Fixed income is something many investors don’t understand, according to the survey, “Fixed Income, Not Fixed Thinking,” by BNY Mellon Investment Management, one of the largest asset managers in the world. The study revealed that the majority of Americans surveyed have a limited understanding of fixed-income investments, regardless of age, income, education level, and other demographics.
The lack of understanding ranged from bonds, different fixed-income solutions, including insurance products, investments inside a mutual fund, comprehending how fixed-income plays into retirement planning, and understanding its risk in comparison to other asset classes. The same study revealed that investors think fixed income is essential solely in the immediate run-up to retirement, or during the decumulation phase when investors start to draw from their retirement nest egg.
However, fixed-income investments can play a part in most investor’s portfolios at any age, and many advisors have incorporated fixed-income into client portfolios to obtain these key objectives:
Before purchasing any fixed-income investment for your portfolio, it is crucial to understand all fees associated with it, if your money is available right away, and the surrender fees, if any. Secondly, following the fixed-income investment’s true return over time is essential to determine tax-consequences and it’s valuation during a down market. All of these factors in the decision to liquidate or hold the investment to maturity, if applicable. Since fixed income securities are debt, it is vital to understand the investment’s rating, and based on financial analysts’ research, if the issuer is likely to pay back their debt to investors at maturity.
Fixed income securities are generally for conservative investors seeking a diversified portfolio. If you have questions regarding fixed income or fixed income investment currently in your portfolio, contact our office.
Here we are, already to the end of 2019! The end of a year
and the start of a new one is when most people decide to clean up and implement
changes in some areas of their lives. Whether it is financial or
health-related, starting the New Year off with tasks completed feels good! Here
are ten things that can make a difference to you now, and later:
Task #1- Increase Retirement Savings Contributions-
Increasing or maximizing your pre-tax and after-tax retirement savings
contributions helps in two ways; first, it helps to ensure you will have more
money in retirement. Second, contributions into pre-tax retirement savings
accounts help to lower your taxable income in the year the contributions made.
Task #2- Take your Losses- If you decide to sell losing
assets before 2020, you may be able to use those losses to offset your taxable
capital gains. Make sure to consult your tax professional to understand if
tax-loss harvesting will benefit you or not.
Task #3- Consider Converting to a Roth IRA- Since
contributions and earnings in a Roth IRA grow tax-free, converting your
tax-deferred retirement savings into a Roth may make sense for you. Although
you are required to pay taxes on the entire contributions and earnings, the
conversion in 2019 may be a tax-smart move in the long term.
Task #4- Prepare
for 2019 Tax Reporting- You don’t need to wait until 2020 to meet with
your tax professional. Having an idea of how much you may need to pay in taxes
for 2019 can benefit you when you still have time to contribute to
tax-sheltered investment accounts opened by December 31st, 2019, to
off-set personal income and capital gains. Especially if you’ve made more money
in 2019 than in previous years, having an idea of taxes due in the 4th
quarter and pre-paying taxes can save you stress later.
Task #5- Evaluate
Health Savings Account (HSA) Contributions- HSAs allow pre-tax
contributions, much like your pre-tax retirement savings. However, when used at
a later date for health-related expenses, including future long-term care
expenses, the contributions and accumulation are tax-free upon withdraw. Make
sure you are maximizing your contributions to enjoy the benefits of using the
account later and lowering your taxable income for 2019!
Task #6-
Contribute to your Children’s or Grandchildren’s 529 College Savings Plan-
Many states offer a state income tax credit or deduction up to a certain amount
for parents or grandparents that contribute.
Task #7-
Rebalance, Rebalance, and Rebalance- Market swings cause portfolio
allocations to change over time. The end of the year is a great time to
rebalance all of your investment accounts.
Task #8- Spread
Your Wealth to Benefit Non-Profits- Donor Advised Funds allow you to
deduct your contributions to a non-profit. Due to the Tax Cuts and Jobs Act,
contributions must be made into a donor advised fund in 2019 to be itemized and
deducted on your 2019 tax return.
Task #9- Check and
Update Beneficiaries- Check and update beneficiary information on your
employer retirement plan and all life insurance policies. Has there been a
marriage, divorce, or name change for any beneficiary? Keeping beneficiary
information and your information current is essential to help avoid problems
later if there is a death claim.
Task #10- Schedule
Your Annual Review for 2020- The beginning of a new year is a great
time to schedule an annual investment review, complete or update your financial
plan.
If you have questions regarding any of the above, contact
our office to complete these before we say goodbye to 2019 and welcome 2020!
Dreaming and goal setting are interrelated; first, you dream
about what you want, then you determine how to obtain it. Our dreams should
help guide us to make the right choices at the right time and in the proper
manner. But merely dreaming about something is not enough; we must set goals to
achieve it. In psychology, goal setting refers to a successful plan of action
that we set for ourselves.
Psychologist Frank L. Smoll, a Ph.D. and working
psychologist at the University of Washington, emphasized through his studies
the three essential features of goal-setting, which he calls the A-B-Cs of
goals. Smoll said that effective goals are:
A-Achievable
B-Believable
C-Committed
Others in the field of psychology have determined that goal-setting for productivity involves
five criteria; it must be specific, measurable, achievable, realistic, and
time-sensitive. Whether your dream is buying a larger house, completing a
degree, losing weight, or saving a specific amount for retirement, all of these
criteria must be included in your planning to achieve success.
If dreaming and ‘goal-setting psychology’ sounds a lot like
financial planning, it is. Financial plans develop with all of these
productivity criteria in mind. Financial advice is then executed to help make a
dream a reality. Achieving more significant goals, such as saving for
retirement to live in retirement as one envisions, takes longer. Throughout a
client’s life, they may change their retirement dream or adjust their goals to
the evolving criteria.
Remember that dreams are like a destination- if you want to go somewhere, you need to visualize where you want to be, recognize
where you are at now, and make a plan to get there. You must also stay motivated
and keep dreaming! I can help you do all of this; all you need to do is ask.
In November 2019, the Internal Revenue Service (IRS)
announced the cost of living adjustments for 2020 for most retirement savings plans. However, IRA contribution limits will stay
the same. If you plan to make the maximum contributions you can in 2020, here’s
what you need to know:
Taxpayers can deduct contributions into a traditional IRA if
they meet certain conditions. If during the year either the taxpayer or their spouse were
covered by a workplace retirement plan, the deduction may reduce, or phase out,
until it is eliminated, depending on filing status and income. (If neither the
taxpayer nor spouse are covered by a workplace retirement plan, the phase-outs
of the deduction do not apply.) Here are the phase-out income ranges for 2020,
up slightly from 2019:
The income phase-out for Roth IRAs is $124,000 to $139,000 for singles and heads of household. For married couples filing jointly, the income phase-out range is $196,000 to $206,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $1 to $10,000.
The income limit for the Saver's Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $65,000 for married couples filing jointly, $48,750 for heads of household, and $32,500 for singles and married individuals filing separately.
Even if you're not able to save the maximum into your retirement accounts, now is a great time to increase your contributions anyway. If you have any questions regarding contribution limits of setting up IRAs or self-employed retirement savings accounts by the end of 2019 to offset your income, contact our office.