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Tax Planning

Your Retirement, Your Rules

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Last weekend, I made my way to Wilmot, South Dakota for something that’s become one of my favorite traditions: my annual Marine Corps reunion. This will be our 19th reunion and I’ve only missed one in all these years. What started as just three guys getting together has grown into a yearly gathering of twenty brothers. 

We’re all getting a bit grayer around the edges, so, naturally, this year’s most popular topic of conversation was retirement. As you can imagine, they all had a few questions for me. I love talking about all things retirement, from savings strategies to tax implications, but there’s one thing that always surprises me.

Every single one of these guys had a completely different vision of what retirement should look like. Some were dreaming of cabins up North, fishing trips and grandkid visits. Others wanted to travel the country. There was even one guy who was planning to turn his woodworking hobby into a part-time business. 

And then there’s me. I’m probably the odd one out. Because honestly? I love what I do so much that I don’t want to step away anytime soon. My ideal “retirement” looks like working 24/7 (that’s 24 hours a week, seven months a year). Still engaged, still helping people, just with a rhythm that allows for more time with family, and maybe a trip to the Kentucky Derby.

Your idea of retirement is unique to you, so why should you follow the exact same retirement planning advice as everyone else?

Too many people get one-size-fits-all advice that doesn’t match their actual dreams and goals. They’re told to save a certain percentage, retire at a certain age, and follow a certain withdrawal strategy, without anyone ever asking what they actually want their retirement to look like.

When my Marine buddies ask me for financial advice, I always tell them the same thing: find an advisor who takes the time to understand your unique retirement goals. Because the strategy that works for someone who wants to retire at 62 and never work again is completely different from someone who wants to ease into semi-retirement while pursuing a passion project.

Your retirement planning should be customized to your retirement dreams. So before you start crunching numbers or comparing investment options, take a step back and get crystal clear on what you actually want your retirement to look like. Then find a financial advisor who listens to those dreams and builds a plan around them.

Because at the end of the day, the best retirement plan isn’t the one that looks good on paper. It’s the one that helps you live the life you’ve always imagined.

Let’s make sure you’re set for your retirement dreams – whatever those dreams may be. Call us: 952-460-3290.

Cup of Joe

CUP OF JOE

From Joe Lucey, Founder of Secured Retirement

There’s something about sitting down with a steaming cup of coffee that always kicks my day into high gear. And it’s not just because of the caffeine it sends coursing through my veins.

Throughout my career, some of my biggest revelations have come to me in conversation with my mentor over a cup of joe. Good conversation and personal connection can pick you up in a special way. It’s that feeling that I’m hoping to bring to you with my series, your Cup of Joe.

What’s Your Tax Plan B?

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There’s something about summer that stirs up that little travel bug within our Minnesotan hearts. Whatever your preference – cabin weekend, road trip, or flight to the coast – ‘tis the season to pack up and go!

Of course, summertime travel around here means one thing: construction. Even a route you’ve traveled a thousand times over may require a detour. Suddenly, traffic’s backed up and you’re searching for another way. 

As any good traveler knows, flexibility is your friend. You adjust. And sometimes, if you’re lucky, you’re onto a better adventure than the one you’d originally planned. Maybe that’s a scenic overpass, the best burger joint in town, or The Biggest Ball of Twine.

It’s always smart to have a Plan B to accompany your Plan A.

The same principle applies to your retirement planning; especially right now, as a new tax bill winds its way through the legislature. While things are still being added and removed, Trump’s proposed legislation would make some significant portions of the 2017 Tax Cuts and Jobs Act permanent. Things like the larger standard deduction, lower tax brackets, and higher gift and estate tax exemptions could be here to stay.

For retirees in particular, that could mean some welcome tax relief, especially when it comes to Social Security benefits.

However, as you may have seen this week, negotiations are still underway, and details will change. So, while we’re hopeful about what’s ahead, we just don’t know how next year’s tax situation will shake out. Your finances are going to need a Plan B to accompany your Plan A.

At Secured Retirement, we’re already working with clients to model both possibilities. What if the tax cuts are extended? What if they’re not? What if your taxable income shifts? What if your deductions change? We’ll walk you through each scenario and help you build a plan that holds up either way. 

Tax strategies are about timing, flexibility, and positioning your assets to weather the unknowns.

Let’s make sure you’re set for the road ahead – whatever detours may come. Call us: 952-460-3290.

Cup of Joe

CUP OF JOE

From Joe Lucey, Founder of Secured Retirement

There’s something about sitting down with a steaming cup of coffee that always kicks my day into high gear. And it’s not just because of the caffeine it sends coursing through my veins.

