What To Know On The Secure Act 2.0 Provision

At the beginning of the year, we posted a blog discussing the ways that the Secure Act 2.0 promised to provide changes to help many Americans’ retirement plans, including over 90 updated retirement plan provisions. More recently, a provision was passed expanding fee-for service planning opportunities for small business clients and their employees. So, let’s take a look at what this means for you.

When Congress passed the Secure Act 2.0, they increased the incentives for small businesses to create new retirement plans, particularly for businesses with 50 or fewer employees. “Beginning in 2023, an eligible employer with 50 or fewer employees may claim up to 100% of its qualified startup costs for adopting and maintaining a new SEP, SIMPLE IRA, or qualified plan (like a 401(k) plan), and the credit may be claimed for three years. Employers with 51 to 100 employees are subject to the limits specified in the original Secure Act.”

Under the Secure Act, qualified startup costs for retirement plans are defined as the ordinary and necessary expenses paid or taken on by a small business to establish a qualifying retirement plan, and educate employees regarding the plan. How these retirement plan admin fees are paid is either by the participant or the sponsor, depending on the set-up and structure of the plan. Many retirement plan fees are paid by plan participants and are not eligible expenses that can be claimed under the qualified start-up cost tax credit, which is why you want to be careful when analyzing what method is best to pay for the plan admin and education expenses. One method that is very attractive is a fee-for-service engagement with a financial planner.

A fee-for-service engagement allows businesses to qualify for the qualified start up cost tax credit. “Under a fee-for-service engagement, costs paid by the employer to establish, administer, and provide employee education for a new retirement plan all qualify as eligible expenses that the business can claim on its tax return.” Companies with 50 or less employees are able to claim 100% of eligible expenses, up to a maximum of $5,000, for each of the first three years from the start of the new retirement plan, deeming as a very attractive incentive for not only the employer but also the plan participants.

If you own a small business and are thinking about implementing a new retirement plan for your company, let us know as we are here and happy to help establish the plan and educate your employees on the plan details and financial literacy. This tax credit is a great benefit for employers to take advantage of, and we are happy to help you understand it further. If you have any questions, email info@shermanwealth.com or schedule a complimentary 30-minute call here.

Is Your Money Safe?

Is my money safe? As expected, this is the number one question we have been getting from clients and prospects following the SVB collapse and banking crisis. So, where should we begin? Well for starters, it is certainly an unusual time in the economy, where we as humans never really thought about whether our money was safe in a traditional style bank account. Obviously when it comes to investing, we know there are plenty of risks involved, but now we are facing a new layer of risk with the banking system.

If this banking crisis has taught us one thing, it is the importance of making sure your funds are FDIC insured. So, only depositing $250,000 per FDIC-insured bank, or $500,000 total if you have a joint account. Being FDIC-insured means that the FDIC protects the money you as the depositor place into insured banks in the event of an insured-bank failure. So, while we had all thought bank failures were quite unlikely, leading some individuals to ignore the FDIC insured limit, given the recent news, make sure you are diversifying your banking institutions to remain within the insured-limits.

If you are a small business owner, the fall of SVB has now added another layer of risk to your business operations, requiring further due diligence on deposits and banking institutions. We know that this banking crisis is scary and causes doubt in the strength of the bank system, which is why we are here to recommend you to re-visit your cash management and seek advice from a financial professional. Given the economic uncertainty, now is a good time to ensure your cash is diversified and you are exploring alternative vehicles, including Treasury bonds, CDs, and money market accounts. If you have any questions or concerns about your cash given the banking crisis, email us at info@shermanwealth.com or schedule a complimentary intro call here.



Did You Know These Money Management Tips?

Given the events of the last year, with the Federal reserve raising interest rates to combat high inflation, the consumer has had to shift the way they think about their money, especially their cash. With higher interest rates, comes the opportunity to earn more interest on your cash, but also makes it more expensive to take on debt and loans, leaving you with some decisions to make. So, let’s discuss a few smart money management tips you can adopt during financial literacy month.

First and foremost, it’s important to create a well-diversified portfolio, maximizing retirement, short-term goals, and your cash. As it relates to your cash, make sure you are taking advantage of higher yield FDIC insured savings accounts, instead of large money center banks earning close to 0%. Shop around different high yield savings accounts and see where you can get the highest rate. Next, if you are willing to take on some more time risk, we’ve been seeing individuals purchase CDs and Treasury bills for one to two percent higher than the high yield savings rates. So make sure you are maximizing your cash and taking advantage of this high interest rate environment.

Next, as it relates to your investable assets, as we always say, avoid timing the market and focus on time in the market with your portfolio. Over the last few years, we have seen many individuals pull their money in and out of the market due to market volatility and anxiety, but as studies, time in the market always proves itself positively.

As it relates to your debt, stay on top of your variable interest rate debt, especially as the Federal Reserve continues to raise interest rates. Furthermore, re-visiting your budget to make sure that it works for you and your financial situation is extremely important during this time. With this changing economic environment, it’s super important to stay on top of your financial plan and make sure you are updating/altering it accordingly.

As we are halfway through financial literacy month, we want to ensure you are taking advantage of all that you can. It’s important you are capturing all of the interest you can earn and that your money is in the right places. If you are interested in re-visiting your financial plan or have questions about your cash management needs, email us at info@shermanwealth.com or schedule a complimentary intro call here.

Don’t Forget To Claim Your Income Tax Offset Credit (ITOC)

If you haven’t done so yet and you qualify, make sure you don’t forget to claim your Income Tax Offset Credit (ITOC). Montgomery County’s Income Tax Offset Credit (ITOC) program allows Montgomery County residents who live in the property they own a $692 credit. Click here for further instructions on how to claim your tax credit on the Montgomery County website. The deadline is only a few weeks away, on May 1, 2023, so make sure you apply now to ensure you receive your credit!

The State law changed. “To receive the ITOC, residential property owners must now have a Homestead Tax Credit (HTC) on file with the Maryland State Department of Assessments and Taxation (SDAT) before May 1, 2023. If a property owner received the credit and does not apply before this deadline, they will be billed $692 and will not receive the tax credit until the State processes their application. Once the application is on file, it will automatically apply to future years.

If you have any questions on your tax situation let us know and we are happy to help! Email us at info@shermanwealth.com or if you have questions on applying for the tax credit, email sdat.homestead@maryland.gov or call 410-767-2165 (toll-free 1-866-650-8783).

Ep. 132 Launch Financial-Financial Literacy Month At Sherman Wealth

Overview: Join us on this week’s episode of Launch Finanical as we discuss the end of the second quarter, the markets and bond yields, financial literacy month, financial empowerment, and our Financial Literacy Women, Wine, & Fitness event here at Sherman Wealth. Check out the sign up link below and we hope to see you there. 

Show Notes:


Check out this episode!

Financial Literacy Month Q&A

As we kick off financial literacy month, we want to share some frequently asked questions we’ve received from clients and friends and provide actionable answers. As we embark on a new quarter and the spring season, it’s a perfect time for some “spring cleaning” and financial organization. Throughout the month of April, we want to stress the importance of financial literacy and spread the word about financial education and empowerment. We will be sharing questions, answers, and advice we receive in hope to help you all organize and prepare your finances for the rest of the year.  

Below you will find some frequently asked questions:

Q: How do I adjust my budget for inflation, and this higher cost of living?

A: With inflation sky-rocketing over the last year, and the Federal Reserve raising interest rates to bring it down, many individuals are needing to adjust their budgets, as the cost of their previous budget is now more expensive. So, let’s start by taking a look at your wants versus your needs…Are you spending money on items you really don’t need? Are there areas of the old budget you can omit? Make sure you are canceling old subscriptions and making sure your cash outflows are not exceeding your inflows.

Q: Is there anything I need to think about with higher interest rates?

A: This is a great question. Given the high interest rate environment we are currently in, there is lots to think about. First and foremost, make sure you are maximizing the interest you are earning on your cash. Don’t park your cash in 0% large money center banks, when you can make close to 4% in FDIC insured high yield savings account. Consider high interest paying vehicles, such as CDs and Treasury Bills/Notes. On the flip side, as it relates to your debt, make sure you know what rates you are paying on your variable rate debt, so that as it increases, you are not letting it get out of hand.

Q: As a new college graduate, where/how do I get started in terms of investing?

A: First and foremost, it’s important to take a step back and establish what your financial goals are. If you are saving up for a new apartment or expenses in the near future, maybe consider building up your emergency fund/savings account. If you want to set yourself up for a solid financial future, you should think about contributing to your retirement, in a 401(k) through your workplace, or a Traditional/Roth IRA if you don’t have a 401k at work.  But most importantly, don’t forget about that emergency fund.  If the last few years taught us anything, it’s to prepare for the unexpected.  

Q: How do I decide which credit card to apply for?

A: Before applying for a credit card and opening lines of credit, make sure you understand the responsibilities involved. When opening a new credit card, you must remember to pay your balances and statements on time in order to keep your credit score in tip top shape. That being said, opening lines of credits are crucial in establishing your credit score, so it’s important to do so. When deciding which credit card to choose, think about your expenses and where most of your dollars go. For example, if you spend most of your money at Amazon, consider purchasing an Amazon credit card that may provide you with cash back or points offers. Or, if you love to travel and dine at restaurants, consider a card that provides you with double points for those activities. Making the most of your credit cards is a great financial literacy tip to start the month. 

Implementing these small tips into your everyday financial routine is a great way to get organized and start off on the right foot. For more financial literacy advice and questions, stay tuned for our content and join us for our very special financial literacy event this month, Women, Wine, & Financial Fitness, where we will provide a open and informal space to empower women on their finances, accompanied by guest speaker, Estates and Trusts Attorney, Sarah Broder. Reserve your spot now: https://www.eventbrite.com/e/women-wine-financial-fitness-tickets-608759424827. If you have other questions similar to the ones above, please feel free to send them to us to answer at info@shermanwealth.com. If you would like to directly discuss your questions with us, please book a complimentary meeting here