Windsor Wealth Management LLC

Investment service in Topsfield, Massachusetts

Financial Planning

How To Spend Confidently & Without Regret in Retirement

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Let’s challenge conventional wealth accumulation wisdom…

Our team recently read the book, Die With Zero: Getting All You Can From Your Money by Bill Perkins. It’s an easy-to-read personal finance book that challenges current retirement norms.

(We have extra copies—feel free to stop by and pick one up. We’d love to meet you!)

Creating memories or leaving an inheritance: when is the right time to give?

Today, we discuss how to:

  • Get all you can from your money, (i.e., highlight ideas from the book Die With Zero).
  • Spend confidently and without regret in retirement.
  • Decide the right time to give—now or later—using sophisticated money modeling.

Get All You Can From Your Money

Bill Perkins’ “Die With Zero” overall argument is:

When preparing for retirement, people often save too much and spend too little, ultimately missing out on meaningful life experiences.

Perkins argues money should be spent strategically for fulfillment, not just left behind.

Before going any further, let’s be clear…

We’re not encouraging you to be financially irresponsible. Absolutely not!

But, Perkins is definitely onto something—especially when you combine his ideas with strategic financial planning.

Here are some of his key points:

Maximize Life Experiences: Instead of focusing solely on accumulating wealth for retirement or your heirs, think about how you can use your money to create meaningful experiences while you’re able to enjoy them.

Time-Bucket Your Life: Your life has different stages, and each one comes with unique opportunities. Be intentional about how you allocate your money so you can make the most of every phase—especially while you’re healthy.

Invest in Experiences Early: The best time to create lasting memories isn’t “someday”—it’s now. Enjoying experiences earlier in life helps you feel more fulfilled.

Avoid Over Saving: Too many people work longer than they need to and save more than they’ll ever spend. The result? They leave behind wealth they never got to enjoy themselves.

Optimize Giving: If you plan to leave money to loved ones or charities, consider giving earlier rather than waiting until after you’re gone. Your generosity could have a much bigger impact now.

[Related Blog Post]: One of the best times to use Qualified Charitable Distributions (QCDs) is early in the year. Learn why in our post, 2025 Tax Planning Resources & Key Financial Data Spreadsheet.

Plan for a Declining Health Curve: Your ability to travel, explore and be active won’t last forever. That’s why it’s important to strike a balance between financial security and truly living while you can.

Perkins’ ideas sound reasonable. In reality, though, most require detailed financial planning.

This is where we come in…

Spend Confidently and Without Regret in Retirement

Many retirees worry about spending their money, i.e., What if the market takes a downturn? What if I outlive my savings?

While these concerns are natural, a well-structured financial plan helps you be intentional with your spending and feel secure knowing your money will outlive you.

Our role is to guide you through this process with a clear four-step approach:

Step #1—Determine Your Retirement Spending Capacity & Create a Tax-Efficient Withdrawal Plan

Everyone’s financial situation is unique, with different levels of savings, income sources and comfort with risk. We take a personalized approach to managing your investments—balancing growth with stability while ensuring you can spend confidently in retirement.

A key part of this strategy is minimizing taxes on your withdrawals so you keep more of what you’ve saved. We do this by carefully selecting which accounts to withdraw from first—whether taxable, tax-deferred or tax-free—based on your income needs and current tax rates.

This approach helps extend the life of your portfolio, allowing your investments to continue growing even as you draw from them.

Overall, it’s our job to tell you how much you can afford to spend in retirement. A primary tool we use to help you is advanced software (aka Income Lab) that includes sophisticated money modeling guardrails.

Resource: We discussed money modeling guardrails in a recent post: 3 Steps To Help Your Money Outlive—You.

Step #2—Create a Monthly Paycheck for You

One of the biggest adjustments in retirement is transitioning from a regular paycheck to drawing from multiple income sources.

Most of our clients rely on a mix of Social Security, pensions, part-time work and investment withdrawals for their retirement income.

Some also have additional income streams, e.g., rental properties, royalties, payments from seller financing, etc.

Understanding how these income sources interact is essential for confident retirement spending.

That’s why we focus on transforming your various income streams into a tax-efficient monthly paycheck.

