FAQ

Deciding when to start taking Social Security benefits is an important and often complicated decision that depends on various factors such as your financial situation, health, life expectancy, and personal preferences. One option is to begin taking Social Security as early as age 62, but this will result in a reduced monthly benefit compared to waiting until your full retirement age, which varies depending on your year of birth but generally falls between ages 65 and 67. Waiting until after your full retirement age to start collecting can increase your monthly benefits even more, up to a certain point—specifically, age 70, after which there's no additional increase for delaying.

Another factor to consider is your current financial needs and other income sources. If you're still working, have substantial savings, or other forms of income that can sustain your lifestyle, you may benefit from delaying Social Security to maximize your monthly payments later on. However, if you're no longer working, have limited savings, or have immediate financial needs, taking Social Security earlier may be more practical. Also, consider the impact of taxes and how your benefits might be affected by other income you receive.

Health and life expectancy are also crucial considerations. If you're in good health and have a family history of longevity, delaying benefits could make sense as you'll likely receive payments for a longer period. However, if you're in poor health or have a shorter life expectancy, taking benefits earlier might be advantageous. The decision is highly personal, talk to your Advisor who can discuss in further detail, and can help you look at your unique situation holistically.

The timeline for planning your retirement can vary based on your individual circumstances, financial goals, and life ambitions, generally speaking, the earlier you start, the better. Starting in your 20s or 30s can offer you the advantage of compound interest, giving your savings more time to grow. Even small contributions to a retirement account like a 401(k) or an IRA during these early years can amount to a significant sum over decades. If you didn't start that early, don't despair. Beginning your planning in your 40s or even 50s still provides you with ample opportunities to save, invest, and prepare for your later years.

In your planning, consider not just financial preparation but also what kind of lifestyle you envision for yourself. Are you planning to travel, take up new hobbies, or maybe even start a second career? All these considerations will affect how much you need to save. Additionally, you should consider possible unexpected costs, such as medical expenses, and consider safety nets like insurance and emergency funds. When calculating how much you'll need, be realistic about your life expectancy, inflation, and potential investment returns. Use online retirement calculators as initial guidance but consider consulting with a financial advisor for a tailored plan.

Retirement planning isn't just a set-it-and-forget-it endeavor; it's an ongoing process that may require adjustments based on changes in your life circumstances, such as marriage, children, career changes, or unexpected windfalls and setbacks. Periodically reviewing and adjusting your retirement strategy, especially during significant life changes, can help you stay on track to achieve your goals. Various life stages may also present opportunities for maximizing retirement benefits, such as catching up on contributions in your 50s or determining the optimal time to start taking Social Security benefits. Therefore, continual assessment and adaptation are key components of effective retirement planning.

Deciding which assets to draw from first in retirement is a complex decision that involves numerous variables, including tax implications, potential investment returns, and your personal financial goals. Typically, advisors recommend withdrawing from taxable accounts first, such as brokerage accounts, because these often have a lower tax impact compared to other types of accounts. Drawing from these accounts first allows your tax-deferred accounts, like traditional IRAs and 401(k)s, as well as tax-free accounts like Roth IRAs, to continue growing. By doing this, you not only stretch the tax advantages of these accounts but also preserve more wealth for the later stages of retirement or for potential legacy planning.

After depleting taxable accounts, the next source you may consider is your tax-deferred accounts like traditional IRAs and 401(k)s and beyond that any annuity income streams, Withdrawals from these accounts are taxed as regular income, so timing these withdrawals is essential, especially if you expect to be in a lower tax bracket in later years. You will also need to consider the Required Minimum Distributions (RMDs) that are mandated from most tax-deferred accounts starting at age 73 (starting in year 2023). Prior to 2023 the RMD age was 70.5 and increased to 72 in 2019. In 2033 it is expected to increase to age 75. Failure to withdraw these amounts results in a hefty tax penalty. Finally, tax-free accounts like Roth IRAs are generally best left for last, as they can continue to grow tax-free and are not subject to RMDs, making them an excellent option for both late-retirement income and estate planning.

