000) that is normally adjusted from year to year.

 

Your ability to “deduct traditional IRA contributions from your tax bills” are dependent on your income and your workplace retirement plan, and/or your spouse’s!

 

If you want to save even more for retirement than the IRA contribution limit, you can consider contributing to your workplace retirement plan (if you have one), such as a 401(k) or 403(b) at a level that allows you to live comfortably, yet reach your retirement goals.  If you don’t have access to a workplace plan, you can look into whether you’re eligible to contribute to a self-employed 401(k) or SEP IRA, if you are self-employed or you have a sideline gig that is showing a profit.

 

Roth IRA income and contribution limits for 2023 and 2024

How much can you contribute to a Roth IRA—or if you can contribute at all—is dictated by your income, specifically your household’s modified adjusted gross income (MAGI)!

 

This is your adjusted gross income (gross income minus tax credits, adjustments, and deductions), with some of those credits, adjustments, and deductions added back in.

 

Depending on your MAGI and your tax filing status, you are either eligible to contribute to your Roth IRA up to the full IRA maximum, contribute only a partial amount, or contribute nothing at all.

 

Note: If you’re ineligible to contribute to a Roth IRA, you can still contribute to a traditional IRA up to 100% of your income, or the annual contribution limit!

 

Calculating your MAGI and balancing contributions to multiple IRAs can be complicated, so consult a financial professional if you have any questions around your eligibility to contribute and you have an uneasy feeling, even after this discussion.

 

If you are married and make $150,000 a year in MAGI and you have a retirement plan on your job, you can contribute $7,000 to a spousal Traditional IRA (you would be eligible for full deduction) or $7,000 to a spousal ROTH IRA (you would be eligible for the full “contribution”) because you meet the income and tax filing guidelines for a ROTH IRA.

 

You could choose to contribute $3,500 annually to a spousal Traditional IRA and deduct the $3,500 on your taxes yearly if you qualified and upon withdrawal after age 59.5 you would pay taxes at your ordinary income tax rate–and also contribute $3,500 to a spousal ROTH IRA that would be non-deductible but would grow tax free and you would owe no taxes upon withdrawal within parameters.

 

Roth IRA income requirements for 2023
Filing status Modified adjusted gross income (MAGI) Contribution limit
Single individuals < $138,000 $6,500
≥ $138,000 but < $153,000 Partial contribution
≥ $153,000 Not eligible
Married (filing joint returns) < $218,000 $6,500
≥ $218,000 but < $228,000 Partial contribution
≥ $228,000 Not eligible
Married (filing separately)1
< $10,000 Partial contribution
≥ $10,000 Not eligible

“Amount of Roth IRA Contributions That You Can Make for 2023,” Internal Revenue Service, August 29, 2023.

Roth IRA income requirements for 2024
Filing status Modified adjusted gross income (MAGI) Contribution limit
Single individuals < $146,000 $7,000
≥ $146,000 but < $161,000 Partial contribution
≥ $161,000 Not eligible
Married (filing joint returns) < $230,000 $7,000
≥ $230,000 but < $240,000 Partial contribution
≥ $240,000 Not eligible
Married (filing separately)2
< $10,000 Partial contribution
≥ $10,000 Not eligible

Source: “401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000,” Internal Revenue Service, November 2023.

 

The IRS’s annual IRA contribution limit covers contributions to all personal IRAs, including both traditional IRAs and Roth IRAs.

 

But as we touched on above, your income may limit whether you can contribute to a Roth. You want to determine at the earliest time possible whether a Roth IRA, traditional IRA—or both—are right for you.

 

Learn about Fidelity IRAs and more about other types of IRAs…

 

What happens if you contribute too much to your Roth IRA?

If you contributed too much to your Roth IRA, you have until the tax filing deadline to fix the mistake. You must remove all excess contributions as well as any investment earnings. Those earnings will have to be reported as investment income. If you remove any excess contributions after you file your taxes, you may need to file an amended tax return.

 

If you over contributed to your Roth IRA due to your income limit, you can re-characterize your Roth IRA contributions to a traditional IRA.  Just make sure you do not contribute more than the combined IRA maximum.

 

If you re-characterized, you’ll definitely want to check and see if you’re now eligible for any income tax deductions.

 

You could also apply your excess contributions to tax year 2023.  But first verify what you roll over will be eligible within 2023’s limits.

 

If you don’t catch your excess contributions when you file your taxes, you may have to pay a 6% penalty on those contributions each year until they are removed from the account.  Visit the IRS.gov to learn more about contribution limits and for more information on tax penalties for IRAs.

 

  • Your contribution limit is based on your income and filing status

 

  • You may be eligible to contribute a partial amount or nothing at all

 

  • If you are married and your spouse is covered, you are entitled to a partial deduction that phases out, and if your income is too high ($240,000 or more from year 2024 onward)–you are not eligible for a deduction

 

  • If your income is too high, you may not be able to contribute to a ROTH

 

  • You can possibly roll over traditional IRA contributions and earnings to a ROTH–be sure you plan for the payment of taxes well in advance so that you have no surprises

 

  • An exception for withdrawal may allow you to avoid taxation on the earnings, therefore both contributions and earnings could be withdrawn where an exception applied.  Tuition, 1st time home buyer qualification (no personal residence ownership in past 2 years) and other exceptions are available that will possibly allow you to withdraw tax free.  Limits and technicalities may apply.

 

How much should you contribute to your IRAs?

 

To give you some historical context, IRA contribution limits in 2011 and 2024 will be contrasted:

 

Income Limitation

 

Single Limits

In 2011 the income cutoffs for a traditional IRA where you can get the full deduction was $56,000 and partial deduction is $65,999 if you are single.

 

In 2011 the income cutoffs for a ROTH IRA where you can get the full contribution was $107,000 and partial contribution was $122,000 if you are single.

 

Married Limits

In 2011 the income cutoffs for a traditional IRA where you can get the full deduction was $90,000 and partial deduction was $109,999 if you are married.

 

In 2011 the income cutoffs for a ROTH IRA where you can get the full contribution was $169,000 and partial contribution was $179,000 if you are married.

 

Keep in mind that the above figures represent the “income cutoff” that is based on your AGI or Adjusted Gross Income—not Total Income!

 

Having a plan in place for your retirement can help you reach your financial goals and give you peace of mind that you are on the right track. To help create a retirement plan, consider consulting with a financial professional to map out your financial future or if you are comfortable, you can create your own path to retirement success.

 

It can be a challenge to determine how much to save in your IRA, as you need to know your retirement number in advance of saving or investing.  As a general guideline, you want to save at a minimum 10% of your pre-tax income each year (including any employer contributions) for retirement.  The higher you go after that is even better as the actual percentage will depend on your unique personal and family profile and your retirement or other goals that you may have in mind.

 

That 10% or more includes savings in any other retirement accounts or savings plans, like 401(k)s, Thrift Plans or 403(b)s–as well as pension and other income that you may receive in the future.  In short, your “retirement number” that is unique to you and what you desire most in your life, will help guide you on the right amount that you need to save and invest to reach your goals.

 

Consulting with a financial professional can help you figure out a strategy that works best for your goals and what you want to see occur in your future.

 

In 2011 the income cutoffs for a traditional IRA where you can get the full deduction was $56,000 and partial deduction was $65,999 if you were single.

 

In 2024 the income cutoffs for a traditional IRA where you can get the full deduction is $146,000 and partial deduction is $161,000 if you are single.

 

As you can see, over that 13 year period the amount adjusted upward by $90,000!

 

In 2011 the income cutoffs for a ROTH IRA where you can get the full contribution was $107,000 and partial contribution was $122,000 if you were single.

 

In 2024 the income cutoffs for a ROTH IRA where you can get the full contribution is $230,000 and partial contribution is $240,000 if you are single.

 

As you can see, over that 13-year period the amount adjusted upward by $123,000!

 

Married Limits

In 2011 the income cutoffs for a traditional IRA where you can get the full deduction was $90,000 and partial deduction was $109,999 if you are married.

 

In 2024 the income cutoffs for a traditional IRA where you can get the full deduction is $230,000 and partial deduction is $240,000 if you are married.

 

As you can see, over that 13-year period the amount adjusted upward by $140,000 for the Traditional IRA.

 

In 2011 the income cutoffs for a ROTH IRA where you can get the full contribution was $169,000 and partial contribution was $179,000 if you are married.

 

In 2011 the income cutoffs for a ROTH IRA where you can get the full contribution was $230,000 and partial contribution was $240,000 if you are married.

 

As you can see, over that 13-year period the amount adjusted upward by $61,000 for the ROTH!

 

Keep in mind that the above figures represent the “income cutoff” that is based on your AGI or Adjusted Gross Income—not Total Income!

 

Contribution Limits

Single:

 

The annual contribution limit for 2011 was $5,000 if you were single and had earned income ($6,000 if you were over age 50).

 

By contrast:

 

The annual contribution limit for 2024 is $7,000 if you were single and have earned income of at least the contribution limit ($8,000 if you are over age 50).

 

Married:

The annual contribution limit for 2011 was $10,000 if you are married and have earned income ($12,000 if you are both over age 50).

 

The annual contribution limit for 2024 was $14,000 if you are married and have earned income of at least the contribution limit ($16,000 if you are both over age 50).

 

Always remember that if your earned income is “less than” the contribution limit—your contribution is limited—to your earned income!

 

Deadline to Contribute

Also keep in mind that you have until the tax deadline (April 15, 2025) to fund your IRA for 2024 and be sure that you understand that with a traditional IRA—your contributions are in pre-tax dollars (deducted on your tax return if you qualify) and your withdrawals are taxable at your ordinary income tax rate at the time of withdrawal.

 

You want to always know that you can make 2024 contributions up until the April 15th deadline in 2025, and you can make 2025 contributions up until the 2025 tax filing deadline of April 15, 2026. 

 

In future years the tax deadline of April 15th is normally the deadline unless the date falls on a weekend or federal holiday.

 

If you file for an extension, the cutoff date for contributions remains April 15th of the tax year or the next business day if the 15th is on a weekend or holiday!

 

With a ROTH IRA you pay your taxes upfront, however you or those who inherit your IRA—will owe no taxes on withdrawals but would be required to make RMDs.  Depending on your tax bracket—the ROTH is often the best choice in the long run—for many.

 

*Again the 2024 Contribution limits are $7,000, or if you are age 50, $8,000

 

*Know that Income Limits Apply when investing using IRAs as there is a minimum that you must earn to qualify–and a maximum that will eventually phase you out.  With a traditional, you can continue to contribute after the phaseout, however you would not be able to deduct the contribution.

 

Can I convert from a Traditional to a ROTH IRA

You can convert from a Traditional to a ROTH regardless of your income.  Be aware that you might have a large tax bite!

 

You want to plan and strategize the conversion to help minimize your taxes in a very serious way as there can be serious tax consequences if you fail to do so!

 

If you do not yet have an IRA—you can set up one at any time, if you qualify and the process is fairly simple.

 

You can also convert to a ROTH IRA at any time—just be aware of your taxes that you will have to pay—prior to doing the conversion–not AFTER!

 

Converting is particularly important if you anticipate being in a higher tax bracket in your retirement years.  With 2024 tax rates from the TCJA scheduled to end at the end of 2024—you would face a maximum tax rate of 35%.

 

Depending on your age and income streams—it can often be difficult to determine whether you will be in a higher or lower tax bracket during your retirement years, but you want to make the best educated guess possible to assist in your planning at this time.

 

IRAs & College Planning

  • Regardless of whether you have a Traditional or Roth IRA, there is a penalty-free way to use your retirement savings to pay for your education, your children’s, or your grandchildren’s education.  IRA withdrawals used for qualified education expenses at an eligible institution are “exempt” from the penalty.

 

  • Higher education is expensive, and if loans are taken out to pay for school, it may take 10 to 30 years to repay a student loan when you borrow, depending on the amount and your repayment schedule. While direct higher education expenses qualify for penalty-free withdrawals from a traditional individual retirement account (IRA), the payment of student loans and interest don’t.

    Be aware that early withdrawals from a Traditional IRA—if you’re not yet age 59½—used to pay for student loans are subject to a 10% penalty, plus any deferred income taxes owed.

 

  • Early withdrawals from a ROTH IRA, however, may be free from penalties as long contributions—and not gains—are touched before age 59½.

 

  • It’s important to determine whether using IRA funds to pay off student loans is viable for your situation as everyone’s financial profile is unique, therefore you want to proactively run the numbers to see if it makes good sense financially as well as you psychologically being comfortable about your decision.

 

ROTH accounts could also work for you in college planning—and as an added bonus if your child has enough to go to college with other means—such as your current income, financial aid, scholarships etcetera—you could avoid using the ROTH (or traditional for that matter) for your child’s education—and continue building up the account for (your and your spouse’s) retirement years.

 

Withdrawals of your “contributions” would be tax free.  There would be no 10% early-withdrawal penalty on “earnings” if you use the money for “educational” expenses.

 

Even with a ROTH, if you were under age 59.5 and you held the account for less than five years. you would owe tax on the “earnings” at your ordinary income tax rate plus a 10% penalty for early withdrawal unless an exception was applicable.

 

Regardless of how you use your contributions, they would be tax free if withdrawn from your ROTH account for any reason!

 

Traditional IRA & Home Purchase

You can take funds out penalty free to purchase your home whether you have a ROTH and/or Traditional IRA.

 

You can also invest in Self-Directed IRAs and Invest in Real Estate.

 

ROTH IRA & Home Purchase

You can take funds out penalty free to purchase your home whether you have a ROTH and/or Traditional IRA.

 

You can also invest in Self-Directed IRAs and Invest in Real Estate.

 

If you plan on using a traditional or ROTH for your home purchase–or investing for retirement using real estate investing, make sure you have a well thought out strategy.

 

Be sure you have your retirement goals in place and a strategy to get to the “number” that you need to reach—dollar wise—to live at your pre-retirement levels at a minimum–where possible.

 

For example, if your “number” was $500,000 and you were age 65, you would be able to withdraw $20,000 per year for approximately 30 years assuming a modest rate of return.

 

You would also need to factor in your Social Security and any other income that you would receive monthly.

 

If tapping into your ROTH for your child’s educational expenses would prevent you from getting to your “number”—you would have to increase the ROTH contributions—or other Retirement Account contributions—or pursue another educational and/or retirement funding strategy for you or your loved one.

 

If you plan on using a Traditional or ROTH account for educational funding be sure to start well in advance.  ROTH accounts have a dollar contribution per year limit—and a little higher if you are over age 50.

 

Traditional IRAs allow you to contribute regardless of your income, and what you can “deduct annually” is limited!

 

If you are married your spouse can also contribute up to the annual amount limits, or a little higher per year if age 50 or older if qualifications are met.

 

Always Remember—in order to Contribute to “Any” IRA You Must Have “Earned” Income!

 

Keep in mind that in order to contribute to a ROTH you must have earned income (employer or self-employed) and there are income limits of Modified Adjusted Gross Income for Single and for Married Filing Jointly that are adjusted annually.

 

An example of what you can achieve using IRA contributions:

 

If you contribute just $5,000 annually from the time your child is born, you would have $90,000 in “contributions” alone.  Assuming you had a modest annual return, your total account value could be over $200,000 by the time your child attended college.

 

If your spouse also contributed the total “contributions” would be over $180,000 and the account value could be over $400,000 by the time your child attended college.

 

IRA Investment Choices

Stocks, Bonds, Mutual Funds, CDs, real estate, precious metals, blockchains and many other financial accounts can be a part of your IRA if set up and structured properly.

 

IRA’s & Alternative Investments

If you open a self-directed IRA with a custodian willing to deal with alternative assets—you could invest in real estate, gold bullion, tax liens, racehorses and other more speculative and/or exotic investments.

 

However, you cannot invest in art or life insurance with your IRA account(s)!

 

It is not always wise to invest in more speculative IRA holdings—even though you are legally allowed to do so.  When dealing with IRA’s that offer more exotic types of investments—you can often run into those who are con-artists and very smooth in their articulation of what they are offering—and the returns you could possibly get may be unrealistic.  You want to have a real understanding of what you invest in and choose your account custodians in a wise and prudent manner.

 

Due to the large number of baby-boomers converting their 401k’s and other retirement accounts to an IRA—con artists and other unscrupulous players feel they have a ripe and lucrative market that they can tap into for years.

 

You must be very careful if you are even considering any out-of-the-ordinary type of investments.

 

Also, realize that there are even more inherent risks when investing in non-traditional ways.

 

You will have market risk if you invest in gold or real estate.  You must also use funds that are inside of the IRA—for renovations and upgrades that you want to do to real estate you own inside of an IRA!  You will have the risk of horses getting sick or dying—if you invest in racehorses…and so on.

 

If you are determined to invest in alternative—out-of-the-ordinary type of investments—a better option may be to consider doing so (inside of an IRA) with a mutual fund that invests in a broad range of investments and has a five-to-10-year track record of success.

 

If your goal is to invest in real estate—consider a mutual fund (REITs) that invests in a broad range of properties!

 

By doing so you will reduce your risk from being conned by fraudsters—and reduce other risks that were mentioned above.

 

Understanding the IRA rules and guidelines before and after you transition

Traditional IRAs will face taxation upon transfer to beneficiaries and will be taxed at transfer–based on life expectancy of beneficiary.  A ROTH can be transferred tax free with no minimum withdrawals required annually to your spouse, other beneficiaries will face mandatory withdrawals.

 

Traditional IRA

With a traditional IRA, you would set it up with an IRA custodian and contribute to it in the manner that you chose to do so—for example weekly, monthly or yearly.  You have up until the tax deadline of the current year to make contributions for the previous year.

 

Let’s say you contribute $5,000 by the April 15th, 2025, filing deadline.  If you filed your return on April 17th, 2025, you could deduct it on your 2024 tax return on form 1040.  If you were in the 35% tax bracket you could save roughly $1,750 on your taxes if you were able to utilize the full deduction.

 

If you had already filed your return before April 15th, 2025, you could amend your 2024 return—or you could decide to make the $5,000 contribution after April 15th, 2025–and deduct the 2025 contribution on your 2025 income tax return.

 

The correct choice for you would depend on your expected contributions or goals.  To maximize your contributions—you would choose the first option.

 

Taxation at Withdrawal

 

Traditional IRA

If you were to withdraw funds prior to age 59 ½ you would have a 10% early withdrawal penalty and the withdrawal would be taxed at your ordinary income tax rate.

 

If you were to withdraw funds after age 59 ½ you would “not” have a 10% early withdrawal penalty and the withdrawal would be taxed at your ordinary income tax rate.

 

Keep in mind that withdrawals were once mandatory at age 70 ½ now the age is 73 with a Traditional IRA.

 

Roth IRA

With a ROTH IRA “you would pay your taxes on your contributions up front” and then contribute to your IRA.

 

Your earnings would grow tax free and your “contributions” that you later decide to withdraw would be tax free—because you have already paid taxes on them!

 

You cannot deduct your contributions on your personal income tax return!

 

Once you reach age 59 ½ and have contributed for at least five years, you can receive your earnings—or investment gains tax free.

 

Withdrawals are not mandatory at age 70 ½, 73 or any age–BUT WITHDRAWALS WOULD BE MANDATORY TO BENEFICIARIES AFTER YOUR TRANSITION.  IF YOUR WIFE WAS THE BENEFICIARY–WITHDRAWALS WOULD NOT BE MANDATORY.

 

Deadline to Contribute to Traditional & ROTH IRAs

Also keep in mind that you have until the tax deadline (April 15 generally) to fund your IRA annually—and be sure that you understand that with a traditional IRA, your contributions are in pre-tax dollars (deducted on your tax return if you qualify)—and your withdrawals are taxable (normally after you retire).

 

With a ROTH IRA, you pay your taxes upfront, however you or those who inherit your IRA—will owe no taxes on withdrawals.  Depending on your tax bracket a ROTH IRA is often the best choice in the long run for many.

 

If you’re 59.5 or older and have had at least one Roth IRA that has been open for more than five years, withdrawals from any of your Roth IRAs are called “qualified” withdrawals.

 

Your qualified withdrawals would be free of any federal income tax or penalty.  The “five-year period” for qualified withdrawals starts on January 1 of the first tax year for which you make a Roth contribution.

 

If you established your first Roth IRA on April 15, 2021—and the contribution was for the 2021 tax year, your five-year period would start on Jan. 1, 2020.

 

You could begin taking qualified withdrawals at any time after Jan. 1, 2025.  You could also take tax-free qualified withdrawals from any and all Roth IRAs that you own by then—as long as you’re 59 ½ or older.

 

Let’s say you opened a second Roth IRA account in 2021 by converting a Traditional IRA, you could take tax-free qualified withdrawals from that account too—after Jan. 1, 2025—as long as you’re at least age 59 1/2.

