While most people have a general sense of what they spend, we often find that the full picture is not always as straightforward as it seems.

Taking the time to look at expenses more closely can provide useful context when making both short-term and long-term financial decisions.

Fixed and Variable Expenses

Monthly expenses are often made up of both fixed and variable components.

Fixed expenses may include items such as mortgage or rent payments, insurance, and certain subscriptions. Variable expenses can include groceries, dining, travel, and other discretionary spending.

Both categories play a role, and understanding how they interact can help create a more complete view of overall spending.

Expenses That Are Easy to Overlook

In many cases, it’s not the obvious expenses that create gaps in understanding, it’s the ones that occur less frequently.

Items such as annual subscriptions, home maintenance, vehicle repairs, or periodic travel may not show up in a typical monthly review, but they can have a meaningful impact over time.

We often see that incorporating these types of expenses into a broader view can help avoid underestimating overall spending.

Why Accuracy Matters

Having an accurate view of expenses can support more informed financial decisions.

Whether someone is evaluating a potential purchase, planning for retirement, or reviewing savings goals, understanding cash flow is an important part of the process.

Even small differences between estimated and actual spending can compound over time, particularly when building longer-term plans.

Changes Over Time

Expenses are not static.

They tend to evolve based on lifestyle changes, family needs, inflation, and other external factors. What may have been accurate a few years ago may no longer reflect current conditions.

For that reason, we generally find it helpful to revisit and update expense assumptions periodically to ensure they remain aligned with reality.

A Practical Approach

Understanding monthly expenses does not require perfect precision, but it does benefit from a thoughtful and consistent approach.

Looking at both regular and irregular expenses, and reviewing them over time, can help create a more reliable foundation for broader financial planning decisions.

Additional Reading

Jeff was recently quoted in an article discussing common categories of monthly expenses and how individuals may think about them when evaluating their financial situation.

You can read the full article here:

https://www.redfin.com/blog/monthly-expenses-list

The post Understanding Monthly Expenses as Part of a Financial Plan appeared first on Cutter Financial Group.

In my experience, that’s where it can be helpful to slow things down and take a thoughtful, step-by-step look at what a second home really means for your finances over time.

Looking Beyond the Initial Purchase

Most people focus first on the purchase price and what the monthly payment might look like. That’s a natural place to start, but it rarely tells the whole story. A second home typically comes with its own set of ongoing expenses, including property taxes, insurance, utilities, routine maintenance, and, in some cases, association or management fees.

Individually, these costs can seem manageable, but over time they may add up in ways that aren’t obvious at the beginning. Taking the time to estimate these expenses up front can help create a clearer picture of the overall long-term commitment.

How It May Affect Cash Flow

Another area that can get overlooked is the impact on day-to-day cash flow. A second property doesn’t just add a mortgage payment; it also brings with it more variability depending on how the home is used, how often it’s visited, and what it takes to keep it in good shape.

It can be useful to look at how these additional costs line up next to your current obligations, lifestyle spending, and longer-term savings goals. Understanding this before you buy may help reduce the risk of the property creating unexpected strain on your monthly budget.

Liquidity and Flexibility

A second home is often a significant use of capital, whether the purchase is made in cash, with financing, or some combination of the two. Depending on how it’s structured, this can reduce overall liquidity and limit flexibility if you face unexpected expenses or changes in your circumstances down the road.

Maintaining an appropriate level of accessible assets is something I encourage folks to think through carefully, especially when they’re considering adding another large financial commitment. Having a plan for where cash will come from in a pinch can be just as important as deciding which property to buy.

Considering the Longer-Term Impact

For many families, a second home isn’t just about today. It can also influence longer-term planning. This might include how and when you plan to retire, how your investments are allocated, and how your overall balance sheet is structured over time.

For some, the decision is driven primarily by lifestyle – a place to gather with children and grandchildren, or a stepping stone toward a future retirement location. For others, there may also be investment-related considerations, such as potential rental use or the role of the property in an eventual estate plan. In either case, evaluating how the second home fits within your broader plan can help bring more clarity to the decision.

Usage and Expectations Over Time

It’s also worth taking a practical look at how the property is likely to be used over the years. In my conversations with clients, we’ve seen that expectations about usage can shift over time as family dynamics, health, work, and travel habits change.

