What’s New for 2025?

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To help you stay informed, here are five changes you can look forward to in the new year.

Higher catch-up contributions for some. As of January 1, individuals ages 60 through 63 may be able to make increased catch-up contributions (if offered) to their workplace plan. The catch-up amount for people age 50 and older is $7,500 for 2025, but for people ages 60 through 63, the limit will be $11,250.1

Cap on out-of-pocket Medicare drug costs. A bit of welcome news for people with Medicare Part D prescription drug coverage — a $2,000 annual cap on out-of-pocket prescription costs takes effect on January 1.2 People with Part D will also now have the option to pay out-of-pocket costs in monthly installments over the course of the plan year instead of having to pay all at once at the pharmacy, which may help make it easier to manage prescription drug costs.

Automatic enrollment for new workplace retirement plans. Businesses that have adopted 401(k) and 403(b) plans since the passage of the SECURE 2.0 Act in December 2022 are now required to automatically enroll eligible employees at a contribution rate of 3% to 10%. After the first year, this rate will increase by 1% each year until it reaches 10% to 15%. New companies in business less than three years and employers with 10 or fewer employees are excluded, and other exceptions apply. Employees may opt out of coverage or elect a different percentage.

REAL ID deadline. The deadline for getting a REAL ID is May 7 (although the TSA has announced that enforcement may be phased in). As of that date, every air traveler who is at least 18 years old will need a REAL ID-compliant drivers license or identification card or another TSA-acceptable form of identification for domestic air travel and to enter certain federal facilities. Other TSA-acceptable documents are active passports, passport cards, or Global Entry cards. Standard drivers licenses will no longer be valid ID for TSA purposes, but enhanced drivers licenses from certain states are acceptable alternatives. Travelers who don’t have a REAL ID by the deadline could face delays at airport security checkpoints. Visit the TSA website at tsa.gov for updates and information.

New credit scoring risk model for mortgages. In late 2025, lenders are expected to begin using VantageScore 4.0 and FICO Score 10 T (instead of Classic FICO) to qualify borrowers. These new credit scoring models will provide a more precise assessment of credit risk.3 Models will consider trended credit data (an analysis of a customer’s behavior over time or historical payment and balance information) and other data not previously considered as part of the Classic FICO score, such as rent, utility, and telecom payments. This change will potentially help more applicants qualify for mortgages.

Learn more about investment products and schedule a call with Calan Jansen, Osaic Institutions Financial Advisor, today!

1–2) These are indexed annually for inflation so may rise each year.

3) Fannie Mae and Freddie Mac, 2024

This content has been reviewed by FINRA.

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc.

 

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc

Choosing a Beneficiary for Your IRA or 401(k)

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Selecting beneficiaries for retirement benefits is different from choosing beneficiaries for other assets such as life insurance. With retirement benefits, you need to know the impact of income tax and estate tax laws in order to select the right beneficiaries. Although taxes shouldn’t be the sole determining factor in naming your beneficiaries, ignoring the impact of taxes could lead you to make an incorrect choice.

In addition, if you’re married, beneficiary designations may affect the size of minimum required distributions to you from your IRAs and retirement plans while you’re alive.

Paying income tax on most retirement distributions

Most inherited assets such as bank accounts, stocks, and real estate pass to your beneficiaries without income tax being due. However, that’s not usually the case with 401(k) plans and IRAs.

Beneficiaries pay ordinary income tax on distributions from pre-tax 401(k) accounts and traditional IRAs. With Roth IRAs and Roth 401(k) accounts, however, your beneficiaries can receive the benefits free from income tax if all of the tax requirements are met. That means you need to consider the impact of income taxes when designating beneficiaries for your 401(k) and IRA assets.

For example, if one of your children inherits $100,000 cash from you and another child receives your pre-tax 401(k) account worth $100,000, they aren’t receiving the same amount. The reason is that all distributions from the 401(k) plan will be subject to income tax at ordinary income tax rates, while the cash isn’t subject to income tax when it passes to your child upon your death.

Similarly, if one of your children inherits your taxable traditional IRA and another child receives your income-tax-free Roth IRA, the bottom line is different for each of them.

Naming or changing beneficiaries

When you open up an IRA or begin participating in a 401(k), you are given a form to complete in order to name your beneficiaries. Changes are made in the same way — you complete a new beneficiary designation form. A will or trust does not override your beneficiary designation form. However, spouses may have special rights under federal or state law.

It’s a good idea to review your beneficiary designation form at least every two to three years. Also, be sure to update your form to reflect changes in financial circumstances. Beneficiary designations are important estate planning documents. Seek legal advice as needed.

