Latest news with #NathanSebesta
CNBC
a day ago
- Business
- CNBC
The No. 1 mistake Americans in their 20s make with money, according to a CFP
Promotions are great, but heed with caution. The most common trap adults in their early 20s fall for when saving for the future happens around income increases, says Nathan Sebesta, a certified financial planner and owner of Access Wealth Strategies, a financial services firm in Artesia, New Mexico. In anticipation of a first paycheck or big promotion, Sebesta says many young adults will make lifestyle changes, like buying a new car or renting a nicer apartment, in accordance with or even by more than the raise. But that isn't necessarily conducive to saving, especially for retirement. Often, "the money is already spent before it even arrives," he says. Instead, Sebesta suggests taking a more a conservative approach. Try keeping the same standard of living or increasing it by a little, but not proportionally to the raise. Although "easier said than done," saving for retirement requires discipline, he says. Here are three strategies Sebesta advises his clients to use to ensure they are putting a healthy amount of money toward their savings. If you've never done so, going through your bank and credit card statements line by line can be extremely revealing, says Sebesta. Small, unnecessary purchases can quickly add up, easily costing some clients thousands of dollars each month, he says. Create a framework for your spending, and consider using a budgeting app — Sebesta says his favorite is Monarch — to track your expenses, or work with a financial advisor. While there are many strategies to pay down debt, Sebesta says he prefers his clients tackle the items that are "screaming the loudest," by addressing their largest debts by dollar amount first and then turning to those with the highest interest rates. But don't ignore the interest rates on your debt. Credit card debt, which hit a collective record high of $1.21 trillion among Americans in February, according to the Federal Reserve Bank of New York, is especially important to tackle because it often comes with a 20% to 30% interest rate — far higher than what most investments can reliably earn in the market, Sebesta says. A general rule of thumb is to have enough money to cover a month's worth of bills in your checking account and enough in your savings account to cover three to six months of expenses in case of emergency. After that, Sebesta says you can move on to funding investment accounts like a Roth IRA for retirement. The breakdown of money in liquid assets, such as a savings account, versus illiquid assets, such as investments in a retirement account that can penalize you if you decide to withdraw money before a certain age, should generally be a percentage equal to your age, Sebesta says. That means in your 20s, you'd ideally have roughly 20% of your money in cash and 80% of your money in the market. This is because the longer your money is invested in the market, the more opportunity it has to grow exponentially — increasing your potential returns. The returns accelerate over time because each year you're earning returns not just on your initial investment, but also on all previous gains. "Start as early as you can and save as much as you can," Sebesta says. "Time and the markets are your best friend. You can't get back those early years of investing." ,
CNBC
3 days ago
- Business
- CNBC
How much you should have saved by age 50, according to financial experts—and 3 steps to take if you're behind
Many Americans are anxious about their savings, especially as they approach retirement age. Over half of Gen Xers, those aged 45 to 60, say they have no more than three times their current annual income saved for retirement, according to a study commissioned by life insurance and financial planning provider Northwestern Mutual. This is significantly less than a benchmark set by Fidelity, one of the largest retirement plan providers in the U.S., which advises accumulating six times your current annual income by age 50 if you anticipate retiring at 67. Other experts take a different view. There's no magic number when it comes to saving for retirement, says Nathan Sebesta, a certified financial planner and owner of Artesia, New Mexico-based financial services firm Access Wealth Strategies. How much you anticipate spending every year of retirement and when you decide to retire can greatly affect how much you should have saved, Sebesta says. For example, those who plan on retiring later, as well as downsizing and living more frugally, may need less than Fidelity's benchmark, the report said. Additionally, the baseline amount you need can vary by as much as $1.49 million depending on what state you decide to retire in, according to an analysis by GOBankingRates earlier this year. To figure out how much you need, Sebesta recommends working backward. Start by deciding how much annual income you'll want in retirement and estimate how long you'll need that yearly income for. After taking that total and adjusting for inflation, you can determine how much you need to save each year and how your investments need to grow to hit that goal. If you're still feeling behind, Sebesta says there are a few other strategies you can consider to catch up and retire comfortably. "Don't panic," Sebesta says. "Start where you are and as soon as you can." While you can start claiming Social Security benefits as early as age 62, doing so means you'll receive a permanently reduced benefit. Alternatively, if you delay claiming benefits beyond full retirement age — 67 for Americans born after 1960 — your monthly payments could increase significantly, Sebesta says. For every year you wait up to age 70, your benefit grows by about 8%. That means someone born after 1960 who waits until 70 could receive up to 24% more than they would at 67. Once you turn 50, the Internal Revenue Service allows you to contribute more to various retirement plans in catch-up contributions. If you have a workplace retirement plan like a 401(k) or 403(b), you can contribute an extra $7,500 beyond the standard limit of $23,500, for a total of $31,000 in 2025. For those with an individual retirement account, the 2025 contribution limit is $7,000, plus an extra $1,000 in catch-up contributions for those 50 and older. These extra contributions not only help boost retirement savings but can also reduce your taxable income, which is especially valuable during high earning years in your 50s and 60s, Sebesta adds. Catch-up contributions are "definitely a neat benefit for people looking for more savings," Sebesta says, but they won't work for everyone: "You've got to be willing to put the money into the plan as well." If you haven't consistently contributed over the years or are struggling to keep enough cash on hand, finding the extra money to take advantage of these higher limits may be difficult. While it's not the ideal scenario, if you're significantly behind on retirement savings and working on paying off debt, Sebesta says you may have to consider lowering your expected lifestyle in retirement. If you have 10 to 15 years left to plan, the focus may need to shift to paying off debt and getting to a point where you can live on less in retirement, Sebesta says. This may look like scaling back on expenses, downsizing your lifestyle or living in a more affordable area. The last option would be to continue working in retirement. "No one ever dreams of that goal," Sebesta says. "But if they do delay for so long and are not able to catch up completely, that might be, sadly, one of the realistic opportunities that they would have." ,
Yahoo
15-05-2025
- Business
- Yahoo
My accountant said I'll have to pay back Social Security I already received if I retire mid-year. Is that true?
