The Social Security Fairness Act (SSFA) was signed into law by President Biden on January 5, 2025. This eliminates the “Windfall Elimination Provision” (WEP) and the “Government Pension Offset” (GPO) from the current Social Security system.

This long overdue legislation will ensure that millions of retired public servants receive the full Social Security benefits they deserve by repealing the WEP and the GPO, which unfairly reduced the Social Security benefits that public employees or their spouses have earned.  These provisions were put in place in 1983, as part of the Social Security Amendments, in order to address concerns about the fairness and sustainability of the program.

Background on the WEP and GPO

WEP

The WEP affects individuals who have worked both in jobs covered by Social Security and those not covered by it, such as government employees or workers from foreign countries. This provision reduced their Social Security benefits by up to 50%, resulting in significantly lower retirement income than what they would have received if they had only worked in jobs covered by Social Security.

GPO

Similarly, the GPO affects individuals who receive spousal or survivor benefits from Social Security and also receive a pension from a government job that was not covered by Social Security. This provision reduces their spousal or survivor benefits by two-thirds of their government pension amount, often resulting in no benefits at all.

Impact on Affected Individuals

The WEP and GPO have had a disproportionate impact on certain groups of people, including teachers, police officers, firefighters, and other public service workers. These individuals often have dedicated their careers to serving their communities and may be forced to choose between collecting their earned government pensions or receiving their full Social Security benefits.

Moreover, the WEP and GPO can result in significant financial hardship for these individuals, especially as they near retirement age. Many were not aware of these provisions until it was too late, and they were left with reduced benefits that may not be enough to support them in retirement.

Recent Developments

In recent years, there have been several attempts to reform or repeal the WEP and GPO through legislation. The Social Security Fairness Act (SSFA) has gained bipartisan support in Congress and has been introduced multiple times since its inception in 1983.

What will the SSFA do for me?

On January 5th, 2025, the (SSFA) finally became law, marking a significant victory for retired public servants across the nation. This long-awaited reform repealed the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), restoring full Social Security benefits to those who had been unfairly impacted by these provisions. The passage of the SSFA demonstrated the power of persistent advocacy and bipartisan cooperation, bringing much-needed relief to countless retirees who had dedicated their lives to serving their communities.

Wealth Management with Towerpoint Wealth

At Towerpoint Wealth, we understand the profound impact that the repeal of the WEP and GPO will have on certain retirees, particularly those who have served as public employees. The passing of the Social Security Fairness Act unlocks new opportunities for individuals to positively reevaluate their retirement benefits and financial goals. For some, this may mean greater confidence in their ability to enjoy a secure and comfortable retirement, while for others, it may open the door to pursuing new ventures or travel plans. Regardless of your unique financial situation, now is the time to reassess and ensure that your wealth strategy aligns with these very recent legislative changes.

Our team at Towerpoint Wealth is committed to helping retirees and those nearing retirement maximize their economic potential in light of these changes. We specialize in tailoring comprehensive financial strategies, ensuring that our clients can make coordinated and informed decisions about their future. With the repeal of the WEP and GPO, you may be eligible for benefits that were previously inaccessible, and our advisors are here to help you fully understand this complex landscape. Together, we can evaluate your current plan, identify deficiencies and opportunities to optimize your income, and strategize on how to best leverage these changes to achieve your personal and financial goals.

If you or a loved one has been impacted by the WEP or GPO and would like personalized financial guidance, we invite you to reach out to us today. At Towerpoint Wealth, we are proud to be trusted financial stewards for the Northern California community, offering expertise and peace of mind during times of transition. Schedule a complimentary consultation with us and discover how we can help you enjoy the retirement and comprehensive financial coordination you deserve. Call us or visit our website and contact us—we look forward to getting to know and supporting you on your financial journey.

Frequently Asked What is Happening with the Social Security Fairness Act Questions

What is the Windfall Elimination Provision (WEP)?

The Windfall Elimination Provision (WEP) is a federal law that affects the Social Security benefits of individuals who have earned a pension from work not covered by Social Security, such as many public sector roles. Specifically, it reduces the amount of Social Security benefits you are entitled to receive based on your earnings history under Social Security-covered employment. WEP applies to workers who have fewer than 30 years of substantial earnings in Social Security-covered employment and also receive benefits from a job where Social Security payroll taxes were not deducted. The intent of this provision is to prevent workers who have both types of income from receiving disproportionately high Social Security benefits. However, the calculation can be complex, and understanding how this law impacts your eligibility requires careful analysis of your work history and earnings.

What is the Government Pension Offset (GPO)?