Designating primary and secondary beneficiaries

When it comes to beneficiary designation forms, you want to avoid gaps. If you don’t have a named beneficiary who survives you, your estate may end up as the beneficiary, which is not always the best result.

Your primary beneficiary is your first choice to receive retirement benefits. You can name more than one person or entity as your primary beneficiary. If your primary beneficiary doesn’t survive you or decides to decline the benefits (the tax term for this is a disclaimer), then your secondary (or “contingent”) beneficiaries receive the benefits.

Having multiple beneficiaries

You can name more than one beneficiary to share in the proceeds. You just need to specify the percentage each beneficiary will receive (the shares do not have to be equal). You should also state who will receive the proceeds should a beneficiary not survive you.

In some cases, you’ll want to designate a different beneficiary for each account or have one account divided into subaccounts (with a beneficiary for each subaccount). Keep in mind that, due to legislation passed at the end of 2019 (the SECURE Act), most non-spouse beneficiaries are required to empty their inherited retirement accounts within 10 years (previously, they could take distributions according to their life expectancies). Exceptions include minor children, those who are not more than 10 years younger than the account owner (such as a close-in-age sibling), and individuals who meet the IRS’s definition of chronically disabled. (Once a minor child reaches age 21, the 10-year rule applies.)

Avoiding gaps or naming your estate as a beneficiary

There are two ways your retirement benefits could end up in your probate estate. Probate is the court process by which assets are transferred from someone who has died to the heirs or beneficiaries entitled to those assets.

First, you might name your estate as the beneficiary. Second, if no named beneficiary survives you, your probate estate may end up as the beneficiary by default. If your probate estate is your beneficiary, several problems can arise.

If your estate receives your retirement benefits, the opportunity to maximize tax deferral by spreading out distributions may be lost. In addition, probate can mean paying attorney’s and executor’s fees and delaying the distribution of benefits.

Naming your spouse as a beneficiary

When it comes to taxes, your spouse is usually the best choice for a primary beneficiary.

A spousal beneficiary has the greatest flexibility for delaying distributions that are subject to income tax. In addition to rolling over your 401(k) or IRA to their IRA or plan, a surviving spouse can generally decide to treat your IRA or plan account as their own. These options can provide more tax and planning options.

If your spouse is more than 10 years younger than you, then naming your spouse can also reduce the size of any required taxable distributions to you from retirement assets while you’re alive. This can allow more assets to stay in the retirement account longer and delay the payment of income tax on distributions.

Although naming a surviving spouse can produce the best income tax result, that isn’t necessarily the case with estate taxes. At your death, your spouse can inherit an unlimited amount of assets and defer federal estate tax until both of you are deceased (note: special tax rules and requirements apply for a surviving spouse who is not a U.S. citizen). If your spouse’s taxable estate for federal tax purposes at his or her death exceeds the applicable exclusion amount, then federal estate tax may be due. In other words, one possible downside to naming your spouse as the primary beneficiary is that it may increase the size of your spouse’s estate for estate tax purposes, which in turn may result in an unexpected tax burden when your spouse dies.

Naming other individuals as beneficiaries

You may have some limits on choosing beneficiaries other than your spouse. No matter where you live, federal law dictates that your surviving spouse be the primary beneficiary of your 401(k) plan benefit unless your spouse signs a timely, effective written waiver. And if you live in one of the community property states, your spouse may have rights related to your IRA regardless of whether he or she is named as the primary beneficiary.

Keep in mind that a non-spouse beneficiary cannot roll over your 401(k) or IRA to their own IRA. However, a non-spouse beneficiary can directly roll over all or part of your 401(k) benefits to an inherited IRA.

Naming a trust as a beneficiary

You must follow special tax rules when naming a trust as a beneficiary, and there may be income tax complications. Seek legal advice before designating a trust as a beneficiary.

Naming a charity as a beneficiary

In general, naming a charity as the primary beneficiary will not affect required distributions to you during your lifetime. However, after your death, having a charity named with other beneficiaries on the same asset could affect the tax-deferral possibilities of the noncharitable beneficiaries, depending on how soon after your death the charity receives its share of the benefits.

 

Learn more about investment products and schedule a call with Calan Jansen, Osaic Institutions Financial Advisor, today!

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc.

6 Steps To Financial Empowerment For Business Owners

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The journey to financial empowerment as an entrepreneur is often challenging. Societal expectations, access to resources, and self-imposed limitations can create barriers to achieving financial success.

However, these obstacles are not insurmountable. By adopting specific strategies, you can break the cycle and build thriving, profitable businesses.

Here are key steps to help you on this path to financial empowerment

  1. Develop a Strong Money Mindset

One of the most critical steps to financial empowerment is developing a strong money mindset. Many people have been conditioned to view money with caution or even guilt, but it’s essential to shift this perspective. Cultivate a positive and abundant mindset around money by recognizing that making money is not only acceptable but necessary for sustaining and growing your business.

