Financial Symmetry: Balancing Today with Retirement: Recent Episodes
Chad Smith, CFP® and Mike Eklund, CFP®
When considering retirement, do you wonder what financial opportunities you may be missing? Busy lives take over and years pass without taking advantage. In this retirement podcast, Chad Smith and Mike Eklund unveil financial opportunities, to help you balance enjoying today so you are ready to retire later. By day, they are fiduciary fee-only financial advisors who answer questions about tax savings, investment decisions, and how to save more. If you’ve been putting off your financial to-do list or are just not sure what you’ve been missing, subscribe to the show and learn more at www.financialsymmetry.com. Financial Symmetry is a Raleigh Financial Advisor, proudly serving clients in the Triangle of North Carolina for over 20 years.
At Financial Symmetry, our internship program has become a core pillar of our growth, innovation, and client experience.
Over time, our program grew from simply filling resource gaps to a foundational development engine, helping to shape the services Financial Symmetry offers and the team culture itself.
What has emerged from these iterations is the recognition that our best chance of success comes from integrating interns directly into the firm’s core wealth management processes. This hands-on approach creates a feedback loop where interns don’t just complete busywork; they contribute valuable perspectives and even shape workflows that staff rely upon to this day.
Outline of This Episode * [00:00] Financial Symmetry’s influential internship program, with insights from Heather Gudac. * [04:13] Refining processes through internships. * [06:42] Internship growth and uniqueness. * [12:06] Intern assessment and development process. * [14:50] Empowering interns through engagement. * [17:49] Internship planning and goal setting.
📰 See the full show notes here
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Claiming Social Security as soon as you become eligible at age 62 is a common choice for Americans. While understandable, this decision can have significant, and often underappreciated, long-term consequences. For many, the urge to claim early may stem from financial necessity, lack of other income sources, or simply a desire to “get what you’ve paid for.” However, claiming early can reduce your benefit by as much as 30% compared to waiting until your full retirement age (typically around 67).
If you are in the fortunate position of having other income sources, such as a pension, 401(k), brokerage accounts, or IRAs, delaying Social Security becomes a viable strategy. This moves the decision away from immediate need and toward maximizing lifetime income, building multigenerational wealth, and supporting charitable or legacy goals.
Outline of This Episode * [00:00] Most Americans claim Social Security at 62 due to a lack of other income, but those with additional resources or financial advice might delay claiming for long-term wealth planning. * [04:16] Consider life expectancy in financial planning, especially for married couples. * [08:56] Evaluate claiming benefits at different ages to optimize long-term financial outcomes, considering life expectancy and age gaps between spouses. * [11:38] Social Security benefits, combined with other income, affect your tax bracket. * [16:00] It’s important to integrate Social Security decisions into your broader retirement plan, considering income sources, tax liabilities, legacy goals, and timing. * [17:18] Retirement tax decisions are complex, involve varying tax rates, and impact Social Security timing strategies.
📰 See the full show notes here
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Chad and Mike break down the major moves in US and international markets from the past quarter, revealing why diversification works unexpectedly. They chat through the impact of recent tariff news, what those headlines might mean for the economy and your portfolio, and share evidence-based strategies for taking action (or not!) when markets get rocky.
Outline of This Episode * [0:00] Major moves in US and international markets from the past quarter * [4:22] The benefits of diversified portfolios * [9:15] Trade deficit and tariffs explained * [9:54] Tariffs impact product prices, and consumer costs increase * [13:03] Historic tariff surge of 22% shocks the stock market * [16:27] Top Tech Chart Insights * [20:39] Interest rates are expected to decline, making equities better for long-term growth
📰 See the full show notes here
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Market volatility is never comfortable, but with the right mindset and a thoughtful plan, you can face downturns not as a victim, but as an opportunist. On this episode of the Financial Symmetry Show, we’re sharing our advice on managing your finances amid turbulent markets and giving you a helpful checklist to guide your decision-making when headlines make your stomach flip.
Outline of This Episode * [0:00] We discuss the importance of planning, reviewing its steps, and controlling expectations during unforeseen events. * [4:29] Evaluate income, expenses, job security, income sources, and potential risks in financial planning. * [7:14] Consider delaying major purchases or expenses if income is uncertain. Assess whether postponing could increase costs or cause issues. * [12:53] Prepare for significant financial events that may impact your portfolio, like downsizing a home or receiving a large sum. * [14:17] Evaluate your portfolio by considering your stock choices. * [17:32] Avoid panic selling stocks, which often leads to long-term financial regret. * [22:50] Take informed action for peace of mind; mindset and planning are key.
📰 See the full show notes here
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Tax planning might not top everyone's list of leisure activities, but in the middle of tax season there’s a hidden opportunity. What if, instead of seeing it as a mere logistic hurdle, we embraced it as a moment to refine our financial strategy?
📰 See the full show notes here
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What if your retirement lasts much longer than you anticipated? Increasing life expectancies have reshaped our understanding of retirement and financial planning in recent years, and we’ll likely become more concerned about effectively managing financial resources throughout a potentially very long life in the future.
In this episode, we’re sharing some insights gleaned from a recent industry conference focused on the impacts of longevity on retirement planning. There's a growing need to rethink how long you'll need your savings to last and how you approach your investment strategies to accommodate potentially decades more of life.
We’re discussing the intriguing idea of a 150-year lifespan and the emergence of cutting-edge longevity research and how this thought-provoking information challenges our traditional views on aging and needs us to rethink traditional financial planning strategies.
Whether it's reimagining retirement careers or evaluating the future of medical advancements, we have to align our wealth span with a potentially extended health span. Join us as we unravel the financial implications of living longer and healthier lives.
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We're spotlighting women's wealth in honor of International Women's Day and Women's History Month. Join us as we dig into some of the stats surrounding women's financial empowerment. From the rising number of women controlling wealth as they outlive their spouses to tackling stereotypes that hinder women's earning potential, this episode addresses the systemic barriers that impact women's financial journeys.
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Four categories are recognized under current regulations to qualify as an Eligible Designated Beneficiary (EDB). These include the surviving spouse, minor children of the decedent, a disabled or chronically ill individual as assessed at the time of the decedent's passing, and other individuals who are no more than ten years younger than the deceased account owner. If you fall into one of these categories, you'll be afforded more time and flexibility than Non-Eligible Designated Beneficiaries. This is due to recent regulatory changes, underscored by The Secure Act, altering the landscape of inherited IRAs.
Outline of This Episode * [00:00] The complexities and benefits of being an eligible designated beneficiary (EDB) for inheriting an IRA. * [03:34] Eligible designated beneficiaries have two key advantages: more time and flexibility in inheritance. * [08:21] Withdrawing from an IRA before age 59 incurs a 10% penalty and income tax; RMDs depend on age, starting at 73 for most people. * [10:10] The stretch IRA avoids a 10% penalty by basing RMDs on life expectancy. * [15:46] Timing distributions strategically can reduce tax liability. Wait until retirement to avoid high tax brackets. * [18:01] Evaluate options carefully when inheriting an IRA, considering tax implications and future changes.
