Powering Your Retirement Radio

Exciting things are coming in the 4th Quarter of 2023. Until then, the show will be in hiatus as I build new tools to help you - my listener. Got questions or want to take one of my Summer webinars? Email dan@danleonard.expert

Welcome to "Powering Your Retirement Radio"! Today, I want to address one of the most frequently asked questions about the documents you should keep hard copies of and for how long. It doesn't matter if it's your tax return or investment statements; fortunately, digital copies are acceptable for many of these documents now. But you may have a concern about what happens if the drive fails. Many people still have banker's boxes or a filing cabinet hiding somewhere. And if you are like many people, it is overdue to be cleaned out. I will go over Tax, Healthcare, Legal, Asset and Debt, and Other Documents to keep track of. Let's start with Tax Documents, as outside of CA, tax season is over, and in CA, it is at least starting to slow down. A. Tax returns and supporting documents - 7 years. B. W-2 and 1099 forms - 7 years. C. Deduction receipts and statements - 7 years. D. Business expense receipts and statements - 7 years. E. Investment statements - until you sell the investments + 7 years. F. Property records - until you sell the property + 7 years. G. Retirement plan statements - until you close the account + 7 years. You should keep these documents for at least seven years in case of an audit. The same goes for your W-2 and 1099 forms. Deduction receipts and statements should also be kept for seven years, as should business expense receipts and statements. You might ask why? The IRS can audit your return up to three years after it is filed unless they are claiming fraud, and then it is seven years. Investment statements and property records should be kept until you sell the investments or property, plus seven years. Finally, retirement plan statements should be kept until you close the account, plus seven years. Now for Healthcare documents, things like: A. Medical records - indefinitely B. Insurance policies - indefinitely C. Explanation of benefits (EOB) - 1 year D. Prescription receipts - 1 year E. Health savings account (HSA) statements - 7 years Medical records should be kept indefinitely, as should insurance policies. Explanation of benefits (EOB) should be kept for at least one year, and prescription receipts for at least one year. Health savings account (HSA) statements should be kept for seven years. I got an EOB this week from May of last year. Since I switched carriers this year, it was good to be able to pull out the old policy and call and find out what the charge was for. Also, on HSA, since you can carry forward expenses into the future, it really is seven years after you have claimed the expense since that is when you would claim the deduction. How about those Legal-related documents: A. Estate planning documents - indefinitely B. Marriage and divorce documents - indefinitely C. Adoption and custody papers - indefinitely D. Wills and trusts - indefinitely E. Power of attorney - indefinitely F. Real estate deeds - indefinitely G. Vehicle titles - until you sell the vehicle. H. Lawsuits and settlement agreements - indefinitely This section is simple, keep everything. You need the current copies but also the old copies to document the changes and when they happen. It doesn't happen all that often, but when a distant relative shows up claiming they were promised or are entitled to something, having clear documentation of when a change occurred can save a lot of hassle and potentially money. Now for Asset and debt-related documents, basically for financial information: A. Loan agreements and promissory notes - until the debt is paid off + 7 years. B. Home purchase and improvement documents - until you sell the home + 7 years. C. Vehicle purchase and maintenance documents - until you sell the vehicle + 7 years. D. Investment and brokerage account statements - until you sell the investments + 7 years. E. Real estate purchase and sale documents - until you sell the property + 7 years. Loan agreements and promissory notes should be kept until the debt is paid off, plus seven years. Home...

Welcome back to Powering Your Retirement Radio. I am Dan Leonard, your host. Today I am joined by Ed Sanders. Ed Sanders is a financial strategist with over 19 years of experience in the finance industry. Originally from Akron, Ohio, Ed attended the University of Arizona before moving to the Bay Area to work for Wells Fargo after graduation. In 2004, Ed made the decision to leave the corporate world behind and pursue his passion for helping people achieve financial freedom. As a financial strategist, Ed specializes in college planning, risk reduction, creating tax-free income sources, and eliminating debt. In this episode, Ed will share answers to many problems people face including: Debt as a hindrance to accumulating wealth. What is your effective interest rate, and why it matters. Eliminating Debt Forever. The snowball strategy. Paying cash for cars and what that costs you. Ed's Webinars Series. Thank you for tuning in to today's podcast with a financial strategist, Ed Sanders. We hope you found his insights and advice on college planning, risk reduction, creating tax-free income sources, and debt elimination helpful and informative. If you have any further questions or would like to learn more about Ed's services, please visit his website and other links below. Don't forget to subscribe to our podcast for more expert insights and advice on a variety of topics. Thank you again for listening, and we'll talk with you in the next episode. Ed's Contact Information: LinkedIn: https://www.linkedin.com/in/edwardfsanders Website: www.edwardfsanders.com Enter debt for immediate effective interest cost: www.eliminatedebtforever.com To book a time to talk to Ed → http://esanders.youcanbook.me For more episodes, please visit the Podcasts website: https://poweringyourretirement.com/2023/04/29/edward-f-sanders-financial-strategist