Invest in your financial education. Understanding the basics of money management, profit margins, and financial planning will give you the confidence to make informed decisions. Surround yourself with positive financial role models who can inspire and guide you.

The more you immerse yourself in an environment that values wealth creation, the more natural it will become to view money as a tool for success rather than a source of stress.

  1. Seek Out Funding Opportunities

Access to capital is often a significant barrier for entrepreneurs, but there are more resources available than ever before. Explore various funding sources, including angel investors, venture capital, small business grants, and even crowdfunding. Don’t be afraid to negotiate and advocate for your business and remember that you deserve the same opportunities as anyone else.

Networking plays a crucial role in accessing these opportunities. Join industry groups, attend events, and connect with other entrepreneurs and investors. Building relationships within these circles can open doors to funding and other resources that can help you scale your business.

  1. Build Confidence

Confidence is a cornerstone of financial empowerment. Entrepreneurs often struggle with self-doubt, which can hinder their ability to take risks, seize opportunities, and assert their worth. Building confidence requires intentional effort, but it’s well within your reach.

Start by setting and achieving small goals. Each success, no matter how minor, will boost your confidence and motivate you to take on larger challenges. Seek feedback from trusted peers or mentors and use it as a tool for growth rather than criticism. Celebrate your achievements, both big and small, to reinforce your sense of accomplishment.

  1. Prioritize Self-Care and Delegation

Balancing the demands of business ownership with personal responsibilities can be overwhelming. Many entrepreneurs feel the pressure to do it all, but this approach often leads to burnout and diminished productivity. Prioritizing self-care and delegation is crucial for long-term success.

Recognize the importance of work-life balance and set boundaries to protect your time and energy. Delegate tasks that don’t require your direct involvement. This allows you to focus on the strategic aspects of your business that drive growth and profitability. Remember, taking care of yourself is not a luxury; it’s a necessity for sustaining your business and achieving financial empowerment.

  1. Find a Mentor

Mentorship is invaluable in the journey to financial empowerment. A mentor who has achieved the success you aspire to can provide guidance, share insights, and help you avoid common pitfalls. Their experience and perspective can be a powerful tool for accelerating your business growth.

Reach out to successful entrepreneurs, industry leaders, or even peers who have expertise in areas where you seek improvement. Building a network of supportive mentors and peers creates a rich environment for learning, growth, and financial success.

  1. Value Your Work

One of the most common challenges for entrepreneurs is undervaluing their work. This often leads to underpricing products or services, which can hinder revenue growth and send the wrong message to potential clients. It’s essential to understand and assert the value of what you offer.

Conduct market research to ensure your pricing is competitive while reflecting the quality and uniqueness of your offerings. Don’t be afraid to charge what you’re worth. Clients who truly value your work will be willing to pay a fair price.

Remember, if you don’t value your work, others won’t either. Confidence in your pricing not only improves your bottom line but also reinforces your position as a serious and successful entrepreneur.

The bottom line is that breaking the cycle of financial struggle requires intentional action and a commitment to change. By following these tips, you can overcome the barriers that hold many people back in business. Financial empowerment is not just about making money; it’s about building a sustainable, profitable business that allows you to live the life you desire while making a positive impact on the world.

By Melissa Houston, Contributor

 

 

 

 

 

© 2024 Forbes Media LLC. All Rights Reserved

This Forbes article was legally licensed through AdvisorStream.

 

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc. 

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

 

 

F&M Bank and F&M Financial Services Announce the Promotion of Calan Jansen to Senior Vice President

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Timberville, VA (8/19/2024)

 

FOR IMMEDIATE RELEASE

F&M Bank is pleased to announce the promotion of Calan Jansen to the position of Senior Vice President. With over 20 years of wealth experience, Calan holds her Series 66, 63, SIE, 7, and 6 licenses, has been an invaluable asset to F&M Bank for the past 8 years, and is an Osaic Institutions Wealth Advisor with F&M Financial Services.

 

Throughout her career, Calan has consistently demonstrated excellence and has been recognized as one of the top 20 advisors nationally within Osaic Institutions, Inc. Her exceptional skills and expertise have also earned her the distinction of being the leading female advisor within the state of Virginia.

 

Calan is known for her personalized approach to financial planning, understanding that each individual has unique aspirations, circumstances, and risk tolerances. Her thoughtful and tailored strategies have set her apart in the industry, earning her the trust and confidence of her clients.

 

When asked about her promotion, Calan stated, “I am honored and excited to take on this new role as Senior Vice President at F&M Financial Services. I look forward to continuing to serve our clients with dedication and expertise, helping them achieve their financial goals and secure their future.”

