Five Tips for Financial Date Night

With the new year comes our tradition of resolutions. One resolution you should make is to have a date night with your spouse, or partner. Hopefully, you are making date night a weekly event. It doesn’t have to be an expensive outing; date night can be dinner at home, time spent with another couple for a movie, a game, or a health walk. There is one thing you should incorporate into date night – a financial date night.

Once a month, you and your spouse or partner should have a financial date night. The purpose of this financial date night is to make sure you are on the same page, and that you are sharing information, setting and tracking goals, and working together. It’s also a good way to hold one another accountable for your financial goals and to track the progress you are making. Here are some tips for successful financial date nights.

Schedule it. Given that there are generally four weeks per month, and that you have four date nights per month, pick only one of the four and designate it as your financial date night. Be sure that you both agree that this date night is to focus on your finances. It’s twelve times per year that you give attention specifically to your finances.

Pick your topic in advance. You have the opportunity for twelve financial date night topics. It is a good idea to sit down together, draw-up a topic list, and decide in what order you would like to cover the topics. You may wish to start with your most pressing matter first. By deciding the topics in advance, you have opportunity to think about the issues, do some research, and be prepared when have your financial date night.

Keep it civil. Financial date night is not the time to fight over money! The purpose is to address financial topics together, to work on solutions, find answers, and exchange information. It’s not the time to argue, or make accusations.  

Record your progress. Keep a special financial date night journal. Record your ideas, decisions, timeline, and any new goals that are discussed or set. If you set a new goal, calendar it and be sure to act on it and put your new goal in action.

Make it fun! Your financial date night is not supposed to be a dreary ordeal. So, open your favorite wine, beer, or make a cocktail to go with the conversation. Serve your favorite snack, or order from your favorite restaurant.

You have a host of topics to choose from whether it be budgeting, saving, debt reduction, loan consolidation, insurance, investment, retirement, estate planning, etc. Pick your topic, schedule it in advance, and record your progress. Remember, keep it civil and make it fun.

As an independent Certified Financial Planner™, I can help you plan for the new year and be on top of your goals.  Contact me and let’s get started on a savings, retirement, or debt reduction plan or just a hike! #talktometuesday #education #Hireaplanner #stressfree #newyear #savings #CFPPro #datenight

Great Year-end Money Tips

Toast all the adventures and successes you’ve had in 2018.

Can you believe it? We are nearly at the end of another year! Given how the Christmas and New Year’s holidays line up, this will be the last #TalkToMeTuesday blog post for 2018. Although money never sleeps, this financial planner needs to and so should you. However, that doesn’t mean taking leave of your financial responsibilities. Here are few year-end tips to help you finish out the year in good fiscal shape.

We all tend to spend more around the holidays so keep a close eye on your budget. If you need to, build a contingency into your budget for slight overages. People do this with remodel and construction projects, you can do it with holiday budgeting. Use an app to track spending, sign up for alerts from your bank or credit card company, or calendar a reminder to check your credit card, savings account, and bank statements more frequently this month.

Keep gift giving to a minimum. No need to be a Scrooge, but definitely sit down and draw up a list of recipients, and a per gift spend for each. It’s better to gift one nice item than several unwanted, cheap gifts that will get thrown away, forgotten, or regifted. You could even consider coordinating and sharing in the purchase of a gift with another friend or family member. For example, if mother needs a new coat but it is out of your budget, consider partnering up with a sibling or relative and co-gift.

Beautiful November weather begged us to fly to Santa Catalina for the day. A great gift spending time with family in such a beautiful locale.

Pay off all credit purchases by December 31. I like to pay off my credit card statement each month. December is a particularly important time to do so. If you are tracking that balance and are prepared to pay it off by month’s end, this will help you stick to your budget and not overspend and carry a balance into the New Year. If you are not quite able to do so, consider making this a goal for next year.

Volunteer. Seriously, do one volunteer activity and if you have children, make them go with you. Teaching your kids that giving of yourself and your time can be just as rewarding and important as giving money is a great thing. I am sure you’ll feel a sense of satisfaction and it will be very helpful to the organization you select. So, go ahead, do something nice and donate some time.

Review your year-end statements and keep an eye out for purchases that are not yours, deadlines to pay bills (especially insurance, auto renewal, taxes, etc.), and anything that if missed would cost you a late fee, or worse, a lapse in coverage or service. Don’t let these items slip through the cracks during all the year-end revelry.

We enjoyed a great family hike at Rock Creek in the Eastern Sierra.

Finally, relax! Seriously, be sure to take a few days and just enjoy some down time. It’s a great time of year to go for a winter walk and actually enjoy the colors of winter and the changeable weather that it brings. Invite a friend that you haven’t seen in a while or spend extra time with the family or that someone special. Just make a point to do it even if you have to mark off a calendar day as a reminder not to book anything.

As an independent CERTIFIED FINANCIAL PLANNER™, I can help you focus on your finances month-to-month and not just at year’s end. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #Christmas #vacation #CFPPro #savemoney

2018 Year-end Tax Tips & Reminders

It’s that time of year to cast an eye toward tax preparation. Most of us don’t like preparing for tax filing season as it is, and this year, there are many new changes to keep in mind with passage of the Tax Cut and Jobs Act 2017 (TCJA). Be prepared and do everything you can to make it easier on yourself. Here are a few ideas for you.

Start gathering your documents. If you have a box of receipts spend some time going through them and organizing and totaling the receipts by category. You should do this prior to giving your information to your accountant or tax preparer. It will save them time, and you money!

Work on your tax prep a little each week and it won’t be overwhelming. Create a specific space to organize your documents and work on your filing. If you start preparing now, the April deadline won’t be so stressful.

Sell stocks or funds that have lost value by December 31 if you need a loss to offset gains. You can apply this loss against gains to help reduce your overall tax burden. Check with your financial planner or accountant prior to making this move. Remember, this applies to taxable accounts, and not qualified, tax-deferred retirement accounts or IRAs.

Consider finalizing cash gifts to charities. Cash gifts to qualified charities are deductible in the year made. However, with the TCJA increase in the standard deduction to $12,000 for single filers, $24,000 for married filing joint, many people will no longer be itemizing. You may need to consider establishing a donor advised fund, or bunching your gifts and filing an itemized return every other year.

