Yearly Archives:2020

The SECURE Act

Long-established retirement account rules change

Provided by Christine Pikutis-Musuneggi, CRPC®, CLTC, LACP

The Setting Every Community Up for Retirement Enhancement (SECURE) Act is now law. With it, comes some of the biggest changes to retirement savings law in recent years. While the new rules don’t appear to amount to a massive upheaval, the SECURE Act will require a change in strategy for many Americans. For others, it may reveal new opportunities.

Limits on Stretch IRAs. The legislation “modifies” the required minimum distribution rules in regard to defined contribution plans and Individual Retirement Account (IRA) balances upon the death of the account owner. Under the new rules, distributions to individuals are generally required to be distributed by the end of the 10th calendar year following the year of the account owner’s death.1

Penalties may occur for missed RMDs. Any RMDs due for the original owner must be taken by their deadlines to avoid penalties. A surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and child of the IRA owner who has not reached the age of majority may have other minimum distribution requirements.

Let’s say that a person has a hypothetical $1 million IRA. Under the new law, your beneficiary should consider taking at least $100,000 a year for 10 years regardless of their age. For example, say you are leaving your IRA to a 50-year-old child. They must take all the money from the IRA by the time they reach age 61. Prior to the rule change, a 50-year-old child could “stretch” the money over their expected lifetime, or roughly 30 more years.

The new limits on IRAs may force account owners to reconsider inheritance strategies and review how the accelerated income may affect a beneficiary’s tax situation.

IRA Contributions and Distributions. Another major change is the removal of the age limit for traditional IRA contributions. Before the SECURE Act, you were required to stop making contributions at age 70½. Now, you can continue to make contributions as long as you meet the earned-income requirement.2

Also, as part of the Act, you are mandated to begin taking required minimum distributions (RMDs) from a traditional IRA at age 72, an increase from the prior 70½. Allowing money to remain in a tax-deferred account for an additional 18 months (before needing to take an RMD) may alter some previous projections of your retirement income.2

The SECURE Act’s rule change for RMDs only affects Americans turning 70½ in 2020. For these taxpayers, RMDs will become mandatory at age 72. If you meet this criterion, your first RMD won’t be necessary until April 1 of the year after you reach 72.2

Multiple Employer Retirement Plans for Small Business. In terms of wide-ranging potential, the SECURE Act may offer its biggest change in the realm of multi-employer retirement plans. Previously, multiple employer plans were only open to employers within the same field or sharing some other “common characteristics.” Now, small businesses have the opportunity to buy into larger plans alongside other small businesses, without the prior limitations. This opens small businesses to a much wider field of options.1

Another big change for small business employer plans comes for part-time employees. Before the SECURE Act, these retirement plans were not offered to employees who worked fewer than 1,000 hours in a year. Now, the door is open for employees who have either worked 1,000 hours in the space of one full year or to those who have worked at least 500 hours per year for three consecutive years.2

While the SECURE Act represents some of the most significant changes we have seen to the laws governing financial saving for retirement, it’s important to remember that these changes have been anticipated for a while now. If you have questions or concerns, reach out to your trusted financial professional.

Christine Pikutis- Musuneggi, CRPC®, CLTC, LACP may be reached at 412-341-2888 or christine@mfgplanners.com.


This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – waysandmeans.house.gov [12/25/19]

2 – marketwatch.com  [12/25/19]

 

Facing the Fears of Goal Setting

FINANCIAL FIRSTS

Christopher S. Musuneggi, CFS, RFC
President, The Musuneggi Financial Group

Securities & Investment Advisory Services Offered Through H. Beck, Inc. Member FINRA, SIPC. H Beck, Inc. and The Musuneggi Financial Group, LLC are not affiliated.

Getting Started

  • Identify your investment goals
  •  Prioritize your saving
  •  Start with a budget

Your investing goals

Whether you’re working with an advisor or managing your own portfolio, the first question is always the same: What are you saving for?

  • Retirement
  • College funding
  • Emergencies
  • Major purchase
    • House
    • Wedding
    • Dream vacation

Saving for retirement might be the most important thing you ever do with your money. And the earlier you begin, the less money it will take!

Saving enough for college might seem impossible. But families like yours are doing it every day, and it’s easy for you to start too.

EMERGENCY FUNDS – Being prepared for life’s surprises can take a burden off your mind—and someday, your wallet.

