The Risks of Bonds 

The Risks of Bonds 

If you’re a conservative investor nearing retirement, a large chunk of your portfolio probably consists of bonds. You may believe your money is safe, and that you’re guaranteed to make money from your investment. While bonds are generally safer than stocks, they are by no means risk-free. In fact, bond investments are a lot riskier than you may have been led to believe. With the combination of default risk, interest rate risk, inflation, and low rate of return, your investment, and your retirement, could be in jeopardy.  

The bond market is changing, here’s what you need to know. 

What is a bond? 

A bond is an agreement between you as the lender and another party as the borrower. That borrower could be a government, a corporation, or even a municipality. To simplify bonds, let’s think about them in terms of an investor loaning money to a company. That company will give the investor regular interest payments for a period of time, typically 10 or 20 years. At the end of that time period, the investor receives their original money back. 

Things get a bit more complicated when bonds are openly traded on the public market. When you go to buy a market bond, that bond is priced according to what the market will bear. These bond prices will rise and fall as interest rates rise and fall. 

Interest Rate Risk of Bonds 

Interest rates and bond prices are inversely related. When interest rates decrease, bond prices increase. For the past 20 years, interest rates have been falling, causing bond prices to go up. However, experts argue that we may be at the bottom of this trend. As the federal reserve tries to combat inflation by raising interest rates, bond prices will go down. This will decrease the value of the bonds you hold. 

There’s a rule in the financial services industry called the 10-1-10 Rule. A ten-year duration bond with a 1% interest rate movement causes a 10% price movement in the opposite direction. For example, if you bought a 10-Year Disney bond for $1000, and interest rates move up 1%, tomorrow the value of your bond will now only be worth $900, which is a 10% loss. 

This may not seem like a huge problem if you only have a few bonds of low value. But, if you’re retiring soon and have a million-dollar portfolio full of bonds, you could be in serious trouble. Rising interest rates, paired with the low rate of return bonds tend to have, could mean you’re taking a lot of risk for very little reward. 

If you consider yourself a conservative investor, be wary. The bond market is changing second by second. 

Default Risk of Bonds 

Many conservative investors believe that their individual bond investments are completely safe, but that isn’t the case. There is always a chance that the borrower will not be able to repay the loan. This is called default risk. 

Take this story for example. In 2011 General Motors needed a bailout. The government stepped in and essentially forced the bondholders to take zero for the money they had in that individual bond. The bondholders got nothing for their investment and lost their capital. 

Some bonds have greater default risk than others. Many consider government bonds to be the highest rated, with nearly zero risk of being defaulted on. However, corporate bonds are a bit riskier. 

One way to avoid default risk is to invest in a bond fund. This way, your money is spread out, not in one company. However, avoiding this risk comes at a cost – administrative costs specifically. Many bond funds have costs and fees built into them that clients may not be fully aware of.  

Alternatives to Bonds 

So, how can you avoid all these risks while still getting a good return on investment? There are many alternatives available to individual bonds and bond funds, including floating rate funds, REITS (Real Estate Investment Trusts), ETFs (exchange-traded funds), and life insurance policies. The qualified financial advisors at DuPont Wealth Solutions are able to discuss your options with you and help you avoid the risks associated with bonds. Give us a call at 614-408-0004 for a complimentary investment analysis. 

Transitioning into Retirement Confidently

Transitioning into Retirement Confidently

Are you getting ready to retire? If so, congratulations! Retirement is an exciting and rewarding milestone in life. But it can also be a daunting transition. Many retirees face financial, mental, and physical challenges that they never expected. That’s why DuPont Wealth Solutions wants to help you make the most of your retirement years by telling you how to prepare for it in a healthy way. In this blog, we’ll discuss topics such as managing finances during retirement, finding new hobbies to fill time and stay active, how to stay connected with family and friends, and more. We want you to have a secure, fun, and fulfilling retirement. So, let’s get started!

Mentally Transitioning into Retirement

Retirement can be a difficult mental adjustment. It can bring up feelings of loss and confusion as you go from having a set schedule to having all the time in the world to do whatever you want. You may feel bored like you’ve lost your identity or purpose in life. While these feelings are normal, there are things that you can do to make sure you have a positive retirement.

Find A New Hobby – Keeping yourself busy is key to having an enjoyable retirement. Find something that interests you and spend time doing it regularly. This could be anything from learning a new language, gardening, or even volunteering with a local charity. Staying busy will help keep you sharp and give you a sense of purpose.

Turn Your Hobby into a Business – If you already have a hobby you love, now is the time to dive deeper into it! You likely wanted to devote more attention to it throughout your working years but never had the time. Whether it’s woodworking, painting, sewing, photography, or something else entirely, you can make money from these activities and supplement your retirement income!

Learn Something New – Retirement is a perfect time to explore new areas of knowledge and skills. Consider taking classes online or at your local community college. Some universities even offer free courses online, or for a minimal fee! Check out Harvard, edX, Couresa, and Study Hall for options. Whether you want to learn a new language, instrument, technology, or something entirely different, there’s a class out there for you. Learning something new will keep you intellectually engaged, plus it’s fun!

Get Involved in Your Community – Retirement is a great time to give back to your community. There are many ways to do this – from mentoring young people, volunteering at local schools or non-profits, or even running for public office. You can also join a club or social group in your area and make new friends who share similar interests. Your local senior center or recreation center are both great places to start.

Stay Connected – Loneliness is one of the most common problems that retirees face. Make an effort to stay in touch with family, friends, and former colleagues. Technology such as Zoom, Facetime, and social media make it easier than ever to stay connected. Even if you’re not tech-savvy, there are plenty of other ways to keep in touch – like sending a handwritten letter or giving someone a call.

