Category: Retirement

If you want to add investment real estate to your portfolio, you may want to know what a 1031 Exchange is. While the rules and regulations for this tactic can get complicated, understanding the basic concepts may help you decide if this strategy is right for you.

Conducting a 1031 Exchange involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional familiar with the rules and regulations. Also, this article is for informational purposes only. It is not a replacement for real-life advice, so consult your tax or accounting professional before moving forward with a 1031 Exchange.

Here’s what a 1031 Exchange is and some requirements to help you determine if you should pursue this avenue further.

What is a 1031 Exchange?

In the simplest terms, a 1031 Exchange is a real estate investment strategy that allows you to defer your capital gains taxes on an investment property if you sell it and buy another “like-kind” property. According to the Internal Revenue Service, “if you make a like-kind exchange, you are not required to recognize a gain or loss under Internal Revenue Code Section 1031.”¹

1031 Exchange Requirements

While a 1031 Exchange can be an excellent strategy for deferring capital gains taxes, there are some requirements to consider to ensure that both properties are eligible. Here are a few of the main requirements:

• The property you sell must have been an investment property, not your primary residence. The IRS defines a property as a primary residence “if it’s used for personal purposes during the tax year for more than the greater of 14 days or 10 percent of the total days rented to others at a fair rental value.”²
• Because a 1031 Exchange is considered a swap, you need to designate the next property shortly after selling the first property. According to the IRS, “you have 45 days from the date you sell the relinquished property to identify potential replacement properties.”³
• In addition to this 45-day rule, you must close the new property within 180 days.³
• Lastly, the funds from the 1031 Exchange must be in an escrow account, and you can’t receive them personally.

What Investors Might Get the Most Out of a 1031 Exchange?

As you can see, there are a lot of specifics to consider when researching 1031 Exchanges. Because of this, they aren’t suitable for everyone. A 1031 Exchange may be appropriate for people looking to acquire additional real estate, especially if they already have an investment property.

Another consideration with a 1031 Exchange is that if you pass away without selling the property obtained through a 1031 Exchange, your heirs may not pay capital gains taxes. In addition, they may not inherit it at its stepped-up market rate value.⁴

To summarize, a 1031 Exchange may allow you to:

• Defer paying capital gains taxes on an investment property if you “swap” it for another investment property
• Use as part of an estate strategy
• Continue to generate income from an investment property while also managing tax-deferred equity in the property

1. IRS.com, November 2022
2. IRS.com, November 2022
3. IRS.com, November 2022
4. Investopedia.com, July 19, 2022

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

The Internal Revenue Service (IRS) has released new limits for certain retirement accounts for the coming year.

Keep in mind that this update is for informational purposes only, so please consult with an accounting or tax professional before making any changes to your 2024 tax strategy. You can also contact your financial professional, who may be able to provide you with information about the pending changes.

Individual Retirement Accounts (IRAs)

Traditional IRA contribution limits are up $500 in 2024 to $7,000. Catch-up contributions for those over age 50 remain at $1,000, bringing the total limit to $8,000.

Remember, once you reach age 73, you must begin taking required minimum distributions from a Traditional IRA in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

Roth IRAs

The income phase-out range for Roth IRA contributions increases to $146,000-$161,000 for single filers and heads of household, an $8,000 increase. For married couples filing jointly, the phase-out will be $230,000-$240,000, a $12,000 increase. Married individuals filing separately see their phase-out range remain at $0-10,000.

To qualify for the tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner’s death.

Workplace Retirement Accounts

Those with 401(k), 403(b), 457 plans, and similar accounts will see a $500 increase for 2024, the limit rising to $23,000. Those aged 50 and older will continue to have the ability to contribute an extra $7,500, bringing their total limit to $30,500.

Once you reach age 73 you must begin taking required minimum distributions from your 401(k) or other defined-contribution plans in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

SIMPLE Accounts

A $500 increase in limits for 2024 gives individuals contributing to this incentive match plan a $16,000 stoplight.

Much like a traditional IRA, once you reach age 73, you must begin taking required minimum distributions from a SIMPLE account in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

As a reminder, this article is for informational purposes only. Consult with an accounting or tax professional before making any changes to your 2024 tax strategy.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

The Internal Revenue Service (IRS) has released new limits for certain retirement accounts for the coming year.

