Servion Financial Advisors Newsletter June 2021

JUNE 2021

In This Issue An Introduction to Annuities 6 Ways to Save More for Retirement 4 Benefits of Rolling Your 401(k) into a Rollover IRA 5 Tips for Couples Managing Their Finances Together

annuities an introduction to

Annuities are financial products for those seeking stable retirement income guaranteed by an insurance company. They are a popular choice for investors who want to receive a steady income stream in retirement.

At a basic level, here’s how an annuity works: you make an investment in the annuity, and it then makes payments to you on a future date or series of dates. The income you receive from an annuity can be doled out monthly, quarterly, annually or even in a lump sum payment.

Money that you invest in an annuity grows tax-deferred. When you eventually make withdrawals, the amount you contributed to the annuity is not taxed, but your earnings are taxed at your regular income tax rate.

The size of your payments is determined by a variety of factors, including the length of your payment period.

You can opt to receive payments for the rest of your life, or for a set number of years. How much you receive depends on whether you opt for a guaranteed payout (fixed annuity) or a payout stream determined by the performance of your annuity’s underlying investments (variable annuity).

There are four types of annuities: • Income annuities provide a guaranteed stream of income starting now or in the future.

• Fixed annuities provide growth at a guaranteed interest rate with no risk of market loss.

• Index-linked annuities pay interest at either a fixed rate or based on the performance of an index.

• Variable annuities let you invest and potentially grow your retirement savings.

While annuities can be useful retirement planning tools, one downside is that they sometimes have high expenses. Before investing in an annuity, it is a good idea to speak with a financial advisor who can explain whether this type of product is a good fit for someone in your situation.

The guarantee of the annuity is backed by the claims paying ability of the issuing insurance company. There is a surrender charge imposed generally during the first 5 to 7 years that you own the contract for variable annuities. Withdrawals prior to age 59 ½ may result in a 10% IRS tax penalty, in addition to any ordinary income tax. The guarantee of the annuity is backed by the financial strength of the underlying insurance company. Investment sub-account values will fluctuate with changes in market conditions.

Source: https://money.cnn.com/retirement/guide/annuities_basics. moneymag/index.htm?iid=EL

6

Ways to Save More for Retirement

Enjoying your retirement years is all about having a savings and spending plan during your working years. If you’re like many Americans, though, you may not have confidence that your current savings habits will get you where you want to be.

These six ideas can help you save more so you can maximize your golden years.

1. Start planning now “Unfortunately, many people wait until they are almost ready to retire to start planning for retirement,” said Patricia Wenzel, president of the National Association of Plan Advisors in an interview with CNN Money. The earlier you get started, the better. One idea is to pick a desired retirement age, and then work backwards to figure out whether you need to up your savings rates or cut your spending.

2. Save as much as you can Most experts suggest saving anywhere between 10 percent to 15 percent of your gross salary, which includes contributions you may receive from your employer.

Saving more is better, if you can afford to, of course. And once again, timing matters: the

sooner you start saving, the more time your money has to potentially grow.

3. Don’t just save it, invest it The power of compound interest is remarkable. Stashing your money in a regular savings account will earn you next to nothing, whereas investing it can earn you a substantial amount. You can invest by putting money in a 401(k) plan at work, where you can get matching contributions if your employer offers them. Other investment options include individual retirement accounts (IRAs), health savings accounts (HSAs), and annuities. Your financial advisor can help you decide what investing methods may fit you best.

4. Watch your spending Cutting back on spending is another way to

save. Take the time to set up a budget and then stick to it. When you sit down and really examine your monthly spending, you might be amazed to see where your dollars go, and find expenses you could easily cut back on or even eliminate.

5. Pay off debt before retiring Carrying debt into retirement means you’ll have to use retirement funds to pay it off.

Paying off big ticket items like your house, cars, student loans and credit cards before you retire helps preserve your nest egg longer.

6. Understand withdrawal rules Withdrawing too early from retirement accounts can lead to costly penalties and

income taxes, which only eat away your funds. There are different withdrawal rules depending on account type and your age, so speak with your financial advisor in the years and months leading up to retirement so you don’t make a mistake by withdrawing from the wrong account too early.

Talk to a financial advisor.

The Servion Financial Advisors team is dedicated specifically to helping credit union members. To set up an appointment, visit servionfa.com or call 651-631-3111.

Source: https://www.cnn.com/2021/04/22/success/ how-to-avoid-running-out-of-money-in-retirementfeseries/index.html Registered Representative(s) of and securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA, SIPC, a Broker/Dealer and a Registered Investment Advisor. Securities and investments products are: Not FDIC/NCUSIF insured - May lose value - Not financial institution guaranteed - Not a deposit - Not insured by a federal government agency. Cetera is under separate ownership from any other named entity.

4 Benefits of Rolling Your 401(k) Into a Rollover IRA If you contribute to a 401(k) at work, what happens to the money in your account when you retire, get a new job or otherwise leave the company?

All the money you’ve contributed to your 401(k) is yours to keep. And, if your employer contributed a match, you are entitled to keep that as well, so long as you are “fully vested.” Different plans have different vesting schedules; for example, your company might require you to work X number of years before you are fully vested. If you leave before becoming fully vested, you may not be able to keep all the employer contributions.