Travel – Many retirees are in a great position to explore the world and experience new cultures. Travel can be an enriching experience, both mentally and physically. With proper planning, traveling can even be affordable! Don’t feel like you have to go halfway across the world to ‘travel’ either. Traveling can be done just within just a few hours of your hometown. If you’re experiencing something new in a new location, you’re traveling! Sometimes your local senior center will even offer discounted rates on group trips.

Working in Retirement – There’s no denying that people are living longer. Retirement used to only last 10-15 years, but with advancements in medicine we can expect retirement to last 30 years or more! That’s a lot of time to fill, and you’ll need a large amount of retirement income to support yourself during that time. To have a secure income, many seniors are continuing to work part-time during retirement. Talk to your employer about having a flexible work schedule.

Staying connected and engaged during your elder years can help you have a fun and fulfilling retirement. Find what interests you and do it! Keep learning, stay connected to your community, explore the world, or even start a business. With proper planning, you can make your retirement years the best of your life!

Physically Transitioning into Retirement

Where do you want to live during retirement? A lake house? Or a bungalow by the beach? Perhaps you want to stay close to family in your hometown. Here are some options.

Keep Your Current Home – Many retirees choose to keep their current home. This can be a great option if the home is paid off, or if you want to stay close to family and friends.

Reverse Mortgage – Reverse mortgages are great for seniors that anticipate serious health problems in the future. A reverse mortgage is a loan available to homeowners 62 or older that have considerable home equity. They have become one of the most popular and accepted ways to pay for many high-ticket expenses, including the cost of long-term care. The homeowner can borrow against the value of their home, and the loan balance becomes due and payable when the borrower dies, moves away permanently, or sells the home. This strategy works best when the home is already paid off, and when only one spouse needs long-term care while the other can remain at home.

Downsize – If your current home is too large for your needs, downsizing can be a great option. It can be a great way to save money during retirement while keeping those lonely ’empty nester’ feelings at bay. You’ll need to consider the cost of moving, real estate fees, and what items you will keep versus sell or donate.

Relocate – Relocating is a great option if you’re looking for a change of scenery. Maybe you want to move to a warmer climate, or closer to family. You may even be able to find senior housing that has all the amenities and services you need without having to worry about home maintenance or repairs.

Buy a Second Home – Buying a second home can be great for retirees who want to stay close to family but are also looking for a change of scenery. If you have the means and desire to travel, this can be a great option for you. You’ll need to consider costs such as real estate fees, taxes, utilities, insurance, and maintenance.

Whatever living situation you choose, make sure to account for health and safety. How accessible is the home? Are there medical facilities nearby? Do you have access to a supportive community? Figure out what your needs are now and plan accordingly.

Financially Transitioning into Retirement

As you transition into retirement, it’s important to have a solid financial plan in place. Here are some tips for making sure your finances stay strong during retirement:

Maximize Your Social Security – You cannot rely on social security to carry you through retirement. However, there are things you can do to make sure you maximize your benefit amount, including making sure you take your benefits out at the right time.

Keep Up with Required Minimum Distributions (RMDs) – RMDs are the minimum amounts you must withdraw from your retirement accounts each year, or incur a steep tax penalty. According to the IRS, you generally must start taking withdrawals from your traditional IRA, SEP IRA, or SIMPLE IRA when you reach age 72 (or 73 if you reach age 72 after Dec. 31, 2022). If you have a 401(k) or other profit-sharing plan with your workplace, you can delay taking out RMDs until you retire. Laws surrounding RMDs are constantly changing so it’s important to consult with a financial advisor when making decisions about how much to withdraw – and when.

Prepare for Long-Term Care – It’s important to plan for long-term care expenses as we age. Most people don’t want to think about it, but it’s essential that you prepare financially and emotionally for this stage in life. At DuPont Wealth Solutions, we can help you find the right long-term care insurance policy, navigate Medicare, and qualify for Medicaid.

Shift Your Investments into Low-Risk Alternatives – As we approach retirement, we want to make sure our savings are safe and available for us to use when we need them. We recommend scheduling an appointment with a trusted financial advisor and getting a 401(k) second opinion. Many of our clients choose to roll over their 401(k) into an IRA and/or purchase an annuity so they can have guaranteed lifetime income.

Draft or Update Your Estate Plan – With retirement comes the need to review your estate plan. Whether you’re starting from scratch or updating an existing plan, it’s important to make sure that your assets and wishes are properly accounted for. Our partners at the Law Offices of DuPont and Blumenstiel can help you with this.

Retirement is an exciting time! With proper financial planning, you can live the retirement of your dreams.

Learn about how we helped our client Gary transition into retirement!

Talk to the Trusted Financial Advisors at DuPont Wealth Solutions

Your retirement is what you make it. At DuPont Wealth Solutions, we provide you with unique financial tools tailored to your needs so that you can live the retirement of your dreams. Our trusted team of financial advisors in Dublin, Ohio have the knowledge and experience necessary to help you develop a financial plan that will carry you through retirement. Let us help you transition into retirement confidently and securely. Reach out today to learn more about our services and how we can help you. Call us at 614-408-0004 to schedule a consult.

4 Things To Do With Old 401(k)s

4 Things To Do With Old 401(k)s

According to the Bureau of Labor Statistics, the average American changes jobs every 4.2 years. As you move on to new opportunities, it’s important to not forget about your old 401(k) or 403(b). These accounts are likely a big part of your retirement savings! So, it’s important to know your options when it comes to what you can do with these accounts. You have the option of leaving it with your former employer, rolling it into a new employer’s plan (if they offer one), consolidating it into an individual retirement account (IRA), or cashing out. To choose the best option for you, consider such factors as fees, investment options, and your overall retirement goals. No matter what you decide to do with your old 401(k) or 403(b), make sure that you take the necessary steps to keep track of it so that it doesn’t get forgotten.

Our client, Betsy, came to us when she wasn’t sure what to do with old company stocks. View her story here.