Simple Example:

Imagine your annual withdrawal plan from investments is $84,000 (excluding Social Security, pensions and other income sources). Each month on the 15th, we’ll deposit $7,000 from your investment portfolio into your checking account, ensuring you receive a steady stream of income.

This way, you can enjoy a sense of stability, knowing a $7,000 “paycheck” will arrive in your account every month.

Step #3—Put Aside Two-to-Four Years of Safety Net

To help ensure you can weather market fluctuations without disrupting your lifestyle, we set aside two-to-four years’ worth of income needs in a conservative investment account (that still grows).

For example, if you plan to spend $84,000 per year, we earmark $252,000 to cover the first three years of retirement.

This portion of your portfolio is stable, meaning that even if the market declines, your ability to meet your spending needs remain intact. Meanwhile, the rest of your investments continue growing for the future.

Step #4—Perform Annual Audits & Make Smart Adjustments

Each year, we reassess your portfolio balance versus your spending and market conditions.

If the market performed well, we “refill” the amount spent from the safety net.

However, if the market had a down year, we hold off on refilling and use the second year’s reserve instead.

Since market recoveries typically take six to 18 months, this approach helps protect your long-term investments.

Audit: Keeping Spending on Track

As part of the audit, we discuss your spending target. Again, let’s say it’s $84,000. If you end up spending more, perhaps $98,000, it may not be an issue if the market was strong. However, if higher spending becomes a pattern, we’ll flag it and have a conversation about sustainability.

Retirement should be about enjoying life, not worrying about money.

By following a plan that balances stability with flexibility, you can confidently spend with the knowledge that your financial future is secure.

Decide the Right Time to Give—Now or Later

Imagine sharing your wealth with loved ones now—without stressing about your future finances.

How does Windsor Wealth Management help you decide whether to give money now (especially if your loved ones could really use it), or wait?

We typically present two scenarios:

Scenario One: You hold onto your money and pass it on after you’re gone.

Scenario Two: You gift, say, $5,000 to each grandchild now and see the impact on your financial plan.

Most of the time, the effect from early giving is minimal.

Using our real-time software modeling, we run the numbers so you can see the difference.

For example, perhaps instead of spending $12,000 per month, you adjust to $11,500.

This way, you can give—now—with confidence.

Final Thoughts

Bill Perkins offers some good insights, encouraging people to make the most of their wealth during their lifetime.

Keep in mind, his perspective comes from the lens of a successful (and wealthy) hedge fund manager and entrepreneur.

Ultimately, as with all things in life, balance is key—enjoying your wealth while ensuring financial security for the long run.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Catch-Up Contributions: How $1,000 May Elevate Retirement

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Retirement planning is all about maximizing your resources, and for those 50 and older, catch-up contributions offer a meaningful opportunity to do just that.

The following two charts illustrate how adding $1,000 annually to your retirement savings (the catch-up amount) can grow to an additional $21,551 by age 67, assuming a 7% annual return.

Chart A (no catch-up)

Chart B (includes $1,000 catch-up contribution)

Source: Windsor Wealth Management, Chart A: Initial Balance $2,000,000, Annual Limit $7,000 at 7% annual return. Chart B: Initial Balance $2,000,000, Annual Limit $7,000 + $1,000 Catch-Up at 7% annual return.

While $21,551 isn’t necessarily a life-altering sum, think about the possibilities that extra cushion could provide in retirement.

For example, maybe you:

  • Boost your living experience, (e.g., add a cozy sunroom for year-round enjoyment).
  • Establish a small scholarship in your family’s name.
  • Fund an annual vacation for the next decade, (e.g., rent a beachfront home to host family reunions).
  • Support family milestones like a grandchild’s education or wedding.

The key takeaway?

Every dollar saved today creates more possibilities for tomorrow.

If you’d like to explore how catch-up contributions fit into your financial strategy, reach out.

PS: In case you missed it, we wrote a detailed post describing 2025 Tax Planning Resources, including a Key Financial Data spreadsheet.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

2025 Tax Planning Resources & Key Financial Data Spreadsheet

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Happy New Year!

As we kick off a new year, it’s time to turn our attention to the upcoming tax season.

This post is intended as a year-long resource, so keep it handy.