📰 See the full show notes here
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Investing can often feel like riding a rollercoaster of exciting highs and daunting lows. This week, we’re digging into the intricacies of the financial planning process, focusing particularly on the importance of understanding market trends and the role diversification plays in safeguarding your wealth.
Outline of This Episode * (03:08) Investing with diversification mitigates risk; US stocks average 10% annual returns over the long term but vary yearly. * (08:39) US and China stock market gains were largely driven by speculative buying, with US stocks being pricier than international and small stocks. * (12:07) Tech stocks are currently overvalued, reminiscent of past market bubbles * (15:57) Bonds have a stable 5% return, but cash rates are volatile and are expected to drop to 3.9% this year. * (17:37) Despite acknowledging the unpredictability of the future, experts from BlackRock, JPMorgan, Schwab, and Vanguard forecast international markets to outperform US markets over the next decade. * (20:01) Diversification guards against risk and helps investors achieve their goals
📰 See the full show notes here
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Retirement, often portrayed as a glorious era of freedom and relaxation, has its own set of challenges beyond the financial arena. This week, we’re exploring the psychology behind retirement and discussing the four phases retirees go through.
- Vacation/Honeymoon Phase: The initial euphoria of not having to set an alarm.
- Loss Phase: Often associated with disenchantment as the honeymoon phase wears off.
- Trial and Error Phase: Trying out various activities to find what gives life meaning.
- Reinvent and Rewire Phase: Adding a new sense of purpose and joy from activities outside oneself.
The excitement of retirement can last about a year. The dreamy honeymoon phase is great, but when reality sets in, it can be tough. The transition takes time and usually involves emotional highs and lows as retirees grapple with their newfound freedom while trying to preserve their sense of identity, purpose, and routine.
📬 Download your Free Retire On Purpose Guide here.
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As the holiday season approaches, many of us find ourselves thinking about gifts. While gifts can come in many forms, monetary gifts often cause the most confusion. In this episode of Financial Symmetry, hosts Chad Smith and Grayson Blaszak discuss the intricacies of financial gifting.
Financial gifting generally involves transferring assets, such as cash or securities, from one individual to another without expecting anything in return. This process can have several benefits, including seeing your loved ones enjoy the fruits of your generosity during your lifetime.
📬 Download your Free Retire On Purpose Guide here.
📰 See the full show notes here
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Have you ever been in the middle of a road trip, and you come upon a roadblock where unexpected traffic adds a half hour or more to your journey?
Similar frustrating circumstances pop up in the years just before and just after retirement. During this new life transition, you are forced to confront retirement roadblocks, and if you don’t know how to maneuver around them, it can leave you feeling stuck.
In this episode, we discuss 3 retirement roadblocks you may encounter along your retirement journey. Think of these tips as your GPS to make it easier to navigate around the retirement roadblocks you will inevitably face.
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Early retirement has unique financial planning challenges, particularly regarding health insurance and tax strategies. For people who retire before age 65, the challenge of finding affordable and adequate health insurance adds another layer of complexity to their financial plans.
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Outline of This Episode * [04:32] Considering Roth conversion for potential tax benefits * [09:07] Rules around qualifying for ACA in 2025 * [12:36] Early retirement may offer a low-tax window for Roth conversions, potentially reducing the lifetime tax burden * [15:49] Consider long-term planning, not just immediate tax impacts, for decisions like Roth conversions * [18:44] Roth conversions are typically completed at year's end to account for unexpected income changes affecting ACA MAGI estimates.
An inherited IRA is essentially an IRA received by a beneficiary after the original owner passes away. Whether it's a spouse, child, or another loved one, the key characteristic of an inherited IRA is that it transitions ownership upon death.
As Grayson Blaszek explains, the funds are transferred intact, but the way you handle and withdraw these funds comes with specific rules and timelines. Grayson and Matthew dig into the new rules in this episode.
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Outline of This Episode * [4:50] Differences between eligible and non-eligible designated beneficiaries * [6:16] Why it’s important to list IRA beneficiaries to avoid tax inefficiency * [8:19] The year that you inherit an IRA impacts that distribution requirement * [10:18] Discussing inheritance can lead to meaningful conversations that make financial planning easier * [14:17] You need to continue taking the required minimum distribution (RMD) if the decedent began them already * [16:00] How to handle a 10-year account withdrawal strategy * [22:07] Key takeaways about your withdrawal options with the new rules as a non-eligible designated beneficiary
Investing can feel like a battle between two polar opposites within us, the rational and the emotional, just like the classic story of Dr. Jekyll and Mr. Hyde.
This week, Dr. Jekyll and Mr. Hyde are our model investors, and we’re talking you through the spooky story of the risks, emotions, and rational strategies involved in long-term investing.
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📰 See the full show notes here
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Outline of This Episode
- [03:06] Dr. Jekyll and Mr Hyde's wildly different investment strategies
- [06:00]Strategies that help mitigate emotional reactions during elections and global crises
- [07:38] Balancing short-term market volatility with a long-term investment perspective
- [10:37] How to stay aligned with long-term goals in the face of market downturns
- [13:28] Diversification to manage risk in an investment portfolio
- [14:17] Psychological factors that cause investors to feel more confident during market upswings
- [15:35] Automating your investment and savings strategy to prevent emotional decision-making
Reaching your financial goals builds confidence and peace of mind, which are essential for making informed decisions that benefit your entire family.
In this episode, we’re following a fictional pop culture couple from newlywed to pre-retirement, to demonstrate how their thought process around an emergency fund could evolve with their changing circumstances.
Join us as we lay out a case study of planning that helps them balance their accessible wealth with a healthy emergency fund.
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📰 See the full show notes here
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Retirement, a phase many of us anticipate for a long time, comes with its own set of financial intricacies. Specifically, how do you effectively withdraw funds from your savings to ensure a comfortable, sustainable, and tax-efficient lifestyle?
A well-crafted retirement blueprint is essential. This plan should outline your long-term goals and the steps needed to achieve them. More importantly, your financial plan should be flexible enough to accommodate life's unexpected expenses, such as healthcare costs or home repairs. Revisiting and updating your blueprint annually—or when significant life changes occur—can help ensure you stay on track.
In this episode, we’re sharing the essential steps to develop a retirement withdrawal plan that caters to your needs. We dig into which accounts to draw from, how to minimize taxes, and how to manage unexpected expenses. You'll also learn about advanced strategies like Roth conversions, tax-loss harvesting, and the benefits of Qualified Charitable Distributions and Donor-Advised Funds.
Outline of This Episode * [5:06] Your options for retirement tax strategies * [8:32] Utilize early years to make strategic financial moves * [11:30] Plan your retirement for peace of mind * [17:12] Lower RMDs with Roth conversions and reduce the tax impact * [19:42] Consider tax loss harvesting, capital gains, heirs' basis * [21:30] Use a QCD to reduce taxable income * [26:12] Exploring blind spots in retirement withdrawal strategies
Resources & People Mentioned * The Retirement Podcast Network
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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Retirement planning is a delicate process, and you need to carefully consider your various income streams, including Social Security benefits. For those of us who plan to continue working while claiming Social Security, it’s important to understand how this decision can impact the monthly benefits you receive.
