A Guide to Maximizing Your Tax Savings

Retirement is a momentous life transition where you shift from the workforce to your golden years, with the journey looking slightly different for each person. Some common experiences include grappling with a changing sense of identity and purpose once your career ends. Some recent retirees or those nearing retirement often find themselves questioning the meaning and purpose (*1) of their lives post-career. However, the retirement experience goes beyond the quest for purpose. It’s a complex transition that can vary depending on the timing of your retirement, which can unfold gradually, similar to the chapters in a book. Each chapter brings its own challenges, moments of joy, and pivotal decisions. The entire retirement journey can be classified into five distinct stages, each bringing unique emotions and expectations. Read on for insights into each phase and how you can best prepare. Chapter 1: Your 50s At this stage of life, retirement becomes less like a far-off dream and more like a forthcoming reality. You begin to seriously think about when you can retire and how to take the right steps to retire comfortably. During your 50s, you will likely launch your kids into adulthood and experience your highest earning years, which gives you more to work with. But that extra money you aren’t used to having can result in “lifestyle creep,” where your expenses grow along with your pay raises (*2). These increased expenses may not always be nonessential either, as you might become responsible for increased housing costs, education expenses, healthcare costs, and even eldercare costs. Despite these financial strains, the inflow of new money into retirement accounts must not cease; your retirement plan assets should not be drawn down through loans or withdrawn too early. Rather, these should be the years where you maximize your retirement plan contributions. If you are over 50, you can make catch-up contributions to beef up your nest egg. Chapter 2: Your Early 60s You are so close, you can almost taste it. Now you are starting to think about the many details that make up the process of retiring and the financial and lifestyle decisions involved. If you find yourself in this phase, it’s time to get realistic about the near future. Do you know what you will do next? How will you make it a reality? For example, will you be able to keep up with your current expenses while on a fixed income? Be sure to test out different budgets to make sure your finances are set. Do you want to volunteer or start an encore career? Start mapping out the details now. If you do not have a set plan for the next chapter of life, a phased retirement may give you more of an opportunity to figure it out. Usually, this is the time to dial down risk in your portfolio. Market downturns have a greater impact on your long-term success as you don’t have the same time to recover. This is what is called sequence of negative return risk. You should speak with an advisor to make sure you have the correct mix of investments (*3) that will provide cash flow in the short term and growth in the long term. You also can’t afford to be too conservative as lower growth will be eroded by the rising cost of living. Chapter 3: Retired Life Begins The first year or so of retirement is akin to a “honeymoon phase.” You have the time and perhaps the money to pursue all kinds of dreams, so the key is not to spend wildly. Lifestyle creep also affects new retirees, and free time often means more chances to spend money. When it comes to your investments, your portfolio looks very different than it did when you were in your 20s and 30s. Bond funds and fixed income may make up a larger portion of your investments. Your focus is on generating cash flow to live on and preserving what you’ve worked so hard to save. However, you should still have exposure to the stock market. If you retire at age 65, there is a good chance you have a 30-plus-year retirement ahead of you. As such, you should keep exposure to stock funds for their growth potential. Up until now, you’ve probably received healthcare coverage from your employer. When you retire, it’s a new ball game. Medicare eligibility begins at age 65. You have plenty of choices for your Medicare plan, such as original Medicare coverage, prescription drug plans, and supplemental insurance. Your premium costs will depend on your coverage choice and your income. Medicare can be complicated and overwhelming, so if you are in this chapter, start researching now (*4) to make informed choices. Chapter 4: Mid 60s Through Late 70s This is the chapter where restlessness can begin to set in. If you didn’t make concrete lifestyle plans before retiring, you might get bored with your all-leisure, all-the-time lifestyle and decide to volunteer or work on your own terms, health permitting. It’s also the time when people begin to worry about how their retirement savings is growing smaller. You may want to adjust your retirement income strategy (*5) or see if new streams of income can be arranged. Chapter 5: 80s and Beyond The last chapter of retirement is one frequently characterized by the sharing of legacies and life lessons, a new perspective on the process of living and aging, and deeper engagement (or reengagement) with children and grandchildren. This is also the time when you should think about your financial legacy and review or update your estate plan so that when you leave this world, things are in good order and your wishes are followed. A Partner to Help With Every Phase In every stage of life, having a seasoned financial professional by your side is a valuable asset. Whether you’re navigating the challenges of early career financial planning, seeking a comfortable retirement, or considering wealth transfer strategies, partnering with an experienced advisor can make a big difference in how quickly you