Author: Katie Stephenson

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Where to Retire

Photo: Matijn Palings | Unsplash

When planning for retirement, people often focus on how much money they need to save, when they’ll retire, and how to spend their free time. An often-overlooked retirement planning consideration is where to retire — and the decision can have a significant impact on your finances. Here are some factors to consider when deciding where to retire:

• Income tax implications 

Let’s go ahead and start with the elephant in the room. Sadly, even after you finish working, you’ll still owe taxes. Taxes can have a significant impact on your retirement, and different states have different tax rates for retirement income. Some states have more favorable tax policies than others, which can allow retirees to keep more of their retirement income. In addition, some states don’t tax Social Security benefits or other types of retirement income, which can help you further maximize your retirement savings. 

• Retirement income

Social Security benefits — While most states don’t tax Social Security benefits, there are a few states that impose some form of taxes on them. Regardless of where in the U.S. you live, up to 85 percent of your Social Security income may be subject to federal income tax. 

Retirement plan distributions — Many people hold most of their retirement savings in tax-deferred accounts, such as IRAs and 401(k)s. While these vehicles provide a great way to save in a tax-deferred manner, retirement distributions from these types of accounts are subject to ordinary income tax at the federal level. However, some states don’t tax retirement plan distributions, which can help you maximize your funds available for retirement. 

Pension income — Some states differentiate between public and private pensions and may tax only public pensions. Other states tax both, while some states tax neither. Again, the amount of state tax you pay on this retirement income source can have a big impact on your lifestyle. 

• Estate taxes 

In 2025, the federal government allows individuals to pass on up to $13,990,000 without any federal estate tax ($27,980,000 for married couples filing jointly). However, depending on where you live, you may need to pay state estate taxes. It’s important to understand the estate tax requirements of your current state as you’re planning your legacy, especially since some states’ estate tax limits may be lower than you would expect. 

• Capital gains 

Long-term capital gains are taxed by the federal government at more favorable rates than ordinary income. However, this is often not the case for states that charge state income tax. Many states don’t differentiate between earned income and capital gains, which means depending on the state in which you live, you may have significant tax liabilities on investment income. 

• Cost of living 

Cost of living can differ widely between various cities and states, making it essential to choose a retirement location you can afford. Some cities have a much lower cost of living than others, which allows you to do more with your retirement savings. By choosing a location with a lower cost of living, you may be able to afford a larger home, travel more often, or pursue hobbies and interests that may be out of reach if you were paying more for daily living expenses. 

• Healthcare costs

When choosing where to retire, it’s important to find a location that offers access to high-quality healthcare facilities. Having convenient access to healthcare can help keep your costs down. 

• Housing costs

Housing costs can vary widely between different cities and states, which is why it’s important to choose a retirement location that aligns with your housing budget. It’s also important to consider what property taxes you’ll be responsible for paying, as these too can vary widely. 

As you begin planning for your retirement, keep in mind it’s important to understand how where you live can impact your retirement finances. This knowledge allows you to choose a location that fits within your retirement budget and can help you live the lifestyle you want. 

Katie Stephenson, JD, CFP, is a Private Wealth Manager and Partner with Creative Planning. Creative Planning is one of the nation’s largest registered investment advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

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Volatile Times

Photo: Denise Chan | Unsplash

There’s no way around it — market volatility can be scary, especially if you are nearing retirement or have other major expenses on the horizon. Whenever you see your portfolio value drop by 10 percent to 20 percent over a short period of time, you may be tempted to sell out and stash a pile of cash. But as unnerving as volatile markets may be, they’re a normal part of investing. So, because volatility is inevitable, the following are tips to help you weather the storm as a long-term investor. 

1. Stay invested.

Fear-driven selling may be the single biggest mistake investors make during periods of market volatility. These significant portfolio adjustments are typically driven from panic rather than sound investment principles. It’s very difficult (I’d dare go so far as to say it’s impossible) to time the market. Most investors who try doing so end up missing out on significant growth opportunities.