What seems realistic at the outset – visiting every other weekend, hosting frequent gatherings, or managing a rental schedule – may feel different a few years down the road. Thinking through questions like travel time, maintenance responsibilities, and how the home fits into your day-to-day life can be just as important as the dollars and cents.

A Thoughtful, Individual Decision

There is no one-size-fits-all answer when it comes to purchasing a second home. For some, it can be a meaningful addition to their lifestyle and long-term plans. For others, the trade-offs may not align as well with their broader financial situation and priorities.

Taking a measured approach, understanding both the immediate and longer-term implications, and viewing the property in the context of your overall plan can help support a more informed decision. For many people, that includes working with a financial professional and, where appropriate, tax and legal professionals to understand the potential implications for their specific situation.

Additional Reading

I recently shared thoughts in a ThinkAdvisor article that discussed considerations related to purchasing a second home, including the importance of understanding financing options, potential tax issues, and how a second property fits into long-term planning. You can read the full article here:​

https://www.thinkadvisor.com/2026/03/24/what-clients-should-know-about-buying-a-second-home

The post Financial Considerations When Purchasing a Second Home appeared first on Cutter Financial Group.

Some key stressors in marriage often include raising children, potentially differing family values, busy daily schedules, etc. Add in money problems, and things can get difficult fast since money and emotion are often closely intertwined.

In fact, money is said to be one of the top causes of marital distress, even if you’re millionaires₁. The conflicts it causes can go beyond just day-to-day spending. Differing attitudes toward budgeting, savings, investing, or even how to spend retirement money can scuttle the best-laid financial plans—and marriages.

Women and men often bring their own personal experience with money to the table, which can shape their views on finances. Consider John and Suzanne, as I’ll call them. In their early 50s with 2 teenagers at home, they came in recently to begin the retirement planning conversation.

They’ve been married for almost 3 decades and explained that while they’ve always known their financial styles were different, it wasn’t until they started to get serious about retirement that it’s begun to cause greater and more frequent disagreements.

The daily differences in their spending attitudes had been manageable up until now, especially because they both had their own company 401(k) to manage as they saw fit. But now the larger picture of how to position their money for long-term income purposes brought their differences to the surface. One of the biggest issues was that John was willing to take investment risks that Suzanne found hard to stomach.

John was raised in a fairly affluent family, whereas Suzanne was raised by a single mom who often worked numerous jobs at once to pay rent and keep food on the table for her and her younger sister. As you might imagine, Suzanne has a much harder time parting with money for anything that’s non-essential.

She’s also a more conservative investor than John, unwilling to take many big investment risks. Their contrasting views were becoming a common topic of disagreement, and they wanted to find common ground to move their retirement plan forward.

Unfortunately this isn’t an uncommon situation. In fact, in my experience there is also usually one individual within the marriage who is the financial “alpha,” so to speak. It isn’t always men, although it used to be years ago. With John and Suzanne, she was the one managing the day-to-day finances for the family. Her money insecurities drove her to watch their pennies carefully. 

At the end of the day, it doesn’t necessarily matter who handles the money, but communication is key to making sure both parties agree—at least to the extent necessary—on the family finances.

This means that everyone should be included in the conversation. Even if one spouse isn’t speaking up, they still need to be heard and their views expressed. Both parties should be comfortable with the process and the decisions being made.

It’s crucial to get all financial concerns and points of dispute out in the open so that you can address them one by one. For example, if one spouse has a strong need for security and the other is more of a risk taker, it may make sense to structure your assets so that you can select spots within your portfolio that offer acceptable safety measures, while allowing other assets to be invested more aggressively. This way both spouses’ needs get addressed, and the overall plan is often even strengthened by this balance.  

Or perhaps the solution comes down to the division of assets in dollar amounts. For example, perhaps each spouse is in charge of managing the money as they see fit up to a certain dollar amount.

Having your own spending and investment account offers each spouse exclusive control over those funds and ideally makes negotiating the rest of the portfolio less stressful or emotionally charged.  

The good news is that, regardless of your financial differences, these often fade over time. According to marriage researchers, no matter how much some couples may disagree, longtime partners often end up reshaping each other’s behavior, financial and otherwise, and become more alike.₂

After years of making decisions together, financial and otherwise, many couples learn the importance of compromise and working together to achieve their goals. In my experience, some of the more successful retirement plans involve a mindset that their money is “ours” instead of “mine and yours,” and this can be a significant contributor to resolving money differences. 

