Exploring the Mega Backdoor Roth: Is It The Right Strategy For You?

Contributed by: Kelsey Arvai, CFP®, MBA

As financial planning professionals, we often seek advanced strategies to maximize clients’ retirement savings. One such strategy that has gained considerable attention is the Mega Backdoor Roth IRA. But is this complex approach suitable for everyone? In this blog, we’ll explore what the Mega Backdoor Roth is, how it works, and whether it might be a beneficial option for your financial planning strategy.

What is a Mega Backdoor Roth?

The Mega Backdoor Roth IRA is an advanced retirement savings technique that allows high-income earners to contribute more to their Roth IRA than traditional limits permit. Typically, Roth IRA contributions are capped at $7,000 annually for individuals under 50 (or $8,000 for those 50 and older). However, the Mega Backdoor Roth strategy enables individuals to funnel significantly larger amounts into a Roth IRA by leveraging after-tax contributions made to a 401(k) or 403(b) plan.

How Does It Work?

Here’s a step-by-step breakdown of how the Mega Backdoor Roth works:

1. Contribute to Your 401(k) or 403(b) Plan: Start by contributing to your retirement plan up to the annual limit of $23,000 for individuals under 50, or $30,500 for those 50 and older, through pre-tax or Roth contributions.

2. Make After-Tax Contributions: Once you reach the annual pre-tax or Roth contribution limit, you can make additional after-tax contributions to your retirement plan. The total defined contribution limit for 2024 is $69,000, including employee and employer contributions.

3. Convert to Roth IRA: Periodically, or as your plan allows, you can roll over the after-tax contributions and any earnings into a Roth IRA. This conversion avoids taxes on the earnings as Roth IRAs grow tax-free.

Benefits of the Mega Backdoor Roth

• Increased Contribution Limits: The Mega Backdoor Roth allows you to contribute significantly more to your Roth IRA than the standard limits, which can be a substantial advantage for high-income earners seeking to maximize their tax-free retirement savings.

• Tax-Free Growth: Contributions to a Roth IRA grow tax-free, and qualified withdrawals in retirement are also tax-free. This can be particularly beneficial for individuals who expect to be in a higher tax bracket during retirement.

• Flexibility: Roth IRAs offer flexibility in terms of withdrawal options. Contributions (but not earnings) can be withdrawn at any time without penalties or taxes, providing added financial flexibility.

Considerations Before Implementing

While the Mega Backdoor Roth offers compelling advantages, it’s not suitable for everyone. Consider the following factors before deciding if this strategy is right for you:

• Plan Availability: Not all retirement plans permit after-tax contributions or in-service withdrawals, which are necessary for executing the Mega Backdoor Roth strategy. Review your plan’s rules to ensure this option is available.

• Income and Contribution Limits: Ensure you are within the income limits and contribution caps that apply to your situation. The strategy is generally most beneficial for high-income earners who have already maxed out their regular 401(k) and IRA contributions.

• Administrative Complexity: Implementing the Mega Backdoor Roth can involve additional administrative steps and paperwork. Ensure you are comfortable with these requirements or seek assistance from a financial advisor to navigate the process effectively.

The Mega Backdoor Roth IRA is a powerful tool for those looking to significantly boost their Roth IRA contributions beyond standard limits. It offers the potential for substantial tax-free growth and flexible withdrawal options, making it an appealing strategy for high-income earners with the proper 401(k) plan structure. However, it’s important to weigh the benefits against the complexities and ensure they align with your overall retirement planning goals.

If you’re considering the Mega Backdoor Roth strategy, consult with a financial advisor to evaluate whether it fits your financial situation and to navigate the process efficiently. The right strategy can make a significant difference in your long-term retirement savings, and the Mega Backdoor Roth might be just the key to unlocking greater financial growth.

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Kelsey Arvai, MBA, CFP®, and not necessarily those of Raymond James.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Contributions to a traditional IRA may be tax-deductible depending on the taxpayer's income, tax-filing status, and other factors. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

Are You a Fiduciary? What Are Your Fees? How Does It Work?