The Government Pension Offset (GPO) is another federal regulation that reduces Social Security spousal or survivor benefits for individuals who receive a pension from a job in which they did not pay into Social Security. Specifically, the GPO reduces spousal or survivor benefits by two-thirds of your government pension. For example, if you receive a monthly pension of $900 from non-Social Security-covered work, your spousal or survivor benefit may be reduced by $600. This provision was introduced to align Social Security benefits with other public pensions and to ensure equitable distribution. Many retirees are surprised by how significantly the GPO can impact their benefits, which underscores the importance of consulting a financial advisor to budget and plan accordingly.

How might the repeal of WEP and GPO impact my retirement plan?

The repeal of WEP and GPO would allow affected retirees to receive the full Social Security benefits they earned in addition to their public-sector pensions. This change could lead to an increase in monthly income, and dramatically alter retirement budgets. However, navigating this transition involves thoroughly understanding how the new regulations apply to your specific situation, including recalculations of your potential Social Security payments and the timeline for increases. Additionally, it may introduce tax or strategic implications, making it prudent to proactively consult with knowledgeable financial professionals. A careful analysis of your retirement plan should be conducted to incorporate these new benefits while ensuring continued financial stability.

Who is most affected by the WEP and GPO regulations?

The WEP and GPO regulations most commonly impact public servants, including teachers, police officers, firefighters, and employees of certain state and local governments, who worked at jobs where they did not pay into Social Security. For instance, teachers in states like California, Texas, and Louisiana often receive a pension through their state, but did not contribute to Social Security during their careers. These individuals might experience reduced or eliminated Social Security account benefits under the WEP and GPO provisions. Retirees with a combination of public and private employment are particularly vulnerable, as their years of Social Security-covered earnings may not fully offset the reductions. Awareness of these provisions is vital for individuals in these sectors to adequately plan their financial futures.

How can I calculate the effects of WEP and GPO on my benefits?

Calculating the effects of the WEP and GPO requires gathering detailed information about your earnings history, pension amounts, and Social Security-covered work. The Social Security Administration (SSA) provides calculators on their website specifically designed for WEP and GPO, which can offer an estimate of your reduced benefits. However, these tools may not account for nuanced scenarios, such as changes in employment or income. For a more precise calculation, working with a financial advisor who specializes in Social Security planning can be extremely beneficial. They can help you analyze your specific circumstances, explore potential strategies to mitigate reductions, and ensure you have an accurate understanding of your financial outlook.

What steps should I take if I think I am affected by these provisions?

If you believe the WEP or GPO may affect your benefits, the first step is to gather your earnings history, current mailing address, direct deposit information, and other information about any pensions you receive or expect to receive from jobs not covered by Social Security. Next, start by visiting Social Security Administration’s website to verify how these provisions apply to your situation, and use the WEP and GPO online calculators for preliminary estimates. After understanding the potential impacts, schedule a meeting with a trusted financial advisor who can guide you through strategies to optimize your benefits. This could include exploring additional sources of income, adjusting tax strategies, or advocating for policy changes if reforms are expected. Proper planning can help reduce the surprise and financial strain often associated with these complex rules.

Conclusion

At Towerpoint Wealth, we understand how overwhelming and confusing Social Security provisions like the WEP and GPO can be. Our team is dedicated to providing personalized guidance to help you take control of and properly coordinate your financial future. We invite you to reach out to us for a complimentary consultation, where we can begin to get to know you, review your unique situation, answer your questions, and develop a customized plan and strategy tailored to your needs. Contact us today to start building a plan that mitigates uncertainty and positions you for long-term success.

Planning for your child’s college education can feel overwhelming—but it doesn’t have to be! With tuition costs climbing every year, and limited access to financial aid, having a solid savings and investment plan to help prepare you for your child’s education costs can provide financial peace of mind, reduce future debt burdens, provide tax benefits, and give your family the flexibility to focus on what truly matters. For busy couples in their 30s and 40s balancing careers, kids, and newfound wealth, having the right strategy can make all the difference. Even for grandparents and other family members wanting to contribute to your child’s future, having a well-coordinated plan is important.

Here’s a breakdown of four top college savings options—in plain English—to help you prepare for your child’s future.

The Top 4 College Savings Accounts and Plans

1. 529 College Savings Plans

A 529 College Savings Plan can be a great go-to college savings tool. Why? Because it’s packed with perks like:

• Tax Benefits: Your money grows tax-deferred, and withdrawals for qualified education expenses—like tuition, fees, or books—are also tax-free at the federal level. Depending on the state you currently reside in, you may be eligible for a state tax deduction.
• Flexibility: It’s not just for college! You can use it for K-12 tuition (up to $10,000 per year), at a public, private, secondary public, or religious school, certain apprenticeship programs, and more.
• Big Contribution Limits: Depending on the state, you can save over $300,000 per beneficiary—way more than other savings accounts allow.