You know, it has been almost thirty years to the day since I went to my father-in-law, Joe, to ask for Jill’s hand in marriage.  I asked him for the secret to a successful marriage like he had.  Joe is a direct kind of guy with few words.  He said, “Jeffrey, a successful marriage is a full-time job! Treat it that way.”  The guy was right.

And as always—be vigilant and stay alert, because you deserve more!

Have a great week, and happy St. Patrick’s Day!

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. Insurance offered through its affiliate, CutterInsure, Inc.

We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. 

Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 1. https://tinyurl.com/4nnb4ndp 2. https://tinyurl.com/23dpd4b2 

The post Marriage . . . It’s a Full-Time Job! appeared first on Cutter Financial Group.

After all, your retirement fund is for retirement, right? You’re not supposed to touch it until you are at least 59 ½ . That’s why the IRS usually imposes a 10% penalty on early withdrawals from qualified accounts like 401(k) plans and Individual Retirement Accounts (IRAs) before you reach that magic age. But sometimes unforeseen expenses pop up and those accounts make a tempting target to alleviate our short-term pain.  

Because we don’t live in a perfect world, we may face financial situations out of our control. Heck, many people have experienced a financial setback at least once during their working years and everyone – regardless of their income or assets – is susceptible to them.  Get this, 3 in 10 Americans said they took cash from retirement accounts during the early months of the pandemic, and the majority of those did so to cover household expenses and groceries₁.

So, before you start draining your retirement savings, let’s dig into some alternative ways to help make ends meet during times of financial crisis. 

For example, start by studying your expenses. When the pandemic hit, you probably spent less on certain categories, such as travel, recreation and commuting. You could decide to continue cutting back on those areas post-pandemic too. You can also look for different streams of income. Many Americans are picking side hustles and gig work if they have some free time, so that could be something to consider if you need to generate some cash. If you’re fortunate enough to have some savings set aside, uncashed bonds or even buckets of loose change, now might be the time to tap into those options. 

Once you’ve considered these and other possibilities, if you still decide to take funds from your 401(k) or other retirement accounts, be sure to understand the rules of the road to help minimize the damage. Let’s review the specifics.

For starters, you need to understand that retirement accounts are designed to encourage folks to put aside funds for the long term for retirement, so the law typically requires people who withdraw money from these accounts before age 59½ to pay ordinary income taxes plus a stiff 10% penalty. But the cost of early payouts can vary widely, so consider these facts.   

You can take a withdrawal from your IRA account and avoid the 10% penalty tax if the funds are used for higher education expenses, first-time home buyers ($10,000) and the cost of health insurance for many people who are unemployed. And folks under age 59½ avoid both income taxes and the 10% penalty on early withdrawals if they are from dollars that were contributed to Roth IRAs (but not the earnings on that money). You can’t do this with your 401(k).

However, 401(k) participants have a few options of their own. For example, the 10% penalty doesn’t apply to workers who retire in the year they turn 55 or later and make withdrawals before age 59½. They will owe ordinary income taxed but not the 10% penalty. 

And many 401(k) plans allow employees to borrow and pay back the loan within five years. You need to be careful here though, because if you leave the company, then the outstanding loan balance is due immediately. If you don’t pay it back, it will be considered a withdrawal and fully taxable. 

For both the 401(k) plan and the IRA, there are also full exceptions for death, disability and terminal illness, as well as for medical expenses exceeding 7.5% of savers’ adjusted gross income. Exceptions also apply for birth or adoption expenses ($5,000); qualified disasters ($22,000); and domestic abuse victims ($10,300). 

Another option is called the “Rule 72(t)” and allows for payments from IRAs or 401(k)s without the 10% penalty.  IRS code IRS 72(t) specifies exceptions to the early-withdrawal tax. Under this option, the owner of the retirement account must take at least “five substantially equal periodic payments”, and the amount of the payments depends on the owner’s life expectancy as calculated through IRS-approved methods. Again, you need to understand all of the requirements here because if you miss a payout, then the taxes, interest, and the 10% penalty could be due retroactive to the beginning of the arrangement. The payments must last until at least age 59½, and sometimes longer.  

Folks, financial challenges are an inherent part of life, but understanding your options can help you minimize their damage.

So as always – be vigilant and stay alert, because you deserve more!

Have a great week.  

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. 

