While we may be approaching the end of the year, there is still time to trim your tax bill for next year. Whether you had a year full of financial gain, suffered financial losses or rode the middle ground all year, you can still make moves to put yourself in a better position come tax day.

Now is a great time to make these easy and smart tax moves to reduce your taxes owed and maximize your returns when you file next year.

1. Make 401(k) and HSA contributions.

A great way to reduce your taxable income is to contribute to your 401(k) and/or your Health Savings Account. While you have until April 15 of next year to put money towards your HSA, the deadline for 401(k) tax-deductible contributions is December 31.

It’s a good idea to try and increase your 401(k) contributions and put in the maximum amount allowed. In 2020, that amount is capped at $19,500. For those who are 50+ the amount is capped at $26,000. Even if you can’t put in the maximum amount, any amount is helping you build your nest egg for retirement.

The contribution limit for a HSA in 2020 is $3,550 for individuals and $7,100 for family plans. Those who are 55+ can add an extra $1,000.

2. Convert money from a traditional IRA to Roth IRA.

If you lost income this year, it may be in your best interest to convert any traditional individual retirement accounts to a Roth IRA. You invest after-tax dollars into a Roth IRA, which means they grow tax-free over time. A major bonus for investing in a Roth IRA is the possibility that your money could be free of taxes in retirement.

Converting to a Roth IRA means you could potentially reap these benefits:

• No required minimum distributions (RMD).
• Very low tax levels.
• Increased flexibility for estate planning and tax diversification.

3. Spend your FSA.

If you have a Flexible Spending Account that you use to pay for out-of-pocket health care costs and still have money left, you may want to use it before the year is over. While you can carry over money to the next year, it’s often limited to around $500.

If you’re not sure how to spend it before end-of-year, you can use your FSA funds for a plethora of items and services. These include eye exams, diabetic supplies, dental treatment, contact lenses, eyeglasses, first aid supplies, sunscreen, over the counter medicine and more.

4. Donate to charity.

If you’re looking to clean out your closet while also trimming your tax bill, consider donating unwanted clothes or other items to a local charity. You can receive tax deductions for donating non-cash items and/or money to qualified charitable organizations. If you’re interested in doing so, make sure to get an itemized receipt for everything you donate!

5. Purchase items for your business.

Consider making purchases for your small business or side-gig before the end of the year as “ordinary and necessary” business expenses can be used for tax deductions. These deductions are available to those who are self-employed. Purchases that are eligible for a tax write-off include: home-office supplies, mileage, expenses pertaining to your home-office and any equipment or materials bought for your business.

6. Meet with your advisor.

Taking the time to meet with your financial advisor before the end of the year is an excellent way to reduce taxes. Ultimately, they’re going to be your best source of knowledge when it comes to tax planning. They can dive deep into your unique situation and pinpoint possible strategies to reduce your taxes.

Billions of dollars of federal aid is given out to students across the country every year. The only way for your student to receive any of this money is by filling out the Free Application for Federal Student Aid, also known as FAFSA. Schools use the information they receive from this application to gauge a student’s eligibility for financial aid.

Completing the FAFSA means your child will be eligible for:

Grants: Money from federal and state governments based on financial need. Grants are a form of financial aid that, in most cases, does not need to be repaid.

Scholarships: Merit-based financial aid given to students. While some believe that means eligibility is not connected to the FAFSA, many scholarships offered by community colleges and universities require applicants to have it completed. Again, this is “free money” that doesn’t need to be repaid in most cases.

Work-study: Work-study allows students to work part-time on campus and use their earnings to pay for their tuition or other expenses. Those who fill out the FAFSA are considered to participate in work-study if they meet a certain criteria.

Federal Student Loans: All students who plan on taking out student loans are required to complete the FAFSA. One perk is that federal student loans are often more affordable and offer better benefits than private loans.

Filling out the FAFSA is crucial in securing money to fund your child’s education, so it’s extremely important that it’s completed correctly and turned in on time. If you’re not well-versed in the FAFSA, this is easier said than done as it’s notoriously long and confusing.

It may seem overwhelming, but don’t let its bad reputation scare you. Taking just a little bit of time to educate yourself on common FAFSA mistakes will put you in a much better position to avoid any missteps or headaches.

1. Not filling it out.

Some choose not to fill the FAFSA out because they believe they won’t be eligible for any money. Thinking like this can actually cost you money! As they say, nothing ventured, nothing gained. Without giving it a shot, you’ll never know what your child could receive. Even if it’s lower than the amount you were hoping for, it’s still money. Plus, you may be pleasantly surprised by what you may get.

