Center Clients Donate over $1 Million in Tax-Savvy QCD Strategy in 2023

Contributed by: Lauren Adams, CFA®, CFP®

We are proud to announce that The Center assisted clients in donating over $1,000,000 to charities using the Qualified Charitable Distribution (QCD) strategy in 2023!

The QCD strategy allows clients with assets in an IRA account and who are over age 70.5 to donate funds directly from their retirement account to a charity. Giving directly from an IRA to charity results in those dollar amounts not being included as taxable income for that year. That usually results in a lower tax bill for clients and can have positive downstream effects like lowering the amount they may pay for Medicare premiums and the portion of Social Security that is taxable to them, depending on their situation and income level. For those 73 or older, QCDs also count towards the distributions they need to take each year for their Required Minimum Distribution.

Now, there are some caveats for QCDs – for example, you need to be at least 70.5, and the charity must be a 501c3. There are also limits on how much you can give each year through this method, but that number is relatively high at $105,000 per person per year currently.

The Center’s mission is to improve lives through financial planning done right, and we are proud to be able to help clients make such a positive impact on the world (bonus points for it being in a tax-savvy manner!). 

Did you know that QCDs are only one of many charitable giving strategies our team helps clients deploy? Check out this video to learn more about ways our clients make their charitable dollars stretch further for the causes they care about while also potentially lowering their tax burden. 

As always, we recommend that you work with your tax preparer to understand how these strategies can affect your situation. If you want to explore these strategies and more, contact your Center financial planner today! 

Lauren Adams, CFA®, CFP®, is a Partner, CERTIFIED FINANCIAL PLANNER™ professional, and Director of Operations at Center for Financial Planning, Inc.® She works with clients and their families to achieve their financial planning goals.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Lauren Adams, CFA®, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Strategies to Help Protect Your Income Plan

Contributed by: Nick Defenthaler, CFP®, RICP®

In my recent blog focused on the popular '4% rule', we discussed safe portfolio distribution rates over the course of retirement. While the percentage one is drawing from their portfolio is undoubtedly very important, other factors should also be taken into consideration to ensure the income you need from your portfolio lasts a lifetime:

Asset Allocation

• It's common for retirees to believe their portfolio should become extremely conservative when they're in retirement, but believe it or not, having too little stock exposure has proven to do MORE harm than holding too much stock! While having a 100% stock allocation is likely not prudent for most retirees, maintaining at least 60% in equities is typically recommended to ensure your portfolio is outpacing inflation over time.

Reducing your Withdrawal Rate 

• Spending less during market downturns is one of the best ways to protect the long-term value of your portfolio. When I think of this concept, I always go back to March 2020, when the global pandemic hit, causing the US stock market to fall 35% in only two weeks. Due to the COVID-induced recession we were living through, we were all forced to dramatically reduce activities such as travel, entertainment, and dining out. This reduced spending for many clients, which helped tremendously while portfolio values recovered. This highlights the importance of reducing fixed expenses over time to provide flexibility. In years when markets are down significantly, having the ability to reduce variable expenses will prove to be an advantage.

Part-time Income

• Let's be honest – most of us don't want to think about work after retirement! That said, I'm seeing more and more retirees work 15-20 hours/week at a job they're enjoying, which is helping to reduce distributions from their portfolio. I find that most folks dramatically underestimate how valuable even earning $15,000 annually for several years can be on the long-term sustainability of their portfolio. While working part-time in retirement certainly has its financial benefits, I've also seen it help with the transition to retirement. Going from working full-time for 40+ years to a hard stop can prove challenging for many. 'Phasing into retirement' through part-time work can be an excellent way to ease into this exciting next chapter of your life.  

Impact of Fixed Income Sources 

• Often, we recommend that clients consider delaying Social Security into their mid-late 60s to take advantage of the over 7% permanent annual increase in benefits. It's also fairly common to have pension and annuity income start around the same time as Social Security, which could mean several years when a client draws on their portfolio for their entire income need. In many cases, this means a significantly higher portfolio withdrawal rate for several years. To plan for this short-term scenario with elevated distributions, one might consider holding at least several years' worth of cash needs in highly conservative investments (i.e., cash, money market funds, CDs, short-term treasuries, and bonds). Doing so helps to reduce the likelihood of being forced to sell stocks while down considerably in a bear market, something we'll want to avoid at all costs – especially in the first several years of retirement.

