For 2023, Social Security Retirement and Supplemental
Security Income (SSI) benefits increased due to inflation. The increase was 8.7%,
resulting in an average monthly benefit increase of $146 per month for a yearly
increase of $1,827 in 2023.
Social Security benefits are adjusted yearly for inflation
as a cost-of-living adjustment (COLA) based on the Consumer Price Index for
Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W index measures the
monthly price change in a market basket of goods and services, including food,
energy, and medical care.
With the inflationary prices Americans experienced in 2022,
the 2023 Social Security COLA adjustment helped increase monthly benefits.
While we can’t predict what inflation will do in 2023, the Consumer Price Index
may decrease if inflation cools. In this instance, the Social Security COLA could
be much less.
According to estimates by The
Senior Citizens League, using current inflation data from the Consumer Price
Index, it's estimated that there will be a 3.1% COLA increase in 2024. The 3.1% COLA increase would be
the lowest since 2020, when there was a 1.3% increase. Social Security benefits represent about
30% of income for Americans aged 65 and older.
Social Security
was meant to be one source of retirement income, with monthly retirement income
from other strategies such as:
Traditional IRAs- Traditional IRAs fund with
pre-tax contributions, which grow tax-deferred. IRA contributions and
accumulation are taxed at the owner's tax rate and are penalty-free if taken
after age 59 1/2 when taken as distributions. If distributions occur before age
59 1/2, they tax as ordinary income, and an early distribution penalty of 10%
may apply.
Roth IRAs- Roth IRAs fund with after-tax
contributions, so you pay taxes upfront. When you take distributions, both the
contribution and accumulation are tax-free. Contributions are withdrawn tax and
penalty-free for emergencies, home purchases, and more. However, drawing the account's
accumulation before age 59 1/2 will result in a 10% IRS penalty.
Annuities- Annuities offer tax-deferred
growth of earnings, protection of principal, and a guaranteed lifetime income. Annuities
are contractual agreements with an insurance company that provide an investor
with a guaranteed income stream during retirement in exchange for a premium.
Cash
Value Life Insurance- Cash value life insurance provides insurance for your entire life.
With this type of life insurance, if you pay the premiums on time, the cash
value accumulates, providing you with the cash you can use in retirement by
taking a policy loan. If cash remains in the policy, beneficiaries will receive
the remaining value as a death benefit after the policy loan is satisfied.
It’s important to not rely on Social Security and COLA increases as the primary source of retirement income. A financial professional can help you plan for your situation by implementing other retirement savings strategies so that Social Security COLA adjustments aren’t so impactful.
Gender lens investing is a type of impact investing that aims to create a beneficial social or environmental impact and an expected financial return.
What differentiates gender lens investing is that it is an investment that, from its inception, is intended to benefit women and girls. Gender lens investing considers gender-based factors in investment decision-making to advance gender equality. Gender lens investing may benefit women and girls in two distinct ways:
#1- Investing with the intent to address gender issues or promote gender equality by:
#2- Investing
with the following approaches to inform investment decisions:
A process that focuses on gender, from pre-investment activities (e.g., sourcing and due diligence) to post-deal monitoring (e.g., strategic advisory and exiting); or
A strategy that examines, with respect to the investee enterprises:
Source- Gender Lens Investing Initiative, Global Impact Investing Network
The Gender Lens Investing Framework prescribes three entry points for investors to consider when selecting investments:
Here are ten ways investors can integrate a gender lens into their investment strategy:
It’s essential to understand how
gender lens investing impacts our society and your portfolio’s performance. If
you desire to invest in companies that benefit women and girls, your financial professional
can help you integrate a gender lens to identify companies that aim to meet the
above requirements.
Understanding the difference between taxable, tax-deferred, and tax-exempt accounts may improve portfolio diversification and how much return you earn over time.
