Category: Retirement Savings

Life rarely stays the same for long. Over time, careers evolve, families grow or change, and priorities shift in ways that may not always be immediately reflected in a financial plan. While financial planning is often thought of as a long-term process, certain life events can naturally prompt a closer look at how everything is structured. Periods of transition can offer a valuable opportunity to step back, review your current financial picture, and consider whether your plan still aligns with your goals and circumstances today. Financial Planning Is Not Static A financial plan is often built around a snapshot in time. It reflects your income, responsibilities, goals, and resources at that moment. As life moves forward, those elements may change gradually or all at once. Because of this, financial planning is not a one-time event. It is an ongoing process that may benefit from periodic review, especially during times of change. Even small shifts can influence how different pieces of a financial plan work together. Recognizing when to revisit your plan can help ensure that it continues to reflect your current situation. Career Changes and Income Shifts Changes in employment are one of the more common reasons individuals revisit their financial plans. A new job, promotion, career change, or transition to self-employment can affect income, benefits, and overall financial structure. These changes may also influence retirement plan options, healthcare coverage, and savings patterns. During these transitions, individuals often take time to review: Changes in income and how they affect cash flow Differences in employer-sponsored benefits Retirement plan availability and contribution activity Adjustments in short-term and long-term financial priorities These moments can provide a clearer understanding of how income and benefits connect to broader financial goals. Approaching Retirement As retirement becomes more immediate, many individuals begin to take a closer look at their financial plans. This stage often involves shifting from accumulating savings to considering how those savings may support future income needs. It may also include reviewing timelines, expected expenses, and lifestyle preferences. Common areas of reflection during this phase include: Anticipated retirement timing Current savings and account structures Income sources during retirement years Healthcare considerations Rather than focusing on specific actions, this type of review helps individuals understand how their current plan aligns with their expectations for retirement. Business Ownership and Changes For business owners, financial planning can be closely tied to the structure and performance of the business itself. Changes such as starting a business, expanding operations, bringing on partners, or preparing for a transition can influence both personal and business-related finances. These developments may also affect income variability, tax considerations, and long-term planning. During these times, individuals may choose to review: The relationship between personal and business finances Cash flow patterns and financial stability Long-term plans related to business ownership Potential transitions, such as succession or sale These reviews can help ensure that financial planning reflects both personal goals and business realities. Divorce Or Separation Significant personal changes, such as divorce or separation, often lead to a reevaluation of financial priorities. These transitions can affect income, expenses, asset ownership, and long-term planning considerations. They may also prompt individuals to revisit documentation and account structures. During this period, individuals sometimes take time to review: Changes in income and household expenses Ownership and division of assets Beneficiary designations and account information Short-term and long-term financial priorities This process can help individuals better understand their financial position as they move forward. Family Changes and Responsibilities Family dynamics can shift over time in ways that influence financial planning. Events such as marriage, the arrival of children, supporting aging parents, or changes in household structure can all play a role in shaping financial priorities. These changes may affect budgeting, savings goals, and long-term planning considerations. Some individuals choose to reflect on: Adjustments in household expenses Savings goals related to education or family needs Changes in insurance coverage Estate planning considerations These types of reviews help ensure that financial plans continue to reflect the needs of those who depend on them. Relocation or Lifestyle Changes Moving to a new location or making a significant lifestyle change can also prompt a review of financial plans. Changes in cost of living, housing expenses, and local tax considerations may all influence how a financial plan is structured. Even smaller lifestyle adjustments can have an impact over time. During these transitions, individuals may consider: Differences in housing and living expenses Changes in income or commuting costs Adjustments in savings or spending patterns Long-term goals related to lifestyle preferences Understanding how these factors fit together can provide clarity as individuals adapt to new circumstances. Why These Moments Matter Life transitions often bring