In this episode, we’re sharing how to avoid financial shocks in retirement. We discuss the essentials of earned income, the reduction in benefits due to excess earnings, and specific scenarios such as spousal and ex-spouse benefits.
Outline of This Episode * [1:08] Social Security benefits may be impacted if you work while claiming * [04:27] How retirement financial planning strategies vary by individual circumstances * [07:17] Earnings affect Social Security benefits before retirement * [11:51] Your spouse's income doesn't affect your Social Security * [15:18] SSA withholds payments until excess income is accounted for * [18:44] Social Security timing advice * [20:04] Seek financial advisor help to make an educated decision about retirement
Resources & People Mentioned * How Is My Social Security Benefit Calculated? - Financial Symmetry, Inc. * SSA - Social Security in retirement * The Retirement Podcast Network
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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We all have visions of our ideal retirement. However, our financial plans can quickly veer off course if we haven't appropriately managed our risks.
On this episode of Financial Symmetry, Greg Suggs from Greg Suggs Insurance joins me to discuss how to manage common risks that could negatively affect your wealth. You won’t want to miss out on these easy-to-implement pieces to your insurance puzzle that could save your assets.
Outline of This Episode * [1:23] A bit about Greg * [2:09] Biggest changes in insurance over the past 30 years * [5:12] The biggest risks for homeowners * [11:11] Common mistakes homeowners make * [14:33] What to think about if you are considering a second home * [17:21] What to consider if you own a rental property * [19:00] Automobile insurance for young drivers * [23:22] What about insurance for gig work? * [25:37] How to lower your insurance needs
Resources & People Mentioned * The Retirement Podcast Network * Greg Suggs Insurance
How do you begin to save for your children to go to college? With the rising costs of college education, is it worth the monetary commitment?
Including tuition & fees, room & board, books & supplies, etc. the average cost of college is anywhere from $27,000 for an in-state public school up to $80,000–$90,000 a year for an Ivy League School.
How you pay for your student’s college is one of the most important financial decisions you’ll ever make. In this episode, we cover the three phases of saving for college and what you need to pay attention to in each phase.
Outline of This Episode * [1:53] Why college? Is it necessary? * [2:41] Average cost of college * [4:42] Phase #1: The Saving Phase * [10:02] Phase #2: Preparing for college * [20:44] Phase #3: In-college strategies * [22:57] Summarizing the big points
Resources & People Mentioned * The Retirement Podcast Network * Social Security – Lifetime Earnings of College Graduates * Morningstar – How to Choose a 529 Plan * The FAFSA Application * IRS – American Opportunity Tax Credit (AORC) * IRS – Lifetime Learning Credit * Independent Education Consultants Association * US News – Qualified 529 Expenses * Charles Schwab – 529 to Roth Rollovers
Some problems are easily solved with a bit of reasoning, logic, or by using a bit of math. Other problems, however, go beyond quantitative thinking.
The most thought-provoking issues aren’t numbers-based. These issues require much deeper consideration and often cause you to reevaluate your way of thinking. Planning for retirement causes us to contemplate the bigger picture.
Recently, Allison Berger and I read a book called Wild Problems by Russ Roberts and we were struck by how its lessons carried into retirement planning.
In this episode of Financial Symmetry you’ll learn how to identify “wild problems” and develop a framework for working through them. Let’s dive a bit deeper into retirement planning; press play to get started.
Outline of This Episode * [4:44] The difference between tame problems and wild problems * [13:21] A wild problem example * [17:16] How to set up a decision-making framework * [22:51] Recognize the value of diversification
Resources & People Mentioned * The Retirement Podcast Network * BOOK - Wild Problems by Russ Roberts * BOOK - The New Retirementality by Mitch Anthony * BOOK - Thinking Fast and Slow by Daniel Kahneman
Connect With Chad and Allison * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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One of the retirement questions that persists through the ages is whether to take a pension or a lump sum payment. On this episode of Financial Symmetry, Mike Eklund joins me to flesh out an example from baseball: Did Bobby Bonilla Day make the right decision back in 1999 to take $1.2 million per year instead of a $5.9 million lump sum payment?
Seeing this example play out over time can help you make your own pension vs. lump sum choice. Listen to find out whether Bobby hit a home run with his financial decision.
Outline of This Episode * [0:46] Our article of the week * [2:47] Pension or lump sum? * [7:27] An advanced strategy to consider * [9:42] What happens if the company goes bankrupt? * [12:26] Our example revealed * [19:01] The takeaways
Resources & People Mentioned * The Retirement Podcast Network * Morgan Housel article
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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What if you had a magic app that told you how much of your net worth you never got to spend at the end of your retirement?
The trouble with planning for retirement is all the uncertainty, however, proper planning can help. In this episode, Cameron Hendricks joins me to discuss how you can learn to spend more in retirement.
Outline of This Episode * [0:50] We need to talk about your retirement spending * [1:55] What if you had an app that told you how much of your net worth you never got to spend? * [10:25] Why it’s important to have a retirement withdrawal strategy * [18:55] Our takeaways
Resources & People Mentioned * The Retirement Podcast Network * We need to talk about your retirement spending
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Have you considered how your instincts influence your decision-making around retirement planning?
Our natural instincts and biases create frameworks that lead our perspectives on how we think the world works.
These frameworks influence our decisions surrounding our financial decisions.
On this episode of Financial Symmetry, we discuss how to build prosperity by analyzinging and identifying your perspective. Listen in to learn 10 instincts identified by the book Factfulness and what you can do to combat the biases they lead to.
Outline of This Episode * [0:50] Our article of the week * [1:58] Your instincts influence your decision making * [5:41] Why are we worried about the current situation? * [7:13] Combatting the gap instinct * [10:36] The negativity instinct * [16:10] The fear instinct * [10:18] Size matters * [23:56] The generalizing instinct * [26:10] Destiny instinct * [29:23] Who’s to blame? * [31:05] The urgency instinct
Resources & People Mentioned * Show Notes * The Retirement Podcast Network * Gapminder * BOOK - Factfulness by Hans Rosling * Episode 209 - 5 Reasons to Consider Investing in More Than the S&P 500 * BOOK - Making Numbers Count by Chip Heath * BOOK - Super Communicators by Charles Duhigg
Today we’re diving in to a specific path that many retirees consider as they move away from the “corporate” world and enter their second act – which is starting a business.
With increased life expectancy, cost of living increases and a desire for continued fulfillment, many retirees are excited to begin a new experiment in an area they are passionate about.
Some surveys show the proportion of people starting businesses at ages 55 to 65 has increased in recent years and, at one point, even surpassed the typical entrepreneur age group of 25- to 35-year-olds.
So today we’re speaking to those currently operating sole proprietorships and single-member LLCs OR those considering starting their own business. We’re going to shine the light on the S Corp business type and provide some details on why this could be an opportunity to explore.