Hello, and welcome back to Powering Your Retirement Radio. Today's episode is not uplifting, but still worth a listen. We will all likely face this event once or twice in our lifetimes. Unfortunately, like most emotional and personal things, you learn by doing it and never really share it with anyone. So, here is an outline of things to consider when your spouse or a loved one passes away. For more information, please visit the podcast website: https://poweringyourretirement.com/2023/04/14/what-to-do-on-your-worst-day/

Hello, and welcome back to Powering Your Retirement Radio. In today’s episode, I want to discuss the most often question I get these days: "Should I buy Treasury Bills?” I also want to discuss what happened with Silicon Valley Bank (SVB). It seems like several times each week. Someone calls to ask what I think about buying Treasury Bills. I first want to know why they want to buy them. Is it because they have extra money languishing in the bank, or do they want to move money from their current investments to something guaranteed? Either way, you can make a case for it, but you need to determine if it is shifting money that is already invested. What will cause you to change your investments in the future? If it is cash in the bank, then it is a little less complicated. With rising interest rates, you should plan to buy bonds that you plan to hold to maturity, in my opinion. You can trade them, but that changes the simplicity of buying a 3- or 6-month Treasury Bill that will mature at par. I will tie in with why this is what happened that caused the failure of SVB. Being forced to sell longer-dated Treasury Securities that were in a paper loss position because of interest rate increases. If they didn’t face a run on the bank and could have held to maturity, they would have gotten all their money back. Unfortunately for SVB, they were forced to realize the loss and caused the second-biggest bank failure in US History. Have a listen for the complete story. For more information, visit the podcasts website: https://poweringyourretirement.com/2023/03/24/treasury-bills

Welcome back to Powering Your Retirement Radio. I want to discuss Long Term Care or Extended Care. This is insurance and not an investment. Insurance, in the long run, is better to have and not need, than to need and not have. It is also better to buy it before there is a need because, at that point, it is either very expensive or not available. So why do you need Extended Care Insurance? You need it because of the unknowable circumstances around your future health, not just yours but, if you are married, your spouse as well. As counterintuitive as this sounds, Extended Care Insurance is not for someone who falls ill or needs care. It is for the surviving spouse. I hear all of the jokes and uncomfortable laughter around; they’ll hold a pillow over my head… No, they won’t. Extended Care isn’t just for end-of-life situations. It covers you if there is a car accident, if you have a stroke or if some other issue where you need prolonged care during your recovery. No one wants to be a burden to their children, and even fewer people want to leave a healthy spouse without enough money to live on because the assets went toward their care. So what is there to do? There are a few options, including Traditional Long Term Care Insurance, which is not very popular, but still available. There is Hybrid Life Insurance that provides a Long Term Care Rider. And finally, there are Long Term Care Annuities. Here is a quick overview, which will hopefully give you enough information to determine what makes sense for you. As always, I am happy to chat if you have questions. Traditional Long-Term Care Insurance: This is what most people think of. It’s a use-it-or-lose-it policy where you pay in for your lifetime, and if you never need it, there is nothing to be paid out. This is the insurance I personally own, only because I got it when I worked at Genworth, and it was inexpensive at the time. Given the cost of care, my premiums over my expected life span will equal roughly 6 months' worth of coverage in a nursing facility. Since the average stay is 3 years, I am comfortable with the fact that I have it, even if I don’t need it. Hybrid Life Insurance with a Long-Term Care Rider: This is a life insurance policy with a death benefit that can be converted to pay for long-term care needs if needed. The good part is that if you need long-term care, you have a predetermined amount of coverage. If you don’t need it, there is a death benefit for your heirs, so the money you paid in premiums is not a sunk cost you can’t recover. If you collect on the death benefit, you don’t lose your money, but the growth of the funds is more like investing in a CD rather than the market. The key is that you have protection since you have insurance and you aren’t spending the assets meant to provide your retirement income. This can be purchased over your lifetime or a set number of years, usually 10 or 20 and you are subject to underwriting on these policies. Annuities with a Long-Term Care Rider: These are usually on a fixed or index annuity and are purchased with a lump sum with some kind of multiple, say 1, 2, or 3 times the amount deposited if you need long-term care. So you invest $100,000 in the fixed annuity, and it grows like any other fixed annuity, and like the hybrid policy above, if there is a need for long-term care, the multiplier kicks in, and your $100,000 now covers $200,000 or more of long-term care bills. There is some underwriting, but it generally has a better issue rate than the hybrid or traditional policies. The quick recap is that a traditional policy is less expensive than a hybrid policy, but with no way to recoup the expense if you don’t need it. Hybrid is good for a person who is a planner but wants some protection. The caveat is that you also need to be insurable. The annuity will likely get you coverage in a situation when you can’t get a hybrid policy, but you need to have a larger sum of money all at once. All three...