 

What Happens if You Take Withdrawals Before Age 59 ½?

If you take a ROTH distribution before age 59 ½, it would be considered a “non-qualified” withdrawal—unless an exception applies.

 

A non-qualified withdrawal or distribution may be subject to federal income tax and a 10% penalty tax!

 

As far as the IRS is concerned, non-qualified withdrawals come first from your annual Roth “contributions”—not your “investment gains or earnings.”

 

If you take out contributions only–you “would not pay taxes on the contributions” as you have already paid taxes on that portion of your ROTH IRA!

 

Always remember that withdrawals from your “contributions” are always tax-free and penalty-free with a ROTH IRA.

 

To figure out how much of your account is “qualified” you would add up your annual contributions to all Roth IRAs set up in your name (do not use any accounts in your spouse’s name).

 

To prove you don’t owe any income tax or penalty, you’ll have to fill out Part III of IRS Form 8606 (Nondeductible IRAs) and file it with your Form 1040 during the tax filing season.

 

If you converted from a Traditional IRA to a ROTH IRA—non-qualified withdrawals are deemed to come from ROTH conversion contributions “after” you determine what your contributions are.

 

To figure out how much is non-qualified due to conversion—you would add up all conversion contributions from converting a traditional IRA or a retirement plan payout to all Roth IRAs set up in your name (again—do not use any accounts in your spouse’s name).

 

Withdrawals from the conversion are federal-income-tax-free, but you could still get hit with a 10% penalty—unless an exception applies.

 

Keep in mind that age 59.5 is generally the required age for starting to receive IRA distributions without getting hit with the federal 10% premature withdrawal penalty tax.  With a Traditional IRA (whether you continue to work or not), there are some circumstances under which you can receive your IRA funds even earlier without the penalty.

 

The 10% penalty applies unless you qualify for an exception:

Exceptions for Early Distributions from an IRA or a Traditional & ROTH IRA include:

• You had a “direct rollover” to your new retirement account

• You received a lump-sum payment but rolled over the money to a qualified retirement account within 60 days

• You were permanently or totally disabled

• You were unemployed and paid for health insurance premiums

• You paid for college expenses for yourself or a dependent

• You bought a house (can be for children or grandchildren—dollar limits apply)

• You paid for medical expenses exceeding 7.5% of your adjusted gross income

• The IRS levied your retirement account to pay off tax debts.

• It has been more than five years since the conversion contribution (the five-year period starts on Jan. 1 of the year when the conversion contribution occurred)

 

Lesser-Known Exceptions:

Annuitize Your IRA—one way to take money from your traditional IRA without incurring the 10% penalty is to “annuitize” your account.  The way this works is that for five years, or until you turn age 59 1/2 (whichever is longer), you take annual cash withdrawals based on your life expectancy, as predicted by the IRS.

Withdraw Roth Contributions—the Roth IRA allows penalty and tax-free withdrawals of “contributions” for any reason.  However, once you’ve taken out that money, you don’t have the option of replacing it.

Take a 60-Day Loan—you can withdraw funds from your IRA for up to 60 days tax-and penalty-free as long as you return the funds to an IRA by the end of the 60-day period.  The IRS looks at this as a non-taxable rollover.

Just make sure that the funds are back in an IRA within the 60 days, otherwise it will be treated as a withdrawal that is subject to taxes and penalties if you are under age 59 1/2!

Also, if you follow this strategy, you can only do it once within a 12-month period for the account in question.

 

Special Penalty-Free Withdrawal Situations:

First-time home purchase—up to $10,000 for you, your spouse, your children or even your grandchildren.

Qualified education expenses—for you, your spouse, your children or even your grandchildren. Approved expenses include post-secondary education, tuition, books, supplies and, if the student is enrolled at least half-time, room and board.

Disability—to qualify for a disability exemption, you must prove that you are incapable of working.

Un-reimbursed medical expenses—expenses must exceed 7.5% of your adjusted gross income.

Health insurance for the unemployed—only after 12 consecutive weeks of collecting unemployment benefits.

 

Use caution before you dip into an IRA or any Retirement Account:

Before you start dipping into your retirement stash, you may want to explore other options including a standard bank loan.

 

If you must withdraw funds from an IRA, avoid paying taxes by withdrawing “contributions” from your Roth IRA first.

 

Be sure to tap a tax-deductible IRA last.  Above all, you generally want to use these tax-sheltered accounts as a last resort–unless you have planned upfront to use them–possibly where an exception applies.  And before you raid your retirement savings, make sure you are leaving enough to support your actual retirement–as you want to know your “retirement number” upfront.

 

Key Points to Remember:

  • ROTH IRAs have a five-year rule that applies in three situations:

 

  • 1) if you withdraw account earnings,

 

  • 2) if you convert a traditional IRA to a Roth,

 

  • 3) or if a beneficiary inherits a Roth IRA.

 

• Traditional IRA withdrawals used for higher education are 10% penalty free but taxable at your ordinary income rate

• Funds in a ROTH that are withdrawn for higher education would be taxed on earnings only—not original contributions

• Funds in a ROTH that have been there for five or more years would be taxed on earnings only—not original contributions

• Funds in a ROTH that have been there for less than five years would be taxed on earnings only—not original contributions

At this time there is a $10,000 maximum withdrawal of IRA funds for a home purchase—whether Traditional or Roth!

• Traditional IRA withdrawals used for disability or death are 10% penalty free but taxable at your ordinary income rate

• A Roth IRA used for death or disability held in account for less than five years would have no penalty but would be taxed on earnings—not original contributions

• A Roth IRA used for death or disability held in account for more than five years would have no penalty –and would have no taxes

  • If you meet the income guidelines and otherwise qualify–you could receive a savers credit (line 4 schedule 3) on top of your traditional IRA deduction

There are no required distributions for a Roth IRA while the original account holder is alive. However, after the account owner dies, their beneficiaries must empty the account according to the rules at the time of death: five years if the account owner died before 2020, and 10 years if he or she died after 2020. An inheriting spouse also has the option of taking RMDs based on their own life expectancy.

 

However, death of a ROTH account owner doesn’t totally get you (the beneficiary) off the hook with regard to the five-year rule.  If you, as a beneficiary, take a distribution from an inherited Roth IRA that wasn’t held for five tax years, then the earnings will be subject to tax.

 

Withdrawals when an exception does not apply:

Traditional IRA withdrawals would have a 10% penalty UNLESS YOU ARE AGE 59.5 OR OLDER—and would be taxable at your ordinary income rate

• Funds in a Roth IRA for less than 5 years would have a 10% penalty on earnings—not contributions—and would be taxed on earnings at ordinary income rates—original contributions would be non-taxable

• Funds in a Roth IRA for more than 5 years would have a 10% penalty on earnings—unless you are age 59 ½ or older—and would be taxed on earnings at ordinary income rates—unless you are age 59 ½ or older—original contributions would be non-taxable regardless of age

• Finally, any further non-qualified withdrawals from Roth accounts set up in your name (after you’ve tapped all your contributions) are deemed to come from earnings or investment gains.

• Non-qualified withdrawals from earnings are 100% taxable prior to age 59.5 and meeting the the 5 year rule.  You or your tax professional would fill out Part III of Form 8606 to calculate the taxable amount from this layer, and enter that on Form 1040.

• In addition, the 10% penalty applies, unless you’re eligible for an “exception.” If you owe the penalty tax, fill out Form 5329 and enter the penalty on line 8 of Form 1040.

 

What if I am age 59 ½ but I fail to meet the five-year test:

Any Roth IRA withdrawal taken before passing the five-year mark would be considered a non-qualified withdrawal.  As such, it may be subject to income tax and a 10% penalty tax.

 

In this case, non-qualified withdrawals are generally handled in the same order as above:

1)—first from annual contributions

2)—then from conversion contributions

3)—and lastly from investment gains or earnings.

 

Most importantly you want to know that, non-qualified withdrawals from investment gains are subject to income tax, and, if you’re under 59.5, the 10% penalty (unless you’re eligible for an exception) would apply.

 

You or your tax professional would fill out Part III of Form 8606 to calculate the taxable amount from investment gains and enter that figure on Form 1040.  If you owe the penalty tax, fill out Form 5329 and enter the penalty on line 8 of Form 1040.

 

If you qualify for the home purchase exception: If you’ve passed the five-year test but you’re under 59.5, a special exception allows tax-free and penalty-free Roth withdrawals in order to buy a principal residence.

 

However, there’s a lifetime $10,000 limit on this deal, and you must use the money within 120 days of the withdrawal.  The home buyer can be you or certain relatives (including children and grandchildren).  However, the buyer must not have owned a principal residence within the two-year period ending on the purchase date.

 

Final Thoughts on Taxation & IRA’s

While the tax rules for “Traditional” and “ROTH” contributions and withdrawals may seem complicated, your custodian (or your tax professional) will clear up much of your confusion by completing Part III of Form 8606 after you receive tax documents from your custodian.

 

In addition, you will receive a form 1099-R from your IRA custodian or trustee shortly after the end of any year in which you take withdrawals.

 

By providing this form to your tax professional—or utilizing the form yourself if you do your own taxes–you can complete your taxes in an efficient manner.

 

As for contributions—you mainly have to keep the income cutoffs in mind if you have income that is in the income cutoff limitation ranges.  Your contribution limit is easy to remember—as it will be $7,000—or $8,000 as of 2024 if you are age 50 or older, and the number could change slightly from year to year.

 

The 1099-R would show the total amount of withdrawals for the preceding year and your tax with-holdings (and the IRS gets a copy) so if you took any “non-qualified withdrawals”—the IRS will expect to see a Form 8606 included with your return.

 

With a traditional IRA—you get a deduction up front on your tax return if you qualify, and you pay taxes on your distributions at “ordinary income” tax rates in later years after you retire (or before if you took a early distribution and there would be an additional 10% early withdrawal penalty)—whereas, with a ROTH you get no deduction up front, however all “qualified” distributions are tax free if you meet the 5 year rule and age 59.5.

 

Be sure to go to our individual retirement account page where you can find other helpful ways in which you can use IRA’s to reach your and your family’s retirement and other goals.

 

For income tax preparation you can utilize the tax professional of your choice—or if your tax situation is not very complicated you can choose to do your taxes yourself!

 

Many retirees who reach age 70 ½ were required to begin to make withdrawals from their retirement accounts in accordance with the IRS guidelines.  In 2023 the age was moved up to 73–giving you more time for your traditional IRA account to grow, if you have no need for the funds prior to age 73.

 

As for your annual taxes once you start receiving your traditional IRA distributions, those who are not working would normally pay their taxes (estimated taxes) in AprilJuneSeptember and the following January on a continuous cycle until their transition or the funds in the account ran out.   For those who continue to work after age 73, they may be able to avoid paying estimated taxes by withholding their taxes at the appropriate level on their W-2.  Still others who are not working could comply with their withholding requirement by having taxes withheld on their social security income or W2P.

 

To avoid the IRS penalty for “underpayment of taxes” you have the option of paying 100% of your previous year taxes through estimated payments (previous year tax divided by 4) in April—June—September and the following January or you can pay 90% of your current year taxes. 

 

You can also choose to have your taxes “voluntarily” withheld by adjusting your W-4P for your pension income that goes on your 1099R that you would get during the tax season.

 

Even your social security benefits can be “voluntarily” withheld by you electing to have taxes withheld (use form W-4V) at varying percentages such as 7%, 10%, 15% or 25% of your monthly benefits.

 

If you receive income from your Traditional IRA, you have more flexibility.  You can choose to have no withholding, otherwise 10% will be withheld by law.  At the other end of the spectrum, you could tell your IRA custodian to withhold 100%.

 

IRA distributions are considered made evenly, regardless of when you receive them during the year.

 

You could choose to receive your IRA distributions yearly if you are able to live off of your other income sources—say November or December and have an amount withheld that could cover the taxes that you owe from all of your other taxable income (must be over age 70 ½–now age 73).

 

To effectively use this strategy (avoid the underpayment of taxes penalty) your RMD or required minimum distribution must be large enough to cover your taxes that would be owed.

 

You would avoid having with-holdings on your other income, avoid writing a check for estimated taxes every 3 months or so–and make your life less stressful by doing so.

 

Conclusion

The strategy that you use with your IRA account(s) will affect not only you, but potentially your heirs as well.

 

It is important that you give serious attention to how you will receive your retirement income after you turn age 70 ½–now age 73 as of 2023, and you have the opportunity to structure your income in a way that can minimize your tax bite or make the payment of your taxes more convenient.

 

 Non-spouse Beneficiaries

Also give serious consideration of what will happen to your retirement income after you transition. 

 

If you are married the process is simpler, however if you have non-spouse heirs in the picture you don’t want to trigger a large tax bill for them by not knowing what may occur after you transition.

 

Non-spouse beneficiaries of “any age” who want to stretch the IRA over their own “life expectancy” must start the RMDs the year following the year the owner of the IRA transitioned.

 

Non-spouse heirs will have to pay tax on distributions of deductible contributions and earnings from a traditional IRA!

 

Even though non-spouse ROTH IRA owners will not feel a tax bite, they still must begin taking RMDs.  If they fail to do so a 50% penalty could apply on the amount that should have been withheld for the year.

 

If you miss the RMD for the year in question, you can still possibly avoid the penalty by emptying the account within 5 years of the owner’s death.

 

However, death doesn’t totally get you off the hook with regard to the five-year rule.  If you, as a beneficiary, take a distribution from an inherited Roth IRA that wasn’t held for five tax years, then the earnings will be subject to tax.

 

The size of your ROTH IRA and the age of your intended beneficiary will come into play and you must plan accordingly at this time to help minimize or eliminate the penalty for your intended beneficiary(s).

 

Also realize that non-spouse beneficiaries cannot roll an inherited IRA over into their own IRA!

 

If you are a spouse, and you inherit an IRA you must take RMDs based on your life expectancy.

 

A separate account must be set up with a title that includes the deceased name and the fact that the account is for a beneficiary(s).   Also have the non-spouse heir name successor beneficiaries on the newly titled account(s).

 

If a number of non-spouse heirs are involved, it is important that they “split the IRA” so that the money can continue to grow tax deferred, otherwise the age of the oldest beneficiary will be used to calculate RMDs which would shorten the growth period of the IRA.

 

To be valid the split must occur by December 31st of the year following the IRA owner’s transition!

 

If you decide to leave your IRA with a charity or multiple non-spouse beneficiaries including a charity or other non-person entity that entity must receive their share by September 30th following the year of the owner’s transition.

 

If that share isn’t paid out, you will create a problem if a non-spouse beneficiary(s) is involved.

 

The entity must be paid out and the account must be split (mentioned above) otherwise your beneficiaries have to empty the account within 5 years if the owner transitioned before his or her required beginning date for taking distributions.

 

If the owner died after their RMD date the beneficiary(s) must take annual RMDs based on the deceased life expectancy, as noted in IRS tables.

 

If a trust is involved the process works a little differently as the IRA custodian must receive a copy of the trust by October 31st of the year following the year the owner transitioned.

 

If the IRA custodian does not receive a copy of the trust in a timely manner the trust will be considered a non-designated beneficiary and the payout rules mentioned above would apply to the trust.

 

Although a lot about RMDs has been discussed, it is important that you process and apply what may be relevant or potentially relevant to you and your family at this time.

 

Be sure to discuss required minimum distributions and tax strategy and plan with your family and other professionals in ways that you can have favorable outcomes.

 

By doing so you can lessen your taxes, make your heirs life less stressful, build your wealth more efficiently and transfer your wealth after you transition in a manner that is best for all parties involved.

 

 

 

IRA’s play a critical role in the United States for workers who lack a retirement account that is sponsored by their employer and is a major tool for those who are in the know and are willing to use the power of compounding and investing consistently over time for their benefit.

 

Whether a Traditional or a ROTH, IRA’s can play an important role for those who qualify and help them live out their retirement years with more dignity.  By starting early and combining the returns with retirement accounts, other investments and social security income, it could provide the needed edge that allows better living for you and your spouse in your retirement years.

 

The bottom line is that IRAs—both ROTH and Traditional are an important tool to help you reach your retirement and other goals and should be given strong consideration by you if your goal is to improve your living conditions for yourself and your family to a high level in possibly a more “tax efficient” manner.

 

With a traditional IRA—you get a deduction up front on your tax return, and you pay taxes on your distributions at “ordinary income” tax rates—whereas, with a ROTH you get no deduction up front, however all “qualified” distributions are tax free.

 

A Properly Funded IRA Can Enhance Your Future Living Conditions

 

If you have addressed your finances in a comprehensive manner and are in financial position to do so—IRAs should be a part of your financial strategy to help you and your family attain the future goals that you desire.

 

Be sure you use realistic projections and you invest consistently using a portfolio that fits your investment style. You can also consider target-date funds inside of an IRA.

 

By starting early in your “life stage” you can set yourself and your family up for real success—in a relatively painless manner.

 

You must not only be good or excellent in the management and understanding of your IRA, but you must also be able to tell someone else about IRAs.  It is your connection and your presentation to others that is at stake and is critical for your successful spreading of how to use IRAs and other wealth building techniques to not only reach your highest heights, but help others reach theirs as well.

 

Isn’t it time to get your IRA and other Retirement Planning under way–today?

 

All the best to your IRA success…

 

Note: This discussion is not intended to be financial or legal advice and the accuracy of all information cannot be guaranteed.  Even though all reasonable action was taken to ensure accuracy, accuracy cannot be guaranteed.

 

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Fraud Prevention & Wealth Building

Learn more about fraud prevention and how you can avoid the unwise use of credit…

 

As you build wealth in the current economy with technology improvements and data breaches occurring on a consistent basis, you want to know how to guard against the breaching of your data and do all you can on the front end to prevent data breaches or respond more effectively in the event of a data breach that involves your identifying information.

 

You also want to be aware of credit and finance promotional offers that you may be bombarded with at the various stages of your life as many offer credit to unsuspecting consumers at high rates of interest or terms and conditions that work for their (credit issuer’s) best interest–and not yours.

 

And just as you must be aware of how you build wealth from an internal point of view, you also need to be aware of fraudsters and scammers who are all around you (external or outside point of view), if you sincerely desire to achieve at a higher level than most.

 

In the last post in which the creator of TheWealthIncreaser.com submitted to the internet universe, the inspiration that was received at the time of that post was thought by the creator of TheWealthIncreaser.com to be a post that could help many, however the first week was unusually slow as visitors trickled in, however most recently visitors have taken a liking to the post and it is now helping many build wealth in a more thoughtful, engaging and eye-opening manner as visitor comments continue to come in on a constant basis about how the page has led them to analyze and approach the management of their finances in a different way and put them on a more prosperous path toward wealth building.

 

In this discussion TheWealthIncreaser.com will discuss what you can do to guard against fraud in various forms and also discuss why you must be more aware of unscrupulous creditors and others who are working day and night to entice you into making decisions that “are not” good for you and your family.

 

By utilizing credit monitoring, freezing of your credit and fraud alerts–you can better protect your finances and achieve more throughout your lifetime.

 

Credit monitoring allows you to review the accounts on your credit reports from one or more of the 3 national credit reporting agencies.  You can go to annualcreditreport.com (877-322-8228) to get a free report from each bureau once per year or you can purchase a copy.  Keep in mind that bank accounts and payday loans that could be opened up using your identifying information would not be picked up by most monitoring services.

 

Whether you utilize free sites or paid sites–in this day and time you want to monitor your accounts, either by self-monitoring or a paid service:

 

Transunion

PO Box 1000

Chester, PA 19016-1000

1-800-888-4213

www.transunion.com

 

Equifax 

PO Box 740241

Atlanta, GA 30374-0241

1-866-349-5191

www.equifax.com

 

Experian

PO Box 2002

Allen, TX 75013-9701

1-866-200-6020

www.experian.com

 

Freezing your credit allows you to freeze your credit file so that no new credit can be opened in your name “without” the use of a PIN or (Personal Identification Number) that is issued to you when you initiate a freeze.

 

The goal of freezing your credit is to prevent potential credit grantors from access to your credit report without your consent.

 

You must temporarily lift the freeze in order for creditors to gain access.  You will in essence have a “delay” in your ability to obtain credit.  If you were looking to buy a house and get a home mortgage–there would be a delay but generally not be of consequence.  By law credit freezes are available at no cost to you, however you must contact each credit bureau individually to implement the freeze.

 

Lifting of Freeze–online or by phone the credit reporting agency must do so within 1 hour–by mail 3 business days.

 

Implementing a freeze–online or by phone the credit reporting agency has 1 business day after receiving your request–by mail 3 business days.

 

NOTE: The IRS also offer an Identity Protection PIN or IP PIN that you can utilize to help safeguard against the fraudulent filing of your taxes.