2025-Tax-Planning-Resources

2025 Tax Planning Resources

Today, we discuss:

  • 2025 key financial data, including tax brackets, retirement plan distribution limits, Medicare premiums, standard deductions, child tax credit, and more. (Summarized in an organized spreadsheet.)
  • Changes in the IRS 2025 retirement contribution limits and a new “super” catch-up contribution for those aged 60-63.
  • Using QCDs earlier in the year.
  • The HSA’s triple tax benefits.
  • Why income taxes “may” increase in 2026.

2025 Key Financial Data (Useful Spreadsheet)

Keep this spreadsheet (links to our website) handy throughout the year. (Updated post President Trump signing the One Big Beautiful Bill Act (OBBBA) on July 4, 2025.)

Within it, you’ll find 2025 tax brackets, retirement plan distribution limits, Medicare premiums, standard deductions, child tax and education credits, tax rates for long-term capital gains and qualified dividends, tax on Social Security benefits, and much more.

If you’d like a quality hard copy, let us know. We’re happy to mail one to you or feel free to stop in.

IRS 2025 Contribution Limit Changes & New “Super” Catch-Up Contribution

We encourage maximizing your retirement savings contributions. If you’re unsure how, reach out. Let’s explore strategies to increase your savings.

401(k), 403(b), 457, TSP & SIMPLE IRAs Limits:

General Limit: $23,500 (401(k), etc.)

General Limit SIMPLE IRA: $17,600 (< 26 employees) or $16,500 (> 26 employees)

Age 50+ Catch-Up: $7,500 most plans; $3,500 (SIMPLE IRAs)

Ages 60-63 “Super” Catch-Up: $11,250 most plans; $5,250 (SIMPLE IRAs)

Traditional & Roth IRAs:

General Limit: $7,000

Age 50+ Catch-Up: $1,000

Key Change: The “super” catch-up contribution allows individuals aged 60-63 to increase their retirement savings by contributing more (generally $11,250) to their employer-sponsored retirement plans.

Use QCDs Earlier in the Year

With a Qualified Charitable Distribution (QCD), you can transfer up to $100,000 directly from your IRA to a charity tax-free. It’s often beneficial to take your QCDs before your Required Minimum Distributions (RMDs), since it can lower your taxable income.

Here’s how it works:

RMD: Let’s say your RMD is $20,000.

Donation: You donate $3,000 to charities directly from your IRA.

Deduction: This $3,000 is deducted from your $20,000 RMD.

Taxable Amount: You only pay taxes on the remaining $17,000.

There are other benefits to using QCDs earlier in the year, including avoiding potential delays that can sometimes occur during the busy year-end season.

Also, if you have a charity in mind, making your QCD early in the year provides the charity with the funds sooner, putting your donation to work faster.

Important Note: When using Fidelity for a QCD, you won’t receive a tax form. To claim the tax deduction, you’ll need to inform your tax advisor.

At Windsor Wealth Management, we regularly facilitate QCDs for our clients, and we’re happy to engage with your accountant.

HSA: Triple Tax Benefits

Health Savings Accounts (HSAs), offer several tax benefits to help you save money on health care costs.

Keep in mind, HSAs are only available to individuals enrolled in a high-deductible health plan, have no other health care coverage, and are not enrolled in Medicare or claimed as a dependent.

Here are the triple tax benefits:

#1—Tax-Deductible Contributions: The money you contribute to an HSA is tax-deductible, meaning it reduces your taxable income, which can lead to tax savings in the present.

#2—Tax-Free Growth: Any investment earnings your HSA accumulates grow tax-free, allowing your savings to potentially build up more quickly over time.

#3—Tax-Free Withdrawals: When you use your HSA funds to pay for qualified medical expenses, such as doctor’s visits, prescription drugs or hospital stays, the withdrawals are tax-free.

Also, HSAs have no “use it or lose it” rule. The funds can roll over indefinitely from year to year. (Whereas, unused funds in a Flexible Spending Account (FSA) are typically forfeited at the end of the plan year.)

For 2025, HSA contribution limits are:

Self-only: $4,300

Family: $8,550

Individuals aged 55 and older can make an additional $1,000 catch-up contribution.

Income Taxes May Increase in 2026

The Tax Cuts and Jobs Act (TCJA) is a tax law passed in 2017 that made significant changes to the US tax code.

