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It took just under five months for it to happen. On August 17th, the S&P 500 closed at 3389.78—an all-time record. That record is also significant because it means the index officially recouped all losses from the downturn that happened in March.

As the COVID-19 pandemic stretches into its seventh month, leaders in Washington are debating a second stimulus bill. On August 8, President Trump signed executive orders that extended the federal unemployment benefit, but reduced the amount from $600 per week to $400. The orders also suspended the payroll tax through the end of the year, and suspended interest on federal student loans.

The United States set a somber record on Thursday, July 16, 2020, with more than 75,000 new COVID-19 cases. In fact, the U.S. set new single-day COVID-19 records 11 times between June 17 and July 16. Dr. Anthony Fauci predicts the country will soon top over 100,000 new cases each day. 1 COVID-related deaths are also increasing in some states. Florida set its single day record for COVID deaths on July 16, with 156. Nine other states also set single-day death records the same week. 1 The resurgence in coronavirus cases has led some states to enact new measures. More than half of all states now have some kind of mask mandate. California has even rolled back its reopening, closing bars, indoor dining, gyms, and more. 2 What does this mean for the economic recovery? And what does it mean for your financial future? It’s impossible to predict what will happen in the short-term, but knowing where things stand today may help you make important decisions with your strategy.

What are the biggest expenses you’ll face in retirement? Healthcare? Housing? Travel? All of those costs could be significant, but one of the biggest could be taxes. That’s right. Just because you’re done working, doesn’t mean you’re done paying taxes. Many sources of retirement income, like Social Security, pensions, and retirement account distributions, are taxable. That doesn’t even include the wide range of other taxes you could face, like property taxes, sales tax, and more. Taxes may be a part of life, but they can also be a drain on your retirement. Every dollar you pay in taxes is a dollar that can’t be used to support your lifestyle and fund your goals. Fortunately, you can take action to reduce your tax burden and maximize your retirement income. Below are five steps to consider as you approach retirement: 1) Use a Roth IRA. A traditional IRA is an effective savings vehicle for retirement. You get tax-deferred growth, and potentially tax deductions for your contributions. However, a traditional IRA can also create tax issues in retirement. Most distributions from a traditional IRA are taxed as income. If you use an IRA to accumulate a sizable nest egg, you could face taxes on much of your income in retirement. The alternative is a Roth IRA. In a Roth IRA, you don’t get tax deductions when you make a contribution. However, your distributions in retirement are tax-free, assuming you are at least age 59 ½ and you have held the Roth for at least five years. As a married couple, you cannot contribute to a Roth if your income is greater than $196,000 in 2020. For a single person, that limit is $124,000. 1 Otherwise, you can contribute up to $6,000 this year, or up to $7,000 if you’re 50 or older. 2 You can also convert your traditional IRA to a Roth. This means paying taxes on the traditional IRA amount. However, after the conversion, you can grow the remaining assets in the Roth on a tax-free basis and take tax-free distributions in retirement. 2) Be strategic about Social Security distributions. Social Security will likely play a role in your retirement income puzzle. However, taxes will impact the net amount you receive from Social Security. The extent that your Social Security benefit is taxed depends on a number called your “combined income.” Combined income is your adjusted gross income plus nontaxable interest plus half of your Social Security benefit. 3 If you are single and your combined income is between $25,000 and $34,000, up to 50% of your benefits could be taxable. If you earn more than $34,000, up to 85% of your benefits could be taxable. 3. For married couples, if your combined income is between $32,000 and $44,000, up to 50% of your benefits could be taxed. If you earn more than $44,000, up to 85% of your benefits could be taxed. The key to reducing your combined income is to reduce your adjusted gross income. Non-taxable income is not included in that number. So, for example, you could maximize your Roth IRA to minimize your adjusted gross income. You could also delay Social Security until age 70 to increase your benefit, and draw down your taxable accounts, like a traditional IRA, before Social Security starts. 3) Consider downsizing. Simply moving to a new home could reduce your taxes. Property taxes may be a major tax burden depending on your home. If you no longer need a large home, consider moving to something smaller that has a lower value and thus lower property taxes. You also may look at a neighboring community that has a lower property tax rate. 4) Relocate to a more tax-friendly state. Another option is to move to another state completely. Some states are more tax-friendly for retirees than others. For example, Alabama doesn’t tax Social Security benefits and has a relatively low sales tax rate. 4 Florida is another option as it doesn’t have a state income tax. 5 Do your research and you may find a new home that is appealing and saves you money. 5) Use an HSA to pay for medical costs. Fidelity estimates that the average 65-year-old couple will pay $285,000 out-of-pocket for health care expenses in retirement. 6 If you’re using taxable distributions from an IRA or 401(k) to pay those costs, the impact on your savings could be even greater. One strategy to minimize the tax burden is to use a health savings account (HSA) to pay for healthcare costs. In 2020, individuals can contribute up to $3,550 to an HSA. Families can contribute up to $7,100. 7 You can invest and allocate those funds to match your goals and risk tolerance. The assets grow on a tax-deferred basis as long as they stay in the account. When you’re ready to use the funds, you can take tax-free distributions to pay for qualified healthcare expenses like premiums, deductibles, copays, and more. By using a tax-free source to pay for healthcare costs, you reduce the amount you need to take from taxable accounts, like an IRA or 401(k). That, in turn, reduces your overall tax burden. A financial professional can help you determine if an HSA is right for you. Ready to develop your retirement tax strategy? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and develop a plan. 1 https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020 2 https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits 3 https://www.ssa.gov/benefits/retirement/planner/taxes.html#:~:text=Learn%20Apply%20Manage-,Income%20Taxes%20And%20Your%20Social%20Security%20Benefit,on%20your%20Social%20Security%20benefits.&text=between%20%2425%2C000%20and%20%2434%2C000%2C%20you,your%20benefits%20may%20be%20taxable. 4 https://money.usnews.com/money/retirement/baby-boomers/slideshows/the-most-tax-friendly-states-to-retire?slide=2 5 https://money.usnews.com/money/retirement/baby-boomers/slideshows/the-most-tax-friendly-states-to-retire?slide=4 6 https://www.cnbc.com/2019/04/02/health-care-costs-for-retirees-climb-to-285000.html 7 https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-2020-hsa-contribution-limits.aspx The information contained herein is based on our understanding of current tax law. The tax and legislative information may be subject to change and different interpretations. We recommend that you seek professional legal advice for applicability to your personal situation. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20277 - 2020/7/20