Insurance offered through its affiliate, CutterInsure, Inc. We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 1. https://tinyurl.com/yntuytan 

The post Need to Tap into your Retirement Funds? Here’s How to Minimize the Damage appeared first on Cutter Financial Group.

March 8 was International Women’s Day₁, and the theme this year is “For ALL Women and Girls: Rights. Equality. Empowerment.” According to their website, “Central to this vision is empowering the next generation—youth, particularly young women and adolescent girls—as catalysts for lasting change.” What is important to note here is that for women to be truly empowered, they need to be informed – and financial education is a critical component for their success. Jill and I have been adamant that we teach our own girls about the importance of being fiscally responsible because it’s one life skill they need to master, yet it’s rarely taught in schools. Understanding how to earn, save, and spend responsibly sets the foundation for their financial independence and success.

Over the years we have used opportunities that crop up in everyday life to share lessons in a practical way. And with our time together this week, I’d like to share with you my Top Five Money Tips for Girls.

Number one is to understand the difference between needs and wants. Life will be full of financial choices, and you need to be able to fund your needs before entertaining the wants. For example, you might sit down with your teen and have them make two lists: one for essentials like food, clothing, and school supplies, and another for non-essentials like trendy shoes or video games. Make sure they realize that the “wants” can be funded only once the “needs” have been met.

Next up is the importance of creating and sticking to a budget. Folks, I cannot express the importance of this enough.  There is one common thread that I see in successful savers . . . is a budget. You night introduce them to budgeting tools like apps, notebooks, or spreadsheets. Start with a simple structure: list income sources (like an allowance or job) and expenses (like entertainment, school supplies, and savings). Teach them the 50/30/20 rule—50% for needs, 30% for wants, and 20% for savings. Reinforce the fact that a budget is not about limiting fun but about making informed choices to help them achieve future financial goals.  Essentially, it gives you control over your finances.

Another critical area to understand is debt, and the risk it can pose to their budget and lifestyle. Too many young people are lured into credit card debt and high interest rates because credit card companies make it too easy. Explain how credit works, including interest rates, minimum payments, and late fees. Teach your kids about the traps of the buy now-pay later approach. Just because you can afford the minimum payment, doesn’t mean you can afford the item. I tell my girls, if you wouldn’t pay cash outright for the item, then you don’t want it enough to warrant the high interest payments you’ll be making – often for months after the purchase has lost its appeal.

This discussion segues into another critical topic, which is how you can make interest work for you, not against you. Teach them the potentially significant power of compound interest. Compound interest may seem like an advanced topic, but it’s a powerful tool for teaching teens about the benefits of saving early. Use real-life examples or online calculators to show how a small investment can grow significantly over time. For example, show them how saving $50 a month in an interest-bearing account could turn into thousands of dollars over a decade.  One site I have used with my girls is Investor.gov.  It clearly shows the magical concept of compounding interest.

And most importantly, be sure to model good money habits yourself. Teens and 20’s are observant, so your habits can influence theirs. Be open about your financial decisions, whether you’re saving for a vacation, paying off debt, or setting up an emergency fund. Share your successes and mistakes to show that learning and improving financial habits is a lifelong process.

Teaching financial literacy lessons takes time and creativity, but you know, it’s one of the most valuable gifts you can give your children and grandchildren. I have seen the benefits of good money habits firsthand with my own daughters and it’s incredibly satisfying knowing that I’m setting them up for long-term success. When they learn to manage their resources wisely, they’re empowered to make a positive impact on their own lives, their communities, and future generations. 

Take the initiative to help them get off on the right foot!

And as always – be vigilant and stay alert, because you deserve more!

Have a great week.  

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. 

Insurance offered through its affiliate, CutterInsure, Inc. We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 1. https://tinyurl.com/5dxpch8h 

The post Empower the Girls In Your Life With These Financial Lessons appeared first on Cutter Financial Group.

I’ve had numerous conversations like this in recent weeks, both from those approaching retirement and those who have already retired, demonstrating that no one is immune to the overall economy’s influence on our personal finances. Many folks are asking what they need to do differently when faced with so many unknown factors, and they want reassurance that they will be OK. They need to know that their years of working, saving and sacrificing for retirement won’t be derailed by today’s chaotic political and economic landscape. And so, with our time here this week, I’d like to share some of the advice and tips I have shared in these discussions to help you navigate your own financial uncertainties too.

