The theme this week on the Retirement Quick Tips Podcast is: Inflation Is Still Getting Worse! What To Do Now

Today, I’m talking about securing a home equity line of credit now. Yesterday, I talked about paying off all of your debts, so it may seem odd that I’m telling you to go out and get a home equity line of credit. 

If you own your home and if you’re like many Americans with substantial equity in your home, a home equity line of credit or a HELOC, can be an important emergency source of funds if you get hit hard financially in the next recession.

That’s because a HELOC can be tapped into as an alternative to racking up credit card debt or using your 401k as a piggy bank if you run into serious financial issues. The rates on HELOCs are much lower than credit card debt, with usually much higher limits. You can borrow up to 85% of the equity in your home, and you can apply for and get approved for a HELOC, and never use it. 

But the time to apply for a HELOC is now, before a recession hits and financial conditions tighten. If you end up being laid off, it could prove impossible to get a HELOC, so it’s best to take care of it now. 

Knowing that you have a reserve of up to several hundred thousand dollars of equity in your home will help you sleep better at night and will help you make rational decisions should you find yourself in a real financial emergency. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

The theme this week on the Retirement Quick Tips Podcast is: Inflation Is Still Getting Worse! What To Do Now

Today, I’m talking about paying off your high interest credit card debt as fast as possible. The problem with credit card debt is that the rates are already sky high and getting worse each time the Fed raises rates. Interest rates on credit cards are approaching 20% for borrowers with good credit scores, and getting higher. They’ll likely get over 20% soon, and could go up to 25% or more as the Fed continues raising rates, which they have every intention of doing to tame inflation. 

As rates continue higher, it becomes harder and harder to dig out of the deepening hole of debt, and as we saw during the financial crisis in 2008-2009, in a severe recession, that debt load can lead to bankruptcy, foreclosures, and much bigger financial problems. 

If you have a few thousand dollars or more of credit card debt, this should be your number 1 priority right now - getting rid of that debt ASAP. I like the debt snowball method for paying off debt, where you pay off the smallest size debt first and then continue from there. The snowball gains momentum as you pay off each debt and you see success right away, so you’re more motivated to continue making progress. 

This goes hand in hand with what I talked about earlier in the week, which is cutting all unnecessary expenses. This becomes crucially important when it comes to paying off debt, and extreme action should be taken, since you’ll need every available dollar to knock out that debt fast. Stop eating out. Stop the Starbucks run. Consolidate all trips and errands to cut down on gas usage. Say goodbye to all vacations and extras this summer. 

Is it fun to live an austere lifestyle? No! Is it forever? No. This is a short term austerity with big long-term benefits. Because it has the potential to save you in the next recession if you pay off your debts now. 

To speed up how long it takes you to pay off your debt, you can get creative by selling things on Craigslist or Facebook Marketplace. And commit to paying cash for everything, so you don’t add any new debt to your credit card balance. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

The theme this week on the Retirement Quick Tips Podcast is: Inflation Is Still Getting Worse! What To Do Now

Today, I’m talking about stockpiling some food and basic necessities. With food prices already crazy high, this is harder to do now than it was a year ago, but it’s still important to do what you can. 

Supply chains are already strained and slow to recover, and with gas prices continuing higher, and the war in Ukraine disrupting the food chain around the world, there are likely to be shortages similar to the baby formula issue that hits other categories of food and other necessities. 

The headline for an article in Business Insider published June 10th, says: “Truckers warn skyrocketing diesel prices are making US supply-chain and trucking industry unsustainable”. 

“Austin Smith, owner of Iron River Express, said it has cost him over $20,000 a week to keep his three trucks running.

"If something drastic doesn't change in the next few weeks/months, I promise you, you'll see empty shelves everywhere you look," Smith wrote in a post that was shared nearly 290,000 times. "You'll see chaos as people fight for the basic necessities of everyday life."

That’s a scary prediction, but it shows the domino effect of inflation and higher fuel prices and how that trickles down to the basic necessities we all need. So take steps now to build up extras of food and necessities, so you won’t be caught off guard and panicking.

There are lots of resources online and guides to help you accumulate the needed items in your stockpile. If you can afford the extra expense to build your food stockpile now, then do it. 2 weeks is a great place to start, and if you can have a goal of 3 months worth of food storage for your family, you’ll be able to get through even the worst case scenarios of supply chain disruption without considerable stress. 

But if you can’t afford to spend $1000-$2000 at Costco to build your stockpile in one trip, you can take smaller steps each time you go to the grocery store. Create your list of needed items for your stockpile, and each time you go to the grocery store, buy a few of those items on the list. You’ll make progress and some extra food is better than no extra food.