both challenges and opportunities. While some changes are planned, others may happen unexpectedly. In either case, these moments can create space for reflection. Reviewing a financial plan during a period of change does not necessarily mean making immediate adjustments. Instead, it allows individuals to evaluate whether their current approach continues to align with their evolving goals. By taking time to review financial information, priorities, and documentation, individuals can gain a clearer understanding of where they stand and how their plan supports their direction moving forward. Keeping Financial Planning Aligned With Life Financial planning works best when it reflects real life, not just a fixed set of assumptions. As circumstances change, revisiting your financial plan can help ensure that it continues to align with your current needs and long-term objectives. Even if no changes are made, the process of reviewing can provide valuable perspective. At Advisors Management Group, financial planning is viewed as an ongoing conversation. Life events often serve as natural points to revisit that conversation, helping ensure that each plan remains aligned with the individual circumstances and priorities of the people it is designed to support. If you are experiencing a life transition or simply want to revisit your financial plan, connecting with a financial professional can help provide a structured approach to reviewing your current situation and understanding how it fits into your broader financial picture. Contact Advisors Management Group If you would like to discuss your financial goals or have questions about your current strategy, please contact us. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin. Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security. Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses. Please do not send orders via e-mail as they are not binding and cannot be acted upon. Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation. This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services. Any subsequent, direct communication by AMG with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

Retirement planning is often discussed in broad terms, but many assumptions about it are shaped by incomplete information or generalizations. These misconceptions can influence how individuals think about saving, timing, and long-term financial needs. Taking time to understand some of the more common misunderstandings can help bring clarity to the planning process. Rather than focusing on specific actions, it can be helpful to look at how different factors interact over time and how expectations compare to reality. When Do Most People Start Saving? One common assumption is that retirement planning begins at a certain age, often later in one’s career. In reality, individuals approach retirement planning at many different stages of life, depending on their circumstances, priorities, and financial situation. Some may begin saving early, while others may focus more on retirement planning as their careers progress. Factors such as student loans, housing costs, or career changes can influence when and how individuals begin to prioritize long-term savings. There is no single timeline that applies to everyone. Instead, retirement planning tends to reflect a combination of personal goals, financial resources, and life experiences. Understanding this can help shift the focus away from comparison and toward individual progress over time. How Long Retirement May Last Another area where misconceptions often arise is the length of retirement. It is sometimes assumed that retirement will last for a relatively short period. However, increasing life expectancy has changed that perspective. Many individuals may spend several decades in retirement, depending on when they retire and their overall health. This extended timeframe introduces additional considerations. Planning for a longer retirement may involve thinking about how financial resources are used over time and how different sources of income interact throughout those years. Because longevity varies from person to person, estimating the length of retirement is not an exact calculation. Instead, it is one of several factors that can influence how individuals think about their financial plans. Understanding Income Sources in Retirement Another misconception is that retirement income comes from a single source. In practice, retirement income is often made up of several components. These may include Social Security, employer-sponsored retirement plans, personal savings, or other financial resources. Each source may play a different role depending on the individual’s situation. Relying on one source alone is not always how retirement income is structured. Instead, these elements often work together to support financial needs over time. Understanding how different income sources interact can provide a more complete view of retirement planning. This perspective also highlights that retirement planning is not just about accumulation. It also involves understanding how resources may be used and coordinated throughout retirement. The Role of Inflation Over Time Inflation is another factor that is sometimes underestimated in retirement planning. While inflation may seem gradual in the short term, its long-term impact can influence purchasing power over time. This