Credit Card Debt: Face It, Then Fix It

Too many Americans are in the dark about how much they owe, what their interest rates are, or even how many credit cards they have. The truth is, credit cards can be tools—if used wisely. But carrying a balance month to month? That’s a recipe for trouble.

The only two reasons I consider “acceptable” for credit card debt are unexpected medical bills and long-term job loss. Anything else is likely a sign of overspending or relying on “buy now, pay later” schemes that snowball into long-term debt.

If you’re stuck, here’s my 5-step plan:

1. List all your cards.
2. Write down your balances.
3. Track each card’s interest rate.
4. Make the minimum payment on all of them.
5. Direct any extra cash to the card with the highest rate.

Avoid raiding your IRA, borrowing from your 401(k), or using home equity to dig yourself out. And please—steer clear of those “debt relief” companies making bold claims. They’re often scams.

Stock Options: Diversify or Regret It

If your employer gives you stock options, it’s tempting to hold on. But unless you want to risk ending up like the folks at Enron or Lehman Brothers—jobless and with worthless stock—consider selling those shares once you’re allowed.

Don’t keep more than 15% of your total investments in company stock. Diversification is not just a buzzword—it’s essential to protect yourself from volatility. Professional investors cap individual stocks at 3% of their portfolios. You should too.

Understand RMDs or Face Big Penalties

Required Minimum Distributions (RMDs) can trip up even the savviest retirees. Don’t wait until you’re 70½ to figure them out. You need to take your first RMD by April 1 of the year after you turn 70½—but doing so may mean two withdrawals in one year, which could spike your taxes.

My advice? Take your first RMD before December 31 in the year you turn 70½. Hire a tax advisor to make sure you stay compliant and avoid the 50% penalty for missing a required distribution.

Smart College Planning with Financial Aid and 529 Plans

Kim Clark shared valuable tips on making college more affordable. One of the easiest things you can do? Apply to multiple schools. Doing so can increase your scholarship opportunities by 30%.

Fill out the FAFSA early. It’s what schools use to put together your financial aid package, and knowing you’ve applied to competing schools might get you better offers.

Also, don’t ignore community colleges or study-abroad programs. Many international universities offer low-cost or free tuition if you’re willing to study in another language. And if you’re saving for education, use a 529 plan—it grows tax-free and gives you flexibility on who the funds can be used for.

When to Let Go of Real Estate

Rao was facing a tough decision: sell his townhouse at a $40,000 loss or hang on. I advised him to cut ties. Emotional attachment is real, but it shouldn’t hold you back from making sound financial moves. Let the first decent offer be the one you take—move on and free yourself.

Rethinking Retirement Relocation

Not everyone needs to head for the Florida sunshine. In fact, most retirees stay within 20 miles of where they currently live. It’s not about palm trees; it’s about being close to people who matter. Before you buy that dream home across the country, think twice. Retirement is as much about lifestyle as it is about location.

All information provided is for educational purposes only and does not constitute investment, legal or tax advice; an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party’s views. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Whenever there are hyperlinks to third-party content, this information is intended to provide additional perspective and should not be construed as an endorsement of any services, products, guidance, individuals or points of view outside Edelman Financial Engines. All examples are hypothetical and for illustrative purposes only. Please contact us for more complete information based on your personal circumstances and to obtain personal individual investment advice.

Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances.

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Key Takeaways from Secure 2.0 Act and Retirement Planning Strategies

