Secure Act 2.0: Tax Planning Tips

Tax planning for your retirement savings is also important. To help with that, you can typically choose between two account types as you save for retirement: Traditional IRA or employer-sponsored plans, or Roth versions of the same. 

All Things Roth

Either way, your retirement savings grow tax-free while they’re in your accounts. The main difference is whether you pay income taxes at the beginning or end of the process. For Roth accounts, you typically pay taxes up front, funding the account with after-tax dollars. Traditional retirement accounts are typically funded with pre-tax dollars, and you pay taxes on withdrawals. 

That’s the intent, anyway. To fill in a few missing links, the SECURE 2.0 Act:

  • Eliminates Required Minimum Distributions for employer-sponsored Roth accounts, such as Roth 401(k)s and Roth 403(b)s, to align with individual Roth practices (2024)
  • Establishes Roth versions of SEP and SIMPLE IRAs (2023)
  • Lets employers make contributions to traditional and Roth retirement accounts (2023)
  • Lets families potentially move 529 plan assets into a Roth IRA (2024 – as described above)

There’s one thing that’s not changed, although there’s been talk that it might: There are still no restrictions on “backdoor Roth conversions” and similar strategies some families have been using to boost their tax-efficient retirement resources. 

Speaking of RMDs

Not surprisingly, the government would prefer you eventually start spending your tax-sheltered retirement savings, or at least pay taxes on the income. That’s why there are rules regarding when you must start taking Required Minimum Distributions (RMDs) out of your retirement accounts. That said, both SECURE Acts have relaxed and refined some of those RMD rules. 

  • Extended RMD Dates (2023): the original SECURE Act postponed when you must start taking taxable RMDs from your retirement account—from 70 ½ to 72. The SECURE 2.0 Act extends that deadline further. If you were born between 1951–1959, you can now wait until age 73. If you were born after that, it’s age 75. 
  • Reduced Penalties (2023): If you fail to take an RMD, the penalty is reduced from a whopping 50% of the distribution to a slightly more palatable 25%. Also, the penalty may be further reduced to 10% if you fix the error within a prescribed correction window. 
  • Aligned RMD Rules for Personal and Employer-based Roth Accounts (2024): As mentioned above, RMDs have been eliminated from employer-based Roth accounts. If you’ve already been taking them, you should be able to stop doing so in 2024. 
  • Enhanced RMDs for Surviving Spouses (2024): If you are a widow or widower inheriting your spouse’s retirement plan assets, you will be able to elect to determine your RMD date as if you were your spouse. This provision can work well if your spouse was younger than you. As described here: “RMDs for the [older] surviving spouse would be delayed until the deceased spouse would have reached the age at which RMDs begin.”

An Addendum For Charitable Donors

One good thing hasn’t changed with SECURE 2.0: Even though RMD dates have been extended as described, you can still make Qualified Charitable Distributions (QCDs) out of your retirement accounts beginning at age 70 ½, and the income is still excluded from your taxable adjusted gross income, as well as from Social Security tax and Medicare surcharge calculations. Plus, beginning in 2024, the maximum QCD you can make (currently $100,000) will increase with inflation. Also, with quite a few caveats, you will have a one-time opportunity to use a QCD to fund certain charitable trusts or annuities. 

Next Steps

How else can we help you incorporate SECURE 2.0 Act updates into your personal financial plans? The landscape is filled with rabbit holes down which we did not venture, with caveats and conditions to be explored. And there are a few provisions we didn’t touch on here. As such, before you proceed, we hope you’ll consult with us or others (such as your accountant or estate planning attorney) to discuss the details specific to you. 

Come what may in the years ahead, we look forward to serving as your guide through the ever-evolving field of retirement planning. Please don’t hesitate to reach out to us today with your questions and comments.

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Reference Materials and Additional Reading:

Secure Act 2.0: Spending Today, Saving Tomorrow

It can be hard to save for your future retirement when current expenses loom large. We advise proceeding with caution before using retirement savings for any other purposes, but SECURE 2.0 does include several new provisions to help families strike a balance. 

