June 2020 Newsletter (Roth IRA questions, 529 & the SECURE ACT, festive recipe, quality of life story)Submitted by Dorval & Chorne on June 1st, 2020
By Keagan Kinsella | June 1, 2020
Welcome back to this month's newsletter! How is June already here? While the world is still crazy, things things like work and being out of the house more are slowly starting to become “normal" again for many of us.
One thing I personally find interesting is the power of perspective. For example, you may hear people talk about how their 401k or other investments have been “crushed” because of the market tanking. Or maybe you are just too scared to look at your statements because you feel like your investments have been crushed! That could be true, they may have been—but as I mentioned in last month’s newsletter, there was a big decline from February 19 that lasted until March 23 and since then, things have been slowly coming back up. Surprisingly, if you look back one year ago, the S&P 500 is actually up 8.1% (as of 5/29). We don’t pretend to know what the future will hold, but it’s always good to be aware to have context!
S&P 500 1 YEAR PERFORMANCE CHART
In today’s newsletter I will share:
- A little story time: “Would you like Xanax, or financial planning?”
- Question of the week: “Can I contribute to my Roth 401k even if I am too high income for a Roth IRA?”
- May 29th (5/29) was 529 Day!… Check out a Youtube video I made about 529s and education planning in regard to the new SECURE ACT
- Recipe of the week: Cinco de Mayo enchiladas!
Story time: Would you like a Xanax, or some financial planning?
A couple months ago I talked to a client on the phone about financial planning and answered a couple basic questions about his company’s blackout period as they switch 401k custodians. As we were about to hang up, he said, “You know, this call was better than a Xanax!” I laughed, because usually people make the joke that before they meet with us they need to take a Xanax because they’re so nervous- but this was the other way around!
One of the best parts about doing financial planning is the relief you see in people when they lay everything out on the table and develop a plan. A lot of people don’t talk about money with each other, so it isn’t exactly natural to lay out all your life before a complete stranger! When was the last time you asked your friend about the balances on their student loans or credit cards? Everyone is dealing with their own problems in their world, but not everyone has an outlet to share. Even if you do…you’ll find people can give conflicting or opinionated advice!
Everything we talk about is personal. Every single person is different, so one-size-fits-all advice like “by the time you’re 35 you should have double your annual income saved for retirement” doesn’t work for everybody! You can look up anything you want on the internet, but finding out what is pertinent to your situation and giving personal advice is why we exist. Talking about a plan and putting it into writing makes so many people feel better. Don’t you feel better when you go to the grocery store with a list in hand? It’s the same thing for money! Whether it be creating a budget or writing down your goals to prioritize them—try it out, you might find it’s surprisingly relaxing!
Question of the month: “Can I contribute to my Roth 401k even if I am too high income for a Roth IRA?”
We had someone ask us this question the other week. The Roth 401k is an interesting and sometimes confusing account for people to wrap their heads around. The reason why is because while they sound similar there is a big difference between a Roth 401k or Roth IRA. The similarity between the two is that they are both vehicles for after-tax retirement saving. This means the money you put into the account is taxed first (not tax-deductible, like a standard 401k or IRA may be) and any growth is potentially tax free.
A Roth IRA is a way to do after-tax savings outside of your employer, however—there are income restrictions to be able to contribute. For a single individual that limit is $124,000 as of 2020 (Married: $196,000). The amount you can contribute is also limited to $6,000/year (or $7,000/year for age 50+).
A Roth 401k has no income restrictions! A Roth 401k also has a higher contribution limit, $19,500/year ($26,000/year for age 50+). However, not all employers offer the Roth component of a 401k. Check to see if you do, it may be worth considering!
To answer the question…since they are two separate plans, if you are under the income limits for a Roth IRA, you could actually contribute to both! However, if you are above the income limits for the Roth IRA, you MAY contribute to the Roth 401k and not be penalized.
Happy belated 5/29 Day! Let’s talk about 529s… what are they, and what the SECURE Act has to do with them:
While not widely celebrated, May 29 (5/29) is a day to celebrate college savings and raise awareness about the importance of saving for higher education. That is like the May the 4th be with you to us financial nerds. To start, a 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. In December 2019, the SECURE Act was passed, and one of the rules allows 529 plan account owners to now withdraw up to $10,000 tax-free for payments toward qualified education loans (student loans!). Check out my video to learn about 3 ways that this may help you!
Recipe of the month: Simple Cinco de Mayo enchiladas!
So, now for something non-financial planning related! I am the queen of simple, fast, recipes (mostly due to my severe lack of patience in the kitchen). This month was the month of Cinco de Mayo… Since I wasn’t able to enjoy a nice Mexican meal at my favorite restaurant, so if you, like me are looking for a great, easy enchilada recipe that is done in 45 minutes, try this out!
- 6 tortillas (corn or flour)
- 3-4 chicken breasts
- 1 can enchilada sauce (PSA don’t use Las Palmas brand from Target. Spicy, tart, disgusting!)
- 1 can black beans
- Cheese (other toppings: avocado, salsa, cilantro)
Preheat oven to 425 degrees
Step 1: Cook chicken, then shred and add seasonings of choice
Step 2: Simmer the beans in a saucepan (I like adding sautéed onions), add the shredded chicken
Step 3: Heat up the enchilada sauce over the stove , and tortillas in the microwave
Step 4: Spread some sauce on the bottom of the pan, then grab a tortilla, add the black bean/chicken mixture, roll it up, then place into 9x13 pan
Step 5: Once all tortillas are in the pan, cover with the remaining enchilada sauce
Step 6: Cover with desired toppings such as cheese, then place in oven for 25-30 minutes until golden
All right, that’s it for this month! Stay tuned for my next newsletter where I will continue to share and inform in new and creative ways. If you want to sign up for the newsletter email, visit www.dorvalchorne.com and enter your email address on the pop up at the top of the screen. And let others know they can sign up!
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