1. Leave Your 401(k) with Your Former Employer

Most employers allow you to do this, and this option is usually the simplest. If your former employer’s plan has low fees and quality investment options then it can be a great choice.

However, leaving money in your old account also has some drawbacks. You won’t be able to add any more money into it, or, in most cases, take out a 401(k) loan. This can be an issue if you’re trying to buy a house soon or make another big purchase. You may have to rely on a different type of loan.

2. Roll Over Your 401(k) into Your New Employer’s Plan

If your new employer has a 401(k) or another retirement plan, you can generally roll over your old account into it. This is usually the best option if your new employer’s plan offers more investment options and lower fees than your old one did. Many people choose this option so they don’t have multiple confusing accounts open.

3. Consolidate into an IRA

If your new employer does not offer a retirement plan, or the options are limited, you can always open an individual retirement account (IRA). An IRA gives you more control over how you manage your money and investments with fewer restrictions than a 401(k). You may be able to take out loans from an IRA if needed, but usually at a tax penalty.

Make sure to work with a financial institution with opening a rollover IRA so you don’t incur tax penalties. You’ll also want to research their fees and expenses.

There are two different types of IRAs, a traditional and a Roth. In a traditional IRA, your contributions are taxed when you take money out during retirement. With a Roth IRA, you pay taxes on your contributions now to avoid being taxed in retirement.

4. Cash Out Your 401(k)

Cashing out your 401(k) may be one of the easiest options, but it’s also often the least beneficial. When you cash out a retirement account, you’re typically hit with income taxes and an early withdrawal penalty of up to 10%. That’s a big chunk of money that could be better used elsewhere!

Before making any decisions, it’s important to consider the potential fees, taxes, and investment options associated with each option. Consulting with a financial advisor can help you make an informed decision. No matter what you choose, make sure to stay on top of your retirement savings and keep track of your old 401(k) so that it doesn’t get forgotten.

Need retirement planning advice? Talk to the trusted financial advocates at DuPont Wealth Solutions. Schedule a consult today by calling 614-408-0004. The longer you wait, the more opportunities you could be missing out on.

How to Help Your Parents Transition into Assisted Living

How to Help Your Parents Transition into Assisted Living

As they age, our parents may need some help with daily tasks. If an elderly loved one becomes unable to take care of themselves due to physical or mental impairment, it might be time to have the long-term care conversation. Eventually, your loved one may need expert care that you are unable to provide. In fact, about 52% of people over 65 will require long-term care services.

If your aging parent is exhibiting signs of dementia, or other health problems, here is how to start your long-term care search.

How to Talk to Your Parents About Long-Term Care

It can be difficult to decide to move a parent into a long-term care facility, but in some cases, it is the best option for their health and well-being. It’s important to include them in this decision, and have an open and honest conversation with them about what to expect. Let them know that they have your support throughout the entire process.

Even though talking about assisted living can be uncomfortable, make sure you approach the conversation in a friendly and understanding way. Here are a few things to keep in mind.

  • Bring up the matter before it’s necessary. This gives your loved one time to process and consider the issue.
  • Include them in conversations you have with the rest of the family.
  • Encourage your loved one to be flexible with their plans.
  • Consider using a social worker or geriatric care manager as a third party.
  • Begin by talking about “senior living communities” or “assisted living facilities” instead of jumping straight to nursing homes.
  • Don’t catch them off guard, or make them feel like their being ambushed or ganged up on.
  • If your loved one simply doesn’t want to talk about it, don’t press the issue; move on.

How to Decide What Level of Care is Right for Your Loved One

There are a variety of long-term care facilities available for your parents, including:

  • Adult Day Care. An organized schedule of activities in a setting of professional care is known as adult day care, and it is intended for elderly people who need daytime supervision or who are solitary and lonely. Seniors can mingle and take part in organized activities in a group environment at adult daycare facilities while still receiving low-level care. This gives family caregivers a break from their caring responsibilities while giving them peace of mind that their loved one is safe.
  • In-Home Aids. Homemaker services are offered to old, ill, or disabled people through in-home aids. Their care often plays a significant role in a person’s ability to stay in her own home rather than having to relocate to a facility. In-home health aids can provide medical care as well.
  • Assisted Living Facilities. A residential alternative for senior citizens who require assistance with some daily activities, such as preparing meals, using the restroom, cleaning, and going to appointments, is assisted living. Assisted living facilities are a great option for seniors that require more personal care services than you can find at home, but still want to live as independently as possible. Some assisted living facilities can provide advanced medical care, while others cannot.
  • Nursing homes. The highest quality of care for senior citizens outside of a hospital is typically found in a nursing home. Custodial care, which includes assistance with getting in and out of bed, feeding, bathing, and dressing, is offered by nursing homes. Nursing homes provide a high degree of medical care as well, which sets them apart from other senior housing options.
  • Rehabilitation centers. Facilities for senior rehabilitation are created to assist seniors recovering from an injury or major medical event to lessen pain and increase function. Facilities for senior rehabilitation frequently offer services like speech therapy, occupational therapy, and physical therapy. These facilities can be found in a hospital or in a nursing home.

Each facility has its own unique set of services and amenities, so it is important to do your research and find one that best meets your loved one’s needs.

Questions to Ask When Touring Long-Term Care Facilities

When touring a long-term care facility, it is important to ask the following questions:

  1. What services and amenities do the facility offer?
  2. What is the cost of residency?
  3. What is the length of stay minimum/maximum?
  4. What are their policies on visitors?
  5. What are their policies on overnight guests?
  6. What are their policies on bringing pets?
  7. What are their policies on leaving the facility for short periods?
  8. What dining options are available?
  9. What activities are available to residents?
  10. What does the facility not provide that residents need to bring with them?

Make sure you talk to current residents about their experience. If your tour guide doesn’t want you to talk to residents, that should be a major red flag!

