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South Carolina Tax Guide

South Carolina State House

South Carolina State Taxes

There’s no question that South Carolina is a desirable destination for retirees and families looking to relocate, with beautiful beaches along the coast giving way to the lush forests and mountains of the upstate region, offering something for every taste.

But how affordable is it to relocate to the Palmetto State? State tax codes play a major role in the financial picture for those planning a move. Fortunately, South Carolina’s variable income tax rates, low property taxes, and lack of inheritance tax make it an appealing choice for many households.

Key Takeaways

  1. South Carolina is generally regarded as a low-tax state, consistently ranking above average when assessing tax affordability.
  2. South Carolina’s lack of an estate tax and low property taxes make it an appealing choice for retirees looking to relocate.
  3. Income tax rates in South Carolina vary by income and are typically in the middle of the pack in terms of competitiveness with other states.

South Carolina state income tax 

South Carolina employs a graduated structure for its state income tax with rates spanning from 0 percent to 6.5 percent—a slight reduction from the previous top rate of 7 percent. To account for inflation, the state adjusts these tax brackets each year and anticipates further rate reductions in future years.

The breakdown of these tax brackets is as follows:

  • $0—$3,200 at 0 percent
  • $3,201—$16,040 at 3 percent
  • Above $16,040 at 6.5 percent

Sales Tax in South Carolina

South Carolina has a basic 6 percent sales tax on most items, but local taxes can increase it to a maximum of 9 percent. The state does not charge this base rate on essential goods like groceries, making everyday expenses more affordable. Most other goods like prepared foods, hotel stays and certain services are taxed at the total rate of both state and local taxes.

For big-ticket items like cars, South Carolina applies its regular sales tax rates but places a ceiling on the sales tax at $500 for each vehicle sold. This approach aims to keep taxes fair for larger purchases, balancing the need for public funding with the need to keep living costs reasonable.

South Carolina Property Tax

South Carolina’s property tax system encompasses two main categories:

  • Real Estate Tax: This tax is applied to homes, land and buildings with rates varying by county. Owner-occupied residences benefit from a reduced rate of 4 percent on assessed value, compared to higher rates for non-owner occupied properties. 
  • Personal Property Tax: This targets motor vehicles, boats and airplanes, taxing them based on fair market value.

Additionally, the state offers exemptions aimed at lessening the burden for certain groups, including seniors over the age of 65, disabled individuals and veterans. The state also aims to provide favorable conditions for agricultural lands actively used in farming. These efforts are designed to balance fiscal responsibility with support for South Carolina residents’ varied needs.

South Carolina Estate Tax

South Carolina does not levy an estate tax, following the federal government’s elimination of its death tax credit program in 2005. This means residents face no state-level estate taxes when transferring or inheriting property. The lack of an estate tax simplifies inheritance matters, allowing South Carolinians to plan their estates without worrying about additional state taxes on top of federal obligations.

This policy reflects South Carolina’s commitment to creating a taxpayer-friendly environment, easing financial and legal processes for residents dealing with inheritances. By removing this layer of taxation, the state aims to promote economic stability and growth by reducing fiscal burdens during inheritance transitions.

South Carolina Retirement Tax

South Carolina offers a tax-friendly environment for retirees, highlighted by:

  • Social Security Benefits: This income is completely exempt from state taxes.
  • No Estate or Inheritance Tax: The lack of a state inheritance tax boosts the state’s appeal by allowing retirees to pass on their financial legacy without additional taxation.

These policies, taken together, create an appealing environment for seniors looking to enjoy their retirement years with minimal tax burdens.

Bottom Line

South Carolina is typically considered one of the most tax-friendly states, combining low property tax rates with the abolition of the state’s inheritance tax to create a tax climate especially appealing to retirees and families nearing the end of their working careers.

To make sure you’re not overpaying on taxes, it’s smart to consult with a professional. A financial advisor can answer your tax questions and help ensure you pay only what’s necessary. At Horizons Wealth Management, we help you navigate your financial future with expertise behind you.

South Carolina Tax FAQs

What income is not taxable in South Carolina?

South Carolina does not levy state taxes on a variety of income sources, most notably on Social Security income, inheritances, military retirement payments and permanent disability retirements, regardless of age.

Is South Carolina a good tax state for retirees?

While South Carolina is an above-average state for tax competitiveness overall, it is especially appealing to retirees due to its lack of state taxes on Social Security income and its low property tax rates on real estate and vehicles.

Is South Carolina or North Carolina better for taxes?

Every situation is different, but overall, South Carolina would seem to be a more favorable tax state than North Carolina for many households. For lower-income families, South Carolina’s graduated income tax rate is preferable to North Carolina’s flat tax rate. Higher-income households and property owners will also prefer the lower tax rates on these major expenses in South Carolina when compared to their neighbors to the north.

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Inheriting a 401K – Rules and What To Do

If you inherit a 401(k) from a spouse, parent, or loved one, itis essential to be prepared. Inheriting this type of account may be less straightforward than other types of inheritances, and comes with many considerations depending on your relationship to the account holder. 

The IRS has specific rules for spousal and non-spousal beneficiaries, all of which can affect your financial outcomes. Depending on the 401(k) type, you may owe taxes on the distributions from the inherited account. If you’re the beneficiary of a 401(k) or will be in the future, here’s what you need to know.

Key Takeaways

  • Inherited 401(k) rules have key differences between spousal and non-spousal beneficiaries. 
  • You will owe standard income taxes if you inherit a traditional 401(k).
  • You will not owe income tax if you inherit a Roth 401(k).

What is a 401(K)

A 401(k) is an employer-sponsored retirement savings plan. There are two types of 401(k) plans, traditional and Roth. With a traditional 401(k), employee contributions are pre-tax, reducing your taxable income, and taxes are paid when withdrawals are made during retirement. For Roth plans, contributions are made with after-tax dollars, but withdrawals in retirement are tax-free.

401(k) plans can be a great asset in retirement savings and should be taken advantage of if offered by an employer. 

What are the rules when you inherit a 401(k)?

The rules for inheriting a 401(k) depend on several factors, including your relationship to the account holder, the age of the owner at their time of death, and whether or not they began taking required minimum distributions (RMDs), which start at 73. Detailed below are considerations for the most common situations.

How inheriting a 401(k) from your spouse works

If you inherit a 401(k) from a spouse, there are four options to consider: 

  • Take a lump-sum distribution. This means you can receive your portion of the 401(k) as a lump sum, without penalty. The IRS considers these distributions as regular income, which can create a significant tax bill. This is generally only a good option if the account balance is relatively small or you need immediate access to the full amount.
  • Roll the assets into your own 401(k) or IRA. This option allows you to treat the funds as if they were originally your own, consolidating your savings into one account. It also provides the opportunity for the funds to continue growing. Rollovers are subject to standard 401(k) or IRA rules, but do not incur any unique penalties. If pre-tax funds are rolled over into a Roth account, you will most likely be subject to tax penalties. It is best to consult a financial or tax advisor if you are considering a Roth rollover. This benefit is only available to spousal beneficiaries.
  • Transfer the 401(k) funds into an inherited IRA. An inherited IRA is an individual retirement account made specifically for inherited funds. This type of account allows the beneficiary to take withdrawals without facing early withdrawal penalties. It requires that you take minimum distributions, but these are based on your life expectancy, not your spouse’s. This option is helpful for spouses under 59½ who would like to make immediate withdrawals.
  • Leave the 401(k) as is. If you leave the 401(k) in its original plan, you may withdraw without triggering the 10% early withdrawal penalty. You will still pay income tax on any tax-deferred funds. If you are over 59½ and your spouse was over 73 and taking RMDs before they passed away, you may choose to continue the withdrawals or wait until you reach 73 to begin RMDs. If you are 73 or over, you must take RMDs. If you are between 59½ and 73 with a spouse who was not yet 73, you can begin taking RMDs when your spouse would have reached 73.

Options for an Inherited 401(K) if you’re a non-spouse beneficiary

Options for an inherited 401(k) vary if you are a non-spouse beneficiary. In this situation, your options are:

  • Take a lump-sum distribution. This option is the same as if you were a spouse. If you choose to take a lump sum, knowing if this distribution would push you into a higher tax bracket and being prepared is important. If the inherited 401(k) is traditional, you will owe taxes at standard income rates; if it is a Roth, you won’t owe any additional taxes on the withdrawal.
  • Transfer the 401(k) funds into an inherited IRA. Money from an inherited IRA must be fully withdrawn within 10 years, unless the beneficiary is qualified as an eligible designated beneficiary, such as a minor child or someone with a disability. If the money in the 401(k) was pre-tax, you will owe taxes on withdrawals from a traditional inherited IRA. If it is withdrawn from a Roth 401(k) or converted to a Roth IRA, taxes will not be owed, as the money was contributed post-tax. If you convert a traditional 401(k) into an inherited Roth IRA you will most likely incur taxes on the conversion.
  • Leave the 401(k) as is. You can leave the funds in the original 401(k), but as a non-spousal beneficiary, they are also typically subject to the 10-year rule.

What if the inherited 401(K) is a Roth?

If you inherit a Roth 401(k), you will not owe taxes on withdrawals, as the money was originally contributed post-tax. However, you may still be subject to the 10-year rule.

401(K) 10 Year Rule

With the passage of the SECURE Act in 2019, most non-spousal beneficiaries are required to fully distribute the inherited account within 10 years, a provision known as the 10-year rule. 

  • If the account holder died in 2020 or later, non-spousal beneficiaries must withdraw all funds by the end of the 10th year of the account holder’s passing or be subject to a 50% penalty on all remaining funds.
  • There are some exceptions for non-spousal beneficiaries inheriting accounts in or after 2020. If the beneficiary is a minor, disabled or chronically ill, or is not more than 10 years younger than the original account owner, they may take RMDs based on their life expectancy. For minor beneficiaries, the 10-year rule applies when they reach the age of maturity, as determined by their state, typically 18 (or 19 or 21 in some states). For the other categories, the 10-year rule never applies.

Bottom Line

If you inherit a 401(k), you have several choices on handling the funds within the account. These options vary in terms of rules and regulations for spousal beneficiaries versus non-spousal beneficiaries. Since these inheritances can come with significant tax liabilities, it may be helpful to consult a professional. Horizons Wealth Management financial services can assist in understanding and managing an inherited 401(k). 

401(K) Beneficiary FAQ

Do beneficiaries pay taxes on 401k (k) inheritances?

It depends on the type of 401(k) inherited. If it is a traditional 401(k), yes, as the contributions were made initially on a pre-tax basis. If it is a Roth 401(k), no, as the contributions were made with post-tax income.

How to avoid beneficiary taxes on inherited money?

There is no way to entirely avoid taxes on an inherited traditional 401(k) besides disclaiming the inheritance. You can minimize taxes paid at once by taking distributions from the original 401(k) or transferring the funds to an inherited IRA and taking distributions over 10 years.

Can I convert an inherited 401(k) to a Roth IRA?

Yes, you can convert an inherited 401(K) but you will have to pay taxes on the conversion. 

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How to Set Long-Term Financial Goals

How to Set Long-Term Financial Goals

Setting long-term financial goals is a necessary component to ensuring stability for you and your family. Without clear goals, it becomes easy to overspend, under-save, or miss out on other financial opportunities. 

Whether you’re looking to buy a house, plan for retirement, pay off large debts, or a combination of all three, you need achievable long-term goals to get you there. The earlier you identify and start planning for your goals, the more likely you are to reach them.

Key takeaways

  • Long-term goals are necessary tools for reaching financial milestones.
  • The SMART method is the best way to break down your goals into achievable steps.
  • Even if you must readjust your goals later in life, starting to plan as early as your 20s is best.

What are long-term financial goals?

Long-term financial goals are those set for five or more years in the future to ensure financial prosperity. These goals include planning for retirement, creating generational wealth, establishing an estate plan, or paying off a large debt, such as a mortgage or student loans. 

How do short-term financial goals differ from long-term financial goals?

Short-term financial goals are those you can achieve in a more imminent period, usually within a year. These can include creating a budget, paying off smaller debts or establishing an emergency fund. While you may also be contributing to long-term goals at the same time, short-term goals differ in that they are completed in a much quicker timeframe. 

Long-term financial goal considerations by age

Time is your biggest asset when it comes to long-term financial goals. The earlier you begin, the easier they will be to achieve. However, it is never too late, and your goals may need to be adjusted over time. Below are considerations for long-term goals based on age.

Long-Term financial goals in your 20s

Generally, your early 20s are the very beginning of your independent financial journey. Knowing where to begin and what goals to set can be challenging. You don’t have to have it all figured out. This is the best time to start learning and taking small steps towards securing your financial future. 

Your 20s are a good time to:

  • Begin retirement planning by opening a retirement account and calculating approximate retirement needs. 
  • Start saving for a down payment.
  • Pay off small debts.
  • Set goals for career advancement.

Even though retirement might feel a lifetime away, it’s best to start preparing early to maximize savings and reduce stress down the road.

Long-term financial goals in your 30s

Your 30s are a time when many settle into their careers and make higher-than-entry-level wages. Ideally, increased financial security will allow you to feel comfortable in working towards long-term goals. 

At this age, goals may include:

  • Paying off student loans.
  • Setting a retirement age.
  • Improving credit score.
  • Continuing or increasing retirement savings contributions.

With a stronger understanding of your aspirations and adult needs, your 30s are a good time to solidify and work towards long-term goals.

Long-term financial goals in your 40s

Life is full of responsibilities in your 40s, from asset ownership to a growing family. Many people review their long-term goals at this time and adjust them for changing needs. 

At this stage, consider:

  • Paying off any remaining non-mortgage debts.
  • Maximizing your earning potential.
  • If you have children, investing in your child’s college fund.

Due to life circumstances and changes, many people at this age take the time to reassess their long-term goals to ensure they still align with their needs. If so, this is a good time to make any adjustments.

Long-term financial goals in your 50s & 60s

At this stage, you are approaching retirement age and should begin to see your long-term goals come to fruition. This is the time to focus on achieving the end stages of your goals and maximizing resources. 

Goals at this age include:

  • Becoming entirely debt-free.
  • Reevaluating your estate plan, including your last will and testament. 
  • Planning for long-term care in old age.
  • Ensuring your lifestyle is sustainable through your planned retirement income.

Why are long-term financial goals important?

Long-term goals are important to avoid stress later in life and ensure you are prepared for retirement and old age. For example, income from Social Security is usually insufficient and must be supplemented with other income. Without long-term financial goals, you could be left without enough money to sustain your lifestyle during retirement.

Tips for setting financial goals (SMART)

Setting goals is one thing; how to actually achieve them is another. According to a poll by NerdWallet, while 9 in 10 Americans (90%) said they set financial goals for 2025, 45% of those goal setters said they either “aren’t on track to hit their biggest money goal or they aren’t sure.”

The SMART method is a framework that can help make long-term goals less daunting. SMART stands for specific, measurable, achievable, relevant, and time-bound. 

For example, if your goal is to buy a house, how will you get there? Creating a SMART goal can help. Rather than just saying “I want to buy a house,” the SMART approach would be “I will buy a house with a $42,000 down payment by saving $700 a month for the next five years.” 

Bottom line

Long-term goals are necessary for ensuring financial security throughout life, but figuring out how to achieve them can be daunting. Horizons Wealth Management’s financial planning and retirement planning services can help you understand, plan for, and achieve your long-term goals.

Long-Term Financial Goals FAQ

What is an example of a long-term financial goal?

A common long-term financial goal is having enough money for a down payment on a house. Others include saving for a child’s college education or saving a certain amount of money for retirement.

What is the first step in creating a successful long-term financial goal?

Use the SMART method. Rather than setting goals with vague objectives, SMART goals require you to break down the process. When you have a clear intention and steps for how you’ll get there, your goals become much easier to achieve. 

Can an investment manager help my long-term financial goals?

Yes, an investment manager can help you reach your long-term goals. They can provide you with individualized strategies that work for your financial needs. 

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Questions to Ask a Financial Advisor

For many people, the journey to financial stability begins when they meet with a financial advisor. No matter what your assets look like, how many people are in your household or what you hope to accomplish with your finances, finding the right advisor is a crucial first step in achieving those goals.

Key Takeaways

  • Asking the right questions during a meeting with a financial advisor can reveal their ability to perform their job and achieve your specific financial goals.
  • Not all advisors are right for all clients, so it’s important to find someone who is qualified and experienced in situations similar to your own.
  • Whatever you hope to achieve through investing, you should focus on your long-term goals and let those guide your decision-making.

Determine Financial Goals

Before you can choose the right financial advisor, you need to understand what you hope to achieve. If you’re planning for retirement, for instance, you need to understand what that looks like for you—how much money do you need each month? How often will you be making large expenses? Will you continue to support other members of a household and, if so, to what extent?

All of these questions should guide your goal-setting process, and you should have a relatively clear picture of what you want before you start seeking assistance from a financial professional.

Questions for a Financial Advisor

Once you understand your financial goals, it’s time to start hunting for the right advisor. This process can be made much simpler by preparing some questions ahead of time, which will show you how qualified the advisor is and how experienced they are with individuals in similar circumstances to your own.

Are You a Fiduciary?

A fiduciary is a financial professional who is legally required to act in the best economic interests of their clients. Certain types of financial advisors, like Certified Financial Planners, must also be fiduciaries, but not all financial professionals are. Knowing your advisor is legally bound to help you make the best financial decisions is a relief for many investors.

How are You Paid?

Different advisors use different compensation plans. Typically, financial advisors receive either a commission, a set fee, or a combination of the two.

Advisors who operate on a commission basis will receive an agreed-upon percentage of the proceeds from the sale of financial products they manage for their clients. At the same time, fee-only compensation is typically either a set hourly rate or a percentage of the total value of assets managed.

For larger financial planning firms, advisors might also be paid a salary based on the company’s total funds generated.

What is Your Investment Philosophy?

No two people see the investing world exactly the same, and it’s important to find an advisor whose perspective on investing aligns with your long-term goals. 

An advisor’s investment philosophy considers factors like their tolerance for risk, preferred investing strategies, beliefs about the market, and many others. These ideas, coupled with the advisor’s professional experience, will dictate how your assets are used to accomplish your financial goals. 

What Services Do You Provide?

Many financial advisors offer a wide range of services, but often they will specialize in certain aspects of investing and financial planning. Asking about available services and specialties when seeking an advisor will ensure you find the right person for your needs.

If, for instance, you plan to send several kids to college in the future, it’s good to know your prospective advisor has experience navigating the costs and challenges of doing so economically. If you’re planning to retire soon, you want to find an advisor who knows every little tip and trick to maximize your retirement savings. Whatever your goals might be, there’s a specialist out there to help you achieve them.

How Will We Work Together?

Some people want to be involved in every little detail of their financial planning, while others prefer not to see how the sausage is made. Finding the right advisor means finding a professional who communicates in the style and frequency that suits your needs, whether that’s consistent and specific updates or more spread-out, big-picture check-ins. 

No matter what you want your working relationship with your advisor to look like, it’s critical to find someone who has clear, effective communication skills and who knows how to break down the necessary information for you to understand in a simple, efficient manner.

How Do You Track Investment Performance?

Whatever your advisor’s investment philosophy and strategy, you’ll want to receive periodic updates about your investments. Understanding how an advisor interprets the effectiveness of their investment decisions up front will allow you to see how things are going over time and can provide insight into their effectiveness as a planner. 

What Professional Experience Do You Have?

No matter how an advisor is trained or what their investing strategies look like, there’s little substitute for working experience. A seasoned veteran of the financial industry will have a better idea of how to navigate complex financial situations and, perhaps more importantly, will know what to do when things go unexpectedly wrong. In the event of an unavoidable financial issue, it’s always good to have someone on your side who’s been there before.

What Types of Clients Do You Typically Work With?

Managing finances and investments requires context. What works for one person or family might not be right for another, and it’s generally a good idea to find an advisor who has worked with clients in similar situations.

An advisor who works exclusively with ultra-high-net-worth individuals, for instance, might not be as experienced in navigating lower-stakes investing strategies or vice versa. Financial professionals who work primarily with single-income, child-free homes might not know as much about financial planning for a large family. Finding someone who’s experienced working with people like you can be a huge help when navigating tricky financial scenarios.

What to expect at a financial planning meeting

A financial planning meeting is your opportunity to get to know your financial advisor and for them to learn more about you and your goals. A typical meeting will include an overview of your long-term plans and the current state of your finances to help your advisor better understand what’s possible and what you hope to accomplish.

You will also have the opportunity to ask these important questions during the meeting. This will allow you to learn more about the advisor’s experience and mindset and determine if they are a good fit for your financial needs before committing to a working relationship with them or their firm.

Bottom Line

Starting to work with a new financial advisor is an important step toward accomplishing your goals, and finding the right person to work with is crucial to succeeding in those goals. By asking questions and arriving well-prepared to your initial meeting, you can greatly increase your chances of finding someone who will serve as a good partner for your financial future.

Horizons Wealth Management offers various services, such as wealth management, managed portfolios, and financial planning. Schedule a call today to start planning your financial future.

Financial Advisor FAQs

Is it worth it to pay 1 percent to a financial advisor?

This depends on your individual situation, but generally, a 1 percent fee is fairly typical for these types of services. For less-complex financial advising, this could be higher than necessary, but for extremely complicated tax situations, it could be relatively affordable. If possible, try to compare rates for your situation across several prospective advisors to get a sense of what’s normal for you.

What rate of return should I expect from my financial advisor?

This is also highly dependent on your unique situation and will likely be influenced by your tolerance for risk and that of your advisor. Safer investments will yield lower returns with a higher rate of certainty, while riskier moves could produce a higher rate of return with less certainty.

How do you know a financial advisor is good at their job? 

The simplest way to know if an advisor is skilled at their job is to check for customer testimonials and ask clear, straightforward questions during your initial meeting. An advisor with a great deal of experience and positive reviews is likely to be in touch with what their clients want and how to accomplish those goals.

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Is Social Security Running Out?

Senior woman with dog

Social Security represents an important source of income for millions of Americans who paid into the system during their working years. Despite contributing thousands of dollars to the program on average, many people have concerns about the future of the Social Security Administration. Estimates from the SSA itself suggest the trust funds used for benefits payments could be depleted as early as 2033 unless changes are made to the program’s funding structure.

Key Takeaways

  • Social Security is a program that uses taxes to fund a benefits program for individuals who contributed to the program during their working years.
  • Two trust funds hold the funds raised through these taxes, but they are estimated to be depleted by around 2033.
  • The government has acted decisively in the past to make the necessary changes to keep Social Security afloat.
  • Social Security should be just one part of your overall retirement plan, alongside investments, savings and lifestyle changes.

How Does Social Security Work?

Social Security is a taxpayer-funded program designed to supplement income for retired individuals and certain other groups. A great number of American workers—184 million people, according to the Social Security Administration—pay taxes into the Social Security system which funds benefits for current Social Security recipients. When those workers retire or otherwise qualify for Social Security themselves, they will receive benefits equal to a percentage of the amount they contributed in taxes.

While many people think of Social Security as a benefit entirely for retired individuals, that’s not the only group receiving regular benefits from the SSA. Other recipients of Social Security benefits include:

  • People with qualifying disabilities
  • Spouses and children of workers who died
  • Dependent parents of workers who died
  • Spouses and children of Social Security recipients

Is Social Security Running out of Money?

To understand the current state of Social Security, it’s essential first to comprehend how your Social Security taxes are allocated to current beneficiaries.

The tax money collected for Social Security is distributed into one of two trust funds—the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund. The funds are then used to pay benefits to their corresponding recipients, with any leftover money invested by the government.

According to estimates released by the SSA, these trust funds are shrinking and could reasonably be expected to be depleted entirely within approximately 15 years. If these trust funds are depleted, the annual income from taxes would only be sufficient to cover 79 percent of the total benefits needed.

If nothing is done to prevent this from happening, Social Security beneficiaries may see a decrease in the percentage of their contributions returned as benefits drop. Benefits would be lower, but they would not disappear entirely. 

It’s also important to note that the trust funds have come close to depletion in the past, but the government has successfully intervened to prevent it. In 1982, Congress was forced to enact emergency legislation to prevent the collapse of the OASI fund. The crisis was averted, and better funding mechanisms were created for the fund to reduce the likelihood of a future crash.

While it is still unclear if or how the federal government might intervene on Social Security’s behalf, even in the worst-case scenario, recipients would still receive a return of some percentage of their investment into the program.

How to Financially Plan Around Social Security?

Regardless of whether or not the Social Security trust fund remains financially solvent, it’s important to have a healthy investment portfolio to prepare you for retirement. Many financial planners recommend aiming for 80 percent of your pre-retirement income from a combination of investments, savings, and Social Security benefits. For the average earner, Social Security benefits are typically between 40 and 50 percent of pre-retirement income.

Many types of investments can help you navigate your retirement more comfortably.

Set up a retirement fund

A retirement fund is a long-term investment account designed to provide certain tax benefits if the money is left untouched for a specified period. They can be created by people of any age, and are a very common tool for those wishing to invest in their retirement.

Max out 401K employer Contributions

Many companies offer matching funds for employee contributions to a 401K retirement account. These accounts function in a similar way to retirement funds, but employers will match employees’ investments up to a certain amount from each paycheck. These matching funds are paid in addition to your paycheck, and it’s a good idea to invest at least enough to reach your employer’s maximum contribution.

Open an IRA

An individual retirement account, or IRA, is another type of account set up to maximize tax benefits for long-term investments. Taxes aren’t paid on funds invested in an IRA at the time they’re placed in the account, making them an appealing target for investment.

Leverage Health Savings Accounts (HSAs)

Medical expenses can be significant at any age, and as you near retirement age, you might find yourself needing to increase your spending on healthcare. An HSA allows for tax-free contributions and growth while the funds are in your account, and those funds can be spent tax-free if they are used for qualifying healthcare products and services.

Lower Housing and Living Expenses, If Possible

Many people find themselves downsizing from much larger homes as they near retirement age. As children grow up and move out, a smaller, lower-upkeep residence becomes appealing to many people. Reducing your footprint, and thereby your costs, is a great way to supplement your savings and investments as you enter retirement. Lower overhead means the percentage of pre-retirement income necessary to sustain your lifestyle stays low as well.

Bottom Line

While there do appear to be some changes on the horizon for Social Security, there’s no need to panic about an unexpected loss of benefits for future recipients. Even without government action, the program will still be able to operate at around 80 percent capacity. With appropriate government intervention, the program can remain totally solvent and continue supporting retired workers, disabled individuals and many other people and families for years to come.

No matter what happens to the SSA, it’s smart to maintain a balanced set of investments as you plan your retirement. Social Security is a crucial component of the retirement puzzle for many individuals, but it should never be viewed as the sole source of income for retirees. 

Horizons Wealth Management can help you with your financial future, even if Social Security is a bit tumultuous. Schedule a call today and start planning for your retirement.

Social Security FAQ

H3: What happens if Social Security runs out of money?

If the Social Security trust funds run out of money, benefits will likely be reduced to match the level of funds coming into the program from taxes. The SSA estimates it could operate Social Security at around 80 percent capacity if this were to happen.

At what age do you get 100% of your Social Security?

You will receive the full amount of your Social Security benefits if you begin drawing them after you reach the full retirement age. This age has increased slightly over time, but is currently 67 years old.

 Do RMDs Affect Social Security?

Required minimum distributions don’t directly impact your Social Security benefits, but they can affect your tax liability. The amount of taxes you must pay on your benefits is determined by your income bracket, and RMDs are treated as income for tax purposes. If your RMD increases your tax bracket, you might have to pay more taxes on your SSA benefits.

How do I know if I’m ready to retire?

Retirement looks different for everyone, and the age at which you’re able to stop working is largely dependent on your pre-retirement income, your overhead, savings and investments. Many planners recommend creating a strategy to access around 80 percent of your pre-retirement income, but this number can be much lower or higher for certain individuals.

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How Much Money You Need To Save Each Day To Become A Millionaire By Age 65

Becoming rich is nothing more than a matter of committing and sticking to a systematic savings and investment plan.

If you want to get rich, start investing- and start as early as you possibly can.

To illustrate the simplicity of building wealth over time, Bach created a chart detailing how much money you need to set aside each day, month, or year in order to have $1 million saved by the time you’re 65.

Next time you consider running to Starbucks for a $4 latte, think about this chart and consider redirecting that coffee cash to your savings.  Check it out here.

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Tony Robbins’ 10 Tips for Living Rich

If you want to be happy, but you’re having a tough time in life due to personal or financial issues, it’s important to take whatever steps possible — even small ones — to progress and grow.

This best-selling author’s advice has been featured prominently in magazines, digital media and in national televised media. He travels all over the country every month for events to inspire people in their lives and in business.

Click HERE for some of Tony’s top pieces of advice on how to change your mindset in ways that can have a positive impact on your life and your finances.

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Your Brain Does Really Weird Stuff When It Thinks About Money

Money is an emotional topic, but what’s really happening inside our brains when money comes up?  The answer, in short, is a whole lot!   A Harvard Business article explains what your brain looks like while thinking about money. Click below to read the 3 key takeaways.

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How Cars Affect your Financial Freedom

It’s not that I don’t want a really fancy car, it is just that there is something I want a bit more: financial freedom. Car payments are many times the #1 obstacle that causes the average family not to achieve financial stability. Spend some time thinking about your current car situation.  Are your car purchases making your bank richer or you?

Here is a great read about “How Your Car Affects Your Financial Freedom.”

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10 Ways To Prevent Money From Ruining Your Marriage

Arguments about money are by far the top predictor of divorce. It’s no secret that fighting about money puts a huge strain on a relationship. Money issues are so troublesome that people who say they’re experiencing stress in their relationship cite “finances” as the number one reason.

This may seem like a grim prognosis for married couples, but it doesn’t have to be.  There are various steps that experts say couples can take to avoid letting money matters get the best of their marriage.

So whether you’re about to say “I do” or money problems have you thinking maybe “I don’t anymore” the following tips can help prevent money from destroying  your relationship.

Click here to read more.

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