Many of the individual tax cuts under the TCJA are set to expire at the end of 2025. If Congress doesn’t extend these provisions, income tax rates for many Americans could increase starting in 2026.

Under the TCJA, marginal tax rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%.

If the TCJA expires on 12/31/25, then marginal tax rates will revert to their permanent pre-TCJA levels of 10%, 15%, 25%, 28%, 33%, 35% and 39.6%, according to a Congressional Research Service report.

Want to see how the potential expiration of the TCJA might affect your taxes?

Our software can illustrate the potential tax implications of different income levels.

Contact us if you’d like to see how your tax burden could change under various circumstances.

Quick Look: 2024 Market Performance

In short, 2024 was a great year for the stock market, with the S&P 500 finishing up 25.02% for the year, and 3% in the last quarter.

Communication services and big tech led the way, consistently outperforming the rest of the market, largely due to the rise of artificial intelligence. Compared to 2023, there was broader market participation in 2024, with sectors beyond communication services and big tech contributing more evenly to the market’s growth.

Looking ahead to 2025, company valuations are high, so we may not see as strong a year.

Fidelity does a nice job recapping 2024 in their article, 2024 Stock Market Report. It’s an easy read too.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Bay Colony Advisors, DBA Windsor Wealth Management, is not a Certified Public Accountant and does not provide tax, legal, or accounting advice. Any tax-related information provided is for general informational purposes only and should not be construed as legal or tax advice. Each individual’s tax situation is unique, and you should consult with your own tax, financial, or legal advisors before making any decisions. We strongly recommend seeking the advice of a qualified CPA or other professional for personalized tax advice.

What’s the Santa Claus rally phenomenon? 5 Potential Factors

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Ho, Ho, Ho.

The year just isn’t complete without mentioning the Santa Claus rally.

Santa Claus Rally
Photo by Microsoft’s AI Image Creator

Santa Claus Rally

The Santa Claus rally is a stock market seasonal trend; specifically, stocks tend to rise during the last five trading days of December and the first two days of January.

The Santa Claus rally phenomenon is often attributed to several factors, including:

Increased Optimism: Investors are feeling festive.

Vacations: Many institutional investors are on vacation, (i.e., fewer large trades reduce market volatility).

Less Tax Activity: Tax-loss harvesting typically slows down in late December, compared to early December.

Window Dressing: Financial firms may make strategic buys in December to improve the appearance of their portfolios.

Year-End Bonuses: Many individual investors use their year-end bonuses to buy stocks, which can boost market activity and prices.

Will it be a jolly good December for stocks?

Only time will tell!

While we’re waiting, here’s a quick look at the last 26 years:

Santa Claus Rally
Source: Investor’s Business Daily

Related: For more stock market seasonal trends, check out our blog post, Stock Market Seasonality and the September Effect.

Happy Holidays

As the year winds down, I hope you find time to relax and recharge. Reach out anytime.

With gratitude,

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Economic Update, Investment Moves & Year-End Strategies

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As we approach the Thanksgiving holiday, I want to take a moment to express my sincere gratitude for your continued trust and business.

It’s an honor to work with you and help you achieve your financial goals.

I hope this Thanksgiving season brings you joy, good health and quality time with loved ones.

Economic Factors and Investment Moves
Photo by Debby Hudson, Unsplash

Today, we discuss:

  • Key economic factors, including consumer spending, the October jobs report, inflation and interest rates.
  • Your portfolio and our money moves.
  • Year-end financial actions to take.

Consumer Spending

While consumer spending remains strong, it’s showing signs of slowing.

Overall, consumers are focused on value. They’re trading down (and have been for months), favoring value retailers like Walmart and Marshalls. Many consumers trading down are also buying smaller package sizes and reducing purchase frequency.

Heading into the holiday season, those with higher incomes are sailing right along, however, others with lower incomes are struggling to manage increased costs.

Although wages have risen, inflation has eroded much of the gains, leaving little room for increased purchasing power.

New Jobs Declined Sharply (However)

The Bureau of Labor Statistics reported 12,000 new jobs were added in October, a steep decline from September (223,000 new jobs).

However…

Acting Secretary of Labor Julie Su attributed the decline to “significant impacts from hurricanes and strike activity,” adding that the strike activity (Boeing) reduced employment growth by 41,000 jobs.