Contributed by: Kelsey Arvai, CFP®, MBA

Contributed by: Nick Errer and Ryan O'Neal

Fiduciary vs. Financial Advisor

There is often confusion surrounding the differences between financial advisors and fiduciaries. While anyone who gives financial advice may call themselves a financial advisor, what separates fiduciaries is their legal and ethical responsibility to act in the best interest of their clients. In other words, a fiduciary is a person or organization with a legal and/or ethical obligation to act on behalf of someone else (or a group of people) and to put the interests of that individual or group ahead of their own. A fiduciary typically has more knowledge or expertise in a particular area than the person or group the fiduciary is helping.

A fiduciary relationship is intended to eliminate the conflicts of interest and abuses that could occur in such an uneven situation by requiring the fiduciary to always act for the exclusive benefit and interest of those they are serving (common examples are doctors, lawyers and fiduciary financial advisors and investors).  A financial advisor who is not held to the fiduciary standards may provide recommendations that could result in higher commissions or other personal incentives, whereas a financial fiduciary must give advice that best suits a client’s needs, regardless of the consequences to themselves.

Who Regulates Fiduciaries?

Financial Advisors who have a fiduciary commitment to their clients will be registered with either the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA) as Registered Investment Advisors (RIAs). All RIAs are required to always act as fiduciaries, which means they put their client’s interests above their own. Additionally, financial advisors may hold professional designations such as Certified Financial Planner™ (CFP®) and Accredited Investment Fiduciary® (AIF®), which have their own ethical standards that must be adhered to.

What Are the Fees?

Fiduciaries are compensated in various ways, and the specific payment structure will vary from one client to another. In some cases, fees are based on a flat rate or hourly charge for a particular plan, while most times, they are calculated as a percentage of Assets Under Management (AUM). Non-fiduciary advisors often receive commissions as part of their payment structure. These advisors are held to a “suitability standard,” meaning they must have a reasonable belief that an investment or transaction is suitable for their customer.

When seeking new financial advice, it is essential to conduct comprehensive research to confirm that the advisor prioritizes your best interests over their own financial gain.

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Kelsey Arvai, Nick Errer, and Ryan O’Neal and not necessarily those of Raymond James.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

GivingTuesday: A 2024 Reminder

Contributed by: Kelsey Arvai, CFP®, MBA

As we approach another season of gratitude, it's a reminder that each act of kindness can make a meaningful difference, no matter how small. Since its inception in 2012, GivingTuesday has grown into a worldwide movement, inspiring millions to contribute time, resources, and compassion to strengthen our communities.

Celebrated on the Tuesday following Thanksgiving, GivingTuesday is a global call to action, but its spirit doesn't need to be limited to one day a year. At The Center, we aim to give back year-round through our Charitable Committee, which leads our mission to support three key areas: Financial Literacy, Community Needs in Metro Detroit, and Staff Involvement.

In 2023, our team contributed over 120 hours of volunteer time and raised $16,500, enhancing lives in our community and beyond. From donation drives to hands-on support, we're dedicated to building a brighter future. To further encourage giving, The Center offers eligible employees up to two paid days per year for community volunteer work and matches employee charitable donations up to $100 annually.

For those looking to join this movement, visit GivingTuesday.org/participate to discover ways to give back through time, donations, or simply using your voice to uplift those around you. Together, we can create a ripple of kindness every day.

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

Raymond James is not affiliated with the above organizations.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Kelsey Arvai, MBA and not necessarily those of Raymond James.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through the Center for Financial Planning, Inc. The Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

This electronic communication and all contents are sent and provided by Kelsey Arvai in her individual capacity as an ACTIVITY, and not in the capacity of agent, representative or financial advisor of Raymond James Financial Services, Inc. and/or any and all of its affiliates, including Raymond James & Associates, Inc. and Raymond James Financial, Inc. (collectively “Raymond James”). Kelsey's STATUS in the ACTIVITY is independent of her activity as a financial advisor with Raymond James, and his additional use of a Raymond James email address for communications pertaining to her POSITION in the ACTIVITY is authorized. Raymond James, however, assumes no responsibility for the substance, accuracy, completeness or reliability of any content in this communication, and Raymond James’ sponsorship, endorsement, association or affiliation of/with the ORGANIZATION or its activities is not implied, nor should it be inferred.