2. Not preparing beforehand.

Before you do any other prep, you need to create a FSA ID. This is the online ID you use to login and complete the FAFSA, as well as access financial aid information.

Next, gather the documents required to complete the application. Preparing beforehand can expedite the process immensely. These documents include:

• Social Security card for both parent and student.
• Alien registration number (if you’re not a U.S. citizen).
• Federal tax returns, W-2s, 1099s or any other records of the money you’ve earned. (Note: you can use the IRS Data Retrieval Tool to access these documents online).
• Driver’s licenses (if applicable).
• Bank statements such as savings and checking account balances.
• Records of any investments.
• Records of untaxed income (if applicable).

If you start the application and realize you don’t have one of these documents, don’t worry! You can save your progress, log out and complete it at a later date.

3. Not filing as soon as possible.

A lot of grants and scholarships offered through states and colleges are first-come, first-served. This is a major reason you don’t want to wait until the last minute to complete the FAFSA. The earlier you complete and submit it, the higher your chances are at receiving financial aid. Getting it done as soon as possible also means you won’t miss any deadlines!

4. Only filing once.

Filing the FAFSA is not something you only do once. There’s a common misconception that once your child’s college of choice has their FAFSA information, it’s good for the entirety of their time there. However, it needs to be submitted each year your child is attending college, even if your information or financial situation has not changed.

That being said, it does get less time consuming after the first time. Because you will already have your FSA ID account set up, your information will be pre-filled and waiting for your confirmation or any updates at the time of renewal.

5. Not filing an appeal if your financial situation has changed.

If families experience any loss in income due to job loss, reduction in hours, extensive medical expenses or large costs for dependents such as elderly parents or special needs children, there’s an option to appeal for more financial aid even after submitting the FAFSA.

Completing this form allows the college your child is already attending, or colleges they’re interested in, to reevaluate their financial needs. A best practice is contacting the college’s financial aid office to see what information they’ll need to start the appeal process.

6. Not finding help if you need it.

Correctly completing the FAFSA is crucial to securing financial aid. If you’re not confident in your ability to do so, the best option is to find help! Seeking the counsel of someone who knows what they’re doing is better than guessing and making simple errors.

Figuring out how to finance higher education for your child or children can be a daunting task. While there are many options to explore, looking into scholarships and grants (also known as gift aid) is a great place to start. Unlike student loans, scholarships and grants don’t need to be paid back and can significantly decrease the amount you’ll need to pay out of pocket.

While they’re both essentially “free money” and some use these terms interchangeably, scholarships and grants are not the same thing. Understanding their differences can help you tremendously to secure them.

Scholarships

A scholarship is usually merit-based, meaning they are based upon a person’s achievements, academic or not. These achievements don’t necessarily need to be from the classroom, but can come from one’s hobbies or interests. They’re usually awarded for academic, athletic, artistic or musical talent. They can also be awarded to students who are going into a certain field of study or for their family background.

There’s vast amount of scholarships out there, and there’s no limit to the amount a student can apply for, and in most cases, use. It’s always important to check the terms and conditions before accepting a scholarship, but most of the time you can accept as many as you’d like. Some academic and athletic scholarships are “full rides” which mean they cover the entirety of a student’s expenses. In this case, you’d only have to accept one!

Grants

Unlike scholarships, grants are given based upon a student’s financial needs and economic status. There are four main types of grants: federal, private, state and institutional.

Federal Grants

These grants are given by the federal government to those attending a community college, four-year university or other career programs. Federal grants are broken down into four programs: Federal Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), Teacher Education Assistance for College and Higher Education (TEACH) Grants and Iraq and Afghanistan Service Grants.

Private Grants

These grants come from private companies and nonprofits. Private grants are usually given to low-income students or those who belong to a certain ethnic or racial group.

Institutional Grants

These grants are given by the institution that a student plans to attend. They often use the information from your FAFSA (Free Application for Federal Student Aid) to determine if you qualify for any grants. Many colleges and universities provide grants to help students attend their school.

State Grants

These grants are awarded by the state, oftentimes to encourage students to attend college. To receive a state grant, you typically must fill out the FAFSA, be a resident of and plan on attending college in that state.

How to Apply

The application process for scholarships and grants have some similarities, as well as some differences. One major similarity is that you can find and apply for a vast amount of them online. It’s as easy as typing in terms that match the description of a scholarship or grant you’re interested in on a search engine, and you’ll be met with a plethora of options.