reach your financial goals. At Cypress Wealth Services, our commitment is to deliver professional support, comprehensive education, and knowledgeable guidance tailored to each client's unique needs. If you’re ready to explore your financial options and create a plan that spans every life phase, we invite you to schedule a no-obligation introductory meeting by reaching out to us at 866.888.6563 or contact one of our offices today. About Cypress Wealth Services Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high-net-worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services serves a broad range of client needs using their knowledge and experience to act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring the wealth and legacy a person has already built to their loved ones. With financial advisors in California, Alaska, Arizona, and Georgia, the firm serves clients across the country with Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250. (*1)- https://www.cypressws.com/news/the-journey-to-purpose-health-and-identity-in-retirement (*2)- https://www.investopedia.com/terms/l/lifestyle-creep.asp (*3)- https://www.cypressws.com/news/are-you-in-the-retirement-red-zone-too-much-risk-can-ruin-your-retirement (*4)- https://www.medicare.gov/ (*5)- https://www.cypressws.com/services

One of the most critical conversations we have with clients revolves around growing their nest egg over time to create long-term financial security. While this may be a goal for many people, it is important to understand that each stage of life brings its own unique challenges and opportunities. Consequently, customizing strategies to align with specific circumstances, risk thresholds, and objectives is imperative. Let's explore these concepts in depth and how they may relate to your situation. Understanding Risk Tolerance Risk tolerance refers to an individual's willingness and ability to endure fluctuations in the value of their investments. It's crucial to assess risk tolerance accurately because it influences the appropriate asset allocation and investment approach. Young professionals just starting their careers may have a higher risk tolerance as they have time to recover from market downturns. Conversely, individuals approaching retirement may have a lower risk tolerance as they aim to preserve their accumulated wealth. Asset Allocation Asset allocation is the process of dividing investments among different asset classes such as stocks, bonds, and cash equivalents. The goal is to create a diversified portfolio that can potentially reduce risk while maximizing returns. Here's how asset allocation strategies can vary across different life stages: Young Professionals (20s to early 30s): At this stage, individuals typically have a longer time horizon and can afford to take on more risk. A common strategy is to allocate a significant portion of the portfolio to equities, which historically have higher returns over the long term. While the portfolio may experience more volatility, young professionals can capitalize on the power of compounding and ride out market fluctuations. Mid-career (mid-30s to early 50s): As individuals progress in their careers and start to accumulate wealth, their focus often shifts towards preserving capital while still aiming for growth. A balanced approach to asset allocation may be suitable, with a mix of stocks and bonds to mitigate risk. Diversification remains key, spreading investments across various sectors and geographic regions to reduce exposure to any single market downturn. Pre-Retirement (late 50s to early 60s): Approaching retirement, the primary objective for many is capital preservation and generating a reliable income stream. Asset allocation tends to become more conservative, with a greater emphasis on fixed-income investments like bonds and cash equivalents. While the potential for high returns may decrease, the priority shifts towards minimizing downside risk and ensuring a steady flow of income during retirement. Building Wealth Over Time Building wealth requires discipline, patience, and a long-term perspective. Here are some key principles to consider: Start Early and Consistently: The power of compounding works best over time. By starting early and consistently contributing to your investment portfolio, even small amounts can grow significantly over the long term. Stay Disciplined During Market Volatility: Market downturns are inevitable, but they also present opportunities for long-term investors. Avoid making impulsive decisions based on short-term fluctuations, and stay focused on your investment strategy. Review and Adjust as Needed: Life circumstances change, as do market conditions. Regularly review your investment portfolio and make adjustments as needed to stay aligned with your goals, risk tolerance, and time horizon. Seek Professional Guidance: Consider working with a financial advisor, as they can provide valuable insights and expertise to help navigate complex financial markets and make informed decisions. We can help Our mission at Cypress Wealth Services is to help bring confidence and clarity to your financial life. We take a proactive and thoughtful approach to helping you grow your nest egg through a well-thought-out financial life plan. If you want to learn more about how we can help you, please contact us to schedule an introduction meeting. About Cypress Wealth Services Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high-net-worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services serves a broad range of client needs using their knowledge and experience to act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring the wealth and legacy a person has already built to their loved ones. With financial advisors in California, Alaska, and Arizona, the firm serves clients across the country with Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.

