The word annuity means a stream of payments. We’re familiar with this concept as it applies to traditional pensions. Unfortunately, there are fewer and fewer people eligible for a traditional pension. For investors planning for retirement, they may consider adding a fixed rate annuity to provide an income stream in addition to other investment holdings. Fixed Rate Annuities have many unique benefits: Growth is tax-deferred. Compound growth without having to pay the IRS for a few years may provide faster growth than taxable investments. The investment risk is minimal and based on the claims-paying ability of life insurance companies. In a fixed annuity your interest rate is generally set at the time of purchase. For Annuitization, there are different payout options including a specified period, a lifetime payout, a guaranteed period (during which your beneficiaries would receive payments should you pass,) and in many cases a joint life option for the surviving spouse. Assets avoid probate. Annuities serve a unique purpose for retirees however they do get their share of bad press. There are two areas of concern you may have heard. The first involves a Life only, immediate annuity. For example, a person invests $170,000 in an annuity. At age 65 they will receive $1,100 a month until they die. Upon passing the money remains the property of the insurance company, not the annuitant’s heirs regardless of their age at death. Fortunately, insurance companies now allow you to add different features and riders that provide an income stream or lump sum to beneficiaries upon death. The second bit of bad press involves fees. When an investor sets up an annuity, the insurance company invests the money to pay an income stream over a long period. If the investor wishes to cancel the contract before the end of the surrender schedule the investor may receive a lesser amount than they paid. This penalty is one of the reasons it is essential to understand the terms of your annuity before investing. One of my clients owns a car dealership, and he laughed when I explained this to him. He told me if someone drove a new car off his lot and came back in a year because they didn’t want it any longer, there would be a significant drop in the car’s value. I like to share that story because more people can relate to a vehicle than the costs involved in creating and selling a financial product. Annuity surrender fees typically decline over a 5-9 year period. Once that period is over, if the annuity is not annuitized, the investor can access all funds without penalty but must consider the tax implications of a full withdrawal. Often a partial withdrawal, transfer or 1035 Exchange is most advantageous. Immediate Annuity An immediate annuity is merely an annuity which begins payment to you within a year. Unlike other annuities where you may have been making periodic contributions and allowing it to grow over time, you are exchanging a lump sum for an income stream that starts right away. Many retirees decide to take a portion of 401(k) money or IRA funds to establish a guaranteed income stream and increase certainty within their retirement portfolio. A fixed annuity whether it is immediate or deferred is a compelling option for retirees. They aren’t for everyone, and there are several types of annuities. I’ll discuss these in my podcasts. An annuity may or may not be the best fit for a couple with a traditional pension plan, as they may not need the certainty of guaranteed payments and they may opt for higher potential returns or the liquidity of other investment vehicles. How to Buy an Annuity It’s important to get the help of a trusted professional when deciding if an annuity or a combination of annuities suits your needs. It is possible to be too conservative or underestimate your income needs. A fully-licensed financial advisor that provides investment and financial advice has a larger pool of options than an insurance agent that sells annuities. Often an insurance agent doesn’t represent multiple companies and this results in a limited number of options for you, the investor. The company they represent may have the perfect plan for you, or it may not. You want to speak with someone that can shop many plans at many companies to find the best fit for you. Also, I firmly believe that anyone discussing annuities ought to have a solid understanding and ability to compare a wide variety the option including securities, mutual funds, real estate, and insurance vehicles. It’s not just about annuity versus annuity. It’s comparing annuities against several investments to find the most suitable portfolio for your situation. Lastly, an experienced advisor knows the ratings and strength of the insurance company guaranteeing your income stream. This rating is critical when making an informed decision. Fixed Annuities are among the most basic form of an annuity. The simplicity of these vehicles makes it easy to understand and offers protection for retirees who need to add as much certainty as possible to their retirement. The best way to know if it is a fit for you is to make an appointment to come in and meet with me to discuss your situation. Wright Wealth Management can help you recognize risks, steer you around them, and help you get the most of this enjoyable period in your life.