Keep in mind that this update is for informational purposes only, so please consult with an accounting or tax professional before making any changes to your 2024 tax strategy. You can also contact your financial professional, who may be able to provide you with information about the pending changes.

Individual Retirement Accounts (IRAs)

Traditional IRA contribution limits are up $500 in 2024 to $7,000. Catch-up contributions for those over age 50 remain at $1,000, bringing the total limit to $8,000.

Remember, once you reach age 73, you must begin taking required minimum distributions from a Traditional IRA in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

Roth IRAs

The income phase-out range for Roth IRA contributions increases to $146,000-$161,000 for single filers and heads of household, an $8,000 increase. For married couples filing jointly, the phase-out will be $230,000-$240,000, a $12,000 increase. Married individuals filing separately see their phase-out range remain at $0-10,000.

To qualify for the tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner’s death.

Workplace Retirement Accounts

Those with 401(k), 403(b), 457 plans, and similar accounts will see a $500 increase for 2024, the limit rising to $23,000. Those aged 50 and older will continue to have the ability to contribute an extra $7,500, bringing their total limit to $30,500.

Once you reach age 73 you must begin taking required minimum distributions from your 401(k) or other defined-contribution plans in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

SIMPLE Accounts

A $500 increase in limits for 2024 gives individuals contributing to this incentive match plan a $16,000 stoplight.

Much like a traditional IRA, once you reach age 73, you must begin taking required minimum distributions from a SIMPLE account in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

As a reminder, this article is for informational purposes only. Consult with an accounting or tax professional before making any changes to your 2024 tax strategy.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

When it comes to retirement, women may face unique obstacles that can make saving for retirement more challenging. Given that women typically live longer than men, retirement money for women may need to stretch even further.¹

Despite these challenges, a wise strategy can give women reasons to be hopeful.

Get clear on your vision.

Do you want to spend your retired years traveling, or do you envision staying closer to home? Are you seeing yourself moving to a retirement community, or do you want to live as independently as you can? If you’re married, sit down with your spouse to discuss your visions for retirement.

You can’t see if you’re on track for your goals if you haven’t defined them. If you do find you’re falling short of where you want to be, a financial professional can help you strategize about how you can either get to where you want to go or adjust your strategy to fit your situation.

Get creative with your strategy.

If you expect to or have taken time off from the workforce, you may want to increase your contributions to your retirement accounts while you are working. If you’re staying home while your spouse works, you may be able to contribute to an individual retirement account.

Once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account and other retirement plans in most circumstances. Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Traditional IRA contributions may be fully or partially deductible, depending on your adjusted gross income.

Look for sources of additional income.

If you’re caregiving for an elderly relative, there are ways to be paid for your time. The Veteran’s Administration or Medicaid may be a potential source of income. Working with a professional who has expertise in this field can help you navigate your options and potentially find a way to earn income for work that you’re doing.²

Keep the conversation open.

One of the best things you can do is to make sure you are having regular conversations about finances and hearing from well-informed sources. There are more resources than ever at your disposal, and working with a trusted financial professional can help ensure that you always know where things stand.

While women can face many challenges as they save for retirement, careful preparation and a creative approach can help you rise to the occasion and pursue the fulfillment of your goals.

1. Urban.org, June 9, 2023
2. JoinGivers.com, August 31, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Will you pay higher taxes in retirement? It’s possible. But that will largely depend on how you generate income. Will it be from working? Will it be from retirement plans? And if it does come from retirement plans, it’s important to understand which types of plans will be financing your retirement.

Another factor to consider is the role Social Security will play in your retirement. When do you plan to start to take Social Security benefits? If you have a spouse, when do they plan on taking benefits? It’s critical to answer key Social Security benefits questions so you have a better understanding of how it will affect your taxable income.

What’s a pre-tax investment? Traditional IRAs and 401(k)s are examples of pre-tax investments that are designed to help you save for retirement.

You won’t pay any taxes on the contributions you make to these accounts until you start to take distributions. Pre-tax investments are also called tax-deferred investments, as the money you accumulate in these accounts can benefit from tax-deferred growth.