In financial planning, diversification is often discussed. Diversifying investments across various asset classes is a common strategy to mitigate risk and optimize returns. However, there's another critical aspect of diversification that is often overlooked but can profoundly impact your financial future—tax diversification. Tax diversification involves spreading your investments across different types of accounts that are taxed differently. This strategic approach can provide flexibility and resilience in the face of changing tax laws and individual circumstances. Here's why you should consider tax diversification as a key component of your financial plan: 1. Managing Tax Efficiency Different types of investment accounts are subject to different tax treatments. Traditional retirement accounts like 401(k)s and IRAs offer tax-deferred growth, meaning you don't pay taxes on contributions or investment gains until you withdraw the money in retirement. On the other hand, Roth accounts are funded with after-tax dollars, but withdrawals in retirement are tax-free. By diversifying across these account types, you gain the ability to control the timing and impact of taxes on your investments. For example, in retirement, you can strategically withdraw funds from taxable, tax-deferred, and tax-free accounts to minimize your overall tax liability each year. 2. Adapting to Tax Law Changes Tax laws are not static – they can change over time due to economic conditions, legislative decisions, or shifts in political priorities. By diversifying your tax exposure, you can hedge against the risk of adverse tax law changes that may disproportionately affect a particular type of investment or account. For instance, if tax rates increase in the future, having a mix of taxable and tax-deferred accounts can provide options to optimize your tax burden. Similarly, if tax-free withdrawals become more favorable, having Roth accounts in your portfolio can offer significant advantages. 3. Enhancing Retirement Flexibility During retirement, having multiple sources of income with different tax treatments can offer flexibility in managing your cash flow and tax obligations. By strategically tapping into various account types, you can control your taxable income to potentially stay within lower tax brackets, qualify for tax credits or deductions, and minimize the impact of taxation on your Social Security benefits. Furthermore, tax-diversified retirement income can provide a buffer against unexpected expenses or changes in financial needs. If one source of income becomes insufficient or tax burdensome, you can adjust your withdrawals from different accounts to meet your evolving requirements. 4. Optimal Legacy Planning Tax diversification extends beyond your lifetime and can significantly impact the financial well-being of future generations. By carefully planning the distribution of assets across taxable, tax-deferred, and tax-free accounts, you can maximize the inheritance your heirs receive while minimizing the tax consequences. For example, leaving tax-free Roth accounts to beneficiaries can provide them with a tax-efficient source of income. Alternatively, using tax-deferred accounts for charitable giving can optimize the tax benefits for both your estate and the charitable organizations you support. We are here to help Incorporating tax diversification into your financial plan is a prudent strategy to enhance your financial stability and maximize your wealth over the long term. By spreading your investments across different tax treatments, you can manage tax efficiency, adapt to changing tax laws, maintain flexibility in retirement, and optimize your legacy planning. Our mission at Cypress Wealth Services is to help bring confidence and clarity to your financial life. We understand the nuances of tax diversification and how to tailor a strategy that aligns with your goals, risk tolerance, and unique financial situation. Remember, proactive tax planning today can lead to significant savings and peace of mind tomorrow. If you would like to learn more about how we can help, we encourage you to contact us here, and we will schedule an introductory call. About Cypress Wealth Services Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high-net-worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services serves a broad range of client needs using their knowledge and experience to act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring the wealth and legacy a person has already built to their loved ones. With financial advisors in California, Alaska, and Arizona, the firm serves clients across the country with Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.

401(k) Insights serves as our monthly newsletter created specifically to assist business owners and plan administrators in navigating their retirement plan requirements. If you have any questions, please contact us anytime. Small business 401(k) plans, while beneficial for employees and employers alike, face efficiency issues due to various reasons. In this edition, we will address how modern plan design features like 360º payroll integration can help drive efficiency with your company’s 401(K). Here are some important points to consider. - Full payroll integration with the 401k: (360º) allows for seamless communication between the company's payroll system and the 401(k). With this, administrative tasks related to the 401(k) such as updating employee contribution elections are fully automated and require no manual intervention. - Data Accuracy: By eliminating manual data entry and reconciliations, payroll integration minimizes the risk of errors and ensures data accuracy across both payroll and retirement plan systems. - Cost Savings: Automating the payroll and retirement plan processes through integration can lead to cost savings by reducing the time and resources required for administration and minimizing the risk of errors that could result in fines or penalties. Are you confident your plan is compliant and maximizing your benefit? We can help. If you’d like a complimentary review of your retirement plan, please click this link and provide some basic information.