  • Student Loan Payments Count as Elective Deferrals (2024): If you’re paying off student debt and trying to save for retirement, your student loan payments will qualify as elective deferrals in your company plan. This means, whether you contribute to your company retirement plan or you make student loan payments, your employer can use either to make matching contributions to your retirement account. 
  • Transferring 529 Plan Assets to a Roth IRA (2024): This one is subject to a number of qualifying hurdles, but SECURE 2.0 establishes a path for families to transfer up to $35,000 of untapped 529 college saving plan assets into the beneficiary’s Roth IRA. With proper planning, this may help families “seed” their children’s or grandchildren’s retirement savings with their unspent college savings.
  • New Emergency Saving Accounts Linked to Employer Plans (2024): SECURE 2.0 has established a new employer-sponsored emergency savings account, which would be linked to your retirement plan account. Unless you are a “highly compensated employee” (as defined by the Act), you can use the account to save up to $2,500, with your contributions counting toward matching funds going into your main retirement plan account. 
  • Relaxed Emergency Plan Withdrawals (2024): SECURE 2.0 relaxes the ability to take a modest emergency withdrawal out of your retirement plan. Essentially, as long as you self-certify that you need the money, you can take up to $1,000 in a calendar year, without incurring the usual 10% penalty for early withdrawal. Once you’ve taken an emergency withdrawal, there are several hurdles before you’re eligible to take another one.
  • Additional Exceptions to the 10% Retirement Plan Withdrawal Penalty (Varied): SECURE 2.0 has established new exceptions to the 10% penalty otherwise incurred if you tap various retirement accounts too soon. For example, there are several new types of public safety workers who can access their company retirement plans penalty-free after age 50. Various exceptions are also carved out if you’re terminally ill or a domestic abuse victim, or if you use the assets to pay for long-term care insurance. The Act also has modified how retirement plan assets are to be used for Qualified Disaster Recovery Distributions. Many of the new exceptions are fairly specific, so check the fine print before you proceed. 
  • Relaxed Emergency Loans from Retirement Plans (2023): If you end up living in a Federally declared disaster area, SECURE 2.0 also increases your ability to borrow up to 100% of your vested plan balance up to $100,000, with a more generous pay-back window. 
  • Expanded Eligibility for ABLE Accounts (2026): ABLE accounts help disabled individuals save for disability expenses, while still collecting disability benefits. Before, you had to be disabled before age 26 to establish an ABLE account. That age cap increases to 46. 
  • A Tax Break for Disabled First Responders (2027): If you are a first responder collecting on a service-connected disability, at least a portion of your disability payments will remain tax-free, even once you reach full retirement age and begin taking a retirement pension. 

Next Steps

If you missed the first part of the blog series, we discussed key provisions in the newly enacted SECURE 2.0 Act of 2022, including updates that impact (1) savers/investors and (2) employers/plan sponsors. Check in next week for the last part of this blog series, where we share tax planning tips under this new Act. 

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Reference Materials and Additional Reading:

Secure Act 2.0: Summary for Individuals and Employers

Who doesn’t enjoy tying up year-end loose ends? The original SECURE Act was signed into law on December 20th, 2019. Its “sequel,” the SECURE 2.0 Act, was similarly enacted at year-end on December 29th, 2022.

Both pieces of legislation seek to reform how Americans prepare for retirement while juggling current spending needs. How, when, or will each of us retire? How can government incentives, regulations, and safety nets help more people safely do so—or at least not get in the way? 

These are questions we’ve been asking as a nation for decades, across shifting socioeconomic climates. Throughout, a hard truth remains:

Employers and the government play a role in helping you save for and spend in retirement, but much of the preparation ultimately falls on you. 

Neither the original SECURE Act nor SECURE 2.0 has fundamentally changed this reality. SECURE 2.0 has, however, added far more motivational carrots than punishing sticks. Its guiding goal is right there in the name: Setting Every Community Up for Retirement Enhancement (SECURE). Following is an overview of its key components. 

Note: Implementation for each SECURE 2.0 provision varies from being effective immediately, to ramping up in future years. A few even apply retroactively. Many of its newest programs won’t effectively roll out until 2024 or later, giving us time to plan. We’ve noted with each provision when it’s slated to take effect. 