Keep in mind the new changes.  Under the TCJA, as noted above, the standard deduction has dramatically increased. It is estimated that nearly 90% of US taxpayers will no longer itemize when they file. Here are a few other key changes: unreimbursed employee expenses, investment fees, tax preparation fees, employment related education expenses, moving expenses, job search expenses, theft, and many casualty losses are no longer deductible. State and local taxes (SALT) are now limited to $10,000. This may affect taxpayers in states with high local taxes or high property values or a combination of both.

On the plus side, long-term capital gains rates are retained at 0%, 15%, and 20%.  The TCJA provides for a 20% qualified business income deduction (QBI). The QBI rules can get complicated pretty quickly, so talk to an adviser. Section 179 expensing rises from $500,000 to $1 million for small business. The Alternative Minimum Tax (AMT) is permanently repealed for corporations (but not for individuals).

Hire a financial planner! Your financial planner may not be able to help you with a lot of tax prep for 2018 at this time of the year, but getting you in financial shape in 2019 is something a financial planner can do. Set some goals and get started.

As an independent Certified Financial Planner™, I can help you get organized and create a plan for a less stressful filing season.  Better yet, we can start working on your 2019 goals.  Contact me and let’s get started! #talktometuesday #education #Hireaplanner #tax #taxfiling #stress #stressfree

What to Look for in Hiring a Certified Financial Planner™

People often question whether hiring a financial planner is worth the money. Studies by Vanguard and Russell Investments and a recent article in AARP The Magazine say yes! For example, in AARP The Magazine in the October/November 2018 print edition, AARP provided guidance on selecting a financial planner even if you are not wealthy.

AARP The Magazine, Oct/Nov 2018, pg. 24 (print edition). All represented data provided by AARP and not by Engage Advising.

AARP The Magazine also included a handy graph reflecting the potential extra money earned by those who hire a comprehensive planner. Please note this is AARP The Magazine’s sidebar and data and not that of Engage Advising. For example, on page 24 of the October/November 2018 print edition, AARP claims working with a financial planner could possibly in the instance of a medium income individual increase overall net worth by $83,000 (see graphic).

So, what should you look for in hiring a comprehensive financial planner? Start with asking for recommendations. Your friend’s financial planner may not be a good fit for you, but that adviser may know someone who is a great fit. You can also search in your area by zip code and/or specialty on sites like NAPFA and XY Planning Network.

Check qualifications. The CFP® mark stands for Certified Financial Planner™ and is considered the gold standard for financial planners. You can visit letsmakeaplan.org to learn more about the designation and to look for a financial planner in your area that is in good standing.

Be sure to question your potential financial planner about fees and compensation. You have a right to know what you are paying, when you are paying, and what you will receive for your fees paid. Today, there are many billing structures offered to meet the needs of clients. Some financial planners are fee-only, others will work with you on an hourly basis, and some will setup a monthly plan. There could also be combinations of these fee arrangements depending on your personal circumstances and needs.

You don’t have to go it alone for financial advice. As an independent Certified Financial Planner™, I can help you decide how to plan for your goals, investments, or retirement, or how to start enjoying your retirement savings. No matter where you are in life, a CFP® professional can help you create an action plan for today and tomorrow. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #retirement #income #drawdown #IRA #401k #CFPPro #LetsMakeAPlan #AARP #AARPTheMagazine #DIY

Should I Save for Retirement, or My Children’s Education?

Clients often feel that they face a conundrum: save for retirement, or save for their children’s education.  Many believe that saving for their children’s education is an absolute must, a responsibility. For many families, education is a top priority and they want the best for their children. For many parents who struggled to pay for their own education, this impulse can be even stronger. There’s nothing wrong with this desire to save and education is invaluable. So, what do you do; which takes priority?

When addressing this conundrum, ask yourself one simple question; can you borrow to fund your retirement? The answer is no. Your children, if necessary, can borrow for their education and as challenging as it is, they have years to repay. You cannot borrow for your retirement and then spend years paying it back. There just simply isn’t the time or income stream in retirement and nowhere to borrow from. Retirement savings simply has to take priority.

That’s not to say you cannot help your children. Keep in mind that saving for your own future and a secure retirement is helping your children. If you save sufficiently for your own needs, you will not need to rely on your children in retirement. This will be beneficial for you and for them. If you have saved sufficiently for retirement, you may have enough money to help pay off student loan debt for your child, or possibly gift them money for a home purchase. Having ample savings in retirement is better than losing out on investment returns and years of compounding by funding your child’s education at the expense of your own security, comfort, and peace of mind.  

Enjoy your Golden Years!

If you are going to fund education for your children, make sure you have met your retirement funding goals first. Be sure to max out that 401(k) plan at work, save in Roth account, save in a taxable account, and have your cash emergency fund in place. Thereafter, if you have the extra cash flow, go ahead and calculate what amount you can allocate to your children’s education fund. Just be sure you prioritize your retirement savings.

If you need budgeting help, retirement savings, debt reduction, or an education savings plan, let me know. As an independent Certified Financial Planner™, I can help you make decisions and layout a plan to reach your goals. Contact me and let’s get started! #talktometuesday #education #Hireaplanner  #retirement #education #529 #income #debt #savings #CFPPro #moneyhabits

Do You Have a Special Grab-N-Go Emergency Binder?

It seems I am covering this topic every year! Here in California it is mostly due to fire, landslide, or earthquake disasters. As I write this post, the Camp Fire has ravaged Paradise, CA and here in the Bay Area we have been breathing unhealthy air for over 10 days. It’s necessary to have an emergency binder for other reasons as well. Most notably, a medical emergency as I wrote about in January 2017. It’s not a pleasant thought, but a disaster is an event for which we should all plan ahead.   

Everyone needs a Grab-N-Go binder for important documents.

We all need to prepare a special binder or folder for that inevitable day.  I call this my Grab-N-Go binder. If you are a couple of modest means, a nice folder should suffice. If you have more to deal with such as investment accounts, businesses, or real estate, you may wish to have a binder with more sections and something that is sturdy.  You want ALL of your important financial and family documents and records in this binder. You should customize it so that it works for your personal situation. For me, I keep passport copies, auto titles, and important certificates in mine as well as all key financial documents.