For individuals covered by a retirement plan at work, the tax deduction for a traditional IRA in 2023 is phased out for incomes between $116,000 and $136,000 for married couples filing jointly, and between $73,000 and $83,000 for single filers.¹

Keep in mind that once you reach age 73, you must begin taking required minimum distributions from a traditional IRA, 401(k), and other defined contribution plans in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

What’s an after-tax investment? A Roth IRA is the most well-known. When you put money into a Roth IRA, the contribution is made with after-tax dollars. Like a traditional IRA, contributions to a Roth IRA are limited based on income. For 2023, contributions to a Roth IRA are phased out between $218,000 and $228,000 for married couples filing jointly and between $138,000 and $153,000 for single filers.

To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Remember, this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, or financial professionals before modifying your retirement strategy.

Are you striving for greater tax efficiency? In retirement, it is especially important – and worth a discussion. A few financial adjustments may help you manage your tax liabilities.

1. IRS.gov, 2023
2. IRS.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

As a small-business owner, figuring out retirement choices can be a little intimidating. How do you pick the most appropriate retirement plan for your business as well as your employees?

There are a number of choices when creating retirement plan strategies for you and your employees. Here, we will review three of the most popular for small businesses: SIMPLE-IRAs, SEP-IRAs, and 401(k)s. Read on below to learn more about each type of retirement plan.

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before implementing or modifying a retirement plan.

SIMPLE-IRAs. SIMPLE stands for Savings Incentive Match Plan for Employees. This is a traditional IRA that is set up for employees and allows both employees and employers to contribute. If you’re an employer of a small business who needs to get started with a retirement plan, a SIMPLE-IRA may be for you. SIMPLE-IRA’s provide some degree of flexibility in that employers can choose to either offer a matching contribution to their employee’s retirement account or make nonelective contributions. In addition, employees can choose to make salary reduction contributions to their own retirement account. Some small business owners opt for a SIMPLE-IRA because they find the maintenance costs are lower compared with other plans.¹

Distributions from SIMPLE-IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 73, you must begin taking required minimum distributions.

For a business to use a SIMPLE-IRA, it typically must have fewer than 100 employees and cannot have any other retirement plans in place.¹

SEP-IRAs. SEP plans (also known as SEP-IRAs) are Simplified Employee Pension plans. Any business of any size can set up one of these types of retirement plans, including a self-employed business owner. Like the SIMPLE-IRA, this type of retirement plan may be an attractive choice for a business owner because a SEP-IRA does not have the start-up and operating costs of a conventional retirement plan. This is a type of retirement plan that is solely sponsored by the employer, and you must contribute the same percentage to each eligible employee. Employees are not able to add their own contributions. Unlike other types of retirement plans, contributions from the employer can be flexible from year to year, which can help businesses that have fluctuations in their cash flow.²

Much like SIMPLE-IRAs, SEP-IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 73, you must begin taking required minimum distributions.

401(k)s. 401(k) plans are funded by employee contributions, and in some cases, with employer contributions as well. In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals are taxed as ordinary income, and, if taken before age 59½, may be subject to a 10% federal income tax penalty.¹

1. IRS.gov, 2023
2. Investopedia.com, July 27, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Much is written about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Some classic financial missteps have been known to plague retirees, too.

Calling them “missteps” may be a bit harsh, as not all of them represent errors in judgment. Either way, becoming aware of these potential pitfalls may help you to avoid falling into them in the future.

Managing Social Security. Social Security benefits are structured to rise about 8% for every year you delay receiving them after your full retirement age. Is waiting a few years to apply for benefits an idea you might consider? Filing for your monthly benefits before you reach your full retirement age can mean comparatively smaller monthly payments.¹

Managing medical costs. One report estimates that the average couple retiring at age 65 can expect to need $315,000 to cover health care expenses during the course of their retirement, even with additional coverage such as Medicare Part D, Medigap, and dental insurance. Having a strategy can help you be better prepared for medical costs.²

Understanding longevity. Actuaries at the Social Security Administration project that a 65-year-old man has a 34% chance and a 65-year-old woman has a 45% chance to live to age 90. The prospect of a 20- or 30-year retirement is not only reasonable, but it should be expected.³

Managing withdrawals. You may have heard of the “4% rule,” a guideline stating that you should take out only about 4% of your retirement savings annually. Each person’s situation is unique but having some guidelines can help you prepare.