However, these are general guidelines, and your specific situation may require a different approach. For example, if you have large medical expenses in a particular year, it might be beneficial to draw from a tax-deferred account to offset those deductions. Alternatively, if you find that you're in a particularly low tax bracket in a given year, converting funds from a traditional IRA to a Roth IRA could be advantageous. Since the decision on which assets streams to deplete first has long-lasting implications, consulting with your advisor can provide personalized guidance tailored to your unique circumstances.

Efficiently passing on wealth to your family involves a range of strategies with a goal towards optimization tax benefits, mitigating risk on assets, and helping to ensure that your financial legacy is distributed according to your wishes. One of the most straightforward tools for this is a Will. But, relying solely on a will can subject your estate to probate, which can be a lengthy and public process. A more private and sometimes more efficient vehicle for wealth transfer is a Trust. There are various types of Trusts, each with its benefits and limitations, that can help you avoid probate, reduce estate taxes, and specify conditions on how and when your assets are distributed. Revocable Living Trusts, for instance, allow you a great deal of control over your assets during your lifetime, while Irrevocable Trusts can offer tax benefits and asset protection but generally require you to relinquish control over the assets placed in them.

Tax planning is another crucial aspect of passing on your wealth efficiently. You can make use of the annual gift tax exclusion, which allows you to give a certain amount of money ($17,000 in 2023) to any number of individuals each year without incurring gift tax. This is a way to gradually reduce the size of your taxable estate. Also it may be worth considering the benefits of Roth IRAs or other tax-free accounts when planning for inheritance; these can be passed on to heirs without incurring income taxes. On the larger scale, estate tax exemptions and the strategic use of charitable donations can also mitigate tax burdens.

Professional guidance can be invaluable when planning to pass on your wealth. Estate Planning Attorneys can help you navigate the legal complexities of Wills, Trusts, and other instruments for asset protection and transfer. At Amerity we can provide tailored investment strategies that work to align with your long-term legacy goals. We can introduce you to legal and tax professionals who can help you devise methods to minimize estate and gift taxes. By taking a multidisciplinary approach and consulting experts, you can establish a comprehensive estate plan that efficiently transfers your wealth to the next generation, aligning with your values and wishes.

Tax and legal advice is not provided by Amerity Wealth Management, LLC or its advisory representatives. Legal, tax and accounting advice must be obtained through legal and/or accounting professionals.

Diversification: The Cornerstone of Risk Management
We believe one of the most effective ways to reduce market volatility in your portfolio is through diversification. Holding a mix of different asset classes such as stocks, bonds, and real estate can help spread risk. Different assets often perform differently under various market conditions; when one asset is down, another might be up, helping to balance out your portfolio’s overall performance. It's not just about diversifying across asset classes, but also within them. For example, if you're invested in stocks, consider a blend of sectors, market capitalizations, and geographic regions. Proper diversification can help mitigate the impact of market swings, providing a smoother investment journey. Your Amerity advisor will discuss this in more detail.

Asset Allocation Aligned with Risk Tolerance
Asset allocation is another critical factor in reducing volatility. Your investment objectives, time horizon, and risk tolerance should guide how you allocate your investments among various asset classes. Generally, equities are more volatile but offer higher growth potential, while bonds are less volatile and provide steady income. Younger investors or those with a higher risk tolerance might opt for a portfolio weighted toward equities, while those nearing retirement or with a lower risk tolerance may prefer a more conservative allocation with more bonds. Reviewing and rebalancing your portfolio periodically helps maintain your desired asset allocation, which can drift over time due to differing returns from various assets.