There has never been a time in history where the market has not eventually recovered from a downturn. Yes, sometimes it takes years for the recovery to occur — and the rebound may not coincide with your investment timeline — but history shows markets will eventually rise again. However, if you take your money out of the market altogether, you’ll realize any portfolio losses and miss out on an opportunity for future growth.

2. Maintain a diversified portfolio.

Portfolios that are highly concentrated in a few investment types, sectors, or industries can be risky. The performance of various asset classes varies greatly from year to year, which is why it’s important to spread your risk out across multiple asset classes and investment types. Diversification typically helps avoid the severe downside of market fluctuations. To dampen volatility over time, diversify across asset classes, sectors, and geography. 

3. Understand your risk tolerance.

When navigating volatile market conditions, it’s important to commit to and maintain an appropriate level of portfolio risk. Consider your risk tolerance, current financial situation, future income needs, and long-term goals. Develop a financial plan and determine a level of portfolio risk you feel comfortable with in advance. And when volatility inevitably comes, hold true to this risk profile regardless of what the market is doing. Having a portfolio that’s too aggressive increases the likelihood you’ll make an emotionally driven decision to sell at the wrong time. On the other hand, having a portfolio that’s too conservative reduces long-term returns and could make it more difficult to outpace inflation and accomplish your financial objectives. 

4. Differentiate between long-term and short-term goals, and invest accordingly.

I always stress the importance of maintaining a long-term, goals-based approach to investing. Market volatility is no fun. Not only can a market drop result in a steep decline in your portfolio’s value but many news outlets and other investors can make volatility feel like the end of the world. 

One way to deal with short-term market volatility while remaining focused on your long-term goals is by following something called the five-year rule. Using this approach, any assets you plan to use within the next five years should be conservatively invested. So, if in the next five years you anticipate a large expense, such as retirement, a new car, college tuition for a child or grandchild, a wedding, etc., you should have a sum of money invested in a short-term, semiliquid account. Your other assets should remain invested in a diversified portfolio in order to support your long-term goals. 

By using this strategy, you can solve the challenge of funding short-term obligations while also remaining focused on your long-term goals because:

• Short-term assets are sheltered from daily market fluctuations, which can provide you with peace of mind that you will be able to fulfill your upcoming financial obligations. 

• Long-term assets remain invested in a diversified portfolio with the potential to outpace inflation, take advantage of market opportunities and grow to fund your long-term goals. 

Ultimately, the best way to grow your wealth in a volatile marketplace is by having a financial plan in place to help keep you on track toward your specific financial goals, regardless of market volatility. 

Katie Stephenson, JD, CFP, is a Private Wealth Manager and Partner with Creative Planning. Creative Planning is one of the nation’s largest registered investment advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

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Are You Leaving Money on the Table?

Photo: Marek Studzinski | Unsplash

It’s important to take steps to minimize your tax liabilities. Many taxpayers miss out on valuable tax breaks. Here are some that are often overlooked but that can potentially save you money. 

1. Medical expenses 

If you itemize deductions, you may be eligible to deduct medical expenses that exceed 7.5 percent of your adjusted gross income (AGI). For example, if your income is $100,000, you may be able to deduct expenses that exceed $7,500. Examples of eligible expenses include:

• Insurance deductibles, co-payments, and other out-of-pocket medical expenses
• Medicare premiums
• Travel expenses for medical procedures, i.e. housing and transportation 
• Crutches, walkers, and scooters
• Long-term care insurance premiums
• Contact lenses and related supplies
• Breathing machines or other durable medical equipment

2. Charity-related expenses

Most people are aware that charitable donations are tax-deductible, but fewer realize that certain out-of-pocket expenses related to charity work can also qualify. Examples include:

• Up to 14 cents per mile if you use your car for charity-related purposes
• Postage cost for charity-related mail
• The ingredients used to prepare a meal for a charity event

3. Home office deduction 

If you are self-employed and use a space in your home exclusively for business purposes, you may be eligible for a home office deduction. There are two approved methods for calculating your deduction:

• Actual expense — Allows you to calculate the percentage of your home that comprises your home office and add in other costs based on that percentage. For example, if your office takes up 5 percent of your home, you can deduct 5 percent of your mortgage interest, real estate taxes, and utilities. (This method requires keeping meticulous records of your expenses.)
• Simplified — Allows you to claim $5 per square foot, up to 300 square feet (a maximum of $1,500). 

