I’ve been a licensed insurance agent in the State of Washington for nine years, helping people understand the value of universal life insurance as a vehicle for future income. While it’s not right for everyone, those who are in good health, have maxed out other retirement options, and are looking for additional tax-advantaged strategies can benefit from this little-known tax code.

Loans
It’s important to understand that terms like withdrawal or distribution come with taxable implications. However, when you take a loan against the cash value of a policy, you create an agreement that is recognized as tax-free under IRS Section 7702. The loan amount and term are determined based on the current cash value of the policy. The loan will be subject to interest, which is set by the policy provider. Depending on the policy and crediting strategy, you may be able to offset that interest with gains.

Pros and Cons
You can use these loans however you choose! For example, if you want to pay for a child’s college education for four years, you can take loans during that time and then stop. If you want lifetime income, you can request a hypothetical projection on when to withdraw income and tailor that to your retirement plan or a self-driven sabbatical. When structured properly, each of these strategies remains tax-free. Misunderstanding the product or failing to work closely with your agent to align the policy with your financial goals can lead to issues down the road.

Modified Endowment Contract (MEC) Considerations
Everyone should be aware of the risk of unintentionally converting their policy into a Modified Endowment Contract (MEC), which eliminates key tax benefits. When setting up a life insurance policy, the amount of coverage is based on a premium schedule—how much you plan to pay and for how long. If the cash value exceeds the limit applied for insurance coverage, the policy becomes a MEC, causing you to lose those tax advantages.

While avoiding MEC status is crucial, other factors like your crediting method and additional policy riders could also limit your growth potential. Comparing multiple providers allows you to find the best product for your needs.

Working with the Right Agent
When shopping for life insurance, consider working with an independent agent. Unlike agents affiliated with a single company, independent agents can compare multiple providers to find the best quotes that match your needs and health profile. Agents tied to larger companies often experience high turnover, meaning you may not continue working with the person who originally set up your plan.

An agent should always disclose their commission for each product. This transparency helps you determine whether they are recommending a policy based on your best interests or their financial gain. As a fiduciary, I believe this is the best way to build trust and confidence with my clients and prospects.

Disclosure:
KJ Dykema of Family Retirement LLC is licensed to sell insurance only in Washington. For clients in other states, like Texas or California, we refer to licensed professionals. You are not required to follow our recommendations or use our services and may choose any provider.

Little-known fact: There are several months throughout the year when people on a biweekly pay system receive an extra paycheck. This year, it happened in January (a great way to start the new year) and August. It would be easy to splurge on that new (fill in the blank) because, why not treat yourself? But I want to make sure you're actually building wealth. Let’s use that third paycheck to jumpstart your finances—not as a get-rich-quick scheme, but as a strategic step forward. First, make sure you've addressed these key financial hurdles:

Are you caught up on your finances?
Bringing your finances up to date can eliminate mental barriers you may not even realize are holding you back. Emotional hurdles are often the biggest obstacles to financial growth. Think of it like your house—if it’s cluttered and overwhelming, you may hesitate to clean because you don’t know where to start or fear what you’ll uncover. The same goes for your finances. Start by reviewing your accounts, catching up on overdue payments, and reaching out to creditors. When you do, you gain the power to negotiate your debt—whether by lowering interest rates, setting up payment plans, or consolidating loans. Imagine how empowered you’ll feel after that first step!

Have you maxed out contributions to your retirement?
It’s all about compounding interest. You don’t need a side hustle—you need to invest what you already have so your money works for you while you’re working. Even better, if your company contributes to your retirement account, those contributions compound as well, accelerating your long-term wealth.

Get a life coach, mentor, or financial advisor
Investing in yourself is one of the best ways to ensure accountability, discover new ideas, and stay on track toward financial success. If you lack the structure or knowledge to create a clear financial path, there are professionals who can guide you toward your goals.

If you've checked those boxes, it’s time to start looking at outside investments. The most common options are real estate and brokerage investing. If you're considering real estate, you could use this extra income toward a rental property down payment or start saving for one. Before diving in, it's a good idea to assess your financial standing—understand how much you need to save and what you prequalify for. This will help smooth the lending process and get you into a property sooner.

If you're looking to invest in the stock market, the process is simple: open an account, fund it, and start investing. As a general guideline, your initial investments should focus on funds that align with your growth goals and timeline for withdrawal.

Both of these investment strategies require having a professional in your corner. As a Master Registered Financial Consultant, it’s my job to ensure that the goals you have for your future come with a flexible plan and measurable progress along the way.