Outline of This Episode * [0:55] How to know when you have enough * [2:09] Starting a business in retirement * [6:02] Why it's important to understand what an S-corp is * [10:10] An example * [14:54] The downside of the S-corp
📬 Get our Retire On Purpose Guide here.
📰 See the full show notes here
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Now that you have made it through the retirement danger zone, you have made it to the Arrivement phase of retirement. You may be wondering, what are my next steps?
This season can be full of opportunities and connection with those you care about. At this point in your life journey, you may face some difficult decisions around relocating or how best to spend or give the wealth you've worked hard to accumulate.
Listen in to hear about the financial and tax moves that we see most commonly used during the middle years of your retirement.
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📰 See the full show notes here
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Have you thought about retiring abroad?
Oftentimes when we think of retirement, we think about sunny beaches with crystalline water shimmering in the sunshine. Could this or some other idyllic vision be your future?
The realities of retiring abroad can be exciting, but at the same time overwhelming. Complex financial strategies need to be considered before grabbing your passport and setting off for the unknown.
In this episode, we discuss seven crucial financial considerations that you’ll need to keep in mind if you are interested in retiring abroad.
Outline of This Episode * [0:36] Overcoming frugality in retirement * [2:15] More people are retiring abroad * [3:44] Put together a blueprint of what life will look like for you * [5:00] Dealing with finances * [6:53] Dealing with taxes * [8:40] Dealing with investments * [10:32] Dealing with real estate * [12:24] Dealing with healthcare * [13:41] Dealing with estate issues
📬 Get our Retire On Purpose Guide here.
📰 See the full show notes here
🌐 Explore the Retirement Podcast Network here
If you are retiring soon, you've most likely wondered if your asset allocation is too risky.
Some have called the period just before and after retirement the Retirement danger zone as it's a time where understanding how you should be invested matters for your long-term financial success.
After years of great returns in tech and large cap US stocks, many retirees could have bigger risks present in their allocations than they realize.
In today's episode, you'll learn why sequence of return risk has been called the retirement danger zone and how to prepare for it within the context of your retirement plan rather than by planning by generalized rules of thumb.
Resources & People Mentioned * Show Notes * DOWNLOAD our guide to "Retire on Purpose" * Retirement Podcast Network
So many of us will be hoping for no tax surprises when preparing our tax returns this year.
This is why we want to provide you with a list of common tax surprises to watch for.
After working with hundreds of clients to prepare their tax returns, we’re sharing the latest tax surprises we see that could be helpful to know when completing your tax return this year.
Outline of This Episode * [0:42] The Slott Report * [2:39] Inheritance surprises * [6:51] Credit card rewards * [8:10] Interest income increases * [10:54] Income earned in different states * [12:32] 1099Ks * [14:14] Underwithholding from your W4 * [15:56] Forgotten statements * [17:32] Double taxation on the Backdoor Roth * [19:49] Underpayment penalty * [21:14] The K1 for small business owners
📬 Get our Retire On Purpose Guide here.
📰 See the full show notes here
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Retirement can hit us with numerous curveballs. One of those could happen right out of the gate–being forced with an early retirement.
We all know that layoffs are part of the corporate landscape. While they are commonplace, when you are faced with one later in your career it can cause you to reevaluate your financial situation.
In this episode, we discuss your options if you are laid off and how they fit in with your financial plan, your tax plan, and your 401K.
📬 Get our Retire On Purpose Guide here.
📰 See the full show notes here
🌐 Explore the Retirement Podcast Network here
While most of our listeners are in or on the cusp of retirement, many have loved ones who are earlier in their careers. Often we get questions on how our listeners and clients can help their younger family members make better financial decisions.
As we celebrate International Women's Day with this episode, you’ll meet our newest CFP, Niamh Douglas. Niamh and Allison discuss some tools and strategies to help young people who are just starting out get off on the right financial foot.
Resources & People Mentioned * Episode 189 - Smart Financial Decisions for Recent College Graduates * 9 Retirement Surprises * The Retirement Podcast Network * 3rd Decade * LadiesGetPaid.com * BOOK - Simple Wealth, Inevitable Wealth by Nick Murray * BOOK - Peaceful Prosperity by Laura Redfern
Many who approach retirement view it as the ultimate goal, but you could have 30+ years to experience the retirement you've worked to build.
While much of retirement planning is focused on the numbers, people often fail to intentionally plan out how they'll spend their time.
In this episode, we explore some common retirement pitfalls and then ten stepping stones to help us overcome challenges you might encounter.
📬 Sign up for the Advisor Corner Newsletter here and receive our Pre-Retirement Checklist.
🎯 Article - Uncertainty is Underrated
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Many investors have been tempted to invest more, if not all, of their portfolios in the S&P 500 given the incredible run it’s had over the last decade.
But today we are talking through five reasons why you should consider not making a concentrated investment only in the S&P 500.
Don't let recency bias rule your decision-making on the road to your ideal retirement.
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🎯 Article - A Few Thoughts on Spending Money
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One of the biggest financial disasters that people can experience in retirement is divorce. On this episode of Financial Symmetry, Grace Kvantas chats with licensed marriage and family therapist, Lesli Doares.
Lesli shares warning signs to look out for, misconceptions about keeping finances separate, and why couples should seek marriage counseling in retirement. Your marriage affects every aspect of your life. Listen in to learn how you can improve it.
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🎯 Article - Many Happy Returns by David Booth
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If you have rollover IRA accounts and want to make a backdoor Roth IRA contribution, this episode is for you.
There are several steps involved to handle this strategy in the right way including understanding how you roll the IRA accounts to your 401k.
Today we walk through five considerations you should think through before you implement a strategy to complete your Backdoor Roth contributions.
📬 Tips each month to help you Enhance Your Today and Enrich Your Tomorrow. Download our Pre-Retirement Checklist Ebook today
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In our usual episodes, we aim to arm you with a particular insight or strategy that can help you inch closer to your ideal retirement. But, with todays show, we want to close the year by providing a list of 15 surprising financial facts about the year that you could share in a conversation with a friend or family member.
We also pay tribute to the great investor Charlie Munger, by providing a few of our favorite Mungerisms.
As you begin your 2024, we thank you all for listening and sharing our show. We look forward to continuing to provide you with helpful steps on your journey to reach an ideal retirement
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If you are planning on retiring before age 65, there is no doubt that you have had this question.
What do you do about health insurance?
In the United States, the health insurance landscape is ever-changing and takes quite a bit of planning.
Many people even feel anchored to their jobs because of the prohibitive costs of health insurance. However, there are options for healthcare before age 65.
Listen in to discover what your options are and what you should be doing to plan for this complicated aspect of early retirement.
Outline of This Episode * [2:44] COBRA * [8:04] Using your spouse’s plan * [10:58] The healthcare exchange * [17:57] On choosing more than one option
Resources & People Mentioned * Episode 204 - 10 Tax Planning Opportunities You Don’t Want to Miss
Taking advantage of tax planning opportunities before year-end may benefit you this year while also lowering your lifetime tax rate.
