Manage Your Risk with Insurance

Many people don’t think about how their family would get by if they experienced a sudden loss of income due to a disability or an untimely death. Even those who have insurance may be underinsured, which can leave their loved ones at risk.

Let’s take a look at how you can prepare for these future circumstances without leaving yourself, your heirs, or your family in difficult situations.

First, keep in mind that the insurance that employers offer is often not enough to fully cover a family’s needs. The good news is that you can have one or more forms of additional insurance coverage to make sure that you and your family will be able to cover the bills if something unfortunate occurs.

Types of Insurance to Consider

Disability insurance is one type of insurance that can provide financial protection if you are unable to work or if you experience a drop in income due to a disability. It’s important to note that disability insurance will only cover a portion of the amount you earned prior to becoming disabled.

Oftentimes, it is higher earners that need disability insurance the most. This can be due to a number of factors like higher living expenses or massive student loan debts that will need to be satisfied regardless of your ability to earn. Making sure you understand the cost-to-value and the number of different options available usually serves as a good starting point.

Long-term care insurance can be very expensive but can cover a significant chunk of costs incurred in a long-term care facility. Like most insurance products, the sooner you inquire, the more affordable it is likely to be. You should always read policy documents carefully before choosing a plan or work with a trusted adviser who can consult and recommend the best options. Before making a decision on insurance, you should understand the exclusions, waiting periods, and other provisions.

Life insurance is another common type that provides financial support for your family if you pass away. With this insurance, they will be able to cover the mortgage and other living expenses. A financial professional can help you figure out how much money your loved ones would need so you can purchase adequate coverage.

Umbrella insurance  Another thing to consider is if you’re found liable for an accident that injured someone. Often times your homeowners or auto insurance policy may not fully cover the medical bills and other expenses incurred. If the injured party begins a lawsuit over the incident, it may subject your home, retirement savings, and other investments to great risk.  As UMBRELLA insurance can protect you by providing extra coverage that goes beyond the limits of your homeowners or auto policy, it is a wise plan to consider.

Get Help Choosing the Right Coverage to Protect Your Income and the Future of Your Family

TIMI advisers have been insurance licensed for over three decades. We will provide a comprehensive in-house analysis to identify household vulnerabilities and piece together a plan to reduce your risks. Once we’ve reviewed your existing annuities, medical, and life insurance policies, we can work with our network partners to help you find the combination of insurance policies that will provide your family with financial protection.

If you’d like to discuss your current financial situation, future needs, potential risks, and available options for one or more types of coverage, give us a call!

A Retirement Crisis in America

For most of those in the workforce today, dreaming about when they can retire and start to enjoy more time for themselves and with their families is a given. The goal to work hard, save and then retire has always been in place – but what the retirement years will look like for many is changing drastically compared to the plans that some of our elders had access to in the past.

In addition to starting to save late in life and access to potentially less federal funding for retirement in the future, we find ourselves in what many experts are calling a “retirement crisis” in the U.S. But what does this really mean and should you actually be concerned?

Let’s take a closer look.

Currently, age 62 is the earliest you can claim Social Security retirement benefits. This is when you would be able to get replacement income based on factors such as your earnings history, the year you’re born, and what age you’ll start to claim Social Security. According to the AARP, the estimated average Social Security retirement benefit in 2021 is $1,543 a month.

In the past, workers had access to additional sources of income to help boost that monthly number. For example employer-sponsored pensions or other retirement savings plans, and personal savings that they accumulated.

Today, most of those defined benefit (DB) pension plans for employees have been replaced. So instead of getting a guaranteed monthly income in exchange for the years of work they’ve put in, they have a defined contribution plan (DC), such as a 401k, 403(b), 457, etc., that allows specific monetary contributions deferred from the employee’s paycheck – and sometimes with an employer match, usually based on a percentage of the employee contributions.