As the flowers bloom and the days grow longer, spring presents the perfect opportunity to rejuvenate not just your home, but also your financial well-being. Just like tidying up your living space can bring clarity and organization, giving your finances a thorough spring cleaning can set you up for financial success in the months ahead. Here are some tips to help you freshen up your finances this spring: Review Your Budget: Start by dusting off your budget and giving it a thorough review. Look for areas where you can cut back on expenses or reallocate funds to better align with your financial goals. Consider any changes in your income or expenses since you last updated your budget and make adjustments accordingly. Declutter Your Accounts: Look at all your bank accounts, credit cards, and investment accounts. Close any unused accounts and consolidate accounts where possible. Streamlining your accounts can make it easier to keep track of your finances and may even help you save on fees. Organize Your Financial Documents: Gather all your important financial documents, such as tax returns, bank statements, and insurance policies, and organize them in a secure and easily accessible location. Shred any documents you no longer need to reduce clutter and protect your sensitive information. We have Life in Book workbook that can make getting organized easier. Please contact us for copy. Check Your Credit Report: Request a free copy of your credit report from each of the three major credit bureaus – Equifax, Experian, and TransUnion – and review them for any errors or suspicious activity. Dispute any inaccuracies you find to ensure that your credit report is up-to-date and accurate. Evaluate Your Investments: Review your investment portfolio to ensure it’s still aligned with your risk tolerance and financial goals. Consider rebalancing your portfolio if necessary to maintain the desired asset allocation. Take this opportunity to explore new investment opportunities or strategies that may better suit your needs. Assess Your Insurance Coverage: Review your insurance policies, including health, life, auto, and homeowners or renters’ insurance, to ensure you have adequate coverage. Consider any major life changes, such as marriage, the birth of a child, or a new job, that may necessitate adjustments to your insurance policies. Revisit Financial Goals: Take some time to reflect on your short-term and long-term financial goals. Whether it’s saving for a vacation, buying a home, or planning for retirement, establishing clear and achievable goals can help guide your financial decisions and keep you motivated. Automate Your Finances: Simplify your financial life by setting up automatic payments for bills, savings contributions, and investments. Automating your finances can help you avoid late fees, stay on track with your savings goals, and take advantage of dollar-cost averaging when investing. Review Your Subscriptions and Memberships: Take stock of all your subscriptions and memberships, such as streaming services, gym memberships, and magazine subscriptions. Cancel any subscriptions you no longer use or can live without to free up extra cash in your budget. Plan for Emergencies: Finally, make sure you have an emergency fund in place to cover unexpected expenses, such as medical bills or car repairs. Aim to have enough savings to cover three to six months’ worth of living expenses in a high-yield savings account or other easily accessible account. By following these spring cleaning tips for your financial life, you can tidy up your finances and set yourself up for a brighter financial future. Remember, just like maintaining a clean and organized home, staying on top of your finances requires regular attention and upkeep. So, roll up your sleeves and get ready to give your finances the fresh start they deserve this spring! About Cypress Wealth Services Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high-net-worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services serves a broad range of client needs using their knowledge and experience to act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring the wealth and legacy a person has already built to their loved ones. With financial advisors in California, Alaska, and Arizona, the firm serves clients across the country with Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.

401(k) Insights is our monthly newsletter, created specifically to assist business owners and plan administrators navigate their retirement plan requirements. If you have any questions, please contact us anytime. How do you think about and evaluate the investment menu in your small business 401(k) plan? In this edition, we will touch on a few important considerations related to the investments offered in your company’s 401(K) plan. Here are some important points to consider. Fiduciary Responsibility: As the plan sponsor, you have a fiduciary responsibility to act in the best interests of your employees. This includes selecting and monitoring the investment options offered in the plan. This fiduciary responsibility is often shared with the plan’s financial advisor. Diversification: Ensure that the investment menu includes a diverse range of options across different asset classes, such as cash, stocks, bonds, and possibly alternative investments like real estate or commodities. This allows employees to build portfolios that align with their risk tolerance and investment goals. Regular Review and Monitoring: Consistently monitor the investment menu to ensure that it remains appropriate and meets the needs of your employees. You will want to consider adjustments as necessary based on changes in the investment’s performance, management and expenses relative to its peer group, i.e. large-cap growth. By carefully considering these factors and taking a proactive approach to managing the investment menu, you can help ensure that your small business 401(k) plan provides employees with quality investment options to help them achieve their retirement goals. Are you confident your plan is compliant and maximizing your benefit? We can help. If you’d like a complimentary review of your retirement plan, please click this link and provide some basic information.