 

F&M Bank CEO, Mike Wilkerson, expressed his confidence in Calan’s abilities, saying, “Calan has consistently demonstrated outstanding performance and exceptional leadership throughout her tenure at F&M Bank. Her promotion to Senior Vice President is well-deserved, and I have no doubt that she will excel in this expanded role, further contributing to the success of our organization.”

 

In addition to her professional achievements, Calan’s team recently achieved a significant milestone by winning the Gold award in the Shenandoah Valley Best contest. This community-voted contest, hosted annually by the Harrisonburg Radio Group, recognizes the excellence and dedication of local businesses within the Shenandoah Valley.*

 

For more information about F&M Financial Services and to get in touch with Calan Jansen, please visit www.fmbankva.com/calan-jansen.

 

* F&M Financial Services was awarded Gold in the 2024 Shenandoah Valley Best Contest’s Wealth Management category. The nomination and voting period occurred in March 2024, with results announced publicly in May 2024. Results can be viewed at www.shenandoahvalleybest.com/categories/2024

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

 

 

###

 

Contact:

Marketing@fmbankva.com

Jake Mowry, (540) 437-3466

About F&M Bank

F&M Bank Corp. (OTCQX: FMBM) proudly remains the only publicly traded organization based in Rockingham County, VA, and since 1908, has served the Shenandoah Valley through its banking subsidiary F&M Bank, with full-service branches and a wide variety of financial services, including home loans through F&M Mortgage, and real estate settlement services and title insurance through VSTitle. Both individuals and businesses find the organization’s local decision-making and up-to-date technology provide the kind of responsive, knowledgeable, and reliable service that only a progressive community bank can.

 

What expenses are included in the annual cost of college?

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To most parents, the annual cost of college simply refers to tuition and room and board. To the federal government, however, the annual cost of college means the cost of attendance. Twice per year, the federal government calculates the cost of attendance for each college, adjusts the figure for inflation, and, if your child is applying for financial aid, uses this number to determine your child’s financial need.

Five categories of expenses are used to determine the cost of attendance at a particular college:

  • Tuition and fees: Same for all students at private colleges but can vary at public colleges, depending on whether the student is in-state or out-of-state
  • Room and board: Can vary by student, depending on the meal plan your child selects and whether he or she lives on or off campus
  • Books and supplies: Can vary by student, depending on your child’s courses and his or her requirements
  • Transportation: Can vary greatly by student, depending on where your child lives in relation to the school
  • Personal expenses: Can vary by student (e.g., health insurance, spending money, clothing)

Tuition, fees, room, and board (referred to as “direct costs”) are calculated using the college’s figures. For books, supplies, transportation, and personal expenses (referred to as “indirect costs”), the federal government sets a monetary figure even though the exact expenses incurred will depend on the individual student. Thus, depending on these variables, your child’s actual cost may be slightly higher or lower than the cost used for official purposes like financial aid determinations.

If you’re interested in obtaining the monetary amount allotted to each category for a particular college, contact that college directly.

 

 

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc. 

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

Can Home Improvements Lower Your Tax Bill? It Depends

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Most home improvements are not tax deductible — with one possible exception. In certain situations, you may be able to deduct improvements deemed necessary for medical reasons (not just beneficial to general health). If you itemize instead of taking the standard deduction, you can deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income, so the tax savings could be significant if a costly home improvement pushes your total medical expenses above that threshold. Installing air conditioning to help treat asthma or modifying a home to make it wheelchair accessible are common examples of qualifying expenses.

Here are two more ways that improving your home could potentially reduce your tax burden.

Capital improvements

Projects that add to the value of your home, prolong its life, or adapt it to new uses are considered capital improvements. When you sell your home in the future, you can add the cost of capital improvements to your initial basis (what you paid for it originally), reducing your capital gain and the resulting tax bill.

Some examples of capital improvements include remodeling the kitchen, replacing all your home’s windows, adding a bathroom, or installing a new roof. Repairs that keep your home in good condition (such as repainting, replacing a broken door or window, or fixing a leak) don’t count as capital improvements. However, an entire repair job may be considered an improvement if it’s done as part of an extensive remodel or restoration.

Energy-saving tax credits

The Inflation Reduction Act of 2022 reconfigured two nonrefundable tax credits for home improvements that save energy. Unlike a deduction, which reduces your taxable income, a tax credit lowers your tax bill dollar for dollar. Both credits are available only for the installation of new products that meet specific energy efficiency requirements.

