Hindsight is defined by Merriam-Webster as the full knowledge and complete understanding that one has about an event only after it has happened. After experiencing a year filled with adversity and unexpected challenges, we are all hoping to bring that hindsight into focus as we move into 2021.

The global pandemic known as COVID-19 has brought substantial devastation to our way of life globally, nationally, and locally. Many among us continue to feel the full force of the economic and health impacts to our daily lives. However, there are encouraging signs that the end of the global pandemic is nearing. Multiple vaccine candidates have had successful clinical trials and are being reviewed and approved by regulatory authorities as of this writing. Effective therapeutics continue to show promise as alternative treatment options. These combinations give us hope that a semblance of normal is possible in 2021. That same optimism can translate into what changes 2021 might bring and how they will impact your finances.

First, there will be a new President inaugurated in January. While most people feel strongly about one party or another, history shows the stock market tends to be indifferent to which party occupies the White House and Congress. According to research from RBC Capital Markets that has tracked the returns of the S&P 500 dating back to 1933, the best outcome for markets have been a Democratic President and split Congress, with an average annual return of 14%. The second-best outcome was a tie between a full Republican sweep and a Democratic President with a Republican Congress. Both of these scenarios returned 13% annually.

Second, 2021 tax laws also continues to offer ample opportunities for investors. Individuals with 401(k) plans can contribute up to $19,500 to their plan from their salary, and for those age 50 or older, an additional $6,500 catch-up contribution is available. Eligible individuals can save up to $6,000 in a Traditional or Roth IRA with a $1,000 additional catch-up contribution for those age 50 or older. Expanded income tax brackets coupled with low tax rates provide opportunity to convert pre-tax retirement accounts to tax-free Roth IRA accounts and manage future taxes and retirement costs such as Medicare premiums.

The year 2020 will undoubtedly go down in the history books as unprecedented.  Let’s look to 2021 and do some financial planning so we will be ready to travel, attend concerts and do all the things to build our economy. From all of us at Keller and KMH, we wish you a Happy New Year! 

Published in the Victoria Advocate

Kyle W. Noack CPA/CFP® is Chief Financial Officer for Keller & Associates CPAs, PLLC and KMH Wealth Management, LLC.

The holidays are officially upon us and with a house full of young kids that can only mean one thing: time to start planning. If your family is anything like mine, planning for Thanksgiving doesn’t start the week of. Even though there’s a pretty set standard of how the day will go, there’s been an family email chain for the past week where we clarified what time we are expected to arrive and most importantly who was bringing what dishes.

I read recently that the average American plans more for vacation than they do for retirement and it is safe to say the same about the holidays. Why is that most will take the time to plan out every detail of an event that will last a few hours, but take at face value assumptions that could affect the rest of their lives? This holiday season, I encourage you to spend at least a few minutes of your time digging a little deeper into some age-old retirement traditions (or rather misconceptions) that need to be set straight.

Myth #1: ‘If I have $_____, I will be able to live comfortably in retirement.’ Reality: There is no magic number. Maybe you have an idea of what it takes you to retire, but that number could look substantially different from your friend down the street. The amount you need in retirement is driven primarily by your retirement spending and long term goals. Does your current employer pay for the cost of your medical care? You may not need as much as someone else who has to pay these bills out of pocket. Planning to buy a second residence out of state? You’ll need to account for that as well.

Myth #2: ‘Once I retire, all of my money should be in ‘conservative’ investments like bonds, cash, and CDs.’ Reality: Asset allocation is specific to a person/couple, not an entire life-stage group. This may have been true fifty years ago when life expectancy through retirement was relatively short. Today, the average couple has a 97% chance of at least one spouse making it until age 93. If that same couple retires at age 65, they need their funds to last them for another 28 years! This isn’t exactly a short-term investment outlook and you’ll likely need more saved up than those with a long-term investment strategy.