can affect everyday expenses such as housing, healthcare, and general living costs. Surveys have shown that many individuals view inflation as a significant concern in retirement, as rising costs can influence how far savings may go over time. Because retirement can span many years, even modest changes in inflation may have a cumulative effect. Recognizing this can help provide context when reviewing long-term financial plans. Assumptions About Spending in Retirement Another commonly held belief is that spending decreases significantly in retirement. While some expenses may change, overall spending patterns can vary widely. For example, work-related costs may decline, while other areas such as healthcare, travel, or leisure activities may increase. Research indicates that many retirees report higher-than-expected expenses, suggesting that spending in retirement does not always follow a predictable pattern. Because of this, retirement planning often involves looking at a range of potential expenses rather than assuming a single pattern. This approach can provide a more balanced view of long-term financial needs. Misunderstandings Around Withdrawal Strategies Rules of thumb are often discussed in retirement planning, particularly when it comes to withdrawing savings over time. While these frameworks can provide a general starting point, they are sometimes interpreted as universal solutions. For example, commonly referenced withdrawal approaches are often based on specific assumptions about time horizons, market conditions, and individual circumstances. These assumptions may not apply equally to every situation. Because retirement planning is highly personal, these types of guidelines are often best viewed as general concepts rather than fixed outcomes. Understanding the context behind them can help individuals interpret them more effectively. Balancing Expectations With Reality Misconceptions in retirement planning often stem from simplified ideas about complex topics. Retirement involves a range of variables, including timing, longevity, income sources, and economic conditions. At the same time, individuals may find that their expectations evolve over time. As circumstances change, so can perspectives on retirement goals and financial priorities. Taking a step back to review these assumptions can help create a clearer understanding of how different elements fit together. Keeping the Focus on Long-Term Perspective Retirement planning is a long-term process that develops over many years. Rather than focusing on a single moment or decision, it often involves ongoing reflection and adjustments based on changing circumstances. Understanding common misconceptions can be a useful starting point for these conversations. It can help individuals ask more informed questions and consider how their plans align with their current situation. At Advisors Management Group, financial planning is approached as an ongoing process that evolves over time. As individuals review their financial picture, these discussions can help maintain alignment between long-term goals and the realities that shape them. While retirement planning can feel complex, taking the time to better understand common assumptions can provide valuable perspective. Over time, that perspective can support more informed conversations about financial priorities and long-term planning. Contact Advisors Management Group If you would like to discuss your financial goals or have questions about your current strategy, please contact us. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin. Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security. Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses. Please do not send orders via e-mail as they are not binding and cannot be acted upon. Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation. This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services. Any subsequent, direct communication by AMG with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

This is a common question related to retirement and retirement planning, and the answer might surprise you. While most people assume there is a magic account balance, for example one million dollars, that is not the case. The truth is that people retire comfortably with all different account balances because every situation is unique. Let’s look at factors that contribute to your retirement needs.  Spending Need Everyone’s spending needs are different. If you plan to retire with no debt and minimal monthly expenses, you may need less than someone who has a larger spending need. For those with minimal spending, Social Security may cover a good amount of their spending need allowing for minimal dependence on retirement savings. On the other hand, if your monthly spending needs are large or you anticipate travel or big-ticket discretionary spending, you will need to have more money available. Ask yourself what you would like your retirement to be like, what expenses you will likely bring into your retirement and what you envision your lifestyle to be like.  