I help to teach folks that one way to help alleviate financial anxiety is to step away from the news headlines. What we see in the news are day-to-day events and their immediate effects on the markets. We need to remember that we are investors and not day traders and that there will be ups and downs along the way. Reacting to the news with knee-jerk changes to your retirement system based on fear is never a good idea. Your financial strategy should be built around your unique goals and objectives, with guardrails in place to help you avoid hasty, news-driven headlines.

It’s critical to also understand that uncertainty is an inherent part of investing. Growing your money in the markets will always involve a level of market risk that is based on things that are outside of our control. We need to accept that we can’t predict or control the whims of the markets. However, we are not completely powerless. Just because we can’t predict the markets doesn’t mean that we can’t aim to anticipate potential market movements and take steps to mitigate their effects.

To paraphrase Warren Buffet, the single most powerful way to compound your returns is to avoid large losses. This is where a downside risk mitigation system is so critical. Employing strategies like this involves ensuring the appropriate portion of your portfolio is protected from market volatility and losses. When your plan includes assets that you may rely upon to avoid losses regardless of market conditions, you create greater confidence to help weather volatile markets without needing to react to short-term market swings. Because you have funds earmarked for your basic needs and expenses, you can avoid selling market-sensitive investments when they are down and allow them the opportunity to gain strength during market recoveries. 

Another key component to navigating volatile markets includes the use of strategic and tactical asset management strategies. Employing these investing strategies built from a bedrock foundation of quantitative data can help ensure your portfolio is not over-exposed to market volatility and risk. This approach seeks to prevent large losses from decimating your retirement system, balancing the pursuit of healthy returns while protecting assets from large losses.  Your investment performance during market downturns can be just as important — if not more — than its performance during bull markets. The last thing any retiree wants is to watch the market drop 20-30% and be left in a place where they must delay retirement or reduce their income if they’re already in it.

Looking ahead, with expected rising volatility in 2025, there are only two things you can control, risk and process.  It’s important to understand what your risk budget is and what is your overall process especially in challenging times.  Is it to just hold on and hope for the best . . . hope is not a strategy.  Is it to just put it into CD’s . . . that won’t work since we won’t stay ahead of inflation.  Is it to employ a downside risk mitigation system to help facilitate a peace of mind you may enjoy?  If not, shouldn’t you? If you already have . . . good for you.  You see, your retirement plan should be designed to provide you with confidence, not stress!

So as always – be vigilant and stay alert, because you deserve more!

Have a great week.  

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. 

Insurance offered through its affiliate, CutterInsure, Inc. We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy.

The post Markets Making You Nervous? You Can Plan for That. appeared first on Cutter Financial Group.

I remember watching my mom cut coupons on Saturday mornings and doing meal planning around what was on sale that week. We often shopped for new school clothes from the sales racks. And heaven forbid we’d let a 2-for-1 offer go by, no matter what it was!

As I entered my teens, I got my first part-time job as the “hot dog” guy at the Raynham Dog Track.  I remember distinctly how I gained a new appreciation for the value of a hard-earned dollar. I also realized how easy she made it all look. Looking back, I now realize that it took a lot of time and effort to make her paycheck stretch far enough to cover all of our expenses and even put a little bit to the side to cover Christmas gifts.

My mom wasn’t a financial whiz and had no ties to the financial industry, yet she instilled in me an appreciation for financial discipline, planning, and making every cent count. I knew we weren’t wealthy by any means, but thanks to her, we weren’t poor either.

As I got older, I realized that while we knew how to live within our means, we weren’t getting ahead either. My mom was not socking away money in a retirement account in hopes of retiring at age 60. Building wealth for the future was always a “tomorrow” task because paying the bills today came first.

When I entered the world of finance, I found myself drawn to the idea of comprehensive financial management. Budgeting, planning, saving, investing, all of it was exciting to me and I worked with many clients who were high-earning professionals in their own right. But I was struck by how many of them shared some of the same struggles that I witnessed from my mother – despite earning six figures or more, they saved very little. They spent almost everything they made. 

What I found was that, without a commitment to financial discipline and long-term strategy, the money simply disappeared. Without a plan and a budget, many of these professionals went through all of their salary without a second thought to tomorrow.

As a father to three daughters just entering adulthood, I knew that I wanted them to have a head start on their finances. I had knowledge of financial management that took me years to acquire, and I wanted them to benefit from this. 