The following is just a sampling of the documents to include (your binder may have more sections and documents):

·         Insurance contracts

·         Will and/or Trust

·         Durable Powers of Attorney

·         Medical Directive

·         A password list (online accounts, social media platforms, etc.)

·         Brokerage account information

·         Bank account information

·         Real estate deeds and agreements

·         Cohabitation agreements (for unmarried couples)

·         Family advisor contacts list (attorney, CPA, financial planner, etc.)

·         Letter of instruction (in the event you don’t have final instructions in a will)

My actual binder. It’s a zip closure for extra security.

Keep the following points in mind regarding your binder. Be sure to review and update your binder documents as needed. It would be a good idea to make sure, for example, that your password list is updated quarterly. Social media platforms and passwords for bank and brokerage accounts change frequently. You may also need to update your will or powers of attorney if you make changes to your decisions or have new members join your family, or if you simply change your mind about your final instructions.  Be sure to let every member of the family know where this binder will be stored and that it should be packed and taken with you when evacuating. One client keeps hers in the family’s disaster go bag. It’s also a good idea to let a close relative or family friend know about your binder and its location or keep a backup copy for you.  If you do not have a family member or friend that you trust, ask your attorney or other close advisor if they would be willing to safeguard your binder copy.

As an independent CERTIFIED FINANCIAL PLANNER™, I can help you. Contact me and let’s get started on creating some peace of mind. #talktometuesday #Grab-N-Go #binder #documents #CFPPro #documentsyouneed

Three Tips to Keep Christmas Spending in Check!

Christmas spending can leave you with a financial hangover! Since Black Friday is just over a week and a half away, I am giving you three tips to keep in mind. Many people struggle with budgeting this time of year and tend to go overboard feeling the need to give to everyone. Keep your goals in mind and your cash flow in check by following Santa’s age-old advice of making a list and checking it twice!

Don’t overspend on office gag gifts, Secret Santa, and don’t feel compelled to buy gifts for everyone in your circle. Definitely heed Santa’s advice about that list – check it twice!

Don’t feel pressured to give beyond your means. Generosity is amazing and should be encouraged. However, you should know in advance to which charities you want to send a monetary donation.

Do set a spending amount in advance. The amount you plan to spend and donate this holiday season should be already accounted for in your annual budget.

Year-end giving and spending really begins in January, so December shouldn’t come as a surprise since it happens every year. Start in January saving monthly for the additional expenditures you have this time of year. Make those charity donations monthly or quarterly; after all, they need the money year around, not just in December.

Being proactive and setting aside smaller cash amounts monthly can help your budget and be a reminder to carry the good cheer of the holidays with you daily and not just at year-end. It can also keep you from having a financial hangover after the holidays.

If you need budgeting help, or a debt reduction plan, call me! As an independent Certified Financial Planner™, I can help you make decisions and layout a plan for year-end giving and holiday spending. Contact me and let’s get started! #talktometuesday #education  #Hireaplanner  #holidayspending  #income  #debt #savings #CFPPro #moneyhabits #giving #charity

What Are Target Date Funds?

Target date funds have become very popular with retirement savers. Today, they are a common and widely-used fund for many 401(k) and 403(b) plans. But what is a target date fund? Quite simply, it’s a fund that is targeted to your retirement year. For example, if you are currently age 40 and plan to retire at age 67, you may be invested in a Target Date Fund 2045.  The year closest to your retirement year is usually part of the name of the fund. The idea of target date funds is that they become less exposed to stocks as you age, and increase exposure to bonds as you approach retirement. There are a couple of points to keep in mind if you are using one of these funds.

Is it a “to” or “through” fund?

It may take a call to your broker or financial planner to find out which type of target date fund you have. You can also dig into the fund prospectus and check what’s known as the glide path to figure it out. Basically, a “to” fund rebalances each year until your target year (2045 in our above example). This means the fund is designed to gradually become less exposed to stocks each year until it reaches your retirement date in 2045. At this point, the fund manager stops rebalancing the fund and it stays “as is”.

A “through” fund keeps going. The fund manager will keep rebalancing your fund beyond your retirement date. This means that once you retire your target date fund continues increasing exposure to bonds and decreasing exposure to stock. If you need to generate more income, this may not be a positive feature of the fund.

Should you sell?

Once you retire, you need to work with your financial planner to determine if you need to sell your target date fund. For some investors, selling opens up additional investment options to help generate income and offset inflation and spending. For others, the target date fund may be just the conservative approach that fits their need. To decide, you have to consider your age, risk profile, number of anticipated years in retirement, how much you plan to spend, and how much your fund has grown (i.e., how much do you have to work with).

If your target date fund is in your tax-advantaged 401(k) or IRA for example, you can make trades to rebalance and not be concerned about paying tax until you ultimately sell to take a distribution. This can be helpful if you want to rebalance your account for retirement. Please keep in mind that if you hold a target date fund in a taxable brokerage account, selling will incur tax! Talk with your financial planner before you pull the trigger on that decision.

As an independent Certified Financial Planner™, I can help you decide your retirement investments.  In addition, I can help you make decisions and layout a plan for spending in retirement. No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #retirement #income #targetdatefund #IRA #401k #CFPPro #LetsMakeAPlan

Are Timeshares an Investment?

You may have heard the radio ad where the announcer proclaims, It’s not your fault you bought a timeshare!  Well, I am here to say, actually it is your fault. If you agreed and signed on the dotted line, it’s your fault.

I recently had the unpleasant yet educational experience of sitting through a timeshare presentation. I was on vacation with my husband and some friends from Boston. We were in Palm Desert, CA and we were offered $200 per couple from our hotel to sit through the presentation. Basically, with two attorneys, a CFP®, and Jedi-master salesman making up our merry band of four, we saw it as an easy opportunity to snag $400 to offset the cost of our vacation.

I will say this about timeshares: gone are the days of picking your week, gone is the single-destination option, gone are the cumbersome trading calendars. The industry does seem to have picked up on the idea that their customers want flexibility. Our timeshare pitch even included cruising as an option. So, hey, you do get some options.

