Building Up

Building Up

is all about accumulation. These are your highest earning years and you’ll want to take advantage of them. Consider maximizing contributions. Explore insurance strategies. And be sure to adjust your tactics as your circumstances change. For example, you may start a family, switch jobs, or see a change in your finances. Be flexible with your tactics, but always keep your eye on the goals you set and remember, this is your best time to save!

Need to speak with a financial advisor? Contact us here.

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"38.1% of all households carry credit card debt. Are you part of the 61.9% without?"1
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"Do you have a formal plan? Many financial advisors recommend saving 10-15% of your annual income for retirement."2

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"As of 2011, housing expenses equated to 44.5% of total costs for seniors."3

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"These days, a 65-year-old woman can expect to live another 20 years. Good news if you’ve planned for it."4

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"A 2015 Government Accountability Report showed that people in their 60s have a median of $172,000 in retirement savings. You can plan to do better!"3
The Basics
When’s the best time to begin working with an advisor?

There is a lot of good financial information readily available these days. Unfortunately, there is plenty of not-so-good information as well. The key is recognizing the difference, and knowing when you need to go beyond what you can learn through all the books and blogs. 

From a retirement standpoint, a financial advisor could be helpful to those who are truly serious about investing in the future—enough to work with an advisor to formulate a plan and begin making contributions. Advisors can also be helpful to those who are already saving for retirement but need guidance in making adjustments to their plan. 

There is no magic asset value at which you need an advisor. What does your gut tell you? If you feel like professional guidance would help with your retirement investing, talk to an advisor.

What does it cost to work with an advisor? Are they all fee-based?

Not all advisors are fee based, and costs can vary from one to another. Be sure you understand how your advisor will be compensated, should you decide to work with them. Common forms of compensation include, but are not limited to, asset-based fees (e.g., you pay 1%-2% per year on your assets under management) and commissions (i.e., you pay a commission when an investment is made).

Am I eligible for a traditional IRA?

More than likely, yes you are. The only requirements are that you have taxable compensation (such as income from your job) and be under age 70½. However, whether your contributions are tax deductible depends on your income and whether you have access to a work-related retirement account. See “What are the limits on IRA deductions” below.

Setting up an IRA is easy. First, decide who you are going to list as your beneficiary. Then, simply select an institution (such as a bank, insurance or investment company), complete some paperwork and make an opening deposit (often as little as $50). The paperwork will require you to select specific investment vehicles to fund your IRA, but your advisor can walk you through those steps.

Am I eligible for a Roth IRA?

It depends entirely upon your adjusted gross income for the year, your income tax filing status, and whether you earned income during the year (typically, wages or self-employment income). Here are the rules for 2018.

If your filing status is:

Your ability to contribute to a Roth IRA is limited if your modified adjusted gross income is:

You cannot make a contribution to a Roth IRA if your modified adjusted gross income is:

Single or head of household

At least $120,000 but less than $135,000

$135,000 or more

Married filing jointly or qualifying widow(er)

At least $189,000 but less than $199,000

$199,000 or more

Married filing separately

More than $0 but less than $10,000

$10,000 or more

Remember, your allowable Roth IRA contribution may be reduced by contributions made to other IRAs during the same tax year.

Roth IRA or traditional IRA—which is better?

It all depends upon your personals goals and circumstances. If you can make deductible contributions and want to lower your taxes while you're still working, a traditional IRA might make sense. Are you looking to preserve assets for your heirs? Minimize taxes during your retirement? If so, a Roth IRA may be a better choice. Here’s why:

Both traditional and Roth IRAs feature tax-deferred growth of earnings. Both allow you to contribute up to $5,500 in 2018 of earned income, plus an additional $1,000 "catch-up" contribution if you qualify. Both allow certain low- and middle-income taxpayers to claim a partial tax credit for amounts contributed. But that’s where the similarities stop.

With a traditional IRA, anyone under age 70½ with earned income can contribute the maximum $5,500 in 2018 (plus catch-up if eligible). Whether you’re allowed to deduct those contributions, however, will depend upon your annual income, your filing status, and whether you or your spouse is covered by an employer-sponsored plan. Any distribution will be subject to income taxes to the extent that the distribution represents earnings and deductible contributions. With a traditional IRA, you must start taking annual distributions at age 70½, but if you draw money out before age 59½, you may pay a 10 percent early withdrawal penalty.

There are no age limitations for contributing to a Roth IRA. You can contribute even after age 70½ as long as you have taxable compensation and qualify. Your income and tax filing status will determine your ability to contribute and the amount you'll be able to contribute. 

Roth IRAs are not tax deductible. However, you’re not required to take distributions from a Roth IRA at any age, which gives you more estate planning options. Also, qualified withdrawals aren’t subject to income tax or the early withdrawal penalty if certain conditions are met. Nonqualified withdrawals will be taxed and penalized, but only on the earnings portion of the withdrawal.

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"In 2016, 46% of retirees left the workforce earlier than planned because of a hardship. During the Building Up stage, think about planning a cushion for these types of events."5

BOK Financial Corporation (BOKF) offers wealth management and trust services through various affiliate companies and non-bank subsidiaries including advisory services offered by BOKF, NA and its subsidiaries BOK Financial Asset Management, Inc. and Cavanal Hill Investment Management, Inc. each an SEC registered investment adviser. BOKF offers additional investment services and products through its subsidiary BOK Financial Securities, Inc., a broker/dealer, member FINRA/SIPC, and an SEC registered investment adviser and The Milestone Group, also an SEC registered investment adviser.

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