The best part? If your child doesn’t use all the funds, you can transfer them to another family member. Keep in mind, however, that non-education-related withdrawals will trigger taxes and a 10% penalty on earnings.

Even better, starting in 2024, you can roll unused 529 plan assets—up to a lifetime limit of $35,000—into the account beneficiary’s tax-free Roth IRA, without incurring the usual 10% penalty for nonqualified withdrawals or generating any taxable income. 

2. Coverdell Education Savings Accounts (ESAs)

Coverdell ESAs might not get as much attention as 529 plans, but they’re worth considering:

• Tax Perks: Like 529s, your savings grow tax-free, and withdrawals for education expenses are also tax-free.
• Wide Usage: Coverdell funds can be used for K-12 expenses, including private school tuition and supplies.
• Limits to Watch: Annual contributions are capped at $2,000 per child, making it ideal as a supplement rather than a standalone option.
• Income Restrictions: Higher earners may not qualify, which could make this less practical for some families.

For families saving for private school or seeking an additional savings tool, Coverdell ESAs can be a valuable complement to a 529 plan.

3. Roth IRAs for Education

While Roth IRAs are traditionally considered retirement accounts, they can also be a creative way to save for education:

• Tax-Free Growth: Your contributions grow tax-free, and you can pull out your original contributions anytime without penalties.
• Education-Friendly: You can access earnings penalty-free if used for qualified expenses.
• Dual Purpose: If your child doesn’t need the money for school, you’ve still got it earmarked for your retirement.

That said, Roth IRAs have yearly contribution limits ($6,500 per person under 50 in 2024) and income caps for making contributions, which may make them less accessible for some families.

4. “Regular” Investment Accounts for College Savings

While a regular investment account obviously doesn’t carry the same tax benefits of a 529 Plan, it is also the most flexible and doesn’t carry any penalty for changing the intended use of the funds. 

• Maximum Flexibility: Unlike 529 plans or ESAs, there are no restrictions on how you use the funds. If your child doesn’t attend college or you have other priorities, you can repurpose the money without penalties.
• No Contribution Limits: You can save and invest as much as you’d like, without the caps imposed by other accounts.
• Wide Investment Options: Regular accounts give you access to a broader range of investment vehicles, from individual stocks to ETFs and mutual funds.
• No Withdrawal Penalties: Withdraw funds whenever needed, for any purpose.

While regular investment accounts don’t offer tax advantages, their unmatched flexibility makes them an excellent complement to other savings strategies. 

How do These Plans Compare to a Custodial Account?

What is a Custodial Account? 

A custodial account is a popular type of savings or investment account that an adult—often a parent or guardian (account owner, custodian)—manages on behalf of a minor (beneficiary). These accounts, typically established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA), can hold a variety of assets, including cash, stocks, bonds, mutual funds, and even real estate in some cases. 

• Ownership: While an adult manages the account, the funds legally belong to the child, who gains full control of the account when they reach the age of majority (usually 18 or 21, depending on the state). 
• Financial Flexibility: Unlike 529 plans, custodial accounts are not solely limited to education-related expenses. The funds can be used for any purpose that benefits the child, such as purchasing a car, covering medical expenses, or even funding a hobby. 
• Tax Considerations: Earnings in custodial accounts are subject to the “kiddie tax,” where a portion of the income may be tax-free, taxed at the child’s rate, or taxed at the parent’s rate, depending on the total earnings. 
• No Contribution Limits: There’s no cap on how much money you can place in a custodial account, but keep in mind that significant contributions may trigger gift tax implications. 

Comparing Custodial Accounts to the 529 Plan and ESA

When deciding between custodial accounts, 529 plans, and Coverdell ESAs, it’s essential to weigh their unique benefits and limitations based on your family’s goals and financial situation.

1 | Flexibility

Custodial accounts shine in terms of flexibility, as they aren’t restricted to education-related expenses. The funds can be used for a wide variety of purposes, including non-academic needs such as buying a car or covering medical bills.

529 plans and ESAs, on the other hand, are specifically designed for educational expenses, with penalties and taxes applied for nonqualified withdrawals. However, 529 plans have seen increased flexibility in recent years, now allowing funds to be used for K-12 tuition, apprenticeship programs, and even a Roth IRA rollover starting in 2024.

2 | Ownership and Control

One significant difference between these accounts lies in control and ownership. With a custodial account, the child becomes the legal owner when they reach the age of majority (typically 18 or 21, depending on the state). This means they have complete discretion over how the funds are spent.

