Addressing Long-Term Care Concerns

When insurance plan conversations lead to discussions about after retirement, there are certain hot-button issues that will swing employee conversations out of your control. When helping older employees with retirement and beyond, two topics will change the atmosphere in the room. One is the long-term viability of Social Security, which frequently comes up as a question. The second is on the conversation of long-term care, which has the possibility to make or break a retirement plan. In this installment of CenterStage, Donald McClurg, one of our financial advisors, breaks down what matters and offers answers to many of the questions concerning long-term health.

What Exactly is Long-Term Care? What’s Gobbling up Your Retirement?

You place insurance on the things that are valuable to you, such as your car, your home and possibly your pet. What about your life? Is your family of importance to you, and beyond that, what about your legacy (i.e. any funds left over from your lifetime given into your living family members)? Currently, there’s about a 50% chance a 65-year-old will require care such as an in-home nurse or a medical/assisted living facility that can deliver optimal, specialized care. For employees near retirement or the 65 years-old mark, there is a trove of questions surrounding long-term care, including:

  • Should I consider a hybrid long-term care plan?
  • Is the insurance worth it for me, given how insurers have been increasing the price of premiums?
  • How do I avoid a government facility should I need care?
  • How much money should be saved and when should saving begin?
  • Can I afford this/Will I make it?
  • What are my blind spots?

Unfortunately, the “right” answer to these vexing questions regarding long-term healthcare is exclusively individual-specific. Factors in the determination are dependent upon the individual’s wealth, age, desire to leave a bequest and a need for peace of mind, amongst all other factors. Donald believes, “The biggest risk to a financial plan is not running out of money, it is incurring a financial catastrophe later in life and not having protection. Right now, that catastrophe has the highest probability of showing up in the form of long-term care.”

Commonly viewed as less superior to other insurance options already being taken out of a paycheck, the fact of the matter is this is not another out-of-pocket expense placed on you, such as renters or car insurance. Rather, long-term care should be seen as a valuable choice; an investment in your future and for your family. As a “numbers guy”, Donald brings up the importance of three variables in particular: 70, 90, and 5, which mean:

  • Singles 65 and older stand a 70% chance of needing long-term coverage
  • Couples 65 and older stand a 90% chance of needing long-term care
  • Only 5% of Americans have long-term coverage plans

The Driving Factor for Long-Term Care

Individuals display an adversity to paying for long-term coverage, as they are worried about the chance of paying for it and not needing it or having to leave their homes and live out their lives in a facility. If that’s you, you may consider a hybrid plan. Most hybrids solve the two main deterrents of long-term care insurance by:

  • Allowing for in-home care (that’s right, they don’t force you into a facility)
  • Return of unused premiums. (i.e. whatever portion you don’t use is returned to your beneficiary)

According to the U.S. Department of Health and Human Services, the average cost for a semi-private room in a nursing home is $6,844 per month, with the average stay being around 2.5 years. As previously listed, 52.3% is the expected percentage of people turning 65 who will have to have a long-term care need during their lives. That is over half the population of individuals turning 65 years of age who will need the assistance offered through long-term care.

The most misleading stat is that 63% of people spend $0 on long-term care. This is because roughly half of Americans have exactly $0 in savings or will have $0 when/if they need long-term care. Those individuals typically find themselves at facilities who accept Medicaid, meaning they are more than likely falling short of the care they need. Here’s the most under reported and most impactful fact of long-term care: the burden is falling on your employees. In total, an estimated $3 trillion in lifetime wages is lost due to unpaid care-giving responsibilities.

How Can Employers Offer Better Long-Term Care Solutions?

It has been said that happy employees are productive employees, and as an employer, you naturally want to increase both the productivity and well-being of employees. Of the many things your employees stress about (home, kids, work, etc.), money is always at the top of the list. In fact, a study investigating employee productivity and well-being found that employees spend 3-4 hours per week, 4-5 times per hour worried about finances. At Saxon, we are happy to help employers implement useful financial tools for their employees to leverage.

For the majority of the working world, healthcare derives from employers, thus, the head of the organization is the one responsible for properly educating employees on their coverage. As the saying goes, “proper planning prevents poor procedure.” With Saxon, employers can schedule a brief, in-house seminar with one of our stellar financial advisors and a long-term care specialist. Through these seminars, clients and employees will discover clear solutions to anything that may still have them on the fence about investing in long-term health. Employees will come to learn the real value in long-term care, such as the reason behind asset location mattering more than asset allocation.