What You Can Do With Your Old 401(k) When you separate from your company, there are four ways you can handle your 401(k): 1. Cash out of the plan 2. Leave the money in the plan 3. Roll over into your new employer’s qualified plan 4. Roll over to an IRA The cashing out option is rarely a good idea.

In fact, most advisors consider cashing out one of the top retirement planning mistakes to avoid. Though leaving your money in your former employer’s plan or rolling it over to a new employer plan are both fine options,

don’t disregard the opportunity to roll your funds into a rollover IRA. A rollover IRA comes with its own set of strategic benefits and when executed properly, ensures you don’t trigger any negative tax consequences.

Benefits of a Rollover IRA Before deciding whether to retain assets in a 401(k) or roll over to an IRA, an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock. Please view the Investor Alerts section of FINRA’s website for additional information.

Click here for a comprehensive discussion of things to consider before doing a rollover.

An Advisor Can Help You With Your Old 401(k) A retirement and investment professional from Servion Financial Advisors would be happy to provide more details on options for handling your old 401(k).

Continued Tax Deferral:

More Investment Choices:

One big advantage of an IRA rollover is the continuation of the tax-deferred treatment you had at your workplace retirement account. What’s more, no tax is owed on a properly executed rollover, although it is a reportable transaction to the IRS.

Within a 401(k) plan, your investment options are limited to the choices provided by your plan custodian and employer. Often, these choices are sufficient, but rarely are they extensive.

With a rollover IRA, you can choose to put your money in virtually any mainstream investment imaginable.

Possibly Lower Fees:

More Investment Choices:

Some employer-sponsored 401(k) plans have high administrative fees.

These fees are not enough to make contributing to the plan a bad deal, but it makes more sense to keep those retirement assets growing in a similarly tax-advantaged option. IRAs tend to have lower fees, if any, depending on where and how you open the account.

Instead of juggling multiple former workplace retirement accounts as you switch jobs over the course your career, consistently rolling over your plans to a single rollover IRA reduces complexity. You can look at one account statement and see the balance, recent performance, and investment selections of most of your retirement savings from one account.

Source: https://www.thebalance.com/benefits-of-rolling-your-old-401-k-into-a-rollover-ira-2894485

5 Tips for Couples Managing Their Finances Together It can be a challenge to track your own spending and stick to a budget. Add a second person to the mix and it can get even trickier. You might think it’s no big deal to drop $100 on a pair of shoes, but your partner might think it’s way too much. When you and your partner can talk openly about money, you can reduce potential conflict and at the same time get comfortable with where your financial lives are headed.

Source: https://www.cnn.com/2021/04/05/success/how-to-budget-couple-feseries/index.html

1

Start talking “Being willing to share your financial picture with another person helps build trust,” according to Mandi Woodruff, chief consumer advocate at Ally. Talking about money is the first step to financial planning as a couple. It can be uncomfortable – most Americans are taught not to talk about money – but you need to understand each others’ financial position so you can build a stable budget.

2

Keep talking The money conversation shouldn’t be just a one-time thing. Set up regular “dates” where you discuss finances, see how you’re progressing toward your goals, and then make any adjustments. Talking steadily helps normalize the money conversation and helps avoid surprises.

3

Track your spending Both of you should track your spending for several months in a row. This helps you understand where your money goes. You can then find areas to cut back on, if necessary, and then create a real budget that you can stick to.

4

To merge or not to merge There are three common approaches to budgeting as a couple: • Merge everything together and share income and expenses; • Create a joint account that you both contribute to for shared expenses while also keeping separate accounts; or • Keep everything in separate accounts and split the bills.

You might consider, for example, splitting expenses 50/50 if your salaries are about equal, but if one earns a lot more then perhaps that partner would pay a larger percentage.

5

Set goals You and your partner will have some shared savings goals, like a wedding or buying a house. You’ll also each have individual goals – maybe one wants to save for a vacation but the other would rather buy a car. You can have different goals, just make sure you’re honest about them and then document your spending and savings habits as you work toward them.

651-631-3111 • servionfa.com

Although it is possible to have guaranteed income for life with a fixed annuity, there is no assurance that this income will keep up with inflation. There is a surrender charge imposed generally during the first 5 to 7 years or during the rate guarantee period. Index annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company, not an outside entity. Investors are cautioned to carefully review an index annuity for its features, costs, risks and how the variables are calculated. The guarantee of the annuity is backed by the claims paying ability of the issuing insurance company. Variable Annuities have a surrender charge imposed generally during the first 5 to 7 years that you own the contract. Withdrawals prior to age 59 ½ may result in a 10% IRS tax penalty, in addition to any ordinary income tax. The guarantee of the annuity is backed by the financial strength of the underlying insurance company. Investment sub-account values will fluctuate with changes in market conditions.

Registered Representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker-dealer and a Registered Investment Advisor. Investments are: • Not FDIC/NCUSIF insured • May lose value • Not financial institution guaranteed • Not a deposit • Not insured by any federal government agency. Cetera is under separate ownership from any other named entity. 500 Main Street, Suite 100, New Brighton, MN 55112. 651-631-3111.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.