 

If you are now or in the future become the victim of a data breach you may want to consider freezing your credit:

 

Transunion

PO Box 160

Woodlyn, PA 19094

1-800-916-8800

www.transunion.com/credit-freeze

 

Equifax 

PO Box 105788

Atlanta, GA 30348-5788

1-888-298-0045

www.equifax.com/personal/credit-report-services

 

Experian

PO Box 9554

Allen, TX 75013-9554

1-888-397-3742

www.experian.com/freeze/center.html

 

Fraud alerts will allow you to place an “initial” or “extended” fraud alert on your file(s) at no cost.

 

Upon seeing a fraud alert a business is required to take steps to verify your identity “before” extending new credit.  If you are a victim of ID theft you can extend the alert for up to 7 years!  By contacting one bureau and placing the alert–they will notify the other 2 bureaus.

 

You also have the option to put an initial fraud alert on your account that is valid for one year if you desire additional protection on top of monitoring and freezing of your credit:

 

Transunion

PO Box 2000

Chester, PA 19016-2000

1-800-680-7289

www.transunion.com/fraud-alerts

 

Equifax 

PO Box 105069

Atlanta, GA 30348-5069

1-800-525-6285

www.equifax.com/personal/credit-report-services/credit-fraud-alerts/

 

Experian

PO Box 9554

Allen, TX 75013-9554

1-888-397-3742

www.experian.com/fraud/center.html

 

By utilizing credit monitoring, freezing of your credit and fraud alerts–you can better protect your finances and achieve more in a safer way.  They are cost effective ways that you can use to prevent, respond to or minimize the effects of fraud in your life. 

 

Although setting up fraud alerts and freezing your credit will take time, it will be worth every minute if you can prevent unauthorized activity on your financial accounts.  Credit monitoring (make sure all 3 credit bureaus are being monitored with the service you select) will also take a few minutes a week of your time and it too can be time well spent.

 

You can now set up credit alerts and other alerts with your creditors, bankers and others whom you have a financial relationship with that will provide alerts and monitor your information on the world wide web, including the dark web.

 

Other Options:

 

Contact the FTC & Your State AG’s Office 

If you find information on your credit report that appears fraudulent or you feel information on you have been misused, you can also contact your local law enforcement and the FTC and your states Attorney General’s office.  Be sure to get a copy of the police report as the report can potentially relieve you of the debt obligation created by the fraudster with your creditor(s).

 

Federal Trade Commission

 

FTC Consumer Response Center

600 Pennsylvania Avenue, NW

Washington, DC 20580

1-877-IDTHEFT (438-4338)

www.ftc.gov/bcp/edu/microsites/idtheft

 

The above contact data for the 3 credit bureaus and the FTC are current as of 06/21/2024

 

Learn More about Consumer Reporting Agencies that You Need to be Aware of…

 

If you suspect Investment Fraud:

 

Call—800-732-0330 SEC Commission or go to www.sec.gov

 

To obtain background information on a broker or brokerage firm call 800-289-9999 or go to www.finra.org/investors/toolscalculator/brokercheck

 

How to choose a Financial Advisor…

Investments & Personal Finance Page…

Investment Simplification & Wealth Building

 

On your personal taxes you can help prevent fraud by getting an IP PIN that will help prevent the fraudulent filing of taxes by a fraudster as they will need to know your PIN even if they have your other identifying data.

 

Credit Solicitations & Wealth Building

In the current economy credit offers abound and if you are new to credit or lack the needed credit management skills, you can find yourself victim to unscrupulous creditors.

 

It is not uncommon for college graduates, undergraduates and others to receive offers from various creditors, and many jump at those offers with no real concern for their future obligations (they fail to begin with the end in mind).  Many creditors offer to loan you money or provide actual checks that you can cash immediately that are tempting and could put you on the hook of paying interest at rates over 30%.

 

Other offers may appear more reasonable such as 8% or less, however they too can put you in a more dire position if you jump at the offer and you do not have a comprehensive overview of your finances.  Still others will offer you credit cards of varying credit limits–even if you have no need or desire to utilize credit or have a credit file.

 

You want to look at the fine print of all offers that you are considering and know the details of your engagement on the front end–not after the fact.

 

Do your acceptance of credit offers line up with your goals and do you have mastery over credit so that credit issuers don’t have mastery over (they know you don’t know what you need to know) you, because you lack mastery over credit?

 

You want to know your APR, Finance Charge, Amount Financed and your Total Payments prior to engagement with creditors, as by knowing that information you can determine how bad (or good) the offer really is.

 

In many instances you have better options, and you want to pursue those options “prior to” making a bad decision or a decision that you will later regret due to lack of preparation, high pressure, lack of knowledge, time limit pressure and other negative occurrences whether created by you or outside forces!

 

Conclusion

 

The cloudy and cluttered view that you have of your credit and financial future ends now!

 

Learn why now is the time that you end your foggy view of your credit and finances and achieve at your highest level of excellence…

 

You want to guard against identity theft and other occurrences or potential occurrences of a negative nature in your credit and financial life.

 

Even the federal government in the United States are taking steps to reduce fraud as they now (2024 and beyond) require many small employers  that are LLC’s or Corporations to provide certain (BOIR) beneficial ownership information reporting, so that illicit pass-through activity and reporting can be better traced.  This reporting is required by FinCen and the deadline for reporting is January 1, 2025.

 

Phone and email fraudsters are out in abundance and their goal is to get you to provide personally identifiable data or click on dangerous links whether text or email.  Other fraudsters and scammers will attempt to gain your trust and get you to provide usernames and passwords so that they can access your data and ultimately breach your accounts.

 

If you desire a more comprehensive approach in the management and protection of your credit and finances, consider purchasing 1-2-3 Credit & Me and take life changing control of your finances from this day forward in a way that can put you on a path to achieving all of your goals in a more definitive way.

 

You already know the importance of “looking within yourself” and improving in areas that you are weak.

 

You also need to look externally (political, regulatory, economic, societal, technological and legal happenings where you reside) to see moves that you can make that will serve your better interests.  In the societal realm, you may have unscrupulous players who may be out to scam you out of your hard-earned cash.

 

In the event that your data is breached and your identifying information is under the care of a company or industry, many will notify you of the breach and often provide free credit monitoring for a year or more if you sign up–and if you find yourself a victim and the service is offered, you want to strongly consider it, particularly if you do not have a paid service at the time of the breach.

 

If you are elderly, you want to be particularly cautious about financial moves that you anticipate making!

 

You don’t have to put yourself in position to be taken advantage of by creditors, lenders, scammers and others–as you deserve a better approach when it comes to the management of your credit and finances, and you now have those approaches at your fingertips, if you are now ready to take action of a proactive nature!

 

To help prevent fraud, you want to implement common sense actions that you can take yourself to prevent scams such as:

 

*Filter unwanted emails to your spam folder and block unwanted calls and texts and do updates and use the latest internet search browser when possible!

*Don’t give in to anyone pressuring or threatening you into giving them your personal information!

*Hang up phone or don’t respond to requests for information or money on contacts (calls, emails, text messages etcetera) that you did not initiate!

*Even if you are contacted by a business that you recognize, don’t give out your personal or financial info to anyone!

*If anyone says you must act immediately, stop and ask–is this how a company that I wish to do business with should act?  If you feel uneasy, there is a good chance that you are right!

*Instead of clicking links in emails and text messages or calling numbers that you did not request, use a company’s real contact information from their “official” website!

*If someone tells you to keep a secret or say something suspicious and you are not comfortable, stop the conversation and discuss what has occurred with a trusted family member or someone else you trust!

*Be sure to consider multi-factor authentication with your banking, investment, retirement and other financial accounts–particularly those with large balances or high credit limits!

*Be on the lookout for those who pretend to be someone you know, offer you a prize or the ability to help you or a family member get out of trouble, pressure you to act before you have had time to think it over and ask you to pay in a specific manner whether by payment app, wire, gift card or check!

 

You want to remain vigilant and be alert for incidents of fraud by reviewing account statements and monitoring free or paid credit reports that are available.  Look for accounts or creditor inquiries that you did not initiate or recognize and make sure all of your data in your credit files from all three credit reporting agencies are accurate.

 

Also be alert for suspicious calls and emails and never give out identifying information unless you initiate the call or email and you are certain of who you are communicating with!

 

Always realize that you have rights under the fair credit reporting act (FCRA) which governs the collection and use of information about you by consumer reporting agencies.  You can learn more about your rights under the FCRA by going to:

 

www.consumer.ftc.gov/sites/default/files/articles/pdf/pdf-0096-fair-credit-reporting-act.pdf

 

In addition to being alert for fraudsters and scammers, you also want to be aware of marketing activity that may be aimed at you that promotes reward and other credit cards, retail cards, personal loans and other promotions of varying types as they can in many cases lead you astray–and off of your well planned path that you need or plan to take.  You want to determine as best you can on the front end if the promotion that is offered fits in with your goals–whether they be your short, intermediate, or long-term goals.

 

Generally, if you have 5 or 6 credit cards that would possibly be sufficient for building and maintaining your credit as long as you are managing them effectively over time on a consistent basis—ultimately it all depends on your goals.  If you have credit card debt and desire to pay the debt off efficiently with lower interest going to the credit issuer, let’s say you have credit card debt of $4,000 and you get a zero percent promotion offer and you generally know that you can qualify based on your credit score–you still want to run the numbers upfront to determine if there is a real benefit for you.

 

Can I pay off the $4,000 with the discretionary income that I have available in the 18 month zero percent interest payment promotional period or window and still meet all of my other obligations on a monthly basis? 

 

To eliminate the debt of $4,000 you would have to pay roughly $220 per month for the next 18 months!

 

In addition, if you apply for a new card you generally won’t know the credit amount that you would be approved for in advance and you would normally have a 3% or 4% transfer fee, meaning if you were to transfer $4,000 of debt, your new balance with the credit issuer would be $4,120 at a 3% transfer rate or $4,160 at a 4% transfer rate.

 

If you were paying interest monthly at 20% on a $4,000 balance prior to the transfer, your monthly interest would be roughly $80 per month–meaning in 2 or 3 months you would have paid more than the transfer fee–giving you a real opportunity to pay off your remaining balance in roughly 18 months at zero percent interest–saving you well over $1,000 whether the transfer fee was 3% or 4%–therefore there is a serious advantage for you to transfer in this scenario if you have the “discretionary income” and credit score that qualifies you for the promotional credit card with a credit limit of $4,000 or higher–and even less–depending on your goals!

 

You also must be disciplined and highly motivated to pay off the debt in an efficient manner!

 

Once that payoff of $4,000 has ended after 18 months, you could choose to invest that $220 that you have become accustomed to living without for say–10, 20, or 30 years and have a nice windfall in a relatively painless way!

 

In closing, realize that unscrupulous actors are all around you and particularly as it relates to your finances and the building of wealth, however there is no reason for you to fear your financial future if you get out in front of your finances.  It is your responsibility to put yourself in a winning financial position so that you can’t be easily taken advantage of as it relates to your finances!

 

By understanding the life stages of your finances and looking at your finances in a comprehensive way at the earliest time possible, you can put yourself in position for greater success and better guard against fraudulent actors that will eventually come your way at some point in your life.

 

All the best to avoiding fraud, being susceptible to non-beneficial marketing techniques and otherwise turning your finances into a mess…

 

Purchase 1-2-3 Credit & Me and totally take control of your credit and financial life…

 

Purchase Wealth Building Now today…

Read a Sample Chapter in Wealth Building Now…

Learn What is Inside Wealth Building Now…

 

FAQsTheWealthIncreaser.com

 

 

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Self-Awareness & Wealth Building


Learn the importance of “knowing yourself” as you embark on your wealth building journey…

 

Frequently Asked QuestionsTheWealthIncreaser.com

Learn about Wealth Building Now new book…

1-2-3 Credit & Me (Frequently Asked Questions)

 

If you are someone who desire to build wealth more effectively and efficiently, it is important that you not only have an effective plan that will take you to where you need or plan to go, you must also know your personality–or have an awareness of how you mentally approach life–or another way of stating it is, you must know yourself and how you operate “internally” in the various facets of your life whether the wind is at your back or you are encountering a major storm.

 

It is important that “you take time” out of your busy life to look inward and determine where you are now at in a sincere manner so that you can enhance areas that you are weak–and utilize areas in which you are strong in a more effective manner, so that you can build wealth more effectively throughout your lifetime.

 

Are you an effective money manager and are you aware of how you approach the management of your finances and do you feel good about yourself on a consistent basis, value your life and what you know you will accomplish, know your self-worth and how you can build wealth optimally, and have confidence in your future in spite of all that may be happening around you?

 

In this discussion TheWealthIncreaser.com will go into detail about the qualities that you need to have or improve upon, based on the success of many past clients and the qualities that they demonstrated while building wealth in varying economic environments.

 

It is important that you demonstrate a high level of focus as you pursue the improvement of your finances and you also want to have a real handle on how you are aware of and manage the following:

 

Self-Esteem

How do you see and feel about yourself?  Your self-esteem must be at a high level as you must see on the inside of you someone who looks good, feels good and does good in the world–and you must know that you are and will continue to be a positive force for the advancement of humanity.

 

When you have high self-esteem you see yourself as having value, you set the bar high and you not only expect more of yourself, you will actually achieve more!  You also never let others mistreat you or knowingly take advantage of you in any facet of your life!

 

Self-Value

How do you value yourself?  Do you see yourself as someone who can set goals and accomplish them?  What do you expect to happen in your financial future?  Do you expect others to be the breadwinner and do what you are responsible for doing, while you sit on the sidelines–or do you plan to be active in making the wealth building future that you desire happen in real time?

 

Do you at this time value your financial management skills or do you feel they are lacking?  Do you expect creditors and others to have the edge over how you manage your finances and do you expect to negotiate from a position of weakness or strength?

 

Self-Worth

How do you see yourself within?  What do you expect from yourself and others as a result of pursuing your goals and dreams at your highest level?  Are you looking at your worth based on the effort that you are willing to expend or are you cautiously optimistic with no plan in place and no real understanding of what you need to do?

 

It is imperative that you feel worthy of whatever you desire to occur in your future and you must know that you are “worthy” of whatever “you” think you are worthy of.

 

Self-Confidence

If you have high self-esteem, you value yourself and what you know you will accomplish, and you feel worthy of the success that you are about to achieve, you will put yourself in great position to have the confidence that you need to succeed as you pursue the various wealth building goals that you may have.

 

Whether it is creating a budget or cash flow statement, determining your income on an annual basis, creating a balance sheet so that you can know your assets and liabilities so that you can determine your net worth, mastering your understanding of credit, and understanding and improving upon your finances in all areas–you must feel confident that you can do all of that and more, and you must put into action what is necessary so that you can soar!

 

Conclusion 

What you accept of a negative nature from others can lower your value, esteem, and worth within your mind and heart and you will be less likely to achieve more–and truly set yourself apart!  You don’t have to accept detrimental or hostile treatment from creditors and others who are in your life.

 

You don’t have to sacrifice or engage in transactions from a point of weakness and achieve less because you failed to give it your absolute best!

 

You can now see the light and you now have the opportunity to take the necessary steps to build your wealth right!  Even if you are on a positive path toward success, you may need to re-focus your efforts toward success so that you can truly put forth your best.  By being keenly aware of what your responsibilities are as you approach your wealth building efforts, you put yourself in real position to making it happen in real time.

 

By having a high level of self-esteem, valuing your life at your highest level, and knowing that you are worthy of whatever “you” think you are worthy of, you will put yourself in position to have the confidence to put together a plan and pursue that plan in an unrelenting fashion because you will have cultivated those important qualities at such a high level that success will be the only possible outcome!

 

Always remember that “you are accountable to yourself” for your and your family’s future, you must have integrity at all times, and you must honestly pursue what you desire to occur because you know wholeheartedly that it is your responsibility to create the future that you desire for yourself and your family–and no one else’s.

 

It is important that you do so in an inspiring and uplifting manner–and not be pulled down by others who do not have your best interest in mind!

 

You must measure yourself based on “who you really are internally” and not by the degrees or titles that you may have or hold.  In order to maximize your self-improvement  and build wealth more efficiently, you must be aware of how you operate daily and particularly how you manage your finances on a consistent basis.

 

You must own peace, freedom, creativity, and clarity “within your mind” and you must know that you are enough and you can and will put a plan in place that will allow you to see your future clearly and build wealth at the level that you desire.

 

Your accomplishments over your lifetime may be impressive and appeal to others, but your achievement should be all about appealing to you and what you desire–as you must set the bar higher–and you want to take your achievement to a level that is acceptable to you–not others who in reality are not as impressed as you may think, by what you do.

 

You must know that you are worth your time, energy and effort that you are expending or will soon expend, and you will do what you need to do to make what you desire most happen in your life at this time!

 

Above all, you must love yourself and the path that you are on, and realize wholeheartedly that how you internally see, hold, and base your approach to your life here on earth, is critical for your long-term success and improving your self (and net) worth.

 

You will never know what is inside of you (your potential) if you don’t put a demand on what is inside of you!  You must rise up with boldness, have a high level of self-awareness, have a high level of self-esteem, have a high level of self-worth, have a high level of self-confidence and you must know in definite terms that you are aware that you are a valuable addition to the human community, and you plan to advance society while you are here on earth.

 

You can choose to play it safe by going through life by not being aware of what is going on in your financial life, or you can choose to talk yourself into success by being more aware of your future and using what you now have and will work to improve upon to take the right action–consistently throughout your lifetime.

 

Isn’t it time you tap into your hidden talents and achieve at a higher level?  Isn’t it time that you release all of your gifts and potential while you are yet alive.  Isn’t it time you have a new thirst for success and isn’t it time you give it your absolute best?

 

Isn’t it time that you turn something that you were put on earth to do from ordinary to extra-ordinary?

 

All the best as you commit to a higher level of success by giving it your absolute best….

 

Learn about Wealth Building Now new book…

Read a Sample Chapter of Wealth Building Now…

Learn how you can benefit from TheWealthIncreaser.com…

 

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This page created in honor of the 50th Wedding Anniversary–Roosevelt & Shirley–may you have many more celebrations…

 

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Bottom Feeders & Wealth Building

Learn why you must expect the best as you pursue success…

 

Read Sample Chapter in Wealth Building Now–NEW BOOK...

What’s inside of Wealth Building Now…

 

In this discussion TheWealthIncreaser.com will lighten the mood some from the blog posts over the last few months that were somewhat technical, and now discuss why those who fail to give it their best must transform their mindset  in a manner that can lead to greater success–and end the type of behavior that is holding them back, if they desire to achieve more in the coming years as they attack more aggressively to get their finances back on track.

 

There are many who let worry, anxiety, fear, frustration, lack of effort and excuses control their daily actions in a detrimental way.  If that type of behavior applies to you, now is not the time to panic as you can learn much of what you need and can do to start or continue on a more definite path that can lead you towards making your wealth building dreams come true.

 

TheWealthIncreaser.com is not for those with a short attention span, but for those searching for meaning in a sincere and real way as far as building wealth more efficiently and effectively at the various stages of their life is concerned.

 

Even though Investment Simplification, Retirement Simplification, Social Security Simplification and Bond Simplification posts over the last few months “tested the patience” of many visitors (20 plus minute reads on all of the posts), those who focused in on–and comprehended the posts at their highest level now have a “new awakening” of how they can achieve lasting success, based on the responses of many visitors to those posts.

 

In particular, the bond simplification post has helped many, as a number of visitors stated that it was the best explanation of bonds that they could readily grasp that they had ever read!

 

Now is the time that you too address the “reality of now” in your life so that you can avoid financial strife.

 

In this discussion, those who are not giving it their absolute best for various reasons will be described as “bottom feeders” (tongue-in-cheek) and if that type of behavior applies to you (actually it applies to all of us on some days), it is important that you don’t take it personally, as the goal for all who come across this page is to get them to do more and achieve more while they are here on planet earth.

 

It is important that you have the mindset to develop a financially alert mind as opposed to just being financially literate as that will allow you to see more, be more, and do more so that you can truly soar!

 

Even if you may be living paycheck to paycheck and feeling the effects of inflation at this time and you know that what you are experiencing is real in a definite way–so too must you know that compounding too is real–and putting together a plan that you can utilize to achieve more can also be made real by you–therefore you want to make the best decisions and manage both inflation and compounding to your best advantage–now that is the real deal!

 

While others (whether consciously or unconsciously) promote worry, anxiety, fear, frustration, lack of effort and excuses, your heart and mind needs to promote “comfort” as you manage your finances.

 

It is important that you gain applied wealth building knowledge that has been proven–and you use every day that allows you to pursue success in a better way to your best advantage–not creditors!

 

You need a “personal wellness system” that includes effective wealth building and financial management that leads to real results based on the income that comes into and goes out of your household on a monthly and annual basis.