Ready to explore your options and become one of the 0.5% of businesses currently offering long-term care insurance to their employees? If so, don’t hesitate; pick up the phone and call Donald with Saxon Financial today at (513) 609-4404 or toll-free at (800) 847-1733 to discover how you can avoid the single largest threat to your employees’ retirement.

Why Saxon Is the Right Choice for You

At Saxon, we care about you – your family, your company, your finances, and your future. We cultivate our years of practice and experience to deliver exceptional service to you every time. We empower you by placing the tools and knowledge necessary into your hands to deliver remarkable returns on investment. An engagement with Saxon is unique. This is because we have invested in developing a culture where business is personal. Our clients are the central heart of our organization; meaning that without you we have no purpose.

To Saxon, experience matters. We know that outcome is crucial, but to us, it matters how we get there. By taking intentional action in an authentic manner, we are a catalyst for your success that is positively refreshing. We invite you to explore the Saxon way.


Medicare: Why an Advisor Makes All the Difference

Often those approaching Medicare eligibility are overwhelmed by the quantity of information available – and understandably so. As a form of insurance, Medicare is fundamentally different from other group/employer, individual, or family plans in that it is centered around the individual, yet any decisions made could potentially affect family members. In order to understand the costs, benefits, plans, and overall structure of Medicare, professional advice is strongly recommended when weighing options. That’s why, in this installation of CenterStage, Rob Glover, our Senior Solutions Advisor at Saxon, provided the following insightful information. Generally speaking, Medicare plans are explored during a significant lifestyle change. Having an insurance sales agent to facilitate retirement planning can help in adjusting Medicare options.

A Two-Way Relationship

Insurance agents are able to conform Medicare options around desired preferences and requirements. Each beneficiary is unique and therefore deserves a plan that delivers a standard of quality that is suited to varying budgets and ways of life. Agents can act as personal advisors and offer close collaboration when sifting through insurance plans. After becoming aware of defined healthcare coverage needs, Medicare advisors can narrow the search and find a solution that will safeguard both the individual and his or her family from looming financial damages.

It’s best to have a licensed agent with years of experience in Medicare. While textual knowledge is certainly important, learned wisdom is paramount in avoiding pitfalls throughout the process. Agents with real experience in the field are the best guides in navigating the processes, policies, and terminology of Medicare. Also, there are benefits in maintaining a relationship with them, since they are well-versed in the details of plans germane to the area. They are likely more familiar with supplier and provider networks and, using this knowledge, can provide guidance on which Medicare plan to choose.

The beneficiary-advisor relationship doesn’t end after the sale. In fact, they are often an advocate for many years after, offering consultations that address subsequent concerns with coverage. Medicare advisors can help review healthcare needs on a yearly basis to ensure the plan is lining up with changing criteria.

Services Worth Using

Independent advisors can offer many options across a multitude of carriers. Some agents are able to compare dozens of providers by contracting many different insurance companies. This method of contracting also aids in eliminating biases during plan research and comparison. The independent advisor can assist in making an informed decision on a Medicare insurance plan that is in line with the individual needs of the beneficiary. There aren’t any fees associated with merely utilizing an advisor. To elaborate, the rates linked to insurance plans already cover advisors’ commissions and thus render the decision on whether or not to employ one free from frugal urges. Therefore, there’s no reason not to seek the advice of a discerning sales agent to make the enrollment process easier. Licensed sales agents in the Medicare field take part in numerous hours of continued education and training annually. They are knowledgeable to pertinent information that could shape the decision-making process in addition to their understanding of a client’s defined parameters. Nevertheless, beneficiaries can only change insurance once within a year and can wind up “stuck” in a chosen plan unless the said beneficiary is eligible for a Special Enrollment Period. Regardless of position in the retirement process, time becomes increasingly more important. Utilizing an informed advisor will lead to time saved on plan comparison and research as they can help pinpoint a solution that fits the circumstances rather than waste time through trial and error. Licensed advisors are able to grant a one-stop shopping experience. Through innovative technology, they can access any and all relevant information at any time. Some create webinars regarding important issues, answer frequently asked questions, and elicit 24/7 assistance. Within some websites, beneficiaries can enroll in Medicare Advantage plans, request proposals, and research and compare options.

If you would like to learn more, contact Rob Glover at 513.703.7720 or rglover@gosaxon.com.