As someone who primarily works with clients either currently retired or within a few years of retirement, I can tell you that completing this retirement income puzzle requires a high level of customization and intention. Over time, your plan and strategy will have to adjust to changes in the market and tax law, to name a few. Please feel free to reach out if you'd like to discuss your plan in greater detail – our team and I are always happy to serve as a resource for you!

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Center for Financial Planning, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services Investment advisory services are offered through Center for Financial Planning, Inc.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Sources:

https://www.financialplanningassociation.org/article/journal/MAR04-determining-withdrawal-rates-using-historical-data

Financial Resolutions to Consider for 2024

Contributed by: Kelsey Arvai, CFP®, MBA

As the year comes to a close, it is time to start thinking about the New Year and starting it off on the right foot. What better way to accomplish this than by improving your financial health in 2024? January is Financial Wellness Month and Wealth Mentality Month – which serves as a reminder to get our finances in order and plan out our financial strategies. It is also the perfect opportunity to check in with your Financial Advisor to ensure you are financially prepared both in the short and long term.

While planning your financial resolutions, remember to be specific about what you want and why. The key to success is being clear about your priorities and choosing a particular goal. Make sure your goals are attainable, write them down, and post them somewhere where you will be reminded of them often. You can ensure accountability by creating calendar reminders to check in on your goals throughout the year.  

For additional resources on Financial Planning tips going into the New Year, check out this blog from Sandy Adams. I have also provided some additional ideas below from a previous blog of mine:

Automate Savings & Debt Reduction

Establishing and maintaining a positive cash flow is a top-tier priority for your financial health. Automation is key to efficiency and effectiveness while working towards your financial goals. Prioritizing your savings contribution through automation helps hedge against the temptation to spend the funds elsewhere. Utilizing automatic payments for your credit card could help your credit score if the payment happens before your due date. After establishing an emergency fund through your automated savings, you might consider directing excess cash to your retirement and health savings plans.

Max Out Your 401(k) & Health Savings Account (HSA)

The beginning of the year is a great time to review your 401(k) and HSA contributions to ensure that you are maximizing your benefits and taking advantage of increased deferral limits for 2024. 401(k), 403(b), and most 457 plan limits are now up to $23,000 for elective employee deferral. The catch-up contribution limit for employees aged 50 allows for an additional savings of $7,500. Similarly, HSA contribution limits are up to $4,150 for individuals and $8,300 for family coverage, with an additional $1,000 for employees 55 for older. Since HSAs are not "use-it-or-lose-it" accounts, and they can be spent on any expense without penalty after 65, it is advantageous to fully fund these accounts every year.

Plan for Charitable Giving

Most people wait until December to give, but we recommend not being in such a rush that you wait until the end-of-the-year deadline and lose sight of your charitable goal. The beginning of the year is a great time to develop a plan for your year ahead.

Invest in Your Emotional and Physical Well-Being

As you take stock of your financial health this year, carving out time for your physical health is equally paramount. There is a connection between health and wealth; each should be analyzed and reviewed professionally, at least annually.

Reach Out to Your Financial Advisor 

Working with your advisor, at least annually, can provide support to keep you on track while determining and working towards financial goals.

On behalf of all of us at The Center, we wish you a happy and healthy 2024!

Kelsey Arvai, CFP®, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the Kelsey Arvai, MBA, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Retirement Plan Contribution and Eligibility Limits for 2024 (Additional Updates)

Contributed by: Kelsey Arvai, CFP®, MBA

The Internal Revenue Service (IRS) announced how much individuals can contribute to their retirement accounts and updated figures for income eligibility limits. See this blog from earlier in the month for adjustments to contribution limits and income eligibility limits that are notable as you set your savings targets for the New Year. Below, you’ll find additional updates worth keeping in mind as well.

Saver’s Credit Income Limit (Retirement Savings Contributions Credit):

For low and moderate-income workers, it is $76,500 for married couples filing jointly (up from $73,000), $57,375 for heads of household (up from $54,750), and $38,250 for singles and married individuals filing separately (up from $36,500).