Financially Preparing to Become a Pet Parent

Contributed by: Kelsey Arvai, CFP®, MBA

Contributed by: Nick Errer and Ryan O'Neal

Typically, we celebrate National Pet Month in May and Pet Appreciation Week in the first week of June. Year-round, we acknowledge the love, joy, and companionship our furry, feathered, or shelled friends bring into our lives. We reflect on the importance of responsible pet ownership and acknowledge the profound impact that pets have on our well-being. 

To say that our pets make us happy is selling short the real physical and mental health benefits of pet ownership. The National Institute of Health (NIH) found that pet owners are encouraged by the motivation and social support provided by their pets and are more likely to adopt a physical exercise routine. Furthermore, pet ownership has been associated with lowered blood and cholesterol levels while increasing our levels of serotonin and dopamine. Although it is easy to focus on the positive effects our pets have on us, it is equally important to acknowledge the caretaking commitment and financial burden we are taking on. 

Be honest: Does your lifestyle allow room for a pet? Consider your lifestyle, work, family, financial, and housing situation. Does your situation support a healthy and happy environment for a pet?

According to the American Society for the Prevention of Cruelty to Animals, the average annual cost for dog and cat ownership lies at $1,391 and $1,149, respectively. This doesn't factor in other financial planning aspects, such as pet insurance and estate planning for your pets. Pet insurance can help cover the cost of medical care for your animals. Typical policies can cost around $60 per month for dogs and $30 per month for cats. Premiums will vary depending on your pet's age, breed, cost of services, where you live, and the policy you choose. Pet insurance isn't right for everyone, but it is helpful if you are struck with an unexpected medical expense which can cost over $1,000. Since most plans won't cover pre-existing conditions, starting as soon as possible is important. The alternative is to "self-insure" by paying out-of-pocket expenses that arise. As a guideline, an average pet insurance policy with a $5,000 annual coverage, a $250 deductible, and an 80% reimbursement level will cost about $50 per month in 2024, according to Forbes Advisor.

I always recommend that everyone have enough cash on hand in an emergency fund to cover a minimum of three to six months of living costs. Once you are a pet owner, you'll need to consider increasing the amount to include expenses for your pets. While pet ownership is a choice, once you have a pet, taking care of it is not.

According to a USA Today Blueprint Survey, some dog owners spend up to $376 per month on their dogs, or $4,512 per year. This includes all day-to-day expenses like food, supplies, grooming, routine vet care, insurance, training, and dog walking, but it also includes occasional costs such as boarding and vet care in case of illness.

Research breed characteristics – explore the unique needs of your potential pet and assess how it could impact your budget. Consider home insurance and rental fees (some home insurers may increase your premiums or choose not to cover you if you own certain dog breeds). If you become a dog owner, you may want to consider additional liability coverage in case of dog bites. If you rent, some landlords require additional "pet deposits" or "pet rent".

In support of National Pet Month, The Center partnered with two local nonprofits this past May to support rescue and caretaking efforts. As part of our commitment, we donated $1,000 each to Happy Paws Haven Co. and Almost Home Animal Rescue. These organizations provide care, comfort, and compassion to animals in need. We hope our contribution helps further their mission and brings comfort to our furry friends in search of forever homes.  

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

Opinions expressed in the attached article are those of the authors and are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Unlocking Future Success: The Center for Financial Planning’s Internship Program

Contributed by: Kelsey Arvai, CFP®, MBA

Contributed by: Nick Errer and Ryan O'Neal

In the fast-paced world of finance, theoretical knowledge is only one piece of the puzzle. True mastery comes from hands-on experience, which is why the Center for Financial Planning's internship program is a transformative opportunity for aspiring financial professionals. This program offers more than just a foot in the door; it provides a robust foundation for a successful career through experiential learning and real-world application.