It’s helpful to ask your friends, family and others in your local community if there are any opportunities they’re aware of. Another excellent resource is your child’s school. Their guidance counselor will most likely be a great asset in helping you find the best match for your child’s wants, needs and talents.

One thing that makes grants different from scholarships is that a student is automatically considered for federal and institutional grants when they submit their FAFSA. They usually don’t require any extra work or searching.

Tips for Applying for Scholarships and Grants

Stay organized.

If your student plans on applying for multiple scholarships and/or grants, it’s in their best interest to keep a list of the ones they’re interested in and which they’ve applied for. It may be helpful to create a spreadsheet that outlines the various requirements and deadlines or each grant/scholarship.

Be aware of potential scams.

There are scams designed to steal your personal information and/or take your money. Make sure the website you’re searching from and any offer your student receives is legitimate.

Follow instructions very carefully.

If you don’t follow instructions or miss a deadline, your application could be thrown out. As mentioned above, staying organized and using a spreadsheet will help ensure no deadlines are missed and that all requirements are met.

Don’t wait to apply.

Many think that they can only start applying for scholarships and grants their senior year of high school. This is false! In most cases, students can apply much earlier. As some opportunities are first come, first served, it’s important to apply as early as possible.

Even after receiving gift aid, sometimes there is still a considerable amount of money to be paid. Through careful planning and expert guidance, you can avoid going into debt or leaving your child with a large amount of student debt. SimplyAdvised has trusted and vetted experts who can help you find the best route possible to finance your child’s education.

What would an income increase of 10% mean to your retirement?

Would it afford you more freedom? More opportunity to travel? The ability to spoil your grandchildren? Or even the ability to buy that vacation home on the lake you’ve always dreamed of?

For most Americans, Social Security benefits are an important part of their retirement income. In fact, according to the Social Security Administration, a whopping 97% of the total population aged 60-89 receive at least some Social Security benefits [1].

Maximizing your retirement income can be key to the healthy and happy retirement you have always wanted. When combining it with other retirement income, your Social Security benefits are an important part of making this a reality.

What many people don’t realize is there are some simple things you can do now to ensure when the time comes for you to take your benefits, your income is maximized. Below we have outlined six of the top Social Security maximization tips. If you follow all of these, you can potentially maximize your benefits and ensure nothing goes to waste.

1. Maximize your working income and work for at least 35 years.

Your Social Security benefits are calculated based on the 35 years in which you earn the most income. If you do not work for at least 35 years, each year less than 35 is counted as zero which can significantly reduce your benefits. The higher the income you earn up to $137,700 (as of 2020) the higher the Social Security benefits you will receive, so be sure to do everything you can to maximize your salary and earning potential.

2. Know your full retirement age and wait to collect Social Security benefits.

While the Social Security Administration technically allows you to start pulling benefits at age 62, this could dramatically reduce your benefits. For example, if you start taking payments at 62, you will only receive 75% of the annual amount you are eligible for. Worst of all, this reduction is permanent! 

It is important for you to understand your “full retirement age” as defined by the Social Security Administration. This is calculated by the age you are born and ranges between 65 and 67. You can find out your “full retirement age” by clicking here. It is at this age that you will receive 100% of eligible benefits. It is worth mentioning that you can also wait to take your benefits until up to age 70. If you wait until age 70, you will receive 132% of the benefits you are eligible for. In other words, for every year you delay past your “full retirement age”, your yearly benefits increase by about 8%.

3. Take advantage of spousal benefits.

When it comes time to start thinking about your Social Security filing strategy, it is important to understand what kind of spousal benefits you may be eligible for. If you are currently married, or if you are divorced and were married for at least 10 years, you may be eligible to reap spousal benefits. This means the ability to claim benefits based on up to 50% of your current (or ex) spouses benefit (at their full retirement age). This is especially important if one spouse earns significantly more money and is expected to see a much higher Social Security benefit. Being strategic on the timing that both you and your spouse claim your benefits is key. Be sure to find a trustworthy Social Security calculator online to determine the best course of action for you and your spouse to ensure that together, your lifetime benefits are maximized.

4. Claim family benefits.

When it comes time for you to file, if you have dependent children who are under the age of 19, they may qualify to receive up to 50% of your benefit. Note, this will not decrease your benefit amount, it will be added on top of it. You will want to keep this in mind when deciding on when to claim benefits as you should add this into your calculation for your lifetime benefit. For example, if you have one or multiple dependent children under the age of 19 when you turn 62, it may make sense for you to start claiming as soon as you are eligible vs. waiting for full retirement age. This is of course highly dependent on your unique situation, so be sure to crunch the numbers and find out what will work best for your family.