Utilizing Volatility-Reducing Investment Tools
There are specific financial instruments and strategies designed to potentially help reduce portfolio volatility. For example, you can include assets that have a low correlation with equities, such as certain alternative investments or real estate, to potentially provide stability when stock markets are turbulent. Some investors also use options strategies to hedge against potential losses, though these can be complex and not suitable for everyone. Additionally, funds like low-volatility ETFs and mutual funds aim to offer market exposure but with reduced risk. These strategies may have their own sets of costs and trade-offs, so it's essential to consult with your advisor to tailor a volatility reduction plan that fits your specific needs.

Using Non-Securities Products
Incorporating annuities into your financial plan may serve as an effective strategy for reducing market volatility and ensuring a stable income stream. Unlike direct investments in the stock market, certain types of annuities offer a guaranteed rate of return and periodic payments, providing predictability and peace of mind. Annuities, particularly indexed annuities, are complex products and are typically regulated by the state insurance Commissions. Fixed index annuities are not an security but are an insurance products offered and sold through licensed insurance agents. Fixed annuity products can be particularly useful for retirees or those nearing retirement, as it helps to shield a portion of your assets from the market's ups and downs. By allocating a part of your portfolio to annuities, you can create a more balanced asset mix that aims for growth while providing the safety of guaranteed income, thereby reducing your portfolio's overall exposure to market volatility.

Important information
Indexed annuities are a complex product and complicated vehicles and methods used to credit interest vary widely and are complicated. It is important to understand you may not receive the entire return of the market index they are tied to. The products have surrender charges and can have different layers of fees and are not easily liquid without incurring surrender fees. Additional information about indexed annuities can be found at link a-complex-choice. Insurance products are offered and sold through Amerity Financial, LLC and licensed insurance agents. No Guarantees are offered that you will attain your financial goals and objectives. Investing involves risk including the loss of initial principle.

Understanding Medicare:
Medicare is a federal health insurance program in the United States designed primarily to serve people aged 65 and older, as well as certain younger people with disabilities or specific medical conditions like end-stage Renal Disease or Amyotrophic Lateral Sclerosis (ALS). The program is divided into several parts, with Part A covering hospital care, Part B covering outpatient services, Part C (also known as Medicare Advantage) offering an alternative way to receive Parts A and B through private insurance, and Part D covering prescription drugs. Medicare is intended to help alleviate the healthcare costs associated with aging, but it's important to note that it doesn't cover everything, such as long-term care, and usually involves co-payments, premiums, and deductibles.

Eligibility Criteria:
The most common eligibility requirement for Medicare is reaching the age of 65. However, age is not the sole determining factor. Generally, you or your spouse should also have worked long enough in a job where Medicare taxes were paid; typically, this amounts to a minimum of 10 years (or 40 quarters). People under 65 may also qualify if they have been receiving Social Security Disability Insurance (SSDI) for more than 24 months or have a qualifying medical condition. Non-citizens may be eligible if they are permanent residents and have lived in the United States for at least five continuous years before applying for Medicare.

Enrollment Periods and Next Steps
It's crucial to be aware of the enrollment periods for Medicare to avoid late enrollment penalties. The Initial Enrollment Period is a seven-month window around your 65th birthday. There are also specific periods annually when you can modify your coverage. If you're still working at 65 and have coverage through your employer, you may qualify for a Special Enrollment Period. If you miss these times, the General Enrollment Period typically occurs from January 1 to March 31 each year, with coverage starting on July 1. To determine your specific eligibility and the best time to enroll, you can visit the official Medicare website or consult with a licensed agent who specializes in Medicare and senior healthcare issues.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. This is not a solicitation for services or a sale of any service or product.

Important information
Indexed annuities are a complex product and complicated vehicles and methods used to credit interest vary widely and are complicated. It is important to understand you may not receive the entire return of the market index they are tied to. The products have surrender charges and can have different layers of fees and are not easily liquid without incurring surrender fees. Additional information about indexed annuities can be found at link a-complex-choice. Insurance products are offered and sold through Amerity Financial, LLC and licensed insurance agents.