But often, investors may not fully understand how a
strategy called asset location may help improve returns and lower their overall
tax bill using these different types of accounts. Each account type has
different tax rules and treatments, and understanding each may help you
determine which accounts suit your situation. Here, we outline what you need to
know about each account type:
Taxable accounts- A taxable account is an account for
which the IRS default rules apply, meaning there are no tax benefits. However,
taxable accounts often have fewer restrictions and more flexibility when
investing and withdrawing from them. Examples of taxable accounts include:
In a taxable account, earnings such as dividends or interest
are taxed yearly (money market, checking, and savings accounts) or when you
sell strategies that gain value. Long-term gains on investments sold from
taxable accounts are taxed at the 15% capital gains rate, which may be lower
than an investor's federal tax rate.
Also, taxable accounts have no contribution limits or age
restrictions for withdrawing.
Tax-deferred accounts- Tax-deferred accounts allow
the payments of taxes to be delayed until the money is withdrawn. Examples of
tax-deferred accounts include retirement savings accounts such as:
Contributions into a tax-deferred account are made with
money that has not been taxed, and contributions may help lower the investor's
taxable income the year they were made. However, once the money is withdrawn
from these various accounts, the contributions and earnings are taxed as
ordinary income at the investor's current tax rate.
Tax-deferred accounts have contribution limits, age
restrictions for withdrawing, or other conditions such as what the money can be
used for, such as health care expenses. Tax-deferred accounts are often part of
an employer-sponsored retirement savings plan or other employer benefits.
Tax-exempt accounts- Tax-exempt accounts require
contributions to be made with after-tax dollars and do not provide a tax
deduction on those dollars. However, tax-exempt accounts may not have
additional taxation, providing the investor follows the applicable tax rules on
these types of accounts:
Tax-exempt accounts provide future tax breaks since
withdrawals at retirement are not subject to taxes; the accumulation is
tax-free.
There may be income limits to invest in tax-exempt accounts
and age restrictions on the withdrawal age or the tax-exempt status, or a
penalty may apply. Your financial and tax professionals can help you understand
the rules on tax-exempt status for your situation.
An asset location strategy using these three investment
strategies, taxable, tax-deferred, and tax-exempt, may help your tax situation
now or later in retirement. A financial professional can help you determine if
diversifying your portfolio using all three investment strategies may be
appropriate for you.
In the U.S., women control a third of household assets. But by 2030, U.S. women are expected to control much of the assets that the baby boomer generation will pass to heirs, roughly 30 trillion in assets.
High-earning women have become the newest face of wealth and will increase their net worth even more. High-earning women are becoming the primary ‘breadwinners’ in many families and are increasingly the financial decision-makers. Women have unique needs that often differ from their male counterparts:
Women must manage their finances and work with an advisor they trust who understands their situation. Even though they may be high earners, they must plan for and manage their wealth and may benefit by incorporating these financial planning components:
Tax planning- Planning for taxes at the beginning of the year can help determine what tax-saving strategies are available based on having a higher income. Certain tax credits and contribution limits for retirement savings accounts may phase out.
Goal setting- Even though a higher income provides more money to save, invest, and spend, it’s vital to identify realistic goals to work toward. Some goal-setting ideas include:
Selecting investment strategies aligned with values- A study by Cerulli Associates found that 43% of women feel a company’s policies on social or environmental issues are essential when deciding to invest in that company.
Working with financial, legal, and tax professionals- High-earning women may have more complex tax and estate planning needs than their female and male counterparts. They must also have professional unbiased financial advice tailored to their unique situation. These professionals can work as a team to help identify unique issues, develop a plan, and select strategies to help their mutual client work toward their goals.
Diversifying their portfolio’s investment strategies- For high-earning women, putting all your money into strategies that aren’t diversified can leave you with a tax bill or put your portfolio at risk of loss during market turbulence. As a high earner, private investments, REITs, or other strategies may offer diversification when included in a portfolio containing tax-deferred and tax-exempt strategies.
Taking action to manage their wealth and plan for their future can help women pursue financial confidence, regardless of their income. Reach out to a financial professional today to get started.
Investment advisory services are offered through Wealth Watch Advisors, an SEC-registered investment advisor. Neither Wealth Watch Advisors or J. Martin Wealth Management, LLC are endorsed by the Social Security Administration or any other governmental organization. Note, registration with the SEC does not denote a certain skill level or guarantee the success of an investment strategy. Wealth Watch Advisors and J. Martin Wealth Management, LLC are independent of one another.