The energy efficient home improvement credit is equal to 30% of qualified expenditures for an existing home (not new construction). A $3,200 maximum annual credit is available through 2032. A $2,000 limit (30% of all costs, including labor) applies to electric or natural gas heat pumps, heat pump water heaters, and biomass stoves and boilers. A separate $1,200 limit applies to home energy audits and building envelope components (such as exterior doors, windows, skylights, and insulation) and energy property (including central air conditioners).

The residential clean energy property credit is a 30% tax credit available for qualifying expenditures for clean energy property (and related labor costs) such as solar panels, solar water heaters, geothermal heat pumps, wind turbines, fuel cells, and battery storage.

Learn more about investment products and schedule a call with Calan today!

 

 

For retirees investing in bonds, don’t assume that individual bonds and bond funds are the same type of investment. Bond funds do not offer the two key characteristics offered by bonds: (1) income from bond funds is not fixed–dividends change depending on the bonds the funds has bought and sold as well as the prevailing interest rate, and (2) a bond fund does not have an obligation to return principal to you when bonds within the fund mature. Additionally, the risk associated with bond funds varies depending on the bonds held within the fund at any given time, whereas the risk associated with individual bonds generally decreases over time as a bond nears its maturity date (assuming the issuer’s financial situation doesn’t deteriorate). Finally, fees and charges associated with bond funds reduce returns. Even so, you may still find bond funds attractive because of their convenience. Just be sure you understand the differences between bond funds and individual bonds before you invest.

This content has been reviewed by FINRA.

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc. 

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

Investment Planning throughout Retirement

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Investment Planning throughout Retirement

Investment planning during retirement is not the same as investing for retirement and, in many ways, is more complicated.

Your working years are your saving years. With luck, your income increases from year to year as you receive promotions and/or pay raises; those increases offer some protection against rising costs caused by inflation. While you’re working, your retirement objective generally is to grow retirement savings as much as possible, and investments that offer higher potential reward in exchange for greater potential for volatility and/or loss are often the focus for those retirement savings.

When you retire, on the other hand, spending rather than saving becomes your focus. Your sources of income may include Social Security, employer pensions, personal savings and assets, and perhaps some income from working part-time. Typically, a retiree’s objective is to derive sufficient income to maintain a chosen lifestyle and to make assets last as long as necessary.

This can be a tricky balancing act. Uncertainty abounds — you don’t know how long you’ll live or whether rates of return will meet your expectations. If your income is fixed, inflation could erode its purchasing power over time, which may cause you to invade principal to meet day-to-day expenses. Or, your retirement plan may require that you make minimum withdrawals in excess of your needs, depleting your resources and triggering taxes unnecessarily. Further, your ability to tolerate risk is lessened — you have less time to recover from losses, and you may feel less secure about your finances in general.

How, then, should you manage your investments during retirement given the above complications? The answer is different for everyone. You should tailor your plans to your own unique circumstances, and you may want to consult a financial planning professional for advice.

The following discusses two important factors you should consider: (1) withdrawing income from retirement assets, and (2) balancing safety with growth.

Choosing a sustainable withdrawal rate

A key factor that determines whether your assets will last for your entire lifetime is the rate at which you withdraw funds. The more you withdraw, the greater the likelihood you’ll exhaust your resources too soon. On the other hand, if you withdraw too little, you may have to struggle to meet expenses; also, you could end up with assets in your estate, part of which may go to the government in taxes. It is vital that you estimate an appropriate withdrawal rate for your circumstances, and determine whether you should adjust your lifestyle and/or estate plan.

Your withdrawal rate is typically expressed as a percentage of your overall assets, even though withdrawals may represent earnings, principal, or some combination of the two. For example, if you have $700,000 in assets and decide a 4 percent withdrawal rate is appropriate, the portfolio would need to earn $28,000 a year if you intend to withdraw only earnings; alternatively, you might set it up to earn $14,000 in interest and take the remaining $14,000 from the principal. An appropriate and sustainable withdrawal rate depends on many factors including the value of your current assets, your expected rate of return, your life expectancy, your risk tolerance, whether you adjust for inflation, how much your expenses are expected to be, and whether you want some assets left over for your heirs.

Fortunately, you don’t have to make a wild guess. Studies have tackled this issue, resulting in the creation of tables and calculators that can provide you with a range of rates that have some probability of success. However, you’ll probably need some expert help to ensure that this important decision is made carefully.

Withdrawing first from taxable, tax-deferred, or tax-free accounts

Many retirees have assets in various types of accounts: taxable, tax-deferred (e.g., traditional IRAs), and tax-free (e.g., Roth IRAs). Given a choice, which type of account should you withdraw from first? It depends on your specific situation.

Roth IRA earnings are generally free from federal income tax if certain conditions are met, but may not be free from state income tax.