It’s important to note that individuals working remotely for companies as W-2 employees aren’t eligible for the home office deduction. 

4. Mortgage discount points deduction

If you paid for points to lower your mortgage interest rate, you may be eligible for a tax deduction. The cost of mortgage points can be deducted during the year in which you paid for them as long as the mortgage was used to purchase or build your primary residence. 

Points related to a mortgage refinance may also be deductible but typically need to be spread out over the life of the loan. 

5. Residential clean energy credit

This allows you to deduct up to 30 percent of the cost of new energy-saving systems that use solar, wind, geothermal, biomass, or fuel cell power to heat water, generate electricity, or heat your home. You can also claim a tax credit of up to $500 for installing energy-efficient doors, insulation, heating and air conditioning systems, and water heaters, and a tax credit of up to $200 for new energy-efficient windows. 

Keep in mind these are lifetime credit limits, which means any credits taken in previous years count toward the maximum allowable credit.

6. Student loan interest deduction

For student loan debt, you may be eligible to deduct up to $2,500 of the interest you paid on qualified loans. This deduction is gradually phased out for single filers with a modified adjusted gross income (MAGI) greater than $85,000 and joint filers with a MAGI greater than $170,000.

7. Lifetime learning credit

The lifetime learning credit is available for those pursuing education at any stage — whether undergraduate or graduate studies, continuing education courses, or certificate programs at eligible educational institutions. The credit is worth up to 20 percent of $10,000 in qualified expenses, with a maximum of $2,000 per year. Qualified expenses include tuition and fees, course materials, books, software, and computers necessary for classes. 

The credit is available to those with a MAGI of less than $90,000 for single filers or less than $180,000 for married couples filing jointly. There’s a gradual phaseout of the credit for those with a MAGI of $80,000 (individuals) or $160,000 (married filing jointly).  

Katie Stephenson, JD, CFP, is a Private Wealth Manager and Partner with Creative Planning. Creative Planning is one of the nation’s largest registered investment advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

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Couples’ Planning

Photo: Greg Bulla | Unsplash

It shouldn’t come as a surprise that the sooner you start planning for the future, the better prepared you’re likely to be. The same goes for retirement planning as a couple. The sooner you’re on the same page when it comes to your vision, the better the chance you’ll achieve it. The following tips can help you as you plan for retirement with your partner. 

1. Decide where you hope to live.

Where you choose to live in retirement can have a big impact on your lifestyle. If you plan to move, it’s important to factor in any changes to your cost of living as you plan and save for retirement. Visit and research various locations to better understand what daily life will look like in a new city or town. Also, decide what type of home you would like to live in (e.g., apartment, condo, single-family home), as this will also impact your expenses. 

2. Discuss the timing.

Not all couples retire at the same time. Although some look forward to leaving the workforce and entering retirement together, others decide to stagger their retirements. When considering the timing, it’s important to take into account your ages, your job satisfaction, the amount of savings you’ll have, your eligibility for pension benefits, your optimal Social Security timing, and more. Your wealth manager can run various projections to help you determine your ideal retirement timing so you can plan accordingly.  

3. Discuss how you’d like to spend. 

What will your spending priorities be in retirement? Do you hope to travel the world? Provide financial support to your children or grandchildren? Purchase a second home? Give to charitable causes?

Having an idea of your spending priorities can help you establish goals and remain focused on your values. It’s also important to know if you and your partner have different spending priorities, as you may need to implement additional savings and investing strategies to plan for these differences. 

4. Discuss your retirement goals. 

What’s your current lifestyle like, and what’s your vision for retirement? How are these similar to or different from your partner’s? 