A house, a wedding, a dream vacation: Don’t forget to plan and save for the big moments in your life!

Retirement

When it comes to preparing for retirement, there are a lot of things you can’t control—the future of Social Security, tax rates, and inflation, for example. But one big thing that you can control is the amount you save.

The earlier you start saving for retirement, the less you’ll need to put away each year. That’s why the best time is now.

How much am I going to need?

That depends on many things, including your lifestyle, your retirement age, and your other sources of retirement income.

What type of account should I use for my retirement savings?

Many people have access to workplace plans (401(k)s, for example) as well as IRAs and general savings accounts.

How much do I need to know about investing to manage my savings?

It’s good to have some basic investing knowledge.

How much am I going to need?

You don’t need very much to get started, and the total amount you save completely depends on your family’s goals and resources. It’s something you can think about either now or as college approaches—but in the end, it’s probably not as much as you think.

College

When it comes to saving for college, there are a lot of myths out there. What’s true? What’s false? We have the answers.

Only rich people can save for college.

False. About half of all American families are currently saving for college. And you don’t need a lot of money to get started. The most important thing you can do right now is to take the same first step they did: Open an account.

Scholarships or financial aid will pay for college.

Most likely false. Getting a full scholarship or enough financial aid to cover the whole cost of college is unlikely. Only a small percentage of students have their entire tuition covered, let alone housing, books, and fees. (And, in case you were wondering, an even smaller number of students pay for college by winning the lottery.)

I can start saving no matter how old my kid is.

True. It’s never too late to start saving for college. The more you save now, the less you’ll have to borrow. So if your child is in high school, don’t let that stop you.

I’ll lose the money if I don’t use it for college.

False. Even if you save in a type of account that’s specifically meant for college, you can use the money to pay for many trade and vocational school expenses. Or you can give the money to someone else (a qualified family member) to use for college or even graduate school. Even the least flexible account types will give you your money back for whatever reason, no questions asked, although you may have to pay taxes or penalties on any amount your account has earned (but not on your contributions).*

I’ll miss out on financial aid if I save for college.

False. The amount you’ve saved for college or any other goal has much less of an impact on your financial aid than your overall income does. In other words: If your income is high enough, you’ll be expected to pay for at least part of your kid’s college expenses, whether you bothered to save anything or not.

Emergency Fund

Emergencies—from a broken bone to a layoff—are a fact of life. When you’re faced with life’s unexpected events, you can be ready. What are emergency funds for?

An emergency fund is a stash of money set aside to cover the financial surprises life throws your way. These unexpected events can be stressful and costly.

 

 

Here are some of the top emergencies people face:

  • Job loss.
  • Medical or dental emergency.
  • Unexpected home repairs.
  • Car troubles.
  • Unplanned travel expenses.

Aside from financial stability, there are other pros to having an emergency reserve of cash.

It helps keep your stress level down.

It’s no surprise that when life presents an emergency, it threatens your financial well-being and causes stress. If you’re living without a safety net, you’re living on the “financial” edge—hoping to get by without running into a crisis.

Being prepared with an emergency fund gives you confidence that you can tackle any of life’s unexpected events without adding money worries to your list.

It keeps you from spending on a whim.

You’ve heard the saying “out of sight, out of mind.” That’s the best way to store your emergency money. If the cash is only as far away as your closest debit card, you may be tempted to use it for something frivolous like a designer cocktail dress or big-screen TV—not exactly an emergency.

Keeping the money out of your immediate reach means you can’t spend it on a whim, no matter how much you’d like to.

And by putting it in a separate account, you’ll know exactly how much you have—and how much you may still need to save.

It keeps you from making bad financial decisions.

There may be other ways you can quickly access cash, like borrowing, but at what cost? Interest, fees, and penalties are just some of the drawbacks.

In a nutshell, you should have at least 3 to 6 months’ worth of expenses. We recommend closer to 6.

Major Purchases

Saving for a big event in your life is exciting! What’s your plan to pursue your goal? How long will it take you to save?

How long it takes depends on what your goal is, how much you need, and how much you can put away every month.

You have options on how to grow your savings, too.

You could just add up whatever’s left over in your bank account after you pay your bills each month.

Why not use a credit card? There are ways around saving for your goal, like using credit cards or borrowing from other savings, but they often come with drawbacks. But putting that money in a separate investment account instead can have major benefits. 