Paying more taxes now to lower your lifetime tax rate may seem unconventional, but if you are serious about building wealth, this episode may include a strategy for you.
Listen in to hear ten tax strategies you could use on the path to your ideal retirement.
📬 Tips each month to help you Enhance Your Today and Enrich Your Tomorrow. Download our Pre-Retirement Checklist Ebook today
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On the journey to reach your ideal retirement, stock options can be a valuable tool to have in your arsenal.
However, it’s easy to make mistakes given most people don’t have a class in high school that provides pointers on how to handle when they vest.
There are many things to consider with stock options: the different types, timing deadlines, tax consequences, and the leverage involved.
Since it is such a complex topic, they’re often put on the back burner and can easily be forgotten about causing you to miss out on a valuable opportunity to increase your wealth.
If you have been offered stock options with your company, you’ll want to hear these 8 common mistakes to avoid when managing your stock options.
📬 Tips each month to help you Enhance Your Today and Enrich Your Tomorrow. Download our Pre-Retirement Checklist Ebook today
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There’s so much we can overlook with retirement plans. Here at Financial Symmetry, we are constantly finding ways to help you be aware of retirement opportunities and rules and improve your wealth.
On this special Halloween-themed episode of Financial Symmetry, Allison has come up with some retirement plan horror stories to spook you. Listen in to ensure that these horrors don’t ruin your retirement plans.
📬 Tips each month to help you Enhance Your Today and Enrich Your Tomorrow. Download our Pre-Retirement Checklist Ebook today
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If you are a long-time listener you know that we like to go through the nuances of financial planning that may be valuable to you.
In this episode, Allison and I take a look at net unrealized appreciation (NUA). Listen in to learn what it is, who could benefit from it, and the benefits and pitfalls of using NUA. You won’t want to miss out on hearing one of our classic fictional case studies involving Freddie Krueger. Press play to hear if you could benefit from using NUA.
Outline of This Episode * [1:20] What is net unrealized appreciation? * [3:45] A case study * [8:40] The four triggering events * [11:15] Benefits of NUA * [15:44] The drawbacks
📬 Tips each month to help you Enhance Your Today and Enrich Your Tomorrow. Download our Pre-Retirement Checklist Ebook today
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When it comes to the question of rolling over a 401K or 403B to an IRA, many people fear making mistakes. It’s true, that retirement account mistakes can be costly. On this episode, we’ll explore the options you have, the factors to consider, and the reasons you should and the reasons you shouldn’t roll over your employer-sponsored retirement account.
Outline of This Episode * [3:15] The 6 options you have when you separate service * [8:01] Factors to consider * [13:54] Reasons to roll over * [20:45] Reasons not to roll over
📬 Tips each month to help you Enhance Your Today and Enrich Your Tomorrow. Download our Pre-Retirement Checklist Ebook today
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Investing is simple but not easy. To that end, what are the impacts if you do a poor job managing your investments?
Several studies from Vanguard and Morningstar have attempted to quantify how behavioral coaching can impact your savings. The numbers settle around 1.5-2%/yr. That may not sound like much, but could equate to millions of difference over 30+ years of savings.
On this episode, we continue to explore the benefits of the wealth management relationship. If you haven’t listened to the first part you can find it here.
Resources & People Mentioned * Episode 198 - The Benefits of a Wealth Management Relationship – Part 1 * Episode 177 - 10 Investing Principles: The Fundamentals That Guide Your Investing Decisions * Episode 164 - Your Game Plan for Volatile Markets * Episode 118 - Do You Ask These Questions When Selecting Investments? * Episode 165 - Why You Need a Professionally Prepared Estate Plan * Episode 176 - Estate Planning Tales from the Crypt * Episode 194 - How to Optimize Your Estate Plan with Adam Tarsitano
🎥 See video recaps here
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Many people who reach out to a financial advisor simply seek help creating a financial plan. A financial plan can get you on the right path to financial freedom. However, there are limitations to creating a one-time financial plan.
In this episode, a few of our wealth advisors discuss how wealth management works from the tax planning, retirement planning and risk planning perspectives.
🎥 See video recaps here
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So, you inherited an IRA–now what?
That’s what we’re here to answer on this episode of Financial Symmetry. In this episode, you’ll learn the three types of beneficiaries and the six questions you need to ask yourself when you inherit an IRA.
The rules surrounding inherited IRAs are more complicated than you think, so If you have already inherited one or see yourself inheriting one in the future, make sure to save and listen to this episode.
Outline of This Episode * [0:48] Inherited IRAs relate to summer concerts * [5:30] Questions to ask yourself about the inherited IRA * [13:59] Non-eligible designated beneficiaries * [19:40] Surviving spouses have special designations * [22:20] A quick summary
Resources & People Mentioned * Episode 196 - Are You Making These IRA Beneficiary Mistakes?
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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When was the last time you thought about your IRA beneficiary form? If you said never, you’ll want to listen to this episode of Financial Symmetry. If you said when you signed up, you’ll also want to listen.
Many people don’t realize this but their IRA has the opportunity to be the star player of their estate plan. In this episode, you’ll hear about the biggest mistakes people make with their IRA beneficiaries.
Outline of This Episode * [3:46] Not naming a beneficiary * [5:22] Assuming your employer has your beneficiaries on file * [8:13] Assuming your spouse will inherit your IRA * [11:00] On choosing a non-spouse beneficiary * [13:13] Make sure to set up the contingent beneficiaries * [15:55] Don’t be too trusting * [17:56] Be aware of changing laws * [21:58] Today’s progress principle
Resources & People Mentioned * Ed Slott Conference
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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The behavioral and emotional side of financial planning takes precedence when planning for our future.
I see this play out frequently in the form of anchoring to a perceived value we’ve grown accustomed to, based on prior experience.
This “value”; however, can unfortunately lead to decisions that damage the success of our financial plan.
Outline of This Episode * [1:40] Anchoring to a dollar amount is what we’re used to * [5:56] Are you stuck on your stock prices? * [10:25] Your retirement number needs to have a basis * [15:20] What are you sacrificing to reach your number? * [16:13] Don’t limit your tax thinking * [20:25] Gain confidence with a financial plan
Resources & People Mentioned * BOOK - Wild Problems by Russ Roberts
Connect with Chad and Cameron * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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Today we’re shedding some sunlight on a somewhat gloomy topic: estate planning. Estate law attorney, Adam Tarsitano, joins me to discuss how you can improve your estate plan. Listen in to learn why you may not look forward to the sunset in 2026, the difference in various trusts, and whether you should open a trust to avoid probate.
Outline of This Episode * [0:49] Why you won’t be looking forward to this sunset * [3:03] A couple of examples * [11:31] The Crummey trust * [14:40] Another example of a higher net worth couple * [17:21] On the charitable remainder trust * [18:44] Do I need a trust to avoid probate? * [21:43] Other things to consider
Resources & People Mentioned * Episode 165 - Why You Need a Professionally Prepared Estate Plan with Adam Tarsitano * Tarsitano Law * Crummey Trust
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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Summer is here! That means it’s time to brush off the bookshelf and get reading. We have a few book ideas to enhance your reading list. If you are looking to improve your financial life or even just enjoy a light beach-read you won’t want to miss this list.