Additional changes made under SECURE 2.0: 

• The limitation on premiums paid concerning a qualifying longevity annuity contract is $200,000. For 2024, this limitation remains $200,000.

• Added an adjustment to the deductible limit on charitable distributions. For 2024, this limitation is increased to $105,000 (up from $100,000).

• Added a deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to a split-interest entity. For 2024, this limitation is increased to $53,000 (up from $50,000).

As we begin 2024, keep these updated figures on your radar when reviewing your retirement savings opportunities and updating your financial plan. As always, if you have any questions, feel free to contact our team! 

Have a Happy and Healthy New Year! 

Kelsey Arvai, CFP®, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

Any opinions are those of Kelsey Arvai, MBA, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Retirement Account Contribution and Eligibility Limits Increase in 2024

Contributed by: Robert Ingram, CFP®

The IRS recently announced next year's annual contribution limits for retirement plans and IRA accounts. Compared with the historically large increases to limits in 2023, 2024 brings relatively modest increases. However, the adjustments to contribution limits and income eligibility limits for some contributions are still notable as you set your savings targets for the New Year.  

Employer Retirement Plan Contribution Limits (401k, 403b, most 457 plans, and Thrift Saving)

• $23,000 annual employee elective deferral contribution limit (increases $500 from $22,500 in 2023)

• $7,500 extra "catch-up" contribution if age 50 and above (remains the same as in 2023)

• The total amount that can be contributed to a defined contribution plan, including all contribution types (e.g., employee deferrals, employer matching, and profit sharing), will be $69,000 or $76,500 if age 50 and above (increased from $66,000 or $73,500 for age 50+ in 2023)

Traditional, Roth, SIMPLE IRA Contribution Limits:

Traditional and Roth IRA

• $7,000 annual contribution limit (increases $500 from $6,500 in 2023)

• $1,000 "catch-up" contribution if age 50 and above (remains the same as in 2023)

Note: The annual limit applies to any combination of Traditional IRA and Roth IRA contributions. (i.e., you would not be able to contribute up to the maximum to a Traditional IRA and up to the maximum to a Roth IRA.)

SIMPLE IRA

• $16,000 annual contribution limit (increases $500 from $15,500 in 2023)

• $3,500 "catch-up" contribution if age 50 and above (remains the same as in 2023)

Traditional IRA Deductibility (income limits):

You may be able to deduct contributions to a Traditional IRA from your taxable income. Eligibility to do so depends on your tax filing status, whether you (or your spouse) is covered by an employer retirement plan, and your Modified Adjusted Gross Income (MAGI). The amount of a Traditional IRA contribution that is deductible is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For example,

Filing Single

• You are covered under an employer plan

• Partial deduction phase-out begins at $77,000 up to $87,000 (then above this no deduction) compared to 2023 (phase-out: $73,000 to $83,000)

Married filing jointly

• A spouse contributing to the IRA is covered under a plan

• Phase-out begins at $123,000 to $143,000 compared to 2032 (phase-out: $116,000 to $136,000) 
  

•  A spouse contributing is not covered by a plan, but the other spouse is covered under a plan

• Phase-out begins at $230,000 to $240,000 compared to 2022 (phase-out: $218,000 to $228,000) 

Roth IRA Contribution (income limits):

Similar to making tax-deductible contributions to a Traditional IRA, being eligible to contribute to a Roth IRA depends on your tax filing status and income. Your allowable contribution is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For 2024, the limits are as follows:

Filing Single

• Partial contribution phase-out begins at $146,000 to $161,000 compared to 2023 (phase-out: $138,000 to $153,000)

Married filing jointly

• Phase-out begins at $230,000 to $240,000 compared to 2023 (phase-out: $218,000 to $228,000)

If your MAGI is below the phase-out floor, you can contribute up to the maximum. Above the phase-out ceiling, you are ineligible for any partial contribution.

Eligibility for contributions to retirement accounts like Roth IRA accounts also requires you to have earned income. If you have no earned income or your total MAGI makes you ineligible for regular annual Roth IRA contributions, other strategies such as Roth IRA Conversions could make sense in some situations to move money into a Roth. Roth Conversions can have different income tax implications, so you should consult with your planner and tax advisor when considering these strategies.