Saving More, Saving Better: Individual Savers

First, key provisions include several updates to encourage individual savers: 

  • Expanded Auto-Enrollment Requirements (2025): Because you’re more likely to save more if you’re automatically added to your company retirement plan program, auto-enrollment will be required for additional new retirement plans. Even with auto-enrollment, you can still opt out individually. Also, the Act has made a number of exceptions to the rules, including, as described here, “employers less than 3 years old, church plans, governmental plans, SIMPLE plans, and employers with 10 or fewer employees.” 
  • Higher Catch-Up Contributions (2024–2025): To accelerate retirement saving as you approach retirement age, SECURE 2.0 Act has increased annual “catch-up” contribution allowances for many retirement accounts (i.e., extra amounts allowed beyond the standard contribution limits); and, importantly, tied future increases to inflation. However, in many instances, the updates also require high-wage-earners ($145,000/year or higher) to direct their catch-up contributions to after-tax Roth accounts. 
  • Faster Plan Participation for Part-Time Employees (2024): If you’re a long-term, part-time employee, the SECURE Act of 2019 made it possible for you to participate in your employer’s retirement plan. With SECURE 2.0, you’ll be eligible to participate after 2 years instead of 3 years (after meeting other requirements). 
  • Saver’s Match for Low-Income Savers (2027): A Saver’s Credit for low-income families will be replaced by a more accessible Saver’s Match for those whose income levels qualify. While the credit offsets income on a tax form, the match will be a direct contribution into your retirement account, of up to $1,000 in government-paid matching funds.  
  • An Expanded Contribution Window for Sole Proprietors (2024): If you’re a sole proprietor, you’ll be able to establish a Solo 401(k) through the current year’s Federal income tax filing date, and still fund it with prior-year contributions. 
  • Potential Tax Error “Do Overs” (2025): To err is human, and often unintentional. As such, SECURE 2.0 has directed the IRS to apply an existing Employer Plans Compliance Resolutions System (EPCRS) to employer-sponsored plans and to IRAs. The details are to be developed, but as described here, the intent is to set up a system in which “most inadvertent failures to comply with tax-qualification rules would be eligible for self-correction.” 
  • Finding Former Plans (2024): It can be hard for company plan sponsors to keep in touch with former employees—and vice-versa. SECURE 2.0 has tasked the Dept. of Labor with hosting a national “lost and found” database to help you search for plan administrator contact information for former employees’ plans, in case you’ve left any retirement savings behind. 

Saving More, Saving Better: Employers

There also are provisions to help employers offer effective retirement plan programs: 

  • Better Retirement Plan Start-Up Incentives (2023): Small businesses can take retirement plan start-up credits to offset up to 100% of their plan start-up costs (versus a prior 50% cap). Also, businesses with no retirement plan can apply for start-up credits if they join a Multiple Employer Plan (MEP)—and this one applies retroactively to 2020.
  • A New “Starter 401(k)” Plan (2024): The Starter 401(k) provides small businesses that lack a 401(k) plan a simpler path to establishing one. Features will include streamlined regulatory and reporting requirements; auto-enrollment for all employees starting at 3% of their pay; a $6,000 annual contribution limit, rising with inflation; and a deferral-only structure, meaning the plan does NOT permit matching employer contributions.
  • Expanded SIMPLE Plan Contributions (2024): Under certain conditions, SECURE 2.0 allows for additional employer contributions to, and higher participant contribution limits for SIMPLE IRA plans. 
  • New Household Employee Plans (2023): Families can establish SEP IRA plans for their household employees, such as nannies or housekeepers.
  • Small Perks (2023): Until now, employers were prohibited from offering even small incentives to encourage employees to step up their retirement savings. Now, de minimis perks are okay, such as a gift card when a participant increases their deferral amount.

Next Steps

Stay tuned for the next part of this blog series, where we discuss strategies under the Secure 2.0 Act.

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Reference Materials and Additional Reading:

Letter to Clients on Market Volatility

Year to date, 2022 is in bear market territory across multiple markets. To place that news in meaningful context, we pose two questions: 

  1. In better times, had you boldly “pre-decided” what you would and would not do during the next bear market? 
  2. Even if you had disciplined bear market plans in place, have you been wondering whether you should un-decide anything anyway? 

Admittedly, it’s a tall order to whistle past the graveyard of recent market returns without being haunted by at least a dash of indecision. Given how unsettling many third quarter and year-to-date events and performances have been, you may struggle to un-notice the usual swarm of hand-wringing predictions and “this time it’s different” warnings about what may lie ahead. 

Perhaps the scariest part isn’t necessarily the numbers themselves, as much as the lingering uncertainty of it all. When will the pain end? 

