Author: Chuck Zuzak

  • Retirement Planning Tips for a More Comfortable Future 

    Retirement planning is one of the most important financial steps you can take to help create a comfortable and secure future. Typically, the earlier you start, the better positioned you’ll be to achieve your financial goals. Whether you’re just beginning your career or are approaching retirement, having a structured plan is essential. In this blog, we’ll explore key tips for effective retirement planning, review the various savings vehicles available, and discuss how a wealth management firm like Confluence Financial Partners can help you stay on track. 

    Start Retirement Planning Early 

    We believe one of the best things you can do for your future self is to start retirement planning as soon as possible. The power of compound interest can allow your savings to grow exponentially over time, meaning the earlier you begin, the less you need to contribute later. Even if retirement feels far off, taking small, consistent steps today can make a significant impact. 

    For example, Mia saves $200 per month for 40 years, while Jennifer waits 10 years to start but doubles her contribution to $400 per month for 30 years. Despite contributing twice as much, with a 6% return, Jennifer would have $827,062, whereas Mia, also with a 6% return would have $987,428. By waiting just 10 years to start, even twice the monthly contribution is not enough to catchup. This demonstrates the power of compound interest—starting earlier, even with smaller contributions, can yield greater long-term benefits than larger contributions made later. 

    The hypothetical examples assume an 6% average annual return. These are point-in-time views and as such do not take into account any growth or loss during retirement. Without investment growth/loss during retirement, a 4% annual withdrawal rate would deplete retirement savings in 25 years. Examples are for illustrative purposes only and do not reflect the results of any particular investment, which will fluctuate with market conditions, or taxes that may be owed on tax-deferred contributions, including the 10% penalty for withdrawals taken before age 59½. Regular investing does not ensure a profit or protect against loss in a declining market. These numbers do not reflect any fees charged to the account.

    Set Clear Retirement Goals 

    Understanding what you want your retirement to look like can help shape your savings strategy. Consider factors such as at what age you want to retire, the lifestyle you wish to maintain, and any significant expenses like travel or healthcare. Establishing clear, realistic goals will help guide your investment and savings decisions. 

    Understand Your Retirement Savings Vehicles 

    A variety of savings vehicles are available to help you build a strong retirement portfolio. Each comes with unique advantages and benefits: 

    Employer-Sponsored Plans 

    • 401(k) & 403(b) Plans – Many employers offer these tax-advantaged retirement accounts. Contributions to traditional 401(k) and 403(b) plans can be made pre-tax, reducing your taxable income, and in some cases, after tax into Roth 401(k). Some employers even provide matching contributions, which is essentially free money toward your retirement. 
    • 457 Plans – Available to government employees and some non-profit workers, this plan allows tax-deferred savings with flexible withdrawal options. 
    • Pension Plans – Some companies offer defined-benefit pension plans, which provide a set income stream in retirement. These plans were common in the past, but in present times, few companies offer pension plans.  

    Individual Retirement Accounts (IRAs) 

    • Traditional IRA – Contributions may be tax-deductible (dependent on one’s annual income), with tax-deferred growth until withdrawals in retirement. 
    • Roth IRA – Contributions are made after tax, but qualified withdrawals are completely tax-free, making this a great option for long-term tax planning. Roth IRAs are only available to those earning under preset IRS levels which adjust annually.  
    • SEP IRA & SIMPLE IRA – These plans are ideal for self-employed individuals and small business owners, offering higher contribution limits than traditional IRAs. 

    Self-Employed & Alternative Retirement Plans  

    • Solo 401(k) – Designed for self-employed individuals, this plan allows for both employee and employer contributions, maximizing tax-advantaged savings. 
    • Health Savings Account (HSA) – While primarily for medical expenses, HSAs can be used as a long-term savings tool due to their tax-free growth and withdrawal benefits. Funds are contributed pre-tax and may be used tax free for approved health related expenses. Distributions that are not used for qualified medical expenses are taxed as ordinary income and avoid a 20% penalty if you are age 65 and older or disabled. In these instances, an HSA can supplement your retirement savings approach similar to a traditional IRA.

    Diversify Your Investments 

    A well-rounded retirement plan should include diversification across various asset classes. Stocks, bonds, mutual funds, exchange traded funds (ETFs), and other investments help manage risk while helping to optimize growth. Balancing your portfolio based on your risk tolerance, time horizon, and retirement goals can be very impactful to long-term financial success. 