Throughout my career, some of my biggest revelations have come to me in conversation with my mentor over a cup of joe. Good conversation and personal connection can pick you up in a special way. It’s that feeling that I’m hoping to bring to you with my series, your Cup of Joe.

Don’t Let These Tax Traps Ruin Your Retirement

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Retirement planning requires a lot of different elements. Investments, tax planning, income planning, and more. Many people dedicate their focus towards managing their investment returns, and while that’s important other factors that can have an even bigger impact on their nest egg get overlooked. One huge factor is taxes.

Taxes could be your largest expense in retirement. Developing strategies around them is key to best positioning your retirement future. To mitigate the negative impact that taxes might have on your retirement savings, be aware of these common tax traps before you start planning that retirement party.

Retirement Tax Trap #1: Claiming Social Security Could Increase Your Tax Bill

Claiming your Social Security benefits could be one of the most important financial decisions of your life. How and when you claim Social Security could impact far more than just the amount of your benefits check. It could also trigger paying taxes on as much as 85% of your benefits.

Don’t make your decision solely based on maximizing your benefits. Instead, consider how it could impact your taxes, Medicare premiums and spousal benefits.

Retirement Tax Trap #2: Withdrawals from Your IRA and 401(k) Are Taxable

Contributing money to your IRA and 401K is easy. But withdrawing this money in retirement is complicated and confusing.

Remember, you must pay taxes when you withdraw this money in retirement. And Required Minimum Distributions will further complicate matters. When you turn 73, “RMD’s” force you to start withdrawing money from these accounts, whether you want to or not. And this could result in paying more and more taxes every year.

The solution? Start planning for RMDs in your 60s to minimize their impact on your tax bill.

Retirement Tax Trap #3: Failing to Diversify for Taxes

Most people understand investment diversification, but few think about diversifying their tax exposure. Many individuals have too much of their retirement savings in tax-deferred accounts, which can lead to big tax headaches down the road.

To minimize your tax burden, aim to have a balance of accounts in three categories: taxed always, taxed later and taxed rarely. If you have too many eggs in one basket, it could spell serious financial trouble in retirement.

Retirement Tax Trap #4: Missing the ROTH IRA or 401(k) Conversion Window

A Traditional IRA or 401K allow tax-free contributions. But you must pay taxes when you withdraw this money in retirement unless you convert some, or all your traditional IRA or 401K to a ROTH.

A ROTH IRA or 401K doesn’t allow tax-free contributions (that’s the catch), but you pay zero taxes when you withdraw money in retirement. ROTH accounts are not subject to RMDs either. That means you get tax-free growth, which could add up to tens of thousands of dollars in retirement (possibly more).

A financial advisor can help you determine whether a ROTH conversion is right for you.

Take Control of Your Retirement Taxes

The good news? You have more control over how much you pay in taxes during retirement than at any other point in your life. But lowering your tax bill doesn’t happen automatically—it requires proactive planning. By addressing these tax traps early, you can set yourself up for a more tax-efficient, stress-free retirement. To set yourself up, give us a call: 952-460-3290.

4 Big Tax Mistakes That Could Cost You an Arm and a Leg When You Retire

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Most people ignore the significant impact taxes could have on their IRA and 401K because they think they don’t have a choice in the matter. This is simply not the case.

You have more control over your taxes than you realize, including your IRA and 401K, Social Security benefits, and investment income. Come along as we discuss how to avoid four big tax mistakes as you plan for retirement.

Mistake #1: Not Having a Strategy for Your Tax-Deferred Accounts

Taxes on Your IRA and 401K: One of the biggest retirement tax traps is withdrawing money from your 401K, IRA, or other retirement accounts. These accounts are very popular for saving money because of employer matching and tax-free contributions. However, withdrawing this money can lead to unexpected taxes, as the IRS will want its share.

Required Minimum Distributions (RMDs): When you turn 73, RMDs kick in, requiring you to withdraw a certain amount from your IRA or 401K each year. Failure to comply with RMD rules can result in severe taxes, penalties, and fees. These accounts have been called “sleeping tax bears” that wake up and growl loudly in your 70s. Creating a withdrawal strategy in your late 50s or early 60s can help you avoid paying thousands in unnecessary taxes and penalties.