Unfortunately, we can’t answer that, or guarantee the doomsday predictors aren’t right. But we can be inspired to reframe the uncertainty and understand what to make of it based on recent reflections from Dimensional Fund Advisors’ David Booth

“You can feel empowered by uncertainty instead of beaten down by it. Without uncertainty, there would be no opportunity. … If you think about it, the life equivalent of compound interest is wisdom. Learning from the past helps you make better decisions in the future, and those lessons build on one another over time.”

In that context, let’s look back to the last time we encountered some of the inflationary and potentially recessionary economic conditions we’re currently enduring. We now have the compound wisdom to know just how wrong an infamous 1979 BusinessWeek cover story turned out to be when it declared “The Death of Equities.” Eventually, BusinessWeek rolled into Bloomberg’s publications. Forty years later, in 2019, a Bloomberg columnist described how they were “still getting grief” about it:

“Three years after [“The Death of Equities”] appeared, the stock market hit bottom and then began a remarkable resurgence. The total return on the Standard & Poor’s 500-stock index since its 1982 low, with dividends reinvested, has been nearly 7,000%. Not bad for a corpse.”

It would’ve been a bad idea to give up on capital markets in 1979. It remains a bad idea to give up on them today, especially given the compound wisdom we’ve acquired since then. Durable, well-diversified asset allocation remains our best strategy in bull and bear markets alike. 

“Great investment experiences treat most portfolio decisions as non-decisions. They’ve been pre-decided, and are immune to market prices, sentiment, and human judgment. They remove agency, and thus reduce regret.” 

Rubin Miller, Fortunes & Frictions

We encourage you to recall everything we’ve already done to manage your globally diversified mix of stock, bond, and appropriate alternative investments. We’ve based your portfolio on the assumption that markets are durable over the years and frequently uncertain in real time (and yes, as we’re seeing, that can apply to bond markets, too). We can also discuss myriad bear market actions worth considering at this time, such as:

  • Sticking with your well-planned portfolio mix (reallocating when appropriate for your personal financial goals).
  • Periodically rebalancing to stay on target. 
  • Tax-loss harvesting in your taxable accounts.
  • Adding even more investable assets to your portfolio while prices are low (especially if you’ve got a long time to invest). 
  • Taking a close look at your discretionary spending (especially if you’re in early retirement).

How else can we assist you and yours at this time? Please let us know if we can answer any questions about current market conditions, or anything else that may be on your mind.

Kirsten C. Cadden, CFP®

Associate Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Five Financial Best Practices for Year-End 2022

To say the least, there has been plenty of political, financial, and economic action this year — from rising interest rates to elevated inflation to ongoing market turmoil. 

How will all the excitement translate into annual performance in our investment portfolios? The answer remains to be seen. But, while we wait to find out, here are five action items worth tending to before 2022 is a wrap. 

  1. Revisit Your Cash Reserves

Where is your cash stashed these days? After years of offering essentially zero interest in money markets, savings accounts, and similar platforms, some banks are now offering higher interest rates to savers. 

Shop around: If you have significant cash saved up, now may be a good time to compare rates on cash accounts. We can help if you need guidance exploring the options.

  1. Put Your Money to Work

If you’re sitting on more cash than you need in your emergency reserve, you may be able to put it to even better use under current conditions. Consider the following:

Lighten your debt load: Carrying high-interest debt is a threat to your financial well-being, especially in times of rising rates. Consider paying off credit card balances or other debts. Avoid accruing new debt during the holiday season. 

Invest: Reach out to your lead advisor to determine what your opportunities are to put some cash to work in the markets.

  1. Make Some Smooth Tax-Planning Moves 

Another way to save more money is to pay less in taxes. Here are a couple of year-end ideas: 

It’s still harvest season: Market downturns often present opportunities to engage in tax-loss harvesting by selling taxable shares at a loss, and promptly reinvesting the proceeds in a similar (but not identical) fund. You can then use the losses to offset taxable gains, without significantly altering your investment mix. If you have a non-retirement brokerage account with us, we’ve already been doing this on your behalf.

Maximize tax opportunities: Make sure you are taking advantage of your 401(k) and other tax-deferred investment opportunities. With only a few paychecks left in 2022,  you’ll want to make sure your contributions are optimized.