With the move to more self-directed retirement plans, figuring out how much you’ll need to withhold to save enough for retirement is very difficult and salary deferrals always reduce your net spendable income. This may be why an astounding number of employees forego participation in available retirement plans. This is partially where the retirement crisis begins.

Add to this the fact that the current Social Security benefit recipients are “paid” by the Social Security payroll taxes of the current workforce; effectively, a pay-as-you-go system.  There are ominous undertones about the equity and long-term viability of the Social Security system, as we know it today.

Then there are the small businesses and private-sector workers that may not have access to a retirement plan through their employer at all due to them being too costly to manage and fund. This often leaves many failing to have any plans for how they’ll survive financially after retirement.

The reality here is that people are living longer and having fewer kids. That means a longer average duration of Social Security benefit payments but fewer workers paying into the Social Security system. So without having enough saved for their retirement years, individuals are depending much more on Social Security benefits to live – and this likely creates additional public assistance expenditures to further strain federal resources and inevitably leading to the potential for higher taxes and lower benefits.

So what can we do now?

It’s up to us as individuals to think about our retirement years now – before we’re close to the age where we are approaching retiring. Having a broad understanding of your options to efficiently and effectively save for your future can make an immeasurable difference. Our financial professionals can help ensure that you work towards securing your financial future. We understand risks, how to properly allocate assets, and help you determine how much to start saving now. Don’t wait until it’s too late – reach out today.

Tips to Protect Retirement Income

With Americans living longer, healthcare costs rising, and many people beginning to save later in life, it’s possible to enter retirement unprepared. If you’re currently saving or planning to retire in the near future, here are some tips to help you get and stay on track.

Diversify Your Investments

Some financial investments will perform better than others and it can be difficult or impossible to predict how an individual investment will fare over the long term. That’s why it’s important to diversify.

Having a mix of assets in your portfolio can increase the likelihood that your money will grow in the long run and help shield you from the impact of an economic downturn. Of course, it’s impossible to completely insulate yourself from risk, but diversification may provide a greater measure of security than putting all of your retirement savings into one investment type or objective.

Plan to Live a Long Time after You Retire

It’s common for retirees to live well into their 80s or 90s. That means that your retirement savings may have to last for 20 or 30 years. You will have to plan accordingly to make sure that you don’t run out of money.

Factor healthcare costs into your retirement planning. As people age, they tend to require medication, as well as in-home assistance or care in a nursing home or assisted living facility. You may want to think about purchasing a long-term care insurance policy, or educate yourself about other protective strategies so you won’t have to drain your retirement account to cover those expenses.

Think about Inflation

Inflation gradually decreases the purchasing power of money. Each year that you’re retired, your cost of living will likely increase, but your savings may not grow enough to keep pace. Some types of investments, such as stocks, commodities, real estate securities, and Treasury inflation-protected securities (TIPS) may help your retirement savings keep pace with inflation so you don’t run out of money as the years go by.

Be Strict When It Comes to Withdrawals

You may accumulate a sizable nest egg by the time you retire and may be tempted to make a major purchase, such as a new car, or take a long and expensive vacation. It’s important to be disciplined when withdrawing money from your retirement account. The fact is, you don’t know how long you’ll live or whether you’ll need expensive healthcare in the future. If you withdraw too much money early in your retirement, you may come to regret it later.

Get Professional Help to Plan for Retirement

Toomey Investment Management, Inc. can work with you to develop a diversified investment portfolio to attempt to optimize performance and minimize risk. Our team can develop an integrated plan that also considers insurance and taxes. Contact us today to learn more.

Wealth Transfer? Here’s What You Need to Know

When it comes to planning the distribution of your estate, there are many questions clients are often asking themselves. Are my heirs responsible? How can I avoid the probate court? How can I make sure my grandchildren are taken care of? Then after considering the moving pieces associated with these complex decisions, clients seldom know where to start. Our answer often starts with one thing: taxes.