Retirees who will not have an estate

For retirees who do not intend to leave assets to beneficiaries, the answer is simple in theory: Withdraw money from a taxable account first, then a tax-deferred account, and lastly, a tax-free account. This will provide for the greatest growth potential due to the power of compounding.

In practice, however, your choices, to some extent, may be directed by tax rules. Retirement accounts, other than Roth IRAs, have minimum withdrawal requirements. In general, you must begin withdrawing from these accounts by April 1 of the year following the year you turn age 73. Failure to do so can result in a 25 percent excise tax imposed on the amount by which the required minimum distribution exceeds the distribution you actually take. (The tax is reduced to 10% if you take the full required amount and report the tax by the end of the second year after it was due and before the IRS demands payment.)

Retirees who will have an estate

For retirees who intend to leave assets to beneficiaries, the analysis is more complicated. You need to coordinate your retirement plan with your estate plan.

If you have appreciated or rapidly appreciating assets, it may be more advantageous for you to withdraw from tax-deferred and tax-free accounts first. This is because these accounts will not receive a step-up in basis at your death, as many of your other assets will, and your heirs could face a larger than necessary tax liability.

However, this may not always be the best strategy. For example, if you intend to leave your entire estate to your spouse, it may be better to withdraw from taxable accounts first. This is because spouses are given preferential tax treatment with regard to retirement plans. As a beneficiary of a traditional IRA or retirement plan, a surviving spouse can roll over retirement plan funds to his or her own IRA or retirement plan, or, in some cases, may continue the deceased spouse’s plan as his or her own. The funds in the plan continue to grow tax deferred, and distributions need not begin until the spouse’s own required beginning date.

Retirees in this situation should consult a qualified estate planning attorney who has some expertise with regard to retirement plan assets.

Balancing safety and growth

When you retire, you generally stop receiving income from wages, a salary, or other work-related activity and start relying on your assets for income. To ensure a consistent and reliable flow of income for your lifetime, you must provide some safety for your principal. This is why retirees typically shift at least a portion of their investment portfolio to more secure income-producing investments, and this makes a great deal of sense.

Unfortunately, safety comes with a price, which is reduced growth potential and erosion of value due to inflation. Safety at the expense of growth can be a critical mistake for some retirees. On the other hand, if you invest too heavily in growth investments, your risk is heightened, and you may be forced to sell during a downturn in the market should you need more income. Retirees must find a way to strike a reasonable balance between safety and growth.

One solution may be the “two bucket” approach. To implement this, you would determine your sustainable withdrawal rate (see above), and then reallocate a portion of your portfolio to fixed income investments (e.g., certificates of deposit and bonds) that will provide you with sufficient income for a predetermined number of years. You would then reallocate the balance of your portfolio to growth investments (e.g., stocks) that you can use to replenish that income “bucket” over time.

The fixed income portion of your portfolio should be able to provide you with enough income (together with any other income you may receive, such as Social Security and required minimum distributions from retirement plans) to meet your expenses so you won’t have to liquidate investments in the growth portion of your portfolio at a time when they may be down. This can help you ride out fluctuations in the market, and sell only when you think a sale is advantageous.

Be sure that your fixed income investments will provide you with income when you’ll need it. One way to accomplish this is by laddering. For example, if you’re investing in bonds, instead of investing the entire amount in one issue that matures on a certain date, spread your investment over several issues with staggered maturity dates (e.g., one year, two years, three years). As each bond matures, reinvest the principal to maintain the pattern.

As for the growth portion of your investment portfolio, common investing principles still apply:

  • Diversify your holdings
  • Invest on a tax-deferred or tax-free basis if possible
  • Monitor your portfolio and reallocate assets when appropriate

 

Learn more about our investment products and schedule a call with Calan today!

 

For retirees investing in bonds, don’t assume that individual bonds and bond funds are the same type of investment. Bond funds do not offer the two key characteristics offered by bonds: (1) income from bond funds is not fixed–dividends change depending on the bonds the funds has bought and sold as well as the prevailing interest rate, and (2) a bond fund does not have an obligation to return principal to you when bonds within the fund mature. Additionally, the risk associated with bond funds varies depending on the bonds held within the fund at any given time, whereas the risk associated with individual bonds generally decreases over time as a bond nears its maturity date (assuming the issuer’s financial situation doesn’t deteriorate). Finally, fees and charges associated with bond funds reduce returns. Even so, you may still find bond funds attractive because of their convenience. Just be sure you understand the differences between bond funds and individual bonds before you invest.

This content has been reviewed by FINRA.

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc.

Have You Met Calan Jansen, One of Virginia’s Leading Financial Advisors?