Going into the New Year, keep these updated figures on your radar as you implement your retirement savings opportunities and update your financial plan. As always, if you have any questions surrounding these changes, don't hesitate to contact us!

Have a happy and healthy holiday season!

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

Any opinions are those of Bob Ingram, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Does the 4% Rule Still Make Sense?

Contributed by: Nick Defenthaler, CFP®, RICP®

'4% rule' history

In 1994, financial advisor and academic William Bengen published one of the most popular and widely cited research papers titled: 'Determining Withdrawal Rates Using Historical Data' published in the Journal of Financial Planning. Through extensive research, Bengen found that retirees could safely spend about 4% of their retirement savings in the first year of retirement. In future years, they could adjust those distributions with inflation and maintain a high probability of never running out of money, assuming a 30-year retirement time frame. In his study, the assumed portfolio composition for a retiree was a conservative 50% stock (S&P 500) and 50% in bonds (intermediate term Treasuries).

Is the 4% rule still relevant today? 

Over the past several years, more and more consumer and industry publications have written articles stating 'the 4% rule could be dead' and that a lower distribution rate closer to 3% is now appropriate. In 2021, Morningstar published a research paper calling the 4% rule no longer feasible and proposing a 3.3% withdrawal rate. Just over 12 months later, the same researchers updated the study and withdrawal rate to 3.8%!

When I read these articles and studies, I was surprised that none of them referenced what I consider critically important statistics from Bengen's 4% rule that should highlight how conservative it truly is:

• 96% of the time, clients who took out 4% of their portfolio each year (adjusted annually by inflation) over 30 years passed away with a portfolio balance that exceeded the value of their portfolio in the first year of retirement.

• Ex. A couple with a $1,000,000 portfolio who adhered to the 4% rule over 30 years had a 96% chance of passing away with a portfolio value of over $1,000,000!

• A client had a 50% chance of passing away with a portfolio value 1.6X the value of their portfolio in the first year of retirement.

• Ex. A couple with a $1,000,000 portfolio who adhered to the 4% rule over 30 years (adjusted annually by inflation) had a 50% chance of passing away with a portfolio value of over $1,600,000!

We must remember that the 4% rule was developed by looking at the worst possible time frame for someone to retire (October of 1968 – a perfect storm for a terrible stock market and high inflation). As more articles and studies questioned if the 4% rule was still relevant today, considering current equity valuations, bond yields, and inflation, William Bengen was compelled to address this. Through additional diversification, Bengen now believes the appropriate withdrawal rate is actually between 4.5% - 4.7% – nearly 15% higher than his original rule of thumb!

Applying the 4% rule 

My continued takeaway with the 4% rule is that it is a great starting place when guiding clients through an appropriate retirement income strategy. Factors such as health status, life expectancy, evolving spending goals in retirement, etc., all play a vital role in how much an individual or family can draw from their portfolio now and in the future. As I always say – there are no black and white answers in financial planning; your story is unique, and so is your financial plan! In my next blog, I'll touch on other considerations I believe are important to your portfolio withdrawal strategy – stay tuned!

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Center for Financial Planning, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services Investment advisory services are offered through Center for Financial Planning, Inc.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

One cannot invest directly in an index. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Past performance does not guarantee future results.

Sources:

• https://www.financialplanningassociation.org/article/journal/MAR04-determining-withdrawal-rates-using-historical-data

• https://www.morningstar.com/lp/the-state-of-retirement-income

• https://finance.yahoo.com/news/even-inventor-bill-bengen-revisiting-143000007.html

Preparing an Emergency Action Plan

Contributed by: Sandra Adams, CFP®

Unknowns are a part of all of our lives, and the potential for the big "unknowns" becomes more significant as we age.

It is a best practice to have a full aging plan in place as we go into our retirement years. This includes:

• Where we might consider living as we age;

• Where, how, and whom we would consider having care for us as we age if we need care;

• How we will use our money, and whom it will go to once we are gone; and

• Who will help us with all of this if we cannot manage things as we age

An aging plan should also include an Emergency Action Plan. What is this, you may ask? It is the minimum provisions you should have in place in case an unexpected event occurs. Even if you don't have a full aging plan in place, an Emergency Action Plan is crucial. So, what should be part of an Emergency Action Plan?