    Work with a Wealth Management Firm 

    Retirement planning can be complex, and partnering with a trusted financial advisor or certified financial planner can help you navigate the process. A wealth management firm like Confluence Financial Partners provides professional guidance, helping to ensure you have a personalized strategy tailored to your unique financial situation. Here’s how they can assist: 

    • Customized Financial Plans – Personalized strategies based on your income, goals, and risk tolerance. 
    • Investment Management – Diversified portfolio strategies designed to grow and protect your wealth. 
    • Tax-Efficient Planning – Structuring your withdrawals and contributions to minimize tax liabilities. 
    • Ongoing Adjustments – Life circumstances change, and your plan should evolve accordingly. A professional team helps you stay on track to meet your retirement goals. 

    Stay Consistent and Review Your Plan Regularly 

    Retirement planning is not a one-time event but an ongoing process. Regularly reviewing your retirement savings, investment allocations, and financial goals help to ensure that you remain on the right path. Making necessary adjustments as life changes—whether due to career shifts, market fluctuations, or personal circumstances—keeps your retirement strategy aligned with your objectives. 

    Conclusion 

    Retirement planning can be essential for financial security and peace of mind. By understanding the various savings vehicles available, diversifying your investments, and working with a wealth management firm like Confluence Financial Partners, you can create a roadmap to a successful retirement. The key is to start early, stay informed, and seek professional guidance when needed. With the right plan in place, you can enjoy your retirement years with confidence and financial stability. 

    Ready to take control of your retirement planning? Contact Confluence Financial Partners today to begin your journey toward a secure and prosperous future. 

    Chuck Zuzak
    About the Author

    Chuck joins Confluence Financial Partners with 13 years of experience in the financial services industry, most recently as Director of Financial Planning at JFS Wealth Advisors. At a fundamental level, Chuck’s passion for financial planning stems from the desire to help clients connect their personal values and purpose with their financial resources.

    Pittsburgh

    412-391-0377
    chuck.zuzak@confluencefp.com
    Email Chuck Zuzak

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    Chuck Zuzak

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  • Protect Your Legacy – Review and Understand Your Beneficiary Designations Today

    When it comes to estate planning, your beneficiary designations are one of the most critical yet often overlooked components. These designations determine how your assets—such as retirement accounts, life insurance policies, and annuities—are distributed upon your passing. Beneficiary designations often supersede other estate documents, making it essential to ensure they are accurate and up to date.

    Understanding the Key Difference: Per Capita vs. Per Stirpes
    When naming individual beneficiaries, two terms that frequently come up in this context are “per stirpes” and “per capita”. While these terms may seem similar, they represent very different ways of dividing an inheritance among your heirs.

    What is “Per Stirpes”?
    The term per stirpes translates to “by branch” and refers to dividing an estate among the branches of a family. This method ensures that if an heir predeceases you, their share will be passed on to their descendants. In other words, per stirpes keeps the inheritance within a specific family line.

    Example: If you have three children, but one of them passes away before you, the deceased child’s share would be divided equally among their children (your grandchildren). The remaining two children would each receive their full share, and the deceased child’s share would be inherited by their descendants.

    What is “Per Capita”?
    Per capita, on the other hand, translates to “by head.” This distribution method divides the estate equally among all living heirs, regardless of their family branch. If one of your heirs passes away before you, their share does not get passed on to their descendants. Instead, the estate is divided equally among the remaining living heirs.

    Example: If you have four children, but one predeceases you, the remaining three children would share the full estate equally. The children of the deceased heir would not receive anything, as the division happens equally among the surviving heirs.

    While the difference between these two options may seem subtle, the impact on your loved ones can be significant. Choosing the wrong option—or failing to clarify your preference—could lead to unintended consequences, disputes among heirs, or even legal challenges.

    Why Review Your Beneficiary Designations Now?
    Life rarely stands still. Over time, your family dynamic and financial situation can shift. Perhaps you’ve welcomed new children or grandchildren, experienced a marriage or divorce, or lost a loved one. Each of these changes could alter how you want your assets to be distributed.

    Outdated or incorrect beneficiary designations can result in assets being distributed contrary to your intentions. For example:

    • A former spouse could unintentionally remain the beneficiary of a retirement account. If there is a per stirpes designation, any new children of the ex-spouse could stand to inherit a portion of the assets, in addition to your own.
    • A child or grandchild born after you last updated your beneficiary designations could be left out entirely when using a per capita designation.

    Without a clear understanding of per capita versus per stirpes, your heirs may not receive the inheritance you intended for them.

    Which Method Should You Choose?
    Choosing between per stirpes and per capita depends on your family dynamics and the goals you have for your estate. Here are a few considerations:

    Per Stirpes: This method is often ideal for families with multiple generations or if you want to ensure that your descendants (grandchildren, for example) are taken care of. If your family includes children and grandchildren, per stirpes guarantees that each branch of your family is represented.