How can you save $1,000,000 in your 401k between the ages of 30 and 60? We'll cover strategies for maximizing your contributions, making smart investment decisions, and taking advantage of employer matching programs in this episode. Maximizing Contributions The first step in saving $1,000,000 in your 401k is to maximize your contributions. If you're 30 years old, you have 30 years to save, so the earlier you start, the more you can save. The contribution limit for a 401k is $19,000 in 2022, with an additional $6,500 catch-up contribution for those over 50. Consider increasing your contribution rate by 1% each year to reach the maximum contribution limit. In my experience, you do not need to maximize your contribution from the start. Being consistent over the years yields a far better outcome. Investment Decisions Making smart investment decisions is key to growing your 401k balance. Start by understanding your risk tolerance and investing in a mix of low-risk, moderate-risk, and high-risk options. Consider using a diversified portfolio, which you can adjust as you near retirement age. You need help making investment decisions that align with your goals. This is where consulting a financial advisor is something to consider. Employer Matching Programs Many employers offer matching contributions to 401k plans. If your employer offers a match, make sure to contribute enough to take advantage of the full match. This is free money, so make sure to maximize this opportunity. If your employer does not offer a match, consider other savings options, such as a traditional or Roth IRA. Compound Interest Compound interest is a powerful tool for growing your savings. Over time, the interest you earn on your 401k contributions can compound, increasing the growth of your balance. Consider using an online calculator to see how much you can earn through compound interest over time. At some point, the amount you contribute annually will be smaller than the interest you receive. Saving $1,000,000 in your 401k between the ages of 30 and 60 is an achievable goal with the right strategies in place. Start by maximizing your contributions, making smart investment decisions, and taking advantage of employer matching programs. By starting early and taking advantage of the power of compound interest, you can build a secure financial future for yourself and your family. For more information, please visit the podcast's website: https://poweringyourretirement.com/2023/02/23/1000000