In particular, my oldest, Maeve, is in her second year working as a nurse at Duke Hospital. Before she moved away to begin her new job, I explained to her the importance of budgeting. I wanted her to understand that managing your money isn’t just about getting by – in fact, being able to stick to a budget is just table stakes. It’s a life skill that should be the foundation of everyone’s financial journey. Once you’ve mastered that, it’s time to move on to strategies to help you build wealth for the future. 

I explained the benefits of investing early and helped her enroll in her company retirement plan. While ignoring her blatant eye rolls, I pulled up a financial calculator online and demonstrated to her the power of compound interest. By starting to save in her 20’s, she could build up a substantial retirement portfolio with much less money than if she waited a decade or longer. I explained that a big salary wasn’t necessarily the key to wealth — keeping it and consistently growing it was.

Financial success doesn’t happen overnight, and I impressed upon her the potential for significant wealth if you consistently save and invest. For Maeve, regular contributions to her company 401(k) are a great start. She doesn’t need to consider speculative or exotic investments to build wealth, particularly because she has the benefit of time on her side. Slow and steady progress is our goal.

Ultimately, I want my girls to understand that financial freedom doesn’t happen by chance, and certainly not an entitlement . . . rather it’s a deliberate journey. With the right education and discipline, they have the power to create their own financial success story, regardless of their salary. 

So as always – be vigilant and stay alert, because you deserve more!

Have a great week.  

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. 

Insurance offered through its affiliate, CutterInsure, Inc. We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy.

The post It’s Not About How Much You Make.  It’s About How Much You Keep appeared first on Cutter Financial Group.

Anyone who knows me also knows that I believe in being grateful for what I have. I appreciate the things I have, whether I earned them or they were given to me. My family, my health, a career I love that allows me to put food on the table. I’ve lived by the mantra that you don’t look a gift horse in the mouth, rather you appreciate all that you have.

I know a lot of folks live by this too – but for many retirees receiving Social Security benefits, it’s easy to be frustrated. 2023 ushered in an 8.7% increase, the largest raise in Social Security benefits in over forty years. Don’t get me wrong, this was a welcome increase and has helped millions of Social Security recipients. At least a little bit. But was it enough?

Unfortunately, for many retirees it’s not. In fact, according to a new survey by the Senior Citizens League, 54% of older Americans think the increase in the Social Security cost-of-living adjustment (COLA) this year won’t keep up with inflation. Even worse, a full 96% of the survey’s respondents don’t think this year’s sizable bump will allow them the opportunity to catch up₁.

And that’s not all. Some retirees worry that the increased benefits will create a bigger tax bill, too. 2023’s COLA, which increased the average retiree benefit by more than $140 per month will have the unintended consequence of pushing some retirees over income thresholds, which are not indexed for inflation.

The result? They may end up having to pay income taxes on part of their Social Security benefit. In fact, more than half of the respondents expressed concern that they will pay more in 2022 taxes due to the 5.9% COLA increase they received last year.

The problem here, according to Mary Johnson, a Social Security policy analyst for The Senior Citizens League is that “…. even as inflation moderates, it will be extremely difficult for lower and modest income seniors, and those who have been retired the longest to ‘dig out’ from the shortfall between what Social Security beneficiaries received over the past two years, and the cumulative effect of actual inflation.₂”

Women will likely fare worse than men, too. According to the Social Security Administration, nearly 9 out of 10 people aged 65 and older receive a Social Security benefit. Among elderly Social Security beneficiaries, 12% of men and 15% of women rely on Social Security for 90% or more of their income₃.

And unfortunately, women age 65 and older typically have less retirement savings and smaller Social Security payments than men. This is primarily due to the earnings gap and time out of the workforce for caregiving and are more than twice as likely as men to be living in poverty. A large COLA helps them, but inflation has made the cost of living on so many items so expensive that it may not be enough.

The COLA increase, coupled with a decrease in Medicare Part B premiums this year, was expected to make a positive difference in helping make ends meet for retired senior citizens and disabled workers. Inflation in January was 6.3%, down from 7.5% a year ago and the high of 9.1% in June of 2022, yet many items that seniors regularly consume, such as food to gasoline, remain out of sight.

And then there’s the issue of taxes. A rise in benefits means a rise in your annual income. Those who surpass income limits will start to see their benefits taxed, and unfortunately the thresholds are surprisingly low.