Stable Income Streams:
One of the main concerns for retirees is the volatility in their income streams, especially when reliant on market-dependent sources like investments. Reducing this volatility is crucial for financial security and peace of mind during retirement. One effective potentially strategy is to have a diversified portfolio not only in terms of asset classes but also in income-generating assets like dividend-paying stocks, bonds, and real estate investments. This diversification can help ensure that when one source of income is down, others might compensate for the shortfall.

Annuities and Other Guaranteed Income Options
Another way to minimize income volatility in retirement is through the use of financial insurance products designed for income stability, such as annuities. Fixed annuities, for example, provide a guaranteed income stream for a specific period or for life, regardless of market conditions. Pensions and Social Security benefits also serve as more stable income sources, as they are generally not subject to market volatility. Balancing out variable income sources with these more stable options can provide a safety net that helps insulate your retirement income from market swings.

Systematic Withdrawal Plans and Professional Guidance
Consider adopting a systematic withdrawal plan for your retirement accounts, wherein you take out a set percentage annually, adjusted for inflation. This strategy aims to help reduce the chance of depleting your savings too quickly, but it requires diligent monitoring and occasional adjustments. Given the complexities and risks involved, consulting one of our experienced advisors can be invaluable. They can help tailor strategies to potentially reduce income volatility based on your specific financial situation, risk tolerance, and retirement goals.

Important information
Indexed annuities are a complex product and complicated vehicles and methods used to credit interest vary widely and are complicated. It is important to understand you may not receive the entire return of the market index they are tied to. The products have surrender charges and can have different layers of fees and are not easily liquid without incurring surrender fees. Additional information about indexed annuities can be found at link a-complex-choice. Insurance products are offered and sold through Amerity Financial, LLC and licensed insurance agents. No Guarantees are offered that you will attain your financial goals and objectives. Investing involves risk including the loss of initial principle.

Trusts can play a pivotal role in your financial planning by providing a structured and legally sound way to manage, distribute, and protect your assets. They offer a versatile framework for a variety of financial objectives, ranging from minimizing estate taxes and avoiding probate to ensuring the financial well-being of minor children or dependents with special needs. Trusts also allow for a greater degree of control over how and when your assets are distributed. For instance, you can stipulate that beneficiaries receive funds only upon reaching a certain age or achieving specific milestones, such as graduating from college. This added layer of control can be particularly useful in cases where you may have concerns about the financial maturity or decision-making abilities of your beneficiaries.

Various types of trusts exist, each serving different needs and offering distinct advantages. Revocable Living Trusts, for example, allow you to maintain control over the assets placed in the trust while you're alive and facilitate the seamless transfer of assets upon death, avoiding the time-consuming and often costly probate process. Irrevocable trusts, on the other hand, can remove assets from your taxable estate, thereby potentially reducing your estate tax liability. Special Needs Trusts can provide for a loved one with disabilities without jeopardizing their eligibility for government assistance programs. Charitable trusts allow you to integrate philanthropic goals into your estate plan, offering both immediate and future benefits for the charitable organizations you wish to support, while often providing tax advantages for you.

While trusts can offer significant benefits, they also come with some complexities and costs, such as the fees for establishing and managing the trust, so they aren't suitable for everyone. Consulting with a knowledgeable estate planning attorney and a financial advisor is crucial for determining whether a trust aligns with your overall financial objectives and for selecting the type of trust that best suits your needs. These professionals can also guide you in the crucial steps of selecting a trustworthy trustee and carefully drafting the terms of the trust to ensure that your intentions are accurately reflected and legally enforceable.

Legal advice is not provided by Amerity Wealth Management, LLC or its advisory representatives. Legal, tax and accounting advice must be obtained through legal and/or accounting professionals. Information provided is obtained from sources deemed to be reliable and may be an expression of our opinion. It is important to consult with an attorney.