1. Understanding Your Retirement Savings Options The journey to retirement begins with making the right choices about where to save and invest your money. Joe and Big Al explain the importance of utilizing various retirement savings options, including 401(k)s, IRAs, and annuities. With so many choices available, it can be difficult to know which path is right for you. The key is to create a well-rounded retirement strategy that takes advantage of tax-deferred growth, employer contributions, and long-term wealth-building opportunities.Financial advisors play a crucial role in helping individuals understand their options and develop a personalized plan. With expert guidance, you can ensure your retirement savings strategy is on track to meet your future goals.
2. The Secure Act 2.0: How It Impacts Retirement Savings The Secure 2.0 Act aims to encourage Americans to save more for retirement by making retirement plans more flexible and accessible. One of the most significant updates is the expansion of catch-up contributions, which allow individuals over the age of 50 to contribute more to their retirement accounts.The new rules also modify Required Minimum Distributions (RMDs), allowing you to delay withdrawals from retirement accounts until later in life. This helps you keep your savings invested for longer, maximizing the growth potential of your funds. Additionally, the Secure 2.0 Act changes inheritance rules and opens up new opportunities for Roth conversions, further enhancing the benefits of tax-free growth.
3. Roth Conversions and Tax-Free Growth One of the most powerful strategies for retirement planning is Roth conversions. The Secure 2.0 Act provides additional flexibility in Roth conversions, allowing you to move funds from traditional retirement accounts into Roth accounts, which grow tax-free. This strategy not only helps you avoid RMDs (Required Minimum Distributions) in retirement but also ensures that your withdrawals during retirement will not be taxed.With tax rates expected to rise in the future, Roth conversions are a great way to lock in current tax rates and ensure that your retirement income will not be subject to higher taxes. If you haven’t already considered a Roth conversion, now may be the perfect time to explore this option with a financial advisor.
4. Inherited IRA Changes Under the Secure 2.0 Act The Secure 2.0 Act has also made changes to the rules surrounding inherited IRAs. Previously, beneficiaries could stretch the distributions from inherited retirement accounts over their lifetimes. However, the new rules require most non-spouse beneficiaries to withdraw the entire balance within 10 years of the original account holder’s death.This change can have significant tax implications for beneficiaries, as they will need to pay taxes on the distributions within a shorter time frame. Estate planning strategies should be adjusted accordingly to account for these changes, and it’s important for both account holders and beneficiaries to understand the new requirements to minimize the tax impact.
5. Education Savings with 529 Plans While retirement planning is essential, many individuals also want to save for their children’s education. The Secure 2.0 Act includes provisions that affect 529 education savings plans. While 529 plans are primarily used for educational expenses, they can also be part of your broader financial strategy.Joe and Big Al emphasize the importance of balancing contributions between retirement savings and education savings. Starting early with 529 plans allows your savings to grow over time, offering tax advantages and helping cover future education costs. In some cases, it may even be possible to roll over unused 529 plan funds into a retirement account, providing more flexibility in your long-term financial planning.
6. Expanding Retirement Plan Access for Part-Time Workers One of the most important changes brought about by the Secure 2.0 Act is expanding access to retirement plans for part-time workers. Previously, many part-time workers were excluded from employer-sponsored retirement plans, but the new law now allows more part-time employees to participate in these plans.By increasing access to retirement savings plans, the Secure 2.0 Act helps more Americans build a secure financial future. It’s essential for part-time employees to take full advantage of these plans, contributing as much as possible to their retirement accounts. Employers should ensure that their employees are aware of the new eligibility criteria and provide the necessary resources to help them plan for retirement.

Next Steps for Maximizing Secure 2.0 Act Benefits

1. Review Retirement Plan Eligibility for Part-Time Workers
   HR departments should update eligibility criteria to ensure that part-time employees can participate in retirement plans under the new rules.
2. Maximize Contributions with Catch-Up Contributions
   Financial advisors should work with clients to develop strategies for maximizing contributions, including catch-up contributions for those over 50.
3. Consider Roth Conversions for Tax-Free Growth
   Roth conversions are a valuable tool for reducing taxes in retirement. Speak with a financial advisor to assess whether a Roth conversion fits your retirement strategy.
4. Update Beneficiary Designations
   With changes to inheritance rules, it’s crucial to update beneficiary designations to align with the new Secure 2.0 Act guidelines.
5. Balance Contributions Between Education and Retirement Savings
   Develop a strategy for balancing contributions to 529 education savings plans and retirement accounts to ensure both goals are met.

Conclusion: Maximize Your Benefits with Secure 2.0

The Secure 2.0 Act provides significant opportunities for individuals to boost their retirement savings, take advantage of Roth conversions, and plan for a more secure financial future. Whether you’re a full-time employee, a part-time worker, or a retiree looking to optimize your wealth transfer, these changes can help you achieve your retirement goals. Now is the time to review your retirement strategy and work with a financial advisor to take full advantage of the new rules.

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

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