5. Minimize your taxes.

There is a common misconception that Social Security income is not taxed. Unfortunately, for many of us, this is not true. Depending on your overall retirement income, you could be required to pay taxes on up to 85% of your Social Security benefit. Taxes in retirement can add up to a significant sum of money and can greatly reduce your overall income in retirement. A key in maximizing your retirement income is doing everything you can to keep this as low as possible.

[1] https://www.ssa.gov/policy/docs/population-profiles/never-beneficiaries.html

Having a financial professional dive deep into each of these points while keeping your unique situation and financial history in mind is the key to maximizing your benefits. SimplyAdvised can put you in contact with a knowledgeable professional who can help.

Before you commit to hiring a financial advisor, it’s important that you ask the right questions. You’ll be working with this professional to achieve your financial goals—whatever they may be. You’ll want to feel confident that they’ll be able to guide you through important decisions and work with your best interest in mind. It’s crucial to be aware of their credentials, experience and knowledge.

Asking these nine questions will give you a good idea if they’re someone you’d be interested in working with. 

1. Are you a fiduciary?

A fiduciary works in the best interest of their client and puts their needs first. Non-fiduciary advisors may be selling their firm’s products/services to earn commission, which could skew their recommendations away from what fits you best.

2. Do you hold any industry certifications?

There’s a wide range of certifications financial advisors can hold. It’s important to understand the background of the person you could potentially be working with.

3. How are you compensated for your services? 

Financial advisors are compensated differently depending on the firm they work for. Whether it be an hourly or a flat fee, this is always a good question to ask so you know what to expect. 

4. What is your investment philosophy?

An investment philosophy will usually determine how your money will be handled. While one advisor might focus on long-term investing in a globally diversified portfolio and may encourage choosing only low-cost exchange-traded funds, another advisor might have an entirely different philosophy. Asking this will make sure you’re both on the same page. 

5. Is there a niche that you work with?

Everyone has different needs from their financial advisor. Make sure you’re working with someone who specializes in the area(s) you’re focusing on.

6. Do you have any account or relationship minimums? 

Depending on your portfolio size, some advisors might be a better fit than others. 

7. How often will we meet?

While this is pretty straightforward, it’s important for you and your advisor to be on the same page  in regard to how often you’ll meet—whether that be annually, semi-annually or quarterly. 

8. How will I hear from you?

You may have a preference of how you’d like to communicate, whether it be phone, email, video conference or in-person. Most advisors are more than happy to communicate with you in whichever method you prefer, just let them know! 

9. Do you have any references? 

Similar to looking for a job candidate, when you’re looking to find the perfect advisor you’ll want to know what others who have previously worked with them have to say.

While you should do your research ahead of time and use search tools to look into someone you’re going to potentially work with, it’s still good to get this information from the advisor themselves and make sure they’re transparent and truthful. 

At the end of the day, you’re creating a relationship. If hired, you’ll be trusting this professional with your financial future. This means you’ll want to be certain that this is the right advisor for you. Asking these questions may be a little uncomfortable, but having a clear understanding of an advisor’s expectations, qualifications and philosophies will be beneficial to both of you in the long run.

Which retirement account is best for you?

The world of personal investing, finance and retirement is filled with acronyms: traditional IRA, Roth IRA, 401(k), RMD, APR, ETF, FDIC and so many more. While they may seem intimidating, a degree in finance is not required to understand the three key retirement accounts that you likely already have access to: a traditional IRA, Roth IRA and a 401(k) plan. 

All three of these plans are considered “tax-advantaged” plans. This means your investments offer tax benefits in the form of tax exemptions or tax deferrals. As many know, taxes can eat up a significant portion of your retirement income and your retirement strategy should account for this. 

Understanding the differences between these accounts and knowing which one (or combination) is best for you and your family could be the key to a long-lasting and stress-free retirement.

401(k)

This is a plan that is generally offered through an employer. You can make tax-free contributions to this plan through automatic payroll withholding. Essentially, this plan automatically contributes or invests a certain percentage of your payroll each month. Depending on your plan, you can then set up these contributions to be allocated to different investments that your plan offers. You can contribute any percentage of your salary to this plan, but there are annual contribution limits. For 2020, if you are under 50 years old, the limit is $19,500. If you are 50 or older, you can contribute up to $26,000.

