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Financial Planning

General Retirement Plan Questions Answered

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How much do you know about your retirement plan or retirement plans in general?

Very few know as much as they think they do. In fact, I’ve found that a majority of retirement plan investors simply make an allocation selection at the beginning of their career and never monitor the status or make any changes.

This can be an absolute disaster as not only do things change over time, but so do you and your goals.

Here are some common questions I receive regarding employer retirement plans.

Q: Can I max out my 401k, 403b, and 457b? Or am I limited to the $18,000 annual maximum (for 2016) collectively among all three type accounts?

A: While you cannot max out all three, you can max out the 401k or 403b at $18,000/yr AND the 457b at $18,000/yr for a total of $36,000 (2016 maximum) PLUS any catch-up contributions.

The IRS rules used to limit you to a total maximum per individual of $18,000/yr which is the reason there’s often confusion, however, those rules changed in the early 2000’s.

Before going into more debt, let’s take a look at each of these accounts.

Q: “What is a 401k?”

A: A 401k is a retirement savings plan sponsored by an employer.

This plan allows employees to elect to have a portion of their income withheld from their paycheck (before taxes are taken out) to be deposited into their 401k account. The contribution is then invested at the direction of the employee and, many times, employers will offer a match. The maximum 401k contribution for 2015 is $18,000, plus any applicable catch-up contributions.

As long as the employee allows the funds to remain in the account, the employee does not have to pay taxes on the balance. However, any withdrawals made prior to age 59 ½ may be subject to a 10% early-withdrawal penalty.Upon reaching age 59 ½, employees are able to make withdrawals penalty free and the dollars are taxed at ordinary income levels.

Upon reaching age 59 ½, employees are able to make withdrawals penalty free and the dollars are taxed at ordinary income levels.

Why 59 1/2? I don’t know either.

Q: What is a 403b?

A: A 403b is very similar to a 401k plan, but they are designed for tax-exempt and nonprofit organizations (schools, hospitals, religious groups, etc).

They have the same tax advantages, contribution limits, and early-withdrawal penalties as the 401k plan. The 403b has the same maximum as the 401k except the total employee contributions between the two must not exceed the employee maximum for either plan. So for 2016, the $18,000 employee maximum counts for both 401k and 403b contributions combined.

Q: What is a 457b?

A: The 457 plan is a type retirement plan offered to state and local governmental employees, as well as certain non-profit organizations.

It is similar to the 401k and the 403b in that you can make pre-tax contributions from your paycheck, but the plan differs when it comes to contribution limits and early-withdrawal penalties. You should pay close attention to whether your 457b plan is a governmental or non-governmental plan.

Often times non-governmental plans are far less flexible in terms of distribution options. For example, it’s not uncommon to see non-governmental 457b plans require full distribution if your employment terminates (at any age). Although you would avoid the 10% penalty with 457b early distributions, this would be fully taxed at ordinary income and could ramp you into the highest tax bracket. Something you want to avoid at all costs if possible.

Question: Should I consider the Roth version of each plan?

A: All three types of retirement plans may also allow for Roth contributions. You must check with your specific plan document to determine if your plan allows for this. The Roth contribution will be after-tax however the balance will grow tax-free and qualified withdrawals will also be tax-free.

You need to check with your specific plan document to determine if your plan allows for this. The Roth contribution will be after-tax however the balance will grow tax-free and qualified withdrawals will also be tax-free.

I would also suggest you looking into whether the Roth option is similar or quite a bit different from a Roth IRA. For example, the Roth TSP and Roth IRA’s are completely different even though they share a similar name.

Question: What if you’re not able to maximize your contributions and need to prioritize between the 401k, 403b, and 457b?

A: This can be tricky – there is no one size fits all answer.

– Cooper Mitchell

About Dane Financial, LLC

 

Dane Financial, LLC is a Registered Investment Advisory firm based in Springfield, Missouri that specializes in Financial Planning and Investment Management for Pre-Retirees, Federal Employee’s, and Millennials.

We offer the following products and services: retirement income strategies, wealth accumulation strategies, asset protection, tax minimization strategies, long-term care planning, and IRA, TSP, and 401(k) rollovers.

We are located on the third floor of the Bradford Place Building.

 

Financial Planning for Millennials

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Millennials often get a bad rap.