You could invest your money. 2 benefits of investing to pursue your goal:

It keeps you from buying something else. No matter how much you really want to check this savings goal off your list, it’s all too easy to spend the money on something else when it’s just sitting in your bank account.

Maybe you think that willpower alone will be enough to keep you on course. If so, that’s great! But what if it doesn’t?

The best way to ensure that your money goes toward your goal is to move it out of your bank account before you’re tempted to spend it. Keeping this money in a separate account also makes it easier to see the progress you’re making toward your goal.

It gives you a chance to potentially reach your goal faster. Let’s say you want to save for a down payment on your first home. You expect to need about $10,000, and you budget $200 a month toward your goal.

Keeping the money in a bank account typically means you’ll earn a pretty low rate of return—0.5%, for example.

At that rate, it will take you a little over 4 years to reach your goal, during which you’ll deposit a total of $9,800.

If you instead invest the money in a moderate-risk investment and earn an average return of 5%, you could reach your goal 4 months earlier—with total deposits of only $9,000.*

*There are risks involved with investing, including possible loss of principal. An example provided herein is hypothetical and not indicative of any particular investment vehicle. It does not reflect the fees and expenses associated with any particular investment. Also, this example does not take into account any state and/or federal taxes that you would owe on your withdrawal. Actual results will vary and fluctuate with market conditions. In addition, rates of return will vary over time, particularly for long-term investments. There is no assurance that any particular strategy will work under all market conditions.

Your Savings Priorities

Now that you know your financial goals, you know that we are talking GoalS…plural. So you also need to figure out how to effectively juggle those goals.

What Comes First?

  1. Save for retirement
  2. Pay off debt
  3. Start emergency fund
  4. Save for college
  5. Save for major purchase

If you haven’t started saving for retirement through your employer or on your own, get started on this goal first. Remember, you can’t take out a loan to fund your retirement.

Next, pay off any consumer debt you might have. This type of debt, like credit card balances or car loans, is usually short term and not tax-deductible. It typically carries a high-interest rate as well.

Once you’re saving for retirement and you’ve paid off your high-interest debt, you should put aside money to build an emergency fund to cover at least 3 to 6 months’ worth of living expenses. You don’t want to be caught off guard when something unexpected happens.

If you’ve got kids or other children in your life and you’re planning to support them in continuing their education, this should be next on your list.

Once everything else is off to a good start, begin saving for a major purchase.

Your Budget

Statistics tells us the leading cause of household stress is money. Yet many people don’t have a system for knowing where their money goes once it comes in the door.

A budget tracks where your money comes from and where it’s going, and this is an important practice for everyone, no matter what your income or goals are. It can be as simple as tracking your money with a basic spreadsheet.

First, you need to know where your money is coming from. What do you earn? Do you have multiple sources of income? Don’t include gifts or bonuses unless you’re certain of them.

Second, know where your money is going. Include every expense and purchase, from your credit cards and student loans to last-minute trips to Trader Joes. Online purchases count here, too.

Once you know where your money is going, study that list a bit. Separate your essential expenses—like rent or mortgage—from non-essentials. Be brutally honest here. Maybe your internet connection is essential, but your Netflix subscription isn’t.

Then you need to add up both columns—income and expenses (include essential and non-essential for now)—and compare.

If you’re spending more than you make, it’s time to look carefully at those non-essentials and cut out what you can.

If your expenses are less than your income…great! You’re in a better position to start saving for those goals we identified earlier. But don’t waste this opportunity by suddenly over-spending. Still look to your non-essentials to see what can be cut; saving more now is a smart strategy, and your future self will thank you!

 

Thank you!

The Musuneggi Financial Group
www.mfgplanners.com
412-341-2888
info@mfgplanners.com

1910 Cochran Road
Manor Oak Two, Suite 520
Pittsburgh, PA 15220

 

  1. Registered Representatives may only conduct securities business with residents of the state(s) and Jurisdiction(s) in which they are properly registered. For additional information, please contact us.

 

2020 Fraud Warning

2020 FAQsAccording to consumer advocates and civic authorities there is a new potential fraud scam that is really simple to fight: Just write out the year “2020”. According to an article in USAToday, scammers can alter a date written “1/6/20” to any different year (for example adding “19” to make the date “1/6/2019” with very little work at all.

Legal experts suggest writting out the full year “2020” easily prevents any confusion… or opportunity for scammers or fraudsters to mess with your documents.

Read the full article by clicking here