• Name Advocates. By this, we mean having your Durable Power of Attorney in place for your financial affairs and your Patient Advocate Designation. If you have no one to name or if your family/friends' advocates need assistance, there are ways to have professional advocates in place to serve or assist (talk to your financial planner to discuss these options).

• Document Your Important Information in Advance. This includes your financial and health information so that your advocates are prepared to serve on your behalf without missing a beat. Our Personal Record Keeping Document is an excellent place to start this process.

• Communicate to Your Advocates that they have been named and verbally communicate your wishes. Your advocates can only make the best decisions for you and carry out your wishes if they (1) know they have been named your advocate and (2) are aware of the decisions you'd like to have made on your behalf.

Planning ahead is the best gift you can give yourself and your family. Having a full aging plan in place, but at a minimum, an Emergency Action Plan can put the pieces in place to allow for decisions to be made on your behalf in the way that you want them to. It can also provide resources for your best interests in your most critical time of need. If you need to put an Emergency Action Plan in place, ask your planner for assistance!

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Opinions expressed in the attached article are those of Sandra D. Adams and are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Another Way to Make Retirement Purposeful for You

Contributed by: Sandra Adams, CFP®

One of our Center values is Education and Personal Growth. Continuously learning and growing in our personal and professional lives is core to what we are and what we do. It is also something we incorporate into conversations with clients as they think about what might make their retirements meaningful to them. 

Beyond knowing that clients are financially prepared for their retirement, we want to help make the next stage of their lives as purposeful and satisfying as possible. Part of that is helping clients explore hobbies, volunteer activities, travel, and learning that will fulfill them and make their lives full.  

Locally, there are several universities that can help fulfill the need of those looking to continue to learn and grow personally in retirement. We have three universities in Michigan that have been named Age-Friendly Universities – Michigan State University, Eastern Michigan University, and Wayne State University. In particular, Wayne State University offers a 75% tuition reduction to students 60 or older and sponsors the Society of Active Retirees, a 1,200-member lifelong learning community. Its volunteer force includes 300 persons 50 and up, and more than half of its faculty and 40% of staff are 50 or older. The WSU Institute of Gerontology also has an extensive research portfolio on aging, having received $54 million in funding for aging issues since 2015.

If you are interested in learning more about Wayne State University’s Age-Friendly University benefits, click here. And if you are interested in learning more about the Society for Active Retirees, click here. If you are interested in having a conversation about exploring other options for developing your own purposeful retirement, please reach out to one of our planners at The Center to start that conversation today.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Opinions expressed in the attached article are those of Sandra D. Adams, CFP® and are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Secure Act 2.0 Roth Catch-up Change Delayed

Contributed by: Kali Hassinger, CFP®, CSRIC™

In late 2022, Secure Act 2.0 was passed by Congress with the intention of expanding access to retirement savings. The package requires retirement plans to implement many changes and updates based on the new rules. Of the nearly 100 provisions within Secure Act 2.0, only a few went into effect in 2023, and many changes were scheduled to become effective in 2024.

One of these provisions would require future retirement plan catch-up contributions (those ages 50 and over) to be categorized as Roth for participants who earned more than $145,000 in the prior year. Although more employer-sponsored retirement plans have included access to Roth savings over the years, not all plans offer that option to participants. With the new rule, they would either need to offer Roth savings to all employees or remove the option to make catch-up savings contributions for future years.

As the fall open enrollment period for 2024 is quickly approaching, many plan administrators and participants were waiting for guidance on implementing and monitoring this change for 2024. In late August, the IRS announced a two-year delay or “administrative transition period,” meaning that plans don’t need to implement this change until 2026.  

For those retirement plan participants who are 50 and older and contributing more than the base savings amount ($22,500 for 2023), pre-tax catch-up contributions can continue for 2024 and 2025 as they have in the past. For retirement plans that aren’t already offering a Roth savings option, they won’t need to make any changes yet!  

We are monitoring this and future changes as information and guidance are released on Secure Act 2.0 provisions. As always, we are here to help if you have questions on how this could affect you and your financial plan! 