Cash Balance Plans for Business Owners

The new tax law is a lucrative opportunity for many pass-through businesses. As long as the owner’s income does not exceed a certain threshold, businesses can earn significant tax savings. In this installment of CenterStage, Todd Yawit – the director of retirement services at Saxon – has provided the following insightful information on Cash Balance Plans and how they can be used to help businesses earn significant tax savings.

The New Tax Law

With the new tax law, some business owners can now deduct up to 20 percent of their qualified business income (QBI) as long as their income falls below a certain threshold. Todd explained, “The new tax law that went into effect treats certain business types differently than it used to. In order to take advantage of the full deductions, certain business owners might need to lower their income to accommodate getting the deductions.”

deductions.” The full 20 percent deduction is available to companies that have an income that falls below the set threshold amount. Because of this, many businesses will have lower effective tax rates. Business owners whose income does not fall below the set threshold amount can still reap significant benefits by placing the difference of their income in a Cash Balance Plan. This will cause their taxable income to fall below the set threshold.

What Are Cash Balance Plans

Cash Balance Plans are a type of retirement plan that combines the maximum benefit amount associated with Defined Benefit Plans with the flexibility and portability of a 401(k) plan. 

Cash Balance Plans are trustee directed and assets are invested into a single pool. Participants receive individual statements with hypothetical account balances on them.

Cash Balance Plans are often preferred over traditional Defined Benefit Pension Plans. Individual statements received by participants reflect what participants could potentially collect in the form of a lump sum, if eligible.

Here are the top 6 features of a Cash Balance Plan:

  1. Niche Retirement Plan – Cash Balance Plans are a great fit for physician groups, dental groups, and other professional practices, as well as small business owners or self-employed individuals.
  2. Tax Deferred Contributions – All contributions are tax-deductible, and the investment earnings are tax-deferred. Assets are not subject to income tax until they are withdrawn from the Cash Balance Plan or a rollover IRA.
  3. Higher Contribution Limits – Cash Balance Plans allow for high tax-deductible contributions than a 401(k). The maximum contribution amount is dependent on the individual’s age and normally increases as participants get older.
  4. Creditor Protection – Plan assets in a Cash Balance Plan are ERISA creditor protected.
  5. Flexible Plan Design – Cash Balance Plans can easily provide for many different levels of benefits and contributions.
  6. Supplement to a 401(k) Plan – Cash Balance Plans can be used as a companion to a 401(k) plan, providing a more favorable contribution cost design.

How Can Cash Balance Plans Help Business Owners Take Advantage of the New Tax Law?

“One of the best ways for a business to lower their income is to make contributions into a retirement plan. The advantage of a Cash Balance Plan retirement plan is it benefits the owner and key other people, as opposed to a 401(k) where it’s benefiting everybody,” explained Todd.

The 20 percent pass-through deduction is “phased out” for business owners with taxable income between the threshold limit and phase-out limit. By taking advantage of Cash Balance Plans, businesses can fall within these limitations.

Please contact Todd Yawit with any questions regarding Cash Balance Plans. You can reach him at (513) 573-0129 or send him an email at tyawit@gosaxon.com.


What’s the Deal With 529 Plans?

It’s never too early to invest. A 529 Savings Plan, prudent financial direction, and steady contributions are paramount to a successful college fund. Due to the intricacies of the financial instrument, an advisor is recommended to guide contributors throughout the process. In this installment of CenterStage, Cyrus Dhatigara – an investment advisor representative – has presented new contributors with his advice on 529 Savings Plans and how they can be beneficial for costly tuition fees.

How are they beneficial?

The 529 Savings Plan is a great way to save money for college. First, there are comparatively high limits on the amounts that parents or grandparents can contribute. Second, these plans are tax free: unlike with a tax-deferred 401(k), funds are exempt from taxation once they are eventually withdrawn. Third, mutual fund companies that are affiliated with state Tuition Trust Authorities are able to offer professional management leveraging a diverse array of funds. Fourth, 529 Savings Plans allow contributors to change the focus of their investments, typically starting with an aggressive strategy during a child’s younger years and moving towards a more conservative approach when he or she gets older.

How much to start?

Parents would naturally like to know how they can foster such an investment. Most have the basic idea of what a 529 Savings Plan is, but not much more. Seeking sound financial advice should fill any gaps in proficiency. Also, there’s no excuse to wait – it takes a mere $25 per month to initiate a plan. Further, 529s can make use of automated checking account withdrawals to enable healthy growth. This is a flexible product, though annual contributions will likely need to increase on that basis. The maximum limit per child is around $300,000; parents can contribute whatever they want and supplement the fund via one-off investments from grandparents.