    Per Capita: This method works best for families where you want an equal division of assets among the surviving heirs. It’s particularly useful if you prefer to ensure that all living heirs receive an equal share, regardless of how many generations are involved or descendants of a particular family line there are.

    How Confluence Financial Partners Can Help
    Your Wealth Manager can help you gather all your account and policy documents, check the names of the beneficiaries listed, the percentages assigned to each, and whether the designation is per capita or per stirpes. Furthermore, we can prepare a report summarizing the disposition of your estate to make sure it aligns with your wishes.

    Ready to Make Changes?
    Estate planning is complex, and small details can make a big difference. You may need to consult with your existing attorney to update your plan or your wealth manager can make an introduction to a qualified professional to draft a new one. Our team is here to help you navigate these decisions and help ensure your legacy is preserved. Call us today to schedule a personalized beneficiary review. Let’s work together to help ensure your estate plan reflects your current wishes and protects your family’s future. Don’t leave it to chance—act now to avoid unintended surprises tomorrow. Your peace of mind is worth it, and your loved ones will thank you.

    Chuck Zuzak
    About the Author

    Chuck joins Confluence Financial Partners with 13 years of experience in the financial services industry, most recently as Director of Financial Planning at JFS Wealth Advisors. At a fundamental level, Chuck’s passion for financial planning stems from the desire to help clients connect their personal values and purpose with their financial resources.

    Pittsburgh

    412-391-0377
    chuck.zuzak@confluencefp.com
    Email Chuck Zuzak

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    Chuck Zuzak

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  • Redefining Your Retirement

    Redefining Your Retirement

    Today’s retirees are choosing from a variety of retirement styles. What’s yours?

    Although an estimated 10,000 baby boomers reach retirement age every day, how each chooses to spend their free time can be quite different. Today’s retirees wish to forge new identities and seek new experiences, while redefining how they spend their time and money.

    See if one or more of these new retiree profiles resonates with you. Deciding how you’ll stay busy can go a long way toward helping you plan and save for your dream retirement.

    The Giver

    Givers contribute time, talent and, yes, even money to support causes close to their hearts. While the typical American spends 20 minutes a day engaged in volunteer, civic or religious activities, the Giver over age 65 dedicates a half hour or more, according to the Bureau of Labor Statistics.

    One retiree may use her musical talents to play the violin for hospital patients, while another works behind the scenes updating a nonprofit’s website. Either way, it’s all about making a meaningful difference.

    Note: Givers may become too altruistic, spending more time and money than planned, undermining health or financial stability.

    Givers represent 33% of working retirees.

    The Thinker

    Thinkers have a deep desire for lifelong learning. They may retire in a college town, take classes, read for pleasure and engage in contemplative activities.

    Many colleges and universities are designing courses aimed at this new senior class. Campuses can be found in areas with affordable housing, quality education, teaching opportunities, walking and biking trails, and excellent transportation, healthcare and entertainment options.

    Note: If you’ve established a 529 plan for a child or grandchild, you may be able to use unneeded funds for your own continuing education. Ask your financial advisor about potentially withdrawing funds without penalties.

    Cognitively active people are 2.6 times less likely to develop dementia or Alzheimer’s.

    The Entrepreneur

    Entrepreneurs typically start a business that’s different from a past career, bringing decades of experience, success, passion and emotional intelligence to their new ventures.

    Goals include a fulfilling career, increased flexibility and enjoyment in their work. Some hope their new endeavors will becomes self-sustaining, while allowing for work/life balance.

    Note: A small business entails a business plan, startup costs, insurance and a financial plan. Work with a professional tax planner and financial advisor to build a successful venture.

    Nearly 3 out of 5 working retirees consider a different line of work.

    The Explorer

    The Explorer dedicates up to a quarter of their financial resources on travel. These globetrotters invest in experiences and indulge their wanderlust while they have the health, energy and resources.

    Good saving habits help Explorers immerse themselves among other cultures, foods and languages.

    Note: Plan for ongoing travel expenses, desired location, frequency and duration, as well as inflation and foreign exchange rates. Health-related issues may become a limitation in later years.

    There are just as many Explorers over age 75 as there are among younger groups.

    The Part-Timer

    The Part-Timer, like the Entrepreneur, seeks a career change, but may not wish to commit to a full-time position. Some favor mini-retirements – periods of work followed by intermissions for relaxation. Think consulting and contracting, for example.

    Note: Returning to work, even part time, can incur expenses such as new work attire, transportation and dining out. Evaluate the impact of additional income on your current tax bracket, Social Security benefits, healthcare coverage, and potential contributions to retirement plans.