The strike disrupted Boeing’s production, which affected its supply chain and other industries. This led to a temporary decline in manufacturing jobs.

Also, many companies didn’t report their job numbers on time, adding to the decline.

Conversely, the unemployment rate held steady at 4.1% in October, unchanged from September. In general, whoever wants a job can find one.

Interest Rates & Inflation

The Fed lowered interest rates again in early November by 0.25%, marking the second rate cut this year. The initial cut of half a percentage point occurred in September.

Inflation is at 2.44%. Last month it was 3.36%. It peaked at 9.1% in June 2022. (The Fed aims for a 2% inflation rate.)

Overall, inflation has cooled. However, prices remain elevated since surging 20-30% over the past several years. The rate of increases has slowed, yet it’s unlikely we’ll return to pre-inflation pricing levels.

Related: Check out our post, Rising Prices: try these saving tips to free up cash.

Client Portfolios & Money Moves

Moderately allocated portfolios are up just over 20% for the past 12 months.

We’ve been taking profits on some investments appreciated by 35% or more, especially those held in tax-advantaged accounts like IRAs. This strategy also helps rebalance your portfolio.

Preparing for December

Many mutual funds distribute capital gains in December, creating a taxable event. Therefore, we may sell some of the mutual fund(s) to avoid capital gains taxes.

To minimize capital gains taxes, we prefer Exchange Traded Funds (ETFs).

ETFs are generally more tax-efficient than mutual funds.

Why? Because ETFs are created and redeemed in large blocks, minimizing the need for frequent trading and triggering capital gains distributions. In contrast, mutual funds often buy and sell securities to accommodate investor transactions, which can lead to higher tax bills.

We’re always striving for tax efficiency!

Related: We just published, A Disciplined, Research-Driven Approach to Investment Success. Key points include tax-smart investing and our daily monitoring and rebalancing of accounts. (We review 20-to-30 client accounts daily.)

Magnificent 7 (Mag 7) Causing Overweighting in Portfolios

We’re actively focused on ensuring portfolios are balanced and, therefore, keep a close eye on any overweighting within portfolios.

Many investment funds are concentrated in large cap stocks, like the Mag 7 (Apple, Microsoft, Amazon, Nvidia, Tesla, Alphabet (Google) and Meta (Facebook/Instagram/Threads).

These companies are massive!

Here are two examples:

#1—Amazon and Microsoft are worth as much as the entire German economy (the largest economy in Europe).

#2—The Mag 7 are almost worth as much as the entire European Union’s GDP.

Overweighting Example & Financial Risks:

The Mag 7 stocks currently account for about 30% of the S&P 500’s total weighting.

This can lead to concentration and high-valuation risks.

Specifically, a fund’s performance is heavily tied to a few stocks, increasing its sensitivity to their fluctuations. Also, the Mag 7 stocks have increased in value substantially, prompting the question:

Do we really want to pay this extreme value?

To help safeguard against these risks, we’re analyzing “equal-weighted funds,” (e.g., if an investment has 100 holdings, each holding is only 1% of the fund).

These funds have the potential for more diversification and outperformance. Historically, equal-weighted funds have sometimes outperformed market-cap-weighted funds, (e.g., Vanguard 500 Index Fund, VFIAX) especially during periods when smaller companies outperform larger ones.

Back to overweighting…

A major Wall Street concern about the Mag 7 and other large corporations is their massive AI investments. Specifically, will this spending erode earnings?

Only time will tell.

Reminder: Year-End Financial Actions

Finally, just a reminder to revisit the following financial items by December 31:

  • Retirement Plan Contributions
  • Charitable Contributions, Including Qualified Charitable Distributions (QCDs)
  • Required Minimum Distributions (RMDs)
  • Health Savings Account (HSA) (Ideal for tax-free growth.)
  • Converting Employee-Sponsored 401(k)s to a Roth 401(k)
  • Partial or Full Roth Conversion (Helps minimize lifetime taxes.)
  • Defer Compensation for High Earners (If you’re preparing to retire, deferring income to the years immediately following retirement may help spread out your income and reduce taxes.)

See our Key Financial Data 2024 spreadsheet for retirement plan contribution limits, catch-ups, etc. For more information describing the above action items, read our post Essential Year-End Financial Action Items.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

4 Financial Action Items for Early Fall

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As the leaves change and the days grow shorter, it’s the perfect time to take a fresh look at your financial goals and refresh financial plans before the year closes.