In fact, not many people think about the tax treatment of different accounts for their heirs, but it is one of the most important estate planning topics that should be considered. If you’re leaving an inheritance, or are an heir yourself, the tax code can have a substantial effect on the how the assets are to be distributed. Here are some of the basics you should consider as you’re planning your estate.

Consider Individual Tax Liabilities

Do you have a large amount of your estate in an IRA? Well, whenever there is a pretax account granted to someone, they also inherit a tax liability. Do you own a non-qualified annuity? People seldom realize that all of the gains in that annuity are taxable to their heirs upon distribution. And the tax they will pay on that inheritance will be based on; you guessed it, that individual’s own marginal income tax rate. So even if you are intent on dividing your estate equally amongst siblings, the actual net inheritance can change drastically due to personal tax circumstances. Understanding the rules for distributions after life will help you make more prudent choices that best suit you and your family.

Understand Other Tax Liabilities

If the inheritance being passed to someone is in the form of property or an estate there may also be taxes to consider that could also significantly change the inheritance amounts. For example, in some circumstances, a state estate tax will be levied on any property left to heirs. In many cases, this tax may be taken from the value of the estate before the assets are distributed. A capital gains tax may also come into play if a property that’s inherited is sold for a profit after the date of death. It’s important to understand the state and federal tax laws that will apply to your inheritance.

Tax Mitigation Strategies

There are many ways we can plan your wealth transfer in a more tax efficient manner.  Utilizing life insurance, converting a portion of your pretax assets during life, or creating a comprehensive gifting program to your family members are all viable strategies. There are also ways to define how and when assets can be inherited with private trusts. It’s always important that prior to taking any meaningful steps, you have a firm grasp on all of the options available. This will ensure you are making decisions with conviction.

Speak with a Trusted Financial Adviser

Meeting with a financial advisor to discuss your future financial plans is critical if you want to create a tax-efficient inheritance strategy. Optimizing in this way requires strategic insight, advice, and planning. Call Toomey today!

The Importance of Simultaneous Investment & Tax Planning

Planning for your future is a big deal. Whether you’re just starting out in your career, building your family and want to develop your retirement still years away or you’re at the age when retirement is finally coming closer, it’s always the right time to get serious about your finances.  We cannot stress enough the importance of working with an experienced and qualified team of financial experts to come up with a plan that works. 

Tax Planning

One thing we speak about often with our clients is the importance of tax planning while you’re assembling plans and establishing goals for the future. Doing this at the same time will help to ensure that you’re choosing accounts that will work for you and that won’t likely generate exorbitant tax bills when it’s time to retire. 

A wise investment plan will incorporate tax liability strategies alongside investment planning. 

When might your plans break down? This is a complicated question, but a common situation which can impact future financial gains may occur if a vast majority of your net worth is sitting in a 401(k) or IRA.  Suddenly when retirement comes, your distributions are treated as ordinary income on the tax return which means higher taxation, per-dollar.*

Tax Loss Harvesting

With assets in a taxable account, a qualified, tactful adviser may help you structure a plan to offset taxes you’ll face on both gains and income so you have optimal asset allocation and minimal surprises.

A better plan could be to contribute to a ROTH IRA and a taxable brokerage account. This may provide ample flexibility to source funds during retirement without a large tax burden. (* per current, general tax law)

This planning should also include a design for inheritance and passing on a financial legacy in a tax-efficient way. All of the parts of the puzzle are interconnected and should be treated that way when coming up with a solid financial plan that will work for you. 

Remember, having diversity across the tax registration of accounts is often overlooked and it’s something you should focus on now. 

If you want to talk to someone who can help you create a healthy financial plan for your future, call Toomey Investment Management, Inc., today. 

A Wealth Transfer Boom is Coming – Here’s What You Should Know

Talking about the untimely passing of a loved one is never easy. However, having these important conversations early and taking the time to responsibly plan for how wealth is transferred to heirs is a critical topic. 

As baby boomers are soon expected to pass on trillions of dollars in wealth to their families over the next few decades, this very topic has become a key area of focus for many.  