What’s not gone is the almost-sleazy, used car salesman pitch. First, you are no longer herded into a presentation as a group. Everything is done by couples – even the four of us were separated into respective couples. This is the separate the weak, thin the herd tactic. We were shown all of the glossy, high-glam destinations, and we were told upfront that today there would be a special points offer! But only today…  We also visited a brand new model of villas to come – a far cry from the villa we were staying in. The salesman presented a very mathematically loose estimate of our lifetime spend on vacations, and the anticipated rising cost of destination vacations, but he never really connected the value he was offering.

Our cost would be just over $28,000 and points would only be .55¢ cents forever, and about $1,300 per year in maintenance and member fees.  But wait… for coming in today, we can earn an instant 2,000 point bonus and a special price of just over $26,000.  The lack of reaction and cold look on our faces conjured up a video for us to watch on our own. Nothing new, just a rehash of the destinations available. Next, the salesman offered us some time on our own while he would persuade his manager to join us. Oh, boy… after about ten minutes, said manager appeared and asked, ‘right, so whose credit card are we going to use?’ An attempt at humor that landed flat, hard and silent. This manager offered us another 2,000 more points (even though it would cost them) and gave us more money off bringing our offer down to just over $24,000 if we would just sign today!

So, what failed? First, we actually have no interest in being tied to one single-branded vacation provider. Second, and most importantly, the salesman couldn’t actually relay how or why we would be saving any money at all. Zip, Nada. No value relayed. Third, that points price is frozen, but the annual maintenance and member fees are not. Those will increase over time. So, think about that for a moment… invest on your own and you can vacation wherever you want! Finally, consider the changes you’ll see over your lifetime in destination accommodation. Already companies like HomeAway, Airbnb, Misterb&b and others offer an astounding array of choices at a great value and without on-going, annual, lifetime fees!

So, are timeshares investments? NO! Absolutely not. Don’t fall for the investment pitch and keep in mind that any brand of timeshare you might be interested in can be had for pennies on the dollar in the resale market. I found our special offer on a resale site for only $2,500. Tread carefully! These programs generally come with lots of caveats and restrictions, and ever-increasing fees, and your timeshare will likely never increase in value. If you do want a timeshare, be absolutely certain you can live with the fees, rules and restrictions that go with the program. But don’t fool yourself thinking it’s an investment! And those points, well… you get new points every year, but for any of the nicer destinations, you’ll find that you are going to have to buy points to cover your stay; possibly a lot of points.  

We escaped unscathed, other than losing nearly two hours of our vacation time, and with $200 in hand. But wait, there’s more! Before we left the desk, we were offered another vacation valued at $695 if we would only pay $195 today and agree to sit through a future presentation. We could go anywhere we wanted, well, except Hawaii. Suddenly Hawaii was a tier 2 property destination. We took our $200 and ran to the car, as did our friends. We all had a very nice lunch!

As an independent Certified Financial Planner™, I can help you sort through the details on various offerings.  No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #timeshare #travel #CFPPro #LetsMakeAPlan

Saying “I Do” Can Cost You Financially

Last week I covered how marriage can improve your financial health. Naturally, the question came up about whether marriage can be harmful to your financial health.  There are a few areas of caution, but you shouldn’t let it stop you from marrying the one you love.

With that said, here are a few ways that tying the knot could be detrimental to your financial standing.

Cost of wedding – be careful not to splurge and wrack-up too much debt.

Debt and wealth acquired during marriage is co-owned in community property states.

Liability for judgments, liens, during marriage.

Benefit loss if widowed, and former spouse was a high-earner, remarrying may jeopardize survivor’s pension or benefit.

Loss of aid – if relying on aid (i.e., Medi-Cal/Medicaid) your new joint income may push you above thresholds that allow you to qualify.

Higher tax burden, ‘marriage penalty’ – if both spouses are high earners, you may be pushed into a higher income tax bracket.

Overall, marriage is a boon to your financial well-being. However, there are a few instances like those noted above that should be considered prior to marriage. If the loss of the benefit is minimal compared to what you are gaining by marrying, by all means, proceed happily down the aisle. Just be sure you are aware of how marriage can change your financial life.

As an independent Certified Financial Planner™, I can help you prepare for your new financial life.  No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #marriage #income #estateplanning #IRA #CFPPro #LetsMakeAPlan

Saying “I Do” Can Improve Your Finances

Marriage, jumping the broom, tying the knot, taking the plunge, getting hitched… Whether you are pro, or con, marriage can actually help you improve your finances. Sure, that’s not a very romantic idea, but it is true. Joining forces can be good for your emotional health and your financial wealth.

Here are just a few ways that tying the knot can help improve your financial standing.

Greater sense of security – spouses can rely on each other.

Legal protections – famously, spousal communication is privileged. But spousal protections go much further and extend to dividing business income, and claiming Social Security benefits.

Unlimited marital deduction – Spouses can pass unlimited assets to each other at any time, tax free!

Social Security may be higher (if one spouse is lower-earning).

Piggyback on benefits – health insurance, auto insurance, etc., cover your spouse and may open opportunities for policy premium discounts.

Less tax burden, ‘marriage bonus’ (if one spouse is low, or non-earning spouse).

Greater wealth building opportunity – spouses generally share the same financial goals and can work together to build wealth using tax, income, real estate, and various other strategies.

Spousal IRA for non-working spouse – this is a great benefit for a stay-at-home spouse to be able to plan for retirement.

When you do jump the broom, don’t forget to review titling on all financial accounts including bank, retirement, and investment accounts as necessary. Be sure to also review and update your beneficiary, pay-on-death/transfer-on-death (POD/TOD) forms. Critically, you need to review and revise your estate planning documents and insurance policies. After all, you wouldn’t want an untimely death after starting your new life that unintentionally leaves your estate to an ex-spouse or sibling if that wasn’t your intent.

As an independent Certified Financial Planner™, I can help you prepare for your new financial life.  No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #marriage #income #estateplanning #IRA #CFPPro #LetsMakeAPlan

Congratulations! You’ve Retired… Now, What’s Your Spending Strategy?

