InSight

Money Stress and the Impact on Your Health

Financial Planning Dentist

No one likes stress. Its impact on our decisions and relationships is bad, but the effect on our health can be permanent. We have all felt the effect of money stress, but often it’s only after the fact, or after the nearness of the stress has passed that we recognize the totality of its impact on our finances and our health. Stress related to financial issues can be especially toxic. Taboos surrounding discussing both finances and mental health can make the subject particularly covert. Some signs that financial stress may be having a negative effect on your wellness:

Delayed healthcare

As budgets get stretched, people who are already under financial pressure begin to cut corners. One of the first and possibly most harmful is sacrificing healthcare services. According to Gallup’s annual Health and Healthcare poll, 29% of American adults held off seeking medical care in 2018 because of cost. That’s right, 3 in 10 people went without medical care for fear of the cost. This is not only heart breaking, it is quite possibly fraught with more costly long term consequences. Delaying medical care can actually lead to worse health outcomes and higher costs, both of which can lead to more stress. This reactionary posture to both money and health can snowball quickly. 

Poor mental health

Mental health and financial wellness are very correlated. Health is cyclical—poor financial wellness often leads to poor mental health. For years, studies have shown that people in debt have higher rates of mental health issues like depression and anxiety than those who are debt-free. They demonstrate higher cortisol levels, poor sleep habits, and generally lower quality of life. 

Poor physical health

Ongoing stress about money has been linked to heart conditions, dietary ailments, diabetes, sleep problems, alcohol and drug dependence, and more. Without proper treatment for both the physical and financial damages, these conditions can lead to life-threatening and long term illnesses, which can plunge you even further into debt.

Unhealthy coping behaviors

Financial stress can cause you to engage in a variety of unhealthy behaviors and jeopardize your relationships with people. People suffering from financial stress report higher rates of stress eating, domestic violence, self harm, and alcohol and drug misuse.

If you’re experiencing any of these warning signs it’s in your best interest to seek professional help in order to find more productive coping responses. Although easy to coach to, asking for help is a great first step. 

At InSight, we guide our clients through stressful situations and decisions because being validated with a difficult choice can provide clarity rather than our clients feeling a sense of doubt or fear on whether or not they made the right decision.

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Navigating the Intricacies of Taxes in Retirement: A Comprehensive Guide

Retirement – a phase that symbolizes relaxation and the freedom to delve into passions and hobbies without the regular hustle of a 9-to-5 schedule. However, this new chapter also brings forth unique financial scenarios, with taxes in retirement often being an overlooked, albeit vital, aspect to consider. The Inescapable Reality of Taxes in Retirement Contrary to what some might assume, retirement does not exempt one from taxes. Various income streams in retirement, such as Social Security benefits, pension income, and withdrawals from tax-deferred accounts, can indeed be subject to taxation. Navigating through this tax maze becomes crucial to ensure a financially stable and stress-free retirement. Diverse Income, Diverse Tax Implications Social Security Benefits: While Social Security benefits can be taxed, it largely depends on your additional income. Understanding the tax implications on these benefits and employing strategies to minimize them can preserve your funds. Pension and Annuity Incomes: Depending on the type and location, pensions and annuities may be subject to federal and state taxes. Structuring these incomes effectively can possibly shield a portion from taxation. Withdrawals from Retirement Accounts: Different retirement accounts, such as Roth IRAs, 401(k)s and IRAs, come with varied tax stipulations. Traditional accounts often impose taxes upon withdrawal, while Roth accounts usually offer tax-free withdrawals. Investment Income: The tax on investment income, such as capital gains and dividends, can impact your tax bracket and, consequently, your overall tax liability. Strategies to Minimize Tax Liabilities – Consult your CPA/Tax Advisor about the implications of these decisions for your personal situation Strategic Withdrawals: Optimizing withdrawals from retirement accounts by understanding the tax implications of each can significantly reduce tax burdens. Coordinating withdrawals from taxable, tax-deferred, and tax-free accounts might create a balance that maintains a lower tax bracket. Roth Conversions: Consider converting portions of traditional IRAs or 401(k)s into Roth accounts during lower-income years, managing tax brackets efficiently. Although you’ll pay taxes during the conversion year, future withdrawals from Roth accounts are typically tax-free.  Tax-Loss Harvesting: Offset capital gains by strategically selling investments that are underperforming. This approach, known as tax-loss harvesting, can help mitigate taxes on investment income. Charitable Contributions: Engage in qualified charitable distributions (QCDs) or donate appreciated securities, which can potentially provide you with tax deductions while supporting worthy causes.  Evaluate State Taxes: Consider the tax landscape of your state of residence during retirement. State taxes on pensions, properties, and sales can vary widely and impact your overall tax expenses. If your SALT obligations are above 10k and you have your own S-Corp you should talk to your tax advisor about paying this liability directly from your company and not your personal bank accounts. Retirement Plan Contributions: Consider contributing to your Traditional 401(k), Traditional IRA, Simple IRA, and SEP IRA if your marginal tax rate is above 24%. Consider contributing to a Roth IRA or Roth 401(k) if your marginal tax rate is at or below 22%. Consider splitting your contributions to both your IRA and Roth accounts if you’re at the 24% marginal tax rate. Be aware of the income and contribution limits if you’re contributing to either an IRA or Roth account. Employer-sponsored retirement plans like 401(k)’s, Simple IRAs, and SEP IRAs have no income limits but do have contribution limits.  Embracing Tax Planning as an Integral Element Effective tax planning is not limited to the years of employment but extends into retirement. A thoughtful strategy that comprehensively encompasses your various income streams and tax benefits can pave the way for a retirement that is financially stable and secure. Final Thoughts Retirement symbolizes a well-earned respite after years of hard work and dedication. Ensuring that your finances, especially concerning taxes, are well-managed and optimized for this new chapter is crucial. Engage with a tax professional or financial advisor who can help you navigate through the tax intricacies of retirement, safeguarding your financial well-being.

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Tax Document Checklist

Tax Preparation Checklist Personal Information Your social security number or tax ID number Your spouse’s full name, social security number or tax ID number, and date of birth Identity Protection PIN, if issued by the IRS Routing and account numbers for direct deposit or payment Foreign reporting and residency information (if applicable) Dependent(s) Information Dates of birth and social security numbers or tax ID numbers Childcare records (including provider’s tax ID number, if applicable) Income of dependents and other adults in your home Form 8332 if applicable Sources of Income Employed: Forms W-2 Unemployed: Unemployment (1099-G) Self-Employed: Forms 1099, Schedules K-1, income records Records of all expenses, business-use asset information Office in home information (if applicable) Record of estimated tax payments made (Form 1040–ES) Types of Deductions Forms 1098 or other mortgage interest statements Real estate and personal property tax records Receipts for energy-saving home improvements Charitable donation records Medical expense records Health insurance documentation Childcare expense records Educational expense records K-12 educator expense receipts State and local tax records Retirement and savings documentation Federally declared disaster documentation Check the FEMA website to see if your county has been declared a federal disaster area. Print Checklist

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