Retire With Ryan

If you’re 55 and older and thinking about retirement, then this is the only retirement podcast you need. From tax planning to managing your investment portfolio, we cover the issues you should be thinking about as you develop your financial plan for retirement. Your host, Ryan Morrissey, is a Fee-Only CERTIFIED FINANCIAL PLANNER TM who lives and breathes retirement planning. He’ll be bringing you stories and real life examples of how to set yourself up for a successful retirement.

Five Reasons a Brokerage Account Might Be Better Than an Annuity for Your Investments, #260 07/01/2025

Five Reasons a Brokerage Account Might Be Better Than an Annuity for Your Investments, #260 I’m exploring a common dilemma for anyone coming into a lump sum of money, whether from an inheritance, the sale of a business, or another windfall: Should you invest in a traditional brokerage account or opt for an annuity? On this week's episode, I discuss the key differences between annuities and brokerage accounts, highlighting the five major pitfalls of annuities that are often overlooked. You'll learn why transparency, flexibility, and tax efficiency make brokerage accounts a better fit for many investors, especially those seeking to beat inflation and maintain control of their funds. You will want to hear this episode if you are interested in... [06:12] Annuities have capped returns and may not keep up with inflation, making brokerage accounts a better investment for retirees. [07:59] Fixed annuities vs. inflation risks. [11:21] Brokerage accounts offer easy, penalty-free liquidity for investment withdrawal. [14:56] Brokerage accounts offer tax advantages, such as zero percent tax on long-term investments and flexibility to access funds at any age. [19:55] Traditional brokerage accounts offer transparency, ease of understanding, and no hidden fees, providing clear valuations and peace of mind. [20:54] Potential conflicts of interest associated with high commissions given to advisors who sell annuities. Understanding the Five Key Advantages of Brokerage Accounts for Lump Sum Investors Inflation Protection A primary concern for retirees is ensuring their income grows at least as fast as inflation. Fixed annuities, which guarantee a steady interest rate, sound appealing in their promise of stability, but these tend to pay rates (typically 4-6% as of now) that may barely keep pace with rising costs. If inflation spikes, the real value of your money could erode. Contrast this with long-term investing via a brokerage account. If you were to invest in a broad index fund tracking, say, the S&P 500, you’d historically average about a 10% annual return since 1957. Even accounting for average inflation (let’s say 3%), you’re left with a meaningful net gain. Over decades, this growth can make a significant difference, allowing your income and nest egg to grow, not just hold steady. Easy Access to Your Money Life is unpredictable. You might need to access your savings for a sudden expense, a home repair, a medical event, or a business opportunity. With annuities, most contracts enforce a “surrender period” during which you’ll pay penalties (sometimes starting at 7% and declining over many years) for early withdrawals above a limited free amount (typically 10% per year). Paperwork and delays are another downside. Brokerage accounts, on the other hand, offer quick and penalty-free access. Whether you need all or just part of your funds, they’re typically available within a couple of business days. You’ll pay taxes on any gains, sure, but you’ll sidestep surrender charges and bureaucratic hurdles. Potentially Lower Taxes With Brokerage Accounts Tax treatment is often overlooked but can have a big impact on your bottom line. Annuitized payouts and withdrawals from annuities are taxed at ordinary income rates, with gains coming out first (LIFO: last in, first out). That can mean higher taxes for many, especially if you’re in a modest or high tax bracket. With a brokerage account, long-term investment gains are generally taxed at lower capital gains rates (15% for most, and sometimes 0% for those in the lower brackets). Plus, if you inherit a brokerage account, most investments receive a “step up” in basis, the new tax cost becomes the value at the decedent’s death, potentially eliminating decades of capital gains tax if sold immediately. Simplicity and Transparency Annuities come with layers of complexity, including various types (fixed, indexed, and variable), confusing rider add-ons, differing fees, and ever-changing product features. Even professionals can struggle to keep up! Brokerage accounts, by contrast, are simple and transparent. You get a clear statement showing exactly what you own, its value, and the associated fees, which are commonly lower than those inside annuity products. No hidden surrender charges or high ongoing costs. Avoiding Aggressive Sales Tactics and Conflicts of Interest Annuities are lucrative for the agents who sell them, with commissions sometimes soaring to 7%. This can create an inherent conflict of interest, particularly for seniors who might feel pressured into buying. Choosing a low-fee brokerage account, especially with the guidance of a fiduciary, fee-only financial advisor, can help you avoid these conflicts. You retain control, minimize costs, and benefit from unbiased advice. Annuities do have a place for certain ultra-conservative investors who value guarantees above all else. However, for most people, especially those seeking growth, flexibility, and transparency, a brokerage account is often the safer and smarter long-term choice. If you’re unsure about your unique situation, consider consulting a fee-only advisor who will put your interests first and steer clear of high-commission sales pitches. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/37202610

Facts vs. Fiction in Retirement Planning, #259 06/24/2025

Facts vs. Fiction in Retirement Planning, #259 From the truths about making large purchases in retirement to whether you really need to pay off your mortgage before you stop working, I’m sharing years of financial expertise to challenge a few retirement myths so you can make balanced, informed decisions. We’re talking strategies for charitable giving, clearing up misconceptions about reverse mortgages, and explaining why inflation may be your biggest risk in retirement. If you’re looking for practical advice on enjoying your savings while still planning for the long run, or if you want to protect yourself from financial scams and fraud, this episode is full of actionable tips to build your financial confidence for the years ahead. You will want to hear this episode if you are interested in... [02:02] Leaving money to charity after death reduces estate value for taxes, but offers no immediate tax deduction. [04:17] Qualified charitable distributions and large donations can reduce taxable income, but are only deductible if you itemize. [08:11] Don't rush to pay low-interest mortgages; invest instead, as returns can potentially exceed mortgage interest rates. [13:03] Balance stocks with bonds and cash to manage risk and volatility. [10:10] Reverse mortgages can be a great idea in certain circumstances. Navigating the Maze of Retirement Myths Retirement often brings a sense of relief; finally, you get to enjoy the fruits of your labor! However, it’s also a period rife with uncertainty, especially when so much advice and information clash or seem outdated. In this episode, I’m tackling six of the most persistent myths retirees face. 1. Myth: Leaving Money to Charity Is Best Done After Death Many retirees assume that bequeathing assets to a charity upon passing is the most virtuous and tax-efficient way to give back. While this is always an option, leaving money to charity at death doesn’t net you a tax deduction; it simply reduces the size of your taxable estate. For the vast majority, it’s more impactful to consider gifting while alive. There are several ways to make charitable giving work for you, including: Qualified Charitable Distributions (QCDs): Donate part or all of your required minimum distribution directly from your IRA, reducing your taxable income. Cash Donations: If you itemize deductions, you can deduct cash gifts, potentially even enough to tip you into itemizing territory if the gift is large. Gifting Appreciated Assets: Donating highly appreciated stocks or real estate can minimize capital gains and offer you an income stream. 2. Myth: Large Purchases Are Off-Limits in Retirement Worried that buying a boat or funding a dream trip will doom your financial future? It’s a myth that large expenditures are always ill-advised. With a solid withdrawal strategy, say, 5% of a $2 million portfolio, making a one-time, reasonable purchase might slightly reduce your yearly income, but if balanced against market growth and overall planning, it’s rarely catastrophic. Thoughtful, planned spending helps you enjoy retirement, so don’t deprive yourself unnecessarily! 3. Myth: The Less You Spend, the Better Many retirees become excessively frugal, reluctant to draw down the savings they worked so hard to accumulate. But can’t take your money with you. While it’s wise to have a budget and withdraw at a sustainable rate, being too conservative may rob you of life’s joys, like travel, hobbies, or supporting family, while you’re healthy enough to enjoy them. The key is balance: know your withdrawal rate and revisit your plan regularly. 4. Myth: You Must Pay Off Your Mortgage Before Retiring It’s comforting to be debt-free, but urgently paying off a low-interest mortgage could backfire. If your mortgage rate is 5% or lower and your investments are earning more, you could be better off keeping the mortgage and leaving your assets to grow. Plus, withdrawing large chunks from retirement accounts to pay down a mortgage could trigger higher taxes or Medicare premiums and leave you with less liquidity. Carrying a modest mortgage into retirement is not a financial failure; it may be a savvy move. 5. Myth: Reverse Mortgages Should Be Avoided Reverse mortgages have a bad rap, often viewed as predatory or risky. While there were issues in the past, today’s products are much more regulated. If you’re 62 or older, a reverse mortgage can provide tax-free cash, letting you access home equity without moving. It’s especially valuable if much of your net worth is tied up in your home, or unexpected expenses crop up. Investigate carefully, but don’t dismiss this option out of hand. 6. Myth: A Market Crash Is the Greatest Retirement Risk Market volatility grabs headlines, but inflation and the risk of outliving your money are bigger threats. The right asset allocation, mixing stocks for growth with bonds and cash for stability, is essential. Yet, don’t forget about inflation: stocks have historically been the best hedge. Also, financial scams are a growing risk; safeguard your accounts with strong passwords and authentication. By understanding the realities behind these common misconceptions, you can build a strategy that sustains not just your finances but your lifestyle and peace of mind. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/37108430

Seven Smart Reasons to Leave Your Old 401(k) with a Previous Employer, #258 06/17/2025

Seven Smart Reasons to Leave Your Old 401(k) with a Previous Employer, #258 Building on last week’s discussion about why rolling over your old 401(k) into an IRA could be a smart move, this episode flips the script. It explores seven compelling reasons you might want to leave your 401(k) with your previous employer instead. I break down factors like fees, company stock advantages, penalty-free withdrawals, legal protections, and unique investment options that could all influence your decision. If you're approaching retirement or just planning your next career move, this episode is packed with insights to help you make the best choices for your financial future. You will want to hear this episode if you are interested in... [04:12] Leave company stock in 401k to use net unrealized depreciation, potentially saving on taxes via long-term capital gains. [08:55] Consider keeping company stock in an old 401(k) to avoid taxes and penalties if under 59.5 years. [10:01] IRA withdrawal exemptions and strategies. [16:01] Consider keeping your old 401 (k) for potential loan access, but check if your provider permits non-employee loans. [17:50] Deferring 401(k) distributions explained. When to Leave Your Old 401(k) With Your Previous Employer Changing jobs often means making quick decisions about retirement savings. While rolling over your old 401(k) into an IRA is a common choice, there are significant advantages to leaving it where it is. This week, I’m discussing the situations when maintaining your previous employer’s retirement plan is advantageous. 1. Potential for Lower Fees If you worked for a large organization, their 401(k) plan might offer exceptionally low administrative and investment fees, especially if they’ve chosen robust menus with index fund options. While IRA costs have dropped due to strong competition among major financial institutions like Schwab, Fidelity, and Vanguard, some large employer plans still offer a lower cost. Always compare fees before making a move; sometimes, your old 401(k) will be the most cost-effective option available. 2. Tax Benefits of Company Stock (Net Unrealized Appreciation) Do you have significant company stock in your 401(k)? You could benefit from the unique tax break called Net Unrealized Appreciation (NUA). This allows you to pay lower long-term capital gains rates on your stock’s growth instead of higher ordinary income rates. However, to take advantage of NUA, you must carefully roll out your stock and be mindful of any 10% penalty if you’re under 59½. Know your stock’s cost basis and consult with a tax professional to determine if waiting is best, especially if your cost basis is higher. 3. Penalty-Free Access Between Age 55 and 59½ Left your job between 55 and 59½? Here’s a little-known benefit: you can tap your old 401(k) penalty-free before age 59½. If you roll the balance into an IRA, that door closes, unless you qualify for rare exceptions. This rule can be crucial if you need those funds to bridge the gap to retirement, so consider leaving at least part of your balance in the plan until you turn 59½. 4. Enhanced Creditor Protection Federal law (ERISA) offers 401(k) plans strong protection from creditors and judgments, even in bankruptcy. While rollover IRAs are also protected under federal and many state laws, the details can get complicated. Certain states may limit IRA protections, so it’s wise to investigate your state’s rules. Segmenting rollover IRAs from contributory IRAs can also help simplify tracking and protection. 5. Access to Stable Value Funds Some 401(k) plans offer stable value funds, a low-risk investment choice that often comes with a guaranteed minimum rate of return. While money market funds are currently paying more, that could change if interest rates drop. In lower-rate environments, stable value funds could offer an edge and a safe harbor for your retirement assets. 6. Possible Loan Availability Need to borrow against your retirement savings? Some plans allow you to take a loan from your 401(k), even after leaving the company. However, this isn’t universal, since loan repayments are usually tied to payroll. Check with your plan administrator to see if this benefit applies; if it does, it could be an important safety net. 7. Required Minimum Distribution (RMD) Deferral if Still Working If you work past age 73, keeping your funds in a 401(k) with your current employer lets you defer required minimum distributions (RMDs). That’s not the case with IRAs. Consolidating old 401(k)s into your current plan can simplify RMD timing and let your funds grow tax-deferred a bit longer. Make an Informed Move Rolling over your 401(k) may seem automatic, but there are times when staying put is the better choice. Carefully assess fees, tax implications, creditor protections, and your unique needs. Most importantly, consider working with a fiduciary, fee-only financial advisor who understands your entire financial picture. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/37013680

