Retirement, Tax Planning & The Dangers of Cutting Corners – Finger Financial Five #18

Finger Financial Five #18

“What is the difference between a taxidermist and a tax collector?  The taxidermist takes only your skin.” – Mark Twain

I grew up fishing with my dad in the rivers and ponds in South Carolina. One of the lessons he taught me, was learning to “read” the water.  That could be the unusual stillness of the surface, could mean shallow water or choppy disturbance in the middle of stillness, could be a protruding log to avoid.

The bend in the river (see the pun?), is another area where experience makes a difference.  The deepest and safest part of the river is usually the outside of the bend, the left side on right turns and vice versa.  The river cuts deeper to the outside.  Many inexperienced boat owners try to cut the corner and get stuck on the sandbar.

Conditions can change without warning.  You may have traveled that river a hundred times, but a storm loosened a few logs upstream, you now must deal with.  The tide could be unusually low and can now bring into play rocks, that you could easily pass over before.  I have seen many people ruin their boats by getting stuck in shallow water or breaking their propeller on a log. Conditions can change for retirement as well.

For example, now non-spousal inherited IRAs have to be distributed over a 10 year period instead of the beneficiary lifetime. Required Minimum Distributions are at 72 instead of 70.5.  You may have been able to get 4% on conservative fix income investments, now it is much more challenging. When rules and conditions change, so you should you.

So where are the obstacles  with retirement and investing currently?

  1. Taking risk and not knowing it.  Like shallow water, unless you know what to look for, you can’t see it.  Day trading the hot stock of the day, perhaps?
  2. Taking risk and knowing it.  I will just ride this wave and get out before anyone else does.  Like a storm on the river, everyone runs to the boat ramp at the same time.  You may have to wait a LONG TIME, to get to safety.  It may be too late by the time it is your turn.  If you are nearing or in retirement, do you really have the time to make up for mistakes??
  3. Inflation Are your safe investments (think life jacket) prepared for rising rates? Your risk investments? Are you holding too much cash?  If so, what to do with it?
  4. Taxes-Are you taking the necessary steps to avoid these rough tax waters ahead? Many changes are being discussed, like raising Social Security tax limits on earned income.  Do you have the proper retirement plan for your company?  Cash Balance plan?  NUA possible? Are you maximizing contributions appropriately? Traditional Roth IRA or 401k?  After tax contributions with automatic ROTH conversions??  How will this affect you and what can you do to prepare?
  5. Time– We never really know how much we have left.  One thing is for certain, is that once spent, time can never be recovered.  Remember to LIVE.  Simplify your life.  Focus on the things that matter.  Create memories.  I remember vividly many times I went fishing with my dad.  Wonderful memories.  I dreaded the times, he made me fix sprinklers in the yard.  Spend a few bucks to outsource things that take time and don’t have much meaning.  Spend more TIME creating your memories and less time fixing sprinklers. See FFF#10-4.

There is a lot to consider in 2021 with taxes and retirement.  If you have any questions, feel free to send me an email or setup a phone appointment.

On the lighter side, Elliott seems to be settling in at the number 2 spot on the Myrtle Beach High School Tennis Team. Hopefully, they have a good and safe season.

Hope all is well with you and your family,

Jeremy Finger, CFP®, CIMA®, CRPC®, CPFA
Founder & CEO
Wealth Management Advisor

Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information.  My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.

This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.


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