Outline of This Episode * [0:55] Never Split the Difference * [5:20] The Gap and the Gain * [9:55] Simple Wealth, Inevitable Wealth * [12:52] Hello, Molly
Resources & People Mentioned * BOOK - Never Split the Difference by Chris Voss * BOOK - The Gap and the Gain by Benjamin Hardy * BOOK - Simple Wealth, Inevitable Wealth by Nick Murray * BOOK - Hello, Molly by Molly Shannon * BOOK - Sudden Money by Susan Bradley * BOOK - Mindset by Carol Dweck * BOOK - What Got You Here Won’t Get You There by Marshall Goldsmith
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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Most of us feel like we have a sound process for investing, that is until curveballs are thrown our way. Then, emotions like envy, greed, and fear take over, making us feel like we need to abandon our long-term investing process for the short term. We do this by taking impulsive actions like:
- Timing the market
- Buying what’s hot
- Selling what’s plunging
However, the investors who do well, in the long run, are the ones who stay the course, focusing less on reactionary changes and more on well-defined targets that you can plan for.
In this week’s episode, we talk about the importance of planning for cash flow needs over the next five years and how to reframe your thinking about making short-term changes to your investment strategy.
🎥 See a video recap
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What can hockey teach us about pursuing your ideal retirement?
As we watched our Carolina Hurricanes progress in the Stanley Cup playoffs, we were reminded of three hockey strategies that are also vital in fulfilling financial planning outcomes.
And despite the early exit of the Canes in the Eastern Conference Finals, this hockey-themed episode can still assist you in the pursuit of your ideal retirement.
As Wayne Gretzky reminded us, you miss 100% of the shots you don’t take. Now on with this week’s episode.
- [2:18] Develop a game plan
- [6:50] Taking advantage of power plays
- [11:23] Winning the face-off
🎥 See a video recap & slides referenced here
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Are you the type of person who loves surprises? One surprise you probably don’t enjoy is having to pay more taxes than you anticipated.
Unfortunately, taxes are a necessary part of life. The best thing you can do to ensure that you aren’t caught off guard at the end of the tax year is to prepare throughout the year.
On this episode of Financial Symmetry, Allison Berger and I review 9 ways to prevent taxes from catching you off guard. Don’t let the next tax season take you by surprise. Listen in to hear how you can improve your tax situation so that you can rest easy come tax time.
🎥 See a video recap & slides referenced here
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Many of our clients ask for financial books and other resources they can share with their loved ones to improve their financial literacy. When young people are armed with financial knowledge they make smarter financial decisions that will ultimately pay off in the long run.
When young adults are just getting started, financial information is best shared in bite-sized pieces which makes a 30-minute podcast the ideal medium for potentially life-changing financial tips.
If you know of someone who is about to graduate from college and embark on their journey into the adult world, this is the episode for them. They’ll learn how to make the best financial decisions they can with their new paychecks. Please make sure to share this episode with the young people in your life.
Outline of This Episode * [3:09] Making good financial decisions now will help you in your future * [5:45] Avoid credit card debt * [9:15] Automate what you can * [11:35] Spend more on experiences * [14:30] Improve your credit score * [15:54] Get the company match * [25:44 Never stop learning
Resources & People Mentioned * BOOK - Die with Zero by Bill Perkins * BOOK - Happy Money by Elizabeth Dunn * How I Invest My Money YouTube video * The Humble Dollar blog * The College Investor * BOOK - Saving for Retirement by Ben Carlson * BOOK - I Will Teach You to Be Rich by Ramit Sethi * BOOK - How to Win Friends and Influence People by Dale Carnegie * NAPFA - find fee-only financial advisors * XY Planning Network - more fee-only financial advisors
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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As you plan to live your ideal retirement, you may want to share your good fortune with others who are less privileged. Giving is incentivized through the tax code, so being charitably inclined can also help to reduce your tax liability.
In retirement, there are many ways to map out your charitable giving to take full advantage of the tax benefits. This is why, on this episode, Grace Kvantas and I discuss ways to capitalize on those opportunities while meeting your charitable goals.
Listen in to learn how to enhance your today and enrich your tomorrow while giving intentionally.
Outline of This Episode * [0:49] Common charitable goals * [2:37] Time talent and treasure * [5:27] Mikey and Minnie’s case study * [11:36] Donald and Daisy’s case study * [19:13] Be intentional about your giving * [21:10] Today’s progress principle
Connect With Allison and Grace * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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Have you ever spent hours trying to fix something that, with the right tools, a professional could fix in five minutes?
We’ve all been there. But it's often difficult to fully appreciate the time, effort, and in some circumstances the cost it could save you to enlist help earlier in the process.
In today’s episode, we’ll explore six steps that are available to augment your lifetime savings. Press play to discover if you are missing out on critical savings tools.
📬 Tips each month to help you reach your Ideal Retirement. Subscribe to the Financial Symmetry newsletter and receive a free Mega-backdoor Roth guide.
📰 See the full show notes here
🎥 See a video recap here
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If you have been watching the news lately you may be wondering if your cash is safe. Watching the country’s 16th largest bank collapse causes people to question whether the banking system is set up to ensure that funds are accessible.
On this episode of Financial Symmetry, we’ll discuss what happened to Silicon Valley Bank, examine how much cash you really need, and explore options for managing your emergency fund. Listen in to learn how to safely manage your emergency fund.
Outline of This Episode * [1:34] What happened with Silicon Valley Bank * [4:40] How much cash do you really need? * [7:50] How to manage your emergency fund * [15:31] Create your own plan
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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As International Women’s Day approaches, we wanted to get together to explore ways to improve the financial outcome for women across the globe.
The gender wage gap costs women $1.6 million in retirement savings over the course of their careers which is especially problematic since women have longer life expectancies than men. In addition, women are more likely to be the caregivers for children and aging parents which limits their ability to maintain paid employment during this time.
This is why it is so important for women to utilize every possible tool to help them improve their long-term financial security. Listen to this episode to discover helpful tools to tackle the four Cs of women’s personal finance.
Outline of This Episode * [2:21] Use technology to help you understand your cash flow * [7:04] Women’s compensation is traditionally less than men * [9:12] Women’s caregiving roles impact their lifetime savings * [14:35] Save early to take advantage of compound interest
Resources & People Mentioned * LadiesGetPaid.com * Big Hero 6 * Care.com * Care Yaya * ElderCare.ACL.gov * SarahCare * Episode 173 - When Retirement Is Derailed by Longterm Illness * BOOK - Being Mortal by Atul Gawande * Credit Karma * Savvy Ladies
Connect with Allison * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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Retirement is one of the most significant changes that you will manage in your life. It takes not just careful financial planning, but also careful life planning as well.