 

In the steps below you will have the opportunity to learn how you can implement a plan so that you can truly grow and a plan that can truly put you in the know:

 

1) Create Financial Statements that You Can Benefit From

It is important that you take an introspective view of how you manage your finances, and you want to eventually come to the conclusion that “how” you manage your finances is very important as you pursue wealth building.

 

You must be ready for all that comes at you financially during your lifetime, and you must always have hope and you must know that there are routes that you can take that can lead to the success that you desire–as there are many options for you to take in the building of wealth.

 

You want to at a minimum create a budget or cash flow statement so that you can get a handle on your finances and determine future moves that you can make.  If you are comfortable with numbers, you may also want to create a personal income statement and a personal balance sheet so that you can determine your personal net worth.

 

2) Have Mastery of How Credit Works

Do you know how you manage your credit?  Have you ever given serious thought about how you manage your credit and considered ways that you can possibly do it better?

 

Effective credit management throughout your lifetime is one of the major tools that you can use to build wealth.  Whether you are credit averse and desire to pay all cash throughout your life or you plan to utilize credit as a leveraging tool to build wealth more efficiently, more than likely you will have to utilize credit at some point.

 

Therefore, you want to ensure that you have mastery over credit and not allow credit to have mastery over you!

 

You master credit by knowing the factors that affect your credit, knowing the major credit bureaus that record your credit and have a credit file on you, and knowing how your credit is scored by the various agencies and how it is reported by the credit reporting agencies and credit monitoring companies that impact your ability to make financial maneuvers.

 

3) Have a Comprehensive Understanding and Application of that Understanding as it Relates to Your Finances

You must have an approach to managing your finances that is “all encompassing” meaning you don’t leave anything up to chance by not knowing all of the areas of your finances that you need to address–and you must address!

 

You want to know at the earliest time possible that you must have an understanding of how you address your insurance. investments, taxes, emergency fund, education planning, estate planning/wills and retirement planning as that knowledge will put you well ahead of 90 percent of the population–and give you the needed focus to achieve more and reach higher toward the excellence that already resides inside of you!

 

Conclusion

It is important that you invest in who invests in you and not be stuck behind–like glue!  The golden rule of wealth building is that you invest in those who invest in you and those who can show you a real path toward making your dreams come true!

 

Even if you are now a bottom feeder so to speak, or possibly moving along in life at a prosperous and productive pace, you must realize that you can do more–and you will do more!

 

Regardless of your money management personality or where you now stand as far as your wealth building knowledge is concerned, you can change all that and benefit even more while you are here on earth, the place of your birth, if you have a real desire to do so–and you are truly willing to expend the effort so that you can grow.

 

By implementing the 3 steps discussed above you can help ensure that you rise higher and achieve the meaningful and significant goals that you desire.

 

Convenience and a focused path are major factors for building wealth, and with the 2024 release of Wealth Building Now, on the market–wealth building success is NOW accessible in an easy to read and apply format that is designed to guide you toward the success that you desire in an empowering manner in any economy–as you now have the convenience and focus that you need so that you can truly succeed.

 

Read “chapter 5” NOW to get a feel for what you can achieve by purchasing this book today…

 

You no longer have to take what life dishes at you!  You can now take control of your wealth building efforts with more clout–as you NOW know what you need to do to manage your way out!

 

Isn’t it time you form a wealth building wellness system within “your mind” that can put you in control and keep you in control?

 

Speaking of bottom feeders, the links below are bottom feeders so to speak (low number of monthly visitors) but can potentially help you improve your credit, finances and life in a more efficient manner.

 

The moral of this blog, you can achieve success in the building of wealth regardless of where you now stand as far as your financial knowledge base is or your financial status is, if you are sincerely willing to make a change in how you approach your future and you decide to do more in a sincere way from this day forward.

 

In order to achieve more–you must want more!  Bottom feeders dream small or not at all nor do they put forth the required effort on a consistent basis!  Now is the time that you use your imagination to dream big, pursue more and do more!

 

By doing so you will be able to “swim to the top” and not remain a bottom feeder and you can position yourself and your family to enjoy a bountiful harvest in the process!

 

Even though the creator of TheWealthIncreaser.com was once a bottom feeder (we all are at varying degrees at some point in our life) and did not have the required financial knowledge at the time and nowhere to turn, you now have better options as this site provides you a comprehensive overview of what you can do to work toward making your dreams come true.

 

The answers to your perplexing financial concerns or questions can possibly be found on this site if you are willing to navigate and address what ails you tonight!

 

All the best as you rise to the top and achieve major success…

 

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Bond Simplification & Wealth Building

Learn all about bonds and how you can possibly use them to build wealth more effectively…

 

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Caution:  30 minute read

In the United States you will often hear of corporate bonds and government bonds being touted by many, but exactly what are corporate and government bonds and how can you use them to build wealth?

 

In this discussion TheWealthIncreaser.com will focus on government and corporate bonds and discuss ways that you can possibly use them to build wealth more efficiently.

 

Municipal, Mortgage-backed, Agency and Corporate bonds will all be discussed to further enhance your understanding of the bond market.  You can also purchase bonds as part of a Mutual Fund, ETF, Target Date Fund, 401k’s, IRA’s or other retirement plans by utilizing brokers or doing the selections yourself on your brokerage account.

 

Treasuries (Bills. Bonds, Notes) and CDs (Certificates of Deposit) are often considered the safest of investments on the market because they are government backed, and they too will be covered in this discussion.

 

Other bond investments, like municipal or corporate bonds, have credit ratings from rating agencies like Moody’s Investors Services and Standard & Poor’s.  The higher the credit rating, the more likely an issuer is to make timely interest and principal payments.

 

Conversely, the lower the credit rating, the greater the risk that the issuer can’t make timely interest or principal payments.  Prices for bonds with longer maturities tend to be more sensitive to changes in interest rates compared to shorter-term bonds.  Be particularly cautious of junk bonds as they are riskier, and the inability of the issuer to make payments should be of higher concern to you.  On the flip side you can potentially receive higher returns, but with more risk.

 

Municipal, are bonds issued by states, cities, counties, and other local governments, as well as enterprises that serve a public purpose, such as universities, hospitals, and utilities.  Those who issue municipal bonds generally pay “interest income” that is “exempt” from federal and potentially state income taxes.

 

Corporate are bonds issued when companies issue corporate bonds to raise capital for activities such as expanding operations, purchasing new equipment, or building new facilities.  The issuing company is responsible for making interest payments and repaying the principal at maturity.

 

Mortgage-backed securities are created by pooling mortgages purchased from the original lenders.  As an investor you would receive monthly interest and principal payments from the underlying mortgages. These securities differ from traditional bonds in that there isn’t necessarily a predetermined amount that gets redeemed at a scheduled maturity date.

 

Agency bonds are issued by either a government-sponsored enterprise (GSE) or a government-owned corporation (GOC) and are debt obligations solely of the issuing agency (fannie-mae and freddie-mac come to mind as well as the Tennessee Valley Authority and the Hoover Dam).

 

There are generally two types of government bonds that you can buy directly at TreasuryDirect.gov, and they are marketable and non-marketable.

 

Marketable:

 

Marketable bonds include TIPs, (Treasury Inflation Protected securities), Treasuries (Bills, Bonds, Notes), FRNs (Floating Rate Notes), and STRIPs (Separate Trading of Registered Interest and Principal securities).

 

Non-marketable:

 

Non-marketable bonds include series EE and series I-Bonds (series is based on issue date), and they can be purchased in electronic form on treasurydirect.gov or purchased with your tax refund at set purchase amount intervals–you will receive a paper bond(s).

 

TheWealthIncreaser.com will start by discussing bond basics and because marketable bonds cause more confusion for many and are generally a more complex transaction than purchasing non-marketable bonds, government marketable bonds will be discussed first among bonds, followed by corporate marketable bonds and then non-marketable bonds.

 

Bond Basics

When you buy a bond, you are a company’s (or government entity) lender and the bond is like an IOU-a promise to pay back the money you’ve loaned to the company or agency, with interest back to you.

 

The amount of income a bond pays is largely determined by the prevailing interest rate at the time of issuance and other factors specific to that bond.

 

In simplified form, face value multiplied by interest rate equals interest payment to you.

 

$1,000 * 5% = $50

 

You might receive 2 coupon payments a year for $50 each and get payment of face value in 5 or 10 years, depending on term of the bond.

 

Bonds are often used to generate income, protect earnings, diversify portfolios and a strong point for many with government bonds are that they are often backed by the full faith and credit of the U.S. government.

 

What determines a bond’s yield?

Two key factors that determine a bond’s yield are credit risk and the time to maturity.

 

Credit risk: A bond’s yield generally reflects the risk that the issuer will not make full and timely interest or principal payments.

 

Rating agencies provide opinions on this risk in the form of a credit rating.  Bonds with lower credit ratings generally pay higher yields because investors expect extra compensation for greater risk.

 

Maturity: Generally, the longer the maturity, the higher the yield.  Investors expect to earn more on long-term investments because their money is committed for a longer period of time, and they lack access to it.

 

Who Issues?

Bonds are issued by both public and private entities.

 

Many cities, states, the federal government, government agencies, and corporations issue bonds to raise capital for a variety of purposes, such as building roads, improving schools, opening new factories, and buying the latest technology—along with other stated purposes.

 

How Bond Yields Work?

The yield you’re quoted when you buy a bond is often different from the interest it pays.

 

I’m sure you want to know why that is the case!

 

Because in addition to the annual interest rate, the bond’s return reflects any difference between its purchase price and its face value—the amount you’re expected to receive when the bond matures.

 

If you buy the bond at a price higher than the face value (at a premium), you’ll receive less than you paid when the bond matures.  Let’s say face value is $1,000 and you pay $1,100, when the bond matures you will only get $1,000.

 

If you buy the bond at a price lower than the face value (at a discount), you’ll receive more than you paid when the bond matures.  Let’s say face value is $1,000 and you pay $900, when the bond matures you will get $1,000.

 

If you sell the bond before it matures, you get its current price, which may be higher or lower than the amount you originally paid and you are in essence forfeiting your future coupon (interest) payments.

 

Frequently Asked Questions about Bonds…

 

TIPS (Treasury Inflation-Protected Securities) Basics

  • Treasury Inflation-Protected Securities (TIPS) are a type of Treasury bond that is indexed to an inflationary gauge to protect investors from a decline in the purchasing power of their money.

 

  • TIPs with a fixed principal can be stripped (more on stripping later in this discussion).

 

  • TIPS are issued with maturities of five, 10, and 30 years and are considered a low-risk investment because the U.S. government backs them.

 

  • Auctions are held several times a year.

 

  • TIPs pay interest every six months based on a fixed rate determined at the bond’s auction.

 

  • The principal value of TIPS rises as inflation rises.

 

  • The principal amount is protected since investors will never receive less than the originally invested principal.

 

  • The principal value of TIPS rises as inflation rises, while the interest payment varies with the adjusted principal value of the bond.

 

  • TIPS can be purchased directly from the government through the TreasuryDirect system, in $100 increments with a minimum investment of $100.

 

  • Some investors prefer to get TIPS through a TIPS mutual fund or exchange-traded fund (ETF).    However, purchasing TIPS directly allows investors to avoid the management fees associated with mutual funds.

 

Suppose you as a bond investor owns $1,000 in TIPS at the end of the year, with a coupon rate of 2%.  If there is no inflation as measured by the CPI, then you will receive $20 in coupon payments for that year.  If inflation rises by 4%, however, then the $1,000 principal will be adjusted upward by 4% to $1,040.  The coupon rate will remain the same at 2%, but it will be multiplied by the adjusted principal amount of $1,040 to arrive at an interest payment of $10.40 for the year.

 

Conversely, if inflation were negative—known as deflation—with prices falling 5%, then the principal would be adjusted downward to $950.  The resulting interest payment to you would be $9.50 over the year.   However, at maturity, you would receive no less than the principal amount invested of $1,000 or an adjusted higher principal, if applicable.  Learn more about TIPs by visiting “Treasury Inflation Protected Securities (TIPS),” at TreasuryDirect.gov.

 

Treasuries

You can buy most at auction or in the open market.  If bought at auction you can re-invest your earnings automatically.  If you have an investment account with a brokerage, many brokerages allow you to purchase treasuries on their platform and re-invest as well.

Check current interest rates…

 

Treasuries (Bills, Bonds, Notes)

NOTE: Treasuries have a competitive and non-competitive bidding process, and you want to be aware of that proactively, as opposed to after the fact.

 

Treasury Bill Basics

Note about Cash Management Bills: Cash Management Bills (CMBs) are also available at various times and for variable terms.  Cash Management Bills are only available through a bank, broker, or dealer and cannot be purchased at TreasuryDirect.gov.

Treasury issues short-term cash management bills periodically to manage short-term financing needs.

 

*Bills are issued in electronic form only for periods of 4, 8,13, 17, 26 and 52 weeks.

  • Interest is “fixed rate” and is set at auction.

 

  • Interest is the difference between what you paid and the face value you get

 

  • when bill matures interest is paid

 

  • minimum purchase is $100 and sold in increments of $100

 

  • Taxes at federal level are due on interest earned yearly (no state or local taxes)

 

  • Not eligible for STRIPs

 

Treasury Bond Basics

*Issued in electronic form only.

  • Term is either 20 or 30 years.

 

  • Bonds pay a fixed rate of interest every six months until they mature and that rate is determined at auction.

 

  • You can hold a bond until it matures or sell it before it matures.

 

  • Interest rate is never lower than .125%.

 

  • Minimum purchase is $100 and interest is paid every 6 months until maturity.

 

  • Sold at auction several times a year.

 

  • Taxes at federal level are due on interest earned annually (no state or local taxes).

 

  • Are eligible for STRIPs.

 

NOTE: Treasury Bonds are not the same as U.S. Savings Bonds

EE Bonds, I Bonds, and HH Bonds are U.S. savings bonds and are “non-marketable,” meaning they can’t be sold in the secondary market, see U.S. Savings Bonds.

 

Treasury Note Basics

*Issued in electronic form only

*Term is of 2, 3, 5, 7, or 10 years.

*Notes pay a fixed rate of interest every six months until they mature.  The rate is fixed at auction.

*You can hold a note until it matures or sell it before it matures.

  • Interest rate is never lower than .125%

 

  • Minimum purchase $100 and interest is paid every 6 months until maturity

 

  • Sold at auction several times a year

 

  • Taxes at federal level are due on interest earned each year (no state or local taxes)

 

  • Are eligible for STRIPs

 

  • Whether you purchase at auction or on the secondary market the bonds can be readily bought and sold.

 

FRNs (Floating Rate Notes)

*are relatively short-term investments that are issued in electronic form only.

  • Mature in two years.

 

  • Pay interest four times each year.

 

  • have an interest rate that may change or “float” over time.

 

  • You can hold a FRN until it matures or sell it before it matures.

 

  • Minimum purchase $100, sold in increments and Interest paid every 3 months.

 

  • Sold at auction.

 

  • Federal tax due each year on interest earned. No state or local taxes

 

  • Are not eligible for STRIPs.

 

STRIPs

You can buy, hold, sell, and redeem STRIPS only through a financial institution, a broker, or dealer who handles government securities.

 

Treasury securities with a fixed-principal, such as notes, bonds, and TIPS are eligible and may be stripped!

 

Treasury Bills and FRNs can’t be stripped!

 

The idea behind STRIPS is that the principal and each interest payment become “separate securities” that are treated individually.

 

Each separated piece is a zero-coupon security that matures separately and, has only one payment.

 

You can learn more about stripping by going to TreasuryDirect.gov!

 

Corporate Bonds

Corporate bonds are often used by investors in their portfolio to help reduce the risk of returns from other investments.  Many investors use a laddered approach (purchase bonds or bond funds of varying maturities to reduce risk) and many laddered corporate bonds pay 5% or better if properly structured.

 

Investors usually select Junk or High Yield Corporate bonds so that they can obtain a higher rate of return and possibly an increase in the bond price down the road.

 

The segment that is considered high-yield would be rated B to BB+ by S & P or B to Ba1 by Moody’s.

 

They can be a good choice during economic expansion and quite risky during an economic decline.

 

High-yield bonds are also less sensitive to interest rate movement than the other categories mentioned in this discussion.  You can buy junk-bonds through a broker or invest through a fund.

 

Investment grade bonds are purchased by many mutual fund companies and more conservative investors as they are not as risky as junk bonds but provide a stable return in many instances.

 

Although many domestic bond funds invest a small percentage in markets overseas you may be able to diversify your fixed income investments and receive a more attractive yield (bond yields and inflation on international bonds tend to have a low correlation to the U. S.  Bond Market).

 

Some corporate bonds pay interest monthly, but quarterly or semi-annually are more common!

 

Be sure you are properly positioned to invest as there will be more risk.  In addition to interest rate risk which is always a constant when investing in bonds—you will also have currency risk.

 

Depending on your “life stage” you could use international bonds to increase your nest egg–or utilize them during retirement if you are properly “positioned” to do so!

 

To help reduce currency risk, some International Bond Funds enter into “currency forward contracts” that lock in an exchange rate to buy or sell a currency on a future date and locks in the foreign currency fluctuations versus the United States Dollar.   In addition, other methods are used to reduce currency risk depending on the company that you choose.  As with any fund it is important that you are aware of the expense ratio—and particularly with International Bond Funds as there are usually other fees added that you won’t see on the expense ratio but will be charged to your account nevertheless.

 

Even though you can get hefty returns during good times, market risk can be substantial when bond funds in international markets plummet during volatile times, therefore it can never be stressed enough that you must be in the “right financial position” and at the “right stage in your life” to utilize International Bonds & Bond Funds in your portfolio for maximum results.

 

Non-marketable Bonds 

 

Series EE and Series I Bonds

These are also government issued bonds that are sold at a “discount of face value” and mature over 20 to 30 years.

 

Series I bonds are also adjusted for inflation twice a year!

 

Non-marketable bonds include series EE and series I-Bonds (series is based on issue date), and they can be purchased in electronic form on TreasuryDirect.gov or purchased with your tax refund at set dollar amounts with your tax refund–you will receive a paper bond(s).

 

The interest would accumulate in your account and once you cashed in you would receive the interest and principal.  If you cash in early there could be a penalty!  In order to get the full face value on the bond, you would have to keep the bond for the full term.  You could also be taxed on the interest unless an exception such as proceeds were used for educational purposes–were to apply.

 

CD’s (Certificate of Deposit) & Money Market Accounts

A CD with a fixed term and guaranteed rate can be a good place for money you plan to spend down the line, such as a wedding, or the purchase of a house or boat.  Due to early withdrawal penalties, however, the money is not as easily accessible as funds in a savings account.  This makes a liquid savings account a better option for money you may need for emergencies.

 

You want to ensure that you properly establish an emergency funds at the earliest time possible to help with unplanned events that will occur in the short and long-term.  A CD could work for you as part of your emergency fund if you found low penalty CD’s that otherwise met your goals and you used a laddered approach in establishing the fund.

 

Unlike bonds, a CD’s fixed term is guaranteed to pay a specific yield on a set date in the future!  If you like the safety of bonds and CDs, you may want to set up a bond or CD ladder so that you can have better access to your funds, particularly if you will be using part or all for your emergency fund utilization!

 

You can use a CD calculator to determine exactly how much interest the CD that you are considering can earn when the CD matures so you will know your “numbers” in advance.  And you can go to bankrate.com to learn more about CDs and how the one you are considering ranks as far as safety and penalties are concerned.

 

Since CDs usually pay fixed yields, a CD may be a smart option in a falling interest rate environment.  When rates are decreasing, you may be able to lock in a higher yield than what will be offered in coming months or years.

 

Although they are not in the bond family, CD’s and money market accounts are worth considering depending on your goals as there are a large number of consumers who possess these accounts and like their safety ($250,000  protection through FDIC).

 

With interest rates fluctuations Certificates of Deposits and Money Market Accounts will vary on what they pay in returns, and returns that you expect may depend on FED policy of keeping short term rates close to zero or utilizing FED policy to raise interest rates!

 

Conclusion

You can use bonds to fund your IRA if you have a brokerage account.  You can possibly save on management fees by purchasing Treasury bonds directly at TreasuryDirect.gov.

 

Bonds can play an important role as you approach retirement and even during your retirement years.  Used as part of an overall or comprehensive wealth building approach they can play a role in helping you live out your retirement years with dignity.  If you are uncomfortable selecting bonds you can use bond mutual funds or let mutual fund managers select bonds that are part of the mutual fund that they manage.  Target Date and Educational accounts may automatically include bonds in your account if you are currently using that type of financial product.

 

All bond types have their pros and cons so you may want to do additional research or consult with your financial advisor if you are still uncomfortable with bonds.

 

Bonds can also be used to fund your, your children’s, or grandchildren’s education, and the interest earned could be tax free if you meet the educational guidelines outline in the IRS tax code.