For example, if you file as an individual and your combined income – your adjusted gross income, plus nontaxable interest earned on investments, plus one-half of your Social Security benefits – is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If you earn more than $34,000, up to 85% of your benefits may be taxable.

An increase in income from a COLA can also result in higher Medicare premiums. If your income is higher than $97,000 (individuals) or $194,000 (joint), you will see an increase in Part B and Part D premiums. Not only that, but those who receive low-income assistance for healthcare costs could also see their aid reduced if their income increases enough.

Folks, don’t get me wrong – I am not advocating against higher COLA increases. Quite the opposite. Retirees in particular need every advantage they can get to make ends meet in today’s high inflationary climate. But you need to evaluate an increase in Social Security benefits in the context of your entire financial situation so that you’re not surprised at potential tax and other consequences in other areas. And of course, don’t look the COLA gift horse in the mouth!

So as always – be vigilant and stay alert, because you deserve more!

Have a great week.

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. Insurance offered through its affiliate, CutterInsure, Inc.

We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable.

Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 1. https://tinyurl.com/y5dswtjm 2.ibid 3.ibid

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Some key stressors in marriage often include raising children, potentially differing family values, busy daily schedules, etc. Add in money problems, and things can get difficult fast since money and emotion are often closely intertwined.

In fact, money is said to be one of the top causes of marital distress, even if you’re millionaires₁. The conflicts it causes can go beyond just day-to-day spending. Differing attitudes toward budgeting, savings, investing or even how to spend retirement money can scuttle the best-laid financial plans – and marriages.

Women and men often bring their own personal experience with money to the table which can shape their views on finances. Consider John and Suzanne, as I’ll call them. In their early 50’s with 2 teenagers at home, they came in recently to begin the retirement planning conversation.

They’ve been married for almost 3 decades and explained that while they’ve always known their financial styles were different, it wasn’t until they started to get serious about retirement that it’s begun to cause greater and more frequent disagreements. The daily differences in their spending attitudes had been manageable up until now, especially because they both had their own company 401(k) to manage as they saw fit.

But now the larger picture of how to position their money for long-term income purposes brought their differences to the surface. One of the biggest issues was that John was willing to take investment risks that Suzanne found hard to stomach.

John was raised in a fairly affluent family, whereas Suzanne was raised by a single mom who often worked numerous jobs at once to pay rent and keep food on the table for her and her younger sister. As you might imagine, Suzanne has a much harder time parting with money for anything that’s non-essential.

She’s also a more conservative investor than John, unwilling to take many big investment risks. Their contrasting views were becoming a common topic of disagreement and they wanted to find common ground to move their retirement plan forward.

Unfortunately this isn’t an uncommon situation. In fact, in my experience there is also usually one individual within the marriage who is the financial “alpha”, so to speak. It isn’t always men, although it used to be years ago. With John and Suzanne, she was the one managing the day to day finances for the family. Her money insecurities drove her to watch their pennies carefully. 

At the end of the day, it doesn’t necessarily matter who handls the money, but communication is key to making sure both parties agree – at least to the extent necessary – on the family finances. This means that everyone should be included in the conversation.

Even if one spouse isn’t speaking up, they still need to be heard and their views expressed. Both parties should be comfortable with the process and the decisions being made.

It’s crucial to get all financial concerns and points of dispute out in the open so that you can address them one by one. For example, if one spouse has a strong need for security and the other is more of a risk taker, it may make sense to structure your assets so that you can select spots within your portfolio that offer acceptable safety measures, while allowing other assets to be invested more aggressively.

This way both spouses’ needs get addressed and the overall plan is often even strengthened by this balance.  

Or perhaps the solution comes down to the division of assets in dollar amounts. For example, perhaps each spouse is in charge of managing the money as they see fit up to a certain dollar amount.

Having your own spending and investment account offers each spouse exclusive control over those funds and ideally makes negotiating the rest of the portfolio less stressful or emotionally charged.  

The good news is that, regardless of your financial differences, these often fade over time. According to marriage researchers, no matter how much some couples may disagree, longtime partners often end up reshaping each other’s behavior, financial and otherwise, and become more alike₂.

After years of making decisions together, financial and otherwise, many couples learn the importance of compromise and working together to achieve their goals. In my experience, some of the more successful retirement plans involve a mindset that their money is “ours” instead of “mine and yours”, and this can be a significant contributor to resolving money differences. 