What do they cover?

Anything that’s necessary for class is covered: books, tuition, fees, and computers or iPads, among other things. In fact, a 529 Savings Plan even covers grad school. Since the investments are earmarked for higher education, money is transferred directly from the mutual fund to the university without any contributor intervention. As a result, parents shouldn’t be concerned about quarterly or semester requirements, and there isn’t room for IRS violations since their only further interaction is taking a receipt.

How can Saxon help?

Cyrus crafts strategic savings plans around children to help fund college tuition, while providing the tools for protection and investment. His largest passion project is an extension of the daily work he does. He revels in contributing financial education to all ages. Saxon’s goal is simple, to mold this program to fit contributors’ individual needs, right from the beginning. We know college savings plans are not one-size-fits-all. Whether you are looking to save for tuition, room and board fees, books, supplies or required computer equipment and technology, Saxon can help.

Please contact Cyrus Dhatigara with any questions you may have on 529 Savings Plans. You can reach him at 513.236.9334 or send him an email at cdhatigara@gosaxon.com.

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Saxon's Go365 Clinic: A Can't Miss Wellness Event

In this installment of CenterStage, we are spotlighting our upcoming event, as presented by our Wellness Director, Abby Graham!

Wellness Director

Saxon, along with Humana and HealthWorks, will host a wellness seminar about Humana’s wellness program on Wednesday, May 23. This exciting wellness clinic will aid employers in creating a more engaged workforce around wellness. Plus, there may be an awesome incentive involving a discount on insurance premiums, so keep reading!

Relationship Status - Going Strong

Humana is an insurance carrier represented by Saxon. Humana offers a personalized wellness and rewards program that we find to be exceptional for helping workplace environments create a great sense of community and health. HealthWorks is an outside vendor that works alongside Humana to provide wellness guidance and related services. HealthWorks will have a roundtable discussion explaining how they coordinate benefits with the Go365 program. With all three of us together at the event, employers will have the ability to have all their questions answered and have educational resources at their disposal.

Things to Look Forward to

“If you are someone in your company that is into wellness and is wanting to get others involved in a health initiative, then this event is for you! It will allow you to become an expert on Humana’s Go365 program and see why it is a fantastic incentive-based wellness program.” - Abby Graham

The event will feature several individual round tables, each one covering a different topic (see next page for topics). There will even be a 15% discount on premium insurance once you reach Gold Status in the program. The event is free to attend, and breakfast and lunch will be provided.

Sounds pretty great, right? If you are interested in saving money, increasing employee incentives, and creating a healthier workforce, be sure to sign up now to attend our Go365 seminar.

All questions and concerns regarding the event can be directed to Abby Graham at 513.334.0371 or send her an email via agraham@gosaxon.com. We can't wait to see you there!

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Saving For Your Children's Education

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This month’s CenterStage features Kevin Hagerty, a Financial Advisor at Saxon. With over 18 years of experience specializing in financial planning solutions, Kevin provides his best advice on educational funding, specifically on 529 Savings Plans.

Educational Funding from Every Angle

In the long run, saving for your children’s education is considerably less costly than borrowing money later. Now more than ever, parents and grandparents are interested in alternate forms of schooling, such as private school. This means educational debt takes place long before college and is why President Trump implemented tax law changes to allow 529 Savings Plans to be used on more than just college.

A key benefit of 529 plans is the potential for compounded, tax-free growth on account funds. Similar to other investments, the earlier the account is started and left untouched, the more funds can grow over the years.

Kevin says, “Whether it’s a car, a TV, a refrigerator, education, retirement, or healthcare – the cost of everything continues to increase.” Having savings to fall back on through the 529 Savings Plan is immensely helpful but most importantly, it gives you options. One of the most frequently asked questions by parents is when they should start saving for their children’s education, and the unfortunate fact is – with inflation – you’re likely already behind. It’s tough for parents, especially new parents, to juggle the high costs of every little thing. “I recommend plugging estimates into an online cost calculator,” Kevin suggests. “Nowadays, those calculators will take into consideration everything – from taxes to inflation to annual income. It’s a great way to see how much a parents’ savings account should aim for.

What is a 529 Savings Plan?

“529 plans are versatile savings accounts that offer federal, and sometimes state, tax benefits. depending on the state you live in, plans are operated in many different ways. You may be able to purchase prepaid tuition credits to use in the future or invest in mutual fund options that grow your 529 account value toward the future educational cost of your child.”