401(k) Pros

• Income grows tax-free allowing for larger initial investments and potentially larger growth.
• Many employers will match a certain amount of your contribution—essentially free money for you.
• There is a large annual contribution limit which offers the largest tax advantage compared to Roth IRAs and traditional IRAs.
• Distributions are potentially taxed when you are in a lower tax bracket in retirement.

401(k) Cons

• Limited investment choices.
• Distributions are taxed as ordinary income.
• Due to the costs of running a 401(k) program, they often include high account fees.
• You are required to start taking Required Minimum Distributions (RMDs) at age 72.
• Early withdrawal fees if you take distributions prior to 59.5 years of age.

As a bare minimum, you should consider contributing enough to get 100% of the money your company will match. This is essentially “free money” you can use to invest in your future.

Traditional IRA

Individual retirement accounts, also known as IRAs, are similar to 401(k) plans as they’re both tax-advantaged investment vehicles. There are two main flavors of IRAs, the traditional IRA, and the Roth IRA. With a traditional IRA, similar to a 401(k) plan, you contribute pre-tax dollars. This allows your money to grow tax-deferred, meaning you do not pay taxes on your original contribution or your earnings until you start taking withdrawals. Contributing a larger amount of money up-front due to taxes being deferred not only allows you to potentially achieve higher lifetime returns (due to the power of compounding), but it also opens up the potential to pay taxes when you are retired—often in a lower tax bracket.

Traditional IRA Pros

• Income grows tax-free, allowing for larger initial investments and potentially larger growth.
• No income limits.
• Invest in any accounts offered by your brokerage (stocks, bonds, ETFs, mutual funds, etc.).

Traditional IRA Cons

• Early withdrawal penalty if you withdraw before age 59.5.
• Distributions are taxed as regular income.
• Strict total IRA (Roth + traditional) contribution limit of $6,000 if under 50 and $7,000 if 50 or older per year.
• Required Minimum Distributions (RMDs) are required starting at age 72.

At the end of the day, determining which IRA makes the most sense for you likely comes down to the tax bracket you expect to be in during retirement. If you believe you will be in a lower tax bracket than you are now, it likely makes sense to max out a traditional IRA. This will allow your money to grow tax-free until you take distributions when you are in that lower tax bracket.

Roth IRA

The key difference between a traditional IRA and a Roth IRA is the timing of the tax advantage. With a Roth IRA, you contribute your money post-tax, meaning you pay taxes on the income, and can then invest your money in the account. The benefit comes on the back end. When you withdraw your money, you generally do so tax-free. Another key difference is that Roth IRAs have income limits. This means that if your Modified Adjusted Gross Income (MAGI) is over $124,000, your total contribution limit phases out based on your income. If your MAGI is over $139,000 you are no longer eligible to contribute to a Roth IRA.

See the two charts below that display 2020 contribution limits for all three tax-advantaged accounts, as well as a breakdown of the income limit phase for Roth IRAs.

If your income or your joint income place you in the “phases out” category, you can learn how to calculate your Roth IRA contribution limit using the IRS formula here.

Contribution limits of IRA, Roth IRA and 401(k)

Roth IRA income limits and phase out

Roth IRA Pros

• Earnings grow and are withdrawn tax-free.
• Contributions can be withdrawn at any time tax-free.
• No Required Minimum Distributions (RMDs).

Roth IRA Cons

• Taxes are paid upfront, and earnings grow off of post-tax dollars.
• Income limits may reduce the amount you can contribute.

If you believe you will be in a higher tax bracket when you are ready to withdraw from your account and your income level allows it, the common practice is to max out your Roth IRA. This will allow your money to grow and be withdrawn tax-free once you are ready in retirement.

The most common strategy people take when it comes to retirement accounts is to start with their 401(k) and contribute up to what their employer will match. From there, depending on their income situation, they generally max out their Roth IRA, traditional IRA or a combination of both. If they still have money left over, the next step would be to max out their 401(k) to the total limit. Finally, if they still have money left over to invest, it is recommended to explore a traditional investment (stocks, bonds, ETFs, mutual funds, etc.). However, these investments are not tax-advantaged.

What is right for you?

Where to contribute your retirement funds can be an incredibly complicated, but also a very important decision. What works best for one individual or family does not always work best for the next. SimplyAdvised works with hundreds of financial professionals nationwide who can review your personal situation and help recommend what the best solution is for you.

While the majority of Americans will collect Social Security at some point in their lives, not everyone fully understands the program. This program, which is often a vital part of a person’s retirement plan, is notorious for being confusing. Taking the time to gain a deeper understanding of Social Security can help you maximize your benefits and avoid benefit reductions. 

