Wealth Management

2021 Retirement Plan Contribution Limits

The IRS announced cost of living adjustments that will impact the 2021 tax year. Contribution limits for pension plans and other retirement related items are affected. We encourage you to review the updated figures by clicking here.

Building Good Financial Habits

Managing finances for many people is difficult and for some can be overwhelming. This is not because people are incapable of managing their finances, but rather they have never been shown how to do so. Basic finance like paying bills and understanding taxes is not taught in schools and most of us did not learn from our parents (or were taught bad habits instead). Below are some tips to help you effectively manage your finances:

1. Keep it simple

Life is complex enough and often the best strategies in life are the simplest. Managing your finances should be the same way. Try and automate as much of your finances as possible. For example, have direct deposit set up and on payday have your bills be paid electronically on the same day. Automate some form of savings as well on each payday to build your wealth as well. In this process, the rest of the money left over can be for you to spend.

2. Pay yourself first

It is important to make sure you save money into a savings account each payday. You want to have at least 3 – 6 months of living expenses so when something happens like a job layoff you do not have to take on debt to manage the situation.

3.  Use technology

There are many great tools out there for free to help you manage your finances. For example, your bank should provide a tool to help you track your budget. Your credit card carrier should provide a free resource to track your credit. If these tools are not available use 3rd party tools like www.creditkarma.com for monitoring your credit.

4.  Be honest with yourself

Take a close look at your spending habits and understand what bills are necessary like rent and utilities. It is important to identify bills that are non-essential items like eating out, buying expensive items, etc. and work on reducing those expenses. The idea here is to not say you can’t have fun but work on making sure you enjoy life while still focusing on long term goals. Your $3 latte each day is not what is keeping you from being a millionaire. Just focus on spending less than you bring home and monitor your progress over time to help ensure you stay on track.

5. Be kind to yourself

Managing finances is hard and there are a lot of emotions mixed with our money. If you make a mistake do not beat yourself up but acknowledge it and move on. The only mistake in life is not learning from our mistakes. 

Also, you do not have to do this alone and there are professionals out there (like us) that are happy to help you!

If you missed our Money Mastery webinar series, we discussed strategies to pay down debt and tips to create healthy financial habits.  Check out the series by clicking here.

How to Say No

In today’s busy word one of the most important skills to learn is how to say “No”. We are very busy and it is easy to become overwhelmed if you overcommit. If you are like most people, you do not like saying “No.” This could be because you genuinely like to help others, or maybe you do not want to reject others. Perhaps you are afraid this will reflect poorly on you if you say “No”. The reality is there are times you need to put your time and your business’s needs first. If you do not balance your priorities effectively you are not as productive, could feel overwhelmed, and harbor feelings of resentment.

As Warren Buffet once said: “The difference between successful people and very successful people is that very successful people say ‘No’ to almost everything.”

Here is how to say “No” and still look good:

Be clear and direct. Providing a vague response, excuses, or an unclear answer will only create an awkward conversation.  You eventually will still have to say “No” after wasting everyone’s time in needless conversation. People may not like hearing “No” but appreciate this more than excuses or a lukewarm response.

Provide positivity. Being able to provide the individual with a positive response helps cement a positive relationship.  For example, try saying “This is a solid opportunity but now is not the right time.”

Tell them the reason. “I appreciate the offer, but this does not… fit our business model, fit our budget, etc.” But if telling the reason could give them an opening for a discussion to pressure you, skip it.

Give yourself time. If you are uncomfortable being firm or dealing with a pushy individual it is ok to say, “let me think about this and get back to you”. Just make sure to get back to them with a definitive answer. This tactic helps you avoid feeling pressured into doing something you do not want to do

Say yes to something else. Propose an alternative option if you can. Maybe you can commit to a smaller role or to a future opportunity.

Do not burn bridges. Let your yes mean yes and your no mean no. Saying “No” does not mean you have to be rude or inconsiderate. The ability to say “No” politely is a powerful tool to keep and even build strong relationships

Tips for Medicare Open Enrollment

As of October 15th Medicare beneficiaries can make changes to their Medicare benefits. This is the time to review your current benefits and make any changes. If you are unhappy with your current plan or perhaps your health has changed during the past year, now is the time to make any necessary changes like switching Medicare health and prescription drug plans. Each year, Medicare plan costs and coverage typically change so if for no other reason it is important to review your benefits to understand any changes to your current plans.

From October 15 – December 17 you can:

  • Join a Medicare prescription drug plan (Part D);
  • Switch from one Part D plan to another Part D plan;
  • Drop your Part D coverage altogether;
  • Switch from Original Medicare to a Medicare Advantage plan;
  • Switch from a Medicare Advantage plan to Original Medicare;
  • Change from one Medicare Advantage plan to a different Medicare Advantage plan;
  • Change from a Medicare Advantage plan that offers prescription drug coverage to a Medicare Advantage plan that doesn’t offer prescription drug coverage; or
  • Switch from a Medicare Advantage plan that doesn’t offer prescription drug coverage to a Medicare Advantage plan that does offer prescription drug coverage.

Keep in mind any changes do not take effect until January 1st, 2021.

Medicare Part B (hospital insurance) premium and deductible costs capped for 2021

A provision of the recent spending bill passed during COVID limits Medicare Part B premium and deductible increases to 25% of what they would normally be. In April, the Medicare Trustees expected a 6% increase of the Part B premium but we will not know the true numbers until later this month or early November as this is when costs for the next year are announced. 

New and expanded benefits for 2021

  • Medicare Advantage plan will offer expanded telehealth and other virtual services.
  • Medicare-eligible individuals with End-Stage Renal Disease (ESRD) can enroll in a Medicare Advantage plan with benefits starting January 1, 2021.
  • Medicare now covers 12 acupuncture visits in 90 days for lower back pain.
  • Now you can join a drug plan that offers lower costs for insulin. The copay is $35 for a 30 day supply.

If you have any questions, please do not hesitate to speak with your adviser or contact us at financialplanning@bfsg.com.

Asset Protection

The American Bar Association published at the end of 2017 that there were 1.3 million lawyers in the United States.  That is one lawyer for every 300 people, the most per capita of any country in the world. Now there are a few more. In today’s litigious society, many of us may be concerned about keeping that for which we have worked so hard. 

What are some of the tools that you can use to protect and preserve your assets during your lifetime and maybe for your heirs also? There are simple and complex strategies.

  • Liability insurance for your home, cars, boats, and RVs are the basics.  Also, do not forget to buy umbrella insurance that ideally will cover your net worth.
  • You can protect your assets by putting them into Family Limited Partnerships and Limited Liability Companies.
  • Assets can be protected by pre-marital or post-marital agreements.
  • Retirement plan assets that are under ERISA are not subject to claims of creditors. 
  • IRAs are exempt from creditors in certain states or up to certain limits. 
  • Life insurance is also protected from creditors.
  • Gifting assets can offer protection for your heirs.  The best protection is in giving up complete control of those assets, but most of us are not willing or able to do that.