INDIANAPOLIS, Ind. — Marie and Larry Emery are preparing for the future after quite the past together—they've been married since the 1960s.
“We’ve been married for 55 years and we owned a business until recently. We wanted to retire so we sold it, but we also wanted to make sure all our employees had the same jobs and at the same pay rate,” they said.
After taking care of their employees, they also took care of themselves and their finances. They did so by going to a local financial expert to work toward a worry-free future. One of the first tips for anyone is to contribute the maximum amount of money possible while working to a 401(k).
"By increasing your contributions, you will be taking home less money, but you will be paying less in taxes and saving more for your future. How much you decide to put in your 401(k) is entirely based on your personal situation, but I recommend at least 10-15% of your income,” said Casey Marx, founder of Crown Haven Wealth Advisors.
Near the start of each year, you should also estimate your tax liability so there are no surprises. It might seem daunting to start running your tax numbers, but you’re better off taking action now than ending up with a surprise tax bill in April. Estimate your tax refund or amount you owe by using an online paycheck calculator, IRS tax withholding calculator or by filling out a sample tax return.
If you discover you aren’t paying enough or you are overpaying in taxes, an easy way to fix the problem is to fill out a new W-4. There is also an IRS calculator to help you determine your correct withholding. Once you figure out how much you’ll be paying in taxes, you should figure out how to invest your money.
“We were worried about the stock market and we know we can make a lot of money, but we can also lose a lot, so we went with a little safer investment with Casey and an annuity on some of our funds,” said Larry Emery.
Another common source of income many have is an IRA. Consider converting your traditional IRA, if you have one, to a Roth IRA because new tax laws are beneficial for that. Talk with your financial professional to see if this a good option for you. With the recent tax law changes, many people may find themselves in a lower tax bracket, making now through 2025 a good time to consider converting. Keep in mind when you convert, you will pay taxes on the conversion.
“You don't take a $500,000 IRA and convert it to a Roth IRA. That's a huge tax bill. But if you do it in a measured way, then you can take advantage of lower tax rates right now and have tax-free income later,” said Marx.
Another financial tip is huge for those who've reached that magical age of 70.5. Have you ever heard of the Required Minimum Distribution? That’s when you have to start withdrawing 401(k) money that you've been growing interest-free.
"Most people don’t realize, if you don’t do that, there's a 50% penalty on the amount you should be taking out, so it's a big deal if you don't do it. And what our firm does is we automatically process those for our clients to make sure that's there's no tax penalty or liability there,” said Marx.
Marx doesn’t believe you should be tied to just a few investment products. He says being an independent agent avoids that and allows you to have your planning under one roof for things such as retirement planning, income planning, and social security, all the way through medicare planning and estate planning.
“My husband wanted us to have the same amount of income during retirement, so we didn't have to change our lifestyle because that's what a lot of retired people have to do. That's why we started to plan early, got plenty of advice and we got a good adviser," said Marie Emery.
And don’t forget to plan for 2020. The end of the year is a great time to check your progress toward your short-term and long-term goals. If you anticipate any major life changes like getting married or having a baby in 2020, you may need to shift your lifestyle to match your financial goals.
Don’t be afraid to ask for help. Sit down with a financial professional to review your goals.