How much should I save for Retirement Annually? The amount you should save for retirement annually depends on several factors, including your age, income, current savings, and retirement goals. Generally speaking, financial experts recommend saving 10-15% of your income each year for retirement. However, it's important to remember that this is just a guideline, and you should adjust your savings rate based on your own individual needs. How much do I need to save to be able to retire? The amount you need to save to be able to retire comfortably depends on several factors, including your age, income, current savings, and retirement goals. Generally speaking, financial experts recommend having saved 10-12 times your annual income by the time you retire. So, for example, if you make $50,000 per year, you should have saved at least $500,000 by the time you retire. It's important to note that this is just a guideline and that you should adjust your savings rate based on your own individual needs. How much do I need to save for health care in retirement? The amount you need to save for health care in retirement will depend on several factors, including your age, current health care costs, and your retirement goals. Generally speaking, financial experts recommend saving between 3-8% of your income each year for health care in retirement. However, it's important to remember that this is just a guideline, and you should adjust your savings rate based on your own individual needs. What is a safe withdrawal rate in retirement? A safe withdrawal rate in retirement is the amount of money you can safely withdraw from your retirement savings each year without running out of money. Generally speaking, financial experts recommend withdrawing no more than 4-5% of your retirement savings each year. However, it's important to remember that this is just a guideline, and you should adjust your withdrawal rate based on your own individual needs. What are the pros and cons of Dollar cost averaging? The pros of dollar cost averaging include the following: 1. Reduced Risk: By investing a fixed dollar amount over time, you will be able to spread out your risk and potentially minimize losses if the market drops. 2. Lower Start-Up Costs: Dollar cost averaging allows you to start investing with a smaller amount of money, which can be helpful if you don't have a large sum to invest all at once. 3. Emotional Benefits: Investing with a regular, fixed amount each month can help to manage your emotions and reduce the temptation to invest impulsively. The cons of dollar cost averaging include the following: 1. Lower Average Returns: Investing regularly each month means that you may miss out on larger gains that could be made if you invested a lump sum all at once. 2. Reduced Flexibility: With dollar cost averaging, you are limited to investing a fixed dollar amount each month, which can limit your ability to adjust your investments in response to changing market conditions. 3. Opportunity Cost: By investing smaller amounts over time, you may miss out on larger investments that could potentially generate higher returns. What are the go-go, slow-go, and no-go phases of retirement? The go-go phase of retirement is the period of time when you are most active and able to do the things you want to do. During this phase, you are able to travel, participate in hobbies, and engage in social activities. The slow-go phase of retirement is when you may need to start slowing down a bit due to age or health issues, but you are still able to do some of the things you enjoy. The no-go phase of retirement is when you are no longer able to participate in activities as you have in the past actively, and you may need to rely more on family and friends for help. For more information, visit the podcast's website: https://poweringyourretirement.com/2023/02/09/saving-for-retirement

Welcome to Powering Your Retirement Radio. Having a long-term perspective when investing is important because it allows you to ride out short-term market fluctuations and focus on the underlying fundamentals of your chosen investments. It also gives your investments time to compound and grow, which can lead to greater returns over the long run. Additionally, it can help you avoid making impulsive and emotional decisions based on short-term market movements, which can be detrimental to your investment portfolio. For more information, visit the podcast website: https://poweringyourretirement.com/2023/01/12/long-term/

Welcome back to Powering Your Retirement Radio. Here are some key tax numbers for 2023 to keep in mind: It's important to note that these numbers are subject to change and that you should consult with a tax professional or the IRS for the most up-to-date information and advice on your specific situation. For more information please visit the podcast's website: https://poweringyourretirement.com/2023/01/12/2023-tax-numbers-to-know/

Welcome back to Powering Your Retirement Radio. On December 23, 2022, Congress passed the SECURE 2.0 Act of 2022 as part of the Consolidated Appropriations Act of 2023, a $1.65 trillion omnibus spending package to keep the government running. The new retirement legislation makes significant alterations to the retirement account rules. Many of these changes impact workplace plans. Not all provisions are effective immediately or even in 2023. Some do not apply until 2024, and some do not for a decade! Here are some of the key impacts: RMD Age Increase: Missed RMD Penalty Reduction: What’s NOT in this Act:no fix to the “at least as rapidly rule” For more information, visit the Podcast Website: https://poweringyourretirement.com/2022/12/29/ep-046/

Welcome to Powering Your Retirement Radio. Tax loss selling is a strategy investors use to offset capital gains on their investments by selling decreased-value securities. The losses from these sales can be used to offset any capital gains realized during the year, thus reducing the overall tax liability for the investor. This strategy is typically used at the end of the calendar year, as investors look to take advantage of losses before the new tax year begins. It is important to note that some specific rules and regulations must be followed to use this strategy effectively. For more information, visit the podcast's website: https://poweringyourretirement.com/2022/12/15/taxlossselling