 

Treasury marketable securities are sold through auctions.  In 2023, Treasury Direct held 428 public auctions and issued about $22 trillion in Treasury marketable securities–no small change!

 

Treasury marketable securities include Bills, Bonds, Notes, Treasury Inflation-Protected Securities (TIPS), and Floating Rate Notes (FRNs).  What makes them “marketable” is that you can sell or transfer them before they mature and there are always ready buyers.  Agency, mortgage-backed, municipal and other bonds are available at the federal, state and local level and are offered by various entities.

 

You can strip some marketable bonds and basically break them down into individual payments!

 

Corporate bonds include investment grade, junk, international, bond funds and other classifications and they can be found in abundance in the financial markets.  You can set up an account with all bond types in 15 minutes or so at many brokerages as the process is fairly straightforward.

 

Many mutual funds that you may already have, or are considering, may already have a percentage invested in bonds that you may not be aware of.  If you have a target date fund or a 529 savings plan a portion of your investment is more than likely already invested in the bond market.

 

Non-Marketable bonds include series EE and I bonds and they can be purchased by you, but can’t be sold in the financial markets.

 

Bonds can be an important part of your wealth building future if you utilize them in the appropriate manner and you have addressed your finances in a comprehensive manner as a major part of your approach to your future, whether it be for retirement or any other purpose.

 

All the best to your bond management success…

 

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Treasury Auction Dates…

 

 

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Social Security Simplification & Wealth Building

Learn the importance of knowing all about social security prior to you actually deciding to get your benefits…                 

 

FAQs of Visitors to the sites created by Thomas (TJ) Underwood…

 

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Caution: 50-minute read, but well worth it in the opinion of TheWealthIncreaser.com for those who desire to take control of their understanding of Social Security

 

In the current economy the threat of Social Security and Medicare tampering happens on a regular basis.  But what exactly is Social Security and Medicare–and how can you make the Social Security and Medicare that you have contributed to work for your best advantage during your retirement years?

 

Deciding on the best approach to take to receive your Social Security benefits can be a confounding and confusing process for many, and this discussion is designed to clear up competing arguments on when and what is the best approach to receive retirement benefits and more specifically your Social Security benefits so that the average person can understand and possibly provide guidance so that they are better informed.

 

And just as your investments and how you approach them are determined by your unique goals that you have, your risk-tolerance level, your income and your personal situation–so too does your analysis of your Social Security that you will receive, to a lesser or greater degree, depend on those same factors.

 

In this timely discussion, TheWealthIncreaser.com will attempt to simplify the topic of Social Security so that you can make better use of Social Security during your retirement years–and possibly be of more benefit to your heirs after you transition.

 

Social Security & Your Finances

 

Learn how to determine the best time to receive the social security and other benefits that you are entitled to…

 

As you age and edge closer to retirement, Social Security and your other retirement income becomes a real concern.

 

In this discussion, TheWealthIncreaser.com will discuss the ins and outs of Social Security so that you can better time “the time” (pun intended) that you will elect to receive your benefits, and furthermore show you other things that you can do as you approach retirement that can enhance your Social Security and other benefits that you may be entitled to.

 

You can apply for Social Security disability income at any time if you are suffering from a disability that allows you to receive benefits.

 

Full Retirement Age, or FRA, is the age when you are entitled to 100 percent of your Social Security benefits, which are determined by your lifetime earnings.  It is gradually increasing, from 66 and 6 months for those born in 1957 to 66 and 8 months for those born in 1958 and, ultimately, 67 for people born in 1960 or later.  Be sure to “distinguish” that FRA when you are entitled to 100% of your Social Security benefit, is not the same as your Maximum Benefit Amount which could be 25% or more higher than the amount you receive at your FRA.

 

Those FRA dates apply to the retirement benefits you earned from working and to spousal benefits, which your husband or wife can collect on your work record.  They differ slightly for survivor benefits, which you can claim if your spouse dies.

 

Full retirement age for survivors is 66 and 4 months for people born in 1958 and gradually increases to age 67 for people born in 1960 or later.

 

  • Claiming benefits “before” full retirement age will lower your monthly payments that you receieve from the SSA; the earlier you file — you can start at age 62 — the greater the reduction in benefits.  Spousal and survivor benefits are also reduced if you claim them before reaching full retirement age.

 

  • You can increase your retirement benefits by waiting past your FRA to retire.  Each month you put off filing up to age 70 earns you delayed retirement credits that boost your eventual benefit.

 

How early should I decide to get my benefits?

 

Your window to elect to receive Social Security benefits begin at age 62 and end at age 70 (note: you can elect to receive Social Security after age 70, however there is no financial benefit of doing so).

 

That’s a difficult question and will depend on your goals, risk-tolerance level, income, tax position, personal situation and other factors that may be unique to your current and anticipated financial position.  You can claim Social Security as early as age 62, but it may be to your benefit to put off filing for benefits as long as possible (pun intended).

 

By delaying you can maximize your monthly payments.  But you may want to do further analysis.

 

Here are some key factors that you may want to consider:

 

  • Q: How’s your and your family’s health history?  A: If you have a reasonable expectation of living decades past retirement, postponing benefits to get a bigger payment could prove important to your long-term financial stability.  But if you turn 62 and you are in poor or debilitating health, or you have a genetic predisposition to certain illnesses, or otherwise have a pessimistic view of your future, you may decide it makes more sense for you and your family to get what you can, while you can.

 

  • Q: How long do you expect to be gainfully employed? A: Many older workers are being nudged into early retirement as companies downsize, and they wind up spending their last working years in the gig economy or other odd jobs.  If you are one who did not plan appropriately for you golden years and you find yourself struggling to pay your monthly expenses, filing for Social Security at age 62 or before your FRA and taking lower benefits may be what you need to make ends meet.  Just be sure to take into consideration inflation, rising property taxes, rising insurance rates and other factors that may be unique to you and the environment in which you live, into serious consideration.

 

Still, there are strong arguments for waiting as long as you can, and you want to use caution and do careful analysis of the choices available:

 

  • Filing earlier locks you into a lower benefit on a “permanent” basis.  You are not entitled to 100 percent of the benefit calculated from your earnings history unless you apply at full retirement age (66 and 6 months for people born in 1957, 66 and 8 months for people born in 1958 and rising two months annually to age 67 over the next few years).

 

 

  • From full retirement age until age 70, you can earn delayed retirement credits that can boost your eventual benefit by two-thirds of 1 percent for each month of delay — and increase survivor benefits for your spouse, if you die first.

 

Survivor, Spousal & Dependent Support

 

  • after you transition your spouse and/or dependents could receive–survivor benefits

 

  • after 10 years of marriage and you divorce–your “former spouse” could be entitled to benefits–divorced spouse benefits

 

  • dependents may be entitled to receive social security benefits based off of your work record–dependent benefits

 

Other family members may be entitled to benefits that you have earned through the Social Security program during your working years.

 

Social Security “survivor’s benefits” are paid to widows, widowers, and dependents of eligible workers and this benefit is particularly important for “young families with children” and the benefit amount would be based on your earnings, if you were to transition after accumulating a work history.

 

If you are divorced, your ex-spouse can receive benefits based on your record (even if you have remarried) if certain conditions are met.

 

Generally, you must be married for one year before you can get spouse’s benefits.  However, if you are the parent of your spouse’s child, the one-year rule does not apply.

 

The same is true if you were entitled (or potentially entitled) to certain benefits under Social Security or the Railroad Retirement Act in the month before the month you got married.  A divorced spouse must have been married 10 years to get spouse’s benefits.

 

You can apply for benefits by going online and completing the application for benefits.

 

Regardless of when you claim Social Security benefits, the sign-up age for Medicare is still 65. You can’t enroll earlier, except under very narrow circumstances, and you may incur hefty fees for signing up later.  There is a “time-period window” (roughly a 6-month period near the time of your 65th birthday) that must be met in order to sign up and receive Medicare!

 

How does a Reduction in Benefits work?

 

It depends on the year you were born and how long until you reach full retirement age, abbreviated as FRA.  That’s the age at which you would collect 100 percent of the monthly benefit payment that the Social Security agency calculates from your lifetime earnings history.

 

Retirement benefits are designed so that you get the full benefit if you wait until full retirement age, which is 66 and 6 months for those born in 1957, 66 and 8 months for those born in 1958 and gradually rising to 67 for those born in 1960 and afterward.  If you file early, Social Security reduces the monthly payment by 5/9 of 1 percent for each month before full retirement age, up to 36 months, and 5/12 of 1 percent for each additional month.

 

Suppose you were born in 1962 and will turn 62, the earliest age to claim retirement benefits, in 2023.

 

Filing at 62, 60 months early, permanently reduces your monthly benefit by 30 percent and if you would have been entitled to $2,000 a month at full retirement age, you will get $1,400 if you start benefits when you turn 62.

 

Here’s what the reduction would be in subsequent years.

 

  • Age 63: 25 percent

 

  • Age 64: 20 percent

 

  • Age 65: 13.3 percent

 

  • Age 66: 6.7 percent

 

In essence, by starting early you would forfeit roughly 5% to 7% or more in guaranteed returns a year, depending on the year you decided to start receiving your benefits.

 

  • The figures above represent the reduction if you start benefits as soon as possible upon reaching the designated age.  The benefit decrease is calculated based on months, not years, and each month that you wait beyond your 62nd birthday lessens the reduction.

 

 

  • All care in the accuracy in the data above was pursued, however the above data cannot be guaranteed as changes occur over time and the data obtained cannot be guaranteed.

 

What is the Maximum Benefit that I could receive?

 

 

You receive the highest benefit payable on your own record if you start collecting Social Security at age 70.

 

Once you reach your full retirement age, or FRA, you can claim 100 percent of the benefit calculated from your lifetime earnings.  Again, the full retirement age is 66 and 6 months for people born in 1957, 66 and 8 months for those born in 1958 and for those born in 1959, 66 and 10 months.

 

It will incrementally increase to 67 over the next few years, however if you were to hold off a few years, you could earn delayed retirement credits that increase your eventual benefit — by two-thirds of 1 percent for each month you wait.

 

For example, if you were born in 1958, your reach full retirement age between September 2024 and August 2025.  If you put off filing for Social Security until you turn 70, you’ll get 40 months of delayed requirement credits, good for a bump of nearly 27 percent over your full retirement benefit.

 

If the benefit you’re entitled to at FRA is $1,800 a month, at 70 your benefit would bump up to about $2,280 a month.

 

Here’s how that $1,800 full benefit could grow for you if you decided to wait:

 

  Year of birth     Full retirement age    Benefit at 70   

 

1954 66 $2,376 (132% of full retirement benefit)
1955 66 and 2 months $2,352 (130.67%)
1956 66 and 4 months $2,328 (129.33%)
1957 66 and 6 months $2,304 (128%)
1958 66 and 8 months $2,280 (126.67%)
1959 66 and 10 months $2,256 (125.33%)
1960 or later 67 $2,232 (124%)

At age 66 and 8 months you would receive a benefit of $1,800 a month, however if you waited to age 70, you could pocket $2,280 monthly–a difference of $480 a month, which could go a long way if you were in financial position and health condition to hold off a few years.

 

Keep Points

 

  • You can claim benefits later than 70, but there’s no financial reason to do so as delayed retirement credits stop, and your payment tops out once you attain age 70.

 

  • From age 67 to age 70 you can earn “delayed retirement credits” which can increase the benefit amount that you would receive.

 

What is the maximum amount that I can receive if I contribute a substantial amount to the system?

 

The most an individual who files a claim for Social Security retirement benefits in 2024 can receive per month is:

 

  • $2,710 for someone who files at 62

 

  • $3,822 for someone who files at full retirement age (66 and 6 months for people born in 1957, 66 and 8 months for people born in 1958).

 

  • $4,873 for someone who files at age 70 (Maximum Monthly Benefit Possible for anyone in 2024)

 

To add more clarity, the average Social Security retirement benefit in October 2023 was $1,796 a month, while the average disability benefit for 2023 was $1,489 a month.

 

You would be eligible for the maximum benefit if your earnings equaled or exceeded Social Security’s maximum taxable income — the amount of your earnings on which you pay Social Security taxes — for at least 35 years of your working life.

 

The maximum taxable income in 2024 is $168,600 and the figure is adjusted annually based on changes in national wage levels (wage adjustments), and thus the maximum benefit changes each year.

 

Also be aware that the maximum benefit is not the same as the maximum family benefit.  The most a family can collectively receive from Social Security (including retirement, spousal, children’s, disability or survivor benefits) on one family member’s earnings record differs from the maximum benefit amount for an individual mentioned above.  That amount is generally, about 150 to 180 percent of your full retirement benefit.

 

Can I stop and later restart receiving my Social Security benefits?

 

Yes, within limitations.  If you are in your first year of collecting retirement benefits, you could apply to Social Security for a “withdrawal of benefits” if you started early, say age 62.

 

If you later got an unexpected windfall such as an inheritance, lottery winnings, or a pay raise or higher-paying job, you could theoretically be in a position to wait until you are older and you can collect a larger benefit if you do so within 12 months of the date you first claimed your benefits.

 

You start the process by filling out Social Security form SSA-521. and sending the completed form to your local Social Security office, preferably by certified mail.

 

If you opt for a stop (withdrawal), Social Security will treat it as if you never applied for benefits in the first place, and you will have to repay every dollar you’ve received including the following:

 

  • Your monthly retirement payments.

 

  • Any family benefits collected by your spouse or children, who must consent in writing to the withdrawal.

 

 

If you’ve been getting retirement benefits for more than a year, the “window for withdrawal” has closed for you!

 

However, once you reach full retirement age (66 and 6 months for those born in 1957, 66 and 8 months for those born in 1958 and rising two months per year to 67 for those born in 1960 and later), there’s a second option:

 

You can request a suspension of benefits!

 

During a suspension, you accrue delayed retirement credits that were mentioned earlier, which will increase your monthly retirement benefit when you start collecting again.

 

You can ask Social Security to reinstate your benefits at any time prior to turning age 70, and if you don’t ask for reinstatement by age 70, the agency will do it for you!

 

Be aware that:

 

  • If you change your mind about a withdrawal of benefits, you have 60 days from the date Social Security approves your withdrawal to cancel the request.

 

  • The SSA-521 includes a question asking if you want to keep “Medicare” benefits.  You can if you want to, however if you don’t, there are numerous implications both for any health care benefits you’ve already received and for re-enrollment in Medicare at a later date.  You can review these implications in the Social Security publication “If You Change Your Mind.”

 

  • You don’t have to hand in your notice when you start getting retirement benefits, as there is “no requirement” that you stop working.

 

  • But continuing to draw income from work might reduce the amount of your benefit if you claim Social Security before you reach full retirement age (FRA), the age when you qualify to collect 100 percent of the maximum benefit allowed from your earnings history.

 

To reiterate, Full Retirement Age is 66 years and 6 months for people born in 1957 and will rise two months for each subsequent birth year, until it settles at 67 for those born in 1960 and later.  Prior to FRA, Social Security doesn’t consider you fully “retired” if you make more than a certain amount from work, and it will deduct a portion of your benefits if your earnings exceed that limit.

 

The earnings caps are adjusted annually for cost-of-living adjustments (COLA), and they differ depending on how close you are to full retirement age.

 

If you are receiving benefits and working in 2024 but not due to attain FRA until a later year, the earnings limit is $22,320.  You lose $1 in benefits for every $2 earned over the cap.  So, if you have a part-time job that pays $30,000 a year — $7,680 over the limit — Social Security will deduct $3,840 in benefits or roughly $125 a month, from your social security check.

 

Suppose you will reach full retirement age in 2024.  In that case, the earnings limit is $59,520, with $1 in benefits withheld for every $3 earned over the limit that applies until the date you hit FRA!  Once you attain age 70 and onward, there is no benefit reduction, no matter how much you earn–once you hit age 70, the sky is the limit as far as your earnings are concerned as it relates to your Social Security benefits.

 

In fact, Social Security increases your monthly benefit at that point so that over time you recoup benefits you lost to the prior withholding.

 

If you receive wages, earnings-limit calculations are based on your gross pay; if you’re self-employed, Social Security counts your “net income” only.  The Social Security pamphlet “How Work Affects Your Benefits” and its Retirement Earnings Test Calculator can provide you with more details.

 

Key points

 

  • The earnings cap applies only to income from work.  The cap does not count investments, pensions, annuities or capital gains.

 

  • If your Social Security payments are reduced because you earned income above the limit, spouses and children receiving benefits on your work record will have their payments reduced as well.

 

  • The earnings cap and rules also apply to the work income of people receiving spousal, children’s and survivor benefits.

 

 

  • It may be wise to consult your tax advisor prior to electing to receive your benefits, if possible, as all tax situations are unique and experienced tax professionals can see through blind spots and areas of taxation that are nuanced and you may not be aware of.

 

Will my benefits increase if I continue to work?

 

It very well could.  It will all depend on how much you’re making now and how much you’ve made working in years past.

 

Social Security uses your “lifetime average” for monthly income, as calculated from your 35 highest-earning years and adjusted to reflect historical wage trends, as the basis for your benefit calculation.

 

Even if you’ve already claimed your benefits, Social Security annually recalculates this average, factoring in any new income from work.

 

If your current earnings fall into your top 35 earning years, your monthly average will rise, and so could your benefit!

 

What is the recalculation time period?

 

The Social Security Administration recalculates your retirement benefit each year after getting your income information from tax documents.  If you have a job, employers submit your W-2s to Social Security; if you are self-employed, the earnings data comes from your personal tax return that you would file during the tax season.

 

Social Security will take any work income from that tax year and figure it into your benefit calculation.

 

That calculation is based on the average monthly income from the 35 best-paid years of your working life (as indexed for historical United States wage trends, a process similar to adjusting for inflation).  If your recent earnings make the top 35, it will increase the monthly average and your benefit payment will increase!

 

You can call Social Security at 800-772-1213 to ask about how your anticipated earnings might change your benefit.

 

What is the payment schedule?

 

Apart from any earnings-based calculations, Social Security makes an annual cost-of-living adjustment (COLA) to your benefit based on inflation, if any.  The COLA for 2024 will be 3.2 percent, boosting the average retirement benefit by $59 a month starting in January.  COLA review and adjustments are done annually by the Social Security Administration.

 

Social Security pays benefits in the month following the month for which they are due.  For example, the January benefit that you are entitled to would be paid in February.

 

For most beneficiaries, the payment date depends on your birth date since changes that were made in 1997 went into place.  If you are receiving payments on the record of a retired, disabled or deceased worker (for example, spousal or survivor benefits), that person’s birthday sets the schedule for the payments that you would receive.

 

Here’s how it works in a nutshell:

 

  • If the birthday is on the 1st through the 10th, you are paid on the second Wednesday of each month.

 

  • If the birthday is on the 11th through the 20th, you are paid on the third Wednesday of the month.

 

  • If the birthday is on the 21st through the 31st, you are paid on the fourth Wednesday of the month.

 

The Social Security Administration adopted this staggered schedule in June 1997.  Prior to that, all benefit payments went out on the third day of the month, but that became untenable as the number of beneficiaries grew to a level that made it impractical to pay out on a single day.

 

Most people who started receiving benefits before May 1, 1997, are still paid on the third of the month.

 

The third is also the monthly pay date for these groups of Social Security beneficiaries:

 

 

  • Those enrolled in Medicare Savings Programs, which provide state financial help for paying Medicare premiums continue to receive their payments on the 3rd day of the month.

 

  • Those who collect both Social Security and Supplemental Security Income (SSI) benefits.  If you were in this group, you would get your SSI on the first of the month and your Social Security on the third day of the month.

 

Social Security has an online calendar showing all the payment dates for 2024 and is updated annually.

 

Key points

 

  • Social Security no longer pays benefits by check. You can receive benefits by direct deposit or via a Direct Express debit card.

 

  • Those who receive Social Security Benefits receive payment based on the birth date of the retired, disabled or deceased person, or a set date determined by the Social Security administration which is generally the 3rd day of the month.

 

  • If a scheduled payment date falls on a weekend or federal holiday, payments are made on the first preceding day that isn’t a Saturday, Sunday or holiday.

 

Medicare payments

Medicare consists of:

 

Part A   Hospital

Part B   Utilizing Outpatient Coverage

Part C   Medicare Advantage

Part D   Prescription Drugs

 

An easy way to remember what each part of Medicare covers (which can be difficult for some) is to use the following system:

 

When you think of part A think of coverage that allows you to go to “A” Hospital

When you think of part B think that you will “Be” getting health coverage or utilizing outpatient coverage

When you think of part C think that you are buying “Coverage” for Medicare Advantage

When you think of part D think that you are going to get prescription “Drug” coverage

 

Medigap Insurance coverage fills in the gaps where you would possibly have out of pocket expenses and deductibles, and it can be purchase by you if you select Medicare–and decide not to buy into Medicare Advantage coverage.