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When it comes to managing your wealth and planning for your financial future, having an experienced and knowledgeable advisor by your side is crucial. In the state of Virginia, one name stands out among the rest – Calan Jansen. With over 20 years of wealth experience and Series 66, 63, SIE, 7, and 6 licenses, Calan has established herself as one of the top financial advisors in the region.

Calan’s Background and Expertise

Raised in Shenandoah County, Calan’s roots are deeply embedded in the local community. Her career in finance has been driven by her passion for helping individuals achieve financial security and peace of mind. Calan’s extensive experience in wealth management has equipped her with a unique set of skills and insights, enabling her to navigate the complexities of the financial world with ease.

Impressive Achievements

For the last five years, Calan Jansen has consistently ranked among the top 20 advisors nationally within Osaic Institutions Inc. This exceptional accomplishment is a testament to her dedication, expertise, and unwavering commitment to her clients’ financial success. Furthermore, Calan is also proud to hold the distinction of being the leading female advisor in the state, breaking barriers and paving the way for other women in the industry.

Extensive Wealth Experience

With over 20 years of experience in the financial industry, Calan Jansen brings a wealth of knowledge and expertise to her clients. Throughout her career, she has honed her skills in various aspects of wealth management, including investment strategies, retirement planning, and risk management. Calan’s expertise extends to a wide range of financial instruments, ensuring that her clients receive tailored advice and guidance to meet their unique financial goals.

Thoughtful Approach

What truly sets Calan apart is her thoughtful approach to each client she works with. She understands that every individual has different financial aspirations, circumstances, and risk tolerances. Calan takes the time to listen and understand her clients’ needs, goals, and concerns, allowing her to develop personalized strategies that align with their long-term objectives. Her ability to build strong relationships based on trust and open communication has earned her a loyal client base who appreciate her genuine care and dedication.

 

Calan Jansen’s impressive track record, extensive wealth experience, and thoughtful approach make her the go-to financial advisor in the state of Virginia. Her commitment to her clients’ financial success, coupled with her expertise in wealth management, sets her apart from the rest. Whether you are planning for retirement, seeking investment opportunities, or looking to protect your assets, Calan Jansen is the trusted advisor who will guide you every step of the way.

 

Learn more about our investment products and schedule a call with Calan today!

 

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

 

 

Should You Buy Long-Term Care Insurance?

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The longer you live, the greater the chances you’ll need some form of long-term care. If you’re concerned about protecting your assets and maintaining your financial independence in your later years, long-term care insurance (LTCI) may be for you.

Who needs it?

As we age, the odds increase that we’ll need some form of long-term care at some point during our lives. And with life expectancies increasing at a steady rate, the likelihood of needing long-term care can be expected to grow in the years to come.

But won’t the government look out for me?

Medicare pays nothing for nursing home care unless you’ve first been in the hospital for 3 consecutive days. After that, it will pay only if you enter a certified nursing home within 30 days of your discharge from the hospital. For the first 20 days, Medicare pays 100 percent of your nursing home care costs. After that, you’ll pay $204.00 in 2024 per day for your care through day 100, and Medicare will pick up the balance. Beyond day 100 in a nursing home, you’re on your own–Medicare doesn’t pay anything.

If you’re at home, Medicare provides minimal short-term coverage for intermediate care (e.g., intravenous feeding or the treatment of dressings), but only if you’re confined to your home and the treatments are ordered by a doctor. Medicare provides nothing for custodial care, such as help with feeding, bathing, or preparing meals.

Medicaid covers long-term nursing home costs (including both intermediate and custodial care costs) but only for individuals who have low income and few assets (eligibility guidelines vary from state to state). You will have to use up most of your savings before you qualify for Medicaid, and aside from a small personal needs allowance, you will have to use all of your retirement income, including Social Security and pension payments, to pay for your care before Medicaid pays anything. And once you qualify for Medicaid, you’ll have little or no choice regarding where you receive care. Only facilities with Medicaid-approved beds can accept you, and your chances of staying in your own home are slimmer, because currently most states’ Medicaid programs only cover limited home health care services.

Looking out for yourself

If you want to retain your independence, protect your assets, and maintain your standard of living while at the same time guaranteeing your access to a range of long-term care options, you may want to purchase LTCI. This insurance might be right for you if you meet the following criteria:

  • You’re between the ages of 40 and 84
  • You have significant assets that you would want to preserve as an inheritance for others or gift to charity
  • You have an income from employment or investments in addition to Social Security
  • You can afford LTCI premiums (now and in the future) without changing your lifestyle

Once you purchase an LTCI policy, your premiums can go up over time, but the rates can only rise for an entire class of policyholders in your state (i.e., all policyholders who bought a particular policy series, or who were within certain age groups when they bought the policy). Any increase must be justified and approved by your state’s insurance division.

