• Stephanie Bacak, CFP
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Smart Money Couples Don’t Wait for January

Marriage is about moving toward a common goal, so you better set some.  I strive to help clients grow together and with a happy retirement in mind.  My part is calculating the numbers and using that shoebox full of old statements to create a picture so informed decisions are possible.  The below are things you can do to grow (wealthy) together:
1. Dream together – set big and small goals and start imaging how you want life to be. Ever create a dream board?  Great activity for the family, instead of saying “I want to travel the world” or “have a sailboat”.  Find a picture of a couple drifting into the tangerine sunset on on a catamaran with the sails full of wind.
2. Plan together – once you have goals, work backwards to figure out what that requires today and every day.  Don’t guess, write it down and add it up.  Some goals have to be adjusted and sometimes, I help clients turn the knob a little on what they are committed to doing today or whatever it takes to bring dreams and realities in line with each other.
3. Start from scratch – the best budget planning is when you consider what if I could make this line item zero (0).  True this doesn’t work for everything but go ahead and look at everything you spend money on and ask Why? and Is this worth my life energy?  Or even if it sparks joy in your life.
4. Create rules together – Easier than a monthly budget is to take step #3 to determine what dollar amount of percentage of income is going to debt pay down or retirement or other goals each month. Review monthly to stay on track.
5.Fun money – having cash each month that is each of yours for eating lunch or entertainment or whatever.   This equals things out because you may prefer lunch out while your spouse may bring lunch and get a massage once a month.
6. Plan a vacation – plan way in advance because the most pleasure is from looking forward to the trip.  And get deals!   Rewards within your budget are good for you and your relationship.
7. Sleep tight – make certain your spouse is covered (and not in debt) if something should happen to you.
8. Contribute to retirement – you are going to share the money when you retire, so motivation one another to put it away today.  There is more than one way to save for retirement and you need to be diversified in investments and tax vehicles.
Get ready for your next 12 months and 20 years now!

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Increased Contribution Limits Announced

The IRS just announced increased contribution limits for IRAs and many retirement plans. IRAs now have a $6000 limit, 401(k) $19,000 on the employee side, and SEPs $56,000 limit.

This is another win for investors and savers in a year where so many tax laws have changed. The new maximum contribution is the amount you can choose to add to your IRA (if you qualify) or 401(k) or SEP pre-tax and it will grow in these accounts tax-deferred until you take it out during retirement.

It may seem like normal course of annual updates but this is the first increase in IRA contributions since they set at $5500 in 2013 (and contribution limits were stuck from 1982 to 2001 at just $20000. For so long there were really no cost of living increases in the IRA and Qualified plan contribution limits so it a great opportunity for so many to be more prepared for retirement.

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Think You Can’t Have a Roth?

Good News!  While the Tax Cuts and Jobs Act of 2017 reads as though the backdoor Roth is dead, never fear!

A Roth IRA isn’t perfect for everyone, it certainly gives a unique opportunity to have assets that grow tax free and can be distributed in retirement tax free.  You forego a tax break in the current year and have a few rules applied but the pay off can be tremendous.

If you are not familiar with BackDoor Roth, it is simply contributing funds to a non-deductible IRA then in the same year or immediately, converting those funds to a Roth.  If they had time to grow then you would pay a tax on that grow.

The new tax laws prohibit recharacterizing your Roth conversion (mouthful right?). That means once your convert an IRA that creates a tax issue for you, you can no longer undue the conversion to a Roth.  So if you have an IRA that has been growing for years, consult with your tax preparer about the potential tax of you converting before you do it.

Not only is the backdoor Roth not going away, the tax-related Congressional committee has said the backdoor Roths are legitimate.  Congress doesn’t have final say over IRS rulings but there are no statutes to the contrary.

 

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