 

Another way of looking at it is part A is Hospital Coverage and possibly free, Medicare is part B, Medicare Advantage is part C, and part D is coverage for Prescription Drugs, whether you have Medicare or Medicare Advantage!

 

Or yet another way to look at it is you must get over the HUMP with your Medicare–and you do so by realizing that part A is Hospital coverage, part B is Utilizing outpatient coverage, part C is Coverage for Medicare Advantage, and part D is Prescription Drug coverage.

 

Now that you have a system that you can use to distinguish all parts of Medicare and MA, let’s discuss Medicare in greater detail.

 

If you elect traditional Medicare, you will pay for parts B, D and Medigap, and you could be surprised by the premiums.  You have just learned and fully understand that part B covers outpatient care and has a monthly deductible ($174.70 in 2023), and there is also a deductible for every hospital visit on part A ($1,632 in 2023).

 

Part A: generally, you will qualify for hospital coverage if you have worked in the United States and have paid Medicare taxes (provides hospital coverage up to 60 days and a high deductible could be involved).

 

Part B: outpatient care is similar in scope to health insurance and in 2024 had a payment of $174.70 per month and the coverage will subject you to the benefits test if your modified adjusted gross income is over $103,000 single or $206,000 married filing joint.

 

Part D prescription drug coverage premiums averaged $50.50 in 2023, however drug and other coverage varies.  Often purchased through a private insurer.

 

Medigap coverage kicks in when there is a “gap in coverage” when you use part B and D, for example you could use the coverage to pay the part A and D deductibles mentioned above!

 

With Medicare, physicians and hospitals would have to submit claims to parts A, B, D and Medigap, where applicable individually, whereas with Medicare Advantage the claim would normally go to just one provider.

 

Medicare recipients could also possibly get financial assistance from Medicaid or other assistance programs if they qualified.

 

Medicare Advantage (part C) —the “competitor to Medicare” offers coverage for parts A, B and D, and coverage and costs varies by provider.  The coverage provided is similar to that of an HMO or PPO and provider costs and coverages that vary from provider to provider, so it is best to shop around.

 

In either plan, Medicare Advantage (MA) or Medicare “pre-existing conditions” will be covered!

 

Star Ratings by AARP could also be helpful when considering plans!

 

If you are signed up for both Social Security and Medicare Part B — the portion of Medicare that provides standard health insurance or outpatient care — the Social Security Administration will “automatically deduct” the premium from your monthly benefit.

 

The standard Part B premium for 2024 is $174.70 a month, an increase of $9.80 from the 2023 rate. Medicare Part A, which covers hospitalization, is free for anyone who is eligible for Social Security, “even if” they have not claimed Social Security benefits yet.

 

If you are getting Medicare Part C (additional health coverage through a private insurer, also known as Medicare Advantage) or Part D (prescription drugs), “you have the option” to have the premium deducted from your Social Security benefit or to pay the plan provider directly yourself.

 

Part D is also subject to a means test, similar to part B!

 

If you want the deduction from your Social Security income, you will have to contact your part C or D provider to arrange it!

 

Keep points 

 

 

  • People with low incomes and limited financial assets may qualify for Medicare Savings Programs that can help with Part B premiums.  These are federally funded but run by the states.  In 2023, income limits to qualify for the programs in most states ranged from $1,235 to $1,660 a month for individuals and $1,663 to $2,239 a month for married couples (the thresholds are higher in Alaska and Hawaii).  The 2024 limits will be posted on the Medicare website once they are announced.

 

  • If you are receiving benefits” from SSA, the Social Security Administration will “automatically sign you up at age 65” for parts A hospitalization and B outpatient care of Medicare.

 

  • Medicare is operated by the federal Centers for Medicare & Medicaid Services, but Social Security handles enrollment.  Social Security will send you sign-up instructions at the beginning of your initial enrollment period, three months before the month of your 65th birthday, however mistakes and delays can occur, therefore you want to act within the 6-month window of your 65th birthday if you have a need for Medicare as you are now aware of the enrollment process.

 

  • Medicare Part A covers basic hospital visits and services and some home health care, hospice and skilled-nursing services.  If you are receiving or are eligible to receive Social Security retirement benefits, you do not pay “premiums” for Part A.

 

  • Medicare Part B is similar to standard health insurance and carries a premium.  The base rate in 2024 is $174.70 a month.  Higher-income individuals pay more depending on the amount of their modified adjusted gross income.

 

  • You can “opt out” of Part B — for example, if you already have what Medicare calls “primary coverage” through an employer, spouse or veterans’ benefits and you want to keep the primary care that you already have.

 

  • Check with your current insurance provider to make sure your coverage meets the standard. Opting out will not affect your Social Security status, but you might pay a penalty in the form of permanently higher premiums if you decide to enroll in Part B later.

 

  • If you want to enroll in Medicare Part C (also known as Medicare Advantage, an “alternative to Part B” that is provided by private insurers, you must sign up on your own. The same goes for Medicare Part D, prescription drug coverage.  You can find more information in Social Security’s “Medicare” publication and AARP’s Medicare Made Easy guide, or you can call Medicare at 800-633-4227.

 

Key points

 

  • If you are living abroad or are outside the United States when you become eligible for Medicare, contact the nearest U.S. embassy or consulate to request an enrollment form.

 

You can only enroll in Medicare at age 62 if you meet one of these criteria:

 

 

  • You are on SSDI because you suffer from amyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s disease (The two-year requirement is waived in this case).

 

  • You suffer from end-stage renal disease.

 

Otherwise, your initial enrollment period for Medicare begins three months before the month of your 65th birthday.  For example, if you turn 65 on July 14th, 2024, the enrollment window opens on April 1st and closes on November 1st, 2024.

 

If you “are receiving” Social Security benefits, the Social Security Administration, which handles Medicare enrollment, will send you an information package and your Medicare card at the start of the sign-up period.  You’ll be automatically enrolled in Medicare Part A (hospitalization) and Part B (standard health insurance) in the month you turn 65.

 

In the meantime, consider looking into other options for health insurance to bridge the gap until you are Medicare-eligible if you lack insurance and have not reached the age to receive Medicare.  Depending on your financial and marital situation, these might include Medicaid, private insurance through the Affordable Care Act marketplace or coverage through your spouse’s workplace plan or your own employer’s work plan.

 

Key point

 

 

How to enroll

 

You can enroll online, by phone at 800-772-1213, or by visiting your local Social Security office.  Local offices fully reopened in 2022 after being closed to walk-in traffic for more than two years due to the COVID-19 pandemic, but Social Security recommends calling in advance and scheduling an appointment to avoid long waits.

 

You should proactively be aware of the enrollment deadlines, as Social Security will not sign you up automatically at 65 for “traditional Medicare” — Part A (hospitalization) and Part B (health insurance) — as it typically does for people already collecting Social Security benefits!

 

In this situation, you’ll have to enroll yourself, either online or by contacting Social Security.

 

Always remember that Medicare and Social Security are “two separate programs” however the Social Security Administration runs enrollment for traditional Medicare!

 

You can enroll in Medicare parts A, B and D (prescription-drug coverage) as early as three months before the month you turn 65 or as late as three months after your birthday month which is called your initial enrollment period.  For example, if your 65th birthday is May 15th, 2024, the initial enrollment window is open from February 1st until August 31st, 2024.

 

Here’s why you need to be on top of your deadline:

 

If you don’t sign up during those seven months, you may be subject to a permanent surcharge once you do enroll.  You’ll find more information on sign-up periods in Medicare publications about enrolling in Part B and Part D.

 

Part A is free if you qualify for Social Security, even if you have not claimed benefits yet, however Part B carries a premium and in 2024, the standard Part B premium is $174.70 a month; it goes up for beneficiaries with MAGI (income) above $103,000 for those who file an individual tax return, and MAGI of $206,000 for a married couple filing jointly.

 

If you are not yet receiving Social Security benefits, you will have to pay Medicare directly for Part B coverage.  Once you are collecting Social Security, the premiums will be deducted from your monthly benefit payment.

 

If you “decide to purchase” a Part D prescription-drug plan, it’s best to do so during your initial enrollment period; and as mentioned previously, you may pay a higher premium, permanently if you fail to sign up in a timely manner.

 

Your Part D provider cannot deny coverage even if you are in poor health or have a preexisting condition.  You can choose between paying Medicare directly or having Part D costs deducted from your Social Security payment.

 

Key points

 

  • The Medicare eligibility age of 65 no longer coincides with Social Security’s full retirement age (FRA) — the age when you qualify for 100 percent of the Social Security benefit calculated from your lifetime earnings.  FRA was long set at 65 but it is gradually going up: It’s 66 years and 6 months for people born in 1957, 66 and 8 months for those born in 1958, 66 and 10 months for those born in 1959 and will settle at 67 for those born in 1960 or later.

 

  • Always remember that even if you don’t elect for Social Security at the earliest time possible, you can still sign up for Medicare at 65 as long you are a U.S. citizen or lawful permanent resident.  You will have to pay Medicare directly for all coverage, including Part A (unless you or your spouse are among the small number of state and local government employees who paid Medicare taxes but not Social Security taxes; in this case, you may be able to get Part A for free).

 

Managing Medicare enrollment

 

For most people, Medicare eligibility starts at age 65 and “if you’re receiving Social Security retirement benefits” at that time, SSA will send you a Medicare enrollment package at the start of your initial enrollment period, which begins three months before the month you turn 65.   This point cannot be over-emphasized and is repeated here yet again due to the importance of you understanding this deadline.  If you are not on Social Security, you want to still know that you must sign up by age 65 if you desire the coverage!

 

For example, if your 65th birthday is July 15, 2024, this period begins April 1.

 

On your 65th birthday, you’ll automatically be enrolled in parts A and B.  You have the right to opt out of Part B, but you might incur a penalty, in the form of permanently higher premiums, if you sign up for it later.

 

If you have not yet filed for Social Security benefits, you will need to apply for Medicare yourself!

 

You can do so any time during the initial enrollment period, which lasts seven months (so, for that July 15 birthday, the sign-up window runs from April 1 through Oct. 31). If you do not enroll during that period, you could face late fees if you do so later.

 

You’ll find comprehensive enrollment information in SSA’s “Medicare” publication and links to application forms on the Social Security website.

 

Paying Medicare premiums

 

If you are drawing Social Security benefits, your Medicare Part B premiums are deducted from your monthly payments.  If you’re not getting benefits, you’ll receive bills from CMS (almost all Medicare beneficiaries pay no premiums for Part A because they worked, and paid Medicare taxes, long enough to qualify for the program).

 

The standard Part B premium paid by most Medicare enrollees is $174.70 a month in 2024. The rate rises with the beneficiary’s income, going up in steps for individuals with incomes greater than $103,000 in 2024 and married couples who file taxes jointly and have a combined income of more than $206,000 in 2024.

 

Social Security determines whether you will pay a higher premium based on income information it receives from the IRS!

 

If your income is high enough, Social Security will impose what is called an Income Related Monthly Adjustment Amount (IRMAA) or means test on Part B outpatient care and Part D prescription drugs.

 

Although this surcharge is unknown to many prior to signing up for Medicare, it can add up and can be hundreds of dollars on a monthly basis for some recipients.  If your income tier (MAGI) is from $103,000 to $129,000 in 2024, everyone in that tier would pay the same annual surcharge.  For MFJ the tiers start at MAGI of $206,000.

 

Therefore, if you are a high-income household and your spouse were to transition, you could fall into the single tax bracket (and the tier of $103,000 to $129,000) and a monthly surcharge could be added to your monthly payment, even though your household actually had a reduction in income.

 

The determination as to whether you will face this surcharge is based on your AGI (line 11 amount on form 1040 that does not go into the calculation of your MAGI or modified adjusted gross income) so charitable contributions or donations, mortgage deduction, taxes and medical deductions would not be of benefit with the exception of a QCD (Qualified Charitable Deduction) in which you can donate up to $100,000 annually and count it toward your RMD (distributions that must begin at age 73 according to the SECURE  Act 2.0.

 

Unlike cash, a QCD will keep the donation out of your gross income (it is an above the line deduction in tax jargon–goes on schedule 1 adjustments) and thus “lower your MAGI” so you could possibly avoid (the IRMAA adjustment) the surcharge.

 

Strategies that you can use to avoid or minimize the surcharge imposed by the Income Related Monthly Income Adjustment Amount:

 

*Consider a ROTH conversion

News flash–withdrawals from a ROTH IRA don’t count toward IRMAA

 

*Contribute more to your Retirement plans

You can lower your above the line income (IRS form 1040 line 11 and above) by contributing the maximum amount or at the very least an increased amount to your retirement plan or IRA account(s) and thus fall below the $103,000 threshold for singles, or $206,000 threshold, if you file as married filing jointly.

 

*Use tax-gain harvesting

By harvesting you sell your stock, mutual fund, etf etcetera, that is outside of your retirement account and buy it back immediately to “reset” your basis.  You would pay taxes on the gain in the year you harvested.   And by doing so the higher cost basis will reduce your taxes once you sign up for Medicare.

 

*Set up a Qualified Charitable Donation

As mentioned above, by setting up a QCD you can take an above the line deduction and reduce the amount of you MAGI, so your income won’t reach the threshold set by IRMAA (Income Related Monthly Adjustment Amount).

 

*Defer taking Social Security

You have up to age 70 until Social Security benefits make the most sense to take for many, and by delaying Social Security won’t count toward IRMAA.

 

*Compare your premiums between Medicare and Medicare Advantage

Medicare Advantage may give you the coverage that you need and might be cheaper than Medicare.  With Medicare you must pay separately for Parts A, B, D and Medigap and that along with the coverage that you desire could tilt the scales as to which one to choose.

 

*Appeal the surcharge

You can appeal if your income is significantly lower than it was 2 years ago.  SSA uses a 2-year lookback to determine current year surcharges.  If you were to start receiving Medicare in 2024, they would look at your 2022 MAGI to determine if IRMAA was applicable for 2024.  Other grounds to appeal include life changing events such as retirement, death of a spouse, divorce, loss of pension and other life changing events that the agency could possibly accept if it appeared reasonable in their eyes.

 

*Use your imagination to find other ways to avoid the surcharge

The surcharge is not necessarily permanent and if you can find ways to reduce your income some in future years, you may be able to avoid this surcharge altogether.  You may want to take the surcharge early because you know you can avoid it later.  Likewise, you may want to find ways to avoid the surcharge early and pay it later.  The surcharge is a year-to- year charge and you want to use the creativity that you have to find ways to eliminate this charge–when possible.

 

Key points

 

  • People with disabilities may qualify for Medicare before age 65 in many instances.  If you are receiving Social Security Disability Insurance (SSDI), Social Security will enroll you automatically in Parts A and B after you have been drawing benefits for two years.

 

  • If you have Medicare Part D (prescription drug plan) or a Medicare Advantage plan, also known as Medicare Part C, you can elect to have the premiums deducted from your monthly Social Security payment.

 

 

Conclusion

Social Security, Railroad Retirement Benefits and Pension income and other retirement income are areas that you want to give proactive analysis to, as the decisions and choices that you make will be critical for a successful retirement where you can do what “you” desire during your retirement years and not be restrained due to inadequate income or poor planning.

 

Although pension income for many is a thing of the past, those who now or will soon receive it can use the proceeds in conjunction with their social security income and sound investment and retirement planning to live out their life with more joy and enthusiasm.

 

Railroad Retirement Benefits are similar in scope to the benefits that the Social Security Administration provides, however those benefits are designed to assist railroad workers and their family in retirement and in the unfortunate transition of the income earner.  It is a system that is generally more generous than that of the SSA (pun intended) toward recipients and beneficiaries.  If you receive, or anticipate receiving those benefits, you too want to plan appropriately and build your retirement nest egg in the best way possible, based on your ability to do so.

 

Now is the time that you contemplate your Social Security payment amount that you will receive and combine the monthly benefit with your other retirement benefits to determine if the number that you are now at or will soon be at, is sufficient or whether you will need to earn more income, work a few more years until ultimately retiring or taking your benefits at the earliest time possible due to financial and health concerns.

 

Your total monthly income must be determined upfront, that means you must combine your 401k or other pre-tax retirement income, pension income, IRA income and income that is outside of your retirement accounts to determine if you have the monthly cash flow that allows you to pay your monthly expenses, do what you desire and have funds that can last for your remaining life expectancy and beyond.

 

The basic questions of choosing whether Medicare or Medicare Advantage is your best choice, whether you should you start your SSB, RRB or other retirement distributions earlier, at a reduced amount, or start later at a higher level may all coincide at this time or at the time you plan to retire!

 

If you delay, your eventual Social Security and/or RRB payment that you could receive will keep rising, until you hit age 70.

 

If you elect to start your benefits today or before reaching your FRA, you can enjoy the benefits earlier, because you are concerned about whether life and the future will go your way!  If you decide to wait, you may find an additional amount monthly, and for you that could be great.  Your unique financial and health condition will play a large role in the approach toward your retirement funds that you choose.

 

The choice as to whether to choose Medicare or Medicare Advantage can be a difficult one and should be given careful analysis, possibly with the assistance of family members and other professionals.

 

But many other factors come into play when determining the best age for you to claim benefits, including your physical well-being, marital status, financial needs, tax position and job satisfaction, other sources of income and your life savings.

 

The election of when and how you will elect SSB, RRB or choosing between Medicare and Medicare Advantage must all be analyzed in a thoughtful manner from all angles.

 

When you combine your SSB, RRB, investment income inside and outside of retirement, retirement income whether from your 401k’s, IRA’s, 403b’s, Thrift and other retirement plans, you want to be in position where you can put yourself, your loved ones and causes that you value most that bring you the most joy at the center.  And if you planned appropriately and obtained the necessary knowledge in a timely manner all of your retirement goals can come into clear focus and be attained in real time.

 

By simplifying the process and the way that you approach investments and retirement, you can make what you desire to happen most during your retirement years become a reality.

 

Other Key Points:

 

You receive the highest “maximum benefit payable” on your own record if you start collecting Social Security at age 70.  Full retirement age is 66 years and 6 months for people born in 1957 and will rise two months for each subsequent birth year until it settles at 67 for those born in 1960 and later.

 

You receive the “highest benefit payable” on your own record at FRA if you start collecting SSB or RRB at age 67.  Full Retirement Age extends from age 65 for beneficiaries born before 1938, to age 67 for those born in 1960 and later.  You can receive your full railroad retirement benefit starting at age 60 if you have 30 years of qualifying service.  Normal full retirement age for railroad benefits is 65 or 67, depending on the year you were born.

 

Medicare and Medicare Advantage are often in a “state of flux” and you can expect changes (hopefully for your benefit) to occur in the future.

 

All the best to your SSB, RRB, Other Retirement Income & Medicare success, as it is our hope that this discussion has allowed you to valiantly perch from your retirement nest…                                                                                                                               

 

 

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Retirement Simplification & Wealth Building

Learn how you can manage your retirement in a more stress-free manner as you build your wealth…

 

Caution:  20-minute read, however it is “well worth your time” in The Wealth Increaser.com’s opinion

 

In the most recent post investment simplification was discussed and investment approaches were presented in a way that allows you to build wealth almost effortlessly.  Based on that post, if you determined that you had the needed discretionary income and you were to apply the principles learned in that discussion on a consistent basis, you would now be on a real path toward investment and possibly retirement success.

 

You must know what you need to do after you have accumulated a large nest egg and this discussion is designed to show you a number of ways that you can receive your retirement income and minimize your taxes so that you can stretch your income over your life expectancy so that you can do more and live more abundantly!

 

Your retirement plan may need to last you decades and you want to know how you can stretch your nest egg at the earliest time possible so that you can live a more comfortable retirement.  Even if your retirement is decades away, you want to proactively familiarize yourself with the information in this timely discussion, so that you can achieve more throughout your lifetime.

 

Once you approach your retirement years you can choose to roll over your 401k, 403b, Thrift or other retirement plan, you can decide to leave your retirement funds in the 401k or other retirement account, or you also have other options, and they will all be discussed below:

 

Do the rollover yourself

Once you retire you can choose to roll over your funds from your retirement plan into an IRA, and you have 60 days to do so if you want to avoid the pain of being taxed on the entire amount.  Even if you roll over your funds within the 60-day window your employer (or former employer) or plan administrator will withhold 20% of the rollover amount for income taxes.

 

If you don’t have the 20% amount laying around in your emergency fund or other accounts, you will only be able to roll over 80%.

 

By coming up with the 20% you can “recoup” the 20% that was withheld at tax time when you file your tax return!

 

If you are unable to come up with the 20%, be sure that you realize that the 20% will be considered taxable income, and if you are under age 55 you will be penalized another 10%!