My guest today, Susan Bradley, is the author of Sudden Money and the founder of the Sudden Money Institute. She is also a Certified Financial Planner (CFP) and a Certified Financial Transitionist (CFT).
You have probably heard of the CFP designation, but many are unfamiliar with CFT. A CFT is someone who is skilled and trained to manage change. Since retirement is one of the biggest changes you’ll go through, Susan has excellent tips to share on how to navigate this change.
This episode of Financial Symmetry will help enhance your today and enrich your tomorrow on your way to discovering your ideal retirement.
Outline of This Episode * [1:14] The top considerations for people retiring in 1-5 years * [7:12] The phases of transitions * [10:54] Common pitfalls in transitions * [15:17] Why she wrote Sudden Money * [20:25] Unique transitions that Susan has seen * [23:48] Today’s progress principle
Resources Mentioned * BOOK - The Upside of Stress by Kelly McGonigal
Connect with Susan Bradley * Sudden Money Institute * BOOK - Sudden Money by Susan Bradley
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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We can all agree that 2022 was a tough year in the markets. It seemed like there was nowhere to hide from the volatility and declining returns. In this episode of Financial Symmetry, we’ll explore why we had such a challenging year and whether you should continue to invest in the stock market.
Listen in to learn what you can from the past year so that you can move forward with confidence. We’re here to help you enhance your today while you enrich your tomorrow.
📬 Tips each month to help you reach your Ideal Retirement. Subscribe to the Financial Symmetry newsletter and receive a free Market Volatility Playbook.
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The Secure Act 2.0 was recently passed bringing in hundreds of new retirement and investment account changes.
In this episode, we detailing some of the most important changes that could impact you.
We’ll break down these changes to explore planning opportunities that could affect your retirement planning strategies.
📬 Tips each month to help you reach your Ideal Retirement. Subscribe to the Financial Symmetry newsletter and receive a free Mega-backdoor Roth guide.
📰 See the full show notes here
🎥 See latest video of podcast recap here
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The beginning of a new year motivates many of us to make lists of things in our lives we may want to change. At the top of those lists typically are financially related items.
So today, we’re going to share our list of items we’ve seen that can have lasting impact on your financial journey. We're going to share an actionable plan with 12 tips to double check your financial vitals that could make a major difference for you and your family in the years to come.
📬 Tips each month to help you reach your Ideal Retirement. Subscribe to the Financial Symmetry newsletter and receive a free Mega-backdoor Roth guide.
📰 See the full show notes here
🎥 See latest video of podcast recap here
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As we come to the end of 2022, Allison and I reflect on some of our favorite reads and podcasts that we have highlighted in our monthly newsletter. Listen in to hear the insights we gleaned from some of the top minds in finance over the past year.
If you’d like to check out what we’ve been reading or listening to on a more regular basis, sign up for our monthly newsletter to get the information delivered straight to your inbox.
Outline of This Episode * Questions to ask yourself before doing Roth conversions [0:57] * Focus on what you can control [4:12] * Balancing purpose and meaning in life [8:44] * Good behaviors are often simple yet not easy [10:55] * How to think about investing during a recession [17:23]
Resources & People Mentioned * BOOK - Social Security Strategies by William Reichenstein * BOOK - Income Strategies by William Reichenstein * Episode 101 - Solving the Social Security Tax Bubble Mystery * Morning Star Podcast - William Reichenstein: Avoiding Tax Headaches in Retirement * Article - So What’s Your Plan for the Bear Market? * Morning Star Podcast - Jordan Grumet: A Hospice Doctor Shares Lessons About Work, Money, and Life * Article - The Long-Term is Not Where Life is Lived * Article - Save Like a Pessimist, Invest Like an Optimist * Article - How to Think About Investing During a Recession * Article - Expectations and Reality
Connect With Chad and Allison * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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How often do you go back and question your retirement and investment decisions? When thinking through your personal financial decisions, it is common to be swayed by emotions rather than rational thoughts. However, your emotions could derail your wealth-building journey.
Today, Cameron Hendricks and I explore five of the most common behavioral financial biases and ways to combat them. If you are ready to get serious about making better financial decisions to build wealth, you won’t want to miss this episode.
Outline of This Episode * [1:21] Overconfidence * [6:27] The familiarity bias * [11:25] Hindsight bias * [16:14] Naive diversification * [21:15] Confirmation bias
Resources & People Mentioned * BOOK - Thinking Fast and Slow by Daniel Kahneman
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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What if one of these ten tax tools could be the tax opportunity that you’ve been missing? If you are looking to increase your wealth over your lifetime you’ll want to ensure that you have the best tax planning strategies in place for long-term success.
Paying more taxes now to lower your lifetime tax rate may seem unconventional, but if you are serious about building wealth, this could be the kind of strategy to use. Listen in to hear our top ten tax planning strategies with our resident tax expert, Will Holt.
As life changes, your opportunities for tax saving change which is why it is important to stay on top of these changes. Make sure to check out all of our episodes to hear details on many of these tax-saving strategies and more. Subscribe now to never miss an episode.
Outline of This Episode * [2:12] Bunching multiple years of charitable giving together can be tax efficient * [5:38] How to use highly appreciated stock as a gifting tool * [6:32] Using qualified charitable distributions * [10:22] Long-term financial planning is critical to long-term tax success * [13:19] How to take advantage of tax loss harvesting * [18:53] Use your retirement accounts
Resources & People Mentioned * Article - Qualified Charitable Distributions – A Retiree’s Secret Weapon to Slash Taxes * Episode 59 - Tax Solutions for Charitable Giving * Episode 104 - How an IRMAA Appeal Can Save You Thousands of Dollars in Medicare Premiums * Episode 174 - Should You Use a Non-Qualified Deferred-Compensation Plan for Your Retirement Savings? * Episode 140 - Choosing the Right Investment Vehicles to Save for Retirement * Article - Tax Loss Harvesting: A Silver Lining in Bear Markets * Episode 144 - Your Retirement Secret Weapon: The Mega Backdoor Roth
Connect With Chad and Will * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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So many conversations today are tied to the news. Hard to not find someone talking about the troubled economy, inflation, and the tumbling stock market.
How should you change your investments in light of all these issues? You may be wondering if you are invested too aggressively, or you might even be considering pulling out of the market and waiting out the storm.
Before you rush in to change your investment tactics, listen to this episode to compare our 10 investing principles to your investing blueprint.
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None of us know how long we will live, so it is important to prepare for the inevitable. Unfortunately, all that we have earned in this life won’t transfer into the next, so it is important that we have our wishes laid out appropriately.
🎥Watch the video here
An estate plan is a critical component of the retirement planning journey.
Estate attorney, Adam Tarsitano joins the Financial Symmetry podcast again today to discuss spooky estate planning tales from the crypt that he has seen in his experience.
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📰 DOWNLOAD the ESTATE PLANNING CHECKLIST
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Have scary markets made you second guess your retirement plan?
For those of you who are near, or already in retirement, you may feel like this year is a part of some retirement horror story.