It’s hard to find good news in today’s economic environment. COVID-19 single-handedly brought an end to the longest bull market in history and ushered in record-setting unemployment.

The first half of 2020 has been a rollercoaster ride. The COVID-19 pandemic completely altered our way of life and threw the economy into a tailspin. Most states have started the reopening process, but there is still significant uncertainty about the long-term impact of coronavirus and how long the pandemic will continue.

The economic fallout from the coronavirus pandemic continues, even as states start to reopen restaurants, retail stores, and other businesses. The crisis brought an end to the bull market that started in 2009 and threatens to usher in a recession. 1 What does the future hold for the stock market and the economy? When will the economy recover? And how will this crisis impact your retirement and your financial future? It’s impossible to definitively answer those questions. In many ways, this event is unprecedented. We don’t know how long the virus will present a threat, so it’s impossible to predict how or when the economy may recover. However, it is possible to make adjustments to your strategy to minimize risk and take advantage of potential opportunities. It’s also helpful to keep in mind the long-term nature of the economy and the financial markets. Nothing lasts forever, including recessions and bear markets.

On March 27, the government passed the Coronavirus Aid, Relief, and Economic Security Act, otherwise known as the CARES Act. The Act had a wide range of provisions to provide Americans and small businesses with economic support during the coronavirus pandemic. The bill provided stimulus payments, enhanced unemployment, and various forms of business loans. One provision that flew under the radar was the ability for qualified individuals to take distributions from their 401(k) plans and IRAs without paying early distributions penalties. Normally, you face a 10% early distribution penalty if you take a withdrawal from these accounts before age 59 ½. 1 However, under the CARES Act you can take up to $100,000 as a penalty-free distribution from your qualified accounts, assuming you are a qualified individual.2 Are you qualified? And even if you can take a distribution, is it wise to do so?

It seems like the entire world has revolved around the coronavirus for the past two months. It has changed our way of life, the way we work, and even the way we interact with friends and family. Believe it or not, there have been other new developments in 2020 besides coronavirus. One of those new developments could have a big impact on your retirement. It’s the Setting Every Community Up for Retirement Act, also known as the SECURE Act. It was signed in December 2019 and became effective as a law on January 1, 2020.1 The SECURE Act makes big changes to many areas of retirement planning, including IRA contributions, 401(k) investment options, and even things like required minimum distributions (RMDs). It is likely to impact all retirees, but it could have significant benefits for women. Below are three ways in which the SECURE Act could help women in their retirement planning: Delayed RMDs One of the biggest changes in the SECURE Act is the adjustment of the RMD age from 70 ½ to 72.1 RMDs are mandatory withdrawals you must take from your 401(k), IRA, and other qualified accounts. The withdrawals are taxable, and there’s a steep penalty if you fail to take an RMD. The RMD amount is based on life expectancy and your account balance. Generally, as you get older, your RMD increases. The same life expectancy formula is applied to both men and women, even though women generally live longer than men. According to the Social Security Administration, the average 65-year-old man will live to 84 while the average woman will live to 86.5.2 The SECURE Act doesn’t change the life expectancy formula, but it does reduce the amount of time that an individual will be forced to take RMDs. Retirees can start taking these distributions later, which could be especially helpful if your goal is to leave assets behind for your loved ones. Guaranteed Income Options in 401(k) Plans Another big change in the SECURE Act is the way it impacts investment options in 401(k) plans. The law makes it easier for 401(k) plans to offer annuities that provide guaranteed* lifetime income. The guarantees* vary by product. However, the general idea is that the funds allocated to the annuity option are used to create a guaranteed* income stream when you retire. You get the income for life, no matter how long you live. Again, this could be beneficial for women because of their longer life expectancy. One of the biggest challenges in retirement planning is generating income that will last for life, especially if you live into your 90s or beyond. This option could provide you with certainty and a predictable income, no matter how long you live. 401(k) Access for Part-Time Employees The SECURE Act also made 401(k) plans more accessible for part-time employees. Under the old rules, an employee needed to work 1,000 hours in a year to be eligible for 401(k) participation. Under the SECURE Act, an employee can be eligible by either working 1,000 hours in one year or 500 hours in three consecutive years.1 For a variety of reasons, more women work part-time than men. According to the Bureau of Labor Statistics, only 12.4% of male workers in the United States were part-time in 2016. More than 25% of female workers were part-time over that same period.3 This change in rules now allows those part-time workers to use a 401(k) to save for retirement. Ready to see how the SECURE Act impacts your plans for retirement? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. 1https://money.usnews.com/money/retirement/iras/articles/what-is-the-secure-act 2https://www.ssa.gov/planners/lifeexpectancy.html 3https://www.bls.gov/opub/ted/2017/percentage-of-employed-women-working-full-time-little-changed-over-past-5-decades.htm Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. *Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged. .. 20043 - 2020/4/28