Conversely, 529 plans and ESAs remain controlled by the account holder (usually a parent or guardian), ensuring the funds are used only for their intended purposes.

3 | Tax Benefits

529 plans and Coverdell ESAs are both tax-advantaged accounts, as contributions grow tax-free, and qualified withdrawals for education expenses are also tax-free. Custodial accounts, however, are subject to the “kiddie tax,” which may result in part of the earnings being taxed at the parent’s rate.

Additionally, custodial accounts lack the robust tax benefits of 529 plans and ESAs, which can make a difference in long-term savings growth.

4 | Contribution Limits

Custodial accounts do not have contribution caps, though substantial contributions might trigger gift tax implications. On the other hand, 529 plans can have high contribution limits (often over $300,000 per beneficiary, depending on the state), while Coverdell ESAs cap contributions at $2,000 per child per year, making them more restrictive in terms of annual savings potential.

5 | Suitability

Custodial accounts provide the most financial flexibility, making them a good option for families who value open-ended use of funds and trust their child to manage the money responsibly in adulthood. 529 plans are ideal for families prioritizing education savings with tax benefits and long-term growth potential. Meanwhile, Coverdell ESAs are a niche tool, best suited as a supplement to a 529 plan for those seeking additional tax-advantaged savings for K-12 or college expenses.

What’s the Right Plan for You?

Every family’s needs are unique, and the best strategy often involves a combination of these options. For most families, a 529 plan serves as the backbone of education savings, while options like Coverdell ESAs, Roth IRAs, or regular investment accounts add flexibility and give you peace of mind.

Before making any decisions, it is wise to consult with a qualified tax advisor, financial planner, CPA, or investment manager.

At Towerpoint Wealth, we specialize in helping families like yours navigate these choices and create personalized education savings plans that align with your overall financial goals.

Ready to get started? Let’s map out a smart, personalized education savings strategy for your family’s future!

Frequently Asked College Savings Plans Questions

What is the best savings plan for college?

The best savings plan for college often depends on your family’s unique financial situation and goals. For many, a 529 plan stands out as the top choice due to its tax advantages, high contribution limits, and versatility for educational expenses. These plans are typically managed by a state-appointed program manager, who ensures the investments within the plan are professionally handled and aligned with long-term growth objectives. This makes 529 plans a reliable and efficient option for families looking to maximize their college savings.

What happens to 529 if the child doesn’t go to college?

If the child does not go to college, the funds in a 529 plan can still be used for other qualified education expenses, such as vocational or trade school costs, apprenticeship programs, or even transferred to another qualified beneficiary, such as a sibling. If the funds are withdrawn for non-qualified purposes, the earnings portion of the withdrawal will be subject to income tax and a 10% penalty. However, exceptions to the penalty may apply, such as when the beneficiary receives a scholarship.

In our latest episode of “A Wealth of Knowledge“, Towerpoint Wealth’s original podcast, we dive into the intricate world of private professional fiduciaries. These trusted professionals play a critical part in managing the financial and personal well-being of their clients, often navigating complex legal, financial, and caregiving responsibilities.

Listen to the podcast below!

Here’s a recap of what we discussed – and why this topic is so important.

What’s a Professional Fiduciary?

At its core, a professional fiduciary is someone who is legally and ethically obligated to act in their client’s best interest, 100% of the time. A private professional fiduciary is legally and ethically bound to act in their clients’ best interests, often stepping in when clients lack the ability—or trusted family members-to manage their affairs. Private professional fiduciaries coordinate a wide spectrum of responsibilities, including:

• Financial Management: Overseeing assets, paying bills, and ensuring compliance with legal and regulatory standards.
• Compliance: Ensuring that their duties are fulfilled in adherence to the Uniform Prudent
  Investor Act and CA State Probate Code
• Personal Care: Coordinating healthcare, living arrangements, and quality-of-life decisions for clients who can’t advocate for themselves.
• Estate Administration: Acting as a trustee, conservator, or estate administrator to manage complex estates and legal matters.

Fiduciaries often serve as an objective, neutral third party, ensuring their clients’ needs are met without family conflicts or emotional bias.

Key Highlights From the Episode

This episode featured insightful discussions led by:

• Joseph Eschleman, President of Towerpoint Wealth
• Jonathan LaTurner, Partner and Wealth Advisor
• Megan Miller, Associate Wealth Advisor

Together, they explored the vital role fiduciaries play and how Towerpoint Wealth supports these professionals in their mission to serve clients effectively. This discussion included things like:

1. The Unique Role of Fiduciaries

• Fiduciaries act as a neutral third party, ensuring that estate and financial matters are managed in accordance with their client’s wishes.
• Licensed by organizations like California’s Department of Consumer Affairs and supported by trade groups like the Professional Fiduciary Association of California
  (PFAC), fiduciaries operate under strict legal and ethical guidelines to protect their clients.
• Their roles can range from managing a trust’s investments to ensuring a client receives proper medical care.