The other reason why this matters is that if you experience a job loss or a pay freeze or pay cut if a full blown recession hits, even if the supply chain doesn’t crack, you’ll be happy that your food costs are lowered because of your stockpile, since you can use your stockpile to stretch the time in between shopping trips, and buy less when you do go to the store. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

The theme this week on the Retirement Quick Tips Podcast is: Inflation Is Still Getting Worse! What To Do Now

Today, I’m talking about dropping all unnecessary expenses. Not the most fun topic to discuss and much easier said than done, but if a recession is coming, financial stress and potential job losses are in store, especially if you work in a highly cyclical industry that tends to get hit hardest by recessions, expect news of layoffs, furloughs, and pay freezes or pay cuts. 

Couple that with the current high rate of inflation, and many Americans will be blindsided by how quickly their financial situation deteriorates if a recession hits. Inflation will likely abate during a recession, but there will definitely be an overlap of continued high inflation and a recession, which is especially painful. 

So the goal then is to create breathing room with your finances. And that means that increasing your savings now will be of utmost importance. You don’t want to be caught in a situation where you’re forced to take on credit card debt because you don’t have enough cash savings to get you through a job loss or a financial hardship that could last a few months. So start now. Drop all unnecessary expenses. Planning to remodel your bathroom? Want to get a new car but don’t need one? Wait. Downsize the summer vacation. If you’re like me, you’ve been itching to travel more since being stuck at home during the pandemic. But instead of the 2 week vacation to Hawaii or the Caribbean, save the cash and take a trip to the lake or beach instead for a few days.

It’s especially important to avoid any expenses that will add to your fixed monthly costs. Which goes back to the new car or the bathroom remodel. Even if you have the cash, hang on to it, and if you don’t have the cash and will be using debt to finance these larger purchases, the last thing you want with a recession on the horizon is a new fixed bill added to your monthly expenses. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

Welcome to a new week here on the Retirement Quick Tips podcast. I’m your host Ashley Micciche, co-owner of True North Retirement Advisors, an independent financial advisory practice managing $340 million in client assets. I’m a Chartered Retirement Planning Counselor, and I started this podcast because I love helping people just like you gain clarity and make a plan for the retirement you envision. 

The theme this week on the podcast is: Inflation Is Still Getting Worse! What To Do Now

As I sit down to record this week’s episodes, gas prices are still climbing to record levels, I just paid $19 at the grocery store for a normal size package of chicken breasts, and the Fed just raised interest rates by .75% - the most aggressive increase in nearly 30 years, as a desperate attempt to bring inflation down.

I’m very frustrated with the Fed, Janet Yellen, and others with the power to squash inflation for being so ignorant and flat-footed. Rates should have started rising in 2021 when inflation started to pick up. They would have had a longer runway to increase rates gradually, which would have bettered the odds avoiding a recession, which now seems all but inevitable.

According to a Newsweek article from June 16th, “the Federal Reserve Bank of Atlanta shows the economy on course for zero percent growth in the second quarter of 2022, and the trend from the data would suggest that the economy is on course for a contraction.

This would put the U.S. into an official recession—defined by economists and policymakers as two consecutive quarters of falling GDP.”

That’s because GDP growth was already negative in the first quarter of 2022, so we are possibly already a few months into the current recession. Many of you are nodding in agreement. Never have I seen so much consensus about a coming recession among CEOs, CFOs, economists about the direction of the economy heading south, where a majority now believe a recession is unavoidable…and that was before the Fed took aggressive action this month raising rates by 75 basis points. 

We still find ourselves in this high inflation environment, which we have little control over. Couple that with stock and bond markets that are in the doldrums, and a seemingly unavoidable recession ahead, and you have a recipe for serious financial stress for many Americans.

So this week, I’m going to help you take control over these current circumstances that seem so hopelessly out of control. I’ll share with you important steps that you can take today that will help you be resilient in this high inflation environment, and keep your financial stress to a minimum. 

That’s it for today. Thanks for listening! My name is Ashley Micciche...and this is the Retirement Quick Tips podcast.

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

It’s Sunday, which means...it’s recap time here on the Retirement Quick Tips Podcast

This week the theme was: Inherited IRAs - Explained

In case you missed any episodes, here’s what I covered this week:

• Inherited IRA Basics
• Understanding The New Inherited IRA Rules
• Clarification to Inherited IRA Rules Coming In 2022 (Hopefully!)
• How To Reduce Taxes On Inherited IRA Withdrawals
• Why The Roth IRA Makes Even More Sense Now

The most important takeaway from this week is: With the new 10-year withdrawal rule on inherited IRAs now in effect, the tax bite on withdrawals could sneak up on you if you inherit IRA assets from family members, and if you’re not diligent with your own estate planning around IRA assets, then you could end up sticking your own children with a fat tax bill when you pass along those inherited IRA assets to them.