 

Say you receive $200,000 to rollover, $40,000 would be withheld and sent to the IRS and $160,000 would be rolled over into your IRA that you designated.  You would receive a 1099R at tax time showing $40,000 as taxable income.  By rolling over 100% it would not be considered taxable income and you could file your taxes and get the 20% withholding back.

 

Arrange for a trustee-to-trustee rollover

A trustee to trustee, also known as a direct rollover could be more beneficial than a rollover that you do yourself as it will be done by your retirement plan administrator, and is generally the best course of action as there would not be a 20% withholding.

 

Once the money is in the IRA, you are not “required” to take anything out until April 1st of the year after you turn 73.  If your contribution includes “after-tax” contributions, you can only roll over for the full amount if the IRA sponsor will account for the after-tax money separately.

 

If you have after-tax contributions, a “portion” of every IRA withdrawal will be tax free.  Or you can receive all of the “after-tax money” before the rollover and pocket it tax free!

 

Leave the money in the account

If you like your plan administration and the returns that you are getting, you can choose to leave the money in the account and cash out or roll it over later if you desire.  If the retirement plan is providing good returns and you are comfortable with the investments, why shake up the pot?

 

You would normally need at least $5,000 or more in the account to make this option worthwhile and distributions would be required by age 73, even if you did not need the money.  If your account was invested in a ROTH, you could leave the money in the account until you transitioned.

 

Roll over to a ROTH IRA

You can roll your assets from your company plans to a ROTH IRA, and because your contributions to your company plan was done on a “pre-tax” basis and have never been taxed, the rollover would now be taxable, however no 20% withholding would be required.  You do not have to take Required Minimum Distributions (RMDs) at age 73 with a ROTH.  The assets in your ROTH IRA could then grow tax-free indefinitely.

 

If you use this strategy, you want to be able to find the money “outside of your retirement account” to pay the taxes, otherwise you will limit the tax-free growth of the ROTH account.  Also, if you transition, the funds in the ROTH IRA could go to your beneficiaries and RMD’s and taxes would come into play.

 

Take out company stock

If you work for a fortune 500 company or a company that has publicly traded stock and your company put those stocks within your retirement plan, you could have yet another option that could help you save on your taxes.

 

You can use a tax concept called NET UNREALIZED APPRECIATION” (NUA) and pull the company stock out and put only the non-company stock balance in the IRA!

 

Rolling highly appreciated stock into an IRA, locks in a high tax rate for that appreciation.  You will owe taxes on the full value of the stock at ordinary income tax rates (up to 37%) “as you sell it” and take distributions from the IRA.

 

However, there is a better way to transfer the stock!

 

Lets say you have $2.2 million (the part not held in company stock) and roll it into an IRA, and you transfer the stock to a separate taxable account.

 

You will owe income taxes on the company stock, but the tax is based on its “cost-basis” — the value of the stock when your employer put them into your account.  In this case, let’s say it was $20,000 and is now valued at $200,000.

 

When you sell the stock from your taxable account, you will report a long-term capital gain, and if the sales price is $300,000, the gain ($300,000 minus $20,000) of $280,000 would be taxed at the more favorable capital gains rate of 0%, 15% or 20 percent–which would for most be lower than the “ordinary income tax rate” mentioned above that could be as high as 37%.

 

Assuming a retirement “long-term capital gains” tax rate of 15%, ($280,000 * .15) your taxes would be $42,000.

 

Had you rolled the entire $2.2 million into the IRA and “then” withdrawn the $300,000, you would owe income tax on the entire distribution in your highest tax bracket–and if it was the 37% tax bracket you would owe $111,000–a difference of $69,000, an amount that can go a long way during your retirement years.

 

Another way of looking at it is if you were able to use the above strategy you would pay $69,000 less in taxes or you would have an additional $69,000 that you could be utilizing for the continued growth of your retirement fund.

 

It is important that you realize that there are things in life that you don’t know–that you don’t know, and you want to know this important “lifelong fact of life” at this time or the earliest time possible in your life (no pun intended)!  This tidbit of knowledge that you have just learned as it relates to company stock can go a long way in protecting your nest egg during your retirement years, if it is a strategy that you can use with your retirement portfolio.

 

If you own the stock when you transition, not having it in an IRA creates a windfall for your heirs as the stock will receive “favorable stepped up basis” (stock will be stepped up to the stock price at your transition date and that means lower taxation for your heirs) treatment and once your beneficiaries sold the stock the tax would be at the capital gains rate and would be based on the price of your company stock at the time of your transition–not when your employer put them in your account.

 

Or another way of looking at it is if the stock is “outside the IRA, appreciation after the distribution becomes tax free” and the gain not taxed at the time of the distribution would be taxed at the 0%, 15% or 20% long-term capital gains rate, depending on where your beneficiaries would fall based on taxable income and filing status.

 

If the stock was in the IRA, the full value would be taxed as income in your beneficiary’s top tax bracket (as high as 37% as of 2024) as it is withdrawn.

 

Taxes & Retirement

Once you retire and start taking distributions from your retirement accounts, pensions, social security or railroad retirement benefits, you want to plan for the payment of your taxes in a proactive manner where possible.  You social security income could be taxable depending on the amount of your retirement income and whether you work part or full time after retirement.  Also keep in mind that taxation at the state level must be taken into consideration as many states exempt some or all income of retirees–and some states have no income tax at all.

 

In addition, consider the estate tax system in your state proactively, as even though you may not have estate taxes at the federal level–you may very well be required to pay them at the state level.

 

During your retirement years you will receive 1099Rs, Social Security Benefit statements, W-2s or 1099NEC if you decide to work, other 1099 statements for interest, dividends, capital gains etcetera, and you want to proactively plan with your tax professional so that you won’t have large surprises at tax time.

 

The IRS also receives copies of all of these documents so you want to do a “double take” to ensure that you have all of your documents at tax time.  Failure to do so and your inability to provide them to your tax pro for any reason could result in your return being audited.

 

Also realize that if you file your personal or business taxes by paper, the return will receive extra scrutiny from the IRS.  Even though many think paper is more secure, filing electronically has proven to be more secure and accurate.  You can also enroll in the IP PIN program (Identity Protection Personal Identification Number program) to further secure your filing, as even if they (scammers) have your social security number or ITIN (Individual Taxpayer Identification Number) they would still need your PIN to pretend they were you.

 

Your payment of taxes (ordinary income rates) will be based on your taxable income and filing status (10%, 12%, 22%, 24%, 32%, 35% or 37%) and you will pay taxes on your investment income at a rate of 0%, 15%, or 20% and that rate would be based on your taxable income and family situation (filing status).  If you are single with adjustable gross income over $200,000, ($250,000 married filing joint), you will have an additional 3.8% net investment income tax on your investment returns that were not offset by losses.

 

You also want to commit age 59.5 (age that you can begin withdrawals), age 73 (age at which you must take RMDs) and the age in which you will eventually transition (your assets will or will not receive “stepped up basis” treatment) to memory as those ages are important to know for planning purposes and particularly for tax and estate planning.  In addition, you want to know that short-term (less than 12 months) gains will be taxed at your ordinary income rates.

 

The above figures are based on the 2023 tax year and the numbers are adjusted annually.

 

Required Minimum Distributions & Retirement

Required Minimum Distributions or RMDs are the least amount of money you “must” withdraw from your traditional IRAs or pretax 401k and other pre-tax retirement accounts based on United States tax law.

 

Always remember that whatever your retirement (or pre-retirement) age, it is never too early to strategize your RMDs for 2024 and beyond.

 

The year that you turn 73 is the year that RMDs will be required to be taken by you.  If you are not turning 73 this year, you may still want to take withdrawals to reduce the amount of your future RMDs.  It will all depend on your goals, risk-tolerance level, income, personal situation–and tax bracket, the impact on the raising of your Medicare premiums and the impact of increasing the taxes on your Social Security income.

 

If you are now 70.5 or older, you can make a QCD (Qualified Charitable Distribution) directly from your IRA to a charity.  If you are 73 or older the QCD will count toward your RMD.  Though you can’t generally claim the deduction for the donation, you won’t be taxed either.

 

If you fail to take your RMDs in a timely manner, you want to notify the IRS of this “before they notify you” when possible (use form 5329) and explain with a letter why you didn’t take the RMDs by the December 31st deadline.

 

By doing so you can possibly avoid a 25% penalty on the amount you were required to withdraw–however you may still be subject to a 10% penalty!

 

Bond Management

Unless you have time to monitor and respond to the bond market, you may want to hire a pro as the pricing of bonds are normally out of the public view when compared to stocks.

 

Bonds have what is called a “bid price” and an “ask price” and shopping around for bonds can save you hundreds on commissions and markups.  If you are a buy and hold investor, you normally want to have at least $50,000 to spend and you want to assemble a portfolio of high quality corporate, treasury and possibly municipal bonds.  Mutual funds offer one stop bond diversification, but a portfolio of them typically costs “more to maintain” than a portfolio of individual bonds.

 

You want to have “at least two brokers” and check with each before placing your order.  You can also search online to compare prices and yields by going to:

 

 

 

 

 

 

All of the above sites would be a good starting point.  Treasurydirect.gov allows you the opportunity to purchase directly without fees and you can manage savings bonds, T-bills, notes, bonds and TIPs (Treasury Inflation Protected securities) in a free online account.

 

You also want to ask the right questions whether online or with your broker.  You would want to know the following:

 

*What is the spread between the bid and ask price?

The closer you buy to the bid price the smaller the markup!

 

*Is the bond callable?

Bonds may be redeemed by the issuer, and if so you want to request the yield-to-worse call (which is the lowest potential yield)!

 

*Which yield are you quoting me?

The coupon, yield to call (YTC) or yield to maturity (YTM)!  Be ready to haggle as brokers expect it.  If you don’t like to haggle, consider treasuries.

 

Since you are retired or are now anxiously anticipating the day that you will be, you now or will one day have the time to learn about bonds and other investments that can possibly help grow your nest-egg with relatively low risk.  You want to put yourself in position to learn what you need to learn in a relaxed and as stress-free a manner as possible while you are improving your finances.

 

You may also want to set up a bond ladder system during your retirement years to “smooth out the ups and downs” of interest rates.  Treasuries are as close to a risk-free investment that you can buy and when purchased in a 5-year laddering system, it can provide you income that guards against inflation during your retirement years.

 

If you need more income, consider CDs, municipal and corporate bonds in a laddering system or even dividend paying stocks such as those offered by utility stocks and REITs (companies that own and manage office buildings, shopping centers, apartments and other large developments).

 

On occasion, annually at least–you may need to re-balance your asset allocation, as over time based on gains and losses–your asset allocation will go out of balance from what you initially selected.

 

If your stocks or bonds exceed your previously set allocations by more than 5% you may want to re-balance once that occurs.

 

You generally want to re-balance first inside of tax deferred IRAs or tax-free ROTH accounts to get their allocation back on track as no taxes would be due and you want your risk level to return to what you selected initially.

 

You can also invest RMDs that you receive from your retirement accounts that are out of balance back into those tax-deferred accounts–so they go back into the market (they will be taxed) and increase your returns further.

 

Conclusion

You will have to allocate your assets based on your goals, risk-tolerance, income and personal situation.

 

You want to buy and sell bonds appropriately and know how to set up a bond ladder if that is of appeal to you and something that you feel can be of benefit during your retirement years.  It is important that you choose the best option possible based on what you desire to achieve during your retirement years and after you transition.

 

As you can see from this discussion the “choices that you make” can lead to lasting, cost-effective or cost-ineffective results during your retirement and pre-retirement years–and even after you transition!

 

The factors that should influence your decision should include your age, income tax bracket, insurance needs, income needs, estate plans, and whether you own individual stocks and/or mutual funds.  If you have adequate pension and social security income, you can supplement resources by spending income “generated in taxable accounts” and letting the “investments in your IRA grow tax deferred” until withdrawals are required.

 

Some people re-invest even after RMDs start, rather than spending their money.  You want to ensure that your allocation of stocks, bonds and cash are at the right mix to balance your need for both income and continued growth.  If you have Treasuries and Money Market accounts, corporate bonds and REITs that generate taxes, you may want to put them in your IRA.

 

You can put municipal bonds, index funds and stocks held for the long-term into a taxable account(s).

 

With the cap rate on most stock dividends capped at 20%, your IRA may not be the best place for dividend paying stocks.  And even though your stocks in a taxable account may generate capital gains taxes when you sell, the top long-term rate is 20% in 2024.  Keep in mind non-qualified dividends could be taxed at your ordinary income rate.

 

It is critical that you create a portfolio (or have your advisor do it) that is diversified among asset classes–from small company domestic companies to international equities, from bonds to commodities to help lessen the effects of an economic downturn during your retirement years as the funds in your accounts along with your social security (and possibly pension income) at a minimum must last through your remaining life expectancy.

 

Keep in mind that an all-stock portfolio will normally “fall more” during a downturn and also “rebound more” during an upturn in the economy.  As you get older during retirement, you may want to shift your allocation to a more conservative position such as 35% to 40% in the market, 10 to 15%% in cash and 45% to 50% in bonds.

 

By taking to heart and giving real consideration to how you will build up and  divvy up your retirement fund(s) during your lifetime, you can make your retirement stage or phase one that you can truly enjoy with your loved ones.  You can also “position your life” where volunteering your time and resources toward causes that are important to you while you are yet alive here on planet earth–can happen for you in a more realistic way–as you awake each and every day!

 

All the best as you make the best choices that will lead to continuous retirement success…

 

 

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Investment Simplification & Wealth Building

Learn if you at this time have the right investment vehicle(s) to effectively reach your investment goals…

 

Caution:  35-minute read, however it is “well worth your time” in The Wealth Increaser.com’s opinion

 

It is important that you start your long-term investing at the earliest time possible and there are investment vehicles that you can utilize to get you where you need to be more efficiently.

 

In this discussion The Wealth Increaser will hone in on some of the most useful and time-tested investment vehicles that you can use to build wealth and reach goals that you desire at the various stages of your life.

 

Your path to investment success does not have to be a difficult one if you start early, invest consistently and you know your “target number” that you need to reach to fulfill your various goals.

 

Your home purchase, college funding, traveling around the world, reaching your retirement number or reaching the number that you need to reach for any other purpose is attainable if you are at this time willing to make a serious effort toward achieving what you desire.

 

Mutual Funds (MFs) Investment Calculator

A Mutual fund is an investment program funded by shareholders that trades in diversified holdings and is professionally managed.  It normally includes a “bundle of stocks” and investment products and frees you from the hassle of selecting individual stocks or other investments yourself.

 

A MF is a portfolio of stocks, bonds and other securities and creates a diversified investment portfolio that generally reduces your risk factor.  It is key that you understand that mutual funds are “bought and sold” at the “end of” the trading day!

 

  • Mutual funds are sold based on dollars, so “you can specify any dollar amount” that you’d like to invest.

 

  • Mutual funds are divided into several kinds of categories, representing the kinds of securities they invest in, their investment objectives, and the type of returns they seek.  Although there are others, most mutual funds fall into categories which include stock funds, money market funds, bond funds, and target-date funds.

 

 

  • Employer-sponsored retirement plans commonly invest in mutual funds and if your employer offers them–especially with an employee match, you want to put yourself in position to contribute as best you can, based on your financial ability to do so.

 

Index Funds (IFs) Investment Calculator

Technically a Mutual Fund, Index funds invest in stocks that correspond with a major market index such as the S&P 500, Nasdaq or the Dow Jones Industrial Average (DJIA).  It could be one focused on a sector, such as healthcare, durable goods or technology.  This investment strategy requires less research from analysts and advisors, so your expenses as a shareholder would be lower, and these funds are often designed with cost-sensitive investors in mind.

  • The positives of index funds are that they require little financial knowledge, are low cost, and are convenient to invest in.  On the negative side, you could end up stuck with poorly performing assets and the potential for returns to be less than those of successful managers of actively managed funds.

 

  • The goal of index fund managers are to mirror the performance of a particular index – and not try to outperform it, which is the goal of managers of active funds.

 

  • Although many think that index funds are relatively new, the first publicly available index fund was launched back in the mid-1970s.

 

  • Index funds often perform better than actively managed funds over longer investment time frames.  Even so, there are still risks involved with this style of investing.  If the tracked index falls, then your investment’s value will follow and if it is at the time of your retirement or planned withdrawal, you will suffer financially, and your living conditions could be affected.

 

  • You can reduce risk by diversifying your portfolio by holding several different index funds covering a variety of stock markets or sectors.

 

  • Index funds can provide a very straightforward, cost-effective, and diversified way for you to steadily increase your wealth over time.  Fund managers do not decide which individual investments they should buy or sell, which is what happens in active mutual funds.

 

  • Investors in these products expect their chosen index to rise over the long term, even if it encounters some turbulence along the way!  The performance of the FTSE All-World Index, which has delivered an average annual return of 9.3% since 1993, according to Vanguard, provides a real world blueprint (30 plus years of results) of what index funds can achieve IF utilized appropriately.

 

  • So, should you as a novice investor choose an active mutual fund(s) or index fund(s)?  You can spread your risk by investing a portion in each at the level that you are comfortable with.  Again, index funds replicate the performance of an index, whereas the managers of mutual funds will pick and choose securities they believe will help them outperform that index.  If an active manager makes the right calls, then they can substantially outperform their benchmark index and deliver handsome returns to investors–normally with more risk.

                                                                                                                                                       

Popular index funds that you may want to consider include the following:

 

*Fidelity 500 Index Fund (FXAIX)

*Schwab S & P 500 Index Fund (SWPPX)

*T. Rowe Price Equity Index 500 Fund (PREIX)

*Vanguard 500 Index Fund Investor Shares (VFINX)

* Schwab 1000 Index Fund

*Many others

 

Be sure to do your own independent research, confirm that fees are low, and you can do so by going directly to the sites by “typing in the ticker symbol” using your favorite search engine!

 

Target Date Funds (TDFs) Investment Calculator

Although technically a mutual fund, target date funds are separated out in this discussion in order to give you more clarity on how you can use them to build wealth.

 

Target-date funds are a “set it and forget it” or “invest it and rest” retirement savings option that removes two headaches for you as an investor:

 

1) deciding on a mix of assets which saves you time and

 

2) re-balancing your investments for you over time which saves you time

 

Target-date funds, also known as life-cycle funds or target-retirement funds—aim to continually strike the right balance between the risk necessary to build wealth and safer options to protect a growing nest egg.

 

The fund automatically re-balances your portfolio with the right mix of stocks, bonds and money market accounts as you age and is a great hands off way for you to build wealth if that fits your personality and risk profile!

 

Target Date Funds are “mutual funds” that purchase from other mutual funds (known in the “investment world” as a “fund of funds”) and they are designed to build a diverse portfolio.  While you set and forget or invest and rest so to speak, the fund updates your asset allocation over the years for you.

 

Early in your working life, a target-date fund generally is set for growth by having a much larger slice of your portfolio in stocks rather than fixed-income investments like bonds, which are safer but provide smaller returns (the approach is similar to that of a 529 education savings plan).  As your retirement year approaches, the fund gradually shifts toward more bonds, money market accounts and other lower-risk investments.

 

Your retirement year is the “target date” of most of these funds–unless you choose a target date for other purposes, and the funds are conveniently named to correspond with your planned retirement year.  Say you are 35 years old and plan to work until you are 65, a Target Date 2055 would possibly be of appeal to you.  Most target-date funds are named in five-year increments with some at 10-year increments, so you would choose the provider with a fund named with the year nearest your planned retirement date or other target date based on your goals.

 

Below you will find some of the more popular target date funds that you may want to consider:

 

Fund

Symbol

Expense Ratio

Vanguard Target Retirement 2045 Fund Investor Shares

VTIVX

0.08%

Fidelity Freedom Index 2045 Fund Investor Class

FIOFX

0.12%

Lifecycle Index 2045 Fund Premier Class

TLMPX

0.25%

American Funds 2045 Target Date Retirement Fund Class R-5

REHTX

0.42%

T. Rowe Price Retirement 2045 Fund

TRRKX

0.62%

There are many other target date funds, and the current data is current as of market close on February 1, 2024.   Be sure to do your own independent research as the accuracy of the data cannot be guaranteed.

 

Always realize that the main appeal of target-date funds for most is their simplicity.   And just as an index fund operates with simplicity, so too does a target date fund!

 

The funds go from a “high ratio” of riskier equity funds to safer investments like bonds, and money market accounts as it gets closer to the “target date”, freezing your asset allocation in order to protect your nest egg.

 

An important question to ask yourself or your advisor when choosing among target-date funds is whether the account will freeze the year you plan to retire, or whether a “through” fund that continues the glide path for 5, 10, 15, or 20 years past retirement before freezing your asset allocation will be in effect.  You want to plan your approach appropriately and select the fund that’s right for your retirement or other goals.