-SavingForCollege.com

K-12 Educational Funding & Unused Funds

Kevin cites the 529 Savings Plan as one of the best educational saving plans on the market due to the new tax law changes. Under the Tax Cuts and Jobs Act, families can now use up to $10,000 annually on tuition expenses at a private elementary or secondary school, increasing educational opportunity for many families. Additionally, under this type of plan, anyone can contribute to the savings – not just the parents. So, family members who would like to help the kids out can contribute.

Many people mistake the 529 Savings Plan to just be for tuition, when in fact the list of eligible educational expenses that it covers is quite broad, including things like books, room, board and supplies. So, that expensive laptop your child’s school requires? Covered. Ask your advisor for a complete list. As far as unused funds in an account go, if you have more than one child and the first child doesn't use all the funds for his or her educational expenses, then you can transfer the funds into the other child's name.

Conclusion

Like most financial planning matters, what will ultimately benefit your family most will be unique to your specific situation. Working with a financial advisor, such as Kevin, to discuss factors unique to your situation and design an appropriate strategy can be easier than you think. Contact Kevin today at 513.333.3886 or shoot him an email at khagerty@gosaxon.com for more information.</span style>

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Is a Health Savings Account Worth Your Time? The Best Advice from an Experienced Group Benefits Consultant.

This month’s CenterStage features Kelley Bell, a Group Benefits Consultant at Saxon. With over 25 years of experience in the financial industry, Kelley knows a thing or two on HSAs or Health Savings Accounts – what they are, who is eligible, how they’re funded, and when they can be used.

Kelley enjoys partnering with business owners and human resources managers to be their Healthcare Consultant. She understands that each business is unique and is dedicated, accessible and proactive in serving the needs of each client.

So, is an HSA a right fit for you? Let’s find out!

The Break-Down

Very similar to personal savings accounts, money in a Health Savings Account (HSA) is used to pay for eligible healthcare expenses (medical, dental and vision). You, not your employer or insurance company, own and control the money in your HSA. To be eligible for an HSA, you must have a special type of health insurance called a high-deductible health plan (HDHP).

With an HSA you can make tax-deductible contributions each year to pay for current and future healthcare costs. What you don't use in any given year will stay invested and continue to grow tax-free, assuming you eventually pull it out to use for medical costs. -CNN Money

Saxon offers HDHP group plans from one person on up that can be paired with the HSA. Here are some different highlights you should know if you are considering this type of Health Savings Account:

  • HSA's aren't ideal for everyone. If having a high deductible seems too risky to you – or if you anticipate having significant healthcare expenses – a plan with a lower deductible and lower co-pays might make more sense.
  • There are tax advantages, because deductibles on the HDHP are higher, premiums are generally lower.
  • There is a maximum contribution limit per calendar year of $3,400 for individuals and $6,850 for families for 2018. Sometimes, these maximums do not reach your deductible. A personal tip: “Try to add a small amount via pre-tax payroll.  You can change the amount anytime and if you have a significant procedure, try adding the funds to the account before the payment is due
  • If you’re over the age of 55, you can make an additional “catch-up” contribution of $1,000 to that account.
  • It is your account. You make the decisions about the contributions and its use. If the funds are not used, the money rolls over to the next year and continues to grow over time.
  • If your employer switches to a different plan, your HSA is still your HSA. The money within your HSA is yours and can continue to be used for eligible medical expenses until it runs out.
  • Most banks provide you with access to your HSA through a checkbook and debit card. You can use these to pay your doctor, as well as for prescriptions at the pharmacy.

Whether an HSA is a good fit for you is determined through each of these highlights, but it comes down to personal preference and your overall health. There’s a lot of freedom with HSAs – which is why it’s important to take your time considering every perk and downfall.

Contributions, Withdrawals, Earnings, & Roll Over

The money you deposit into the account is not taxed. The idea is people will spend their healthcare dollars more wisely if they're using their own money.

However, others can contribute to your HSA. Contributions can come from various sources, including you, your employer, a relative and anyone else who wants to add to your HSA. However, if you exceed the maximum contribution limit, you could be penalized by the IRS.

  • Pre-tax contributions. Contributions made through payroll deposits (through your employer) are typically made with pre-tax dollars, which means they are not subject to federal income taxes. In most states, contributions are not subject to state income taxes either. Your employer can also make contributions on your behalf, and the contribution is not included in your gross income.
  • Tax-deductible contributions. Contributions made with after-tax dollars can be deducted from your gross income on your tax return, which means you may owe less tax at the end of the year.

