Matthew Sheets, CFP®, details ways retirees can manage their shift into their new lifestyle.
Cleaning and Organizing … the Swedish Way
There are many organizational methods for reducing our clutter and making our spaces more efficient, tidy, and serene. There is the “One-Touch Method” which bucks procrastination in favor of putting things away immediately after use, and the “Neat Method” which employs various color-coded containers and labeling for sorting and display. The KonMari method from Japan instructs organizers to ask themselves if their items still spark joy in them, and if not, to release the belongings with gratitude. And, yet another approach has risen in popularity, this time from Sweden, known as “döstädning,” or the translated “death cleaning,” which seeks to reduce clutter and stress from an aging person’s home and life.
While it may sound severe, the idea of döstädning is actually a very thoughtful and respectful exercise for both the individual and their loved ones. Contrary to KonMari, which centers on the individual’s attachment to their possessions, this approach asks how family and survivors will feel about the items left behind after a loved one’s death. Margareta Magnussen, author of “The Gentle Art of Swedish Death Cleaning,” explains how employing döstädning can streamline an individual’s space and create a peaceful environment in which they can focus on what matters to them at that stage of life. The process of sorting and gifting belongings and communicating with family and friends about what they would like to have can often bring loved ones closer together, and may minimize the future burden on family members, allowing them to focus on grieving rather than a large clean-out project.
For those interested in the process of döstädning, professionals recommend the following:
- Tell your family about this process you are undertaking, what you hope to get out of the experience and ask them what items they would like to inherit from you.
- Start with your clothing and closets, sorting through what does and does not fit and what can be donated to charity.
- Declutter furniture, décor, and household items by room and then size, gifting functional pieces to family and friends and donating the rest.
- Address digital information and share details for important vendors such as your bank and insurance provider to your next of kin.
- Take stock of valuable jewelry and heirlooms and communicate with your insurance provider regarding appropriate coverage. Next, give some thought to who you will leave these items to and make those wishes apparent in your documents.
- Gather your paperwork and leave clear instructions regarding your will, advance health directive, power of attorney and any other related documents to your intended survivors.
While it may seem like a big undertaking, döstädning can give practitioners the chance to find memory and meaning in their possessions, as well as a sense of lightness and contentment when they let them go.
To connect with a client relationship manager, email info@vcmi.net.
New Year, Fresh Start
The start of the new year is a great time to review your finances and take any action that may be prudent. With that in mind, we have written a short manageable list of actionable items everyone can take to kick off their year on a productive and responsible note.
Revisit your budget
- Take the time to review your spending over the last year. Did your actual spending budget align with what you had planned? Evaluate your spending trends and make appropriate adjustments to your household balance sheet.
- Closely review your debt and strategize ways to pay it. Start by tackling the balances with the highest interest being charged and prioritize becoming debt free.
Prepare for the planned and unexpected
- Project the cost of expensive essentials – have you been noticing issues with your water heater? Or is there a household appliance that needs to be replaced? Preparing for a large expense will feel better than relying on a credit card when the time comes.
- Bolster emergency savings – no one wants to admit that they could be laid off or suffer some other setback that would put pressure on their savings. Look closely at what you have saved and what you can do to increase your savings in the short-term for a more secure future
Review your legal documents and insurance policies
- Have there been changes in your life that should be reflected in your legal documents, like a change in residential address or marital status? Pull your files out and review what is stated and contact your attorney if there are updates to make.
- Similarly, it may be worthwhile to assess your insurance coverage. If there have been changes to your home, such as an addition or remodel, it may be necessary to increase the amount of coverage. Other reasons for increasing insurance coverage could be a new car or boat purchase, family heirlooms and jewelry coming into your possession or outdoor investments such as a sprinkler system, hot tub or storage shed.
Increase your retirement contribution
- Another year passing means we are all that much closer to retirement. Whether that brings you excitement or anxiety, or a healthy mix of both, the realization hopefully moves you to increase the amount you are saving for your golden years.
If you have any questions about the above list, please email your client relationship manager or the team at info@vcmi.net.
Year-End Reminders and Considerations
The end of the year is approaching, making it a good time to pause and review your financial strategies and decide what to do, if anything, in the short and long term. Below we have listed several items and reminders for consideration. Please do keep in mind that some of the tasks below are time-sensitive and may take longer than normal to complete due to a spike in volume. For reference, Schwab released its Year-End Giving Guidelines which provides timelines and due dates for charitable donations and gifting.
Charitable Giving and Tax Planning
- Charitable Gifting – Aligning a client’s financial plan with their charitable gifting wishes is a great way to support issues they are passionate about while also reducing tax liabilities. You may want to give additional funds to charity before the end of the year to realize tax deductions in the spring.
- Qualified Charitable Donations from Retirement Accounts – For those that are 70 ½ and over, it may make sense to either cover a portion of the required minimum distribution (RMD), or, if they are not yet of RMD age, simply reduce their future tax liability by arranging QCDs from IRA accounts.
- Gifting Stock to a Charity – If an investor is aware of a highly-appreciated stock in their portfolio, they can gain a tax deduction by gifting that stock to a nonprofit and moving a future tax liability out of the account.
- Open and/or Contribute to a Donor Advised Fund – A client with appreciated stock or cash can open or move money into this type of account and receive a current year tax deduction without needing to designate a specific charitable organization until, potentially, several years later. These funds can also be invested for growth within the donor advised fund.
- Donation Bunching – This is a strategy in which an investor stacks two-or-more years’ worth of donations into a single year and then itemizes the deductions for the year in which the donations are made.
Retirement Planning
- Company Stock – Do you have company stock from your employer? Now would be a suitable time to review with your advisor and decide whether to exercise your stock options in order to save on taxes. Speak with your advisor and find out if you can avoid unnecessary liabilities.
- Take It to the Max – If you are able to do so, it would be advantageous to increase, or max out, your retirement savings for 2024, optimizing your savings and reducing your tax liability on investment earnings.
- Tax Harvesting – The end of the year is an optimal time to review your portfolio and, if you have experienced some losses, to consider selling other holdings that have depreciated in value to offset taxes.
Education Savings
- Paying College Tuition – If a parent or grandparent or other benefactor is paying the educational institution directly, the amount will not be counted as a gift.
- “Superfunding” 529 Plans – There is the opportunity to increase the amount of funds being saved for educational purposes by way of “superfunding,” which allows contributors up to five times the annual gift tax exclusion in a single year without triggering additional reporting requirements. In short, this allows one to essentially prefund five years’ worth of gifts at one time.
Flexible Spending
- Spend or Save – If you have a flexible spending account for healthcare or dependent care services, you will want to check the provisions of the account as some of the funds could be “use it or lose it” dollars, meaning they will not roll over into the new year.
To discuss these topics and strategies with a client relationship manager, please email info@vcmi.net.
End-of-Year Financial Planning
As the year winds to a close, it is a good time to assess aspects of your financial plan, such as emergency funds and education savings, and to review interest-rate sensitive areas of your portfolio.