Do you feel you have taken the steps to ensure your financial future, having an IRA and/or a 401(k) account? Do the new tax laws throws a wrench into your plan, making the conversion to a Roth IRA seem beneficial? You may think the Roth IRA sounds like a viable option, but you have a variety of questions. Should you convert all your money to a Roth IRA account? What are the steps, benefits, and drawbacks to the conversion process? Is this the right move for my portfolio considering my investments and my age? What Is the Problem with Conversion? When you switch from a traditional IRA or 401(k) to a Roth IRA, the actual process is relatively easy, the process involves some paperwork and some signatures. You can conveniently convert any account and any amount, even one dollar, over to a Roth IRA. The major problem barreling down in the form of a tax bill —how much you pay and when. Essentially, you have to pay taxes on the principal amount you are converting, as they were initially pre-tax investments. These taxes could pose a roadblock if you are experiencing a lull in steady employment, have a pile of bills and debt to pay, or another variation of a financial hiccup. Overcoming the Problem for the Greater Financial Good Right now, the tax rates are low for all income levels, based on the current administration’s new tax laws. Therefore, a window of opportunity exists for you to take advantage of the lower taxes on your conversion amount. Below are a few additional strategies that may help make the conversion tax more feasible for your financial situation. Remember the old cliché about the value of moderation? This cliché’ is applicable here. You can spread the amount you want to convert over a period of time. Because the converted amount is added to your annual income amount, or gross adjusted income, you want to convert a sum that allows you to maintain your tax bracket. If you move to the higher tax bracket tier, you will be subjected to a higher tax rate. Depending on how much money you want to convert and where you stand within the tax bracket, you may have to convert money for quite a few years. However, with the new tax laws in place, you can expect lower tax percentages for at least another three to seven years. Therefore, you can find lower tax rates at all income levels. Looking past that beginning in roughly 2026, financial advisors predict an increase, even a doubling, of tax rates. To minimize the tax impact, you can also consider a tax-deductible donation to a public charity. The deduction you receive could be as much as 60% of your adjusted gross income. Remember that this amount could increase in the future when tax rates are higher. Keep in mind that with the traditional IRA/401(k) to Roth IRA conversion, you are moving your money from a taxable to a tax-free account. This is for the overall benefit of your retirement portfolio, so this initial tax hit may be for the long term greater good. Diversification is Key You have probably heard about the importance of a diversified financial portfolio. Diversification obviously refers to the types of companies in which you invest, but it also refers to the types of accounts you have. Balancing traditional IRAs with Roth IRAs allows you to balance when you pay taxes. As discussed above, Roth IRAs require taxes upfront on the principal, and traditional IRAs impose taxes on the withdrawals, a.k.a. required minimum distributions, you make starting at age 70.5. Moreover, based on your income, you are limited in the amount of contributions you can make to a Roth IRA, but no contribution limits exist with a traditional IRA. Since the two types of IRA have opposing characteristics, you can see why it would be valuable to partake in both types. Trust Your Gut and Your Advisor The strategy that is right for you depends on your current and projected financial situation. People have all types of job circumstances, sources of income, and expenses. Therefore, no one perfect strategy exists. Regardless of where you stand on the financial tier, it is recommended that you take an active, tactile approach to tax and investment planning. Ultimately, you want to mitigate future risks and protect your retirement. Only you know what you can handle, and a financial expert here at Wright Wealth Management Group can help you find the right program or strategy to reduce the conversion tax. Regardless of where you stand on the financial tier, it is recommended that you take an active, tactile approach to tax and investment planning. Ultimately, you want to mitigate future risks and protect your retirement.

If you are planning for your future, then you know that having enough money upon retirement is a top agenda item. It can be challenging to determine how much of your money you should put into an IRA vs. a Roth IRA vs. traditional investments vs. a 401(k) plan, especially if your place of business offers a matching opportunity for their plan. Even if a Roth IRA is not something you considered previously, take a moment to look at the details below. See how the value of a Roth IRA conversion may benefit your plan and help you in your preparation for retirement. What is the Deal with a Traditional IRA? A traditional IRA involves tax-deferred growth, as well as tax-deductible contributions you make until age 70.5. If you withdraw money from the account before age 59.5, you could face a penalty. This is a great plan, however, in certain circumstances, it is possible to have too much money in a traditional IRA account because of the required minimum distributions. What this means is that starting at age 70.5, on a traditional IRA you must withdraw annual sums of money from your account. The money you withdraw is subject to taxes, just as your current job income is subject to taxes. Depending on the amount you withdraw, your social security income might also face a higher tax percentage since your overall income could reach a higher tier. What is So Great about a Roth IRA? You can convert any dollar amount from a traditional IRA and/or a 401(k) to a Roth IRA. This retirement account involves tax-free growth, so you pay tax on the initial investment amount, but the withdrawal is subsequently tax-free. The key is to