401(k) Insights is our monthly newsletter, which was created specifically to assist business owners and plan administrators in navigating their retirement plan requirements. If you have any questions, please contact us anytime. How do you attract and retain talent in a competitive job market? In this edition, we will touch on a few important considerations related to the potential impact of offering a match in your company’s 401(K) plan. Here are some important points to consider. In a competitive job market, a 401 (k) match can be a significant differentiator. Prospective employees often compare benefits when choosing between job offers, and a generous retirement plan can attract high-quality candidates looking for stability and long-term benefits. - Financial stress can negatively impact employee performance and satisfaction. A 401(k) match helps employees build their retirement savings, contributing to their long-term financial well-being and reducing stress, which can lead to higher productivity and loyalty. - A good employee retention strategy can save a small business a significant amount of money, both directly and indirectly. The costs associated with employee turnover can be substantial and include costs related to recruitment, training, lost productivity and customer satisfaction. Offering a 401(k) match is a powerful tool for enhancing employee recruiting and retention. It contributes to employees' long-term financial security and increases job satisfaction and loyalty. While the precise impact on retention rates can vary, the overall trend indicates that companies with competitive retirement benefits, including matching contributions, are more successful in retaining their employees. Are you confident your plan is compliant and maximizing your benefit? We can help. If you’d like a complimentary review of your retirement plan, please click this link and provide some basic information.

Tax planning should play an important role in your financial life. Too often, people only think about taxes at year-end or when filing their taxes. However, staying proactive throughout the year can help you maximize your deductions, avoid last-minute stress, and ensure you're making the most of tax-saving opportunities. Mid-year is an excellent time to reassess your financial situation and make adjustments to optimize your tax position. Here are some essential mid-year tax planning tips to consider. 1. Review Your Tax Situation Take a comprehensive look at your financial situation. Evaluate your income, deductions, and any changes that have occurred since the start of the year. Consider any significant life events such as marriage, divorce, the birth of a child, or a new job, as these can impact your tax liabilities and benefits. 2. Adjust Your Withholding and Estimated Payments Ensure that your withholding and estimated tax payments are aligned with your projected tax liability for the year. Use the IRS withholding calculator to determine if you need to adjust your W-4 form with your employer. If you're self-employed or have additional income sources, verify that your quarterly estimated tax payments are accurate to avoid penalties and underpayment. 3. Maximize Retirement Contributions Review your contributions to retirement accounts such as 401(k)s, IRAs, and Roth IRAs. Contributing to these accounts not only helps secure your financial future but can also provide significant tax benefits. If you haven’t maxed out your contributions, consider increasing them during the second half of the year. 4. Take Advantage of Tax-Advantaged Accounts In addition to retirement accounts, ensure you're making the most of other tax-advantaged accounts like Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). Contributions to HSAs are tax-deductible, and withdrawals for qualified medical expenses are tax-free. For FSAs, make sure you’re on track to use the funds before the year-end deadline, as they typically have a "use it or lose it" policy. 5. Plan for Charitable Contributions If you plan to make charitable contributions, consider timing them to maximize your tax benefits. Donating appreciated stocks or other assets can provide a larger deduction while avoiding capital gains taxes. Keep detailed records of your contributions, including receipts and documentation for any non-cash donations. 6. Evaluate Your Investment Portfolio Review your investment portfolio and consider tax-loss harvesting, which involves selling losing investments to offset gains in other areas. This strategy can help minimize your overall tax liability. Consult with a financial advisor to ensure your investment strategy aligns with your long-term financial goals and risk tolerance. 7. Keep Track of Tax-Deductible Expenses Stay organized by keeping detailed records of tax-deductible expenses throughout the year. This includes business expenses, medical expenses, mortgage interest, and state and local taxes. Accurate records will simplify the tax filing process and ensure you don’t miss out on any deductions. 8. Consider Tax-Deferred Investments Explore tax-deferred investment options such as annuities or certain types of bonds. These investments allow you to defer paying taxes on the income they generate until you withdraw the funds, potentially providing tax savings and enhancing your overall investment strategy. 9. Review Estate Planning Strategies Mid-year is a good time to review your estate planning strategies. Ensure your will, trusts, and beneficiary designations are up to date. Consider gift tax exclusions and other estate planning tools to minimize estate taxes and ensure your assets are distributed according to your wishes. 10. Consult with a Tax Professional A mid-year check-in with a tax professional can provide valuable insights and personalized advice. A tax advisor can help you navigate complex tax laws, identify additional tax-saving opportunities, and ensure you're on track to meet your financial goals. We are here to help Mid-year tax planning is an essential part of maintaining your financial health and ensuring you're prepared for tax season. By staying proactive and implementing these strategies, you can optimize your tax situation, reduce your liabilities, and make informed decisions that benefit your long-term financial well-being. Remember, our team is here to help you. If you have any questions, please contact us anytime. About Cypress Wealth Services Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high-net-worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services serves a broad range of client needs using their knowledge and experience to act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring the wealth and legacy a person has already built to their loved ones. With financial advisors in California, Alaska, and Arizona, the firm serves clients across the country with Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.