The Power of Experiential Learning

Experience is the greatest teacher, and this is especially true in finance, where understanding theory and practice are equally crucial. The Center for Financial Planning's internship program bridges this gap by immersing interns in the day-to-day operations of financial planning, including work related to client service, marketing, and investments. This practical exposure allows interns to apply classroom concepts in real-world scenarios, deepening their understanding and honing their skills.

Hands-On Training with Industry Professionals

Interns at the Center for Financial Planning benefit from working closely with seasoned financial planners who bring years of experience and expertise to the table. This mentorship is invaluable, offering interns direct insights into the intricacies of financial planning, from client interactions to complex financial strategies. The opportunity to learn from professionals at the top of their field equips interns with a nuanced understanding of industry practices and standards.

Building Real-World Skills

One of the most significant advantages of the internship program is the development of practical skills. Interns gain experience in key areas such as financial analysis, client relationship management, and portfolio management. They engage in tasks ranging from preparing financial reports to assisting advisors with investment strategies, providing a comprehensive view of what a career in financial planning entails.

Networking and Professional Growth

The internship program also serves as a valuable networking platform. Interns connect with industry professionals, fellow interns, and potential employers or future collaborators, which can open doors to future job opportunities and professional collaborations. Additionally, interns receive and provide constructive feedback and guidance, which is crucial for personal and professional development.

Real Experiences from This Summer's Interns

Nick Errer, one of this summer's interns, shares his positive experience: "My time at The Center has been a truly great experience. Being placed in a corporate environment for the first time, I wasn't sure what to expect. Since my first day, everyone at The Center has shown me how great it is to work for a company where everyone is aligned with a unified belief. It's obvious that the core values translate from basic words on the wall to everyday practice. During my time here, I've had the pleasure of working and learning alongside tenured financial professionals. Being in an environment with so many advisors, each with a unique background has helped me better determine the path I'd like to take. The structure of the internship allowed me the freedom to work on projects that interested me while making meaningful contributions to The Center and its clients. I want to thank Kelsey Arvai and everyone at The Center for an amazing summer and for coordinating such a fulfilling internship."

Ryan O'Neal reflects on his journey: "During my internship at The Center for Financial Planning, I engaged in various aspects of financial planning, including tax and estate planning, compliance, client servicing, and investment management. Initially, I had reservations about whether I belonged in this field and questioned the impact of financial planning on clients' lives. However, working closely with clients and observing the team's efforts, I came to appreciate financial planners' significant role in helping enhance clients' financial well-being. This experience not only dispelled my doubts but also reinforced my decision to pursue a career in financial planning."

A Pathway to Future Employment

The Center for Financial Planning's internship program is not just a learning experience; it is often a gateway to future career opportunities. By providing interns with hands-on experience, professional mentorship, and networking opportunities, the program equips them with the tools they need to succeed in the financial planning industry. For those looking to make a meaningful impact in finance, this internship is a critical steppingstone toward a successful career.

In summary, the Center for Financial Planning's internship program offers a comprehensive and enriching experience that prepares interns for the challenges and opportunities of the financial planning profession and beyond. Through practical experience, professional mentorship, and valuable networking, interns are well-positioned to succeed in their future careers.

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Kelsey Arvai, Nick Errer, and Ryan O’Neal and not necessarily those of Raymond James.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Can You Move Required Distributions from Your Tax-Deferred Retirement Plan or IRA to Your Roth IRA?

Contributed by: Kelsey Arvai, CFP®, MBA

Contributed by: Nick Errer and Ryan O'Neal

Required Minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year. You generally must start taking withdrawals from your Traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 72 (73 if you reach age 72 after December 31st, 2022, or 75 if you were born after 1960).

Account owners in a workplace retirement plan (for example, a 401(k) or profit-sharing plan) can delay taking their RMDs until the year they retire unless they own 5% of the business sponsoring the plan.

These amounts vary depending on the value of your account and your life expectancy factor. The amount of your Required Minimum Distribution (RMD) is calculated by dividing the value of your account value at the previous year's end by a life expectancy factor, as determined by the Internal Revenue Service (IRS). If the sole beneficiary of your IRA is your spouse and your spouse is ten years younger than you, use the life expectancy table from Table II (Joint Life and Last Survivor Expectancy).