You have made it to retirement and are ready to tap the myriad investments you have accumulated during your lifetime. Hopefully, you have been diligent and saved money in the traditional three investment buckets: taxable, tax-deferred and tax-free. So, which do you tap first? Is there a general rule of thumb? Could the general rule be different for people in different situations? The answers to the last two questions are ‘yes’ and ‘maybe’.

A general rule of thumb is that investors should first draw from their taxable accounts immediately after retirement if they are in a lower tax bracket year. This could help you somewhat avoid a tax bite.  Next, investors should look to their tax-deferred accounts. These accounts likely have minimum distribution requirements at a certain age (think IRA and 401(k) at age 70 1/2).  Lastly, investors should consider drawing from their tax-free accounts (think Roth). Don’t forget that this strategy may very well be impacted by whether you are still working, already taking Social Security, or opting to delay Social Security. Working with your adviser is key to knowing the lay of the land ahead and drawing strategically from your investments. You also need to calculate how much to drawdown and that can be a real challenge.

Of course, every situation is different and you should consult with an adviser to figure out the advantages of using the rule of thumb approach or executing a more customized drawdown strategy based on your personal situation and funds needed. If you are not sure why this general rule applies or if it might help you, contact me and we can discuss your situation.

As an independent Certified Financial Planner™, I can help you decide how to start enjoying your retirement savings and in what order.  In addition, I can help you make decisions and layout a plan for spending in retirement. No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #retirement #income #drawdown #IRA #401k #CFPPro #LetsMakeAPlan

What Happens at XYPN Live, is Awesome!

This week’s blog post is more of an update on what I’ve been doing lately as opposed to a specific financial topic. Last week, I had the pleasure of attending XYPN Live 2018 in St. Louis, Missouri. XYPN Live is an international gathering of financial planners who are members of the XY Planning Network, whose members focus on fee-only planning. This year, we had attendees from nearly all US states, Canada, and our first colleagues from Australia!

Me at the opening night mixer.

The vast majority of XYPN members run their own firms as solopreneurs and are changing the way clients access financial advice. One huge advantage to being in XYPN is the fact that advisers openly share their knowledge, resources, experiences, and at times, client referrals! It’s an invigorating and fresh perspective in an industry viewed as being PMS – Pale, Male, and Stale.

XYPN Live gives attendees a chance to meet their fellow advisers who are all at various stages in their careers and share knowledge and experiences. We also meet in small groups called “Launchers” or “Mastermind” groups. Basically, when you join XYPN you are added to a small group based on where you are in your journey and your group meets once a week via Zoom to update and support one another. Upon arriving at the conference, you already have a small group of advisers that you know. It was like a reunion instead of first meeting! This approach accelerates networking and you feel as though you have always belonged.  

So what else makes XYPN Live different from other conferences? For one, we have an anti-harassment policy that made headlines in 2017 when it was introduced. Harassment in any form simply is not tolerated at XYPN events. We have more women at our events! The industry has struggled adding women and minority advisers and XYPN is changing that dynamic. Content is timely and delivery is intimate utilizing roundtables and one-on-one sessions with experts. I attended roundtables on improving client deliverables, cyber security, marketing yourself, writing content for blogs, books, and newsletters, and a special roundtable on equity awards in startups.

Another feature is a targeted vendor exhibit hall limited to one day. Gone is the dreaded vendor exhibit hall that runs the length of the conference with shotgun pitches. The vendor exhibits are primarily vendors that XYPN members are already using. One nice touch is the vendor Nerd Bar where you can meet and greet your vendors and thank them for their product, make recommendations for changes (that the vendors actually listen to), or learn more about the vendor’s product you are using in a personal consultation. That is a huge benefit!

Overall, XYPN Live 2018 was a lot of fun and very beneficial. It’s also very different from other financial services conferences. I am already looking forward to next year!

#talktometuesday #CFPPro #Hireaplanner #XYPNLive #conference #goals #education

Why You Should Hire a Financial Planner

We live in DIY world.  Whether for home repairs or financial planning most folks these days feel they can go it alone. When it comes to your finances and planning your future is that really the best choice? Sure, you can search the Internet and find a few retirement calculators and even articles on saving, investing and “Top 5” lists, but is that information relevant to your personal situation? How do you know if what you found fits into your financial life plan? What if you make a move only to learn later that your decision cannot be undone without costly consequences?

Hiring a financial planner can help you reap more than just potentially better investment returns. Financial planners can help you with a myriad of financial decisions and life changes such as retirement, debt management, marriage, divorce and the birth of a child. The help, guidance and advice of a financial planner is well worth the fees charged and studies by Vanguard and Russell Investments support this position. Vanguard claims working with a financial planner can add “about 3%” over time to your returns and that behavioral coaching is the most valuable benefit an investor receives. Russell Investments assess the value of a fiduciary adviser at around 4%.  However, these studies point out that a financial planner brings more to the relationship after fees than just a potentially better return. The studies reveal that in addition to a potentially better return, financial planners help clients with difficult decisions, free up clients’ time, explain complex transactions, and provide guidance and an on-going relationship.

When you do have a life change or follow-up question, a call to your planner can be a lot more comforting than going it alone. As an independent Certified Financial Planner™, I can help you create a plan, set goals and a timeline, and put that plan into action. I can also be there to talk you through market jitters and remind you of your goals and timeline. Let’s start planning today.

LINKS BREAK. FOR LOCATING THE REFERENCED STUDIES PLEASE SEARCH THE FOLLOWING IN YOUR SEARCH ENGINE:

Vanguard – The Added Value of Financial Advisors

Russell Investments – 2017 Value of a fiduciary adviser update: More than 4%

 #talktometuesday #CFPPro #Hireaplanner #retirement #socialsecurity #goals #savings #cash 

What’s All This Talk About IRAs?

Recently, my friend Esmeralda pointed out that I haven’t really written about or explained IRAs.  I looked back over my posts and realized she was right on the money. I often mention IRAs but I’ve never really done a Q&A about them or explained what they are.

So, what is an IRA? IRA stands for Individual Retirement Account. There are several types of IRAs, but this blog post will focus on the two most common: the traditional IRA and the Roth IRA. The IRA itself is not an investment, it’s an account and you make investments within the account. At their most basic, both IRAs share some common features; individuals can set aside personal savings from earned income ($5,500 per year as of 2018, over age 50 you are allowed an additional $1,000 called a catch-up contribution), both provide tax advantages in their own way, both allow for spousal IRAs for non-working spouses, and both may be protected from creditors in bankruptcy proceedings. But as with all things investing and governed by federal law and the US tax code, things aren’t always that simple.