Whether you’re looking to claim your benefits in the near future, or you’re years away from retirement, it’s in your best interest to gain a fundamental understanding of Social Security.

While the majority of Americans will collect Social Security at some point in their lives, not everyone fully understands the program. This program, which is often a vital part of a person’s retirement plan, is notorious for being confusing. Taking the time to gain a deeper understanding of Social Security can help you maximize your benefits and avoid benefit reductions. 

Whether you’re looking to claim your benefits in the near future, or you’re years away from retirement, it’s in your best interest to gain a fundamental understanding of Social Security.

1. What is it?

Social Security is a program created in 1935 to provide retirement income to Americans. It’s still used today by most Americans once they reach a certain age. Some use it in conjunction with other retirement income sources and some use it as their only income stream.  

Currently, the system works like this: every time you receive a paycheck for working, a portion of the taxes you pay go towards Social Security. This money is then reallocated back to Americans who are collecting their benefits.

2. How are benefits determined?

Not everyone receives the same benefits. Your benefits are determined by how many credits you earn during your working years. Essentially, the more you make the more credits you receive. As of 2020, a credit is defined by $1,410 in income, and you need to earn 40 credits to qualify for benefits. 

Once you qualify, the Social Security Administration (SSA) uses a formula to determine your benefits. They look at your highest 35 years of average earnings. This is then used to determine your Average Indexed Monthly Earning (AIME). Once you have your AIME, you can apply it to the Social Security benefits formula. 

3. When should I claim?

When you claim your Social Security benefits is completely up to you and is different for each person based on their unique financial history. If you claim at your full retirement age (FRA) you’ll get your standard benefit. Your FRA is designated by the law and is based on the year you were born. Filing even a month early could lead to early filing penalties which reduce your benefits. Waiting to claim past your FRA has advantages, too. If you wait, you earn delayed retirement credits every month until you turn 70—leading to a bigger check from Social Security.

4. Does working affect benefits?

Many retirees choose to pick up a part-time job after they’ve claimed their benefits. If you’ve reached full retirement age, you can work without affecting your Social Security benefits. However, if you’re under FRA and receiving your benefits, you could forgo a portion of your benefits (temporarily) if you’re earning too much. In this case, once you do reach FRA, your monthly check will be recalculated to account for the lost benefits.

5. How do spousal benefits work?

As with any aspect of Social Security, spousal benefits are a bit confusing and come with many stipulations. If you’re unfamiliar with spousal benefits, they work like this: current spouses and ex-spouses (who were married for over 10 years and are not remarried) are eligible to receive equal to half of what their spouse earns if it’s higher than their own.

In certain cases, when someone dies, their Social Security benefits may be available to their current or former spouse. You can also collect spousal benefits without a death occurring. In order to qualify for spousal benefits, the spouse with a work record must already be receiving their benefits and the other spouse must be at least 62. If your spouse dies, you can collect a survivor’s benefit as early as age 60.

6. Do I owe taxes on Social Security benefits?

You may owe taxes on your Social Security benefits based on your income. If it’s above a certain threshold, you could be taxed on up to 50% of your benefits. 

If you’re a single filer, this threshold is $25,000 to $34,000 of countable income per year. If you make more than that as a single filer you could owe even more in taxes (up to 85% of your benefits). If you file jointly, this income threshold is $32,000 to $44,000. As with single filers, if you make more than that in countable income you’ll be taxed even higher. 

Again, with any aspect of Social Security, tax rules for benefits are complicated and conditional.

When to claim, deciding to work after claiming, tapping into spousal benefits and understanding how your benefits will be taxed are all extremely important if you’d like to get the most out of Social Security.

Keep in mind that we’ve provided surface level answers to these common Social Security questions. Having a professional dive deep into each of these questions while keeping your unique situation and financial history in mind is the key to maximizing your benefits. SimplyAdvised can put you in contact with a knowledgeable professional who can help.

Many of us spend years looking forward to and planning for retirement. It’s only natural to want to enjoy the fruits of your labor and spend your golden years stress-free. That’s why it’s important to avoid making mistakes that could throw a wrench in your plans. A secure retirement comes from meticulous planning and not leaving anything up to chance. 

Steering clear of these five mistakes can help you accomplish your long-term financial goals.

1. Not having a plan.

Not having a clear plan for your retirement is a huge mistake. Without a plan in place, your odds of having a stress-free retirement, or even one at all, is slim. Every person’s situation and goals are different, which is why you’ll want to calculate how much you’ll need and figure out how to get there. It seems counterintuitive to list something so basic, but nevertheless it’s true. Not planning at all is putting a nail in the coffin of your retirement. It’s not only important to create a plan, but to update it regularly to reflect your wants, needs and any lifestyle changes. 