  1. Check Up on Your Healthcare Coverage 

As year-end approaches, make sure you and your family have made the most of your healthcare coverage. Take a moment to examine all your benefits. For example, if you have a Health Savings Account (HSA), have you funded it for the year? If you have a Flexible Spending Account (FSA), have you spent any balance you cannot carry forward? If you’ve already met your annual deductible, are there additional covered expenses worth incurring before the meter resets in 2023? If you’re eligible for free annual wellness exams or other benefits, have you used them?   

  1. Get Set for 2023 

Why wait for 2023 to start anew? Year-end can be an ideal time to take stock of where you stand and consider what you’d like to achieve in the year ahead.  

Audit your household interests: What has changed, and what hasn’t? Have you shifted careers or decided to retire? Added new hobbies or encountered personal setbacks? How might these and other significant life events alter your ideal investment allocations, cash-flow requirements, insurance coverage, or estate plan?

How Can We Help?

How else can we help you wrap 2022 and position you and your loved ones for the year ahead? 

Whether it’s helping you manage your investment portfolio, optimizing your tax planning, considering your cash reserves, weighing insurance offerings, or assessing any other components that contribute to your financial well-being, we stand ready to assist — today, and through the years ahead. 

Cary Facer

Wealth Advisors, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Celebrating Tustin, Dino Dash Style

As proud Tustin residents, Warren Street was thrilled to support the Tustin Public Schools Foundation at the 31st annual Dino Dash, a community walk-run event. The Tustin Public School Foundation uses proceeds from the event to support initiatives such as sports programs, robotics programs, and grants to teachers for enrichment programs.  

Our Director of Financial Planning, Emily Balmages, CFP®, CRTP has participated in the event for nearly a decade with her family and views it as a highlight of her year. 

Director of Financial Planning Emily Balmages and her daughter, Lola and son, Max in 2011.

“I was raised in the Tustin School District, and now my kids are receiving an education there,” Emily said. “It’s such an impressive school district — from the quality of education and diversity of the student body to the quality of teachers and staff. I’ve seen the great things these kids end up doing — personally, professionally, and in their communities.”

Director of Financial Planning Emily Balmages and her son, Zach, at the 2022 event.

Emily’s Tustin pride runs deep, and the entire Warren Street team also shares that passion for the city that we call home. This year, Emily and her son, Zach, were joined by a number of other Warren Street team members at the Dino Dash: Founding Partner and President Cary Facer and his sons, Reed and Grant, and Client Service Associate Aileen Obedoza.

The boys ran the race together, while the rest of the team manned the popular Warren Street booth (the spin-the-wheel game was a hit!). All in all, nearly 8,000 people attended the event.

Founder and President Cary Facer with Client Service Associate Aileen Obedoza.

As Founder and President Cary Facer put it, “I was blown away by the turnout and amount of people who stopped by to spin the wheel! Seeing the community come out to support all the runners reminds me why it’s so important to get involved and give back to the local community.”

Grant and Reed Facer post-race.

Grant and Reed Facer, Cary’s 10- and 8-year-old sons, agree. “I liked running with Zach and Reed. The best part was just hanging out and talking,” Grant said.

At the heart of Warren Street’s mission is to put clients first in all things, and that commitment extends to our community. We were proud to support such a meaningful mission and have a feeling we’ll be back next year!

Jennifer La

Marketing Manager, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Essential Financial Planning for Expecting Parents

You just learned that you are going to have a new baby or child join your family, by birth or adoption. It’s an exciting time! As you start to make preparations you will quickly discover that there is a seemingly endless list of things to do, items to buy, books to read, and classes to take. 

Despite what the targeted ads and influencers may tell you, it doesn’t matter too much if your bundle of joy has state-of-the-art nursery gear or the trendiest stroller on the market. But there are a few financial planning considerations that will make a world of difference for your family and your child’s well-being.

1. Estate Planning

As soon as you become responsible to care for a dependent, basic estate planning documents are essential. You may think you don’t currently have an estate plan if you have not drafted a will or trust, but guess what? You actually do have an estate plan! It was written for you by federal and state law and will be administered by a court (at your estate’s expense). If you pass away you can either rely on the state’s estate plan for you, or you can have the peace of mind that comes from writing your own estate plan that is specific for your wishes and your family’s best interests.

At a minimum, all parents (or anyone with financial dependents) should have (a) a will that includes guardianship designations, (b) an advanced health care directive, and (c) a durable power of attorney. Many parents or guardians will also want to establish a trust.