Traditional IRA

With a traditional IRA, you make contributions which may be tax-deductible. I say ‘may’ because you might be in a situation where contributions to your traditional IRA are not tax deductible. More on that below.  Your contributions grow tax-deferred until you make a withdrawal – a distribution. Your distribution is taxed at ordinary income tax rates provided you are age 59 1/2 or older. If you are under age 59 1/2, your distribution may be subject to a 10% penalty in addition to ordinary income tax. This penalty can be avoided if the distribution is for qualified education expenses, first-time home purchase (up to $10,000), or unreimbursed medical expenses in excess of 10% of your AGI if you are under age 65 (7.5% if over age 65).

What are those tax-deductible limits mentioned above? Well, this depends on whether you or your spouse is covered by a retirement plan through your employer and your income level.

If you are married filing jointly and YOU are covered by a retirement plan, you can take a full deduction up to $101,000 AGI. Between $101,000 and $121,000 AGI a partial deduction. Over $121,000 AGI, no deduction.

If you are married filing jointly and YOUR spouse is covered by a retirement plan, you can take a full deduction up to $189,000 AGI. Between $189,000 and $199,000 AGI a partial deduction. Over $199,000 AGI, no deduction.

Single or Head of Household? You can take a full deduction up to $63,000 AGI. Between $63,000 and $73,000 AGI a partial deduction. Over $73,000 AGI, no deduction.

Married filing separately? Not a good situation. You can take a partial deduction if your AGI is less than $10,000 AGI and you get no deduction if your AGI is $10,000 or more.

You have to take a Required Minimum Distribution (RMD) after age 70 1/2 and you can no longer make contributions to your traditional IRA – even if you are still working!

Roth IRA

With a Roth IRA, you make post-tax contributions (i.e., no current tax deduction available). There is no RMD requirement at age 70 1/2 and you can continue saving in your Roth IRA if you have earned income. Three are, however, income limits on who can contribute.

If your tax filing status is single, you can contribute up to $5,500 if you earn less than $120,000 MAGI. You can make a partial contribution between $120,000 and $134,999 MAGI. If you earn $135,000 MAGI or more, you are ineligible. You may, however, be able to make a Backdoor Roth IRA contribution.

For married filing joint, you can contribute up to $5,500 if you earn less than $189,000 MAGI. You can make a partial contribution between $189,000 and $198,999 MAGI. If you earn $199,000 MAGI or more, you are ineligible. You may, however, be able to make a Backdoor Roth IRA contribution. Notably, you can contribute even if you or your spouse are covered by an employer retirement plan.

Your Roth IRA contributions grow tax free and if your distribution is a qualified distribution, it is tax free! If you happen to take a distribution prior to age 59 1/2 and have owned your Roth IRA less than five years you’ll owe taxes and a 10% penalty on your earnings portion of the distribution.  Like the traditional IRA, this penalty can be avoided if the distribution is for qualified education expenses, first-time home purchase (up to $10,000), or unreimbursed medical expenses in excess of 10% of your AGI if you are under age 65 (7.5% if over age 65). There are a few other exceptions as well so be sure to check with your tax preparer.

If you happen to take a withdrawal prior to age 59 1/2 and have owned your Roth IRA for at least five years or more, you can avoid the income taxes and 10% penalty on your earnings portion of the distribution if you meet one of the following exceptions: first-time home purchase (up to $10,000), disability, or the distribution is paid to a beneficiary of your estate after your death.

If you are over 59 1/2 and have owned your Roth IRA for less than five years, you’ll owe income tax but no 10% penalty on your earnings.

If you are over 59 1/2 and have owned your Roth IRA for five years or more, there is no income tax or 10% penalty on your earnings.

Q&A

Q. Can I have an IRA for my child?

A. Generally, yes. However, your child has to have earned income.

Q. When can I open and make my IRA contribution?

A. You can open and contribute to your IRA at any time. You do have the ability to open and contribute to an IRA for the previous year up until tax filing in April. Just make sure to open and fund your IRA prior to submitting your finalized tax return. For example, let’s say you want to fund an IRA for 2018, you may open and fund the IRA as late as your tax filing date in April 2019. For a Roth IRA in particular, this sets the five-year clock (for avoiding potential tax on distributions) starting at January 1, 2018.

Q. I had $4,300 in earned income. Can I contribute $5,500 to an IRA?

A. You can only contribute up to $4,300 (your maximum earned income).

Q. Can I contribute and have both types of IRAs (a traditional and a Roth)?

A. Yes, but your maximum combined contribution cannot exceed $5,550 (or your maximum earned income). For example, you could contribute $2,750 to each if you are otherwise eligible.

Know that all investing involves risk, and you should always seek help if you are not sure about what you are doing. As an independent Certified Financial Planner™, I can help you. No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. #LetsMakeAPlan #CFPPro #talktometuesday #Hireaplanner #RothIRA #fees #IRA

Avoid HOT Stock Tips Like the Plague

For new investors, the allure of a hot stock tip can be too much to ignore. This is a common desire on the part of new investors. They want to hit a homerun with little investment the first time up to bat. The truth, is sadly different. Too many investors fall prey to the hot stock tip and end up with an investment that is not in line with their risk tolerance, doesn’t fit into their investment plan, or worse, costs them money they couldn’t afford to lose in the first place.

Being a financial planner, I often encounter people who tell me they have a tip on a hot stock that is a guaranteed winner. Poppycock! No stock is ever a guaranteed winner and we all need to keep that in mind. Furthermore, as a Certified Financial Planner™ I’m not a broker or day trader who buys and sells equities daily. Financial planning is much more than buying and selling shares of stock.

As a new investor, you should first determine your personal risk tolerance. A financial planner can help, and there are available online tools as well that gauge your tolerance for risk (think possible loss) of your investment. Knowing your risk tolerance will help you determine the amount and types of investments you will be comfortable making. Next, determine how much you can afford to invest and work with a financial planner to setup a diversified portfolio that matches your risk tolerance, timeline, and your goal.