2. Why Fiduciaries Are Critical

For clients without suitable family members to oversee their affairs, fiduciaries offer a professional, impartial solution. They:

• Minimize family conflicts by serving as a neutral decision-maker.
• Ensure compliance with legal, ethical, and regulatory standards.
• Manage complex estates and financial responsibilities with expertise and care.

3. Towerpoint Wealth’s Role

As fiduciaries themselves, Towerpoint Wealth offers invaluable support to professional fiduciaries. We understand the unique challenges fiduciaries face. Our role is to empower fiduciaries by helping them manage the financial intricacies of their responsibilities, including:

• Investment Management: Ensuring portfolios align with the Uniform Prudent Investor Act (UPIA).
• Tax Strategies: Offering expert tax advice and coordination with CPAs to optimize financial outcomes.
• Comprehensive Support: Partnering with estate planning attorneys and other professionals to address clients’ diverse needs.

Why This Niche Matters

Fiduciaries wear many hats, often balancing caregiving with financial management and legal oversight. At Towerpoint Weath, we alleviate their workload by handling the financial complexities, allowing fiduciaries to focus on their primary goal: ensuring their clients’ well-being.

What Sets Towerpoint Wealth Apart?

As Jonathan and Megan shared in the podcast, our team’s depth of experience, combined with our unwavering commitment to helping fiduciaries meet their responsibilities with precision, sets us apart. Whether it’s navigating trust requirements or providing tailored investment strategies, we’re here to deliver solutions that make help fiduciaries fulfill their obligations to their clients.

• Decades of Expertise: With over 15 years of fiduciary experience, Jonathan brings a depth of knowledge in asset and estate management. Our team deeply understands the complexities of fiduciary responsibility in accordance with regulations and best practices.
• Tax Strategy Excellence: Megan Miller’s credentials as an Enrolled Agent allow us to provide comprehensive tax advice.
• Ongoing Support and Communication: We prioritize regular updates and are always available to address questions and provide advice, ensuring fiduciaries feel supported every step of the way.
• Dedication to Learning: Our team is committed to continuous education, staying informed on the latest developments and regulations to ensure we provide fiduciaries with the most accurate and actionable guidance.
• Passion for Service: Our team is dedicated to educating fiduciaries and empowering them to achieve the best outcomes for their clients.

Connect With Us!

If you’re a private professional fiduciary or interested in learning more about this fascinating field, we invite you to:

• Subscribe to Our Fiduciary Focus Newsletter for curated content tailored to your needs.
• Follow us on Instagram, LinkedIn, and Facebook for the latest updates.
• Visit our website at Towerpoint Wealth for additional resources.

Stay tuned for more episodes of A Wealth of Knowledge, where we’ll continue to explore financial strategies, wealth management insights, and more. Don’t forget to like, share, and subscribe to ensure you never miss an episode!

The comparative tax burdens between the United States and several other advanced economies. The central message highlights that the U.S. has a significantly lower tax burden, with total tax revenue constituting 27% of its Gross Domestic Product (GDP). This figure is notably lower than the tax revenue percentages of other major economies such as France (45%), Germany (40%), and Italy (43%).

The lower tax revenue as a percentage of GDP in the U.S. suggests a relatively lighter tax load on its economy compared to these nations. This can impact the level and scope of public services and infrastructure the government can provide. Countries with higher tax revenues often fund extensive social welfare programs, healthcare, and other public services, reflecting their socio-economic policy choices. In contrast, the U.S. tends to rely more on private and state-level initiatives for services that other countries might provide at a national level through higher taxation. This comparison underscores the diversity in economic policy approaches among advanced economies, each balancing taxation, public service provision, and economic growth differently.

If you are concerned about how your tax burden affects your financial future and wealth growth, it’s essential to understand your options and plan strategically. Contact us today to set up an initial analysis. Our experts can help you assess your current tax situation, explore strategies to minimize your tax liabilities, and align your financial planning with your long-term goals. Don’t let uncertainty about taxes hinder your financial growth—reach out now for tailored advice and proactive solutions.

Thank you to the Peter G. Peterson Foundation for this infographic. 