In addition to drafting these documents, we also recommend making sure that you have named non-minor primary and contingent beneficiaries on all your financial accounts and life insurances. At your death, many accounts will simply pass to the named beneficiaries on file. 

Check out our post Estate Planning: A Checklist of Essentials for more valuable guidance as you review your estate planning.  

2. Life Insurance

If you were to pass away tomorrow, your partner and/or children would most likely need additional financial support. The cost of a funeral, additional child care, extra time off work, and covering everyday expenses and bills can add up. Not to mention the desire many parents have to help with specific expenses, such as education, for a child. Life insurance can fill that gap and provide vital support and peace of mind to your family during a difficult time. 

Whatever role you serve in your household, there is a cost to your absence. If you are an income-earner for your household, the loss of your income would need to be supplemented for your family. If you are the primary caretaker of children and household manager, your labor would need to be replaced. Life insurance is for everyone with dependents, no matter their income-earning or employment status.

Term life insurance is usually inexpensive and easy to obtain. We strongly recommend term life insurance for all parents or those with dependents. 

3. Extra Cash Savings

The cost of having a baby is no small thing. There are baby essentials to buy, doctor’s appointments to attend, and the labor and delivery bill at the end. It can add up to thousands of dollars to bring a new life into the world, and that is without a single complication. Additional medical care, a NICU stay, or any other unexpected circumstances can compound the bill.

When you find out that you, or your partner, is pregnant, you should start making plans for your cash flow needs. Remember that so much of the next 9-12 months is unpredictable for your bank account, so having a larger-than-average cash reserve is a good idea. 

Medical care and baby items are the first expenses that come to mind when planning for your new child. But it is wise to also consider what other large expenses may come up during the pregnancy and postpartum period. Your savings account during this time has to do double duty as a baby preparedness fund and an ongoing emergency fund.

Consider two of the biggest culprits for emergency fund withdrawals – home repairs and car repairs. Do you have a lingering issue with a home appliance that is going to require a repair or replacement any day? Is your old car on its last leg? Is there anything in your house or car that needs to be addressed to ensure safety for your little one? Keep in mind that these non-baby expenses can and should be part of all the other preparations.

There is no hard fast rule for how much to save for a new baby, but having easily-accessible cash in a savings account is a must. If your emergency fund is slim, it may be time to pause aggressive debt repayment plans, saving for your next vacation, or excessive spending on non-essentials and put that extra cash in savings. Once you have returned to a more predictable financial situation, you can reevaluate your budget and priorities and return to your usual emergency fund and other financial goals.

4. Know Your Legal Rights and State Benefits

The state that you work in may have specific laws that require your employer to provide a certain amount of leave for pregnancy-related disability and/or bonding with a new child. Your state may also have paid leave or disability pay available for pregnancy and the postpartum leave period. You should carefully research your legal rights as a worker in your state and be familiar with all the benefits available to you.

In California, there are three laws or resources available to support you during pregnancy and postpartum and to bond with a new child: the Family and Medical Leave Act (FMLA), Paid Family Leave (PFL), and State Disability Insurance. FMLA legally protects the ability of eligible employees to take up to 12 workweeks of unpaid leave a year. PFL provides up to 8 weeks of payments for lost wages due to time off work to bond with a new child. State Disability Insurance may provide payments during pregnancy and postpartum recovery if you are unable to work.

Visit the following state websites to learn more about these California benefits:

Family and Medical Leave Act

FMLA Frequently Asked Questions

Am I Eligible for Paid Family Leave?

Disability Insurance – Pregnancy FAQs

5. Know Your Employer’s Policies and Make a Plan

On top of any legally-required paid or unpaid leave, your employer likely has their own company policies related to family leave. Ask your HR representative for all the information you can get about these policies. Start making a plan for how you (and your partner, if applicable) will take leave and how you will bridge any gaps in income during this time.

Your ability to negotiate paid or unpaid leave depends on various factors, but many employers are becoming more family friendly. Talk with a trusted supervisor or manager about your options. Don’t be afraid to negotiate and ask for what you need in terms of additional paid time off, schedule flexibility, or extended leave. 

– – – 

Are you expecting a little one? First – congratulations! If you feel like now is the time to get the support of a financial professional for your growing family, contact Warren Street for a free one hour consultation.

