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Tips for Building and Protecting Your Retirement Income

Tips for Building and Protecting Your Retirement Income

The creative team for real estate developers came up with the term “the golden years” in 1959 as part of a pitch to sell homes in the nation’s first large-scale retirement community. Developers of the $2 million golf resort in the middle of an Arizona desert were hoping to sell the idea of “an active new way of life” for people approaching retirement.[i] Their idea worked.

The “golden years” refers to the years of retirement, normally after age 65. Making the golden years truly golden involves having relatively good health, adequate income, and a meaningful life.

While good health and living meaningfully depend on lifestyle choices and sometimes heredity, maintaining or generating adequate retirement income requires prudence and well-laid financial plans.

Risk Management and Growth Strategies for Your Retirement Income

Here are six ways for managing your money in retirement:[ii]

  1. Cut investment expenses and fees. You can potentially increase your income by reducing your outgo. If you have income from mutual funds, look for hidden fees. You may have fees for fund management, transactions, and loads. Get with your financial advisor to examine the lowest-cost options for your investment funds.
  2. Take a look at how your investments are taxed. You may want to consider moving your investments with the highest possible tax liability to tax-deferred accounts and those investments with the lowest taxable liability to taxable accounts. Keep in mind that this may involve transactional fees. Investors should consult with their tax advisor regarding the tax consequences of investing.
  3. Catch-up contributions are one way to build your retirement fund quickly. Annual contributions to tax-deferred accounts are limited, but once you reach the age of 50, you’re allowed to add more into your retirement account. Once you’re 55, you can also make catch-up contributions to your health savings account.
  4. Although Social Security income is only supposed to be part of your retirement income, you can boost your benefits by waiting to apply. Full retirement age, when you’re eligible to receive 100% of your designated benefit, is currently 66 or 67. You get about an 8% increase per year by waiting until you’re 70. For healthy older workers, this is an excellent way to boost your annual Social Security benefit by up to 24%.
  5. Part-time work for retirees is becoming an increasingly attractive option to boosting retirement income. Part-time employment may also improve your quality of life in retirement.[iii]
  6. Paying off your debt before you retire helps to bolster retirement income. Unfortunately, it’s becoming more commonplace for workers to enter retirement with mortgage or credit card debt. If you aren’t retired, you should consider making debt elimination a priority.

If you would like to talk more about your options, please give us a call at 800.929.1001.

Financial & Estate Planning

[i] http://rowleylegal.com/2014/08/03/the-term-golden-years-was-coined-in-1959-as-an-advertising-pitch-for-sun-city/

[ii] https://www.cnbc.com/2018/06/12/4-easy-ways-to-increase-your-retirement-income.html

[iii] https://www.fool.com/retirement/2018/02/04/boost-your-retirement-income-with-these-6-tips.aspx

Tips for Managing Your Annuity Income

Tips for Managing Your Annuity Income

Many retirement planners find that utilizing annuities may be a good way to generate guaranteed income. Annuities allow you to set retirement distributions based on their type and how much you contributed.

Like all investment and insurance products, annuities are subject to fees and expenses. Generally, you will have to pay fees on distributions. Using fixed index annuities as an example, here are two fees to consider:

  • Surrender charge: If you collect income before the designated distribution date, you’ll have to pay a surrender fee. While charges may vary by provider and type of annuity, you should expect to pay around 10% of your total contract price for the first year. Surrender fees may drop by around 1% each year.[i]
  • Administrative fees: Annuity managers typically charge fees to cover the administrative costs of managing your accounts. Fees will vary by firm.[ii]Purchasing certain annuities allows you to defer paying taxes on your investments. This applies to annuities that are held in traditional IRAs, 401(k)s or other qualified retirement accounts. However, once you start receiving annuity income from a tax-deferred source, you should be mindful of the following:[iii]

Remember to Prepare for Taxes

  • Ordinary income tax: You will have to pay ordinary income taxes when you collect annuity income. Taxes may vary depending on if you receive a lump sum or ongoing payments.[iv]
  • Early-withdrawal tax: You may incur a 10% tax penalty if you withdraw money early, prior to age 59½, from your annuity fund.[v]

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. This material has been prepared for planning purposes only and is not intended as specific tax or legal advice. Tax and legal laws are often complex and frequently change. Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

You may also have to address other tax issues, so researching tax rules or consulting with a tax professional is important. Taxes and fees depend on the type of annuity you bought and how much you contributed to it. If you would like to discuss your options and potential financial and tax obligations, we’re here to help.

[i] http://www.investopedia.com/terms/s/surrenderfee.asp?lgl=myfinance-layout

[ii] https://www.fidelity.com/viewpoints/retirement/shoppers-guide-to-annuity-fees

[iii] https://www.annuity.org/annuities/taxation/

[iv] http://www.investopedia.com/exam-guide/series-26/variable-contracts/annuity-distributions-charges.asp

[v] https://www.irs.gov/newsroom/early-withdrawals-from-retirement-plans

Tax Act May Affect Small Business Depreciation Deduction*

Tax Act May Affect Small Business Depreciation Deduction*

The passage late last year of the Tax Cuts and Jobs Act may lessen the tax load on small business by expanding deduction allowances, the IRS states.

Tax deductions on depreciation increased, which means small business owners may see their taxes decline.

Businesses are allowed to depreciate “tangible property except land, including buildings, machinery, vehicles, furniture and equipment.”

Highlights include:

  • The act increases the number of items businesses may list as expenses, which includes the cost of any business property. Businesses may deduct the property in the year it is put in service.
  • The maximum deduction rose from $500,000 to $1 million.
  • The phase-out threshold went from $2 million to $2.5 million.
  • Taxpayers may choose to include improvements made to nonresidential property. The improvements must have been made after the property was initially put in service.
    • A building’s interior
    • A roof
    • Heating and air conditioning systems
    • Fire protection systems
    • Alarm and security systems

These improvements do not qualify:

  • Building enlargement
  • Elevator or escalator service
  • The building’s internal structure framework

These changes apply on property put into use after December 31, 2017.

Other details may apply, and you can find more information on the IRS website.

*This information is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax advisor.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.irs.gov/newsroom/tax-reform-changes-to-depreciation-affect-businesses-now

 

 

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