The great reset is coming. Every year at the end of the year, everything gets set back to Zero. Everyone likes it when the market is up, but 2022 certainly has not been an up year. Every year on December 31st, all reporting systems reset. When the market is up, an advisor dislikes the reset since you lose the good performance. When the market is down, we don’t mind it as much because it is great to forget the downturn. Regardless of whether the market is up or down, the fact that the reset happens means you need to understand math. For instance, this year, the market is currently down 17%, which means if you started the year with $100,000, you’d have $83,000 today. If the year ended today, it would take a 20% return on the $83,000 to get back $100,000. If you were up 17% and then lost 14.5%, you would be back at $100,000. Enough math. The market goes up and down. Percentages can play games with what you need to make up for downturns. The key to remember is currently, every time the market has gone down, it has come back and reached new highs. While I can’t say that will happen again, with certainty, it seems likely that it will happen. If you are retiring this year, it can be a little trickier since you will be pulling a higher percentage of your portfolio since it is the account would be down. As the market grows, you will be taking a smaller percentage. If you are still working, you are regularly investing in your 401k, which means you are Dollar Cost Averaging each month. As the market falls, you buy a few more shares each month than before. The whole time you are lowering your cost basis. Once the market returns to its previous high levels, you don’t lose those shares. They are there for as long as you hold them. Once you retire and start taking money out of your account, you are not likely to take all your money out simultaneously. So, you start systematically withdrawing money out of your account. This is essentially the same concept of Dollar Cost Averaging but reverse. If the market is going up, you sell fewer shares every month, and if it goes down, you will sell a few more shares. Since retirement is hopefully a multi-decade experience, you are going to sell shares and take money over several market cycles, meaning the withdrawals will likely average out over time. From 1950 to 2020, on 12 different occasions, the S & P 500 fell 20% or more, with an average fall taking over 340 days and the average decline being just over 33.3%. The market falls more than 10% about every 1.2 years, and from 1980 to 2020, there have only been two years without a 5% loss and another 4 years where it only fell 5% one time. So that is 34 years with multiple 5% declines. I know that is a lot of numbers, but the story's moral is that despite this lackluster year, with high inflation, and political upset, what is happening in the market is not unusual. There are lots of people that want you to reposition portfolios and change strategies. Now is not the time to change your plan. Good solid diversified portfolios are meant to weather difficult markets. The goal is not to not go down but to go down less. With the market down 17%, you need a 20% return to break even. If you are only down 13%, you only need a 15% return to break even. Stay strong, review your plan, and know your numbers. Visit the podcast website here: https://poweringyourretirement.com/2022/12/01/the-reset

Welcome to Powering Your Retirement Radio. A Health Savings Account (HSA) is a savings account used in conjunction with a high-deductible health plan (HDHP) to pay for qualified medical expenses. Contributions to the account are made pre-tax and can be withdrawn tax-free to pay for qualified medical expenses. The money in the account can roll over from year to year and be invested to grow over time. Only people enrolled in an HDHP are eligible to open and contribute to an HSA, and there are limits on the amount that can be contributed each year. For more information visit the podcasts website: https://poweringyourretirement.com/2022/11/17/hsa_ideas

Health Savings Accounts (HSA) are great for saving for future medical expenses. This isn’t news to most people, but one thing I learned that I should have known was if you have an expense this year and you don’t use it, you don’t lose it. You can accumulate receipts and year you are covered by a High Deductible Health Plan (HDHP)...meaning if you can afford to pay your expenses now, you can save money that will grow TRIPLE tax-free. You can collect on your prior expenses in the future after your money has grown tax-free and not have to pay tax on that money ever. Today I am going to cover five basics: 1) Eligibility 2) Tax Treatment 3) Accumulation 4) Decumulation 5) Portability The average married couple will spend approximately $361,000 for health care in retirement. At today’s tax rates, if you were in the 24% Federal Tax Bracket and in California’s 9.3% State Tax bracket. Not paying tax on those distributions could save you $180,229.38 in tax, if you were to pull the money from a retirement account to pay those expenses. Learn More on the podcast website: https://poweringyourretirement.com/2022/11/10/hsabasics

Welcome to Powering Your Retirement Radio. The Social Security Cost of Living Adjustment (COLA) is an increase in the amount of Social Security benefits that are intended to keep pace with inflation. The COLA is determined each year by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the current year to the third quarter of the previous year. If there is an increase in the CPI-W, then Social Security benefits will also increase by that percentage. The COLA helps ensure that the purchasing power of Social Security benefits remains constant over time. However, COLA is not guaranteed, and in some years, there is no increase or a very small increase. The COLA can affect many factors, such as inflation, economic conditions, and political decisions. It's important to note that COLA only applies to Social Security benefits, not to SSI (Supplemental Security Income) payments, which are based on need and are not subject to COLA adjustments. For More Information, visit the podcast's website: https://poweringyourretirement.com/2022/10/20/ss_cola