Kirsten C. Cadden, CFP®

Associate Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Meet the Team: Emily Balmages, CFP®, CRTP

Welcome to our current edition of “Meet the Team.” We sat down with Emily Balmages, Director of Financial Planning at Warren Street, to learn more about her role, hobbies, and goals for the future. Join us in getting to know Emily below!

In your role as Director of Financial Planning, how do you assist Warren Street’s clients?

In collaboration with the rest of the team, I help families organize their finances. We proactively work to help them find ways they can grow their assets and portfolios, while saving on taxes.

Most importantly, our team is here to make sure clients have a professional in their corner, looking after the big-picture of their financial lives. Our goal is to take financial management off their plates, so they can focus on doing things they enjoy — whether that’s traveling, running their own business, spending more time with loved ones, or enjoying the retirement that they have worked so hard to save for.  Clients can trust us to watch over the financial aspects of their lives. Most of my clients have spent the bulk of their lives working hard to get to the point where they can retire – I want to help them enjoy it! 

On a personal level, as director, it’s my job to make sure we consistently deliver a high-quality experience to clients. That means keeping our team educated on industry happenings and tax law changes; managing our network of professional partners (CPAs, attorneys, and insurance agents); and researching emerging technology solutions.

How does Warren Street align with your personal values?

The top core value at Warren Street is putting our clients’ best interests first. This aligns perfectly with my personal value of “Do the right thing, no matter what,” even if it’s hard, even if it’s scary. I try to live by that rule in my personal life — and that commitment extends seamlessly into my professional life at Warren Street, where we are all Fiduciaries committed to acting in our clients’ best interests.

Another personal value of mine that I share with Warren Street is how family-oriented our group is. We are all 100% committed to our work but also 100% committed to our families, and that’s something I value a lot. Every leader here wants each person to succeed in their job, while still having a strong family life. 

What do you love most about working at Warren Street?

For one, I love my clients!  Often our relationships extend beyond financial conversations and we get to become close friends.  I also love that I get to work with the incredible Warren Street team — truly hardworking, thoughtful, generous people.  

Who or what motivates you?

I was raised by wonderful parents. They were always so dependable, generous, and considerate of the people around them. I am very inspired to reach that same level in both a personal and professional capacity.

I’m also passionate about financial literacy: simplifying financial advice to help families and individuals understand financial topics. It’s my goal to help people feel confident about their financial situations and the decisions they’re making — especially when going through life transitions such as a retirement, birth, marriage, divorce, or death. Those events can be a shock to our lives and a shock to our financial goals.  Knowing I can help people weather those storms is incredibly motivating. 

What are three fun facts about you?

  1. I can juggle. My dad taught me when I was very young. It’s a rite of passage in my family that the kids learn to juggle at a young age!
  2. We go to the UC Berkeley family camp in the Sierras — Lair of the Golden Bear — every year. I’ve attended since my childhood and I enjoy  continuing the tradition with my family.
  3. My 19-year-old daughter and I became weightlifting partners during the pandemic, and we love it! We go three days a week and have a lot of fun with it. 

What are your aspirations?

Professionally, I aspire to carry on Cary and Blake’s momentum with the firm, continuing to scale and grow Warren Street while still providing client-focused service, based on relationships.

Personally, my husband and I are on a mission to try every brewery in Orange County (recommendations welcome). 🙂

Have questions about your finances? Emily will be happy to meet with you and address any questions you may have. Click here to schedule a complimentary consultation with her. 

Veronica Torres

Director of Operations & Chief Compliance Officer, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Tax Loss Harvesting: How to Make the Most Out of Market Volatility

When we invest money, our main objective is to see the money grow. When we think about market losses and downturns, we may think of painful periods where we watch our account balances decrease instead of grow. While market losses are never fun, they are unfortunately a part of the normal investment life cycle. However, when market volatility hands us losses, there are some options to make lemonade out of lemons.  

What is tax loss harvesting?

Tax loss harvesting is the process of selling securities while they are at a loss, realizing that loss for tax purposes, and then redeploying that money into another investment (such as a different stock, bond, or mutual fund). The IRS does not allow you to sell an investment at a loss, receive the tax benefit, and then immediately reinvest those proceeds into the exact same security right away. Selling a security and re-purchasing it within the same 30-day window is called a “Wash Sale.” You can avoid triggering the Wash Sale rule by investing in something similar but different enough to avoid having the rule apply.