Replacing Income If the idea of living without your 9 to 5 paycheck causes you to feel stressed, you are not alone. When you start retirement, you will need to replace your paycheck with other sources. For most people, Social Security will be the base portion of your retirement income. According to the Social Security Administration, on average, Social Security payments will replace about 40% of your income. If you have lower income, this number will be higher, but if you have higher income, this amount will be closer to 25-35%  Anything that Social Security does not cover can be supplemented by your savings. IRAs, 401ks, Roth IRAs and non-qualified assets can be used to create a stream of income that becomes your paycheck in retirement. A professional financial planner can help to navigate how to spend your money to avoid spending it too quickly or paying too much in tax.  Pensions While only an estimated 15% of employees work for a company or entity that offers a pension, certain professions such as those in skilled trades, education or government likely offer a pension. If you are one of these workers, you will likely retire with less money in investments than your neighbor who works in the private sector. If you have worked in this industry for most of your career, you may have significant income that is not dependent on your personal savings. You may need far less money in savings to retire comfortably if you have a pension. The Case for Financial Planning The ins and outs of retirement planning can feel overwhelming. Financial planning can give you a look into the future and help you shed some light on your retirement future. There are a lot of factors that come into play when it comes to determining how much money you will need to save for retirement, and it is not a universal answer. It is easier to adjust your strategy earlier, then make compromises to your lifestyle later.  You do not need a lot of money to benefit from a financial plan; however, it can be the difference between having a comfortable retirement or not. Not sure where to turn? We can help. Contact us today to start planning for your retirement future.    Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

Changing jobs can carry a mix of emotions depending on the reason for the career change. Regardless of the reason for the job change, one thing everyone needs to know is what their options are with their 401k account from a previous employer. The U.S. Bureau of Labor Statistics estimates that Americans will hold over 12 jobs over the course of their career. While younger workers are more likely to move around, the average job in the U.S. is held just over 4 years. Compensation and advancement are often the largest driving factors that leads people to make job changes. As people move from one phase of life to the next, sometimes they underestimate the importance of taking their retirement savings with them. While it may seem insignificant, making a conscious decision about your retirement nest egg can help you to keep moving forward financially. After you leave your job, you have four options for your old 401k account. Option 1: Leave your 401K where it is In most cases, you can leave your 401k in the former employer’s plan.  This option requires the least amount of work since there is no additional paperwork needed. Also, your account is still able to grow tax-deferred until you withdraw funds. While this option might be an easier option it may not be the most advantageous. One of the limits of a 401k plan is that there can be fewer investment options. Also, 401k maintenance fees may be passed on to you, which can increase the expenses of the 401k plan. Another restriction is that you cannot contribute to a 401k once you no longer work for that employer. Finally, it can be complicated to keep track of where you have funds if you have multiple 401k with past employers. Option 2: Roll it over your 401K to your new employer If your new employer has a 401k and the plan allows rollovers, consolidating your 401k from your previous employer with your new employer may make it easier to keep track of where your funds are located.  Earnings will accrue tax-deferred until you withdraw funds. Some 401k plans allow loans, by rolling over your previous 401k to the new one you may be able to borrow against that balance in the future. The are some potential downfalls of rolling over your 401k to a new employer. Most 401K plans have limited investment options.  Those investment options can be replaced by the plan trustee without your approval. In addition, record keeping and administrative fees of the plan may be passed on to you. Option 3: Cash out your 401k Cashing out your 401k is another option for an old 401k. While this option allows you to gain access to your funds, it usually carries a penalty if you don’t meet certain qualifications. If you withdraw the money from your 401k and do not meet the required qualifications for a withdrawal (such as age, typically 59.5, financial situation, or disability) you will be required to pay a penalty for the early withdrawal. In addition to the early withdrawal penalty, income tax may also need to be paid on the withdrawal. Option 4: Rollover your 401k to an Individual Retirement Account (IRA) Rolling your 401k to an IRA allows for the most flexibility with your investment choices. This can give you access to mutual funds, exchange traded funds, stocks and bonds, to name a few.  You may also have greater flexibility with investments that provide income, such as dividends and interest.  IRAs can provide for greater flexibility with withdrawals and various tax withholding.  IRAs continue to allow for tax deferred saving. There are some possible disadvantages to using an IRA.  