Myth #3: As long as I only withdraw 4% of my portfolio, I will have enough money to live off of. Reality: This is one of the oldest retirement assumptions in the book driven largely by market assumptions. While it may not be entirely wrong, it was never meant to provide a guarantee of security in retirement. Similar to Myth #1 above, this assumption isn’t dynamic enough to forecast what retirement looks like for you, your way.

So just like with the holidays, you could assume that the way things have always been with retirement planning are the way they will continue to be. Nevertheless, just like your family member that changes up the recipe on her dish each year, the truth is that the difference is in the details and minor changes can make a big impact on the end result.

Work with a CFP® professional to see if you are on track for the retirement you’re expecting.

Published in the Victoria Advocate

Sara Potts is a CFP® professional for KMH Wealth Management, LLC.

As a woman I sometimes find myself not wanting to bother with financial planning, insurance, and tax returns, just to name a few financial issues.  I am married to a CPA, CFP® professional so this makes it is easy for me to not get in the weeds on these matters. 

However, I know I need to be as intelligent as I can be for many reasons.  Many, many years ago I felt I had no clue what insurance policies we had, what they covered, what they paid out if and when.  I even paid the bills but did not know any specifics.  So my husband and I sat down and I forced myself to educate myself about our insurance.  You hope you wake up to another day, but if something had happened to my husband I had to have the knowledge to carry on and the insurance would have been a major start.  Do you have the right insurance for your needs?

We have an older daughter and triplets who are four years younger.  They are all ‘adulting’ now, but when they were born we knew they would be in college at the same time so we needed to plan ahead.  We immediately started saving for their college educations and calculated this into our annual budget.  Three graduated from college with no debt and some money left over and the fourth went out-of-state so her out-of-state tuition ate through all of her savings.  But she had no debt.  So from sound college planning our children and us dodged the college debt bullet.  Where are your college savings?

As baby boomers, we are entering “twilight years.”  We stay active and healthy, but we have wills, power of attorneys, and directives to physicians and have made sure the beneficiaries are noted on our portfolio and bank accounts.  I have to be prepared, as well as my husband if something were to happen to one or both of us.  Like most, we have property and interests that we have the responsibility to maintain.  We also want no surprises for our children such as no will that would require time and effort in the probate process, and potentially have our assets distributed in a way that we did not approve of.  They live all over the country and do not have time for our financial negligence.  Do you have a will and estate documents?

So, as a woman, as much as I would prefer to keep my head in the sand, I have financially enlightened myself.  This makes me prepared for most things life throws my way so I can carry on.  I hope women take charge of their finances, call a CERTIFIED FINANCIAL PLANNER™ Professional since October is Financial Planning Month, and understand what it would take for them to carry on.

Published in the Victoria Advocate

Phyllis Keller is the Chief Information Officer for KMH Wealth Management, LLC and Keller & Associates CPAs PLLC.  She graduated from Texas A&M University, has an MBA from the University of Houston Victoria and has been with the firms over 15 years.

Chances are that you are familiar with the process of choosing the right vehicle for you. For some, a large truck bed used for hauling heavy equipment is necessary. For others, it’s spacious seating for the family. I currently own a 2005 Blue Chevy Corvette. V8 engine, 400 horsepower, and 0-60 in 4.1 seconds. While that vehicle fits me currently, I can tell you that its two-seat capacity wouldn’t make any sense for my sister who has two young boys to chauffer daily. In retirement planning, we ask a similar question that warrants as much, if not more diligence – what is the best retirement savings vehicle? A savings vehicle is a type of account – it’s what you put your money in that carries it from point A to point B.

You have worked hard over the years to accumulate wealth, and would probably find it comforting to know that after your death the assets you leave behind will continue to be a source
of support for your family, friends, and the causes that are important to you. But to ensure that your legacy reaches your heirs or causes as you intend, you must make the proper arrangements.
Legacy planning as defined by Investopedia “is a financial strategy that prepares people to bequeath their assets to a loved one or next of kin after death.”

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