Financial Action Items for Early Fall
Photo Credit: Anna Zakharova, Unsplash

Today, let’s consider the following 4 financial actions:

#1—Revisit Your Retirement Plan Contributions (see example)

#2—Identify Recent Life Changes and Tax Implications

#3—Prepare for Year-End Charitable Donations

#4—Utilize Household Improvement and Energy Tax Credits

Deep Dive: For a detailed look at U.S. and global economic trends, read Capital Group’s Economic Indicators.

#1—Revisit Retirement Plan Contributions

Maximizing contributions to your company’s retirement plan can have a significant impact on your future quality of life.

Plus, if your employer offers matching contributions, that’s essentially free money!

And let’s not forget the power of compound interest—it can play a major role in shaping your retirement lifestyle.

Simple Example:

Imagine you’re planning to retire in five years.

After reading this, you decide to increase your retirement plan contributions by $300 per month.

Over five years, with an annual return of 7% compounded annually, that extra $300 a month could grow to almost $21,000 (i.e., a new roof, two luxury two-week European vacations, or 210 dining-out meals for a couple, according to Gemini AI).

And, the above numbers don’t include your employer’s contributions.

Here’s the compound interest calculator we used.

Another Consideration: Many employers offer Roth 401(k)s and IRAs, in addition to traditional retirement plans. If you’re currently contributing to a traditional plan and have access to a Roth option, let’s discuss whether switching might be beneficial for you.

Finally, don’t forget to max out your health savings account (HSA) if you have a high-deductible health plan. HSAs are tax-deductible, ultimately reducing your taxable income and possibly placing you in a lower tax bracket. Remember, qualified withdrawals are tax-free.

#2—Identify Life Changes and Tax Implications

If you’ve recently experienced the following, please contact us as soon as possible.

Employment Changes—New job or raise? Let’s revisit your retirement income plan to address potential changes in benefits, income or life insurance.

Family Dynamics—Divorce, marriage, adoption, parent needing caregiving or a child with special needs? With changes, you’ll likely need to re-optimize your financial and estate strategies.

Health Concerns—Serious illness or nearing 65? Let’s discuss Medicare and your spending options.

Large Expenses or Inheritance—Planning a big purchase, sale or received an inheritance? Let’s prepare for the tax implications.

Many of the above events can trigger a need to revisit your tax withholdings to help ensure you’re on target for 2024.

Here’s a detailed chart (on our website) reflecting the 2024 tax rate schedule, standard deductions, retirement plan contribution limits and more.

Key Resource: Download our Prolonging Retirement Income Checklist. It’s packed with important questions to ponder.

#3—Prepare for Year-End Charitable Donations

It’s best to start planning your year-end charitable donations early, particularly if you’re planning to donate stocks or other appreciated assets.

Considerations Include:

Matching Gifts: Maximize your charitable giving with matching gifts from your employer. Consider suggesting a cause you’re passionate about. Reach out to your HR department to inquire about this option.

Volunteer Your Time: In addition to financial donations, volunteering can make a significant impact. Many employers offer paid time off for volunteer activities. Have you used your hours?

[Related Article]: Help others, help yourself? Why volunteering can be good for you.

Donate Appreciated Assets: Giving appreciated assets like stocks or bonds to a charity can provide a significant tax benefit. You can deduct the fair market value of the asset, avoiding capital gains tax.

Donor-Advised Funds: These funds allow you to make a tax-deductible donation now and distribute the funds to charities over time.

Qualified Charitable Distributions (QCDs): If you’re over 70½, you can make a direct contribution from your IRA to a qualified charity, reducing your required minimum distribution (RMD).

#4—Utilize Household Improvement & Energy Tax Credits

There’s an abundance of improvements you can make to your primary residence and receive potential tax credits, including energy-efficient doors, windows, insulation, roofs, furnaces, water heaters and more.

Here’s a detailed list by the IRS describing what qualifies: Energy Efficient Home Improvement Credit.

Also, Massachusetts offers several energy rebates and incentives as well as New Hampshire; and be sure to check with your respective energy providers for their unique incentive programs.