Make individual retirement goal wish lists and compare them. Look for common goals and identify where you have different visions. Discuss how you can each compromise on your vision or make adjustments in your current lifestyle to help ensure you both achieve happiness and fulfillment in retirement.

5. Discuss how you plan to pay for medical expenses and long-term care.

Healthcare and long-term care expenses are some of the biggest costs faced by many retirees. In fact, a 65-year-old couple retiring in 2024 could expect to spend approximately $330,000 on medical expenses in retirement.

Not only that, but an estimated seven in 10 people will require long-term care in their lifetime, which can be pricey. In 2023, the median cost of a private room in a nursing home was $9,733 per month, while the average cost of a home health aide was $6,292 per month.

These numbers highlight the importance of having a plan in place to pay for healthcare and long-term care expenses in retirement. It may make sense to set aside funds in a health savings account (HSA) or purchase long-term care insurance (LTCI). Your wealth manager can advise you on a course of action that makes sense for you, given your personal financial situation and future goals. 

Katie Stephenson, JD, CFP, is a Private Wealth Manager and Partner with Creative Planning, one of the nation’s largest registered investment advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

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How to Leave Your Legacy

Keep a record of memories for your heirs. (Photo: Laura Fuhrman | Unsplash)

To leave a legacy means more than the dollars you leave in the pockets of your children. A legacy is an opportunity to love someone from the grave. It’s forever tying a memory to a smell, taste, or sound. It’s asking yourself how you want to be remembered and what your core values are — then putting those answers into action. Here are four ways to leave a legacy for those you love.

Give back to your community. 

If generosity and acts of service are among your core values, consider participating in at least one volunteer activity per year with friends or family. You can take part in a fundraiser or donate your time or talent to a local nonprofit you’re passionate about. If you have an affinity for a particular cause, creating a charitable foundation can be a meaningful way to provide your loved ones with employment or board membership opportunities directly related to the cause you support. While a private foundation is certain to leave a powerful financial legacy, it also promotes collaboration, creativity, and continuity of your philanthropic vision. A foundation can be structured to operate indefinitely so that the lessons you leave to your heirs can be taught for generations to come. 

Keep a record.

Record a video message or keep a journal. When a loved one passes away, it’s common to hear sentiments such as, “I wish I could see their face or hear their voice again.” Recording a video message is an opportunity to express your love, share your life experiences and values, and offer guidance to your loved ones. 

If a video feels too formal or induces stage fright, consider keeping a journal. Put it someplace you’ll see it often so that you can jot down daily observations, funny memories, random thoughts, and pieces of wisdom you want to pass along. There’s no need to copy edit or write multiple pages at once. Keeping a journal can be a low-pressure way of putting your personality to paper — a gift your loved ones will cherish when you’re gone. 

Create a will and/or a trust.

The act of creating a will and/or trust gives the absence of chaos to your heirs following your death. These documents outline who will inherit your assets as well as how and by whom they’ll be distributed. Putting your wishes in writing helps to prevent disputes and legal battles among your heirs. Additionally, a trust may be able to protect your assets from creditors, reduce estate taxes, and provide financial support to your beneficiaries. A trust can also prevent your heirs from having to participate in probate, a lengthy and often expensive formal court administration processes that “proves” the legitimacy of your will after death. While far from glamorous, creating a will and/or trust is a generous and loving act of housekeeping that may spare your children from unnecessary additional suffering after your passing.

Start a family tradition. 

Whether it be the dependable smell of homemade birthday cake, the sound of Frank Sinatra coming from the kitchen on Saturday mornings, or counting constellations from a tent under the open sky every summer, a tradition reinforces your family’s values and creates a sense of belonging. Establishing positive family traditions has proven to increase a child’s ability to form a strong sense of identity — an identity you have the opportunity to forever influence. 

Katie Stephenson, JD, CFP, is a Private Wealth Manager and Partner with Creative Planning. Creative Planning is one of the nation’s largest registered investment advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.