One final note about this week’s topic. IRA rules are complicated and since the rules around Inherited IRAs are still a work in progress, its especially important that you always talk with your professional advisors - your financial advisor, tax advisor, and your estate attorney before implementing any ideas from this week’s topic. There’s always exceptions to the rules and while I talked about the rules in general terms that apply to most people, I simply don’t have the time in each episode to cover this topic from every angle, so talk to your professional advisors to help you avoid misinterpreting the rules and making mistakes that could prove costly. 

Tomorrow, come on back because we’re starting a brand new theme: How To Deal With Inflation. 

Inflation is a topic I’ve covered a few times on the podcast, and in August of 2020, before the Fed ever took inflation seriously, which was a massive policy error on their part, I was saying that inflation wasn’t a problem…yet. 

Well now it is and I was wrong for thinking that the Fed would be able to rein it in sooner. Yet, here we are with record high inflation at 8.6% and those fears are driving stock markets into a tailspin. 

So next week, I’ll talk about a few actionable steps you can take today to minimize the impact of inflation on your family’s finances.

Thank you so much for listening this week! If this podcast is valuable for you, please share the show with a friend, a neighbor, your brother, or co-worker who is getting close to retirement. Just go to your favorite podcasting app, hit the share icon, then text or email the show link to someone you know who is eyeing retirement. 

Thanks for sharing the love and spreading the word. I hope you have a blessed Sunday. My name is Ashley Micciche, this is the Retirement Quick Tips Podcast.

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

The theme this week on the Retirement Quick Tips Podcast is: Inherited IRAs

Today, I’m talking about Inherited Roth IRAs, and why the case for Roth IRAs just got stronger. Yesterday, I briefly touched on how moving more of your Traditional IRA assets into Roth can help reduce future taxes beneficiaries of those IRA assets will pay on the withdrawals. That’s because unlike inherited IRAs for traditional IRAs, heirs generally won’t pay taxes on assets withdrawn from an inherited Roth IRA, which is great news since the tax bite on a large inherited IRA of say $1,000,000 could be as much as 40% or more for those non-spouse beneficiaries! That’s $400,000 or more gone in taxes over 10 years from a $1,000,000 IRA that took decades to accumulate. 

If you’re as sick to your stomach as I am, then the case for Roth IRA assets after these 10-year rule changes went into effect is even more compelling. 

So if you’ve been considering a Roth Conversion or simply contributing more of your 401k dollars to the Roth account while you’re still working, think not just about the taxes this year that you’d miss out on by contributing to your Roth, or the taxes you’d pay on a conversion, but think long-term as well on the taxes that your heirs won’t pay on those Roth IRA withdrawals once they inherit the account. 

And considering that Roth IRA assets are most often the last accounts to be drawn down in retirement, you’ll want to ensure that as much of your assets are sheltered inside of a Roth to reduce the future tax bite on your heirs. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

The theme this week on the Retirement Quick Tips Podcast is: Inherited IRAs

Today, I’m talking about a few clever ways to potentially reduce taxes on inherited IRA withdrawals. 

With the SECURE Act accelerating the withdrawals and the taxes paid on IRA withdrawals for non-spouse beneficiaries, some of you may want to make some changes to your estate plan and consider some alternatives in how you deal with IRA assets and who you name as beneficiaries. 

As I mentioned yesterday, the rules on Inherited IRAs were overhauled in 2019, and even though they should be clarified later this year, there are steps you can start taking now to reduce the tax bite on IRA assets you’re planning to pass along to your kids, or if you’re planning to receive IRA assets from your own parents, it’s wise to have a conversation about planning that can be done in light of these new rules. 

In most cases, an estate attorney needs to get involved, so it’s a good excuse to revisit your estate plan. 

That’s because mishandling an inherited IRA could bump you into a much higher tax bracket, and significantly reduce the net amount that you would receive from an inherited IRA, so it’s important that the original account owner - whether that’s you for your own IRA, or mom and dad for an IRA that you plan to inherit from them - it’s important that you do some advanced planning here. 

First of all, its important to understand the exceptions to the 10-year rule for mandatory withdrawals. A disabled or chronically ill person, a child who has not yet reached the age of majority, and lastly, a beneficiary who is not more than ten years younger than the deceased. If a beneficiary checks one of these boxes then the rules could be significantly different. 