It’s about more than just mapping out a plan you feel good about, but also keeping it up to date over the years and having your heirs in on the conversation early so they can make future plans as well. 

At Toomey Investment Management we can help you to understand the different methods available to effectively leverage, pass and distribute wealth to your heirs. An estate plan is unique to every client and because of that, the process may benefit from a firm with an independent approach. Our clients can expect a transparent experience as we analyze the market for investment vehicles that correlate with your goals.

If you’re on the cusp of entering your retirement years or have started to think about more effective management of your assets, we have some key things you’ll want to consider when it comes to wealth transfer. 

The event of this money shifting has already been referenced by many as the “Great Wealth Transfer.”

First, a little background. As we mentioned, the generation born between 1944 and 1964 – also known as Baby Boomers, spent the decades of their core working years amassing a lot during economic strong years and are now moving into the retirement years. Market projections indicate they’ll be transferring around $60 trillion in wealth to millennials and Gen X by 2061. The effects of these inheritances are far-reaching and without a solid plan, those funds – even large sums – could easily be squandered. 

Unexpected wealth can happen quickly and beneficiaries may not be able to keep a solid perspective when it happens. By making them aware of the future wealth and giving them time to speak with an advisor there is time to make a solid foundation and plans for preserving and growing those inheritances. 

So what can you do now? Start having these conversations about money and future inheritances with your Gen X and Millennial kids and grandkids if you plan to pass money down in the future so that they can start planning early.  

A trusted financial advisor can assist with understanding tax obligations, planning for expenses, and even allocating inheritances to meet their own financial goals.

Capital Gains Tax in Mutual Funds – What You Should Know

Investing in mutual funds is something you may have heard about before. Those looking for a solid way to invest their assets will often choose these types of investments because they can offer the chance to invest in a more diversified portfolio.

Even if you’ve never looked into options for managing your finances before, there are some important things you’ll want to keep in mind as you pursue Mutual Funds.

Understanding Capital Gains Taxes

Capital Gains Taxes, which you may be responsible for, are something many dismiss when they’re first getting started but there are many reasons to factor this in as you plan for your future.

Both long-term and short-term capital gains should be considered. When these are in a taxable account, and depending on how much you’ve earned for the year, your tax bill could come as a surprise.

Currently, there are some benefits to keeping the investments for longer than one year as it may provide greater tax savings versus selling quickly.

Understanding these different working parts may require working with a trusted investment management firm. At Toomey, we can help our clients create tax-efficient portfolios. That means using more than actively managed mutual funds – like ETFs, individual stocks/bonds, and index funds – that may minimize unfortunate tax surprises at the end of the year.

Planning for the Future

Of course, we can’t talk about Capital Gains Tax without also talking about the hot topic issue in the press right now that many investors are keeping an eye on. And that is the emerging threat of taxation of long-term capital gains which the current administration has hinted at possibly enacting.

If this were to pass and become reality, there are a number of different things that could occur in the larger market you would want to be aware of.  For example, substantially higher rates could spark mass selling in 2021 and impact the market as many become leery and take money off the table before 2022. And that’s only the start.

So what should you do? Work with a team that understands all of the parts working together and that can implement strategies that will mitigate your tax burdens for the long term.

Talk to Toomey Today!

What Should You Expect From A Financial Adviser?

Just listen carefully to any advertisement from a typical investment company and you’re bound to feel a little warm and fuzzy.  And then, there’s the old warning, “its in the fine print”.   As you know, financial “people” are everywhere; from downtown to the bank.  Whether  you already work with an adviser or you’re thinking about it, here’s what you must inquire about  as you disclose your very private, personal information to any financial planner, broker or adviser.  The questions that follow should help you to set your expectations very high, because you and your family should settle for nothing less.