​Generational wealth is often built through real estate, as it provides a relatively accessible path for adult children who struggle to save money. Many view real estate as a valuable asset rather than an expense. However, qualifying for a mortgage or saving for a down payment can be nearly impossible without financial assistance. When parents help with this process early on, they set their children up for long-term success. The challenge, however, is that not everyone is in a position to do so, and it’s important to assess how this could impact your income—especially if you are nearing retirement.

For parents in a strong financial position, it’s best to avoid tapping into their IRA accounts. Withdrawing from an IRA could create a significant tax burden for both parties. IRA withdrawals are taxed as ordinary income, so if parents rely on their IRA for retirement, taking out more than needed could push them into a higher tax bracket. Additionally, Medicare premiums are based on income from the previous two years, meaning a large withdrawal could increase insurance costs during that time.

A more tax-efficient strategy may involve using after-tax accounts. These accounts can be ideal for funding a home purchase, and if managed correctly, they may have minimal tax implications for the parents. It’s also important to consider the Tax Cuts and Jobs Act (TCJA) of 2017, which doubled the lifetime gift exemption for beneficiaries to $13.99 million starting in 2025. If a child receives more than the gift limit, they could face tax consequences. Consulting with a tax professional is essential to ensure proper planning for your child’s future.

If you plan to buy the house yourself and have your adult child make payments, it’s crucial to ensure the home is titled in a way that benefits them. In cases where there are multiple children and the parents have passed away, an improperly titled estate—without a transfer-on-death designation—could leave the asset’s distribution to the discretion of the estate's guardian, potentially leading to complications.

When making major financial decisions, it’s essential to assemble a team of financial advisors, tax preparers, and estate attorneys to ensure the best outcomes for both the present and the future.

I've seen many people get into trouble with their spending habits, especially when they have extra money and don't save it. Over the years, I've observed some of the worst ways tax refund checks have been spent.

A Down Payment on a New Car or Boat (Lease or Purchase)
Depreciating assets is one of the worst ways to spend your money. Generally, when someone puts a large sum down on a car or boat, they believe it will help reduce their monthly payments. However, they are often still paying high interest rates. Many times, they won’t be able to pay off the loan before the vehicle or boat breaks down. While salespeople may counter concerns about high interest by offering refinancing options, interest rates haven’t improved much in recent years. If the loan balance exceeds the asset’s value, refinancing may not even be an option. Ideally, you should be able to make these payments in line with your income and expenses without needing extra funds to cover them.

Paying Off Small Debts with the Lowest Interest Rates
It may feel great to pay off a small loan, but if that loan has a lower interest rate than others, you're potentially prolonging your financial struggle. Instead, prioritize paying off higher-interest debt to reduce the total interest you pay over time. These loans might have larger balances, but by tackling them first, more of your payment will go toward reducing the principal, helping you pay off the debt more quickly.

Putting it in a standard savings account for a large purchase
At first glance, it may seem like you’re making a smart decision by saving your money. However, with current inflation, you could actually be reducing the value of your savings. Considering a high-yield savings account or a fixed CD for a set period is a better way to maximize your returns. When evaluating a CD or high-yield savings account, be sure to consider the duration and your liquidity needs.

Ultimately, the key question to ask is: Will this purchase contribute to future debt, or will it help grow the assets in my portfolio? If you're someone who struggles to see the long-term impact of your spending beyond immediate gratification, it's wise to consult a financial advisor for guidance.

​Emotional investing is nothing new to the markets. In recent history, we have seen it work in our favor as promises of growth propelled our future. However, when investors are warned that momentary pain is on the horizon or are already experiencing it—a primal sense of survival takes over. How do we evaluate this and recognize when to preserve and when to pivot?

Evaluating where you are in your plan is the first step in assessing your next move. Just as you would not continue your strategy in chess after a counter-move without reading the board, it’s important to reassess your position. In some cases, that might mean stepping back to position yourself for a stronger defense. This pivot can involve sectors, bonds, or equities that you may not have previously considered. As you evaluate, you will need to establish a time horizon for performance and set expectations for pivoting again. This method will keep you vigilant and foster a sense of control.

Preserving your future contributions to avoid undue market volatility is not always the favored approach, but when all asset classes decline, cash can be the best place to hold until markets reach all-time lows. When evaluating an entry strategy from a preservation or cash position, the metrics differ from those used when dollar-cost averaging into the market. You will need to determine which positions have the most upward trajectory or resilience in similar conditions. This approach allows for faster growth, as accumulation occurs without needing to recover from market turmoil. However, it is important to note that past performance is not an indicator of future growth.

Those nearing retirement have likely already discussed with me how to structure a plan that allows for market corrections without affecting their income. For those with a longer time horizon, stockpiling and investing now may present an opportunity, as this could be the lowest market level seen for some time. If you know someone who is struggling to feel confident in their plan, refer them to me so they can experience the same peace of mind that comes from the strategies we set up earlier in the year.