They’re a generation that knows what they want, strive to have a proper work/life balance, and reject the notion that simply because it was done a certain way in the past, it has to be done that way today.

Although these may seem like negatives to previous generations, in all reality, these are great qualities.

First off, why strive to live up to the expectations of others? Millennials in large part understand what they want for their lives and push after it.

Working a 9 to 5 in a cubicle may have been a dream for previous generations, but that’s far from it for Millennials. Why spend a majority of your life doing something you don’t want for people you don’t like?

Trailblazers are always viewed in a negative light. People don’t know what to think of people they don’t understand.

All of these traits, when used correctly, are absolute positives and will lead to a changed world.

One thing that Millennials often lack however is the means to plan.

There’s a million and one ideas floating around in the minds of young people, but few actually have a plan to make the goal become a reality.

That’s where financial planners come in.

Having a goal is simply not enough.

Here’s a list of goals often expressed by Millennials I’ve met with:

  • I’d like to retire in my 40’s.
  • We want the freedom to travel often.
  • I want to only have to work 6 months out of the year.
  • We don’t want to have kids until we’re in our 30’s.

These are all great goals and many of which I have for myself.

However, when I ask how my clients plan to achieve those goals, they often have no idea.

THIS IS A PROBLEM.

Too often we focus on the end goal, rather than the work it takes to get there.

Retiring in your 40’s is no small task, there’s a reason so few do it. It takes HARD work and an insane amount of discipline. Forget eating out every meal and going to every new release movie at the theatre.

This isn’t a bad thing however.

You don’t need to eat out every meal, for one it’s expensive, and secondly, it’s pretty unhealthy. Limiting your dining consumption will increase your health and your wallet.

Having the goal to travel often and see the world is a great one to have. But, it takes proper budgeting and allocation of your money when you’re not traveling, to allow you TO travel. Not only will you be spending money while traveling, most of you will also not be making money while you’re doing so.

You only want to work 6 months out of the year? Then you better be working like a slave while you’re working, and spending like a monk when you’re not. Working 6 months out of the year is completely doable, but living frugal will have to be top of mind at all times, not just when you’re not working.

Having kids later in life will allow you get to know your partner and explore your life with freedom. But, having kids later in life also means they’ll be living in the home later into your life. Planning accordingly is important to ensure they’re taken care of.

These are just a few questions, but illustrate the importance of a plan.

Not only do you need a plan, but you need someone who understands your who, what, when, where, and why’s.

Your financial planner should pair with you to tackle your goals and give you guidance on where to push and also where to pull.

Don’t work with your father’s Financial Planner.

Work with your Financial Planner.

About Dane Financial, LLC

 

Dane Financial, LLC is a Registered Investment Advisory firm based in Springfield, Missouri that specializes in Financial Planning and Investment Management for Pre-Retirees, Federal Employee’s, and Millennials.

We offer the following products and services: retirement income strategies, wealth accumulation strategies, asset protection, tax minimization strategies, long-term care planning, and IRA, TSP, and 401(k) rollovers.

We are located on the third floor of the Bradford Place Building.

 

Springfield Missouri Financial Planner

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Ahhhh!

Springfield, Missouri.

Springfield is a unique place. At times it feels like a BIG city, and yet at others you can’t go anywhere without seeing somebody you know.

I like it that way. A city that offers the amenities and features of a large city, but with the personality of something smaller.

Many people live in Springfield for that exact reason.

In the same sense, many people are looking for a financial planner that has the features of and technology of a large corporation, but with the service of a small, locally-owned company.

I am Cooper Mitchell and I am the President and founder of Dane Financial, LLC a Registered Investment Advisory financial planning firm located in Springfield, MO.

Dane Financial, LLC was formed to offer a comprehensive range of tailored investment and financial planning strategies while maintaining local decision-making control, all while providing exceptional customer service.

We utilize the latest technology, portfolios, and software and combine it with a unique and personal approach to each client.

About Dane Financial, LLC

We are a Springfield-based, Missouri Registered Investment Advisory financial planning firm, founded in 2014.

Dane Financial, LLC was formed to offer a comprehensive array of tailored investment and financial planning strategies while maintaining local decision-making control and providing exceptional customer service.