It’s also key to understand withdrawals, earnings, and roll over with HSAs:

  • Tax-free withdrawals. Withdrawals from your HSA are not subject to federal (or in most cases, state) income taxes if they are used for qualified medical expenses.
  • Earnings are tax-fee. Any interest or other earnings on the assets in the account are tax free.
  • Funds roll over. If you have money left in your HSA at the end of the year, it rolls over to the next year.
  • Investment tool. Many people use it as an investment tool, not just for current or future medical expenses, but for long-term retirement planning.

Keep your receipts in the event that you are audited by the IRS to show that you used the funds in your HSA for eligible medical expenses.

Conclusion

A Health Savings Account can be a great choice for people who wish to limit their upfront healthcare costs while saving for future expenses. HSAs go together with HDHPs. In addition, favorable tax treatment means you may owe less in taxes on your income tax return. What’s more, an HSA may allow you to pay in pre-tax dollars for items your employer’s other insurance options don’t cover, such as eyeglasses.

HSAs have the potential to become “more compelling than a 401(k)” due to tax-deductible and tax-deferred incentives. Does it sound like you’re a perfect match for a Health Savings Account? Still not sure if a HSA a good fit for you? Contact Kelley at 513-774-5493 for more information on taking this step towards a better health plan.

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CenterStage: Traditional IRA, Roth IRA, 401(k), 403(b): What’s the Difference?

In this month’s CenterStage article, we are going to take a look at the difference between traditional IRA, Roth IRA, 401(k), 403(b), curtesy of Kevin Hagerty, a Financial Advisor at Saxon.

The earlier you begin planning for retirement, the better off you will be. However, the problem is that most people don’t know how to get started or which product is the best vehicle to get you there.

A good retirement plan usually involves more than one type of savings account for your retirement funds. This may include both an IRA and a 401(k) allowing you to maximize your planning efforts.

If you haven’t begun saving for retirement yet, don’t be discouraged. Whether you begin through an employer sponsored plan like a 401(k) or 403(b) or you begin a Traditional or Roth IRA that will allow you to grow earnings from investments through tax deferral, it is never too late or too early to begin planning.

This article discusses the four main retirement savings accounts, the differences between them and how Saxon can help you grow your nest egg.

“A major trend we see is that if people don’t have an advisor to meet with, they tend to invest too conservatively because they are afraid of making a mistake,” said Kevin. “Then the problem is that they don’t revisit it and if you’re not taking on enough risk you’re not giving yourself enough opportunity for growth. Then you run the risk that your nest egg might not grow to what it should be.”

“Saxon is here to help people make the best decision on how to invest based upon their risk tolerance. We have questionnaires to determine an individual’s risk factors, whether it be conservative, moderate or aggressive and we make sure to revisit these things on an ongoing basis.”

Traditional IRA vs. Roth IRA

Who offers the plans?

Both Traditional and Roth IRAs are offered through credit unions, banks, brokerage and mutual fund companies. These plans offer endless options to invest, including individual stocks, mutual funds, etc.

 

Eligibility

Anyone with earned, W-2 income from an employer can contribute to Traditional or Roth IRAs as long as you do not exceed the maximum contribution limits.

With Traditional and Roth IRAs, you can contribute while you have earned, W-2 income from an employer. However, any retirement or pension income doesn’t count.

Tax Treatment

With a Traditional IRA, typically contributions are fully tax-deductible and grow tax deferred so when you take the money out at retirement it is taxable. With a Roth IRA, the money is not tax deductible but grows tax deferred so when the money is taken out at retirement it will be tax free.

“The trouble is that nobody knows where tax brackets are going to be down the road in retirement. Nobody can predict with any kind of certainty because they change,” explained Kevin. “That’s why I’m a big fan of a Roth.”

“A Roth IRA can be a win-win situation from a tax standpoint. Whether the tax brackets are high or low when you retire, who cares? Because your money is going to be tax free when you withdraw it. Another advantage is that at 70 ½ you are not required to start taking money out. So, we’ve seen Roth IRA’s used as an estate planning tool, as you can pass it down to your children as a part of your estate plan and they’ll be able to take that money out tax free. It’s an immense gift,” Kevin finished.