Are you preparing your taxes and preliminarily seeing that you owe this year? While that can be frustrating, there is still time to reduce your taxes if you qualify. The main ways are through contributions and losses—contributions to a traditional IRA or HSA and realizing losses from a brokerage account. Contributions need to be made by April 15th, and losses have closed out in past years but can roll over.

Traditional IRA
For 2024, the maximum IRA contribution is:

• $7,000 for those under 50
• $8,000 for those 50 or older

This can be directly deducted from your income. However, certain exceptions may limit the full deduction, such as if you or your spouse have a 401(k) through work or if your income exceeds certain thresholds. At a glance, here is whether it’s possible to contribute to get that deduction.

HSA Contribution
Contributing to a "prior year" HSA is another option for people who have a high-deductible healthcare plan (HDHP). Those plans have access to an HSA, and contributions can be tax-deductible. If you are unsure whether you have the right type of plan, ask your benefits specialist.

• $4,150 for an individual plan
• $8,300 for a family plan
• Additional $1,000 for those over age 55

If both spouses have a family HSA, their max contribution can be $8,300 combined. Lastly, if your employer contributes to these plans, their contributions will count toward your total contribution.
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Capital Losses
You can deduct up to $3,000 from your ordinary income if you sold positions in your brokerage accounts in the previous year. These losses can roll over from year to year. Be sure to keep records of these transactions and consult a tax professional for personalized guidance.

​If you have talked to your tax preparer and are ready to fund an account, we are here to help. With an array of investment options and guidance tailored to your financial goals and risk tolerance, we will ensure your account fits into your broader financial plan.

Reference
1. Publication 590-A (2024), Contributions to Individual Retirement Arrangements (IRAs)

I love this exercise and implement it with my clients. I call it Frugal February—the perfect financial reset for anyone who has experienced out-of-control spending after the holidays. I prefer February because it’s the shortest month, and people often lose momentum with their financial goals around this time. This strategy provides the perfect boost to help them regain focus and stay on track.

In an ideal no-spend month, it’s essential to have a budget already in place. This helps you clearly understand your usual spending patterns and allows you to streamline the expenses that will automatically deduct from your account, such as rent or mortgage, utilities, transportation, debt payments, and subscription services. For subscriptions that automatically renew, consider putting non-essential ones on hold or removing them entirely if they no longer serve a purpose. The goal is to keep only necessary expenses in your account, with the rest transferred to a high-yield savings account to earn interest. The focus here is to maximize how much you save during the month.

Next, create a comprehensive inventory of essential monthly needs—food, hygiene products, medical prescriptions, and so on. The key is to assess your needs ahead of time to avoid impulse purchases. This also helps you distinguish between wants and needs. For example, you may encounter tempting offers on Amazon or in the grocery store, but ask yourself: "Will I actually use this in the next month?" All non-essential purchases should be completed before the start of the no-spend month.

Lastly, plan your days—not just your meals, but your social activities as well. If you can host events at your place or spend time with friends at theirs, you’ll avoid unnecessary spending and FOMO. By taking these proactive steps, you're not only setting yourself up for financial success but also reinforcing the discipline needed to maintain long-term financial health.

There are three types of individuals who may struggle to successfully commit to a no-spend month:

• Those whose fixed expenses fluctuate by more than $100-$200 per month, making it difficult to predict and control spending.
• Individuals who frequently make impulse purchases or who are prone to making concessions for purchases they’ve already committed to.
• People who lack self-motivation and do not seek out accountability partners to help them stay on track.

When I work with my clients, we typically spend an hour reviewing the plan and addressing any questions. Afterward, it’s up to them to implement the strategy, which may involve several hours of shopping, budget organization, and necessary preparations. I’ve seen firsthand how these steps empower people to leap into the new year with achievable financial success.

The IRS has released new tax brackets and contribution limits for 2025, which are detailed in the charts below. Before we dive into the specifics of the 2025 tax year, let’s examine five actions you can take now to maximize your tax position for 2024:

1. Maximize your 401(k) contributions
2. Make a contribution to your IRA/Roth
3. Fund your HSA
4. Tax-loss harvesting
5. Establish a 529 plan
   

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Now that you have these accounts funded, it’s time to invest them. I can assist you in this process. Based on your account values, financial objectives, and time horizon, we can create a plan to make your funds work for you.
For those of you preparing your tax plan for 2025, here are some crucial details you’ll need to know. Tax brackets have been adjusted for inflation, with an approximate 2.8% increase, which is smaller than in previous years. The Tax Cuts and Jobs Act will expire at the end of 2025, potentially pushing taxpayers into higher brackets in the future. Additionally, the Secure Act has introduced some new provisions.