For the 2024 tax year, the annual contribution limit to an IRA is $8,000 if you're 50 and older. The limit is the total of all your IRAs – traditional and Roth. (The limits are $1,000 less for anyone under age 50). The IRS requires you to have enough earned income to cover your Roth IRA contributions for the year – but the actual source of your contribution need not be directly from a paycheck. The IRS defines Earned income as any income from wages, salaries, tips, and other taxable employee pay, including self-employment income. However, the IRS does not regulate the pool of money from which the contribution comes. This means you can take your RMD from a Traditional IRA, pay the taxes, and reinvest into your Roth IRA. The only catch is that you would need enough earned income to cover the contribution, but not too much, so you are over the contribution threshold.

The Roth IRA contribution rules are based on your income and tax-filing status. If your modified adjusted gross income (MAGI) is in the Roth IRA phase-out range, you can make a reduced contribution. You can't contribute if your MAGI exceeds the upper limits for your filing status. If your RMD was $8,000 or less, you could deposit all the money into your Roth IRA; however, if you contributed $4,000 to another IRA in the same year, you could just place $4,000 of your RMD into a Roth IRA.

Just because you can, doesn't mean you should… 

It is important to remember that no method is perfect for every individual and there are important factors you should consider before reinvesting RMD income into a Roth IRA. Any contribution to a Roth IRA must be held in the account for a five-year period to avoid a 10% early withdrawal penalty. Additionally, converting RMDs to a Roth IRA is not the only reinvestment vehicle you have. Other options include Roth Conversions, 529 Contributions, and Qualified Charitable Distributions. Talk to a financial advisor today to find a solution that works best for you. Reach out to us here or call us at 248-948-7900.

Sources:

• https://www.investopedia.com/ask/answers/08/ira-rmd-reinvest.asp

• https://smartasset.com/retirement/planning-to-take-rmds-convert-to-roth-why-not

• https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

• https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs#:~:text=The%20RMD%20rules%20apply%20to,while%20the%20owner%20is%20alive.

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Contributions to a Roth 401(k) are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Unlike Roth IRAs, Roth 401(k) participants are subject to required minimum distributions at age 72.

Will Social Security Run Out in The Next 10 Years?

Contributed by: Kelsey Arvai, CFP®, MBA

Contributed by: Nick Errer and Ryan O'Neal

No, social security won't run out, at least not entirely. As a result of changes to Social Security enacted in 1983, benefits are expected to be payable in full until 2037. When these reserves are used up, continuing tax revenues are expected to pay 76% of scheduled benefits. What is causing the financial status of the Social Security Fund to shortfall? Americans have fewer children, live longer, and have an aging population of Baby Boomers retiring at a record pace, further lowering the workforce.

Many discussions have surfaced about how Congress will address the issue of an insolvent Social Security fund. Because we are currently in an election term, it is unlikely that any immediate action will be taken, but these are likely the eventual options on the table, barring any other creative solutions.  

Payroll Taxes may increase. The current Social Security tax rate is 12.4%. For most Americans who are W2 employees, this is split 50/50 between the employer and employee. An increase of 1% for both parties would bring the total rate up to 14.4% and substantially improve the program's state.  

Retirement age may have to go up. There have been no significant changes to the Social Security Program since the full retirement age was lifted from 65 to 67 in 1983. Since then, the average life expectancy in the United States has risen from 74.6 to 77.5 years old. A slight increase in the full retirement age represents how much longer people live today. Another increase would extend the fund substantially.

Benefits may get cut. Like any other struggling budget, there are two ways to fix it. One can either increase revenues or decrease spending. Rather than increasing revenue via payroll taxes to improve the state of the Social Security Fund, policymakers may decide to lower the maximum benefit individuals may receive. While this option would face scrutiny in the current high-price environment, it is certainly on the table.