You are not allowed to take a loan against an IRA.  Depending on your investment choices there could be upfront commissions, high annual fees or even back-end charges limiting you from withdrawing money from the IRA within a certain period of time. It is important to remember everyone’s situation is different. When deciding what is the best option for you, it is wise to research all options and understand the fees involved with those options. These decisions are difficult, and you may want to reach out to a financial professional to assess your situation. In doing so, we suggest you work with a fiduciary, an advisor that works in your best interest. Shay Benedict Trading Specialist Shay joined Advisors Management Group in June of 2020. Shay works as a Trading Specialist for AMG. He works alongside the advisors to trade client portfolios. He helps to provide continuous improvement within the trading department, to ensure we meet our client’s needs. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

As financial planners, we hear all kinds of thoughts that people have about retirement. The fact is that no two people are the same and neither are two retirement scenarios. Your neighbor may plan on spending a whole winter in warm weather and you may prefer to stay near your children and grandchildren. There isn’t a right or wrong way to do retirement, but it is important to plan properly to make your ideal retirement happen. Let’s break down some of the common misunderstandings about retirement. Myth # 1 - I need $1,000,000 to retire You may need 1 million, 2 million, 10 million or perhaps you can retire on far less. It really is relative to what you need monthly to make your world go around. Let’s reframe this scenario and completely take a dollar amount out of the equation. You will need a certain amount per month to pay all your bills and pay for the extras you desire. If the mix of income, market growth, inflation, and distributions you have will provide what you need per month, you may be able to retire. Let’s say Jeff and Sharon are 65 and 67. They do not have a million dollars saved. They own their home and have paid off their mortgage and have no debt. They have normal bills such as utilities, insurance, home maintenance, and taxes. Additionally, they spend money on gas, groceries, gifts and other discretionary spending. Both Jeff and Sharon receive Social Security and Sharon has a teacher’s pension. These 3 sources of income pay for most of their expenses, but they do have other expenses that it doesn’t cover. They both have IRAs, and they have some money in accounts at their local bank. They withdraw a small amount from their IRAs to cover expenses that Social Security and pension does not cover. They work with their advisor to make sure they do not take too much money out of their IRAs, putting their portfolio in danger of running dry. Since their IRAs are invested, they see modest long-term growth that will allow them to increase their draw in the future as inflation increases their income need. This works well for them. A solid financial plan and an experienced advisor will help you to determine what you need to save, how much you need to accumulate and help you manage investments and plan out how to start to spend your money. Myth # 2 - I don’t have enough money saved to hire an advisor While there are some firms that require a certain level of wealth, many, like ours do not. We believe that having an advisor at all levels of wealth will put you on the right path to accomplishing your goals. If you wait until you feel your portfolio is large enough, you may not have enough time to change the path of your strategy. It is far better to seek help earlier in the game so that you can determine what is appropriate for your situation and what you will need to do to get there. Myth # 3 - My employer manages my 401k Nope, nope, nope…this is absolutely false. In fact, your employer cannot manage your 401k. Your employer is responsible for choosing suitable options for employees to invest in and getting the contributions into the plan, but they are not choosing what you personally are investing in or managing it for you. You will decide how much you’d like to contribute and what to invest in. There may be an investment person that will help you fill out the paperwork to enroll, but they won’t automatically make changes to your account through the years. Because a 401k plan sponsor (your employer) has a fiduciary responsibility to provide a suitable plan, many have included Target Date Funds or Lifestyle Funds to help investors select something suitable, but these are not personalized portfolios. Some financial advisors will help their clients oversee their retirement plans and adjust their strategy as they get closer to retirement. Some people may even decide to move a portion of their investments to IRAs as retirement approaches for a more hands-on approach to management. Myth # 4 - I should contribute all my savings in my pre-tax 401k to save on my taxes It is by no means wrong to save as much as you can afford in your pre-tax 401k, but it may not be the most tax efficient way to do things. In fact, you may want to include investments that are not in your 401k plan. Having different “buckets” of money that will be taxed differently will allow you to control tax in retirement and gives added