Mistake #2: Not Having Tax Diversification

Tax diversification involves spreading your investments across accounts with different tax treatments to better manage your tax liability in retirement. There are three basic tax categories to diversify in:

  1. Taxable accounts: Brokerage accounts, checking, and savings accounts. You pay tax on dividends, interest, or capital gains.
  2. Tax-deferred accounts: 401(k), Traditional IRA, 403(b), real estate, or hard assets.
  3. Tax-free accounts: Roth IRA, interest from municipal bonds, and certain types of life insurance.

By putting investments in accounts across the categories, you’ll likely significantly impact your retirement tax bill. But it’s important to do so proactively – BEFORE the tax bill comes.

Mistake #3: Not Converting Some of Your Money to a Roth

An IRA or 401K allows tax-free contributions. But when you withdraw that money in retirement, you have to pay taxes on that money. However converting some, or all of your traditional IRA or 401K to a Roth can lower your tax bill since Roth distributions aren’t taxed.

How a Roth IRA Works: Unlike traditional IRAs or 401Ks, Roth IRAs don’t offer tax-free contributions, but you pay zero tax when you withdraw money in retirement. And you don’t have to deal with RMDs either. That means you get tax–free growth – which could add up to tens of thousands of dollars in retirement, if not more. Another benefit is the lack of early withdrawal penalties, which makes Roth IRAs a flexible option for retirement planning.

A Few Watch-Outs: All of this said – Roth conversions can be tricky. Knowing the exact tax impact can be challenging until the year is over, and you’re not able to reverse your conversion decision. It’s important to seek financial advice to navigate the complexities of Roth conversions effectively.

Mistake #4: Forgetting About Taxes on Your Social Security Benefits

Taxation of Social Security Benefits: Many people are unaware they could pay taxes on as much as 85% of their Social Security benefits. This tax bill can be a shock if not anticipated and planned for in advance. Here’s how your benefits are taxed:

  • If your income is over $25,000 (or $32,000 for couples), you will face taxes on up to 50% of your Social Security benefits.
  • If your income exceeds $34,000 (or $44,000 for couples), you could be taxed on up to 85% of your benefits.

Planning for these taxes can help you avoid unexpected reductions in your Social Security benefits.

Tax laws are subject to change, and staying informed about new legislation is crucial. Working with a tax professional can help you adapt your retirement strategy to any changes in the tax code, so you know you have the latest information and strategies to maximize your retirement savings and minimize your tax liability.

For your complimentary review meeting – step one of our Taxsmart Retirement Program™– to get your taxes on track for retirement, call us today: 952-460-3290.

5 Considerations To Help You Land the Right Financial Advisor

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With more and more financial products hitting the market and a growing number of so-called gurus shilling financial advice from every nook and cranny of the internet, it’s more important than ever to have a trusted financial advisor in your corner. But with so many opinions floating around, how can you determine who to actually trust? Navigating through the maze of investment options, retirement plans, and financial strategies demands tried-and-true expertise and insight. We’ve put together a list of five things to consider as you sift through the noise and find a professional who’s worthy of your trust.

  1. Communication Style: Clear and effective communication is crucial to the advisor-client relationship. In this industry, things can get complex and confusing quickly. You want an advisor who can spell it all out for you in a way you understand. Beyond that, you’ll want to work with someone who responds promptly and is willing to provide you with regular updates. Transparent and open communication fosters trust and ensures that you remain in the know and empowered throughout your financial journey.
  2. Credentials and Beyond: Formal credentials can be a valuable indicator of expertise, but they don’t provide a complete picture of competency. In the world of financial consulting and retirement planning, there is a whole spectrum of designations ranging from rigorous to just plain formalities. Take into account a prospective financial advisor’s track record, integrity, and compatibility with your financial goals, rather than simply relying on the acronyms trailing their name.
  3. Specialization: Just like you’d consult a cardiologist for heart-related concerns rather than your family doctor, you should seek out a financial advisor whose expertise aligns with your specific financial needs. At Secured Retirement, our specialization revolves around income and tax planning for retirement. Having a specialty indicates the presence of proven strategies. Whether you’re interested in retirement planning, estate management, or investment strategies, and depending on where you are in your financial journey, working with a specialist ensures guidance and comprehensive insights tailored to your goals.
  4. Life-Long Learning: Even the most decorated financial professionals should seek out ongoing education and training. This is a field that is constantly changing. You want to work with advisors who keep up with this change. What’s more, you want to know that the training they’re doing isn’t on sales techniques, but in areas of financial substance. Ensure your financial partner values honing their knowledge and skills in their area of expertise so that they consistently stay on top of their game.
  5. A Range of Approaches: Every family’s financial situation has its strengths and weaknesses. Within their specialty, your financial advisor should be able to tailor their approach to your unique situation in order to achieve your personal financial goals. You need a partner who takes the time to listen to your vision and can craft a strategy around it. There is no one-size-fits-all approach in this industry, and if anyone claims there is. . . Beware!