    There are more than 7.1 million Part-Timers age 55 or older.

    The Foodie

    Foodies prefer quality dining and enjoying the experience of the meal. They typically spend about an hour and 20 minutes when dining, relishing how food and drink increases their quality of life. They enjoy experimenting with new creations, introducing new flavors or bringing friends and family together.

    Since the Foodie spends time shopping for and preparing meals, other expenses are typically lower.

    Note: Food connoisseurs need to factor in healthcare costs and inflation, as well as utilities and transportation.

    Foodies spend, on average, 28% of their income on food and beverage.

    The Athlete

    The Athlete may compete in triathlons or play tennis into their 80s and beyond. They stay in top form and enjoy training and competition.

    As the Athlete eventually slows down, or faces sudden illness or injury, healthcare costs can account for a significant share of retirement income, including Medicare expenses, prescriptions or long-term care needs.

    Note: It’s important to budget for proper equipment and training. Select an appropriate Medicare or healthcare policy and account for expenses that aren’t covered. Be sure to factor in inflation and long-term care or assisted living.

    Approximately a third of Americans over 65 are considered physically active.

    Next Steps

    • Decide what type or types of retirement styles you’d like to pursue
    • Further explore the necessary steps to achieving your goals
    • Talk to your financial advisor about the best strategy for turning your retirement dream into reality

    Sources: Journal of Financial Planning: “How retirees spend their time”; Bureau of Labor Statistics; Robert S. Wilson, Ph.D., Rush Alzheimer’s Disease Center; Work in Retirement: Myths and Motivation; J.P. Morgan “Cost of Waiting” study; President’s Council on Fitness, Sports & Nutrition

    Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you use withdrawals for eligible education expenses, such as tuition and room and board. However, if you withdraw money from a 529 plan and do not use it on an eligible education expense, you generally will be subject to income tax and an additional 10% federal tax penalty on earnings. Investors should consider before investing, whether the investor’s or the designated beneficiary’s home state offers state tax or other benefits only available for investments in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. 529 plans offered outside their resident state may not provide the same tax benefits as those offered within their state.

    RETIREMENT AND LONGEVITY

    August 15, 2018

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    Chuck Zuzak

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  • Maximize Your Year End Giving: Charitable Planning Strategies for Individuals

    As the end of the year approaches, it’s an opportune time for clients to utilize strategies that align charitable goals with their financial objectives. In this article, we will explore various charitable planning opportunities and strategies to leverage to help our clients optimize their giving while improving their overall financial situation.

    Tax Efficient Charitable Giving Opportunities

    One of the primary incentives for charitable giving is the potential to reduce taxable income. However, timing and method play a crucial role in maximizing these benefits. Below are several techniques to consider as part of year-end planning:

    Donating Appreciated Securities: Instead of giving cash, clients can donate appreciated stocks, bonds, or mutual funds directly to a charity. This strategy offers two key benefits:

    • Avoiding Capital Gains Tax: Donors avoid paying capital gains tax on the appreciation of the asset.
    • Maximized Tax Deduction: They receive a charitable deduction for the fair market value of the donated securities, provided they’ve held the asset for more than one year.
    • Watch Your Limits: The IRS places limits on the amount clients can deduct for charitable contributions. For cash donations, the limit is typically 60% of AGI, while donations of appreciated assets are limited to 30% of AGI. If the total contributions exceed these limits, the excess can be carried forward for up to five years.
    • Helps Portfolios: This strategy is particularly useful in bull markets, where many clients may have appreciated assets they would otherwise sell to rebalance their portfolios.

    Qualified Charitable Distributions (QCDs): Clients aged 70½ or older can make a QCD of up to $105,000 annually (indexed annually to inflation) directly from their IRA to a qualified charity. QCDs offer several advantages:

    • Satisfies Required Minimum Distributions (RMDs): For clients who have reached their required beginning date, QCDs can reduce taxable income by offsetting RMDs.  However you need to be careful to make QCDs first, before taking any other income yourself.  The first dollars out of a qualified account are the RMD dollars; if you take your RMD first and then try to make a QCD later, it won’t count.
    • Tax-Free Distribution: Unlike regular withdrawals, the QCD is excluded from the client’s taxable income, offering a substantial benefit for those who don’t itemize deductions, which can help clients stay within lower tax brackets or avoid Medicare premium increases.
    • This strategy is particularly advantageous for clients who may no longer need the full amount of their RMD for living expenses but are still required to take it.