You know, it has been almost thirty years to the day where I went to my father in law, Joe, to ask for Jill’s hand in marriage.  I asked him for the secret to a successful marriage like he had.  Joe is a direct kind of guy with few words.  He said, “Jeffrey, a successful marriage is a full time job! Treat it that way.”  The guy was right.

And as always – be vigilant and stay alert, because you deserve more!

Have a great week!

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. Insurance offered through its affiliate, CutterInsure, Inc.

We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. 

Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 1. https://tinyurl.com/4nnb4ndp 2. https://tinyurl.com/23dpd4b2 

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If you have money in your company’s 401k or in a traditional IRA, you may be considering converting these funds into a Roth IRA now while tax rates are historically low. The idea is that if you pay income tax on your retirement money now – especially when many account balances are significantly down – future gains in the Roth are tax free. But you need to understand the 5-year Rule.

I had this conversation recently with one of my neighbors, I’ll call him “Hank”. Hank and I ran into each other at Mary Ellen’s Portuguese Bakery and sat down for a few minutes to catch up over a cup of coffee. Hank’s youngest daughter, Becky, was recently engaged and thrilled to be planning her wedding to Josh, a recent college graduate from Boston University.

Hank’s wife, Joann, had some grand plans for Becky and Josh’s special day as well. Hank was in sticker shock at how much it costs to plan even a medium-sized wedding. He was happy to help foot the bill for his youngest, but the timing wasn’t great.

You see, Hank had changed jobs about 18 months ago, and at the time he decided to roll his company 401(k) into a Roth IRA. When Becky got engaged, he assumed he would take a withdrawal from his Roth to cover the wedding. He knew that the purpose for this money was to eventually provide him and Joann with income in retirement but thought that he could tap into it in the meantime if necessary. 

The tax free features of a Roth IRA are mighty—but they come with some conditions, as Hank found out. Your contributions to a Roth can be withdrawn at any time, but you can’t touch the earnings unless the account’s been open for at least five years.

So, if you’re rolling another retirement account into a Roth IRA in 2023, for example, you need to make sure you don’t need the earnings until at least 2028. And if the account for the rollover is your first Roth IRA account or you opened your first Roth less than five years ago, the earnings will be taxed when withdrawn. And the 5-year rule applies even if you’re older than age 59-1/2. You need to satisfy both requirements or you lose the tax break on your gains.

And for a conversion of an Individual Retirement Account into a Roth, there’s more. The 5-year rule on Roth conversions requires you to wait the full five years before withdrawing any converted balances—contributions or earnings—regardless of your age.

In Hank’s situation, he couldn’t withdraw any of his earnings because he was under age 59-1/2 and the account was less than 5 years old. The IRS will let you withdraw some funds without the 10% early withdrawal penalty for things like a first-time home purchase, for qualified higher education expenses, if you become disabled or pass away, or a few other reasons – but you will still owe income taxes on the earnings which negates the purpose of converting to a Roth in the first place. Unfortunately, none of these situations applied to Hank.

This doesn’t mean that a Roth IRA conversion is not a valuable retirement strategy, however. Many savers choose a Roth rollover or conversion when they want to avoid the required minimum distribution rules (RMD) that kick in at age 73 – even on Roth 401(k) accounts. The Roth IRA is exempt from RMD requirements, which allows the money you would have been forced to withdraw to continue growing, untouched by taxes.

Unfortunately not everyone can open a Roth IRA because there are income limits that apply to contributions if your adjusted gross income (AGI) is more than $144,000 for a single filer or $214,000 for joint returns. However you may be able to get around the income limits by doing what’s referred to as a “back-door” Roth conversion.

This entails rolling an existing traditional IRA into a Roth IRA, since traditional IRA accounts do not have income limits. You might want to do consider this soon, since some Congress members have been talking about closing the back-door loophole for a while now. 

Converting a traditional IRA to a Roth can be a savvy move for many, but you need to understand the commitment necessary to fully realize the benefits. My mom always told me that patience is a virtue – in life and in money, as is the case for a Roth IRA!

So as always – be vigilant and stay alert, because you deserve more!

Have a great week.

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. Insurance offered through its affiliate, CutterInsure, Inc.

We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss.

Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 

The post Like the Roth IRA? Beware the 5-Year Rule appeared first on Cutter Financial Group.