Buying a single company’s stock based on a tip you heard on the street is not sound investing and could lead to losses you cannot afford. If you do not already have an investment portfolio, risking money you have to start investing on a single stock is not a sound move. Chances are, if you are hearing the hot tip on the street or from a friend, the investing firms on Wall Street heard it long ago and the stock may be at or near it’s high. Worse, other traders may already be preparing to short the stock.

Investing is emotional and no one likes to lose money, but losses can and do occur. As a new investor, or even an investor with some experience, keep the following in mind.

1. Don’t chase returns. How the stock performed last month or last year may not continue.

2. Don’t chase news. Chasing news and trying to time your investment is a losing proposition. If you’re reading or watching the news, it’s likely too late. Again, professionals have beaten you to the punch.

3. Don’t invest money you can’t afford to lose. This is tough for a lot of people. They have a little money and want more and see buying a single, hot stock as a quick route to riches. Keep in mind that any money you invest stands a chance of being lost. If you can’t afford to lose it, don’t invest it.

4. Don’t buy based on a tip or hot stock recommendation. Period!

There may come a day when properly analyzed individual stocks fit the bill for your investing plan. By that time, you will have more experience and better understand that investing is not just buying a stock. Until then, know your risk, put a plan in place, and don’t rush to invest more than you can afford to lose.

Know that all investing involves risk, and you should always seek help if you are not sure about what you are doing. As an independent Certified Financial Planner™, I can help you. No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. #LetsMakeAPlan #CFPPro #talktometuesday #Hireaplanner #mutualfund #fees #hottip #stock

A Few Key Items to Look for in a Mutual Fund Prospectus

These days, an overload of data is just a few keystrokes away. This is especially true when researching financial instruments. Let’s take a look at a few key items that you should focus on when researching a mutual fund that you may be interested in purchasing.

This fund indicates it is a domestic stock fund with a $10,000 minimum (initial) investment and expense ratio of 0.04%.

In the fund’s prospectus, or disclosure pages online, you want to look for sections with titles such as Fund Facts, and Price & Performance, and Fees & Minimums. These areas will give you some vital information about the fund in which you may be interested in investing. Keep in mind that language and layout will vary from provider to provider. Key items to focus on are the fund’s asset class (it should fit into your portfolio goal), risk ranking (align with your personal risk tolerance), and fees (know what it costs you).

Let’s take Fund Facts for instance. Here you should find a quick breakdown of the fund and its general makeup. For example, you should find key details such as the fund’s asset class defining in what and where it invests, such as domestic or international, stock or bond. Look in this section for the fund’s ticker symbol or fund number. This area may also include the fund’s risk rating usually expressed as a number; less risk potentially less reward, or higher risk with potentially higher reward. You may also find in this section who manages or advises the fund.

In this example, risk potential is indicated on a scale with 1 being lower risk and 5 higher.

This chart reflects fund performance over the past 10 years.

In the Price & Performance area of fund disclosure, the information is pretty much what it seems. Here you can find historical price information and historical returns for the fund. Many providers include a graph or chart to show you a representative performance of say $1,000 or $10,000 had you invested at a particular time in the past. In this section you may also find the fund’s current price and its historical returns for 1-year, 5-year, 10-year, or even since inception. This performance is usually compared to the fund’s benchmark (the ideal against which the fund is measured).

To find out what it will cost you to start investing, and how much it will cost you thereafter, look in the Fees & Minimums section of the disclosure. Here you can find out what the minimum investment is to invest in the fund. Some funds have no minimums; others require a larger amount of say $2,500 or $3,000 or even $10,000. No two funds are the same. You should also look in this area for the fund’s expense ratio (sometimes expressed as ER). These days, the expense ratio should be fairly low, under say 1.5% or possibly lower. You also want to look to see if the fund charges 12b-1 fees (annual marketing or distribution fees), redemption fees (for selling your fund), purchase fees, or account maintenance fees. Funds may charge these fees and it is not an indicator that the fund is good or bad, just be aware of what you are paying for and how much. Generally, you should consider funds with low-to-no fees in these areas so you keep more of your returns over the time you own the fund.

Even with all of the disclosure available regarding a mutual fund these days, keep in mind the old adage that past performance is no indicator of future performance. Know that all investing involves risk, and you should always seek help if you are not sure about what you are doing. What’s your plan? As an independent Certified Financial Planner™, I can help you. No matter where you are in life, a CFP® professional can help you create a financial plan for today and tomorrow. #LetsMakeAPlan #CFPPro #talktometuesday #Hireaplanner #mutualfund #fees

Is Your Adviser a Fiduciary?

You may have heard a lot in the press lately about financial advisers and whether they act as a fiduciary. So, what does it mean? Basically, it means your adviser is required to act in your best interest, and not their own. That’s it! Seems simple, right?

Ask your adviser if he or she is a fiduciary.

Not so. For starters, not all advisors are fiduciaries nor are they required to be a fiduciary. There are financial professionals who are only required to act under a suitability standard. This means, the adviser need only have adequate reason to believe a recommendation is suitable for their client. In this situation, it is possible a conflict of interest may exist. That is, when deciding between investment options, if one choice pays the adviser a better commission, the adviser may select that option believing it suitable for their client. It doesn’t mean that the adviser (or the investment) is necessarily bad, it just means a conflict exists. In dollars and cents, it means you as the client may end up paying more for your advice and investment.

Under a fiduciary standard, an adviser uses a well thought out and prudent process. Conflicts of interest must be disclosed. They will also discuss their choices with you in detail to be certain you understand the recommendation, the rationale behind it, and provide you ample opportunity to ask questions. This way there is no misunderstanding about the choices being made or the logic behind those choices. A fiduciary adviser looks beyond short-term commission and puts the client’s best interest first. Keep in mind that the Securities and Exchange Commission also regulates registered investment advisers that claim to be fiduciaries.

When seeking financial advice, do your homework and know that there are two types of advisers out there. Be direct and ask your adviser if he or she is a fiduciary. The answer should be a simple yes or no. If you do pick an adviser that is not a fiduciary, just understand upfront what the costs and conflicts may be.  Again, it’s not a ‘bad guy’ vs. ‘good guy’ but knowing who and what you are paying for in advance. This will help avoid conflict, maybe save some money, and reduce stress from the beginning.