Compensation packages for directors, VPs, software engineers, or other employees of technology based firms almost always contain restricted stock units, or RSUs. If you own RSUs, you may be asking one or more of the most common questions about RSUs:

Maximize stock compensation
Stock options vs RSU
How are restricted stock units taxed?
RSU selling strategy to mitigate the tax burden
Does your RSU selling strategy grow net worth?

Maximize stock compensation | RSUs in your compensation package can become a substantial part of your overall net worth.

RSUs, also commonly known as restricted stock units, are a form of stock compensation, whereby an employee receives the right to own shares of stock in the company they work for, subject to certain restrictions. Initially, these units do not represent actual ownership, however, once the restrictions are lifted and your RSUs vest, the units convert into actual company stock, and you, the employee, then have vested stock – you own the shares outright.

The “restricted” in RSUs is generally based on a vesting schedule. Most vesting schedules will fall into one of two categories: Time based or performance based.

Stock options vs RSU

When most people think of stock compensation they typically think of vested stock OPTIONS, or the right to buy a company’s stock at some future date, but at a price established TODAY.

RSUs and stock options have some notable differences. (More about stock options vs RSUs in our white paper, link below.)

How are RSU, restricted stock units, taxed?

RSUs are taxed when the restriction lifts, at which time shares vest and become part of an employee’s taxable income, taxed at the fair market value of the total amount of shares that vested. The taxation of restricted stock units is identical to normal wage income, included on an employee’s W-2.

The shares of vested stock are subject to federal, state, and local income taxes, as well as Social Security and Medicare taxes.

When an employee sells their vested stock, they will pay capital gains tax on any appreciation over the market price of the shares on the date of vesting. If the shares are held longer than one year after vesting before being sold, the sales proceeds will be taxed at the more favorable long-term capital-gains rates.

RSU selling strategy to mitigate the tax burden  | RSU tax selling strategy

While you must pay ordinary income taxes when your RSUs vest, and also must pay capital gains taxes upon selling appreciated RSUs, you can mitigate the tax burden. Your RSU tax selling strategy could include targeted charitable giving, utilizing capital losses to offset capital gains, and outright gifting of vested shares are three ways.

When can RSUs have a negative effect on your net worth? Does your RSU selling strategy grow net worth?

While restricted stock units complement a traditional compensation package, and can contribute to your net worth, there are risks involved in managing RSUs.

The primary risk is that you have too much of your net worth concentrated in one individual stock, and one individual company.

How can we help maximize stock compensation?

Please call, 916-405-9166, or email spitchford@towerpointwealth.com our certified financial planner Steve Pitchford, CPA, CFP^® nd Director of Tax and Financial Planning, to discuss the following:

• How to properly manage your Restricted Stock Units.
• How to structure a tax-efficient RSU unwind strategy.
• How to analyze your non-traditional / equity-based compensation.

To learn more about RSUs, please also click the image below to download our recently-published white paper. What is an RSU?

We serve clients primarily in the Northern California region. Glad you’re here! Please contact us with any questions you have about our wealth management process.

4 Reasons You Might Fall Short of Your Retirement Plan

When you find yourself daydreaming about retirement, does your dream retirement entail traveling the world? Dedicating time to beloved hobbies? Helping your children and grandchildren? Will you have enough money to retire this way? Dreams like these can become your reality, but numerous planning mistakes often cause retirement plans to fall short.

Everyone deserves a great retirement, but prudent planning and saving enough for the lifestyle you aspire to are critical to making it possible.

According to recent studies, retirement savings look grim for many Americans. One survey showed that just 24% of Americans feel like their savings are on-track for retirement, and 20% don’t have any retirement savings at all. The 2024 Northwestern Mutual Planning & Progress Study showed that there are large gaps between what people think they’ll need to retire and what they’ve saved. Financial planners recommend investing at least 10-15% of your income in a retirement account to be on track. 

If you have started saving for retirement, you are definitely ahead of the curve. But don’t rest on your laurels just yet: You may still be engaging in some of the most common retirement planning mistakes without even realizing it. Here are four retirement planning mistakes to avoid:

Four Retirement Planning Mistakes to Avoid

Mistake #1: Not Saving Consistently

Most people are not saving as much as they need in order to maintain their current lifestyle in retirement. One of the worst retirement mistakes to avoid is saving too little now and hoping to “catch up” in the future. The truth is, catching up rarely happens and unexpected life circumstances can make doing so nearly impossible.

According to the median retirement account balance for 55 to 64-year-olds was just over $144,000 in 2019. Sound like enough money to retire? Well, if this money had to stretch over 20 to 25 years (read our blog post which discusses the financial complexities of longer life expectancies), it amounts to only ~$545 per month to live on.

