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.

Here’s Why Women Need to Take Control of Their Finances

Finances can be overwhelming, especially when you feel lost or uneducated on the “right” decisions to make. Over the last few years, we have found that women are contributing more and more to their family’s finances and are making strides towards further financial independence. 

Despite women playing a larger role in their family finances, they still feel a lesser sense of confidence than they should as it relates to larger financial tasks. A 2022 Bank of America survey revealed that a “majority of women feel comfortable managing their day-to-day finances, but struggle with longer-term actions like paying down debt, saving for emergencies or retirement, and building wealth.” This data reinforces the importance for women to ask questions, seek advice and education surrounding their finances, and not take the back seat when making big financial decisions. 

As we just hosted our Women, Wine and Financial Fitness event and are wrapping up financial literacy month, we want to use this new data as an opportunity to encourage and motivate women to take control of their finances and better educate themselves to become financially independent. We know that a lack of financial education in schooling systems impacts the confidence level of financial literacy for both men and women and we are here to advocate for change. 

As a financial advisor who works to empower women to become confident to make their own financial decisions, we have found that many women are often met with anxiety when it comes to having to make financial decisions on their own. For that reason, it is extremely important to start educating yourself about financial concepts from a young age, along with passing that on to the next generation, such as your children or grandchildren. Take it upon yourself to set up a budget, understand your cash flows, your benefits at work, and your whole financial picture. Leaving the big decisions to another family member or spouse can impact your understanding and confidence level down the road. In the event your spouse or family member passes away, you want to ensure you are financially equipped to handle your finances on your own. 

At Sherman Wealth, we strive to educate all of our clients, no matter gender, age, or background, to become financially independent and feel confident to make their own decisions. If you have any questions or would like to talk to us about ways to educate others about financial concepts, please reach out to us at info@shermanwealth.com or schedule a 30-minute complimentary introductory 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.



Lock In Peaking Interest Rates While You Still Can

For those of you who have been following the markets and the current state of the economy, you know that the Federal Reserve has been hiking interest rates for months now to combat high levels of inflation. Living in this higher interest rate environment, many individuals have been seeking strategies to maximize their cash, including taking advantage of these high rates in vehicles such as high yield savings accounts, CDs, Treasury Bills, and I-bonds. As inflation is finally beginning to ease, let’s talk about how these vehicles will also change in response and what to look out for.

As we saw in the most recent CPI report, inflation slowed in March to 5%, hitting a nearly 2-year low. So, it seems as though the Federal Reserve’s efforts to combat inflation is starting to show progress and will soon impact these interest rates. As we have talked about a great deal over the last few months, high yield savings account rates have reached a 15-year high, with “top-yielding online savings account rates now just north of 5%, the highest since 2008, and much higher than last year’s 0.8%”, according to Bankrate.com. So, if you have yet to capture this higher yield and your money is still in a large money-center bank earning close to 0%, consider switching to maximize your savings.  Given the uncertainty we have seen in the banking system, you also want to keep in mind the importance of FDIC-insured limits while still shopping around for the best interest rates.

Next, for those savers who have wanted to earn additional interest on their cash, they have been parking their money in I-bonds, Treasury Bills, and CDs, that have been earning over the 5% mark. However, in more recent weeks, with inflation easing, Series I bonds and Treasury bills are beginning to slip, with CDs still remaining attractive to savers. So, if you have cash sitting you’d like to earn risk-free interest on, lock up those 5%-range CDs before it’s too late. Of course, before locking up your cash into a CD, you need to make sure you address your time horizon and need for those dollars.

We know that current economic environment is ever-changing and the future of the banking system and economy is uncertain, but want you to maximize your savings and take advantage of all attractive financial opportunities available. As mentioned above, before jumping into anything or locking up your money in an investment vehicle with time restrictions, make sure you think about your goals, priorities, responsibilities, and needs. Now is a great time to think about working with a financial professional to spring clean your finances and plan for the rest of the year. If you have any questions about interest rate policy of your specific financial situation, 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.

How To Teach Your Children About Finances

In honor of financial literacy month, we want to talk about financial empowerment and education, but not just amongst adults, children too. So, as we are well underway with 2023 and think about financial goals for the year, many clients and prospects have been asking us how to think about finances for their kids and the best ways to teach their children about money from an early age. While there are many different routes to save money for children and teach them about personal finance, we wanted share a few with you. 

First and foremost, we want to stress the importance of teaching children personal finance topics and smart financial decisions from an early age. Knowing what money means to you is an important concept whether you’re a child or an adult. One savings vehicle we always recommend to parents when saving for their children is 529s plans. For further details on 529 plans, you can check out our blog, but this savings vehicle is a great way to get ahead of college and education savings for your kids. 

For those who want to educate their children about money and finances, setting up a donor-advised fund is a great way to get the kids involved in not only charitable giving, but the importance of budgeting and setting money aside for different buckets and priorities. Another question we’ve been getting from clients is where to save “birthday” or “gift” money for their kids? Parents can open a minor high yield savings account for their children to earn maximum interest while still being FDIC insured. As their money grows overtime, you can explain to them how interest works and how money can grow overtime. 

Some other ways to teach your young children about money is to talk about it. Make sure you are having conversations with your children about money, for example, how much things cost and how people earn money so that they can spend it. Teach them the difference between wants and needs. Exposing them to concepts such as these will help them learn about personal finance topics as they mature and enter adulthood. 

It is never too late to start learning personal finance concepts. If you have children that are approaching college and you want them to learn and prepare how to manage and budget their finances on their own, let us know and we are happy to help. We offer financial literacy meetings to children and young adults to educate them on personal finance and answer any questions that they have. If you are interested in educating your children, email us at info@shermanwealth.com and we are happy to set up some time to connect and share our resources. 

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).