As you’re researching and touring facilities, make sure to keep in mind your parent’s needs and your budget. If you want to be able to visit often, you should also take into account how far away the facility is from your home.

Moving Your Parent into a Long-Term Care Facility

Once you’ve selected a facility and it’s time to move in, make sure you have a conversation with your loved one about what to expect. Stay present throughout the move-in process and offer emotional support.

After everything has been arranged, you should stay in contact with the long-term care facility to make sure your loved one’s needs are being met. Moving your parent into a long-term care facility can be a stressful experience, but it is important to remember that your parent’s well-being should always come first.

If you are in an emergency situation and are struggling to pay for long-term care, we can help. Check out our long-term care and Medicaid planning guide, Aging with Confidence. And if you have any questions, give us a call at 614-408-0004.

How to Prepare Your Child for College

How to Prepare Your Child for College

The United States has long been known as a world leader in education. Our universities are some of the best in the world, and our public school system is also highly regarded. Because of the importance of education in our society, many high school students decide to go to college and pursue a degree. If you’re a parent looking to help prepare your child for college, we have some tips for you.

If you’re lost at where to start with preparing for college, we recommend investing in some kind of college savings account, filing out the FASFA, and helping your child research schools and programs.

How to Save for College

The sooner you start saving for your child’s college tuition, the better. Many families wait until their child is in high school to save, and effectively limit the choices their child will have. If you’re looking for ways to save for your child’s college tuition, here are two common options.

  • A 529 Plan is an investment account that offers tax benefits when used for qualified education expenses. The downside to using a 529 plan is that if your child chooses not to go to college, or if they end up not needing all the money in the account, you will pay a tax penalty on the money withdrawn.
  • Some universal life insurance policies allow you to use the cash value component for expenses, including education. Instead of using student loans to pay for college, you can borrow from your own savings and not have to pay interest.

We do not recommend putting college savings in a standard bank savings account, as these accounts earn very little interest.

How to Save on College Tuition

One of the biggest expenses we face in life is college tuition. Luckily, there are a few ways you can save money on your tuition costs.

First, you should consider applying for financial aid. There are a variety of different types of aid available, and you may be eligible for more than you think. The first step is filling out the FASFA with your child. The FASFA will give you an ‘expected family contribution’ number, that is the amount you will be expected to pay out of pocket. It will also tell you what federal aid you may be eligible for. You’ll also want to look into scholarships and grants that can help you cover your costs. Scholarships are offered through many different avenues. Look to see if local businesses or organizations offer scholarship programs and contests.

Another way to save money on your tuition is to take advantage of tuition discounts. Many colleges and universities offer tuition discounts for students who meet certain criteria, such as being a member of a certain organization. It’s also important to remember that in-state tuition is often less expensive than out-of-state tuition.

You can also save money on your tuition by taking advantage of credit exchange programs. These programs allow students to exchange their tuition credits for credits at another school. For example, in Central Ohio many students choose to take classes at Columbus State Community College, and then use those credits to transfer to The Ohio State University. Through this approach, your student can stay home while going to college, allowing them to save money on room and board.

Tips For Families on Their First College Application Process

The college application process can be daunting, especially for families who are new to the process. It’s important to talk to your child about the application process, and work through it together. Here are a few things you can do to make the process less overwhelming and more efficient.

  • One of the best things you can do is to start early. The earlier you start, the more time you’ll have to research schools, visit campuses, and complete applications. You’ll also have a better chance of getting financial aid if you start the process early.
  • Another tip is to be organized. Create a list of deadlines and requirements for each school your child is interested in, and make sure you meet all the deadlines.
  • Finally, don’t be afraid to ask for help. There are several resources available to help you through the college application process. Don’t hesitate to reach out to your child’s guidance counselor.

Keep in mind that in most cases, you will have to pay a small fee for each college application you submit. If you can only afford to apply to a few schools, make sure you let your child know that. Have your child thoroughly research schools they are interested in, and narrow down choices from there.

Why Parents Should Be Involved in Their Children’s College Application Journey

The college application process is an important time for parents to be involved in their children’s lives. There are several reasons why parents should be involved in the process.

  • One of the most important reasons is that parents can provide support and guidance during what can be a stressful time. The college application process can be overwhelming and having the support of parents can make a big difference.
  • Another reason why parents should be involved in their children’s college application process is that they can offer financial assistance. Many families cannot afford to pay for their child’s entire college education, so having the help of parents can be a big relief. Additionally, parents can often negotiate better financial aid packages for their children.
  • Finally, parents can serve as a sounding board for their children during the college application process. It can be helpful for students to run their ideas by their parents and get feedback. Parents can also offer advice and guidance when it comes to choosing a school or major.

The college application process is an important time for parents to be involved in their children’s lives. If you’re a parent of a teenager, make sure you’re checking in with them throughout this stressful time.

Are you wondering, “what’s the best way to save for college”? We would love to help you find that out. Every family’s situation is different, and we’re eager to create a unique plan for you. Schedule a consultation with the financial advocates at DuPont Wealth Solutions by calling 614-408-0004.

How To Start a Business During Retirement

How To Start a Business During Retirement 

Many retirees are finding that starting a business is the perfect way to stay active and engaged after leaving their full-time job. Staying afloat and being financially secure during retirement is a must for us to survive in this world. A perfect way to keep the money coming in your mature days is to start a business!

Tips for Starting a Business During Retirement

If you’re considering starting a business during retirement, there are a few things you should keep in mind.

  1. Make sure you have enough money saved up. Starting a business can be expensive, so you’ll need to make sure you have enough money set aside to cover the costs.
  2. Consider your health. Starting a business can be demanding, so it’s important to make sure you’re physically and mentally up for the challenge.
  3. Choose a business that interests you. Retirement is the perfect time to pursue something you’re passionate about, so choose a business that you’ll enjoy working on. Oftentimes, you can monetize a hobby you currently have, like woodworking or cooking. However, don’t just start a business because you enjoy it, do market research, make sure that there a people willing to pay you for your business.
  4. Get help from others. Don’t try to go it alone – reach out to family and friends for help and advice. Consider reaching out the Small Business Administration SCORE business mentoring volunteers.
  5. Plan for the future. Retirement is often seen as the end of one chapter, but it can also be the start of a new and exciting one. Make sure you have a solid plan in place for your business so you can enjoy success for years to come.

By following these tips, you’ll be well on your way to starting a successful business during retirement. So, what are you waiting for? Get started!

Register Your Business

To become a legitimate business in Ohio, you’ll need to take certain legal steps.

  • Register your business with the Ohio Secretary of State. You’ll need to choose what type of business you want to be (an LLC, S-corp, etc.).
  • Obtain a federal Employer Identification Number (EIN) through the IRS.
  • Open a business bank account, using your new EIN.
  • Register with the Ohio Department of Taxation. The department also offers a training program so you can learn more about Ohio tax laws and requirements for small business owners.
  • Report new hires to the Ohio New Hire Reporting Center (including yourself).
  • Apply for worker’s compensation insurance. This is required if you have one or more employees.
  • Determine if you need to establish an Unemployment Compensation Tax Account through the Ohio Department of Jobs and Family Services.
  • Obtain any necessary licenses and permits. Many specialized services, such as construction and food, need to obtain special local and state permits to do business in Ohio.

How Can I Get a Business Loan?

Many first-time business owners choose to apply for a SBA-backed loan. The Small Business Administration helps small businesses get funding by setting guidelines for loans that lending partners provide.

There are many types of SBA-backed loans, including:

  • 7(a) loans, the SBA’s most common loan program. 7(a) loans provide financial help to small businesses – with special requirements. 7(a) loans can be used for real estate, short- and long-term working capital, refinancing current business debt, and purchasing supplies.
  • 504 loans, which are long-term fixed-rate loans. They can be used to help finance, purchase, or repair real estate, equipment, machinery, or other assets.
  • Microloans provide $50,000 or less to help businesses start up or expand.

Check Your Eligibility Before Obtaining a Business Loan

When evaluating your small business loan application, local lenders will likely consider four primary factors. However, requirements for business loans can vary among lending institutions.

  • Credit score. A business loan lender will use your personal and business credit scores to help assess the likelihood that you’ll repay your loan. Generally, a high credit score means more chances of loan approval and a lower interest rate.
  • Collateral and/or personal guarantee. Lenders may require that you put up collateral, or something of value such as equipment or inventory, which they can take if you don’t repay the loan. Some lenders also ask for a personal guarantee, which means you have to secure the loan with personal assets like your savings account balance, home equity, or other valuable belongings.
  • Time in business. If you’ve been operating your business for less than one year, don’t despair. Some online lenders will still approve qualified applicants who have only been in business for six months. While a traditional bank usually requires a company to have already been running for two years before they’ll lend money, an online lender often only needs proof that the business has existed for twelve months.
  • Annual revenue. Another important deciding factor is your total annual sales. Make sure to check with the lender about their requirements before starting the application process and take a look at your business finances to see if you qualify.

Using Retirement Accounts to Fund Your Business

For some people, using their 401(k) or IRA to start their business may be a better option than a traditional loan. Here are a few options:

  • Borrow money from your 401(k). If you need money, you can take out a loan from your retirement account instead of withdrawing the funds outright. If you have a 401(k) account, you can usually borrow up to 50% of your total funds, or $50,000, whichever is less. Repayment terms require that all borrowed money be repaid to your 401(k) within five years on a quarterly payment schedule. You’ll also need to pay interest on the loan – which is usually around 1 percent – back into your 401(k).

    Be sure to talk to your accountant and 401(k) administrator before pursuing this option.
  • Invest IRA and/or 401(k) funds directly into your business. If you’re forced to dip into your retirement funds, tax law permits you to do so without penalty or interest rate if you adhere to some specific rules. These rules are complex, but in short, you will need to establish your business as a “C corporation” that will disperse all of its stock and transfer it over to a new 401(k) profit-sharing plan in trade for the cash already in the plan. Getting this process started will require support from either a tax attorney or an accountant who is experienced with incorporating businesses and setting up new retirement plans.
  • Withdraw directly from your 401(k). This should be a last-resort option. You’ll have to pay taxes on any funds you withdraw, and you could face a hefty penalty depending on your age (10% if you’re 59-1/2 or younger).

There are many ways you can obtain the money you need to start your business. Our financial advocates are here to help you every step of the way, from registering an LLC to applying for business loans. Call us today at 614-408-0004 to get started.

Need inspiration? Listen to Episode 37 of our podcast, Your Financial Advocate, where Dr. Bimbo Welker talks about his journey from “working for the man” to starting his own veterinary practice.

How to Minimize the Impact of Income Taxes on Your Finances 

How to Minimize the Impact of Income Taxes on Your Finances 

No one likes to pay taxes, but they are a necessary part of life. The good news is that there are ways to mitigate the impact of income taxes on your finances. In this blog, we will discuss some of the best ways to do just that!

What are income taxes?

Income taxes are levied on the income of individuals and businesses. The amount of income tax that you owe depends on your income level and filing status. Income taxes are used to fund public services, such as education and infrastructure.

How can I reduce my income taxes?

Whether you are an active or passive income earner, here are several ways that you can reduce your income taxes. Some of the most common methods include:

  • Taking advantage of tax deductions and tax credits: There are many different deductions and credits that you may not realize you can obtain. By taking advantage of these, you can lower your taxable income and owe less in taxes.
  • Investing in a retirement account: Retirement accounts, such as a 401(k) or Traditional IRA, can help reduce your taxable income. This is because the money that you contribute to these accounts is not taxed until you withdraw it in retirement. You can also choose to invest in a Roth IRA, and pay the taxes now, but none when you withdraw the money in retirement.
  • Giving to charity: Donating money to a qualified charity can also help reduce your taxes. This is because you can deduct the amount of your donation from your taxable income.

The Trump Tax Cuts

The Trump tax cuts are a series of tax cuts that were enacted by the Trump administration in 2017. The most notable changes include a reduction in the corporate income tax rate from 35% to 21%, and a reduction in the top marginal income tax rate from 39.60% to 37%.

While the Trump tax cuts have reduced income taxes for many people, there are some negative impacts as well. The most notable of these is the increased standard deduction reducing the value of certain itemized deductions.

What does this all mean for you?

Income taxes are a necessary part of life, but there are ways to reduce their impact. By taking advantage of deductions and credits, investing in a retirement account, and giving to charity, you can minimize the amount of taxes that you owe. The Trump tax cuts have also reduced income taxes for many people. However, this reduction is schedule to end in 2025 and with the national debt skyrocketing, many people expect additional increases in the future. When it comes to your finances, it is important to consider both the short-term and the long-term impact of income taxes.

Ways To Mitigate the Impact of Income Taxes

When it comes to your finances, knowledge is power. Stay informed and be sure to consult with a tax advisor if you have any questions. With careful planning, you can minimize the impact of income taxes on your finances!

Use these tips to help you make the best decisions for your financial future.

  • If you are in a low tax bracket, consider investing in a Roth IRA. With a Roth IRA, you pay taxes on the money you contribute now, but all future withdrawals are tax-free.
  • Consider contributing to a traditional IRA if you are in a higher tax bracket. With a traditional IRA, you pay taxes on the money you withdraw in retirement.
  • Consider investing in tax-advantaged accounts such as a 401(k) or 403(b). The money you contribute to these accounts is deducted from your taxable income.
  • If your employer offer’s a Roth 401k plan, consider paying a bit more in taxes now and contributing to that plan instead of the traditional 401k.
  • Take advantage of tax deductions and credits. There are many deductions and credits available that people are unaware of that can reduce your tax bill.
  • Talk to a tax professional. They can help you identify ways to reduce your taxes.

For more information on mitigating the impact of income taxes, listen to Episode 36 of our podcast Your Financial Advocate. This episode features special guest Jason Pueschel, Founder and Managing Director of Alternative Wealth Management.

How to Defer and Reduce Capital Gains Taxes on Investments 

How to Defer and Reduce Capital Gains Taxes on Investments 

The federal deficit is at an all-time high, and the government needs to find new ways to raise revenue. One of the main ways they do this is to increase taxes. In fact, according to the Bureau of Labor Statistics, about 40% of a person’s income goes to some form of taxes! Tax breaks and tax advantages are few and far between. So, when one comes along, it’s in your best interest to take advantage of it. There are several strategies you can use to defer, reduce, and eliminate capital gains tax on real property and other assets. 1031 Exchanges, Delaware Statutory Trusts, Opportunity Zone Funds, and Installment Sales are just a few options to discuss with a trusted financial advisor.

What Are Capital Gains Taxes?

Capital gains are the profits you make from the sale of a property or investment. If your property or investment has increased in value since you bought it, you’ll likely have to pay a capital gains tax. This usually falls within the 15-20% range.

There are two types of capital gains taxes, short-term and long-term. Short-term is defined as a property or investment held for one year or less, while long-term is anything over a year. Different rates apply to each.

Short-Term Capital Gains Tax Rates

If you hold a property or investment for less than a year before selling, your capital gains tax rate will be your marginal income tax bracket. Marginal tax brackets are the tax rates applied to your last dollar of income. So, if you’re in the 20% marginal tax bracket, you’ll pay a 20% capital gains tax rate on any short-term profits.

Long-Term Capital Gains Tax Rates

The long-term capital gains tax rates are 0%, 15%, or 20%, depending on your taxable income and filing status. They’re much lower than short-term rates because the government wants to encourage people to invest for the long haul.

How to Defer, Reduce, and Avoid Capital Gains Taxes

There are a few ways you can defer, reduce, or avoid your capital gains taxes. The best strategy will depend on the type of asset in question.

How to Defer Capital Gains Tax on Real Estate

In the crazy real estate market we’re in right now, it seems like you just can’t win. If you’re selling property, you’re likely getting a great profit. However, you’re also setting yourself up for a huge tax. Luckily, there are tax planning strategies you can use to protect your real estate capital.

1031 Exchange

If the asset you’re selling falls under the real estate category, a 1031 exchange can help you reduce, and potentially even eliminate, the capital gains tax. However, you must follow specific rules to take advantage of this tax code.

  • First, the property you’re selling can only be an investment or business property. You cannot perform a 1031 exchange on a primary residence or vacation home.
  • To qualify for 100% tax deferment, the market value of the property you’re purchasing must be of equal or greater value than the property you’re selling.
  • The property you’re selling and the property you’re buying must be of “like-kind”. As defined by the IRS, a like-kind property must be “of the same nature or character, even if they differ in grade or quality”. This doesn’t mean you have to exchange an apartment building for an apartment building, but rather an investment property for an investment property.
  • Both the property being sold and the property being bought must be purchased by the same party.
  • From the day you sell the property, you have 45 days to choose 3 potential replacement properties.
  • You must complete the exchange within 180 days of selling the property.

There are more rules to 1031 exchanges than we can list here. Be sure to speak with a trusted financial advisor before attempting to make a 1031 exchange.

As a real estate owner, you can continue to defer tax as long as you keep doing 1031 exchanges. For example, you can sell a condo and purchase a duplex, then sell that and purchase an apartment building, then sell that and purchase a commercial building, etc. As long as you follow the above rules.

If you pass away, your beneficiaries get a step up in cost basis. This essentially permanently eliminates the tax.

Delaware Statutory Trust (DST)

A Delaware Statutory Trust can be a great solution for real estate owners that no longer want to manage their properties. A DST is a type of business trust where the trustee is a professional management company. The trust holds a piece of property and allows investors to pull their capital so they can acquire properties they otherwise couldn’t afford. Because DSTs are professionally managed, it effectively makes them a passive income tool.

Another benefit of a Delaware Statutory Trust is the ability to diversify. With a DST, you can own a small piece of many different properties. This limits your risk because if one property tanks, the others may not be impacted.

Investing in a DST can help you avoid capital gains tax.

Installment Sale Method

If you’re selling real estate property in 2022, you’re likely selling for a large profit. However, you’re also setting yourself up for a huge capital gains tax. An installment sale can help lessen the tax burden while the real estate market cools off.

The installment sale method utilizes a third party, called a qualified intermediary, to whom you sell your assets. Then, they pay you installments over a certain period. Because the large profit never directly hits your bank account, you won’t have as big of a tax burden.

How to Defer Capital Gains Tax on Businesses and Other Assets

Many investors who have held stocks or business interests for a long period are sitting on a tax time bomb. There are several strategies you can use to defer, discount, and avoid capital gains tax on these assets.

Qualified Opportunity Zone Fund

Qualified opportunity zones were created in 2017 under the Tax Cuts and Jobs Act. They are meant to encourage investment in areas that the state has targeted for economic redevelopment.

Qualified opportunity zones provide(d) three major tax benefits:

  • Deferral of capital gains tax: You can defer paying capital gains tax on the sale of an asset if you reinvest the proceeds into a qualified opportunity zone fund within 180 days. Under current law, tax is deferred until 2026. However, there is current legislation being pushed through Congress to extend this deferral to 2028.
  • Step up in cost basis: Unfortunately, this benefit was sunsetted at the end of 2021. However, there is current legislation being pushed through Congress to reinstate this benefit. Under the step up in cost basis, if you were in an opportunity zone fund for five years you got a 10% step up. If you were in it for seven years, you received a 15% step up.
  • Flexibility: The actual investments made within these opportunity zones are typically real estate developments, but they can also be new companies.

If you feel like you’re stuck in a capital gains problem, all hope is not lost! You can greatly reduce your tax burden by working with a qualified financial advisor. The professionals at DuPont Wealth Solutions are ready to discuss your goals and help transform your financial future. Call 614-408-0004 today to schedule a free assessment.

Interested in learning more about how to preserve capital? Listen to Episode 35 of our podcast, Your Financial Advocate.

What Are My Long-Term Care Options? 

What Are My Long-Term Care Options?

Many people equate the term ‘long-term care’ with being in a nursing home. However, there are many different forms of long-term care including assisted living, at-home care, and care in the community such as an adult day care center. It’s not unlikely that you will need long-term care at some point during your life. About 52% of people over 65 will require long-term care services.

Long-term care refers to a variety of services that help meet both the medical and non-medical needs of people who cannot care for themselves for long periods. There are several different types of long-term care options available, each of which is best suited for different individuals.

Here are just a few of your options:

Home Health Aides (national median cost – $5,148/per month)

Home health aides are health care professionals. The responsibilities of a health aide include assisting with daily living activities such as cleaning and cooking, monitoring a client’s physical and mental condition, and handling health emergencies.

The biggest benefit of a home health aide is they work in the client’s home. Hiring a home health aide can be a great choice for those who wish to stay in their own home and do not want to be moved elsewhere.

Adult Daycare (national median cost – $1,690/per month)

Adult daycares serve as a place to for older people to spend the day and receive care if needed. They differ from traditional senior community centers. Community centers typically offer social and entertainment services while an adult daycare can offer medical services along with social and entertainment services.

Adult daycares are great options for elders who are feeling lonely. They will have a chance to socialize with their peers and alleviate any isolation and loneliness. An adult daycare will also give the family caretaker a break during the day. Alleviating tension and stress for all parties.

Assisted Living Facilities (national median cost – $4,500/per month)

Assisted living combines the comforts of a residence with personalized assistance. These types of residences provide seniors help with activities of daily living such as bathing, dressing, and eating. Most assisted living facilities will also include social activities and laundry and cleaning services.

Assisted living is a good solution for elders who want to maintain their independence but need some help with daily activities.

Nursing Homes (national median cost – $9,034/per month)

A nursing home is a facility that provides around-the-clock care for those who are unable to care for themselves. Along with supportive medical services, nursing homes also provide social and recreational activities.

Nursing homes are typically the most expensive long-term care option but they also offer the highest level of care. Nursing homes are best suited for those who need constant medical attention and cannot be cared for at home.

Many seniors who need long-term care services may struggle to keep up with their finances. There are many bill paying services available for them. Pairing these services with a Financial Power of Attorney document can help ensure that bills are paid accurately and on time.

Deciding what type of care is right for you or your loved one can be tricky. Making sure you have the money to fund these services is even trickier. The key to being able to provide for yourself during retirement is by planning ahead. Meet with a financial advisor to discuss how you can plan for your future and the possibility of long-term care. They can help you maximize funds and alleviate the stress of saving for the unknown.

For more information on long-term care options and their financial impact listen to episode 34 of our podcast Your Financial Advocate.


5 Questions to Ask Your Financial Advisor Before a Recession

5 Questions to Ask Your Financial Advisor Before a Recession

While the U.S. is not currently in a recession, it is a very likely future. This is rightfully making many families feel nervous. The U.S. has not faced a serious recession since 2008. During that time, many people lost their jobs and homes.  

Working with a trusted financial advisor is one of the best ways to get through a recession unharmed. They should be able to guide you through this tough time with minimal losses. In order for them to do so, you both need to know what your expectations and goals are. Here are 5 important questions to ask your financial advisor that will help spark conversation. 

What is the strategy? 

First and foremost, what is the plan? This is not the time for making risky moves. Work with your financial advisor to figure out what to do with your money and why. Your advisor should also be looking for opportunities. With every problem, there is still opportunity. For example, one of the problems right now is the federal government raising interest rates. The opportunity is you can move money into a high yield savings account and take advantage of the high interest rates. 

Ask you financial advisor about what opportunities are out there and incorporate them into your plan. 

What does the future look like? 

No one has a crystal ball that can predict the future, including financial advisors. But, they should be able to tell you what could happen. Ask your advisor to model out for you what will happen to your assets in a bear market, in a bull market, in times of volatility, etc. Many advisors will show you what’s called a ‘Monte Carlo’ analysis. Essentially, it is a probability graph with outlying possibilities on the side and more likely possibilities in the middle. 

Don’t settle for this. What concrete tools does your advisor have to handle a recession? You deserve an easy-to-understand explanation. 

What changes should I make to my portfolio? 

Your portfolio should be a dynamic and changing thing. It should not be stagnant. As the market changes, so should your portfolio. During a recession, it may be time to scale back on some of your more risky stocks and look into getting more bonds or cash equivalents. 

Specifically, ask your advisor if you should increase any liquid savings in case of a job layoff or business downturn. You can also ask for a timetable on when your investment portfolio should recover. 

How does your firm manage a bear market? 

A bear market refers to a 20% or more drop in the stock market. In other words, a flat or low-growth economy. This can be a scary time for many investors. Many people will lose money during this time and it can be difficult to recover. Your financial advisor should have a strategy for how to manage your portfolio during a bear market. They should also be transparent with you about what they are doing and how they are doing it.  

Does this change my retirement or income plan? 

For many, the reason for having a financial advisor is to have a successful retirement.  This is a valid goal and one that you should continue to pursue even during a recession. An advisor might examine whether clients are on track to retire and what delaying retirement by six months to a year would do to boost savings. An advisor can evaluate a variety of options, including pushing back retirement, taking up part-time work, or considering other possibilities for extra income. 

You may need to make some changes to your retirement plan but they should not be drastic. If they are, this is a red flag. A good advisor will help you stay the course and weather the storm. 

Asking your financial advisor these five questions before or during a recession will help you get a better understanding of their strategy and how they plan to help you through this tough time. It is important to be an active participant in your financial future and to make sure you are comfortable with the decisions being made. 

For more information on how to weather a recession and how to best utilize your advisor during this time listen to Episode 33 of our podcast Your Financial Advocate

3 Things Pre-Retirees Must Know About Cryptocurrency Investments

3 Things Pre-Retirees Must Know About Cryptocurrency Investments

A good retirement investment portfolio should have diversity in asset classes in order to mitigate risk. One way many pre-retirees are diversifying their assets is by investing in cryptocurrencies. This year it was recorded that 31% of near retirees (between ages 55 and 64) were invested in crypto. If you’re considering investing in crypto to diversify your retirement portfolio, here are some things you should know. 

Are cryptocurrencies a profitable investment?

Cryptocurrencies are highly volatile. Harvard University senior fellow Timothy Massad explains how compared to other asset classes, they are also not regulated by any federal authorities which is why there are unique risks attached to crypto. He noted that “investor protection is much, much weaker on these big exchanges than it is in our securities markets or our futures market.” This makes cryptocurrency a high-risk investment, especially for retirees who could lose a lot and not have the time to regain their lost assets. If investing in cryptocurrency is only a small part of your retirement portfolio and you have a long-term plan then the risk does decrease. Investing in crypto can be profitable, but retirees carry the added risk of a shorter reaction and recovery time. 

How are cryptocurrencies taxed? 

As the IRS classifies cryptocurrencies as property, transactions are taxable by law. These transactions involve any event where you make gains through selling, trading, or disposing of any cryptocurrencies. This is why buying crypto on its own is a taxable purchase. And if, for instance, you buy crypto at $2,000 and sell it later on for $3,000, then you’ll need to pay taxes on the profit of $1,000. 
Because cryptocurrencies are taxed differently from other asset classes those who invest in them need to be very careful. Maryville University states that crypto taxes are never fixed, so retirees must make the effort to keep clear records so the taxes they paid are never questioned if audited. If you’re not confident with documenting your own record, get a professional accountant to bookkeep. Remember: failure to pay proper taxes could result in hefty penalties. 

Which retirement accounts allow crypto investments?

Depending on the type of retirement account that you hold, you might not be able to include cryptocurrencies in your retirement investment portfolios. Many 401(k) accounts, which are opened through your employer, often work with pre-selected funds and might not consider cryptocurrencies as an asset you can invest in. You may be able to work around this, though, if you own a self-directed 401(k) account. The good news is that NPR reports that some 401(k) brokerages like Fidelity, however, have begun to welcome Bitcoin as an investment option. 
If you have individual retirement accounts (IRAs), which you open, fund, and manage on your own, then it’s best to consult an advisor before making crypto investments. Most IRAs are managed by banks or broker-dealers, but self-directed IRAs allow you to control what’s in your account — including crypto if it’s allowed by the brokerage. Moreover, self-directed IRAs can help defer or eliminate capital gains taxes for regular crypto investments. 
Cryptocurrencies can be a strong investment to include in your portfolio. They can also be risky, so a good rule of thumb should be that you only invest what you can afford to lose. With how volatile the crypto market it, it’s quite possible you could lose up to 50% of what you invest.  As long as you equip yourself with the necessary knowledge and practice care, then cryptocurrencies could be a great asset to explore. 

Article written by Remy Judson 
Exclusively for DuPont Wealth Solutions