Financial Facts vs Fiction

Many individuals aspire to build wealth, yet a significant portion lack a clear starting point or financial roadmap. Studies indicate that over half of individuals feel more confident and live more comfortably with a financial plan in place. While hiring a financial planner can be beneficial, it’s crucial for everyone to develop at least a basic financial strategy to guide their financial decisions.​

Investment Strategies: Timing and Misconceptions

A common misconception is that it’s either too early or too late to start investing. Consider the example of two investors: Jane begins investing at age 25 for 10 years, while John starts at 35 and invests for 30 years. Despite investing for a shorter period, Jane’s early start allows her investments to grow to $2.2 million, surpassing John’s $2 million. This illustrates the power of starting early and the impact of compound interest.​

Additionally, small daily savings can accumulate significantly over time. For instance, saving $4 daily on discretionary expenses like coffee can grow to approximately $132,000 over 30 years, assuming a 6% annual return. This highlights the importance of mindful spending and consistent saving.​

While the stock market carries inherent risks, historical data shows that from 2001 to 2020, the S&P 500 had an annualized return of 7.5%. However, the average equity investor earned only 3% due to emotional decision-making and market timing. This underscores the value of a disciplined, long-term investment approach.​

Understanding Social Security Benefits and Taxation

Social Security benefits may be subject to taxation depending on your combined income. For single filers, if combined income is between $25,000 and $34,000, up to 50% of benefits may be taxable. For incomes above $34,000, up to 85% of benefits may be taxable. For married couples filing jointly, these thresholds are $32,000 to $44,000 for up to 50% taxation, and above $44,000 for up to 85% taxation. ​SmartAsset+1Penn Wharton Budget Model+1Penn Wharton Budget Model

Combined income includes adjusted gross income, non-taxable interest, and half of your Social Security benefits. Implementing tax planning strategies, such as Roth IRA conversions, can help manage and potentially reduce the taxable portion of your Social Security benefits.​

Strategic Timing for Claiming Social Security Benefits

The age at which you claim Social Security benefits significantly affects the monthly amount you receive. Claiming benefits before reaching full retirement age results in reduced monthly payments, while delaying benefits increases them due to delayed retirement credits. For example, claiming at age 62 may yield a monthly benefit of $1,400, whereas waiting until age 70 could increase the benefit to $2,480. Factors such as life expectancy, financial needs, and tax implications should be carefully considered when deciding the optimal time to claim benefits.​SmartAssetSocial Security

Medicare and Anticipating Healthcare Costs

It’s a misconception that Medicare fully limits out-of-pocket healthcare expenses. Without supplemental insurance, there is no cap on these costs. Healthcare expenses are projected to rise, with estimates indicating that by 2040, nearly half of couples aged 65 and older will spend over 20% of their income on healthcare. A Fidelity study estimates that a 65-year-old couple will need over $300,000 to cover medical expenses in retirement, excluding long-term care. Planning for these costs is essential to ensure financial stability in retirement.​

Maximizing Health Savings Accounts (HSAs)

Health Savings Accounts offer a tax-advantaged way to save for medical expenses. Contributions are pre-tax, the account grows tax-deferred, and withdrawals for qualified medical expenses are tax-free. For 2025, the contribution limits are $4,300 for self-only coverage and $8,550 for family coverage, with an additional $1,000 catch-up contribution for individuals aged 55 and older. It’s important to note that contributions to HSAs are not allowed once you enroll in Medicare, typically at age 65. Investing HSA funds can provide long-term growth, making them a valuable component of a comprehensive retirement plan.​Optum Bank+4Fidelity Investments+4Wolters Kluwer+4

Personalized Financial Planning with Pure Financial Advisors

Pure Financial Advisors operates on a fee-only, fiduciary model, ensuring that clients receive unbiased, comprehensive financial planning. Their collaborative approach integrates certified public accountants and financial planners to address tax planning and investment strategies tailored to individual needs. With offices in multiple locations, including Irvine, Los Angeles, and Seattle, they are committed to providing personalized financial advice to local communities.​

Accessing Retirement Planning Resources

To assist individuals in preparing for retirement, resources such as the Retirement Readiness Guide are available. This guide offers insights on Social Security, taxes, Medicare, and investment strategies, serving as a valuable tool in developing a personalized retirement roadmap.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.