2. Not utilizing tax-advantaged accounts.

Another mistake to avoid is not making the most of tax-advantaged accounts you may have access to, such as a 401(k), Roth IRA or a traditional IRA. All of these accounts are great vehicles to grow your retirement income over time. 

A 401(k) is a retirement option provided by your employer. With a 401(k), a specified amount of money is deposited into your account from each paycheck. The money is from your income before taxes are taken out. These plans can vary vastly depending on your employer. Some companies offer a matching program, which can be very beneficial. 

An IRA, which stands for Individual Retirement Account, allows you to save money outside of any options offered by an employer. A Roth IRA puts dollars that have been taxed into your account, they grow tax-free and you can usually take money out tax and penalty free after the age 59 ½. With a Traditional IRA, you can contribute taxed or untaxed money into the account, your money will grow tax-deferred and withdrawals are taxed.

Deciding which type of account is best for you can be confusing, and knowing the differences and benefits of each type of account is a good start. Getting professional help is a great way to determine what you should do or if you’re on the right track. Again, each person has a unique situation and they’ll require a different plan. However, not utilizing any tax-advantaged accounts to save for retirement is a huge mistake! 

3. Underestimating the length and cost of retirement.

Many aim to retire by 62-65. If you do, this means you’ll probably need your funds to last you anywhere from 20-25 years. Because of this, you’ll also want to plan for inflation. As time goes on the cost of living could rise. Not taking this into consideration could leave you without money later in life, or needing to delay retirement. 

Other aspects people tend to underestimate are costs such as healthcare and long-term care. Even if you’re enrolled in Medicare, it only covers a portion of healthcare costs. So, you may have to plan to purchase supplemental insurance or pay out of pocket. Without taking these costs into consideration, you could blow through your retirement savings.

4. Cashing out your 401(k) savings.

Most people have more than one job throughout their lifetime. This means they may be contributing to more than one 401(k) throughout the years. It’s common to cash out this account as you’re leaving a job, however, you may not want to. If you withdraw money from them too early you can be hit with harsh penalties—not to mention the taxes you’ll pay on the income. So, if/when you change a job where you’ve been contributing to a 401(k), you’ll want to be aware of all your options.

5. Not taking care of your health.

Because healthcare can be so costly, it’s imperative that you protect your health now. This means exercising, resting, keeping stress levels low and eating a nutritious diet. Also, getting check ups regularly can help you prevent disease or catch problems early. 

Taking these steps can allow you to work longer, enjoy your life and help prevent you from having to pay for long-term care early. Another benefit of being healthy is the potential to secure more affordable rates for coverage such as life insurance, disability and long-term care.

It’s never too late to start, rethink or change your retirement plan. Not only avoiding the mistakes above, but leaning on advice from a trust and vetted financial professional can help immensely. The thought of figuring out how to set up a successful financial future post-retirement can be overwhelming. SimplyAdvised can match you with a local professional to make the process as easy as possible. 

While many choose different paths for their retirement, there is one thing that stays constant: taxes. No, taxes don’t stop once you’re retired. They’re probably even more important to keep an eye on during retirement as you’re on a fixed income—meaning you don’t want to pay the IRS any more than need be.  Let’s start with the basics—what’s taxable and what isn’t? The short answer is basically everything. This includes work income, regular investments, IRAs and 401(k)s.  When you’re planning for retirement it’s important to understand exactly what and how things are taxed. Whether you’re just starting the planning process or already retired, there are things you can do to lower your taxes and keep more of your hard-earned money. 

1. Have a variety of retirement accounts.

By having a diverse pool of retirement accounts, you can use them to balance your withdrawals in a tax-friendly way. If you have a mix of taxable and non-taxable accounts, you can pull from your non-taxable accounts when your income is high and draw from the taxable accounts when it’s lower. Basically, you want to draw money from your sources in a way that cuts your taxes in the best way possible.

2. Minimize taxes on Social Security.

Depending on your income, your Social Security benefits can be taxed. If you’re single and your income is less than $25,000, or if you’re married and your income is less than $32,000, your benefits aren’t taxable. If you make more than this amount, you can be taxed on up to 85% of your benefits.  You can avoid this by either not working, only working enough to make less than the amounts listed above or by delaying your benefits for as long as possible. 