Maximum Contribution Limits

Contribution limits between the Traditional and Roth IRAs are the same; the maximum contribution is $5,500, or $6,500 for participants 50 and older.

However, if your earned income is less than $5,500 in a year, say $4,000, that is all you would be eligible to contribute.

“People always tell me ‘Wow, $5,500, I wish I could do that. I can only do $2,000.’ Great, do $2,000,” explained Kevin. “I always tell people to do what they can and then keep revisiting it and contributing more when you can. If you increase a little each year, you will be contributing $5,500 eventually and not even notice.”

Withdrawal Rules

With a Traditional IRA, withdrawals can begin at age 59 ½ without a 10% early withdrawal penalty but still with Federal and State taxes. The Federal and State government will mandate that you begin withdrawing at age 70 ½.

Even though most withdrawals are scheduled for after the age of 59 ½, a Roth IRA has no required minimum distribution age and will allow you to withdraw contributions at any time. So, if you have contributed $15,000 to a Roth IRA but the actual value of it is $20,000 due to interest growth, then the contributed $15,000 could be withdrawn with no penalty.

 

 

Employer Related Plans – 401(k) & 403(b)

A 401(k) and a 403(b) are theoretically the same thing; they share a lot of similar characteristics with a Traditional IRA as well.

Typically, with these plans, employers match employee contributions .50 on the dollar up to 6%. The key to this is to make sure you are contributing anything you can to receive a full employer match.

Who offers the plans?

The key difference with these two plans lies in if the employer is a for-profit or non-profit entity. These plans will have set options of where to invest, often a collection of investment options selected by the employer.

Eligibility

401(k)’s and 403(b)’s are open to all employees of the company for as long as they are employed there. If an employee leaves the company they are no longer eligible for these plans since 401(k) or 403(b) contributions can only be made through pay roll deductions. However, you can roll it over into an IRA and then continue to contribute on your own.

Only if you take possession of these funds would you pay taxes on them. If you have a check sent to you and deposit it into your checking account – you don’t want to do that. Then they take out federal and state taxes and tack on a 10% early withdrawal penalty if you are not age 59 ½. It may be beneficial to roll a 401(k) or 403(b) left behind at a previous employer over to an IRA so it is in your control.

Tax Treatment

Similar to a Traditional IRA, contributions are made into your account on a pretax basis through payroll deduction.

Maximum Contribution Limits

The maximum contribution is $18,000, or $24,000 for participants 50 and older.

Depending on the employer, some 401(k) and 403(b) plans provide loan privileges, providing the employee the ability to borrow money from the employer without being penalized.

Withdrawal Rules

In most instances, comparable to a Traditional IRA, withdrawals can begin at age 59 ½ without a 10% early withdrawal penalty. Federal and State government will mandate that you begin withdrawing at age 70 ½. Contributions and earnings from these accounts will be taxable as ordinary income. There are certain circumstances when one can have penalty free withdrawals at age 55, check with your financial or tax advisor.

In Conclusion…

“It is important to make sure you are contributing to any employer sponsored plan available to you so that you are receiving the full employer match. If you have extra money in your budget and are looking to save additional money towards retirement, that’s where I would look at beginning a Roth IRA. Then you can say that you are deriving the benefits of both plans – contributing some money on a pretax basis, lowering federal and state taxes right now, getting the full employer contribution match and then saving some money additionally in a Roth that can provide tax free funds/distributions down the road,” finished Kevin.

 

Editor’s Note: This article was originally published in June 2017 and was updated in January 2018 for accuracy.


CenterStage: Help Us Fill The Truck!


For this month’s CenterStage, we’ve decided to do something a little different. Due to the holiday season being in full-swing, we wanted to spread the love and joy that fills our hearts this time of year by sharing with you our involvement with Fill the Truck as a sponsor.

"One of the best parts of Fill the Truck is being there to deliver the donated goods to our awesome charities. The expressions on their faces and their gratitude, makes all of the hard work and extra efforts worth every second."

-Kelly Ackerman, Sales Operations Director at Frames USA

Our Part & Yours

Saxon invites our local community to come together in donating things like personal care items, toilet paper, winter clothing and bedding to fill up boxes. These items allow us a chance to give back directly to our local community. Then, we load the boxes up onto the truck, overjoyed with the sensation of giving back to those in need.

The truck delivers to all charities involved – such as The Healing Center, who offers practical, social and spiritual support to individuals and families, and the Children’s Home of Northern Kentucky, who focuses on providing a better life for abused, neglected and at-risk children – around the 21st of December, and every donated dollar goes toward buying needed items with no administrative costs.