In today's political environment, it is astute to structure your retirement portfolio to accommodate at least 30 years of retirement or longer. You can do this by creating a savings plan and choosing the right mix of investments (also known as a portfolio allocation). Individuals may rely on several fixed income sources besides Social Security in retirement, such as annuities, pensions, rental properties, or other recurring sources. Maintain at least one year of cash in a relatively safe, liquid account, such as an interest-bearing bank account or money market fund. Next, create a short-term reserve in your investment portfolio equivalent to two to four years' worth of living expenses, accounting for regular income sources or not, depending on how conservative you are. Invest the rest of your portfolio in investments that align with your goals and risk tolerance. The overarching goal here should be to hold a mix of stock, bond, and cash investments that can generate growth, provide income, and preserve your capital—balancing retirement income between social security and other income streams to create a more reliable financial future. Are you looking to implement a retirement income strategy? Reach out to us!

Sources:
https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html  
https://www.investopedia.com/ask/answers/071514/why-social-security-running-out-money.asp  

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of the author and are not necessarily those of RJFS or Raymond James. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment or investment decision. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Past performance is no guarantee of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Navigating Your Financial Journey

Contributed by: Kelsey Arvai, MBA, CFP®

In a world where financial decisions can often feel overwhelming and complex, the role of a financial planner stands out as a guiding beacon, offering expertise and tailored strategies to help individuals achieve their financial goals. Whether you're aiming to buy a home, save for retirement, or planning for your children's education, a financial planner can be an invaluable asset in navigating the intricacies of personal finance. In this blog, we'll explore who financial planners are and what they do.

Who are Financial Planners?

Financial planners are professionals who specialize in helping individuals and families manage their finances, make informed decisions, and plan for their financial future. We possess expertise in various areas of finance, including investment management, retirement planning, tax strategies, estate planning, insurance, and more. Our primary objective is to understand clients' financial situations, goals, and risk tolerances and develop comprehensive plans to help them achieve their objectives.

What Do Financial Planners Do?

1. Goal Identification & Determining Net Worth: Financial planners begin by assessing clients' current financial status, including income, expenses, assets, and liabilities. We then work with clients to establish short-term and long-term financial goals, such as buying a home, saving for retirement, or funding a college education.

2. Financial Planning: Based on the client's goals and financial situation, planners develop personalized financial plans that outline strategies to achieve those objectives. This may involve budgeting, investment management, tax planning, risk management, estate planning, financial independence review or retirement income analysis, charitable planning, college planning, preparing future generations for wealth management, and coordinating with multiple advisors (i.e., CPA, attorney, etc.).

3. Investment Management: Financial planners help clients ensure their investments reflect their objectives, risk tolerance, and time horizon. We may recommend specific investment vehicles, asset allocations, and diversification strategies to help clients maximize returns while managing risk.

4. Retirement Planning: Planning for retirement is a significant aspect of financial planning. Planners help clients estimate retirement expenses, determine retirement savings goals, and develop strategies to accumulate retirement assets through vehicles such as employer-sponsored retirement accounts (e.g., 401(k), IRA), pensions, and other investments.

5. Risk Management and Insurance: Financial planners assess clients' insurance needs, including life insurance, health insurance, disability insurance, and long-term care insurance. We help clients select appropriate coverage to protect against unforeseen events and mitigate financial risks.

6. Estate Planning: Financial planners assist clients in ensuring their beneficiary designations are properly set up on accounts, including retirement, checking & savings, brokerage accounts, and life insurance policies. Estate planning documents (wills, durable power of attorney, health care power of attorney, and trusts) are drafted by an Estate Planning Attorney. Your Financial Planner will help to ensure that you work with an attorney when appropriate and that your estate plan is reviewed at least every 3-5 years.

7. Regular Reviews and Adjustments: Financial planning is not a one-time event; it's an ongoing process. Planners regularly review clients' financial plans and adjust as needed based on changes to your financial situation, goals, and market conditions.

Financial planners play a vital role in helping individuals and families navigate the complexities of personal finance, achieve their financial goals, and build a secure future. Financial planners empower clients to make informed decisions and take control of their financial well-being by providing expertise, personalized advice, and ongoing support. When choosing a financial planner, it's essential to consider their qualifications, expertise, and alignment with your financial goals and values. With the right planner by your side, you may embark on your financial journey with confidence and clarity.