Several factors affect the cost of your long-term care policy. The most significant factors are your age, your health, the amount of benefit, and the benefit period. The younger and healthier you are when you buy LTCI, the less your premium rate will be each year. The greater your daily benefit (choices typically range from $50 to $350) and the longer the benefit period (generally 1 to 6 years, with some policies offering a lifetime benefit), the greater the premium.

 

Connect with an Osaic Institutions Financial Advisor today!

 

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc.

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal

Incorporating Impact Investing Into Your Retirement Planning

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Are you interested in the responsible investing trend? Looking for a way to get a competitive return on your investment without compromising your values? Impact investing allows you to directly support environmental and social change. Keep reading to learn more about impact investing, how it compares to ESG investments, and whether or not it’s right for you.

Hands holding the world

What Is Impact Investing?

The concept of impact investing was introduced in 2007 by the Rockefeller Foundation and others. The goal is to marry financial return alongside a measurable social impact. This type of investing is growing rapidly, with estimates in 2022 reaching $1.164 trillion.

 

Impact investors put their money in funds that consist of businesses driving environmental and social change. This can be in both the emerging and developed markets. Impact investments typically support areas like sustainable agriculture, renewable energy, conservation, microfinance, housing, healthcare, and education.

Who Can Be An Impact Investor?

Impact investing can be pursued at both the individual and institutional levels. For example:

 

  • Fund Managers
  • Development finance institutions
  • Diversified financial institutions
  • Private foundations
  • Pension funds and insurance companies
  • Family Offices
  • Individual investors
  • NGOs
  • Religious institutions
  • Corporates

Money growing trees

How Does Impact Investing Differ From ESG Investing?

Some people use “ESG” and “impact investing” as interchangeable terms, but there are some important distinctions.

What is ESG Investing?

 

  • ESG stands for Environment, Social, and Governance.
  • ESG investors choose to invest in companies with a high ESG score because they want their investments to align with their values.
  • However, ESG-designated companies are not necessarily making a direct impact on environmental, social, or governance issues.
  • Instead, ESG investors are supporting companies that are committed to protecting the environment, doing good in the communities where they operate, and meeting high standards for management and corporate governance.

What is Impact Investing?

  • Impact investing means using your money to drive the changes you want to see in the world. Impact investors want to get a good return on their investment, but they also want to invest in businesses that are driving change.

Overall, you can think of the difference between impact and ESG investing as a question of how you want your investment funds to count. Do you want to support existing companies that operate in a way that matches your values? Or, do you want to help newer companies make a direct impact in the areas that you care about?

ESG is a framework that helps investors understand the choices an organization makes. Impact investing is a strategy that helps investors make a difference directly from their investments. Both ESG and impact investing seek a return on the investment.

One last distinction: While all impact investment funds are ESG-compliant, not all ESG funds are impact investments.

Four Tenets of Impact Investing

These four characteristics of impact investing define investors’ expectations for what impact investing means and what they can hope to get out of it.

  • Intentionality: Perhaps the primary characteristic of impact investing is the investor’s intention to make a positive social or environmental impact through their investment decisions.
  • Data-driven: Impact investing may have a lofty goal, but it should still be based on evidence and data, not instinct or hunches.
  • Performance-measured: Impact investment funds should measure the actual impact produced to ensure investors are getting the desired results.
  • Knowledge sharing: Impact investors should share their experiences, using a shared language, to help grow the industry and help others learn.

Trends In Impact Investing

Interested in becoming an impact investor? Here’s what to watch for in this space:

 

  • More focus on women-owned businesses
  • More focus on the climate crisis
  • Greater adoption of digital technologies to track and measure impact
  • Standardization in the industry to avoid “impact washing”
  • Collaboration between investors and NGOs
  • A shift from broad, diversified investments to more focused and singular themes
  • Partnership between Impact and EGS investments

Man investing smart

Is Impact Investing a Good Fit For You?

As with many other questions around money and investing, the answer here will depend on your personal situation, values, and long-term goals. There are a variety of impact investments to choose from, but you should always do your research first and ask questions. Be realistic about the return you can expect on your impact investment. All investments carry risk, so make sure your choice of investment matches your risk tolerance (high, medium, or low). Finally, remember that you can also volunteer your time or make charitable donations to your favorite causes if you decide not to pursue impact investing.

Talk to our Osaic Institutions Financial Advisors for personalized advice!

If you have questions about impact investing, want to know which investments will best support your goals, or just need help developing an investment plan, F&M Financial Services is here for you. Schedule an appointment with an Osaic Institutions Financial Advisor with F&M Financial Services at any of our locations today!

Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. F&M Financial Services is a trade name of F&M Bank. Osaic Institutions and F&M Bank are not affiliated.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal