Author: Robert Harmon, Client Services Page 1 of 3

Your Children and Inheritance

You invested wisely for forty years, building your nest-egg. You are in retirement now and enjoying every minute of it. At some point you realize that you will be leaving some of your investments to charity, and in many cases, most to your children. Over the next 30 years trillions of dollars will transfer from the “Baby Boomer” generation to their children.

You would be surprised how many working adults haven’t prepared for their own retirement.

The average 401k balance for 60-69-year-old individuals is $195,500 and the median balance in this age group is only $62,000. This means that half of soon-to-be retirees have less than $62,000 in their 401k accounts. Generally, by age 60 you should have six times your current salary in savings and at normal retirement (age 67) eight times your salary.[i]

Whether it be for health reasons, an ended marriage, not profitable investment decisions or a slew of other reasons, many adult heirs aren’t prepared for retirement due to a lack of assets.

Over the past 25 years I’ve seen what happens to client assets when transferred to their beneficiaries. An adult child (or heir) inherits an investment portfolio and instead of investing the inheritance, every penny is spent. “I had to pay off my debt, I wanted a new car, or a new house”, says the adult child. While debt is important to pay down, and a new car or home is not a malicious want, the hard earned money you have saved and worked for can be gone so quickly when you may have wanted this wealth to have a different impact in your children’s and future generation’s lives.

While your children may be mature adults with their own families, having the conversation with them on how you would like their inherited wealth to be treated is important. Equally important is helping them become knowledgeable about investing. The most important thing you can do right now, if you haven’t done so already, is to have a conversation with your heirs about investing.  Let them know about your intentions of their eventual inheritance and the importance of continuing to invest what you have already invested over the years so they can have a comfortable retirement. If you feel uncomfortable talking to your heirs about your investments, we can help.

You have several options to transfer wealth, from setting up a trust, identifying who is a beneficiary and the percentage he/she receives on your qualified retirement account(s) and setting up a Transfer-on-Death (TOD) individual account. An inheritance, if handled correctly, can ensure your heirs a comfortable retirement in the future. This can give you much-needed peace of mind. At Spectrum Financial we encourage our clients to talk to their heirs about the importance of investing. We enjoy having conversations with children and even grandchildren of our clients, whether in person or on a phone call. Call us today at 888-463-7600 if you would like to learn more about how we can help your children or grandchildren start investing today and be prepared to handle an inheritance in the future.

[i] Investopedia. What’s the Average 401(k) Balance by Age? See how your savings stack up. By Tim Parker, November 21, 2019.

Tax Season and your Investments

It’s that time of year again.  Time to get an early start on tax season, from taking required IRA distributions to maximizing your IRA contributions if you are working.  Now is the time to declutter, organize paperwork and speak with your advisor to make sure you are on track with your investment portfolio goals.  Wouldn’t it be nice to head into the new year free of all this stress?  There are many things you can start doing right now.

Soon, investors over the age of 70 ½ will receive their Required Minimum Distribution Letter stating how much of a distribution needs to be taken by December 31st.  This is a specific amount calculated based on your age and the balance of your retirement accounts on December 31 of the previous year.  Roth IRA accounts are excluded from these required distributions.

If you must take annual distributions, you can set up a Periodic Distribution Plan that can be customized to distribute monthly quarterly or annually.  Many investors don’t realize that if you don’t need the money for expenses, you can distribute the funds into an individual brokerage account and continue to invest the proceeds.  The funds are always available to withdraw when income needs arise.

A qualified charitable distribution (QCD) is another option for your required distribution.  The distribution can go directly to your favorite charity/charities.  You can use a QCD to donate up to $100,000/year without being taxed.

For everyone that is working, be sure to max out your IRA each year.  For 2019 you can contribute up to $6,000 if you’re under 50 and $19,000 into a 401(k).  If you’re 50 or over the maximum contribution increases to $7,000 and $25,000, respectively.  It is amazing what the power of compound interest can do when you contribute to an IRA annually at a young age.  For a great article about compound interest you can visit our website at www.investspectrum.com, go to Resources-Our Newsletter and select the April 2019 newsletter.  The article is on the last page.


These are just a few of the steps you can take to get a start on tax season.  By starting now, it will give you time to make any adjustments to your investment portfolio well before any deadlines approach.  At Spectrum Financial we help implement these tax season steps into a year-round process for our clients.  Call us today at 888-463-7600 to learn more about our company and how we can help you by creating investment portfolios to meet your unique goals.

***When maximizing retirement contributions, first consult a qualified tax professional for details based on your personal situation.

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Spectrum Financial, Inc 2020