Tip: Before you pay to recycle an old dehumidifier, refrigerator or similar, check to see if your energy provider offers free pick-up and a rebate. Many do.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Q2 Stock Market Results, Job Creation Cooling, Rate Cut Likely

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It’s hard to believe it’s already August.

Where does the time go?!

We hope you’re enjoying a healthy and relaxing summer.

Acadia National Park
Acadia National Park
Photo by Peregrine Photography

Today, we’re discussing:

– Last quarter’s stock market results.

– Factors driving market movements.

– Noticeable slowdown in new jobs.

– Reasons for the early August market correction.

– Potential September interest rate cut.

– Changes we’re making to your portfolio.

Q2 Stock Market Results

The market performed well last quarter.

From January through June, it saw an overall increase of about 15%, with Q2 contributing 4.25% of this growth.

The Magnificent 7 (Apple, Microsoft, Amazon, Nvidia (computer component manufacturer), Tesla, Alphabet (Google) and Meta (Facebook/Instagram/Threads) continue to drive the market’s growth.

However, in the past several days the tech giants are down roughly 20% compared to the overall market.

Why?

Because they’re overvalued.

The other 493 stocks in the S&P 500 are generally performing well. While they haven’t seen the 100%+ gains like the Magnificent 7, their steady performance is a positive sign, reinforcing the benefits of diversification.

Recent Development

A new trend we’re seeing is the sell-off of tech stocks.

Investors are rebalancing by taking profits from these stocks and shifting their investments to more stable, dividend-producing stocks.

Berkshire Hathaway Sold 50% of Its Apple Shares

Speaking of selling tech stocks, Warren Buffett, chairman and CEO of Berkshire Hathaway, supported the sale of roughly 50% of the firm’s Apple stake since the start of the year. Keep in mind, the firm still owns about 400 million shares of Apple stock!

What’s driving the tech selling?

A few things are likely: economic caution, profit taking and maneuvers spurred by the recent jobs report.

July 2024 Jobs Report

According to the Bureau of Labor Statistics (BLS), the U.S. economy added 114,000 jobs in July, a noticeable slowdown from June’s 206,000 jobs.

The unemployment rate also rose to 4.3% in July from 4.1% in June.

Unemployment Rates at a Glance (Last 20 Years)

Job Creation Is Cooling Unemployment Trends
Explore more unemployment factors here, including unemployment by age and education.

Another Interesting Fact From the BLS Jobs Report:

The number of people employed part time for economic reasons rose by 346,000 to 4.6 million in July.

These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

Suffice it to say, the labor market is cooling some. Also, much of the recent job creation is government and health care jobs.

Early August Stock Market Activity

August started with a market correction.

Interestingly, 94% of years have a decline of 5% or worse (see chart). Said differently, the U.S. stock market experiences a correction almost every year.

By definition, a market drop of 10% is considered a correction, while a drop of 20% signals a bear market, the latter occurring about every four years.

Even with the correction, we’re still up about 13% on the year.

Remember, the stock market dislikes uncertainty—the jobs report, upcoming elections, recession rumors and geopolitical turmoil (Iran-Israel tensions) often cause market movements in every direction.

Will the Fed Cut Interest Rates This September?

It’s likely they will, as well as in November and December. Given the recent jobs report and signs of economic slowing, there’s increasing pressure on the Fed to cut rates.

Keep in mind, the Fed’s focus is managing inflation and maintaining full employment. In general, they’re not supposed to care about the stock market.

Your Portfolio

We’re focused on balancing portfolios.

Recently, portfolios have become overweighted in tech stocks due to the sector’s rapid growth over the past few months.

It’s time to take some profits.

After extensive financial modeling, we’re also pulling out of the Vanguard Health Index (VHT). While it’s been one of our favorite investments, it’s now causing health care to be overweighted in portfolios as other funds have added more health care stocks to their mix.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

3 Steps To Help Your Money Outlive—You

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Today, we help you understand how to make your money outlive you.

The topic of “outliving your money” arises often.

To help ensure your money outlives you, understand these three concepts:

#1—Understand the 4% Withdrawal Rule

#2—Include Retirement “Smile” Spending Changes

#3—Apply Sophisticated Financial Modeling Guardrails

Let’s look at each step in detail and dispel a popular retirement money myth.