At age 72, advisors must remind clients about the Required Minimum Distributions (RMDs). With some version of this, for decades, the IRS has allowed you to defer paying taxes on your retirement accounts, but now, like the Pied Piper, they want to get paid. It is not usually received warmly or happily, but as an added tax burden they had knowingly forgotten or, in some cases, never knew about. The good news is there are strategies to leverage the benefits of RMDs. In this episode, I discuss the basics of how you need to take them, what accounts can be combined and what accounts need to stand alone. You want to ensure you understand the rules because the penalty for not taking an RMD is up to 50% of the amount not taken. Ouch, that is high even for the IRS. Two strategies to lower and avoid paying take altogether are Qualified Charitable Deductions (QCDs) and Roth Conversions. I’ll explain in greater detail in the episode, but QCDs allow you to avoid the tax altogether and helps to avoid phantom taxes. The extra income can create even if it is donated once taken. Roth Conversions lower future RMDs since Roth IRAs do not need to take RMDs and all growth once converted is tax-free. You do have to pay tax at the time of the conversion. I will cover some strategies to minimize those taxes and how to spread them out. For more information, you can visit the podcast website: https://poweringyourretirement.com/2022/10/06/rmd-strategies

Welcome back to Powering Your Retirement Radio. This week we are talking about the four different Tax buckets to everyone has access to. Ordinary Income Bucket This bucket is your paycheck, regular taxable investments, rental income, and Social Security. It is money you are earning that is taxed at ordinary income rates. Income tax rates are somewhere between 0% to 37% Tax Deferred Bucket This bucket is your retirement vehicle that offers a tax deferral of ordinary income tax today. The trade-off is later. All distributions are taxed at ordinary income rates, which may or may not be lower than when you earned the initial money deposited. Again, tax rates are somewhere between 0% to 37% Capital Gains Bucket This bucket is regular investments held for over a year. If you own a stock, rental property, or other capital assets. On the dividends, you need to hold the stocks for different periods, generally 61 to 91 days (more info. here). Capital Gain tax rates are somewhere between 0% to 20%. For most people, this will result in a lower tax rate. Tax-Free Bucket This bucket is everyone's favorite bucket, Tax-Free Investments. All growth once you make the investment is Tax-Free. The catch is you are limited to how much you can contribute annually. You can convert other retirement assets unlimitedly, but you have to pay the tax due when you convert. Converting too much at one time can push you into a high tax bracket when you convert. Visit the Podcast Website for more information: https://poweringyourretirement.com/2022/09/22/tax-buckets

Welcome back to Powering Your Retirement Radio. In the episode, we will discuss the different Milestones that certain birthdays bring. 0 to 18 years - Kiddie Tax Issues 18+ - Claiming children as dependents 18 or 21, even 25 - Age of Majority for UTMA and UGMA accounts 26 - "adult" children of parent's healthcare The Gap years - College to Age 50 - Retirement Savings 50+- "Catch-Up" Contributions - 401k, 403b, IRA, Roth IRA 55+- "early" retirement - Penalty Free Distributions from company plans, in the right circumstances. 59 ½ - Access to all retirement assets penalty-free 60+ - Ability to claim Widow Benefits (if applicable) 62+ - Social Security Benefit claiming 65+ - Medicare sign-up and annual renewals ~68+ - Future RMD (Required Minimum Distribution) Planning 70 ½+ - QCD (Qualified Charitable Distributions), avoids sneaky taxes 72+ - RMD (Required Minimum Distribution) start Visit the Podcast site: https://poweringyourretirement.com/2022/09/15/tax-birthdays-and-milestones

continued from the last Episode. 5. Spillover Election 6. After-Tax Contributions, regardless of income 7. BrokerageLink *Bonus Tip Visit the podcast website: https://poweringyourretirement.com/2022/08/25/401k-tune-up-tips-part-2/(opens in a new tab)