FINANCIALLY FOCUSED

February 2023 Newsletter

Greetings!

February might be the shortest month of the year, but it’s a jam-packed of beloved national holidays from Ground Hogs Day, Valentine’s Day, Presidents Day, to Mardi Gras. But don’t forget, February is traditionally the snowiest month of the year…let's hope that’s not the case this year!

This tends to be one of the busiest months of the year for Swenson Wealth, everyone preparing for their taxes, doing their IRA contributions, and visiting with advisors to make sure their goals are being met for the upcoming year! If you haven’t heard from us and would like to sit down and visit, please do not hesitate to call our office and make an appointment with your advisor! We would love to see you all and touch base!

FYI
You should start to receive your 1099 and tax statements shortly so please be on the lookout for them. Charles Schwab sends them out in groups, so if you weren’t in the first group, you'll see yours shortly. Please call our office if you have any questions.

IS A ROTH CONVERSION FOR YOU?
You must pay income taxes on any converted funds in the year of the conversion, but there are several scenarios in which that might be to your advantage:

1. You believe your tax bracket will be higher in retirement. It could make sense to convert all or a portion of funds in a traditional IRA to a ROTH today and not in the future.
2. You want to maximize your estate for your heirs. If you do not have a need for the IRA funds during your lifetime, converting FUNDS from TAXABLE to TAX FREE would potentially leave more for your heirs.
3. Your accounts aren’t diversified by tax treatment. By converting you may be able to better manage your tax brackets and enable more advantages income planning in retirement.
4. You have irregular income streams and lower than usual income this year. Example of a farmer or business owner generating a net operating loss from non-passive income. This could be the perfect opportunity to do a ROTH conversion with a low tax impact.

1. You may be nearing retirement and need your traditional IRA to cover your living expenses. Money you need soon is not a good candidate for conversion. You will need some time to recoup the taxes you’d have paid to convert.
2. You are currently on Social Security or Medicare Benefits. If the Roth conversion increased you taxable income, you may owe more tax on Social Security benefits and your Medicare costs could rise.
3. You cannot pay the tax on the conversion or must sell other taxable assets to pay it. It is most advantageous to pay the tax with cash on hand rather than deduct it from the conversion or sell other assets that will create more tax.
4. You plan on giving your Traditional Ira to Charity using a Qualified Charitable Distribution (QCD). This avoids taxes, no need to convert it first.

In my opinion, it makes sense to do a Roth Conversion at today’s low tax rates. Keep in mind that the current income tax cuts are expected to be in effect until 2025. Congress may extend the cuts or enact a very different set of rules. However, today’s tax rates are relatively low. Every year you wait, your account continues to grow and so will the tax bill. This tax year (2023) does allow anyone 50 and over to add up to $22,500 to their 401k with an additional $7,500 catch up contribution for a total deposit of $30,000. IRA contributions have increased to $6,500 with an additional $1,000 allowed if over 50 for a total of $7,500.

The biggest attraction of a Roth is that you should owe no money on the account ever again. As always, you should speak with someone who can help you accurately determine if a Roth Conversion is in your best interest. Just give Swenson Wealth a call if you are interested in more information on this subject.

Important Update:
There are Annuity companies we represent that have increased their fixed interest rates on the MYGA’s (multi-year guaranteed annuity) to rates as high as 6%. There are some A+ Annuity Companies offering up to 32% bonuses on first year premiums placed in their Index annuity policies.

Please call for office details.

Contracts are subject to state availability, and certain restrictions may apply. Fixed interest rate quoted above as of 2/1/2023 is based on the claims paying ability of Ibexis life and Annuity Insurance Company. Indexed Annuity Bonus rate quoted above as of 2/1/2023 is based on current 222 annuity with Allianz life. Rates being offered are subject to change at any time. Annuities such as MYGA’s and Index Annuities are subject to early withdrawal penalties and do have specific contract rules. Withdrawals may be taxable and subject to tax penalties if made before age 59 ½. Tax deferral offers no additional value if the annuity is used to fund a qualified plan, such as an IRA or 401k and may not be available if the owner of the annuity is not a natural person such as a corporation or certain types of trusts.

Swenson Wealth Management
Travis, Brady, Mark, Makayla, & Jenn

How Much Cash Should I Have on Hand?

Given that we’re increasingly becoming a cashless society, the question of how much cash we should keep on hand is difficult to answer.

A U.S. News and World Report article, How Much Cash Should I Keep on Hand, has some insights that may help you determine how much money you should keep in your home and in your pocket when you’re running errands or shopping.

Read More

Sugar Cookie Bark

This sugar cookie dough bark is a combination of candy and cookie dough! Sugar cookie dough is transformed into a delicious white chocolate cookie bark with the festive colors of sprinkles – it’s the ultimate sugar rush!

Get Baking!

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PLEASE KEEP US IN THE LOOP

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MakaylaBoer@swensonag.com

Or call us at 605-274-8707

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Investment advisory services offered through Alternative Investment Advisors, LLC. (AIA), an SEC Registered Investment Advisor. AIA and its advisors do not render tax, legal or accounting advice. Fixed insurance products and services are offered through Swenson Wealth Management. Swenson Wealth Management is not a registered investment advisor and is not a subsidiary or affiliate of Alternative Investment Advisors, LLC. Swenson Wealth Management and their individually licensed and appointed insurance agents, and AIA are not affiliated with or endorsed by the Social Security Administration or any government agency.

This communication may contain information that is proprietary, privileged, or confidential, or otherwise legally exempt from disclosure. If you are not the named addressee, you are not authorized to read, retain, copy, or disseminate this memo or any part of it. if you have received this memo in error, please notify the sender immediately by Email or fax, and destroy all copies of this communication. Please be further advised that, pursuant to the Bank Secrecy Act, the USA PATRIOT Act, and similar laws, any communication in this e-mail is subject to regulatory, supervisory, and law enforcement review.