convert a partial amount over time, which you can discuss with a financial advisor. Once you have a Roth IRA account, you can keep adding to the account at any age, even beyond 70.5. You are only subject to a tax on the principal investment amount. Unlike a traditional IRA, you will not be taxed on future withdrawals. As with a traditional IRA, you might have to pay a penalty on withdrawals of money from Roth IRAs that occur before you turn 59.5. To highlight the differences between the two, let’s say you are a farmer, and you have to pay a tax. Would you prefer to pay a tax on the initial seed amount or pay a tax continuously on the future harvests the seeds yield? At first, it might seem challenging to pay for the seeds and the tax all up front. However, once you pay the tax on the initial seed, you have paid your debt to Uncle Sam. You can then enjoy the fruits of the harvest. If it is a plentiful harvest, then you can really enjoy the fruits. Some of the money can replace the original tax you paid, but then the rest is profit. Essentially, a Roth IRA taxes the seeds rather than the full harvest. The Time Is Now Based on the current administration’s decision to reduce marginal tax brackets for Americans of all income levels, now is the time to consider a Roth IRA conversion. Now refers to the next three to seven years, with sooner better than later. This is the lowest tax percentage you could see in the next 30 years or more. In 2026 and beyond, it is possible that middle income Americans could see tax percentages double. Because, with a Roth IRA, only the principal is taxed, it is ideal to pay the taxed amount while the tax percentages are at an all-time low. In the past, people might have felt put off by having to pay taxes on the principal amount, especially during a low-income period. If, in the future, the tax brackets increase, then you would not have to worry. With a traditional IRA, you would have to consider future tax percentages. What Should You Do Now? Whether all these financial terms make you feel confused or you have a firm grasp on the options but want a second opinion, then reach out to a financial advisor here at Wright Wealth Management Group. We can go over the pluses and minuses of each account type and why diversification is key, and discuss various strategies, given your age and income, for the best options for your investment. Minimize Risk You probably love to make money, but you do not want to lose that money. Losing money seems like something that happens to gamblers and other extreme risk takers. The risk does not seem appealing when it is associated with your nest egg—the money you intend to enjoy during your retirement years. While taxes keep the country supplied with roads, services for seniors, education, and more; you want to pay your fair share rather than too much. In particular, you do not want to take any more money than required out of your nest egg. A Roth IRA conversion during this low-tax period can help ensure that money is there when you need it.

Imagine you’re in a mall with your spouse and you realize there was something you forgot in the car. You then suggest, “honey, wait right here so I can find you. I’ll be right back.” Your spouse waits where you agreed, but starts to smell smoke. Should they call you and tell you they’ve adjusted the plan and will try to meet you at the car as well? What if the same situation existed and there is no smoke in the mall, but as you reach the parking lot you see fire engines approaching, lights flashing, sirens blowing, then firemen running inside? Would you contact your spouse to make sure they are out of harm’s way? The answer, I hope, is we all make plans, but part of the plan is to be flexible when the situation changes. Let’s now say that the two of you are driving to a favorite restaurant in town when you hear on the radio that one of your other favorite restaurants is offering 30% off everything on their menu. Would you at least discuss changing your plan and saving 30%? It’s a fact of life, situations change. In our daily lives, most of us make regular adjustments to unfolding sets of circumstances. For example, when traffic is moving slow on the route heading into my office, I look for a chance to take a different avenue, one that’s moving faster. One might think I’m changing the original plan, but my original plan has the caveat that allows realignment with my goal. Many people don’t allow for defined caveats in their investments and retirement goals. They are either buying, holding, and hoping that over time markets repeat historic averages, or they are reacting to account statements mailed to them after it’s too late. They may benefit from a process which tactically adjusts with the changing markets. Tactical Investing At its core, tactical investing, or having a tactically managed account, requires diligence. After all, it’s a deliberate process that aims to align your account with the current state of the market. The often touted “buy and hold” strategy can be part of tactical investing as long as holding makes sense within current market conditions — or if buying can be rationalized at current prices. However, very often buy and hold seems to be more of a tool of convenience. Some investment firms have a reputation for taking your risk profile, which by the way is based on your age and a handful of questions you probably guessed at, then treating it like it’s a magic answer. Their ideal allocation model, the basis for your portfolio, is often decided by someone who has never even met you — possibly three time-zones away. Client’s are told this allocation is designed specifically for them. The truth is, it is not designed by someone who has taken the time to truly know them and it is not even designed using up to the minute economic information. Most of the pie chart models weigh in a series of averages which ultimately can only make the suggestion average under average conditions. This is why I left a big firm when I did. My clients aren’t average, they deserve better. Plus, there is no way I want to be dissuaded from suggesting that my clients rotate out of a sector that is trending down while ignoring one on the rise. Markets can move down quickly. For the year 2008, the Dow lost 33.8%. For those invested and already in retirement and also depending on taking allocations from their equity accounts, this was devastating. No one wants to hear, just sit tight, stocks will be back one day. Remember, in order to recover from any point drop you need twice the growth. In other words, the market would have to rise 67.6% just for investors to be at their starting point. If they’re taking even a small amount out to live off, it becomes mathematically less possible to ever recover. Pie chart allocations are designed to make life simpler in theory, but the inflexibility can be a hinders next. Investment flexibility under various scenario analysis is part of the tactical process. If one market is at the top of its price range, as a tactical manager, I may give you the advice to take some profits off the table. That is, I would rotate you out at the high price level and perhaps rotate you into a market segment that is considered lower priced and trending up. This is buy low, sell high with the added benefit of allowing your account to get out of the way of trouble. Traditional buy and hold has its place when markets are more stable, but with decades long volatility and the idea that most people over the age of 40 don’t have 30 years to wait for markets to return, tactical management can steer your account to preferable holdings. Deciding if Tactical Management Could Benefit your Savings About that aforementioned fire, most aren’t willing to ignore the smell of smoke and most will take protective action when red lights are flashing and sirens are blaring outside of our building. In the same vein, no one throws money away while turning down money being handed to them. But there are households that are doing this, people that are otherwise careful with their households that take it upon themselves to figure out their own wealth management process. They try to figure out how, why and where to invest on their own, and most of them have very few of the tools and analysis available to a full time, reputable professional wealth management company. These folks may not smell the market smoke until they are getting somewhat burned — or completely consumed. If you wish to learn more about the process of preserving and enhancing your accumulated wealth, call today. We’ll help you best understand how employing tactical management may improve your investment outcome. Thank you, Chris Wright Wright

When it comes to trusting someone with your hard-earned money, you want to know you’ve chosen a reliable, ethical financial agent who is acting in your best interests. In today’s uncertain economy, you need to feel confident that your family will be provided for in the future. Or, you’d like to look forward to enjoying a pleasant retirement without financial worries. Whatever your reasons for seeking a financial advisor, you should know some facts about choosing an independent local agent before making a final decision. What is a fiduciary? A fiduciary will manage the financial assets of another party with the legal and ethical obligation of putting the client’s best interest first. For a financial advisor, they will guide the client and help them make the best financial decisions, reorganizing investments and managing assets. It should be made clear that not all financial advisors are fiduciaries. Be sure to ask your financial advisor about their credentials and certifications. It is important to note, in your search for a financial advisor, it’s easy to be misled by brokerage firms that use the term “independent.” Many of these firms are owned by large insurance companies or other product providers that place strict limitations on the agent’s recommendations to their client. So, how can you know for sure that your agent is independent, qualified, and a registered financial consultant? You may first check to see if they are a member of the National Society of Financial Educators. This nation-wide network of finance instructors offers courses and advice drawing from the educators’ knowledge, experiences, and careers in personal finance. They utilize personal or real-life experiences in order to make for a more interactive and relatable education and better prepare you for your financial future. Next, you need to know if an agent is a Registered Financial Consultant (RFC) or Registered Investment Advisor (RIA). An RFC will have official recognition by the International Association of Registered Financial Consultants and will have had at least four years experience as a financial planning practitioner. Alternatively, an RIA will manage the assets and investments of high net-worth clients and must be registered with the practicing state. Finding an Advisor Who Cares About You The best independent financial advisor is the one who is experienced, competent, knowledgeable and most of all, one who cares about you. Finding an advisor that practices as a fiduciary can eliminate some of the potential conflicts of interest. Some of the other things to look for include: Does the agent take a thoughtful approach to investing or do they use an automated program? Do they do actual planning or just concern themselves with selling product? Is tax-planning incorporated into their advice? Do they have an understanding of Social Security claiming strategies? Do they understand the difference between investing for accumulation versus investing in the retirement distribution phase of your life? What do I need to know about a financial advisor near me? There are several questions you should ask a potential advisor: What experience do they have? What are their qualifications? What financial planning services are they offering? What is their approach to your financial plan? What type of clients do they typically work with? How do they charge for their services? Have they ever been disciplined for unlawful or unethical actions? Does anyone else benefit from the advice and fees? If you would like more information about our investment advising services, please contact us today. We will be happy to answer your questions. In Prescott, we have been providing objective financial planning since 2000, and we look forward to developing a plan for you.