Managing taxes. Some people enter retirement with investments in both taxable and tax-advantaged accounts. Which accounts should you draw money from first? To answer the question, a qualified financial professional would need to review your financial situation so they can better understand your goals and risk tolerance.

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your investment strategy for tax considerations.

Managing other costs, like college. There is no “financial aid” program for retirement. There are no “retirement loans.” A financial professional can help you review your anticipated income and costs before you commit to a long-term strategy, and help you make a balanced decision between retirement and helping with the cost of college for your children or grandchildren.

1. SSSA.gov, 2023
2. Fidelity.com, 2023
3. LongevityIllustrator.org, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Preparing for retirement is not entirely financial. Your degree of happiness in your “second act” may depend on some factors that don’t come with an obvious price tag. Here are some non-monetary factors to consider as you prepare for your retirement.

What will you do with your time? Too many people retire without any idea of what their retirement will look like. They leave work, and they cannot figure out what to do with themselves, so they grow restless. It’s important to identify what you want your retirement to look like and what you see yourself doing. Maybe you love your career and can’t imagine not working during your retirement. There’s no hard and fast rule to your dream retirement, so it’s important to be honest with yourself. A recent Employee Benefit Research Institute Retirement Confidence Survey shows that 73% of workers expect to work for pay in retirement, whereas just 23% of retirees report that they’ve actually worked for pay.¹

Having a clear vision for your retirement may help you align your financial goals. It’s important to remember that your vision for retirement may change—like deciding you don’t want to continue working after all.

Where will you live? This is another factor in retirement happiness. If you can surround yourself with family members and friends whose company you enjoy, in a community where you can maintain old friendships and meet new people with similar interests or life experiences, that may be a plus. If all this can occur in a walkable community with good mass transit and senior services, all the better.

How are you preparing to get around in your eighties and nineties? The actuaries at Social Security project that the average life expectancy for men turning 67 is 84.6 years old, and the life expectancy for women turning 67 is 87.1 years. Some will live longer. Say you find yourself in that group. What kind of car would you want to drive at 85 or 90? At what age would you cease driving? Lastly, if you do stop driving, who would you count on to help you go where you want to go and get out in the world?²

How will you keep up your home? At 45, you can tackle that bathroom remodel or backyard upgrade yourself. At 75, you will probably outsource projects of that sort, whether or not you stay in your current home. You may want to move out of a single-family home and into a townhome or condo for retirement. Regardless of the size of your retirement residence, you should expect to fund minor or major repairs, and you may need to find reliable and affordable sources for gardening or landscaping.

These are the non-financial retirement questions that no pre-retiree should dismiss. Think about them as you prepare and invest for the future.

1. EBRI.org, 2023
2. SSA.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

How do you know you are psychologically ready to retire? As a start, ask yourself four questions.

One, is your work meaningful?

If it is emotionally and psychologically fulfilling, if it gives you a strong sense of purpose and identity, then there may be a voice inside your head telling you not to retire yet. You may want to listen to it.

It can be tempting to see retirement as a “finish line”: no more long workdays, long commutes, or stressful deadlines. But it is really a starting line: the start of a new phase of life. Ideally, you cross the “finish line” knowing what comes next, what will be important to you in the future.

Two, do you value work or leisure more at this point in your life?

If the answer is leisure, score one for retirement. If the answer is work, maybe you need a new job or a new way of working rather than an exit from your company or your profession.

An old saying says that retirement feels like “six Saturdays and a Sunday.” Fantastic, right? It is, as long you don’t miss Monday through Friday. Some people really enjoy their careers; you may be one of them.

Three, where do your friends come from?

If very little of your social life involves the people you work with, then score another point for retirement. If your friends are mainly your coworkers, those friendships may be tested if you retire.

Creating a financial strategy for retirement is important. But there are also other important factors, including your physical health, your mental health, your relationships with family and friends, your travels and adventures, and your outlets to express your creativity. Building a life away from work can be a plus.

Four, what do you think your retirement will be like?

If you think it will be spectacularly different from your current life, ask yourself if your expectations are realistic. If after further consideration they seem unrealistic, you may want to keep working for a while until you are in a better financial position to try and realize them or until your expectations shift.

Ideally, you retire when you are financially, emotionally, and psychologically ready. Why you are retiring is as important as when you choose to retire. When you are motivated to retire, you see retirement as a beginning rather than an end.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2022 FMG Suite.