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The information contained in this letter does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger, CFP®, CSRIC™, and not necessarily those of Raymond James. Expression of opinion are as of this date and are subject to change without notice. There is no guarantee that these statement, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Individual investor’s results will vary. Past performance does not guarantee future results. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.

The Dangers of Ignoring Financial Planning When You're in a Couple

Contributed by: Sandra Adams, CFP®

In an ideal world, a committed couple would be on the same page about most of the important things in life, especially about their financial future. Not only would they be on the same page, but they would equally participate in the planning process — all the way through the process. So, what happens when one partner is not engaged in the planning process — whether it be lack of interest in the process at all, or lack of engagement and/or follow-through once a plan has been completed? And what can be done, if anything, to make sure the couple and their plan are successful?

If both partners have been involved in going through at least an initial planning process, this is a good first step. This means that the couple has worked through the steps of establishing common goals, gathered their common financial information, and worked with a financial planner to review the analysis regarding how the assets and income they have may work to fulfill their specific goals, both now and in the future. These couples likely worked with the planner to establish at least an initial set of action steps to start working towards meeting their short- and long-term goals in the key areas of their financial plan.

Why One Partner May Be Unengaged:

Here is where there is usually a disconnect — where the less engaged spouse likely becomes unengaged. Once the initial financial plan is complete and the action steps are in place, the less engaged spouse may check out for various reasons:

• They may decide they don’t see the full value of the financial plan;

• They may get too busy with “life” and not make the financial plan a priority; or

• They may not see themselves in the “financial” lead role in the relationship and be simply delegating the action items to their more financially savvy spouse (whether or not this makes sense remains to be seen.)

If one of the partners is not involved in the planning process at all, this can be an even harder situation to address. When one partner is not engaged in the process at all, it is hard to discuss, set, and include common goals in the planning process. If one partner goes ahead with a plan, it can be one-sided or incomplete if done without the unengaged partner. The plan will lack input from one partner and may, in fact, be missing important information about assets, employment benefits, and/or future income resources if the participating spouse isn’t privy to all of the couple’s collective financial resources. Not having a financial plan that both partners have participated in putting together will be one that is lacking in some way — whether it be a lack of information or resources or a lack of input or agreement on current or future goals.

Why You Should Move Ahead Anyway:

Why might someone decide to move ahead with the financial planning process even if their partner is hesitant to participate in the process? In my experience, there are clients who have wanted to do planning for years and haven’t been able to get their partner on board. They may finally decide that they need to move forward, with or without their partner, for fear that they will end up without a plan and completely unprepared for the future. In addition, they may have had an experience as a caregiver for an older adult parent or watched someone they are close to go through the process of becoming a widow or widower and decide they want to be prepared if either of these major life transitions ever happens to them. For these clients, the personal experience of seeing others go through major life transitions without proper planning may compel them to want to plan more urgently than their partner.

What are some actions that a couple can take if one is more engaged than the other in the financial planning process so that their plan can be successful?

1. Come to a base agreement that a financial plan is needed. If you can come to a common agreement that a financial plan is needed, even if one of you is more enthusiastic about it than the other, that can be okay. If you can come to an agreement about who will take charge of scheduling a meeting with an advisor, collecting and organizing the information, scheduling appointments, etc., that is the first step. It is best if both partners will agree to participate in the full process, even if one takes the lead. This is the best way to ensure that you agree to and set common goals.

2. Set a regular “date” with your partner to discuss and review your finances. This blocks out time on your common schedules to concentrate on just your plan when you are working on preparing for the initial financial plan, and then can be helpful when you are working on the action items following your plan. This helps with the issues related to partners who get busy with life and can’t seem to make finances a priority.

3. Find a financial advisor that you feel you can trust and can delegate to. For those who have trouble with follow-through, or again, for those who have trouble carving out time, having a trusted professional to whom they can delegate to make sure that the plan gets carried out fully can be valuable and worth the cost.

As with many things in a relationship, partners aren’t always 100% on the same page or always rowing in the same direction all of the time. Finances are one of the most important issues a couple faces, and being in lock-step as much as possible is important. If a couple can find a way to work together in some way to complete and follow through on the financial planning process, even if one of the two takes the lead, but both participate, the process can still be a successful one.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. It is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Sandra D. Adams and not necessarily those of Raymond James.

Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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