By Susan Elise Campbell
\nRetirement plan holders went on a historic roller coaster ride this past year, but to their credit they held on tight, said local investment professionals.
\n\u201cFortunately no one panicked in March,\u201d said Mark Wells, CFP, co-founder of Three Buckets Wealth Management serving clients out of Fort Covington and Glens Falls.\u201cIn all aspects of life, when things are up in the air it\u2019s easier to act irrationally.\u201d
\nUncertainty is what no one wants, said Wells.
\nThe Three Buckets formula is to determine guaranteed income sources such as Social Security and pension, then calculate the gap between that amount and what the client wants to live on in their retired years, he said.
\nWith a comprehensive plan and short, intermediate and long-term investment buckets in place, Wells said \u201cclients understood how unexpected market swings can affect their overall goals and therefore did not act emotionally\u201d when COVID-19 drove down the stock market.
\n\u201cWho could know how the pandemic would play out?\u201d said Conor Boyd, managing partner of Thoroughbred Advisors, which has a Queensbury office. \u201cBut we were prepared by being positioned in such a way that we could take advantage of opportunities.\u201d
\nBoyd highlighted the need for a strong liquidity position in any portfolio, through cash equivalents and a guaranteed portion, which is traditionally fulfilled by insurance products.
\n\u201cOne end of the advisory spectrum is investment and the other is insurance, an area in which some advisers fall short,\u201d said Boyd.
\nHe promotes three factors to successful retirement planning. \u201cThe first is a focus on habit formation, which includes automated savings. Next are the tools, including investments and insurances. The third is the strategy that informs the habits to create and the tools to implement.\u201d
\nAt Minich MacGregor Wealth Management in Saratoga Springs, financial planner Cory Laird, CFP said the methodology is \u201cto determine the risk profile and make sure clients are getting the growth rate they\u2019re expecting and the amount of sleep that they want at night\u201d using a sector rotation strategy.
\n\u201cEven if we see a couple of down years, customers can still be comfortable,\u201d he said.
\nWith COVID\u2019s striking impact on investments, Laird said \u201cby the time clients got their statements the first week in June, the markets were already improving.\u201d
\nNow, with a new year and a new administration ahead, professionals are focusing on planning techniques that help retirement account holders meet goals beyond simply accumulating money.
\nOne strategy is to consider converting traditional IRA assets to a Roth IRA. There are two reasons why, say the experts. The first is the current ordinary income tax rates and the second is a new, but less advantageous, provision in the Secure Act passed at the end of 2019.
\nIRA assets can accumulate so much that when combined with other retirement assets, one\u2019s tax rate may be higher than it is today. The current levels sunset in 2025, but people today are facing 30 years in retirement or more, Laird said.
\nWhile IRA assets may still be taxed at a marginal rate lower than it was during the client\u2019s accumulation years, professionals say most people will be in a higher bracket during retirement than they had anticipated.
\nRoth IRA earnings are never taxed, said Laird, so if Congress has increased income tax rates or shifted brackets in the years withdrawals are made, Roth IRAs can become more attractive.
\n\u201cEarlier this year, the concern was for legacy planning,\u201d said Wells, when the Secure Act changed the required minimum distribution age for tax-deferred qualified plans from 70 1\/2 to 72.
\nWhile that\u2019s a plus, say the experts, that provision was countered with another that makes it difficult for beneficiaries to keep more money for themselves, according to Wells.
\n\u201cIn the past a non-spouse beneficiary could stretch distributions from the deceased\u2019s plan over many decades based on life expectancy,\u201d he said. \u201cNow all assets must be liquidated within 10 years. That means that unless a person aged 72 takes more money out of the plan during retirement, there will be more left for beneficiaries who will incur a quicker and higher tax liability.\u201d
\nOne solution is a Roth IRA, which has neither a required minimum distribution nor any tax liability for beneficiaries.
\nHe said there are also are strategies that shift retirement assets in order to be in control of taxes paid and money kept. \u201cFor some clients this may mean taking out more retirement money now and putting it into accounts managed in a way to provide tax advantages for heirs.\u201d
\nBoyd said Roth 401(k) plans resolve tax issues for many retirees, but many lack knowledge about what they are and how to get an account.
\n\u201cMany employees think they are not eligible, but every employee or small business owner may be eligible regardless of income,\u201d said Boyd. \u201cAdding the right option is straightforward if the existing plan doesn\u2019t currently offer one, and employees should request it.\u201d
\nBut be careful with Roth accounts, said Laird. \u201cUnlike a traditional IRA or rollover, Roth account assets can be used by Medicare during the five-year look-back period for nursing home care, although not in-home care,\u201d he said.
\nLaird said he recommends to all eligible clients during the open enrollment period to carefully choose a Medicare Advantage plan that suits their needs for medications, dental coverage, and level of premiums versus co-pays.
\nHe said the right health care program is another way of keeping more money for yourself, as some people have lost everything to expensive hospitalizations and treatments. For this same reason Laird is also a proponent of long-term care insurance.<\/p>\n","protected":false},"excerpt":{"rendered":"
By Susan Elise Campbell Retirement plan holders went on a historic roller coaster ride this past year, but to their credit they held on tight, said local investment professionals. \u201cFortunately no one panicked in March,\u201d said Mark Wells, CFP, co-founder of Three Buckets Wealth Management serving clients out of Fort Covington and Glens Falls.\u201cIn all […]<\/p>\n","protected":false},"author":196,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"yoast_head":"\r\n