flexibility to a retirement plan. You will however want to make sure that you continue to save enough in your 401k that you pick up any match that you are eligible for. Roth-401k - Many employers are offering Roth 401k as a supplement to the traditional pre-tax 401k. With Roth 401k you can use after tax dollars to fund the same employer sponsored plan. You won’t get a tax break this year, but you can take it out later without paying tax. Roth IRA - These work in a similar way as a Roth 401k; however, they are outside your employer’s plan. This puts you in the driver's seat when it comes to choosing the investments and allows for professional management. Again, you won’t get a tax break in the year you save it, but if you follow Roth IRA rules, you will be able to take it out tax free later. Please note that Roth IRAs are subject to income thresholds. Be sure to verify with your financial advisor or tax preparer that you are eligible to contribute. Brokerage - Retirement savings do not need to be in a retirement account at all. You can use accounts such as brokerage accounts or even bank accounts that are funded with after tax money to fund your retirement. You will owe tax when dividends and interest are paid on investments and when investments are sold at a gain. It is possible to control taxes by offsetting capital gains with losses as well. Brokerage accounts do not have the age restrictions on them like retirement accounts do; this allows you flexibility with retirement age and can be very useful if you are planning to retire before age 59.5. When you diversify your savings strategy, you also diversify your tax strategy which can pay off when it is time to start your spending strategy. Retirement Reality When considering what is fact and what is fiction when it comes to your retirement, it is important to know what facts apply to you. The perfect retirement is as individualized as you are. Working together with a trusted professional will help you to determine how you need to save, grow, and distribute the money you will need for your retirement. Rebecca Agamaite Investment Advisor Representative  Rebecca joined the firm in 2011 as an Investment Advisor Representative. In this role, she works with clients to manage their investment assets and help them obtain their financial objectives. Rebecca brings a great deal of experience to the team having worked for several years at Marshall & IIsley Bank and MetLife. She earned a Masters of Business Administration degree (with an emphasis on finance) from Concordia University. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

Roth IRA contributions are not tax-deductible, so there is no tax benefit for the year of contribution.  The tax benefit comes when you take a distribution.  If you follow the IRS rules, distributions from Roth IRAs are generally tax-free.  Typically, you have to be 59 ½ or older and the account has to have been established for at least five years. Although, there are special rules in the case of death, disability, and conversions. Not everyone can contribute to a Roth IRA.  First, you must have earned income, basically income from a job or self-employment.  Secondly, there are income limits for contributing to Roth IRAs.  In 2021, if your filing status is married filing joint or qualified widow(er) and your modified adjusted gross income falls between $198,000 and $208,000, you can still contribute to a Roth IRA, but the contribution is limited.  If your income is above $208,000, you cannot contribute to a Roth IRA.  For single or head of household filers, the phase-out range is $125,000 to $140,000.  If you are above $140,000, then you cannot contribute to a Roth IRA.  These income ranges can change each year. It is best to consult with a tax professional or an investment advisor to understand if you are eligible to contribute to a Roth IRA and how much. Backdoor Roth IRA If your income is too high and you do not qualify to make a Roth IRA contribution, there may still be a way to contribute to one. The strategy uses current tax law, and the term is coined, “backdoor” Roth IRA contribution.  First, you make a non-deductible Traditional IRA contribution. This can be done even at high-income levels.  Next, you immediately convert that traditional IRA to a Roth IRA; there is no income limitation for these types of Roth IRA conversions. A Few Words of Caution Even though the backdoor Roth IRA process seems simple, there are several things to be aware of when completing one.  The first thing is the timing of the traditional IRA contribution and the conversion to the Roth IRA is important. If done appropriately there may be no tax due on this transaction. Also, delays in the process could cause gains in the traditional IRA to be taxable upon conversion. In addition, if you already have other traditional IRAs, this strategy may not work for you as it can cause unwelcome tax surprises down the road.  Finally, this transaction will generate a 1099-R and will need to be reported on your tax return.  Due to the complexity of this strategy, we recommend consulting a tax professional and investment advisor before starting this process. If you would like to learn more about this strategy to see if it is right for you, please contact one of our team members. Rebecca Agamaite, MBA Client Experience Manager, Investment Advisor Representative Rebecca joined the Advisors Management Group in 2011 as an Investment Advisor Representative. Rebecca brings a great deal of experience to the team having worked for several years at Marshall & IIsley Bank and MetLife.  Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