    Bunching Charitable Contributions with Donor-Advised Funds (DAFs): Since the introduction of higher standard deductions through the Tax Cuts and Jobs Act (TCJA), many clients no longer benefit from itemizing deductions annually. Bunching donations into a single year can help overcome this threshold. Bunching involves concentrating charitable giving into one year to surpass the standard deduction, allowing clients to itemize and maximize their tax savings.

    One way to implement this is through a Donor-Advised Fund (DAF):

    • Clients can make a lump-sum contribution to a DAF and receive an immediate tax deduction.
    • In subsequent years, the client can take the standard deduction and not make additional charitable contributions until the next “bunching” year.
    • The funds can be distributed to charities over several years allowing donors to maintain their philanthropic commitments.
    • It’s ideal for clients facing a windfall year or who have highly appreciated assets they wish to donate.
    • For clients seeking to create a structured giving plan, or for those who may not have specific charities in mind yet, a DAF can serve as a helpful intermediary.

    Charitable Trusts: Charitable trusts are powerful tools for individuals looking to balance their philanthropic goals with tax-efficient wealth management. These trusts not only provide a way to support meaningful causes but also offer substantial tax benefits for donors and their heirs.

    • Generate Income Streams: Charitable trusts allow donors to convert highly appreciated assets into a steady income. For example, with a Charitable Remainder Trust (CRT), donors or their beneficiaries receive a fixed or variable income for life or a specified period. This can be an attractive option for retirees or clients seeking supplemental income while also supporting charities in the future.
    • Grow the Legacy: One of the most significant benefits of charitable trusts is the potential to transfer appreciated assets, such as real estate or stocks, without triggering capital gains taxes.  When assets are placed into a Charitable Remainder Trust (CRT) and sold, the proceeds are untaxed to the trust, allowing more principal to be retained for both income generation and charitable legacies.
    • Immediate Tax Deduction: Contributions to a charitable trust are eligible for an immediate charitable deduction, based on the present value of the future charitable donation. This deduction can help offset taxable income in the year of the contribution, providing immediate tax relief.

    Incorporating Family in Charitable Planning

    Holiday gatherings present a unique opportunity to engage family members in philanthropy. Clients can involve their children or grandchildren in charitable discussions to foster shared values and create a lasting legacy of giving.

    It’s important to manage expectations on how the family will work together; make it optional, not mandatory, to create the most positive experience possible.  You should also honor individuality and allow your children the flexibility to choose the organizations they want to support; involving adult children in the decision-making process is vital, but it will be frustrating to them if they feel like they are only along for the (your) ride. 

    Charitable giving shouldn’t be compulsory because it immediately becomes an obligation as opposed to enjoyable.  Finally, giving small gifts to every organization that asks each year might be easier than saying no, but to truly maximize your legacy, try to create a plan to give to charitable organizations in such a way to create a big change.

    Maximizing Impact with Matching Gift Programs: Clients should check if their employers offer matching gift programs, which amplify the impact of charitable donations. Many companies will match employee donations dollar-for-dollar, effectively doubling the contribution. Some corporations also match volunteer hours, allowing clients to combine their time and financial resources for greater impact. Encouraging clients to investigate these programs can result in more strategic giving.

    Creating a Year-End Giving Plan with Your Wealth Manager

    Your wealth manager can help you formulate a personalized year-end charitable giving plan. Here’s a checklist approach to developing it:

    1. Identify Charitable Goals: What causes are important to you?
    2. Review Taxable Income: Determine whether itemizing or taking the standard deduction makes sense.
    3. Evaluate Assets: Identify appreciated securities or other assets that could be donated.
    4. Consider Timing: Ensure donations are made before December 31 to qualify for the current tax year.
    5. Explore Donor-Advised Funds: If clients plan to give over multiple years, DAFs may be an optimal solution.
    6. Engage Family: Involve family members in the charitable conversation.
    7. Check Matching Programs: Encourage clients to explore employer matching gift

    By using strategies such as donating appreciated securities, leveraging QCDs, or utilizing donor-advised funds, clients can maximize both the impact of their giving and the financial benefits. Incorporating charitable planning into family discussions further deepens the impact while fostering a legacy of philanthropy.  As the year draws to a close, now is the perfect time for clients to engage with their Wealth Managers in conversations about their charitable goals and ensure they have a plan in place.

    Chuck Zuzak
    About the Author

    Chuck joins Confluence Financial Partners with 13 years of experience in the financial services industry, most recently as Director of Financial Planning at JFS Wealth Advisors. At a fundamental level, Chuck’s passion for financial planning stems from the desire to help clients connect their personal values and purpose with their financial resources.

    Pittsburgh

    412-391-0377
    chuck.zuzak@confluencefp.com
    Email Chuck Zuzak

    •

    Chuck Zuzak

    •