Understand the power of when in your finances
Tuesday, July 6, 2021
You have heard the saying, “the right place at the right time” a million times, I am sure. Perhaps it’s associated with being lucky or investing in a company that explodes to massive profits.
When I think of this as a financial services professional, I call it the power of when. Essentially, this is your ability to control an outcome by choosing “when” you do something. For example, “when” you elect your Social Security benefits will determine how much you collect over your retirement years.
If I said you could collect over $1 million in Social Security benefits, would that surprise you? It’s very possible for a married couple who earned a good living in their working years, but “when” they elect those benefits may prevent this from this coming to fruition.
You are eligible for normal retirement benefits at 62. Currently full retirement age for people born in 1955 is 66 and 2 months and 67 for anyone born in 1960 or later, with the maximum benefit occurring at age 70. There are several thousand combinations for a married couple who are both eligible for benefits. So the power of when is very relevant with how much you can collect based on “when” you commence your benefits.
Taxes are another realm that can have a significant impact from “when” you make a decision. An example here would be to decide whether to convert your traditional IRA to a Roth IRA. You would pay the taxes now to potentially have tax-free income in retirement on the converted amount. Maybe your taxable income is going to be lower this year, for whatever reason, and doing a conversion may make sense. Or perhaps you are thinking about selling your business and you have the flexibility to get payments over three years instead of one lump sum (thus causing your income to be taxed at the highest rate).
These are just two examples in the financial planning arena. Most people weigh pros vs. cons when making decisions, which is smart, but don’t forget about the power of when.
Advisory services are offered through Innovative Financial Planners, LLC, an Investment Advisor in the state of Missouri. Insurance products and services are offered through Innovative Insurance Consultants, LLC, an affiliated company.
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