How much can you save for retirement in 2021 in tax-advantaged accounts? How does $58,000 sound? The Treasury Department has announced inflation-adjusted figures for retirement account savings for 2021.  The basic salary deferral amount for 401(k) and similar workplace plans remains flat at $19,500; the $6,500 catch-up amount if you’re 50 or older also remains the same; but the overall limit for these plans goes up from $57,000 to $58,000 in 2021. That helps workers whose employers allow special after-tax salary deferrals, and self-employed folks who can save to the limit in solo or individual 401(k)s or SEP retirement plans.  For the rest of us, IRA contribution limits are flat. The amount you can contribute to an Individual Retirement Account stays the same for 2021: $6,000, with a $1,000 catch-up limit if you’re 50 or older. There’s a little good news for IRA savers. You can earn a little more and get to deduct your IRA contributions. Plus, the phase-out income limits for contributing to a Roth IRA are bumped up. And the income limits to claim the saver’s credit, an extra incentive to start and keep saving, has gone up. We outline the numbers below; see IRS Notice 2020-79 for technical guidance. For more on 2021 tax numbers: Forbes contributor Kelly Phillips Erb has all the details on 2021 tax brackets, standard deduction amounts and more. We have all the details on the new higher 2021 estate and gift tax limits too.  401(k)s The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is $19,500 for 2021—for the second year in a row. Note, you can make changes to your 401(k) election at any time during the year, not just during open enrollment season when most employers send you a reminder to update your elections for the next plan year. The 401(k) Catch-Up The catch-up contribution limit for employees age 50 or older in these plans also remains steady: it’s $6,500 for 2021. Even if you don’t turn 50 until December 31, 2021, you can make the additional $6,500 catch-up contribution for the year. SEP IRAs and Solo 401(k)s For the self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) goes up from $57,000 in 2020 to $58,000 in 2021. That’s based on the amount they can contribute as an employer, as a percentage of their salary; the compensation limit used in the savings calculation also goes up from $285,000 in 2020 to $290,000 in 2021.  Aftertax 401(k) contributions If your employer allows aftertax contributions to your 401(k), you also get the advantage of the new $58,000 limit for 2021. It’s an overall cap, including your $19,500 (pretax or Roth in any combination) salary deferrals plus any employer contributions (but not catch-up contributions). The SIMPLE The contribution limit for SIMPLE retirement accounts is unchanged at $13,500 for 2021. The SIMPLE catch-up limit is still $3,000. Defined Benefit Plans  The limitation on the annual benefit of a defined benefit plan is unchanged at $230,000 for 2021. These are powerful pension plans (an individual version of the kind that used to be more common in the corporate world before 401(k)s took over) for high-earning self-employed folks. Individual Retirement Accounts The limit on annual contributions to an Individual Retirement Account (pretax or Roth or a combination) remains at $6,000 for 2021. The catch-up contribution limit, which is not subject to inflation adjustments, remains at $1,000. (Remember that 2021 IRA contributions can be made until April 15, 2022.) Deductible IRA Phase-Outs You can earn a little more in 2021 and get to deduct your contributions to a traditional pretax IRA. Note: Even if you earn too much to get a deduction for contributing to an IRA, you can still contribute—it’s just nondeductible. In 2021, the deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $66,000 and $76,000, up from $65,000 and $75,000 in 2020. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $105,000 to $125,000 for 2021, up from $104,000 to $124,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $198,000 and $208,000 in 2021, up from $196,000 and $206,000 in 2020. Roth IRA Phase-Outs The inflation adjustment helps Roth IRA savers too. In 2021, the AGI phase-out range for taxpayers making contributions to a Roth IRA is $198,000 to $208,000 for married couples filing jointly, up from $196,000 to $206,000 in 2020. For singles and heads of household, the income phase-out range is $125,000 to $140,000, up from $124,000 to $139,000 in 2020. If you earn too much to open a Roth IRA, you can open a nondeductible IRA and convert it to a Roth IRA as Congress lifted any income restrictions for Roth IRA conversions. To learn more about the backdoor Roth, see Congress Blesses Roth IRAs For Everyone, Even The Well-Paid. Saver’s Credit The income limit for the saver’s credit for low- and moderate-income workers is $66,000 for married couples filing jointly for 2021, up from $65,000; $49,500 for heads of household, up from $48,750; and $33,000 for singles and married filing separately, up from $32,500. QLACs The dollar limit on the amount of your IRA or 401(k) you can invest in a qualified longevity annuity contract is still $135,000 for 2021.   Sourec: Forbes