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Financial Resolutions to Consider for 2024

Contributed by: Kelsey Arvai, CFP®, MBA

As the year comes to a close, it is time to start thinking about the New Year and starting it off on the right foot. What better way to accomplish this than by improving your financial health in 2024? January is Financial Wellness Month and Wealth Mentality Month – which serves as a reminder to get our finances in order and plan out our financial strategies. It is also the perfect opportunity to check in with your Financial Advisor to ensure you are financially prepared both in the short and long term.

While planning your financial resolutions, remember to be specific about what you want and why. The key to success is being clear about your priorities and choosing a particular goal. Make sure your goals are attainable, write them down, and post them somewhere where you will be reminded of them often. You can ensure accountability by creating calendar reminders to check in on your goals throughout the year.  

For additional resources on Financial Planning tips going into the New Year, check out this blog from Sandy Adams. I have also provided some additional ideas below from a previous blog of mine:

Automate Savings & Debt Reduction

Establishing and maintaining a positive cash flow is a top-tier priority for your financial health. Automation is key to efficiency and effectiveness while working towards your financial goals. Prioritizing your savings contribution through automation helps hedge against the temptation to spend the funds elsewhere. Utilizing automatic payments for your credit card could help your credit score if the payment happens before your due date. After establishing an emergency fund through your automated savings, you might consider directing excess cash to your retirement and health savings plans.

Max Out Your 401(k) & Health Savings Account (HSA)

The beginning of the year is a great time to review your 401(k) and HSA contributions to ensure that you are maximizing your benefits and taking advantage of increased deferral limits for 2024. 401(k), 403(b), and most 457 plan limits are now up to $23,000 for elective employee deferral. The catch-up contribution limit for employees aged 50 allows for an additional savings of $7,500. Similarly, HSA contribution limits are up to $4,150 for individuals and $8,300 for family coverage, with an additional $1,000 for employees 55 for older. Since HSAs are not "use-it-or-lose-it" accounts, and they can be spent on any expense without penalty after 65, it is advantageous to fully fund these accounts every year.

Plan for Charitable Giving

Most people wait until December to give, but we recommend not being in such a rush that you wait until the end-of-the-year deadline and lose sight of your charitable goal. The beginning of the year is a great time to develop a plan for your year ahead.

Invest in Your Emotional and Physical Well-Being

As you take stock of your financial health this year, carving out time for your physical health is equally paramount. There is a connection between health and wealth; each should be analyzed and reviewed professionally, at least annually.

Reach Out to Your Financial Advisor 

Working with your advisor, at least annually, can provide support to keep you on track while determining and working towards financial goals.

On behalf of all of us at The Center, we wish you a happy and healthy 2024!

Kelsey Arvai, CFP®, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the Kelsey Arvai, MBA, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Retirement Plan Contribution and Eligibility Limits for 2024 (Additional Updates)

Contributed by: Kelsey Arvai, CFP®, MBA

The Internal Revenue Service (IRS) announced how much individuals can contribute to their retirement accounts and updated figures for income eligibility limits. See this blog from earlier in the month for adjustments to contribution limits and income eligibility limits that are notable as you set your savings targets for the New Year. Below, you’ll find additional updates worth keeping in mind as well.

Saver’s Credit Income Limit (Retirement Savings Contributions Credit):

For low and moderate-income workers, it is $76,500 for married couples filing jointly (up from $73,000), $57,375 for heads of household (up from $54,750), and $38,250 for singles and married individuals filing separately (up from $36,500).

Additional changes made under SECURE 2.0: 

• The limitation on premiums paid concerning a qualifying longevity annuity contract is $200,000. For 2024, this limitation remains $200,000.

• Added an adjustment to the deductible limit on charitable distributions. For 2024, this limitation is increased to $105,000 (up from $100,000).

• Added a deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to a split-interest entity. For 2024, this limitation is increased to $53,000 (up from $50,000).

As we begin 2024, keep these updated figures on your radar when reviewing your retirement savings opportunities and updating your financial plan. As always, if you have any questions, feel free to contact our team! 

Have a Happy and Healthy New Year! 

Kelsey Arvai, CFP®, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

Any opinions are those of Kelsey Arvai, MBA, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.