In the complex world of financial planning, working with competent financial professionals you can trust makes all the difference. At Secured Retirement, we’ve built our business with these very considerations in mind. We’re a partner you can rely on and thrive with. 

Connect with us today: 952-460-3290

Tax Prep Vs Planning – Two Strategies For Tax Savings

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As the new year unfolds, it brings not just resolutions and fresh beginnings but also the commencement of a new tax season. The tax season is upon us and tax professionals across the country are spending their wee hours crunching numbers to save you money where they can. While the best tax preparers can sometimes find savings for you, tax planning offers a more comprehensive way to secure longer-term savings, rather than just once-every-couple-years savings. And that’s the difference between tax preparation and tax planning. Blog over. Case closed. Just kidding! Let’s dive into the distinction between these practices and why there’s a place for both of them in your financial routine.

Tax Prep Vs. Tax Planning

Tax prep and tax planning have two central differences: Their purpose and their timing. Tax prep is primarily focused on completing and filing the correct tax forms in order to be federally compliant. This process happens between January 1 and the April due date – the 15th this year. If you’re lucky, a skilled tax preparer will find some ways to minimize the amount you owe Uncle Sam yearly. This reactive strategy does work out some years!

On the other hand, tax planning is an ongoing effort that happens year-round. These tax-saving strategies take into account your long-term financial goals and make more substantial money-moving adjustments to minimize your tax liability to the tune of a small fortune. Its purpose is to create a proactive strategy for savings accomplished in advance of your retirement. 

Tax Planning’s Growing Importance

In today’s financial world, taxes primarily have a significant effect on retirement earnings. The current generations of retirees are the first to fund their retirements from 401Ks and IRAs, as opposed to the pensions of previous generations. Therefore, it’s more important than ever to prioritize tax planning as part of your retirement savings arsenal. Planning before you retire will help you reap the most rewards.

Additionally, federal taxes are currently at a 40-year low. In order to pay off our record-breaking national debt, it’s likely the federal government will raise taxes. So make your adjustments and maximize your savings while the gettin’s good.

Strategies To Maximize Savings and Minimize Tax-Liability

When it comes to actually implementing tax savings strategies, there are a host of factors that contribute to your tax-optimized equation. Things like managing when and how you withdraw from IRAs, 401Ks, and take your social security benefits all have tax consequences. In retirement, as you transition your income, you’ll be taxed on all of those things. A robust retirement withdrawal strategy often relies on diversifying your money across different types of accounts. This applies to things like reserve funds, taxable accounts (traditional brokerage accounts), tax-deferred accounts (401K or Roth IRA), and tax-free accounts (Roth 401K or Roth IRA). Tax planning may involve

consciously paying taxes now in an effort to save on taxes later, such as converting traditional IRAs into Roth IRAs.

Another often-implemented strategy involves reducing your taxes when the time comes to actually make withdrawals from your tax-deferred accounts, like your 401K. Sometimes taking too large of a withdrawal from your account can push you into a higher tax bracket. By planning carefully, you can limit your 401K withdrawals to prevent that push, and then take the remainder of your cash needs from after-tax investments, cash savings, or Roth savings. When you fund big-ticket purchases from a mix of accounts, you can best minimize your tax expenses.

Bottom Line

Both tax preparation and tax planning can save you money at the end of the day. At Secured Retirement, we believe one of the most effective ways to plan for retirement is to implement tax planning. Most folks don’t want to pay the government one dime more in taxes than they have to. They want to enjoy their retirement and their earnings. If that sounds like you, the single, most important key is to take advantage of every tax-saving opportunity available to you.

Let’s find the best strategies for you — and see how much money you could save!

Email us to schedule your free tax analysis today.

Danielle Christensen

Paraplanner

Danielle is dedicated to serving clients to achieve their retirement goals. As a Paraplanner, Danielle helps the advisors with the administrative side of preparing and documenting meetings. She is a graduate of the College of St. Benedict, with a degree in Business Administration and began working with Secured Retirement in May of 2023.

Danielle is a lifelong Minnesotan and currently resides in Farmington with her boyfriend and their senior rescue pittie/American Bulldog mix, Tukka.  In her free time, Danielle enjoys attending concerts and traveling. She is also an avid fan of the Minnesota Wild and loves to be at as many games as possible during the season!