Secondly, it might make sense to unequally split different account types among different children, giving IRA assets to children with lower income and a bigger portion of taxable assets like trust accounts to children with higher incomes. [Explain]...

Another consideration here is that Roth conversions become a lot more attractive when viewed in light of these changes, especially from an estate planning and tax minimization standpoint. 

That’s because the 10-year withdrawal rule still applies to Roth IRA assets, but none of those Roth IRA withdrawals will be taxable for Roth IRA beneficiaries. A beautiful thing! 

Those are probably the 3 main considerations, but it’s important to do some advanced planning while the original account owner is still alive to ensure that the tax drag on inherited assets is minimized. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.  

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

The theme this week on the Retirement Quick Tips Podcast is: Inherited IRAs

Today, I’m talking more about the new rules on Inherited IRAs and the clarification that will hopefully be coming later this year. 

In true lawmaker form, when the SECURE Act was first signed into law at the end of 2019, there were no specifics on how the rule changes to inherited IRAs were going to apply. 

For example, the new rule stated that if you inherited an IRA as a non-spouse beneficiary after December 31, 2019, you now must withdraw those funds within 10 years of the owner’s death. In addition, there are other little landmines to watch out for too. You must take the original account owner’s RMD if they hadn’t already done so by the calendar year-end, and it’s unclear whether or not you need to take withdrawals annually or not. We’re 2 ½ years in, and there still isn’t clarification on the required timing and amounts for the withdrawals, making planning difficult. 

As an article in Kiplinger points out: ”an adult child who is the beneficiary of a parent’s IRA could wait 10 years after inheriting and then withdraw – and pay taxes on –  the funds in a lump sum. This would allow for a decade’s worth of tax deferral and make the process comparatively simple to handle – just empty the account by the end of 10 years.

But the proposed regulations which still aren’t finalized, are pointing toward an annual withdrawal requirement…and again, if you inherited an IRA in 2020 and you still haven’t taken a withdrawal, you’re still in the dark 2 years later about what to do with the inherited IRA withdrawals. It doesn’t matter when they finally get around to finalizing the rules…you still have 10 years from the account owner’s death to withdraw all of the funds. 

So you can see why some analysts in the planning world have used terms like “mess” and “nightmare” to describe some of the provisions. 

The good news is that the regulations will finally be final (hopefully!) later in 2022, so you’ll be able to plan around it better if you inherited an IRA, or you’re planning to pass along IRA assets to your children. 

Tomorrow, I’m going to talk about some clever ways to potentially reduce the tax bite on inherited IRA withdrawals. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance

The theme this week on the Retirement Quick Tips Podcast is: Inherited IRAs

Yesterday, I explained Inherited IRAs and how they work, so if you missed that episode, go back and have a listen because it’s the foundation for understanding what I’m covering today and the rest of the week. 

Today, I’m doing a deeper dive into the new Inherited IRA rules that went into effect in 2020, and what you need to know about how these rules might apply to IRA assets that you plan to inherit and/or pass along to your own children or heirs someday. 

Before the SECURE Act was passed that changed the rules, when you inherited an IRA from Mom or Dad, you could take RMDs, which are the required annual withdrawals from a IRA, and stretch those over your remaining life, which significantly reduces the annual amount that you would need to withdraw from the account each year, and most importantly, also reduced the taxes owed by the beneficiaries on those annual required RMDs.

IRA withdrawals are taxed as income, so every dollar withdrawn from an IRA counts towards your income for the year, and so the taxes can be significant, and IRA withdrawals from inherited IRAs can bump beneficiaries into new tax brackets and significantly reduce the net amount of the inheritance that you actually receive once the taxes are paid on those required withdrawals.

What all changed in 2020 after the passage of the SECURE Act is that those withdrawals were no longer allowed to be stretched over your remaining life, but are now limited to 10 years. So if you inherit an IRA worth $500,000, you have 10 years after the original account owner’s death to cash it out and pay the taxes. So for example, let’s say you just let the account sit in cash (which hopefully you wouldn’t!), and the account doesn’t grow at all, you would take out $50,000 per year if you spread out the withdrawals over those 10 years equally.

That $50,000 gets included with your other income, and if you’re already in a higher tax bracket, you could be paying anywhere from 24% to 35% marginal tax rates on those withdrawals, which hurts. There is also a ripple effect from this unexpected higher income in that depending on your income tax situation, it could reduce other tax benefits like deductions and tax credits - especially at lower income levels - that you were used to, and counted on when your income was lower. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance