The Uncommon Path – March 3rd Edition

Ukraine

The Uncommon Path

Plan Wisely | Retire Well | Travel on Your Terms


In this issue…
  • The travel app you must have on your phone
  • How much does it cost to travel the world?
  • The most significant U.S. tax breaks ranked by revenue
  • The best Asian countries to retire in

…and more!


To My Clients
The events in Ukraine have been a reminder of how blessed I am. How I am able to do what I love with people I genuinely care about. And to live in a country where I have the freedom to do so. 

I tried to find an inspirational quote on travel and the goodness in people — but just couldn’t find the right one. I downloaded an engaging study on geopolitical events and how the market has reacted historically but it didn’t seem right. Instead, some thoughts below.
 
Your Portfolios
History shows that major political events tend to have a short-lived effect on markets, and your portfolios are constructed for the long term. I know it’s never easy to stay the course when headlines are grim and your investments are heading south, but it is almost always the best course of action. If you’re still concerned that recent events could hurt you financially, please refer to this market correction checklist. 
 
Ukraine
I had the privilege of visiting Ukraine in 2008. Even though the country had gained independence in 1991, it still had a Soviet Union feel. There was a single expensive, government-run hotel in Kyiv, people outside the service industry were hesitant to talk to strangers, and the United Colors of Benetton window display featured seven mannequins wearing shades of black and grey.
 
However, the people were friendly (once they warmed up to you) and entrepreneurial. We rented privately-owned homes well before I knew what Airbnb was. As a child of the cold war, it was fascinating to visit a country emerging from it.
 
When you travel, it’s the people who stick with you. It’s who you remember and why we travel in the first place. It saddens me to think of the ongoing invasion of Ukraine and the people in danger on both sides, who are powerless to stop a dictator run amok.
 
The small positive emerging from the invasion is the outpouring of support from the international community. Hopefully, countries with similar hostile intentions will think twice before acting on them in the future.
 
Please reach out if you have any questions or concerns.

Safe Travels,

David


Travel

How much does it cost to travel the world? Find out from someone who’s done it.

If there’s one travel app I refuse to live without, it’s Hopper. It often has the lowest prices on flights and hotels. I’ve found customer service to be helpful. And the app will track your selected flights/hotels alerting you when prices change.

Book your summer vacations now! They’re not going to get any cheaper.


Retirement

The most significant U.S. tax breaks ranked by revenue. I’m a sucker for a good infographic, and this one is great!

The people, the sights, the smells, the food – Asia is hard to describe. It’s one of those places where walking out of the airport slaps you in the face with a sensory overload. If you’ve ever thought about retiring there, here’s a list of top countries and why they make sense. 


Pittsburgh

I updated my travel guide to Pittsburgh. Here’s the best way to spend two days in the city. 


Did you miss the last issue of The Uncommon Path? If so, you have a second chance to catch up on:

  • Exactly what you need to do to get a refund on Southwest when the price of your ticket drops
  • Why you should avoid buy now, pay later offers – my Wall Street Journal quote
  • If you’re over 50 and feel behind on your retirement savings I wrote this article for you 
  • Non-stop flights out of Pittsburgh are coming back and here’s the list

Prefer to receive my newsletter in your inbox?

You’ll not only be signed up for my newsletter which is published twice a month, but you’ll also get a PDF that shows you exactly what a comprehensive retirement plan for people who love to travel is all about. Thanks for reading!

 

 
 
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    Financial Advisor David Tuzzolino

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

     

     

    Is It Too Late to Save for Retirement in Your 50s?

    9 of the best ways to jumpstart your savings.

    American workers are struggling to prop up their retirement savings. A recent Bankrate survey reports that 60% of Generation X and 56% of Baby Boomers feel behind.

    If only time travel existed, we could visit our younger selves, break out an overhead projector, and dazzle with a presentation on compound returns and the importance of starting retirement savings early.

    Is it too late to save for retirement in your 50s? No, and here are 9 of the best ways to catch up if you’re behind.

    Contribute to Tax-Favored Accounts

    “…in this world, nothing is certain except death and taxes.” – Ben Franklin

    Taxes will be one of the most significant expenses in your lifetime. Avoiding taxes when you can will help grow your retirement savings tremendously. Take advantage of retirement plans offered at work, such as a 401k or 403b, and contribute to individual accounts like an IRA when possible.

    The rules on retirement account eligibility are confusing and specific to your situation, but the answers can be found online. Or by walking through a flowchart like those listed below.

    It is often advantageous to invest in a Roth account (401k or IRA) if you believe you’ll be in a higher tax bracket in the future. You pay taxes on contributions now and can pull money out in retirement tax-free. If, however, you believe that your tax rate will be lower in the future, a traditional 401k or IRA might be a better option.

    Take into consideration how much money you expect to make in future years and if you think the government will raise or lower tax rates. All else being equal, I’d err on the side of paying taxes now as it’s nice to get them out of the way, and it’s not hard to imagine higher tax rates down the road.

    Flowcharts:

    Make Catch-Up Contributions

    A wonderful thing happens when you turn 50, no not reading glasses, catch-up contributions! However, according to Vanguard, even though 97% of retirement plans they oversee offer catch-up contributions, only 15% of plan participants take advantage. This is a missed opportunity.

    In 2022, participants can make catch-up contributions of $6,500 in plans such as 401ks and $1,000 in IRAs. Adding extra money to these tax-favored plans as you’re nearing retirement is a fantastic way to move the saving’s needle.

    Don’t wait until your 50th birthday to start catch-up contributions. You’re eligible on January 1st of the year you will turn 50, so there’s no reason to wait.

    Contribute to an HSA

    A health savings account (HSA) may be available if you have a high-deductible health care plan. The account allows you to save money for a significant list of HSA-eligible expenses. The beauty of this account is its triple-tax-free status. You won’t pay taxes on contributions, investment growth, or when funds are spent.

    Did someone say investment growth? HSA accounts allow you to invest contributions. Unfortunately, according to the Employee Benefit Research Institute, only 7-9% of participants held something other than cash. Additionally, 60% of account holders withdrew funds during the nine-year study.

    I often see HSAs misused, but it’s easy to fix. Here’s how to use an HSA to extract the most value.

    In 2022 contribution limits for self-only HSA coverage are $3,650 and $7,300 for a family plan. You should be making these maximum contributions, if at all possible. Your first retirement savings should be to your company retirement plan up to the match. Your second contribution should be to your HSA, and max it out if you can.

    Invest the money you put into your HSA like any other retirement account. Only hold cash if you’re going to need the HSA funds soon. Optimally, you’ll want to leave your HSA alone until after you turn 65. Paying medical expenses out of pocket before age 65 will allow this tax-free account to grow more quickly.  

    When you reach 65, you can withdraw HSA funds for any reason, medical or not. If you spend HSA money on something other than a medical expense, it will be treated as an IRA withdrawal and taxed. If you stick to medical expenses, withdrawals will be tax-free.

    Catch-up contributions can be made once you turn 55. That’s an extra $1,000 in 2022.

    It’s hard to stress how powerful a triple-tax-free account is in your retirement savings arsenal. But you must use it optimally to extract the greatest benefit by investing contributions, letting it grow untouched until at least age 65, and maxing out contributions each year.

    Invest Your Raise

    The good news for 2022 is the average salary in the U.S. will increase 3.4%, according to a recent WTW survey. Inflation may come into play, reducing your spending power, but this is still a fantastic opportunity to put away more money. Try not to spend the extra money in each paycheck and contribute to one of the tax-favored accounts discussed earlier.

    Invest Your Bonus

    It’s tempting to sit around in late December and earmark your end-of-year bonus. A new swimming pool? A European vacation? Don’t do it. Or, if you must, try spending only a quarter or half of your newfound stash. Invest the remainder. The average bonus in 2021 was 11% for exempt employees in the U.S., per research by Zippia. Investing your bonus can be a significant boost to your nest egg, and investing most, if not all, of your bonus can be a painless way to jump-start your savings.  

    Get a Second Job

    Today’s robust economy presents many opportunities for a second job. There are few ways better to inject significant funds into your retirement savings than working more hours in the week.

    Not only can you increase your income, but you can follow pursuits that might have very little to do with your day job and more to do with beloved hobbies. A second job can also be a great way to transition to retirement. Not everyone wants to lay on a beach when they retire, and if you’d like to spend your time working in a different field, here’s a great way to test it out.

    Eliminate High-Interest Debt

    Not all debt is harmful, but when it has a double-digit interest rate, such as a credit card, pay it off as quickly as possible. Lower interest rate debt, within reason, is perfectly acceptable and can be paid off at a more leisurely pace. I would include mortgage debt, school, and car loans in the less-of-a-concern bucket, assuming they carry interest rates in the single digits.

    Invest the money saved on interest payments for retirement. Interest can be a negative or a positive, depending on which side of it you’re on. By paying off debt and investing, you’ll make interest work for you.   

    Reduce Costs

    Nothing is worse than paying for things you don’t use or need. If you review your credit card statements each year, you’ll likely discover services you’re no longer using.

    Is your home bigger than it needs to be? Once children have moved out, you might find yourself in a house with more space than you need. How about other big-ticket items such as cars? Do they still meet your needs, or could you get away with one less car? Is the auto you own designed to carry around the whole family? Maybe a smaller, less-expensive car now suits your needs?

    I specialize in working with people who love to travel, and this is an area ripe for saving money. Consider shorter trips, stay closer to home, and travel during the slow season.

    You can trim these large expenditures, and the money saved can be used for retirement. Don’t go overboard by cutting too deeply, but aggressively eliminate unnecessary costs in your life.                

    Move

    Moving to save money for retirement may seem drastic, but it can contribute to your savings dramatically. I already mentioned moving into a smaller, less expensive home if you don’t need the space. Savings from downsizing may include a lower overall cost of the home, lower taxes, and lower utility bills.

    There are also many ways to reduce expenses by moving to a different location. Lower tax rates stand out as a compelling way to save more money. Among the taxes that you might be able to lower are state/local income taxes, property taxes, and sales taxes. It may not take a move across the country to reduce your tax bill, sometimes a move across town or into a new county can have a big effect.  

    It’s Not Too Late to Start Saving

    If you feel you’re behind in saving for retirement, it’s not too late to take action! By using some of the 9 suggestions outlined above, you can aggressively make up lost ground. It’s not how you start, it’s how you finish!  


    Your questions about planning for retirement and travel answered. Where to go? What to do? How to plan it? How to afford it?

    You’ll not only be signed up for my newsletter, but you’ll also get a PDF that shows you exactly what a comprehensive retirement plan for people who love to travel is all about. Thanks for reading!

     

     
     
  • *Privacy policy: your email address is safe, and you will never receive SPAM.

    Financial Advisor David Tuzzolino

     

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

    The Uncommon Path – February 3rd Edition

    Burj Khalifa

    The Uncommon Path

    Plan Wisely | Retire Well | Travel on Your Terms


    In this issue…
    • January was a bad month for the market. Should you sit tight or make changes?
    • How much does it cost to go to Disney World?
    • Putting your investments in the proper account can make a big tax difference
    • Pittsburgh welcomes the Moonshot Museum in 2022

    …and more!


    (Pictured above: Luxury travel operator Unforgettable Travel determined the number one post-pandemic, bucket-list destination is Burj Khalifa in Dubai. See the article below for the complete list.)


    I do not like heights. I consider myself pretty rational, but the fear of heights is my one true phobia. As an example, I refused to walk across the glass floor at the top of the CN Tower in Toronto regardless of how many elephants I was told it could support. 

    So how can I explain why I’m also intrigued by the view from very high places? My fear of heights didn’t keep me from walking along the Cliffs of Moher or running off the side of a mountain to hang-glide in Brazil. I also tend to visit the highest building in most of the cities I visit.

    So why would I jump at the chance to visit the Burj Khalifa Observation Deck on the 148th floor of the tallest building in the world? I guess when the view is worthwhile, I can overcome irrational fear. Or I’m so ready to travel internationally that I’d walk across a long glass floor to get there. 

    Safe Travels,

    David


    Travel

    You’re not alone in your desire to travel. Here’s a list of the top-10 “bucket list” destinations travelers want to visit post-pandemic. The article also lists the top-10 for each continent.

    Something excites me about being on a boat where the view is 360 degrees of water. Maybe it’s the adventure (in an admittedly controlled setting) or contemplating the voyage my Italian ancestors made from Europe over a hundred years ago. Here are the pros and cons of a transatlantic cruise.

    How much does it cost to go to Disney 2022? It’s not cheap, but the kids (and some adults) just might find it’s worth every penny.


    Retirement

    What should you do when the market drops 10% in a month? As a financial advisor, it’s easy to tell clients to sit tight during market corrections and plan for the long-term, but sometimes it’s more complicated than that. Here’s a great checklist that walks you through the important questions to be asked. Maybe changes to your portfolio or plan should be made?

    There’s nothing worse than retiring overseas to a place where you feel unwelcome and just don’t fit in. Worry no more! Here’s an article that features 5 places to retire where it’s easy to fit in.


    Investing

    A good reminder that asset location is important to avoid a tax bomb. However, taxes are only part of the equation. It’s important to mention how advantageous it is to have high-growth investments in a tax-efficient account if you have a long time horizon.


    Pittsburgh

    16 restaurant & brewery openings coming in 2022.

    If you’re a space junky like me, you’ll be excited to hear a new museum is opening in Pittsburgh in 2022. The Moonshot Museum will exhibit actual spacecraft, flight simulators, and a ton of moon-centric displays.


    Did you miss the last issue of The Uncommon Path? If so, you have a second chance to catch up on:

    • 14 credit cards that have 100k sign-up bonuses
    • Exactly how much are those points/miles worth? Every major program’s value
    • Solving the 70-year-old case of who turned in Anne Frank’s family
    • A 2022 Market Outlook by Goldman Sachs

    Prefer to receive my newsletter in your inbox?

    You’ll not only be signed up for my newsletter which is published twice a month, but you’ll also get a PDF that shows you exactly what a comprehensive retirement plan for people who love to travel is all about. Thanks for reading!

     

     
     
  • *Privacy policy: your email address is safe, and you will never receive SPAM.


    Financial Advisor David Tuzzolino

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

     

     

    The Uncommon Path – January 20th Edition

    The Uncommon Path

    Plan Wisely | Retire Well | Travel on Your Terms


    In this issue…
    • 14 credit cards that have 100k sign-up bonuses
    • Exactly how much are those points/miles worth? Every major program’s value
    • Solving the 70-year-old case of who turned in Anne Frank’s family
    • A 2022 Market Outlook by Goldman Sachs

    …and more!


    Nothing says the Dog Days of Winter like twelve straight days of below-freezing highs – yes, highs! If the Weather Channel is accurate Pittsburgh is looking at sub-freezing weather for the rest of January. I’m trying to focus on future travel instead of the weather and hope COVID doesn’t derail my spring vacation to France. 

    Also, I highly recommend The Greater Journey: Americans in Paris by David McCullough. The non-fiction book written by Pittsburgh’s most well-known historian documents the adventures of American writers, artists, architects, and more as they experience 19th-century Paris. The book does a fantastic job of highlighting what makes Paris, Paris. 

    Lastly, if you have investment accounts with me at TD Ameritrade, your tax forms are available. Please sign in to your account to access.  

    Safe Travels,

    David


    Travel

    Even if you’re uncomfortable traveling now, you can still plan for the future. A list of 14 credit cards offering 100k sign-up bonuses. 

    Oh, and exactly how much are each of those offers worth? Every major airline/hotel rewards points/miles are valued in the January 2022 guide by The Points Guy. 

    One of the travel credit card families I recommend the most is Chase Sapphire given their generous rewards and flexibility. Ever wonder whether you should be using Chase miles or cash when booking a flight? This guide explains the ins and outs.


    Retirement

    Not everyone is lying on the beach during retirement, some retirees are solving 70-year-old cold cases. This is a great 60 Minutes piece about an ex-FBI investigator who goes to Amsterdam to help solve the enduring mystery – Who gave up Anne Frank’s family? 

    The annual retirement account contribution limits, tax rules, etc. change constantly. Here is a two-page document that lists all of the 2022 Annual Limits for Financial Planning. 


    Investing

    I normally take outlooks for the year ahead with a boulder-sized grain of salt. However, when they are well done and backed up with valuable data they can be a very interesting read. Here’s the 2022 Outlook by Goldman Sachs. Even if you’re a skeptic, like me, when it comes to making market/economic predictions accurately it’s a thought-provoking paper. 


    Did you miss the last issue of The Uncommon Path? If so, you have a second chance to catch up on:

    • 2022 has not been kind to many large growth stocks, but it’s not too late to rebalance
    • Exactly how much does it cost to retire in each country? A list
    • In case your retirement fund is a little low, a list of the cheapest countries to live in
    • Ready to renew your passport? Soon you won’t have to mail it in

    Prefer to receive my newsletter in your inbox?

    You’ll not only be signed up for my newsletter which is published twice a month, but you’ll also get a PDF that shows you exactly what a comprehensive retirement plan for people who love to travel is all about. Thanks for reading!

     

     
     
  • *Privacy policy: your email address is safe, and you will never receive SPAM.


    Financial Advisor David Tuzzolino

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

     

     

    Three Ways to Reduce Your Pennsylvania State Taxes and Save More Money

    Federal taxes get a lot of attention, but what you pay in state taxes is a big part of your tax bill, too. For Pennsylvania residents, there are some strategies that can both reduce this bill and help you meet other financial goals.

    This article covers Roth conversions, capital losses, and the PA 529 plan, which are three areas of the Pennsylvania tax code that can save you a lot of money if you understand them, or cost you a lot more if you don’t. While I’m not a tax expert, and this is not an exhaustive list of money-saving opportunities, I often run into these three less-known situations when helping my clients avoid unnecessary taxes. 

    Disclaimer: These tax strategies are complex and contain many nuances. Please check with your tax advisor before implementing any of the strategies presented to see if they apply to your specific situation.

    Does Pennsylvania Tax Roth IRA Conversions?

    Roth IRA conversions are one of the most attractive opportunities available to save on federal taxes if you have significant assets in tax-deferred retirement plans.

    Why is a Roth conversion so attractive? It allows you to pay taxes when you’re in a lower tax bracket.

    There is often a significant drop in income for retirees between their retirement date and when they start taking social security or are forced to take required minimum distributions (RMDs) from their retirement accounts. If you retire at age 55 and wait to take social security until age 70, you could have 15 years of depressed income. This period is the sweet spot for Roth conversions.

    The conversion process involves taking money from tax-deferred retirement accounts, paying taxes at the federal income tax rate, and putting the money into a Roth IRA account. Your money will then grow tax-free, can be withdrawn tax-free, and there will be no estate tax at the federal level for these accounts. In addition, Roth IRAs are not subject to required minimum distributions, which gives you more control over your income levels. Unfortunately, PA has an inheritance tax that can be as high as 15% depending on your relationship to the deceased, but that’s a topic for another day and doesn’t change the attractiveness of a conversion.  Refer to the 5-year rule for exceptions and limitations involving conversions.

    Unlike the federal government, Pennsylvania does not allow you to put money into a retirement account tax-free. You will pay a 3.07% tax when you first contribute to any retirement account. The state will also tax you on any IRA gains if withdrawn before their official retirement age of 59 ½.

    The critical distinction to remember is:

                  A Roth conversion performed before age 59 ½ will be subject to the 3.07% Pennsylvania tax.

                  A Roth conversion performed after age 59 ½ will not be subject to the 3.07% Pennsylvania tax.

    This difference can cost you thousands of dollars. When completing a Roth conversion, there are many factors to consider, including the timing of income, your current federal tax bracket, and your expectations of future tax rates. However, don’t forget to include the Pennsylvania 3.07% tax into any decision you make if converting to a Roth IRA before 59 ½.  

    Can I Carry Forward Capital Losses in Pennsylvania?

    The federal government allows you to carry forward capital losses. A $100,000 loss generated by selling a stock can be carried forward into future years. If you have a $100,000 capital gain the following year, it washes out, and you pay nothing in federal taxes.

    Pennsylvania, however, does not allow residents to carry forward a loss into future years to offset gains. Instead, you lose it if it’s not used in the year it is generated. In this example, you will owe state tax on the $100,000 in capital gains in year two. That’s a $3,070 check.

    How do you avoid losing this potential deduction and pay less state tax? As long as it doesn’t adversely affect your federal state taxes, such as generating a short-term gain now or in the future, it often makes sense to sell a stock with capital gains in the same year. Also, there is no 60-day wash rule when it comes to generating capital gains. You can immediately buy back your investment. However, keep in mind your one-year holding period to achieve long-term capital gains will reset. 

    Caveats:

    • You don’t want to convert long-term capital gains into short-term capital gains and pay more in federal taxes
    • Consider the impact this might have on dividend-paying stocks and the taxation of dividends
    • You can apply $3,000 in capital losses to earned income at the federal level, so you may not want to offset capital losses completely
    • Always weigh the tax implications on both a federal and state level before making any decisions
    • Capital gains and losses do not offset for spouses at the state level

    Of all the topics discussed in this article, capital gains and losses may be the most intricate. Please do your homework and check with your tax advisor before making any decisions.

    How Does the PA 529 Plan Tax Deduction Work?

    The following discussion only applies to PA 529 plans. You can read about the difference between this plan and out-of-state plans here.  Like the other topics in this article, I recommend you talk to an expert to determine the best alternatives for your specific situation.

    There are many ways to save money for your child’s education, and a 529 plan is one of the most popular alternatives. Benefits include no Pennsylvania state tax on contributions, the growth of assets, or withdrawals. Because of this triple-tax-free treatment, it usually makes sense to run all applicable education expenses through your 529 plan.

    The money you contribute can be withdrawn in approximately ten days, so even if your student is near the end of their college experience and your 529 plan has run low on funds, or has been completely drained, it can benefit you to make payments through the plan. You’ll avoid the 3.07% Pennsylvania tax and have more money to pay college tuition.

    Conclusion

    Planning for retirement is a process often filled with compromises and sacrifices. So it’s especially sweet when you can save thousands of dollars by deftly navigating tax laws. While federal tax laws get most of the attention, understanding Pennsylvania tax laws is just as important. Sometimes no compromises or sacrifices are necessary to save thousands of dollars, just some well-applied knowledge.


    Your questions about planning for retirement and travel answered. Where to go? What to do? How to plan it? How to afford it?

    You’ll not only be signed up for my newsletter, but you’ll also get a PDF that shows you exactly what a comprehensive retirement plan for people who love to travel is all about. Thanks for reading!

     

     
     
  • *Privacy policy: your email address is safe, and you will never receive SPAM.

    Financial Advisor David Tuzzolino

     

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.