My tax preparer said that I should not retire mid-year because of my income level. She said I will have to pay back my Social Security. Do I need to take this into consideration? Ready to Retire My wife and I paid off my stepdaughter's $415K mortgage in exchange for her house, but it's now worth $310K. Should we sue? The retail buy-the-dip move paid off. What that crowd of investors is doing now, according to JPMorgan. Has the stock market's epic rebound come too far, too fast? What investors chasing the rally should keep in mind. My second wife says her 2 kids should inherit our estate, but I also have 2 kids. Is that fair? Why Friday's options expiration could send this historic stock-market rally skidding to a halt Related: My wife and I have $20 million and plan to retire in 5 years. What's our annual retirement allowance? As the saying goes, timing is everything. When you're financially, mentally and emotionally prepared to retire, there's no 'wrong' time of the year to do so. However, there are some ways to make it a more ideal time, and that is likely what your tax preparer was trying to tell you. Yes, it's true that a mid-year retirement can impact your taxes and Social Security, but it depends on a few factors. Also, you don't exactly 'pay back' your Social Security, but I will get to that in a minute. I don't know your income, but if you stop earning income in the middle of the year and then draw down from your retirement accounts and Social Security, your taxable income may be higher than expected. A much higher taxable income could affect your tax bracket, Medicare premiums and ultimate tax bill, said Nathan Sebesta, a certified financial planner and owner of Access Wealth Strategies. 'The key is making sure withholding and/or estimated tax payments are adjusted accordingly,' he said. 'As long as that's accounted for, retiring mid-year isn't inherently problematic. Planning ahead can smooth the transition and avoid any unpleasant surprises at tax time.' Retiring in the middle of the year can affect a few other things, too. For example, your health insurance. If you aren't 65 yet, you'll have to find healthcare another way. Keep in mind, many health-insurance deductibles are based on the calendar year and, even if you've already started paying toward it, you might have to start over toward a new deductible in the new plan, said Melissa Caro, a certified financial planner and founder of My Retirement Network. She brings up another good point: a pension. If you have a pension, the payout could be based on a formula that averages the highest three or five years of earnings. If you're at your peak earnings and you stop mid-year, you're essentially taking that year out of the running in the calculations, she said. Now for Social Security. It is true that the Social Security Administration does require people to pay back their benefits when there's been an overpayment, but your tax preparer may have been referring to the limit the program has on earned income when beneficiaries have already started collecting. Workers can claim Social Security benefits even if they're not retired yet, but if they're under their Full Retirement Age, or FRA, they may be subject to withholding of part of their benefits. For someone who is under FRA for the entire year, the Social Security Administration, or SSA, will deduct $1 for every $2 above the annual limit, which is $23,400 in 2025. For someone in the year of their FRA, the agency deducts $1 for every $3 up until FRA above a separate limit, which is $62,160 in 2025. Here's more from the SSA on that. Just know you do get that money back. The SSA will recalculate your benefit after your FRA, and there's no limitations once you hit that age. Also, remember that Social Security benefits can be subject to income taxes, too. That's a separate formula, but up to 85% of benefits can be taxable based on your income. One more consideration, per the advisers I asked: if you're up for a bonus, best to stick around for it. 'If your employer has a bonus or vesting program you would hate to work half the year and quit before you get paid on that bonus if they are paid at year end,' said Crystal McKeon, a certified financial planner and chief compliance officer at TSA Wealth Management. But the issue isn't that you shouldn't retire mid-year — just why waiting could be better for you, McKeon said. 'I think retirement is so individualized to each person that making a blanket statement that the worst time to retire mid-year would not give the proper attention to aspects of the particular clients' circumstances.' Your tax preparer's feedback needs more context, which happily you can now provide. My husband and I spend more money on our daughter and her family than on my single son. Do we compensate him? I have $50,000 in credit-card debt after my divorce, but received $30,000 after a car wreck. Do I buy a used Lexus? Wall Street's biggest bull held his nerve throughout this year's selloff. What he's saying now. 'I am scared to death that I'll run out of money': My wife and I are in our 50s and have $4.4 million. Can we retire early? These $5,000 bonds can help you fix a stock-heavy portfolio Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