If you are looking for an independent CERTIFIED FINANCIAL PLANNER™, I can help you. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney #retirement #fiduciary #suitability

How to Improve Your Credit Score

It’s interesting to hear folks talk about their FICO score and it’s even more interesting to hear some of the myths people believe will affect their FICO score. Most are not even sure what FICO means. It’s the names of the founders who started a data analytics company to score credit usage back in 1956.  The company was founded in San Jose, CA and FICO comes from Fair, Isaac and Company with Fair being Bill Fair and Isaac being Earl Isaac. If you are concerned about your FICO score, here are three tips that will help you improve your score.

1. Check Your Credit Report

Consumers are entitled to a free credit report every twelve months.  You can contact Experian, TransUnion, or Equifax and ask for a copy of your credit report. Consider getting your report from each of the agencies to compare. If you find errors, start working to rid your report of the error. Removing errors can take time, so don’t put this off. To stay abreast of your credit score, consider signing up for a free credit reporting service such as Credit Karma, Credit Sesame, or possibly through your credit card. For disclosure, Engage Advising has no professional relationship with any company mentioned. Choose the one that works best for you.

2. Pay Your Bill

Much has been misconstrued about your credit utilization rate (the amount of credit you use). For example, if you have a card with a $1,000 limit and you charge and carry a $500 balance without paying it off, you are utilizing 50% of your credit. Don’t focus on carrying a balance to build credit; focus on paying your bill each month. If you do start to carry a balance, consider making micropayments during the month before your due date to reduce your balance. This will help pay down your balance and it will generally be reported monthly by your card issuer, lower your utilization rate, and improve your score. 

3. More is Not Better

You don’t need to open an account with every credit card or store account for which you can qualify.  Keep it simple! It’s better to have fewer credit accounts that are paid on time, over a longer period of time in a responsible manner than it is to have as many open accounts as you can qualify for. Consider putting some of your regular bills that you pay each month in an autopay program that is automatically charged to your credit card every month (think cable, cell phone, streaming service, etc.) and be sure to pay your balance. The other benefit is that you will not forget to pay that bill.  This use of credit and managing it well over time is much more important than having multiple credit lines. Think about having a Visa or MasterCard and/or an American Express card. That will give you some flexibility in the event a vendor does not accept your preferred card. An entire post could be written on which card to select, so do your homework and select the ones that work for you. For disclosure, Engage Advising has no professional relationship with any company mentioned.

Overall, keep an eye on your credit report, pay your bill each month, and don’t open more credit accounts than you really need. There’s no need to have a department store card when you can pay be Visa, American Express, or MasterCard. As an independent Certified Financial Planner™, I can help you prepare a debt payment strategy and clean up your credit profile.  Contact me and let’s get started! #talktometuesday #education #Hireaplanner #stressfree #FICO #FICOscore #savings #debt

Back to School and the ABCs of Talking Money with Kids

Back to school is a great time to teach your kids the ABCs of money. With lots of back to school shopping you have many opportunities. Don’t worry; tackle the easy topics first but keep the dialogue going. Whether you have children in grammar school, junior high, or high school, this is a great time to start talking with your kids about earning, saving, and investing money.

A – Address the Topic

The first hurdle is to address the topic with your child. Address the topic of money directly but keep it casual and assess where your child is with their understanding of money. A good starter is to simply ask if they understand where money comes from. If they reply ‘you,’ it’s time to let your kids know more about how your family earns its living. Keep the topic fun, casual, and light. Don’t make this first step too complicated.

For the youngest child, introduce the concept of money and show them examples. Ask them if they know what it is, where it comes from, and what it is used for. It’s important to show them some physical money because many of today’s transactions are digital. For a junior high child, now is a great time to introduce them to earning money. Start with a simple example such as earning $10 per hour and talk to them about taxation. Show them how much they would truly receive of the $10 if their tax rate was, for example, 20%.  For high school kids a little math is good so take this exercise a step further. Have them pick an item they would like to buy and calculate how many work hours it would take to earn enough money to pay for the item after tax.

B – Beyond the Basics

For this step, you are going to take your child beyond the basics of understanding what money is, how it’s earned, and what it takes to earn enough to buy an item. Now is the time to instill good savings habits in your child. For your youngest, start by teaching them to save at least 15% of money they earn, even from their allowance. Withhold 15% of their allowance, gift money, birthday money, etc., and teach them it is for savings. Don’t cheat your child; put this aside to grow in a savings account and gift it to them as a surprise in the future.

For your child that is in junior high or high school, they may already be earning money from a part-time job. If so, sit down with them and go over their pay stub and explain to them the taxes (and possibly benefit deductions) that are being withheld. If your junior high child only has an allowance, have them save 15% in a savings, money market, or CD account. For your working high school child, ask that they set aside at least 15% in savings; more if you can get them to do it. As long as your child has earned income, now is a good time to introduce them to a Roth IRA in addition to savings, money market, and CD accounts. A child with earned income is allowed to contribute to a Roth IRA. To inspire them, use an online Roth IRA calculator to show them how much their investment could grow by the time they reach certain ages.

C – Confirm, Check in, and Continue

Over time, confirm with your child that they understand the concept and value of money. You can also take this time to teach them that although money is important, it’s not more important than people or doing something they love in life. Confirm that they are saving and check in with them about how they feel about what they are doing. It’s also good to check in with your child as they save and learn about their goals. Get them to set a goal and continue saving and investing. Finally, when they reach the goal – celebrate!

The takeaway from the ABCs of money is to start a dialogue with your child and address the topic of money. Move beyond basics and help them to start investing and understand why they are doing so to instill good money habits for life. Get them used to saving at least 15% of everything they earn over their lifetime. Confirm that they are understanding the concepts of money and saving, check in with them about how they are doing, and encourage them to continue saving and investing for life.

If you need help or would like to know how to start, give me a call. As an independent CERTIFIED FINANCIAL PLANNER™, I can help you start a dialogue with your child about money and make this a profitable back to school year. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #summervacation #vacation #CFPPro #savemoney #retirement #backtoschool #childrenandmoney #saving