To save more: create a budget, cut out unnecessary spending, open a retirement plan, such as a 401(k) through your employer, or an individual retirement fund as a self-employed individual, and save extra money with each raise or bonus you receive from work.

Mistake #2: Focusing on the Return Rate

If you have an investment that produces a high rate of return, it is easy to get caught up in always

Rather than chasing a high rate of return, we recommend shifting your focus to creating a diversified portfolio that spreads out investments through a variety of fund types and asset classes. Working with a financial advisor who helps you diversify and measure and manage the risk of your portfolio can help protect your retirement savings if/when the economy goes sideways.

Mistake #3: Not Factoring Taxes into the Equation

Another common mistake made during retirement planning is not considering taxes and their impact on your savings. In order to maximize retirement success, a retiree will need a plan to efficiently manage taxes in retirement. Consider speaking with a financial advisor regarding the creation and implementation of a tax-efficient retirement strategy.

Mistake #4: Retiring Too Early

Many people approach retirement age and realize they haven’t saved as much as they needed to maintain their current lifestyle (or pursue their dreams) in retirement. If this sounds like your situation, consider staying in the workforce a little longer to further add to your retirement nest egg. (You might ask, is $2 million enough to retire? It might be, but it might not.)

Staying in the workforce longer may also allow you to delay taking your Social Security benefits, allowing your eventual Social Security guaranteed income stream to continue to grow. (Note: Social Security data shows that around 33% of retirees live until 92 years old, yet 75% of retirees apply for benefits as soon as they hit 62).

Of course, pushing back retirement is not always the best or most attractive option for everyone. Health issues or other life circumstances may encourage an early retirement.

Whether you plan to retire early or need to retire later than expected, working with a financial advisor can help you determine the best way to prepare yourself for your specific retirement needs.

We Are Here To Help

Want to avoid other retirement saving mistakes and create a personalized, comprehensive retirement plan? Please call (916-405-9140) or email us (info@towerpointwealth.com) for a complementary consultation.

Sources

https://www.nirsonline.org

https://www.fool.com/retirement/general/2016/01/26/20-retirement-stats-that-will-blow-you-away.aspx

https://money.usnews.com/money/retirement/articles/2016-01-28/5-retirement-planning-mistakes-and-how-to-fix-them

https://news.northwesternmutual.com/planning-and-progress-study-2024

Understanding that the world of investing and wealth-building is filled with opportunity, not only for growth but also for errors,  at Towerpoint Wealth we believe our role is to raise awareness and help our clients and friends avoid investing mistakes as they work to build and growth their net worth and move toward a more prosperous financial future.

To that end, we’ve created a special four-part educational video series, focusing on 20 of the most common investing mistakes to watch out for, as identified by the CFA Institute.

Are you aware of, or even making, any of these common investing mistakes?

In this, our first video of the series, we look at the first five investing mistakes people make and answer these questions:

• How can we manage having impractical expectations?
• What does it mean to have a shorter-term focus?
• What is performance blindness?
• What’s the best way to react (or not react) to bad news?
• And, what exactly does emotional investing mean?

Like taking a penalty in hockey or a personal foul in basketball, building and protecting net worth requires avoiding mistakes as much as it requires careful consideration, discipline, guts, strategic planning, and sometimes even a little luck. In the second video of our series on the 20 most common investing mistakes to avoid, we focus primarily on risk management.

Since committing common investing mistakes can directly interfere with getting your money’s best performance, part three of our four-part series focuses on five investing mistakes we know we shouldn’t make, but sometimes do anyway.

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In our final video of the series, Joseph Eschleman, answers these questions:

• What does it mean to do a portfolio checkup?
• How regularly should you do a portfolio checkup?
• Why is it important to account for inflation within your investment portfolio?
• Why in the world would an investor buy high and sell low?
• What can be consistently controlled within your financial and investment plan?

If you would like to discuss your financial portfolio, how we help clients build and protect their net worth, or learn more from our wealth management firm’s white papers, blog posts, and educational videos, click below.

Compare Treasury bill —T-bill— rates with bank CD best rates. T-bill rates today are often as competitive, and oftentimes more competitive, than the interest rates offered on CDs. But this is only one reason why, if you’re looking head-to-head at T-bills or CDs, Treasury Bills may be a superior safe investment.

Let’s look closely at T-bill yields and three other reasons why Treasury bills—short-term government bonds issued by the US Department of the Treasury—often emerge as the superior choice over Certificates of Deposit, or CDs.

Primarily, T-bills almost always carry virtually all of the benefits of CDs with a number of additional features and economic benefits—including tax benefits.

Taxes: Who wins, T-bills or CDs?