While most people will tend to do this only once at year end, this is actually something that can be done at any time in the year with no limit as to how frequently you do so. With custom indexing and commission-free trading, frequent tax loss harvesting has become more achievable than ever. In years of high volatility, frequently harvesting tax losses can have a big impact on your tax bill.  

Keep in mind that for this strategy to work, you must have capital invested in a taxable, non-retirement brokerage account. Your 401(k) and IRA are not eligible for tax loss harvesting.

How does it benefit you?

In years of extreme volatility, you may be able to accumulate a large amount of tax losses in a short period of time. These losses can then be used to offset future capital gains.  If you end up with more tax losses than you have gains to offset them in any given year, you can use the losses to offset up to $3,000 of ordinary income on your tax return.  

You will be able to carry forward an unlimited amount of these losses into future tax years until you’ve been able to use them up.

Tax loss harvesting can be especially useful for investors who might have highly concentrated company stock with a large amount of unrealized gains, or other legacy investments that they’ve been holding onto to avoid a large tax impact. These tax losses can be used to help decrease single stock risk and sell off legacy assets with little to no tax impact.

What are the next steps?

If you are a Warren Street client, we are already doing this for you (as applicable).  For clients with larger taxable brokerage accounts invested in our custom indexing strategy, you will likely see tax loss harvesting happening on a more frequent basis.  

All in all, seeing losses reported on your Form 1099 form is not necessarily a bad thing. While your long term objective remains the same in terms of seeking growth, taking advantage of short term volatility through tax loss harvesting can lead to a nice tax perk that can aid in your overall financial return on investments in the long run.

If you have any questions or would like to speak with one of our advisors for complimentary portfolio review, you can schedule a consultation here

Justin Rucci

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Meet the Team: Veronica Cabral

Welcome to our current edition of “Meet the Team.” We sat down with Veronica Cabral, Director of Operations and Chief Compliance Officer at Warren Street, to learn more about her role, hobbies, and goals for the future. Join us in getting to know Veronica below!

In your role as Director of Operations and Chief Compliance Officer, how do you assist Warren Street’s clients?

I manage all our business processes and workflows on the backend, so our associates and advisors have a streamlined process when serving our clients. 

In my new role as Chief Compliance Officer, I also keep an eye on everything compliance-related to make sure we have the right systems and programs in place to protect our clients. 

How does Warren Street align with your personal values?

At Warren Street, we have a really big emphasis on putting clients’ best interests first and always being transparent and honest. I try to lead a similar life personally with my family and friends. I like to try to put others first and consider how my actions affect them. I’m also really big on being open, honest, and transparent. I carry those values back and forth between work and my personal life. 

What do you love most about working at Warren Street?

What I love most is the flexibility I’ve had with my role. What I mean by that is at a really large corporation, I might have gotten boxed into a specific role. Because we are a smaller firm, I’ve been able to grow and take on many responsibilities quickly. I really appreciate the flexibility and trust that Cary and Blake have placed in me to explore and not just stay comfortable.

What is your biggest accomplishment thus far?

Professionally, taking on the role of Chief Compliance Officer. It’s definitely a lot of responsibility, but I’m thankful for the trust that’s been placed in me.

Personally, my biggest accomplishment has been my husband and I buying our house!

Who or what motivates you?

I was born in Mexico, so my parents came here when I was two. Knowing that they left what was super comfortable for them back home to come here to fight for a better life motivates me to honor their sacrifice. I want to make sure that we are always getting better with every generation. My family and husband both motivate me every day to be my best for them. 

What are your aspirations?

Professionally, I’d love to stay at Warren Street and continue to grow with the company. 

Personally, I hope to build on my Vee Make Cents brand, expanding the platform and formalizing educational programs that empower young women to get more comfortable with money. 

What are three fun facts about you?

1. I was born in Mexico, and Spanish was my first language. I’m still fluent. I didn’t start learning English until kindergarten, and I wasn’t immersed in an English classroom until third grade.

2. I played water polo in high school. (I started swimming first, which is normally done in reverse order!) I was one of the smallest girls on the team, but I tried to keep up.

3. My husband and I just spent six months on a new home build. We currently have no decor, so all suggestions are welcome! 

If you would like an introduction to Warren Street, but only speak Spanish, Veronica can join calls to help translate and address any of your questions. Click here to schedule a complimentary consultation with her. 

Cary Facer

Founder and Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.