3. Plan for estate taxes.

Estate planning can be complicated, but avoiding it can result in a nightmare for your loved ones. It’s important to have a plan in place that’s mindful of estate tax—it can be as high as 40%. Considering this, structuring your estate plan in a way that reduces the amount of potential taxes your estate will owe is crucial. Proper planning can keep your assets in the hands of your heirs and not tax collectors. 

4. Pay off your mortgage before retiring.

A great way to minimize your expenses and therefore taxes, is to pay off your mortgage before retiring. A mortgage payment is often a person’s largest monthly expense. By eliminating this expense, you’ll reduce how much income you’ll need to achieve within a tax year. It will also allow you to have more flexibility in retirement as it’s difficult to minimize your taxes when you need to withdraw a large amount of money each month to pay your mortgage. However, we know that for some this is no easy feat. Another option is to try and get your mortgage payment down as much as possible.  

5. Choose where you live wisely. 

Some retirees decide to relocate for various reasons—wanting to be closer to family or friends, wanting better weather or perhaps for a change of pace/scenery. Whatever the reason is, it’s important to be smart when choosing this location as it can affect your taxes. Some states have lower income levies combined with fair rates for sales and property taxes, while others don’t impose income taxes at all! While taxes shouldn’t be an end-all be-all reason for moving somewhere, they’re worth taking into consideration.

While these are just a few options, there are a plethora of ways you can get your taxes in check during retirement. Keeping your taxes low means you’ll have the ability to spend your retirement income exactly how you’ve always wanted to. Consulting a professional to really drill down into your unique situation is extremely worthwhile if you’re not well versed in the world of taxes. SimplyAdvised can help you find a local, knowledgeable and trusted financial expert to guide you through the tax minimization process.

If you’re nearing retirement, you may find yourself daydreaming about enjoying the fruits of your labor. While it’s important to plan for retirement at any stage of life, if you’re getting close it’s crucial to be realistic about how prepared you really are. One way to take inventory of what you have and haven’t accomplished is to ask yourself a few questions.

1. How much money do I have saved and is it enough?

Without knowing how much money you have saved and determining if it’s enough for your plans in retirement, you can’t be sure that you’re ready. 

With any retirement plan, different people will have different sources of income. Some have multiple 401(k)s, some have a variety of IRAs and/or investments and some people may have a pension plan. Whatever the case is, you’ll want to check on these accounts to get an idea of what you’re working with. You may be pleasantly surprised, or you may be concerned. Either way, it sets up a realistic expectation of what you’ll need to do while moving forward. 

It’s also important to think about what your income source(s) will be during your retirement. You may be banking on a pension, tax-advantaged retirement accounts or expecting help from Social Security. Some retirees also choose to stay busy and start a business, buy real-estate or generate income through other ventures. Making the right decisions now and diversifying your income sources can help contribute to a stress-free retirement. 

2. Have I made an estate plan?

Ensuring there’s a plan in place for easy management of your assets after death or incapacitation should be included in your retirement planning. Without an estate plan, your financial affairs could be left in shambles and headed to probate court—a headache for your heirs. 

Check out these five estate planning documents you may want to have in place before you retire. 

3. What is my plan for healthcare?

Let’s face it—as you get older you’re most likely going to need healthcare. While you’re planning for your retirement, you should be planning for your medical needs and how you’re going to fund them. Healthcare isn’t cheap, and it may even become more expensive. However, healthcare costs don’t have to wipe out your retirement savings if planned for properly.

Many use a Health Savings Account (HSA) to secure funds for healthcare in retirement. Any money you contribute to this account is tax-deductible—and if used for healthcare costs your funds will grow tax-free. Another option is Medicare. Once you turn 65, you’ll want to carefully review and consider all your options. 

At the end of the day, the most important thing to do is to not underestimate these costs. 

4. What will my Social Security benefits look like?

Social Security is another source of income for retirees. However not everyone’s benefits will look the same. There are many stipulations that affect how much you’ll receive. These include:

• What age you claim your benefits at.
• The amount of time you worked and contributed to Social Security.
• How much money you made during those years.
• Your marital status.

Unfortunately, this program is somewhat confusing and not well-understood by the public. By doing a bit of research and/or getting professional help, you can maximize your Social Security benefits. Getting the most out of Social Security means having an additional monthly income stream to fund your retirement.

While there are many things to consider before taking the leap into retirement, honestly answering these questions can help you create a long-lasting and enjoyable retirement. Knowing where you stand, where you want to be and figuring out how you will get there can be complicated. SimplyAdvised can match you with a vetted and knowledgeable professional to analyze your situation and put you in the best position possible.