T-Bills Carry Tax Benefits

The interest income from T-bills, while still taxable at the federal level, is exempt from state and local taxes, presenting a notable advantage for investors in states with moderate-to-high state and local income taxes.

This state and local tax exemption enhances the after-tax yield of T-bills—the money you get to keep—and helps to contribute to more efficient returns on investment (ROI).

Conversely, the interest paid by CDs is fully taxable at the federal, state, AND local level, potentially reducing the net returns for investors. The tax-favored treatment of T-bill interest enhances their appeal as a tax-efficient investment, particularly for those seeking to optimize their returns while minimizing tax liabilities.

Liquidity: Who wins, T-bills or CDs?

T-Bills Have Exceptional Liquidity

Treasury bills are renowned for their exceptional liquidity in the financial markets. They are easily bought and sold, and offer distinct liquidity advantages over CDs.

As short-term bonds issued by the US Treasury, T-bills are actively traded in the secondary markets, enabling investors to easily buy or sell them—if they want—at prevailing market prices, even before their maturity.

This dynamic secondary market presence provides a high degree of liquidity, enabling investors to swiftly convert T-bills into cash without incurring significant transaction costs.

On the other hand, while CDs offer some liquidity, they often come with significant penalties for early withdrawals. T-bills carry no such penalties.

Safety and Risk: Who wins, T-bills or CDs?

T-Bills are Extremely Safe Investments

While we think of CDs as being the safest investment, Treasury bills hold a distinct advantage over certificates of deposit when considering safety and risk. T-bills are issued by the US Department of Treasury, and are backed by the full faith and credit of the US government. This government guarantee makes T-bills virtually risk-free, as, despite periodic political noise, the likelihood of US default is exceedingly low. This level of security provides investors with a safe haven for their capital, particularly during uncertain economic times. Conversely, CDs offered by banks are subject to the credit risk of the issuing bank, and as we know, it’s not unheard of for banks to fail.

T-Bills Have No FDIC Insurance Limits

With a bank CD, FDIC insurance limits are relatively low ($250,000 per depositor, per FDIC-insured bank, per ownership category), especially when compared to the limit-free US government insurance that T-bills provide.

Money earned: Who wins, T-bills or CDs?

T-Bill Yields are Often More Competitive

T-bill yields are often as competitive, and oftentimes more competitive, than the interest rates offered on CDs with comparable maturities, especially during periods of economic uncertainty or when interest rates are low. Take a look at T-bill rates today, compared with bank CD best rates, and see for yourself.

Though it might look like there is a clear-cut winner here, truth is, there are a lot of moving parts, and it’s important to consider all the elements involved. Before making any changes to your investment strategy, it’s a good idea to reach out to a certified, independent financial planner. One that is a fiduciary, that is—legally bound to act 100% in your best interests. All your life you’ve been working so hard for your money. It’s time to get THAT money to work for you.

Empower yourself with this strategy for financial independence, early retirement, and peace of mind.

More than a hot trend, FIRE investing principles have been guiding wealthy, independent people towards financial independence and early retirement for many decades. Implementing the Financial Independence Retire Early strategy takes discipline and commitment.

In this video, Towerpoint Wealth’s President, Joseph Eschleman, lays out the basics of this financial strategy. Click on the video image below to watch the video.

Consider: are you optimizing your lifestyle? Are you saving aggressively? Are you investing strategically? Will you be able to maintain a sustainable withdrawal rate post-retirement? These are essential pieces of the financial independence early retirement (FIRE) financial strategy.

Developing a customized financial and wealth management plan and strategy now will help you advance towards your personal and financial goals, grow net worth, and ultimately help you retire on your schedule. Time is money. Partnering with an advisor that understands you means you may spend less time worrying about this aspect of your life.

Are you curious about whether a FIRE investment strategy could work for you? Towerpoint Wealth serves clients primarily in the Northern California region with an annual household income exceeding $250,000. Please contact us with any questions you have about our wealth management process.

A 2020 survey from Schwab Retirement Plan Services found that the average worker expects to need roughly $1.9 million to retire comfortably. Is $2 million enough to retire? Is retiring with 2 million dollars a reasonable goal? There certainly are a myriad of moving parts involved in answering the question of whether retiring with 2 million is enough, and a number of things to consider.

Is $2 million enough to retire if you plan to live off interest alone? Is $2 million enough to retire if you plan to embark on expensive hobbies? Where you will live, and how? What will you need to cover health costs? These are just some of the financial complexities when you consider retirement.

Whatever the number you settle on as “enough,” click below for five steps you can take immediately to build and protect your net worth.

To learn more, download our white paper “Is $2 Million Enough to Retire?“