 

How to purchase:

 

*through your retirement plan

*directly from fund

*open brokerage account ($500 to $3,000 to open)

 

Exchange Traded Funds (ETFs) Investment Calculator

They are similar to Mutual Funds as just a few key differences set them apart.  The biggest similarity between ETFs (Exchange-Traded Funds) and mutual funds are that they both represent professionally managed collections (or “baskets”) of individual stocks, bonds or other investments.

 

However, investment minimums are normally lower with an ETF!  You can purchase an ETF share of Vanguard FTSE Emerging Markets for under $100.  Many more ETF shares start at $500 or more and you can learn more about ETF offerings by visiting VettaFi financial website.

 

  • It is key that you understand that ETFs allow you to trade “throughout the trading day” at market prices.  This flexibility is a key difference in how the fund works as compared to a mutual fund.  This level of flexibility may be utilized by active traders making moves throughout the day.

 

  • The main difference between ETFs and mutual funds are that an ETFs price is based on the market price and is sold only in “full” shares.  Mutual funds, however, are sold based on dollars, so “you can specify any dollar amount” that you’d like to invest.

 

  • As an investor, you have options and can reap the benefits of diversification.

 

Conclusion

When you are investing it is imperative you know that your goals, risk-tolerance, income and your personal situation must be taken into serious consideration!

 

If you currently owe $100,000 on your home mortgage and you desire to pay it off in 5 years, you will need to do some analysis and not just choose the first thing that comes to your mind.  If your monthly payment is $1,000 and $500 of your mortgage payment is going toward principal, in 5 years your balance would be roughly $70,000 if you continued on that path.

 

By adding $1,200 to the monthly payment of $1,000 you could pay $2,200 monthly ($1,700 going toward your principal) and have your mortgage paid off in 5 years, however you would be responsible for paying your property taxes (mandatory) and insurance (optional after your home is paid off, but generally makes sense to have).

 

Or you could choose an investment strategy of investing the $1,200 per month for 5 years in the market and based on historical trends you could have over $90,000 after 5 years, and since you continued your mortgage payments at $500 per month in principal payments, you would owe $70,000 and therefore have an addition $20,000 plus after the payoff of your mortgage, in your pocket by doing so–assuming your returns were as expected.

 

In this example inflation is assumed to be 3% and your rate of return is assumed to be 9%.  Even if you only assumed a rate of return of 3% (same as inflation) you would have over $80,000 which would still put you ahead by over $10,000 after the payoff of your mortgage.  As long as you had a positive return you would come out ahead based on the assumptions mentioned above.

 

If after 5 years of investing you had a negative return you would possibly fall short of the $70,000 that was needed and you could decide to ride the market longer and pay off the mortgage later, cash in, in spite of the losses and payoff as much as you could on the mortgage.

 

As you can see from this discussion, your goals, risk tolerance, income and personal situation will play a large part in how you decide to pay off your debt and how you select your investments!

 

You want to know how to invest properly on the front end and you want to know that you can invest inside of your retirement account(s) (your earnings will grow tax free) and avoid taxes for years or outside of your retirement account(s) (you will provide 1099 and other paperwork to your tax professional that your brokerage would send to you at tax time) where you would possibly owe taxes on an annual basis (ETFs and Index funds are often tax efficient even outside of retirement accounts).

 

If you are age 25 and desire to retire by age 55 with your house paid off and over 4 million in your account in today’s dollars, you would have to invest $1,600 monthly for 30 years assuming 3% inflation and a 10% rate of return–and also assuming you pay your house off within that 30-year period.

 

Therefore, in the above examples, your returns would be affected depending on the type of investment and whether the investment is inside or outside of your retirement accounts.  Once you reach age 59 1/2 you can withdraw your retirement funds without incurring an early withdrawal penalty, however you would pay taxes at your ordinary income rate–unless the distributions were from a ROTH IRA or there was an exception that applied.

 

Mandatory withdrawals from your traditional IRA or retirement plan would be required once you reached age 73, however with a ROTH IRA, there are no mandatory withdrawals, however after your transition your beneficiaries must take required minimum distributions!

 

Also realize that you can choose balanced funds that invest in a hybrid of asset classes, whether stocks, bonds, money market instruments, or alternative investments. The objective of this fund, known as an asset allocation fund, is to reduce the risk of exposure across asset classes.

 

In closing, it is important that you realize that this discussion is not about theory or what you possibly need to do, but what you CAN do!  You must at this time analyze your income and expenses and determine your discretionary income that you have available so that you can start investing now, get more income by creating a plan to increase your income whether by the payoff of your debt, scaling back on your entertainment and other expenses–or finding other ways to get income on a consistent basis.

 

Although you will hear many financial planners tout the fact that you can increase your savings and come up with a significant amount to invest by scaling back on the $5 that you spend daily on your favorite latte or coffee, that is not something that we are a big proponent of as we realize that for some, a $5 cup of coffee can give them the added energy that is needed to help them earn more on a daily, weekly and annual basis–therefore they more than offset the $100 or so that they spend on a monthly basis on coffee that they could be using for investing.

 

However there are other ways that you can get more income and cut expenses and you may want to analyze and pursue them!

 

Once you determine the amount of income that you have available to invest and you commit to investing that or another amount over a period of time, you can start on a path to reaching the number that you need to attain your goal(s) and live daily with more joy on the inside!

 

Whether your discretionary or available funds to invest are $200 per month or $2,000 per month and you decide to use it to invest long-term, you can achieve significant results over a 30-year period.  By calculating what you can do now, (you need to know your discretionary or available income that you have to invest, whether you will invest weekly, monthly, yearly or a one-time lump-sum investment and furthermore you need to know the “time frame that is needed or desired” to reach your goal) you can determine the nest egg that you can have by investing consistently in a relatively painless way–starting today.

 

Investment Calculator

 

Investing $200 monthly at 3% inflation and a 9% rate of return will will provide you the opportunity to have over $500,000 (five-hundred thousand) in 30 years! 

 

The 4 percent raise that you get, the promotion that you get or working one or two days a month for lyft, uber, grubhub or other new economy options can easily provide you that cushion to invest either temporarily or permanently over the next 30 years.  In many cases, you can find the $200 by analyzing your monthly spending and tightening up your budget some.  You can do a detailed analysis of your insurance products, taxes and other areas of your finances and discover new savings or increases in income.  The ways that you can come up with the needed funds for long-term wealth building success is endless–if you want to achieve your goals in a sincere manner!

 

Investing $2,000 monthly at 3% inflation and a 9% rate of return will provide you the opportunity to have over $5,000,000 (five million) in 30 years! 

 

To get that extra $2,000 per month you may have to start a business, have your stay-at-home spouse find employment either part-time or full time or determine other ways to increase your monthly income based on your creativity and the unique skills that you now have or will cultivate in the near future.  In many instances high net worth and high-income earners wasted hundreds if not thousands on a monthly basis on frivolous or unnecessary spending that could be utilized more appropriately for building long-term wealth of significant amounts.

 

What is the discretionary amount that you “need or want to get to” so that you can invest at this time and in your future, to work towards making life more manageable for you and your loved ones?

 

How You Can Invest using Mutual Funds, Index Funds, Target Date Funds and Exchange-Traded-Funds:

 

  1. Make sure you have a brokerage account with enough cash on hand, and with access to mutual fund shares and other investments
  2. Identify specific mutual funds or ETFs that match your investing goals in terms of risk, returns, fees, and minimum investments.  Some brokerage platforms offer fund screening and research tools.
  3. Determine how much you want to invest initially and submit your trade.  If you choose, you can set up automatic recurring investments in the amount that you desire.
  4. Monitor and review performances periodically, making adjustments as needed.
  5. When it is time to close your position, enter a sell order on your platform.
  6. Realize that with some funds you can invest directly and depending on the fund type, the functions mentioned above will be done by the fund manager or brokerage.

 

While many mutual funds are no-load, you can often avoid brokerage fees and commissions by purchasing a fund directly from the mutual fund company instead of going through an intermediary or third party.

 

Expense ratio is the percentage of your account that is calculated for the fund management such as .20 expense ratio on a $200,000 fund would mean you are paying $40 for the fund management and that would have the effect of reducing your fund amount by $40 for that particular year, or if held in a retirement account the ratio would accumulate from year to year and would be subtracted out from your funds once you were to retire or cash out.

 

There are pros and cons of investing utilizing mutual funds and you can go to investopedia.com to learn more about investing in a simplified, yet effective manner!

 

Some funds are defined with a specific allocation strategy that is fixed, so the investor can have a predictable exposure to various asset classes.  Other funds follow a strategy for dynamic allocation percentages to meet various investor objectives.   This may include responding to market conditions, business cycle changes, or the changing phases of the investor’s own life.

 

The portfolio manager is commonly given the freedom to switch the ratio of asset classes as needed to maintain the integrity of the fund’s stated strategy.

 

Below you will find what is often included in mutual funds, including balanced funds, index funds, target date funds, and exchange traded funds.

 

Money Market Funds

The money market consists of safe, risk-free, short-term debt instruments, mostly government Treasury bills.  An investor will not earn substantial returns, but the principal is guaranteed.  A typical return is a little more than the amount earned in a regular checking or savings account and a little less than the average certificate of deposit (CD).

 

Income Funds

Income funds are named for their purpose: to provide current income on a steady basis.  These funds invest primarily in government and high-quality corporate debt, holding these bonds until maturity to provide interest streams.  While fund holdings may appreciate, the primary objective of these funds are to provide steady cash flow​ to investors.  As such, the audience for these funds consists of conservative investors and retirees.

 

International/Global Funds

An international fund, or foreign fund, invests only in assets located outside an investor’s home country.  Global funds, however, can invest anywhere around the world.  Their volatility often depends on the unique country’s economy and political risks.  However, these funds can be part of a well-balanced portfolio by increasing diversification, since the returns in foreign countries may be uncorrelated with returns at home.

 

Specialty Funds

Sector funds are targeted strategy funds aimed at specific sectors of the economy, such as financial, technology, or health care.  Sector funds can be extremely volatile since the stocks in a given sector tend to be highly correlated with each other.

 

Regional funds make it easier to focus on a specific geographic area of the world.  This can mean focusing on a broader region or an individual country.

 

Socially responsible funds, or ethical funds, invest only in companies that meet the criteria of certain guidelines or beliefs.  For example, some socially responsible funds do not invest in “sin” industries such as tobacco, alcoholic beverages, weapons, or nuclear power.  Other funds invest primarily in green technology, such as solar and wind power or recycling.  Fidelity Charitable and other “Socially Responsible Investment Funds” are now available in abundance in the investment world.

 

 

Isn’t it time that you use a “more pragmatic approach” toward investing and building wealth?

Always realize that you have numerous options to choose from in the investment world regardless of your goals, however the process of investing in an effective manner is not that complicated, unless you make it complicated.  In this short (relative to what you have learned) discussion you have learned how you can invest in a straightforward manner and achieve realistic results that can enhance your living conditions while you are here on planet earth.

 

All the best to your investment and wealth building success…

 

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Mental Awakening & Wealth Building


 

Learn why a financially alert mind provides you the ability to grind and the freedom to unwind at this time…

 

This discussion is intended to provide you a mental awakening as you work toward “investorship” and attaining a financially alert mind as you pursue a serious path toward building wealth in a more efficient manner!  It is imperative that you operate daily with a financially alert mind–and not just financial literacy if you desire to go to a place that you need–or want to be.

 

In this discussion TheWealthIncreaser.com will discuss the importance of using your mind in an optimal manner as you build your wealth and pursue the dreams that you desire most.  Successful financial planning “starts with a thought” and the decision by you to work diligently toward making your dreams come true.

 

Unlike others who go about their life daily without a mental awareness of what they are doing and knowledge of where they are going–you will position your mind for better success if you are at this time willing to give it your absolute best.

 

Know Your Thought Process

Whether you fall into Gen Alpha (born after 2010), Z or Zoomers (born between 1997 to 2010), Millennials (born between 1981 to 1996), X (born between 1965 and 1980), Baby Boomers (born between 1945 and 1964), the Silent generation (born 1928 to 1945) or the Greatest generation (1901 to 1927), there are actions that you can take to reach higher than you can see, and it all starts with giving deep thought about the future that you desire and who you truly want to be.

 

It is very important that you are aware of the way that you think on a daily basis, as your thoughts are critical as you work toward wealth building success!

 

You must be undeniable as you put your wealth building plan into action as “permanent” failure is not an option at any time when you are pursuing your wealth building goals!  Your wealth building efforts must be offensive, not defensive–if you desire to achieve at an optimal level!  Your understanding of your money management personality, thinking about the right things on a consistent basis and going after your goals with more enthusiasm or fire, will allow you to reach higher and achieve much of what you desire!

 

You must create the success that you desire and not just defensively react–after the fact!  You must think about ways to get more income, cut expenses or do a combination of the two so that you won’t slack, but you will attack your finances so that you can stay in the black and not live daily with lack!

 

It is important that you create something that you and others have never seen before, and you use your mind in more empowering ways so that you can truly build wealth and attain meaningful and significant goals that will move you and your family forward.

 

Implement the Right Plan of Action

Your goal is to utilize credit and wealth building strategies in  a way that is most advantageous to you, improve your financial focus, possibly find ways to get other income, have a contingency plan or emergency fund in case things don’t work out, address your insurance (including disability, health, life, key person etc.), investments, taxes, education planning, estate planning/wills and retirement planning in a way that serves your best interest.

 

You must also season and marinate in your mind what you must do to make your life and financial dreams come true, and “knowing and implementing” the right plan of action that is uniquely created for you can lead you toward the success that you desire.

 

You want to without a doubt create one of the most empowering financial plans possible that addresses what you desire to achieve and also review from time to time and have a—just in case strategy—or default strategy in case your plans don’t work out!

 

Your financial plan should complement how you approach the management of your finances and direct you in a more focused way towards goals that are good for you and your family.

 

Review to Ensure that You are on a Definite Path Toward Making Your Dreams Come True

Always remember that by reflecting on your past you can plan better, do better—and review better.

Adversity has its advantages if you are determined to get through adversity and recognize that major success is ahead!

Are you dissatisfied with being stagnant?  Are you justifying your failure by inactivity, blaming others, blaming your income–or lack thereof, blaming your knowledge–or lack thereof, for your wealth building shortcomings?

 

You must realize that failure is not final—and now is the time that you get renewed and dream big again and cultivate a money management personality that will lead to continuous success throughout your lifetime!

 

Once you master the actions that you need to take on a consistent basis, you can reproduce those successful actions over and over and duplicate success throughout your lifetime.

You must have the vision of a deal maker and not associate with—shakers—breakers—takers and fakers!

You must create a plan of attack that you desire and not react after the fact!

By applying what you are learning in this discussion in a sincere manner, you can achieve exponential growth in your wealth building understanding and achieve far more in your life.

You are only as strong as you think you are, weak, wrong or incomplete thoughts will not take you where you need to be, as you must focus in on the goals that you now see.

Your goal is to row (take the right action) so that you will know and grow and achieve results that will show!

A “just in case or default strategy” allows you to continue to move toward your dreams in an uninterrupted way as you will still pursue your goals at a high level with some adjustments along the way.

Many want to see results before they learn what they need to do in advance of achieving those results (preparing their mind and heart with the knowledge that they need to succeed) and that can lead to frustration for some when the results that they desire never happen.

Your challenge at this time is to plan, do, review and work diligently toward making your dreams come true!  By doing so you put yourself in position to make the needed adjustments that will get you back on track or help you improve your wealth building attack.

 

Conclusion

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Your desire to successfully build wealth is contingent upon your ability to utilize your mind at a higher level of urgency as you move toward who you were truly meant to be.

Your wealth building efforts don’t have to provide 100% certainty, but you must utilize passion and pursue your goals in a more vigorous manner.

A financially alert mind makes you more self-aware of what you need to address.

Learning about investorship helps put you on a path that is not a blip.

The universe honors character and other qualities—you will succeed.

Character and giving it your absolute best is more important than achieving wealth building success.

Your gift makes room for giving, and a high level of character will take you toward better living.

You must manage your risks throughout your life so that you won’t live in strife.

A job loss, pay cut, car breakdown, plumbing issues, HVAC issues and any other form of adversity should not deter your wealth building efforts in any way.

Get your mental awareness where it needs to be starting today–a new mental awakening is what your actions and thoughts should now portray!

 

You must transform or renew your mind from the inside out–and find new and more effective ways of thinking about matters that are of importance to you!

 

Regardless of where you fall generationally, whether you are a member of the Greatest generation (1901 to 1927), the Silent generation (1928 to 1945), Baby Boomers (born between 1945 and 1964), X (born between 1965 and 1980), Millennials (born between 1981 to 1996), Zoomers (born between 1997 to 2010) or Gen Alpha (born after 2010) you must conclude that you can do more, and you will do more!

 

This discussion is designed to get you on a more consistent path toward using your mind and heart in a more reliable way so that you can think and act in a manner that truly serves your and your family’s best interest.

 

Success must always be your expectation and you must know that you will get out of your situation or solve your equation (your financial dilemma).

 

Your elevation of your mind when responding to devastation based on your unique situation can help you more effectively reach your destination as you create a new presentation that will not lead to your degradation.

 

Always realize that your mental awareness (or what is going through your mind and heart at this time and/or any time in your future) is under your control and you can effectively direct your thoughts and do more from this day forward–and achieve more!

 

The choices that you make throughout your life will in large part determine your future.  Although there will always be times of unplanned struggle, you must realize that you have been blessed with a “mind and heart” and you are now in position to do far more to build wealth than you were prior to visiting this page.

 

Is what you want to achieve in your future what you deserve or are you putting forth less than optimal effort that is leading you on a path to achieving a lesser version of you–because you failed to act and do what you needed to do–to make what you desired most come true?

 

You must think and act proactively and not think and act re-actively, if you really desire to be all that you can be and more than what you now see!

 

You must get to a point where self-motivation directs your actions and improved decisions are made that will truly guide you to your destination–because you are not waiting on others to give you the ok to improve your situation!

 

All the best as you become “mentally awake” and learn once and for all how you will achieve lasting wealth building success–as your landing on this page was not a mistake…

 

 

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Reliability & Wealth Building

Learn why it is important that you and those who you interact with are reliable when it comes to building wealth…

 

As you move about throughout life it is important that you do what you plan to do and you also interact with those who do what they say they will do.  Or another way of looking at it is, you must be reliable in doing what you need or want to do and you must associate with those who are reliable in doing what they need or want to do whether on their behalf or yours.

 

And with the transition of Joe Madison (The Black Eagle) on January 31st of this year, it is more important than ever that you do something positive to transform your finances.  What are you going to do about it is one of his favorite quotes and it is important that you ask yourself “what are you going to do about it” when it comes to your finances–and life!

 

In this discussion TheWealthIncreaser.com will focus on why you must have a reliable track record of doing what you say you will do and you also associate with those who will do the same in their life.

 

You must reliably create personal finance statements

It is important that you realize that effective management in the financial realm of your life starts with you analyzing your finances on a monthly and yearly basis, determining what you own and what you owe (your net worth) and determining from this day forward that you will do all you can to understand your finances in a way that is more rewarding for you and your family–not creditors!

 

You must reliably master your credit

If you are like many, there will come a time in your life that you will have to (or you will choose to) utilize credit to live at a higher level.

 

If you choose to utilize credit in a more effective way, you will need to master the 5 credit factors that include keeping your credit positive by reliably paying “on” time, utilizing your available credit appropriately, reliably paying off your credit “over” time, utilizing various types of credit (your credit mix) based on your goals and doing your best to keep hard inquiries into your credit file at a minimum if you are trying to improve your credit and utilize your credit for a major transaction in the short-term (next year or so).

 

You must reliably understand your overall finances

Your determination to understand and utilize personal finance statements, have mastery over how you manage your credit and understanding your financial responsibilities with heightened awareness in the following areas such as insurance, investments, taxes, emergency fund, education planning, estate planning/wills and retirement planning, is what will potentially set you apart from your peers as you progress through the various stages of your life.

 

Conclusion

You cannot go through life making mistake after mistake, let worry, anxiety and fear rule you, or become frustrated because you are unwilling to put in the required effort when others who are truly determined are willing to do so because they have a strong desire and are highly committed to making their big dream happen in real time.

 

You must make it  a priority to associate with those who are reliable and will come through for you on a consistent basis in good and bad times.  And you must know that those who are reliable have a plan in place for success and they have already made up their mind to perform at a level that is their absolute best.

 

You must persuade yourself of the success that you will achieve and you must have a track record of being reliable as you reach higher and higher towards the goals that are uniquely your own–and what you sincerely desire!

 

All the  best as you reliably pursue success…

 

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