Will you have mostly proprietary investmentsIn general terms, proprietary investments are those which are developed by the primary firm, itself.  For example, Fabulous Investments, Inc. is a financial firm.  The firm happens to own and sell a dozen mutual funds called Fabulous Investment Funds.  Those are called proprietary funds.  So, if you have or have been presented with investments that have the same or similar names as the investment firm, I would strongly suggest that you get another opinion.  Proprietary investments cause great concern in terms of objectivity…or the lack, thereof.   

Is your adviser a fiduciaryI believe that the fiduciary duty is the gold standard in the financial industry.  A fiduciary must be objective and pursue the best strategies for your objectives and goals.  The guidance must be in your best interests and conflicts of interest, e.g., sources of compensation, must be disclosed.   So how do you know if your adviser is a fiduciary?….Just ask

Does your adviser work for you?  Consistent with being a fiduciary, its very important that your adviser works for you.  In my opinion, advisers employed by many big-brand institutions may not be able to be completely objective.  Frequently, production requirements and specific, packaged products might supersede the best guidance for you.  I have been working with the public for over 30 years—I have seen that all too often.  

Does your adviser have recommended, respected credentials?  Now, it doesn’t mean that credentialed advisers are the absolute best, but its a good starting point.  If your adviser does have letters after their name, I would implore you to look up the acronym and investigate the criteria for credential qualifications.  You may be shocked to learn that some credentials can be used simply by joining an association, paying a fee and completing little or no educational curriculum.  In a nutshell, look for experience, education and continuing education which are required for most industry-respected credentials.

Is your adviser an experienced tax adviser\preparer?  Again, in my opinion, a thorough history of taxation and return preparation can be critical to precise guidance.  You see, a financial adviser should be much, much more than someone who facilitates investments.  Your financial world is chronically integrated with taxation.  How could you expect cutting-edge advice without the requisite experience in tax preparation?  And you may also be shocked to learn that frequently, in the fine print, the paperwork you have completed with your adviser may state something like, …we do not provide tax advice so please consult a tax adviser.  Think about that—a financial adviser who can’t provide critical tax advice? Isn’t a tax return the core of your financial picture?…you have to do one, right?  But still, it appears that your adviser may be prevented from, or be unqualified to provide detailed advice regarding the primary financial instrument in your financial world.  

Finally, be certain to inquire about and understand how your adviser will be compensated.  Its a very important question that may help you understand the fiduciary vs. salesperson distinction.    And discuss your expectations for communications with an adviser.  Your financial world can be very dynamic and you should insist on guidance-on demand.

securities offered through Leigh Baldwin & Co., LLC

Member FINRA\SIPC

Toomey Investment Management, Inc. What Makes Us Different:

In the course of our new client engagements, we analyze many different portfolio’s which had originally been presented to the client as “managed”.  Although the definition of managed is a bit vague, it is reasonable to say that a managed account is overseen by an investment professional who charges separate fees for services rendered.  Within the framework of these managed accounts, investment management fees are charged, typically, as a percentage of total assets.  Honestly, many portfolio’s we see appear to be pre-constructed allocations which operate autonomously in accordance with algorithms.  These allocations were created in the home or corporate offices, in many cases.  At face value, it certainly appeared that the adviser with whom they were working had almost nothing to do with how their money had been invested as the months and years passed. 

We could recite actual cases which illustrate the “indifference” of garden-variety computer algorithms.  For example, 2008 can be remembered as the most punishing year in the investment markets in our lives; at least we hope. In early 2009, we had occasion to review historical activity of a big-name investment firm whose computer algorithms sold absolutely nothing during that debacle.  The fact that the markets rebounded in 2009 doesn’t excuse the fact that management fees were charged, though it could be argued no evidence of asset management existed.  If the computer had not been programmed to at least attempt to protect capital during 2008, just when would it execute trades to pull money from the markets?   On Wall Street, the selloff happened because the institutions and ultra-wealthy liquidated  huge volumes of their holdings.  Meanwhile, that client, and perhaps John Q. Public at-large,  was left holding the bag…and got charged fees, on top of it!!  We can only hope that you didn’t experience anything similar (yet). 

So, what makes Toomey Investment Management (TIMI) different?  TIMI operates as a fiduciary investment firm.  We work for you and we do our best every day, to find the best solutions for you and your family.  Purely from an investment management perspective, we are the accountable party in your relationship with us.  We research and design portfolio models at our offices….not someone in a distant back office who has never met you. We monitor the portfolio components every day.   And we have a history of acting and reacting to attempt to preserve capital in rocky environments.  Though it’s an imperfect science, we do not just watch while Wall Street sells off. 

Additionally, we are tax preparers and advisers, too.  It has been an incredible benefit for our clients when we can tailor guidance around IRS implications.  We are also involved with most types of insurance; life, medical, long-term care and we work closely with an auto and homeowners agent.  From our offices, we have coordinated and assisted our clients with advanced strategies including Wills, Trusts and Medicaid planning. 

So when you’re assessing financial advice, I ask you, is an algorithm good enough?  Our business was designed to look at each client independently and at many financial levels….a hands-on, personal approach.  Within one firm, you will receive customized portfolio design and management, tax analysis, insurance review and assessment of possible advanced strategies which may benefit you and your family….and you will actually be working with one firm that can complete all of it!!

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IRREVOCABLE TRUSTS ARE SPRINGING UP EVERYWHERE

Trust entities have been employed for hundreds of years for many purposes. During my professional career, different types of trusts have gone in and out of favor as peripheral legal and planning situations have come to the fore. Though revocable trusts have been quite common throughout, irrevocable trusts were generally reserved for people of means who were able to permanently relinquish assets and even income. Well, in the past generation or so, the common application of irrevocable trusts amongst mainstream society has expanded greatly.
It is important to realize that trusts can be drafted in many forms and can be very flexible. The main parties to trusts are the grantor or settlor, the trustee or administrator and the beneficiaries. Generally, trusts are either revocable or irrevocable, can be disregarded or very rigid for tax purposes, are created to preserve assets and distribute income and even protect those who are or may become disabled. And there are many other benefits one may realize from using trusts. But they also can be a real nuisance, in hindsight.
As the term suggests, revocable trusts can be altered. Frequently, revocable trust beneficiaries and trustees are changed. During the grantors life, the grantor is often the trustee as well. The assets in the trust are typically deemed to be the property of the grantor in those cases. In general, revocable trusts are transparent, fluid and can be modified or terminated.
On the other hand, irrevocable trusts are usually very restrictive in terms of access and continued ownership by the grantor. And though possible variations include details beyond the scope of this discussion, most irrevocable trusts are set into stone once executed. Unlike the revocable version, the trust language affords very little, if any, modification of parties or terms.
So why has the irrevocable trust evolved into a common tool for more people? Its clear to me that asset protection is still the underlying objective. But unlike decades ago, the real catalyst is the unnerving prospect of long-term illness and nursing home expense. In fact, its fair to say that the majority of retirees have only one concern that could annihilate their retirement and estate plans…and that is long-term care. Chronic medical care expenses can reach $150,000 per year and more. And waiting until a family member has received a dire prognosis makes planning to shelter assets very difficult.
Enter the irrevocable trust. Though conveying assets to the trust is usually permanent, many retirees are making irrevocable transfers of the family home into a trust. And depending on the volume of other assets and income, additional transfers may be delivered to the trustee. Once conveyed, 60 months must normally elapse after transfers into trust before the system will consider those transfers to be immune from medicaid inclusion. As mentioned above, revocable trusts are typically deemed to be owned by you. As such, they will not help you insulate assets during your life. So the threat of losing the family home and other assets to medical expense has induced irrevocable transfers with the hope that 60 months will pass without chronic, debilitating diagnosis.
Please recognize that trust design and trust uses are extremely complicated and that after execution, unexpected problems may ensue without possible recourse. If you are contemplating any advanced estate planning, it is advisable to seek expert legal and financial guidance and ask many questions before executing the documents.

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