Servicing Springfield, MO and More

We are located at:

1531 E. Bradford Parkway
Suite 304
Springfield, MO 65804

Need Directions? Here is a map and directions to our location.

I mainly service Missouri and Arkansas to include: Springfield, St. Louis, Kansas City, Joplin, Fayetteville, Bentonville, Little Rock, Fort Smith, and other great Missouri and Arkansas cities. I also service Oklahoma (especially when there’s a Oklahoma City Thunder game.)

My Focus as a Financial Planner

As a financial planner, I look to provide comprehensive financial planning for individuals and families. I specifically focus on millennials, pre-retirees, and federal employees.

Some areas I specialize in are employee benefits and retirement planning, investment management, estate planning, and insurance.

Contact Cooper Mitchell

If you are interested in a free consultation feel free to schedule a phone call or meeting or call 417-429-0510. If you are in the Springfield area please feel free to stop by our office.

5 Tips for Buying a Home

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Far and away, one of the largest purchases nearly everyone will make is their home.

People put a lot of pride in their home. They buy all sorts of things to make both the outside and the inside unique and welcoming.

This is for good reason as the majority of people will spend most of their time over their lives in their home.

But, too often people jump into purchasing a home all too early.

In working with people in deciding when is the best time to buy a home and how to go about buying one, we’ve created a list for our clients to assist in this process.

Here are 5 Tips for Buying a Home:

1. Arrange Your Finances

Before deciding to buy a home, ensuring that your finances are in order is essential step number one.

This includes:

  • Having a solid budget in place
  • Being debt-free
  • Having a fully funded emergency fund (3-6 months of expenses set aside in easily accessible accounts.)

These steps are essential in forming the foundation for the future and should be practically mandatory before moving on to the next tip.

2. Determine if You Can Even Afford a Home

Having your own home is great, however not if it’s at the expense of your livelihood.

There’s three main questions that you should ask yourself before purchasing a home:

  1. Can I afford to make AT LEAST a 10% (20% would be best) down payment?
  2. Can I afford a 15-year fixed rate loan?
  3. Can I keep the home payments at or preferably below 25% of my monthly take-home pay?

Honestly look at these questions before deciding to buy a home.

One of the reasons these questions are so important is because you won’t honestly be able to even answer them until you’ve completed the first tip.

Purchasing a no-money down mortgage is simply asking for disaster to come, choosing a fixed rate loan that is longer than 15 years and spending over 25% of your monthly take-home pay is a sign you’re purchasing too expensive of a home.

3. Get Pre-Approved for the Mortgage and Plan for Extra Expenses

Getting pre-approved for a mortgage will increase your chance of getting the best deal when you go to actually purchase a home.

A few things to be aware of when starting the process are:

  • Meet with an honest mortgage professional
  • Get a good faith estimate breakdown of your mortgage that includes an estimate of the payment and interest rate.
  • Use the good faith estimate when comparison shopping with mortgage providers.

Paying the down-payment isn’t all that goes into purchasing a home.

Plan for extra expenses such as property taxes, utilities, and homeowners insurance.

4. Make a List of Desires and Find a Good Buyer’s Agent and Home Inspector

Due to the purchase of a home being such a large and long-term investment, it’s important that it has the features your family desires.

A few common features to be thinking about are how many levels, the location, garage size, backyard size, and amount of bedroom and bathrooms.

Once you have your list, take it to a trusted Buyer’s Agent also known as a Realtor. Once you find a home that meets your needs, interview multiple inspectors to find one that provides a complete and detailed report.

5. Close on the Home

Before signing for the mortgage, you’ll want to make sure you get a property survey to determine the boundaries and possible easements/encroachments as well as a home inspection.

Once you approve of the home following the survey and inspections, make an offer with your real estate agent. Use the agent when making an offer, but ultimately the decision is upon your shoulders.

About Dane Financial, LLC

 

Dane Financial, LLC is a Registered Investment Advisory firm based in Springfield, Missouri that specializes in Financial Planning and Investment Management for Pre-Retirees, Federal Employee’s, and Millennials.

We offer the following products and services: retirement income strategies, wealth accumulation strategies, asset protection, tax minimization strategies, long-term care planning, and IRA, TSP, and 401(k) rollovers.

We are located on the third floor of the Bradford Place Building.