A Brief Fill the Truck History Lesson

Fill the Truck began when the CEO of Frame USA, Dan Regenold, envisioned filling a 54-foot semi-truck full of supplies for a local charity. His idea flourished into a full-blown charitable operation, including a team of packers, donation collectors, marketing & PR professionals and more.

This year, the 2017 vision is to fill multiple trucks and provide substantial donations to each charity, partnering with several businesses and corporate partners, including Saxon.

You can read the full Fill the Truck history here.

Donate Today

Are you ready to take action and join Saxon for this charitable Community Strong event? Donations can be dropped off directly to Saxon’s local office or any one of the participating locations. Unsure of what to donate? Monetary donations are accepted and will be used to purchase items to help finish Filling the Truck. Happy holidays from Saxon and we look forward to “Filling the Truck”!

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CenterStage: Fee-Based vs Commission-Based Advisors: What You Should Know

“After almost 30 years of working in the business, the most important question to ask,” Garry Rutledge, AIF®, a Fee Based Advisor with Saxon, explained, “is do you trust that person to make decisions in your best interest or in theirs?”

In this month’s CenterStage article, we sat down with Garry to get the lowdown on what to expect from both fee-based financial advisors and commission-based advisors.

When Is a Commission-Based Advisor a Better Choice than a Fee-Based Advisor?

A commission-based advisor receives compensation for transactional business, usually at the point of sale, with a small annual fee to encourage advisor engagement. A client rarely knows the commission amount until the transaction is completed.

Garry mentioned, “those who purchase investments for the long term are better off choosing a commission-based advisor, who won’t pursue the client for information and bombard you with advice.”

Also, if you are a do-it-yourselfer when it comes to investing, a commission-based advisor is a great fit for you.

When Is a Fee-Based Advisor a Better Choice than a Commission-Based Advisor?

A fee-based advisor tends to value relationship’s over transactions. This results in, typically, a more involved and hands on process, because positive results increase the value of client’s portfolio.  A fee-based advisor takes a consultative approach to managing client’s assets and is more likely to offer a broader scope of advice than compared to a commission based advisor.

A fee-based advisor works for the relationship resulting in little or no bias to an investment or its sponsor, as it relates to compensation, vs a commission-based advisor who may consider the compensation when making a decision when weighing similar products.

What Are You Paying Your Financial Advisor?

There are three means of advisor compensation:

  1. Commission for products or transactions
  2. A percentage of assets an advisor manages
  3. A hybrid between method 1 and 2

 

It’s imperative to know which method your advisor utilizes.  This knowledge allows you to determine if you are receiving advice commensurate with the value provided.  A Commissioned advisor, after making a sale, generally has no interest in what the outcome is because they have received compensation vs a fee based advisor who must build trust with clients to maintain a meaningful relationship.

Garry very rarely utilizes the hybrid model when working with clients.  However, in keeping with his philosophy of doing right by his clients, there are times when he must employ this model.  Garry points out, “at times, an alternative investment that is a complimentary piece of a client’s portfolio is not available on a fee basis, in which circumstance dictates that I receive a commission.  In full disclosure, my clients realize when this happens and exactly what their charge will be.”

 

As a means of building relationships, Garry has and is focused on sustaining the fee based practice he has built and continues to build through client referrals.  Garry’s fees range from 1% to .5%, depending on the assets and complexity of a client case.  With this knowledge, clients know what their expenses will be up front.

 

The length of his client relationships is a testament that fee based advising is successful in building a solid financial advisory firm.

 

In the end, the client must determine what works for them, as far as how they will compensate the advisor. If a client wants to be transactional, commission is the way to proceed; but if an ongoing relationship is a requirement, a fee-based advisor is the best path for them.

 

More About Garry

 

Garry joined Saxon in August of 2006 and his focus has been the strategic management of client assets with tax minimization and capital preservation as the foundation of his planning strategy.

Since graduating from Wright State University in 1988 with a degree in Finance, Garry has worked for two respected firms.  Garry holds Series 7 & 63 securities licenses, and his Life & Health license, along with achieving the professional AIF (Accredited Independent Fiduciary) designation.

 

You can contact Garry via email, phone, or connect with him on LinkedIn.

 

These are the opinions of Garry Rutledge and not necessarily those of Cambridge; they are for informal purposes only, and should not be construed or acted upon as individualized investment advice. All investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.

 

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