Step #1—Understand the 4% Withdrawal Rule

The 4% retirement income withdrawal rule has been used for decades by many investors and financial advisors.

It’s a general rule-of-thumb to help ensure you don’t overspend and, therefore, run out of money during retirement.

Specifically, 4% is considered a sustainable annual withdrawal rate that maintains your savings throughout retirement.

It’s a helpful benchmark.

However, it often doesn’t include all income forms (e.g., apartment rental, Social Security, pension, etc.), or life events (e.g., divorce and helping adult children financially).

4% Rule in Action: Married Couple Example

The below chart depicts a married couple beginning retirement with $2 million in savings, and after applying the 4% rule, having roughly $2.6 million in savings 30 years later.1

That’s right, they end up with more money than they started with.

This example accounts annually for: 2.5% inflation, 6% portfolio growth and 4% income withdrawal, with the couple starting retirement on January 1 and withdrawing $80,000 for the year.

4% withdrawal rule chart
1This is a hypothetical example, simplified for illustration purposes. The ending values do not reflect taxes, investment costs or expenses.

Generally speaking, when you use the annual 4% sustainable withdrawal rate, you likely won’t run out of money in retirement.

Deep Dive: See Fidelity’s comprehensive explanation of the 4% withdrawal rule.

Step #2—Include the Retirement “Smile” Spending Changes

In reality, most retirees spend similar to the retirement smile.

Specifically, spending is higher in initial retirement years, dips during middle years and then increases again in later years.

Simple Example:

Many retirees spend extra on travel during early retirement. Then as you age travel drops off, while health care spending grows.

Up, down, up = smile.

Retirement Smile Spending Chart
Retirement Smile
Image created using Microsoft’s AI image creator.

Continuing the 4% rule example above, the couple would withdraw at least $80,000 from savings each year to cover their expenses.

However, this number isn’t always reflective of reality.

Some years the couple’s withdrawal rate may need to be higher, perhaps $120,000.

Why?

Because hot water heaters break, pool liners tear, vehicles become unreliable and adult children sometimes ask for loans.

We can budget (links to/downloads our budgeting worksheet) till we’re blue in the face and we should! But, life happens.

Therefore, to help make your retirement savings last, consider how spending changes throughout retirement.

Step #3—Apply Sophisticated Financial Modeling Guardrails

There’s a popular myth about retirement.

Specifically, many retirees believe stock market performance could cause them to run out of money.

This isn’t likely true.

Instead, your greatest financial risk is generally longevity risk.

Stock market risk can be greatly reduced by how your portfolio is constructed.

For Example:

The market generally falls about 14% in a given year and bounces back, and one out of five years it typically drops up to 30% for a period.

We help protect you from these fluctuations during retirement by putting about two-to-three years of money aside (cash-like investments still earning interest), so you’re not selling during a down market to fund living expenses.

Managing longevity risk, however, requires sophisticated financial modeling to help reduce the possibility of running out of money in retirement.

Our team uses several financial modeling programs to help you understand what you can spend each year during retirement without running out of money.

One key feature is the ability to apply “guardrails” that show how your money performs during both up and down years.

Ultimately, we stress test your money by applying different scenarios, e.g., retiring during the 2007 financial crisis.

The goal is to keep your spending within the guardrails. Ultimately, your annual “paycheck” may fluctuate some year to year.

Here’s one program in action, using the couple’s $2 million:

The following graph depicts upper (green) and lower (red) guardrails with the couple’s portfolio balance in blue.

Each vertical line shows an intersection whereby the couple can withdraw more than their annual $80,000.

How are the guardrails set?

Our goal is to keep you from hitting the red guardrail.

Therefore, when establishing your unique guardrails we consider your age, goals, health, risk tolerance and how much money you have, while also putting aside a couple years of spending so we don’t have to invade the portfolio during market down years.

In general, we construct your portfolio to stay in between the market’s highs and lows.

We also use historical data to drive the highs and lows. (It goes without saying we don’t know what the future holds.)

Your Money Outliving You Using Financial Modeling Guardrails
Modeling Program: Income Lab

As you can see, there’s a lot going on here, including establishing guardrails and spending limits based on unknown longevity.

Reach out anytime to discuss. We’re happy to show you various retirement withdrawal scenarios using your unique guardrails.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.