Five Reasons to Roll Over Your Old 401k into an IRA, #257 06/10/2025

Five Reasons to Roll Over Your Old 401k into an IRA, #257 In today's episode, I’m diving into a topic that’s top-of-mind for anyone who’s switched jobs: what should you do with your old 401(k) plan? I discuss five key reasons why moving them into an IRA could simplify your financial life, from consolidating accounts for better control to gaining access to a broader range of investment options, reducing fees, optimizing Roth and after-tax funds, and making it easier to work with a financial advisor. Whether you’re planning your next career step or just want to make your retirement savings work harder for you, this episode is packed with practical advice to guide your decision. Stick around until the end, and don’t forget to tune in next week when I cover situations where rolling over your 401(k) might not be the best choice! You will want to hear this episode if you are interested in... [00:00] Vested retirement funds offer four options: keep them in the plan, or withdraw and pay taxes [04:46] Rolling over a 401(k) to an IRA offers more control and access to your retirement funds, preventing forgotten accounts as you change jobs [06:41] Consolidate investments for simplicity and control; update records if keeping old retirement accounts [12:05] Convert Roth contributions to a Roth IRA to start the five-year period and ensure future gains grow tax-free, especially for after-tax funds in a 401(k) without in-plan Roth conversions [13:13] Rollovers to an IRA can facilitate Roth conversions and allow financial advisors to manage retirement accounts. Consolidate Old 401ks for a Smoother Future When you change jobs, it's important not to leave your old retirement accounts behind. For many Americans, the primary vehicle for saving for retirement is their employer-sponsored 401(k) plan. But what should you do with that 401(k) once you’ve moved on? Rolling it into an Individual Retirement Account (IRA) may be the smart move, offering control, flexibility, potential cost savings, and tax advantages. Let’s walk through five compelling reasons why a 401(k) rollover into an IRA might make sense for you. 1. Greater Control and Account Consolidation One of the biggest headaches of changing jobs multiple times is having various retirement accounts scattered across different institutions. Not only is it difficult to keep track of these accounts, but there’s the risk that you might forget about them entirely. By rolling old 401(k)s into a single IRA, you consolidate your investments, making it easier to manage and monitor your retirement savings. With all your funds in one place, you’ll have more control over your asset allocation and will be better positioned to implement a cohesive investment strategy. Additionally, consolidating accounts reduces the administrative burden of managing multiple logins and statements. 2. Expanded Investment Choices and Flexibility Most employer-sponsored 401(k) plans offer a fairly limited menu of investment options, typically ranging from a dozen to twenty funds. These may or may not align with your preferred asset allocation strategy, and some plans are more limited than others. By rolling over your 401(k) into an IRA at a major discount broker like Schwab, Fidelity, or Vanguard, you unlock a much broader universe of investment possibilities, mutual funds, exchange-traded funds (ETFs), stocks, bonds, CDs, and more. This flexibility lets you fine-tune your portfolio, properly diversify, and better tailor your investments to your risk profile and retirement timeline. 3. Potential for Lower Investment Costs 401(k) plans, particularly those from smaller employers, often feature higher administrative and fund expenses, sometimes reaching 1% or more in annual fees. These extra costs chip away at your investment returns over time. With an IRA, especially when investing in low-cost ETFs or mutual funds, you can often significantly reduce the expense ratios you pay. Over decades, even a modest reduction in annual fees can translate into thousands more in retirement savings due to the power of compounding. 4. Managing Roth and After-Tax Contributions Many 401(k) plans now offer a designated Roth component as well as avenues for after-tax contributions. When you roll over your account, this is a valuable opportunity to ensure your Roth and after-tax money are treated with optimal tax efficiency. For example, rolling Roth 401(k) funds into a Roth IRA starts the five-year clock for tax-free withdrawals on earnings, which is critical for planning your retirement withdrawals. Additionally, an IRA rollover can be structured to split after-tax contributions into a Roth IRA, giving those funds tax-free growth potential rather than the more limited advantages offered inside the 401(k). 5. Access to Professional Management If you want professional help managing your retirement investments and financial planning, rolling your assets into an IRA is almost always a prerequisite. Advisors generally cannot manage assets held within a former employer's 401(k) platform, but with funds consolidated in an IRA at a major custodian, they can actively manage your investments, make ongoing adjustments, and assist with tax planning and distributions as you transition into retirement. Assess Your Situation Before Moving While rolling over your old 401(k) to an IRA offers considerable advantages, it’s not always the perfect solution for everyone. Each situation is unique, and certain protections or features (such as early withdrawal options or creditor protections) may be stronger inside a 401(k) for some individuals. Be sure to review your specific circumstances carefully, ideally, with a trusted financial advisor, before making any big moves. A well-considered rollover could make your road to retirement much smoother, giving you more control, lower costs, and better investment options along the way. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/36907265

Retirement Reality Check, with Michael Sheldon #256 06/03/2025

Retirement Reality Check, with Michael Sheldon #256 This week on the show, I’m joined in person by investment veteran Michael Sheldon, who brings over 26 years of experience in the financial services industry. We dig into essential strategies for investing as you approach and enter retirement, covering asset allocation, diversification, income planning, and how to handle inevitable market volatility. Whether you’re a pre-retiree, a recent retiree, or just looking to strengthen your investment approach, Michael offers some great actionable insights designed to help you build a resilient portfolio and stay on track toward your long-term financial goals. You will want to hear this episode if you are interested in... [04:52] Portfolio risk should change as you age, becoming more conservative in retirement. [09:34] Why US large-cap stocks have outperformed recently. [14:13] Pros and cons of target date funds, including fees, asset allocation, and international exposure. [16:07] Michael warns against chasing high-yield dividend stocks. [18:51] Private equity/real estate and understanding the liquidity and risks. [31:15] Building income streams, reducing volatility, and portfolio standard deviation as you near retirement. [43:18] Why maintaining discipline through corrections is key to investment success. Strategies to Weather Market Ups and Downs Any successful investment journey begins with a clear financial plan. Michael emphasizes the importance of understanding your spending needs in retirement. This process often starts with creating a detailed budget. A thorough assessment of current and expected future expenses helps determine the appropriate rate of return necessary to achieve your retirement goals. Once you have a handle on your budget, you can set a target allocation that aligns your risk tolerance with your required investment returns. Your personal plan should factor in not only your goals and time horizon, but also your comfort level with market volatility. Balancing Risk and Opportunity As you move closer to retirement, adjusting your asset allocation becomes increasingly important. Younger investors can often afford to be more aggressive, allocating a larger portion (often 70% - 100%) to equities, since they have time to recover from market downturns. However, those approaching or in retirement generally benefit from more conservative portfolios, emphasizing capital preservation. A common rule of thumb discussed was to maintain 3 - 5 years of living expenses in cash or short-term bonds. This buffer allows retirees to weather market downturns without selling equities at a loss. Still, every investor is different. Some retirees, especially those with higher risk tolerance or substantial resources, may maintain large allocations to equities. The key is to structure your portfolio to ensure you can meet your expenses even during extended market declines. Don’t Chase Home Runs The conversation stressed the dangers of seeking the next “big winner” stock. Instead, the focus should be on diversification, owning a broad mix of asset classes and geographies. While the past decade has seen U.S. large-cap growth stocks outperform other areas, this may not always be the case. International markets, small-cap stocks, and value stocks each tend to outperform at different points in the economic cycle. Proper diversification can help reduce risk and smooth out returns, preventing the common mistake of buying high and selling low. It’s wise to avoid concentrating your portfolio too heavily in a single sector, country, or investment style. Beyond Chasing High Dividends One of the big myths in retirement investing is the need to load up on high-dividend-paying stocks for income. Michael cautioned against focusing solely on high yields, as these companies might carry more risk or have unsustainable business models. Instead, look for companies with a solid history of gradually increasing their dividends, which indicates healthy cash flows and business stability. Active vs. Passive Management and Cost Considerations The debate between active and passive management continues. For broad U.S. markets, low-cost index funds and ETFs have outperformed most active managers over time, thanks to lower costs and automatic portfolio updates. Increasingly, investors are turning to ETFs for their tax efficiency, tradability, and lower fees compared to traditional mutual funds. As with any investment, understanding fees and their impact on long-term returns is vital. The Power of Discipline Finally, Michael shares a valuable perspective on market volatility. Historically, the S&P 500 has experienced average intra-year declines of over 14%, yet finished positive in 76% of years since 1980. Volatility is normal, and patient investors are rewarded for staying invested. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/36808665

Breaking Down the FERS Retirement System for Federal Employees, #255 05/27/2025

Breaking Down the FERS Retirement System for Federal Employees, #255 On this week’s episode, I’m discussing the Federal Employees Retirement System, or FERS, a program that covers nearly all civilian federal workers. If you’re a federal employee curious about when you’re eligible to retire, how your pension is calculated, what the Thrift Savings Plan offers, or how special early retirement and survivor benefits work, this episode is your go-to resource. We’re breaking down the three key components of FERS: your Basic Benefit Plan (a pension), Social Security, and the Thrift Savings Plan, as well as important details like cost-of-living adjustments and tax considerations. Whether you’re just starting your federal career or planning your retirement right now, you’ll get practical insights to help you make the most of your retirement benefits. You will want to hear this episode if you are interested in... [00:00] I share an overview of how FERS provides federal employees' retirement benefits. [05:02] Your basic benefit plan is calculated using the highest average salary over three consecutive years, often the final service years. [09:52] Federal employees retiring at 55-57 receive a FERS supplement until age 62, calculated by years of service/40 times the estimated Social Security benefit. [11:41] Benefits include cost-of-living adjustments for those 62+ or in special roles, aligned with consumer price index increases. [14:52] FERS survivor benefits are available if the deceased had at least 10 years of service. What is FERS, and Who Does It Cover? As one of the most significant employment sectors in the United States, the federal government supports over 3 million workers, the majority of whom participate in the Federal Employees Retirement System (FERS). If you're a federal employee, understanding FERS is vital to planning a comfortable and financially secure retirement. The Federal Employees Retirement System (FERS) is the primary retirement plan for U.S. civilian federal employees hired after 1983. According to the Office of Personnel Management, FERS provides retirement income from three sources: 1. The Basic Benefit Plan (a pension). 2. Social Security. 3. The Thrift Savings Plan (TSP), similar to a private sector 401(k). FERS covers different federal professionals, from law enforcement and firefighters to engineers, analysts, and other administrative roles. Special provisions exist for high-risk positions such as air traffic controllers and certain law enforcement officers, which affect their benefit calculations and retirement age. When Can You Retire Under FERS? Retirement eligibility under FERS primarily depends on age and years of credible service. The key term here is Minimum Retirement Age (MRA), which varies based on birth year, from 55 for those born before 1948 to 57 for workers born in 1970 or later. Retirement options include: Age 62 with 5 years of service. Age 60 with 20 years of service. MRA with 30 years of service. MRA with 10 years of service (MRA+10), though benefits are reduced by 5% for each year under age 62. Early retirement is available in some situations, such as involuntary separations or major agency reorganizations. In those cases, eligibility can be as early as age 50 with 20 years of service or at any age with 25 years of service. Calculating Your Basic Pension Benefit The FERS pension is calculated using your “high-3” average salary, the highest three consecutive years of basic pay, usually your last three years. The formula generally provides 1% of your high-3 salary for each year of government service (increases to 1.1% if you retire at 62 or older with 20+ years). Special categories, like federal law enforcement or air traffic controllers, receive 1.7% for the first 20 years and 1% thereafter. For example: If you retire at 57 with 30 years of service and your high-3 average is $165,000: - 30 years x 1% = 30% - $165,000 x 30% = $49,500 annual pension The FERS Supplement Since some federal employees retire before they’re eligible for Social Security (age 62), FERS includes a Special Retirement Supplement. This bridges the income gap until you can claim Social Security, calculated as: Years of service ÷ 40 x age-62 Social Security benefit For example, with 30 years of service and a projected Social Security benefit of $2,500 per month, the supplement would be $1,875 per month from retirement until age 62. Understanding FERS is essential for federal workers considering retirement. Regularly reviewing your retirement strategy, estimating future benefits, and taking advantage of financial planning resources can help you maximize your retirement security. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/36705650

Four Costly Mistakes to Avoid When Claiming Social Security While Working After 65, #254 05/20/2025

Four Costly Mistakes to Avoid When Claiming Social Security While Working After 65, #254 Thinking about collecting Social Security while you’re still working? It’s a tempting option, but there are several crucial mistakes you’ll want to avoid. Using real-life stories, I’m laying out the four big pitfalls, like earning over the social security limit, jeopardizing your health savings account, mishandling Medicare enrollment, and forgetting about tax withholding. These missteps can lead to unnecessary penalties, and so I want to give some actionable strategies to help you make the most of your benefits without unpleasant surprises. You will want to hear this episode if you are interested in... [00:00] Four key factors to consider before collecting Social Security while you’re still working. [06:04] Collecting benefits while working can affect HSA contributions. [07:40] Stop HSA contributions six months before enrolling in Medicare Part A to avoid penalties. [13:32] Enrolling in Medicare Part B while having employer insurance is unnecessary, as employer coverage remains primary. [14:33] Medigap timing and social security taxes. [15:21] Social Security is taxable income for most people, which means that you will owe income tax on that money. Choosing when and how to collect Social Security is complex, especially if you intend to keep working beyond age 62. While the prospect of “double-dipping” might seem appealing, several critical factors can impact your overall benefit, tax situation, and healthcare coverage. Here are the four big mistakes I often see: 1. Exceeding the Social Security Earnings Limit One of the biggest mistakes is not understanding the earnings limit set by Social Security for those who collect benefits before reaching their full retirement age (FRA). If you start taking benefits before your FRA, which currently ranges from 66 to 67 depending on your birth year, your benefits may be reduced if your annual earnings exceed a certain threshold. Before FRA: For every $2 you earn over this limit, Social Security will deduct $1 from your benefits. The year you reach FRA: The limit jumps to $62,160, but the calculation changes to $1 withheld for every $3 over the limit, and only the months before your birthday month are counted. After FRA, there is no longer an earnings cap; you can earn as much as you want without reducing your benefits. Failing to plan for these restrictions can lead to a surprise clawback, so calculate your annual income carefully if you plan to collect early. 2. Losing Eligibility to Contribute to an HSA If you’re enrolled in a high-deductible health plan and are contributing to a Health Savings Account (HSA), be wary: Once you enroll for Social Security after age 65, you’re automatically enrolled in Medicare Part A. By law, you cannot contribute to an HSA while on Medicare. To make matters more complex, Medicare Part A enrollment is retroactive up to six months, and any contributions made to your HSA during that period will be considered excess contributions, exposed to a 6% IRS penalty unless withdrawn in time. Before you trigger Social Security benefits, stop your HSA contributions (and your employer’s) at least six months in advance to avoid penalties and the loss of valuable tax deductions. 3. Accidental Enrollment in Medicare Part B Some assume that enrolling in Medicare Part B is required or beneficial while they keep their employer coverage, but that’s not always the case. If your employer has 20 or more employees and you’re covered under their group health insurance, your employer’s plan remains primary, and Medicare Part B is unnecessary and costly, with premiums starting at $185/month and higher for high earners. Enrolling in Part B during this period can limit your future ability to buy a Medigap policy with automatic acceptance (no health questions or exclusions for pre-existing conditions). Unless you’re losing employer coverage, it’s usually best to delay enrolling in Part B and carefully respond to any enrollment communications from Social Security. 4. Not Withholding Enough Taxes on Social Security Payments Social Security benefits are taxable for most retirees, especially if you’re still working. You need to anticipate the added income and withhold sufficient federal (and potentially state) taxes to avoid underpayment penalties. You can file IRS Form W-4V to have Social Security withhold federal tax from each payment, choosing between 7%, 10%, 12%, and 22%. Alternatively, increase withholding at work or make estimated tax payments. Planning ahead ensures you won’t face a large bill come tax time. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/36626235

Applying Warren Buffett’s Investment Wisdom to Your Life, #253 05/13/2025

Applying Warren Buffett’s Investment Wisdom to Your Life, #253 It’s been announced that Warren Buffett is stepping down as CEO of Berkshire Hathaway. In this episode, I’ll discuss Buffett’s humble beginnings, his approach to investing, and the philosophy that built one of the most successful companies in history. I’ll also break down Warren Buffett’s wisdom into seven powerful, practical tips that align with my own approach to advising clients. Listen for tips on starting your investment journey early, staying the course during tough markets, and prioritizing temperament over intellect. You will want to hear this episode if you are interested in... [00:00] Principles of Warren Buffett's investing strategies. [05:55] Buffett co-founded The Giving Pledge, pledging 99% of his wealth, and influencing other billionaires. [07:08] Berkshire Hathaway class A shares have averaged a 19% annual return since 1966, vastly outperforming the S&P 500's 11%. [12:41] Invest early, stay committed through market ups and downs, and be fearful when others are greedy and greedy when others are fearful. [17:03] Warren Buffett advises most people to use index funds due to the difficulty of replicating his results. [18:43] Make investment decisions based on facts, not emotions. Investment Lessons from Warren Buffett Warren Buffett, often called the “Oracle of Omaha,” has long been considered one of the greatest investors of all time. His recent announcement that he will step down as CEO of Berkshire Hathaway after more than six decades is the perfect time to reflect on what sets Buffett apart, not just as an investor but as an individual. This episode digs into key lessons from Buffett’s life and career, exploring practical ways to apply his wisdom to your financial journey. From Humble Beginnings to Monumental Success Warren Buffett’s rise didn’t begin in a Wall Street boardroom, but in Omaha, Nebraska, where he was born in 1930. From an early age, Buffett showed an affinity for entrepreneurship, selling chewing gum, Coca-Cola, and magazines as a child. His formal education at the University of Nebraska, Wharton Business School, and Columbia University (where he studied under the legendary Benjamin Graham) laid the foundation for his value investing philosophy. Buffett started his first investment partnership in 1956 with $105,100, much of it from family and friends. By the age of 32, he was a millionaire. His acquisition of Berkshire Hathaway, a struggling textile company at the time, became the launchpad for one of the most successful investment conglomerates in history. The Power of Modesty and Discipline Despite amassing unparalleled wealth, Buffett is renowned for his modest lifestyle. He still lives in the house he purchased in 1958 for $31,000 and drives an older model Cadillac, proving that frugality and comfort often go hand in hand. This modesty is more than a quirk; it’s a testament to his belief that wealth should serve a purpose beyond personal extravagance. Buffett’s philanthropic efforts are equally legendary. Through The Giving Pledge (co-founded with Bill and Melinda Gates), he’s committed to donating more than 99% of his fortune. For Buffett, investing is not just about making money, it’s about stewarding resources responsibly and generously. Berkshire Hathaway’s Long-Term Outperformance Under Buffett’s leadership, Berkshire Hathaway’s stock has delivered returns averaging 19% annually since 1966, trouncing the S&P 500’s historical average of 11%. One share of Berkshire’s Class A stock now costs nearly $800,000, a figure that tells the story of sustained outperformance. Buffett has also issued Class B shares at a lower price tag to democratize access for smaller investors, reflecting his desire to make wealth-building accessible. Buffett’s Top Investing Lessons 1. Don’t Lose Money Buffett’s two most famous rules are simple: “Rule number one: don’t lose money. Rule number two: don’t forget rule number one.” He emphasizes buying quality businesses with durable competitive advantages rather than taking risks on struggling firms with unsustainable dividends. 2. Start Early and Stay the Course In his book The Snowball, Buffett likens investing to rolling a snowball down a long hill: the earlier you start, the bigger the results. Even if you’re approaching retirement, encouraging the younger generation to invest early can yield enormous benefits over time. 3. Remaining Committed Through Market Ups and Downs is Equally Vital Buffett urges consistent investing, especially when markets are turbulent. Staying invested and buying during downturns can lead to significant long-term gains. 4. Be Fearful When Others Are Greedy Buffett’s contrarian mindset, being “fearful when others are greedy, and greedy when others are fearful”, has served him well during market panics. While it’s emotionally taxing to buy during selloffs, history shows that long-term investors are often rewarded. 5. Buy Great Companies at Fair Prices Rather than chasing bargains, focus on acquiring well-run businesses at reasonable valuations. Many of Buffett’s best investments, Apple, Coca-Cola, and American Express, embody this approach. 6. Focus on Buying and Holding Low-cost Index Funds Buffett believes this is the simplest and most effective long-term investment strategy because it provides broad market exposure while keeping fees to a minimum, both of which are important for building wealth over time. 7. Temperament Is Key According to Buffett, success in investing is more about temperament than IQ. The ability to remain rational and stick to your plan, regardless of market noise, is what separates great investors from the rest. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/36520240

Top Five HSA Mistakes That Are Costing You Money and How to Avoid Them, #252 05/06/2025

Top Five HSA Mistakes That Are Costing You Money and How to Avoid Them, #252 On the show today, I’m discussing something that could be a game-changer for your retirement savings: Health Savings Accounts, or HSAs. If you’re on a high deductible health plan, you might be eligible for this unique, triple tax-free account, but are you making the most of it? I’m sharing the top five mistakes people make with their HSA accounts. If not avoided, those mistakes can cost you serious money and limit your financial options later in life. I’m covering everything from choosing the right HSA provider to maximizing your investments within the account, tracking expenses, and even strategizing for retirement healthcare needs. Plus, I’ll give you actionable tips to avoid these common pitfalls and explain how an HSA can function as a powerful retirement savings tool. You will want to hear this episode if you are interested in... [00:00 HSAs offer triple tax benefits for qualified health costs. [06:17] Transfer your HSA to invest funds instead of letting them sit idle. [08:36] Use a bucketing strategy for investments and allocate funds based on risk and term. [13:24] Use an HSA to reimburse for long-term care insurance, COBRA costs, and Medicare Part B, D, and Advantage after age 65. [14:31] An HSA is suitable for tax-free withdrawals post-retirement. The Triple Tax Advantage of HSAs Health Savings Accounts (HSAs) have grown in popularity steadily due to their unique triple tax advantage: contributions are tax-deductible, earnings grow tax-deferred, and qualified withdrawals are tax-free. If you’re enrolled in a high-deductible health plan (HDHP), you’re likely eligible for an HSA, and maximizing this account could significantly boost your retirement planning. However, many account holders fail to capitalize on the full benefits. Let’s explore the most common (and costly) mistakes people make with their HSAs, and the steps you can take to avoid them. 1. Sticking with a Poor HSA Provider Not all HSA providers are created equal. A “good” provider offers diverse sets of low-cost investment options, competitive yields on cash balances, a user-friendly platform, and minimal fees. Unfortunately, many people end up with accounts that lack investment choices or charge unnecessary fees, simply because their employer picked the provider. The good news? You can transfer your HSA balance to a more flexible institution like Fidelity or Charles Schwab without penalty, even while still employed. Doing so could unlock better investment potential and higher earnings on your cash, making it well worth investigating your current provider's offerings and considering a move if they fall short. 2. Not Investing Your HSA Money Surprisingly, many HSA owners leave their funds idle in low- or no-interest accounts, missing years of tax-free growth. If you don’t plan to spend your HSA funds soon, consider using a “bucket” approach: keep enough in cash or a money market for your deductible, and invest the remainder in stock or bond funds for long-term growth. Since medical expenses are rarely incurred all at once, investing your surplus funds can help your account grow exponentially, harnessing the power of compounding. Review your provider’s investment options and allocate your HSA funds according to your risk tolerance and time horizon. 3. Failing to Max Out Contributions Because HSAs offer unbeatable tax benefits, it’s wise to contribute as much as possible. For 2025, contribution limits are $4,300 for individuals and $8,550 for families, including employee and employer contributions. If you’re 55 or older, you can contribute an extra $1,000 as a “catch-up” contribution. If you’re married and you and your spouse are over 55, each spouse can make their own catch-up contribution, but you’ll need separate accounts. Remember, you have until the tax filing deadline to make contributions for the previous year, giving you ample opportunity to reach the maximum annual limit. 4. Treating Your HSA Like a Checking Account Many people promptly spend their HSA funds on current medical expenses, inadvertently missing a powerful savings opportunity. Instead, consider paying for qualified medical costs out-of-pocket and letting your HSA investments grow. As long as you keep records of those qualified expenses, you can reimburse yourself tax-free at any point in the future, even years later. This allows your HSA to function much like a “stealth IRA,” providing tax-free growth and withdrawals for medical needs in retirement, when such expenses are likely to be higher. 5. Neglecting to Track Qualified Expenses To take advantage of delayed reimbursement, it’s crucial to maintain careful records of out-of-pocket medical expenditures. The IRS can require documentation during an audit, so scan or save receipts and keep a running log in a spreadsheet. Good record-keeping ensures that, when the time comes, you can confidently withdraw HSA funds tax-free to reimburse yourself or cover eligible costs like Medicare premiums, long-term care insurance, and more once you reach retirement age. Make Your HSA Work Harder for You Used strategically, an HSA can become one of your most valuable retirement planning tools. By carefully choosing your provider, investing wisely, maximizing contributions, delaying withdrawals, and tracking all qualified expenses, you can fully realize the triple tax benefits and enjoy greater financial security in retirement. Take a moment today to review your HSA practices, your future self will thank you. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/36445775

Six Dave Ramsey Tips That Could Hurt Your Retirement Plan, #251 04/29/2025

Six Dave Ramsey Tips That Could Hurt Your Retirement Plan, #251 Radio personality Dave Ramsey is a huge name in the personal finance niche. While he’s celebrated for helping countless listeners take control of their finances, many of his recommendations have sparked debate within the financial planning community. I’m going to break down six of the most controversial opinions promoted by Ramsey, including advice on retirement withdrawals, debt payoff strategies, Roth accounts, investing approaches, mortgages, and the use of credit cards. I will also weigh up the pros and cons of Ramsey’s methods, highlighting where they might help and where they might hinder your journey towards a successful retirement. Whether you’re a Dave Ramsey fan or just curious about best practices for financial wellness, this episode offers a thoughtful, practical take on some hotly contested money moves. You will want to hear this episode if you're interested in... [0:00] Exploring Dave Ramsey’s financial advice and when it might not work for you. [07:07] Contribute to your retirement plan to at least match company contributions while managing high-interest debt. [09:07] Prioritize pretax 401(k) contributions for potential tax savings and growth, especially for high earners and those nearing retirement. [13:57] Some active funds may outperform the market, but it's challenging. Paying off all debt immediately may not always be ideal. [17:43] The problem with cash or debit use and envelope budgeting to control spending and avoid debt. [20:11] Limiting credit card use could cause missed benefits. Debunking Controversial Dave Ramsey Financial Advice In the world of personal finance, few names are as recognized as Dave Ramsey. He’s helped countless listeners reclaim control of their money, but not all his advice sits comfortably with financial professionals. This week, I’m exploring several of Ramsey’s most controversial recommendations, offering candid insight into where these strategies may fall short for those planning a secure retirement. 1. The 8% Retirement Withdrawal Rule is Riskier Than It Seems Dave Ramsey suggests that retirees can safely withdraw 8% of their portfolio annually. He justifies this by assuming long-term market returns of 11-12%. The problem is that average long-term returns are generally projected in the 6-8% range, and those figures often require heavy equity exposure, something unsuitable for most retirees due to the risk of major market downturns. The more widely accepted “safe withdrawal rate” is between 4 and 5%, supported by decades of research. Relying on Ramsey’s higher figure may rapidly deplete retirement savings, especially during bear markets. Retirees should consider their investment mix and plan for longevity, erring on the side of caution to avoid outliving their assets. 2. Pay Off Debt, But Not at the Expense of Retirement Savings One of Ramsey’s hallmark principles is eliminating all debt before focusing on retirement contributions. While high-interest debt like credit cards should indeed be a priority, neglecting retirement savings, especially employer-matched 401(k) contributions, means missing out on invaluable compounding growth and free money from your employer. Ideally, individuals should strive for a balanced approach: aggressively tackle high-interest debt while contributing enough to their workplace retirement plan to secure the full employer match, and, if possible, work towards saving 10-20% of salary for retirement. 3. All Roth, All the Time? Not Necessarily Ramsey strongly favors Roth accounts for retirement savings, arguing that after-tax contributions and tax-free withdrawals offer valuable benefits. While Roth accounts can be powerful, particularly for young savers or those in lower tax brackets. For higher earners, often in their peak earning years, the upfront tax deduction of pre-tax 401(k) or IRA contributions can provide meaningful savings. Since many retirees drop into a lower tax bracket after leaving the workforce, traditional accounts can be more tax-efficient for certain households. Morrissey advises tailoring the choice to individual circumstances, considering both current and expected future tax rates. 4. Active vs. Passive Investing Ramsey promotes active mutual fund management and even suggests that up-front mutual fund commissions are worthwhile. In the last decade, though study after study has shown that most active fund managers fail to outperform inexpensive index (passive) funds after fees. With some actively managed mutual funds charging fees of over 1%, the compounding effect of those costs can dramatically diminish returns over decades. Passive investing, through low-cost index funds, allows investors to keep more of their money and often experience better outcomes. The same is true for mutual fund commissions; with so many no-load, low-fee options available, there’s little justification for paying unnecessary charges. 5. Mortgage Payoff Strategies Ramsey encourages paying off all debt, including mortgages, as quickly as possible and recommends only taking out 15-year mortgages. While debt freedom is a worthy goal, for many, low-interest mortgage debt (especially at rates under 5%) isn’t necessarily worth rushing to eliminate. Investing surplus funds in the stock market historically yields higher returns than today’s mortgage rates. Additionally, restricting home purchases to what’s affordable on a 15-year mortgage makes homeownership unattainable for many. It’s more beneficial to keep total debt payments below 35% of gross income and focus on long-term wealth accumulation. 6. Ditching Credit Cards? Ramsey’s final controversial opinion is to avoid credit cards altogether and rely instead on cash or debit. While this is a great strategy for habitual overspenders or those burdened by credit card debt. However, for disciplined users, credit cards offer valuable perks, such as travel rewards and cash back, often up to 2% or more. These rewards, when paired with responsible habits (paying off balances monthly), can add up to significant savings without the risk of debt. Dave Ramsey has helped millions move toward better financial habits, but some of his advice may not serve everyone equally well. There’s no one-size-fits-all approach to money. Evaluating your financial landscape and consulting with a fiduciary professional are key steps toward making smart choices that truly align with your goals and circumstances. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/36336990

Social Security Survivor and Spousal Benefits Demystified, #250 04/23/2025

Social Security Survivor and Spousal Benefits Demystified, #250 Welcome to a special milestone episode of Retire with Ryan! In this 250th episode, we’re digging into one of the most frequently asked topics by listeners: Social Security. I answer four real-life listener questions about Social Security benefits - covering issues such as survivor benefits after divorce, spousal and ex-spousal benefit eligibility, changes to the Windfall Elimination Provision and Government Pension Offset, and rules for collecting benefits based on a former spouse’s record. I’m breaking down complex Social Security rules in an easy-to-understand way and sharing practical advice for retirees and those planning their dream retirement. You'll want to hear this episode if you're interested in... [0:00] Access your free copy of my e-book Fiduciary at [5:34] Divorced spouses have options for Social Security benefits based on age, remarriage status, and whether claiming their own or an ex-spouse's benefits [6:58] Earnings above $23,400 (ages 62 to full retirement) reduce Social Security benefits by $1 for every $2 over the limit. After reaching full retirement age, the reduction is $1 for every $3 over $62,160. [10:07] If your ex-spouse dies before you file, you can use a restricted application, but ex-spousal benefits don't earn delayed credits. Wait until age 70 for a higher personal benefit. [14:38] The ten-year requirement for an ex-surviving spouse currently still stands unless [15:54] If you have recently divorced and your spouse hasn't claimed benefits, then you have to wait two years until you can begin collecting benefits from your ex-spouse Navigating Social Security: Answers to the Most Common Questions for Retirees and Divorced Spouses Survivor Benefits for Divorced Spouses A question from Andrea regarding her mother’s eligibility for survivor benefits after her father and his second wife passed away highlights the intricacies many face. The Social Security Administration (SSA) does provide certain protections for divorced spouses, but eligibility hinges on specific criteria: Marriage Duration: To claim an ex-spousal survivor benefit, the marriage must have lasted at least 10 years. Remarriage Restrictions: If remarriage occurs after the age of 60 (or 50 if the survivor is disabled), the survivor can still claim benefits from the former spouse. Earlier remarriage generally directs benefits to the new spouse. Age Requirements: Survivors can claim benefits as early as age 60 (or 50 if disabled), but waiting until reaching “full retirement age” (typically 67) means collecting the full survivor benefit (100% of the deceased’s benefit). Early claims result in reduced monthly amounts. Earnings Limits: If a recipient claims before full retirement age and continues working, their benefits may be reduced if their income exceeds the annual limit ($23,400 in 2025). Survivor benefits application can’t be completed online, applicants must call or visit their local SSA office. Myths, Realities, and the Restricted Application of Ex-Spousal Benefits Stephanie, a divorced listener, asked if she could claim a spousal benefit and later switch to her own higher benefit. This is a common idea, but it is rarely permitted in practice today. No “Restricted Application” Unless Widowed: Generally, ex-spouses can only claim the higher of their benefit or up to 50% of their ex-spouse’s benefit if the ex is alive. The “restricted application” (where you claim one benefit first and then switch later) is only available to widows or widowers, not to those whose ex-spouses are still living. Delaying for More: Your benefits do grow (8% per year between full retirement age and 70). However, survivor and spousal benefits don’t accrue these “delayed retirement credits”; there’s no advantage to waiting past full retirement age to claim them. Earnings Matter: Like survivor benefits, earnings above the income limits before full retirement age can result in reductions. The Social Security Fairness Act and New Opportunities Recent legislative updates, like the Social Security Fairness Act, have had a profound impact, especially for those affected by the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO). Retirees such as teachers, firefighters, and some government workers previously saw reductions in their Social Security due to pensions received from non-Social Security-taxed jobs. The Key Change is that WEP/GPO was repealed, and anyone affected can now claim full Social Security benefits. Most should already see retroactive and increased monthly payments. If you’ve not yet applied, check if you now qualify, the hurdles may have vanished! When Can You Claim on an Ex-Spouse’s Record? Donna’s inquiry emphasizes a lesser-known rule: If the divorce is recent and the ex-spouse hasn’t claimed benefits, one must wait two years to claim on the ex’s record unless the ex starts claiming earlier. For divorces older than two years, you can generally proceed without waiting. Those under full retirement age must ensure their income doesn’t result in reduced payments. Social Security remains complex, especially during life events such as divorce, remarriage, death, or career changes. The rules can and do change, and representatives aren’t infallible. If you suspect your situation is unique or you’ve been misinformed, it pays to contact the SSA or consult a trusted financial advisor. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/36225910

Six Tactical Moves for Navigating Down Markets, #249 04/15/2025

Six Tactical Moves for Navigating Down Markets, #249 This time, we're featuring financial insights from co-host Ryan Morrissey, who's here to help you navigate this turbulent financial landscape. We'll explore the recent volatility sparked by President Trump's tariff announcements and discuss the remarkable market rebound that followed. Ryan also lays out six strategic moves you can make to optimize your investment strategy during these downturns, whether it's buying the dip, rebalancing your portfolio, or taking advantage of tax efficiencies. Stay tuned for valuable tactics and practical advice to bolster your financial well-being and prepare for a successful retirement. Let's get started with Retire with Ryan! You will want to hear this episode if you are interested in... [0:00] Suggested market strategies for navigating a down market [5:45] Invest early in Roth IRA, IRA, HSA, and 529 accounts to capitalize on market declines and potential growth. [6:46] Rebalance your portfolio regularly to maintain target allocation and capitalize on market shifts without overthinking decisions. [8:37] Set your savings up so you put a certain amount in every month to take advantage of dollar cost averaging. [9:01] Cut your losses and sell underperforming investments [10:41] How to take advantage of tax losses inside your taxable investment accounts [15:00] Consider replacing mutual funds with ETFs for better tax efficiency when the market is down for long-term benefits. Smart Investment Moves to Leverage Stock Market Declines Market volatility is not uncommon, but it can be nerve-wracking for investors. Yet, as seasoned investor Warren Buffett famously said, "Be fearful when others are greedy, and greedy when others are fearful." In times of market downturn, opportunities abound for those who know where to look. Here’s a breakdown of six strategic moves you can make to take advantage of a down market: 1. Buy the Dip When markets decline significantly, it presents a unique buying opportunity. This strategy involves purchasing stocks when their prices are lower than usual, positioning yourself to benefit when prices rebound. It’s important to remember that timing the market perfectly is nearly impossible, but by entering a 10% decline or more, you're likely to see gains as the market recovers. This can also be a great time to maximize your contributions to your IRA, Roth IRA, or HSA to take full advantage of the opportunity. 2. Rebalance Your Portfolio Portfolio rebalancing is crucial for maintaining your desired asset allocation, especially after market fluctuations. For instance, market dips might skew this balance if your target is a 60/40 stock-to-bond ratio. Rebalancing during market declines can ensure the original allocation is restored and takes advantage of lower stock prices. 3. Automate Your Investments Automating investments ensures consistent contributions to your portfolio, regardless of market conditions. Dollar-cost averaging mitigates the risks associated with market volatility. Whether through a 401(k), IRA, or other investment accounts, setting up automatic contributions allows you to buy into the market regularly without second-guessing the timing. 4. Sell Underperforming Investments Market downturns clarify which investments are not worth holding onto. If individual stocks or mutual funds consistently underperform, it may be time to cut losses and reinvest the capital into more promising assets. Clearing these underperformers cleans up your portfolio and allows you to focus on investments with better potential. 5. Harvest Tax Losses Down markets offer a chance to engage in tax-loss harvesting. Selling securities at a loss can offset taxable gains from other investments, reducing your tax liability. Additionally, you can claim up to $3,000 in capital losses against your ordinary income each year. When using this strategy, be mindful of the wash sale rule, which prohibits repurchasing the same or substantially identical security within 30 days to claim the tax loss. 6. Transition to Tax-Efficient Investments During a market downturn, re-evaluating your taxable investment accounts for tax efficiency can be advantageous. Mutual funds often distribute capital gains annually, potentially increasing your tax bill even if you haven't sold your shares. Consider exchanging mutual funds for exchange-traded funds (ETFs), which typically offer greater tax efficiency by limiting capital gains distributions to shareholders until shares are sold. While market downturns can be daunting, they provide excellent opportunities for investors to reshuffle their portfolios strategically. You can navigate market volatility and improve your financial health by buying the dip, rebalancing, automating investments, selling underperformers, harvesting tax losses, and transitioning to tax-efficient investments. Resources Mentioned Subscribe to the Connect With Morrissey Wealth Management /episode/index/show/retirewithryan/id/36104750