🎥Watch the video here: https://youtu.be/bPmWBKTM-yg
Which reminded us of a common retirement tale from one of Halloween’s favorite fictitious characters, Michael Myers.
After 40+ years of scaring audiences, the Halloween movie franchise is coming to an end. Now that Michael has reached 65, we thought it fitting to envision that everyone’s favorite murderer is finally done chasing victims and is ready to settle down into retirement.
Has he prepared well enough or did he chase returns the way he chased his victims? Listen in to hear the retirement horror story of Micheal Myers.
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Have you ever been offered a non-qualified deferred compensation plan as part of your benefits package?
In this episode, you’ll learn who non-qualified deferred compensation plans were created for, what they are, the pros and cons, and their potential for helping you reduce your lifetime tax bill.
Find out if this additional savings tool could be a difference maker for your retirement withdrawal strategy.
📬 Tips each month to help you reach your Ideal Retirement. Subscribe to the Financial Symmetry newsletter!
📰 DOWNLOAD the free EBOOK Your Game Plan for Market Volatility ebook
🎥 See latest video of podcast recap here
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We all have visions of our ideal retirement, and none of them include a terminal illness. However, sometimes life has other plans.
Today, we discuss the top concerns that are often overlooked for those facing a terminal diagnosis.
This is a difficult, yet important, subject to address. Investment strategies, tax strategies, and estate planning may not be at the forefront of your mind during this challenging time period, however, doing the legwork now will set your loved ones up for success after your passing.
You won’t want to miss this episode if you or a loved one has recently experienced a terminal diagnosis.
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You’ve probably heard of a few retirement rules of thumb that help you know when to retire. Or do they?
Today you’ll learn why you should set these guidelines out to pasture. Cameron Hendricks and I discuss what these rules are, where they came from, why they aren’t the best prescriptions for success in retirement, and what you should do instead of relying on these common retirement norms. Press play to hear why it's time to lay these retirement rules of thumb to rest.
Check out our expanded pre-retirement checklist Our expanded pre-retirement checklist is packed with common questions asked by our clients. Our new guide answers 4 questions you should ask about Social Security, includes common tax planning tools used by retirees, and examines how your investing may change in retirement. Download this newly revised and expanded checklist to improve your retirement.
Outline of This Episode * [1:34] How the first rule of thumb came to be * [7:21] Debt in retirement * [12:38] The 4% rule * [18:10] When you should retire * [23:06] Download our newly revised pre-retirement checklist
Resources & People Mentioned * Download the Retire on Purpose Guide. * Episode 89 - How Sequence of Returns Risk Could Impact You
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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What if you could take action now so that you have significantly more tax-free savings to utilize in retirement? On this episode of Financial Symmetry, we’ll take a look at an often misunderstood tax planning opportunity.
The Roth conversion is a tool that can benefit you throughout different stages of your retirement saving journey. Today you’ll learn how to take advantage of Roth conversions during various periods of life. Listen in to learn the opportunities and pitfalls of Roth conversions.
Outline of This Episode * [2:38] Benefits of Roth IRAs * [4:09] How to take advantage of Roth IRAs in your teens and 20s * [8:38] Life is hectic in your 30s and 40s * [14:27] In your 50s and 60s retirement is on the horizon * [19:10] Opportunities in your 70s, 80s, and beyond * [28:30] Today’s progress principle
Resources & People Mentioned * Episode 129 - Building Wealth by the Decades * High Earners Can Still Get into a Roth IRA * Ed Slott’s newsletter * Executing a Roth Conversion * Solving the Social Security Tax Bubble Mystery * Should I Make a Roth Conversion?
Connect With Chad and Allison * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Have you ever wondered how your retirement preparations compare with others? This is a common question that we hear as financial advisors. On this episode of Financial Symmetry, we’ll take a look at data from a recent study about the 4 types of retirement journeys that people take. You’ll also hear about the risks and opportunities that stem from these 4 retirement paths.
People’s circumstances, attitudes, and ambitions can greatly affect their retirement experience. So, if you are on the cusp of retirement you may be wondering what type of retirement you will have. You can think of retirement as a Choose Your Own Adventure book. Each path has its own opportunities and lessons to learn. Which retirement adventure will you choose?
Outline of This Episode * [2:01] Retirement is like a Choose Your Own Adventure book * [3:13] The regretful strugglers * [7:34] Challenged yet hopeful * [11:34] Relaxed traditionalists * [16:19] The purposeful pathfinders * [21:41] Choose your own progress principle
Resources & People Mentioned * Episode 160 - Retirement Trends You Should Know About * Episode 105 - Retirement Regrets * Episode 104 - An IRMAA Appeal Can Save You Thousands in Medicare Premiums * YouTube video - How to Execute a Roth Conversion * Schitt’s Creek * Seinfeld * The Intern * BOOK - 30 Lessons for Living by Karl Pillemer
Connect With Chad and Allison * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Which retirement stage are you in? Spoiler alert: the stages begin before you are retired. You'll also be surprised by some of the stats we uncover as we dissect findings in the latest Age Wave study on retirement.
We've had the pleasure of working with hundreds of families as they have planned and transitioned into retirement. Let’s dive in to this episode to explore how you can maximize these 4 phases of retirement through financial planning.
Outline of This Episode * [1:44] The anticipation stage * [7:20] Liberation/disorientation stage * [13:45] The reinvention stage * [17:44] The reflection and resolution stage * [25:08] Today’s progress principle
Resources & People Mentioned * Longevity and the New Journey of Retirement Study * Episode 36 - Money Can Buy Happiness * Episode 165 - Why You Need a Professionally Prepared Estate Plan
Connect With Us * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Follow Our Podcast * Apple Podcasts * Google Podcasts * Spotify
How do you deal with a major financial transitions?
Video recap: https://youtu.be/2tWrduVAS14
When this happens there can be many choices that you need to make. Without the right decision-making framework, navigating these choices can lead to analysis paralysis.
Allison Berger joins me today to share some of what she has learned while studying for the CFT designation (Certified Financial Transitionist). The coursework for this professional title combines financial planning with cutting-edge research in neurology, sociology, and psychology. With her newfound knowledge, Allison will help us learn how to navigate the technical and personal side of major life decisions.
Listen in to learn how to build a framework that can help you navigate major financial decisions.
Outline of This Episode * [0:44] What is the CFT designation? * [2:32] The two sides of money * [8:23] The 4 stages of money * [17:50] Questions to ask during transitions * [19:29] The progress principle
Resources & People Mentioned * The Sudden Money Institute * BOOK - Sudden Money by Susan Bradley * BOOK - Atomic Habits by James Clear * Check out our FREE resources!
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
In a bear market, it can be easy to panic and forget that investor behavior drives results more than choosing the right investments. People tend to be their own worst enemy during these trying times. That’s why it is important to learn from those that have gone before you.
Check out this episode to discover the 4 typical investors that we encounter during market declines. As you listen consider who you have been like in the past. Which one are you feeling like now? Which one do you want to be in the future?
Outline of This Episode * [2:56] Nervous Ned * [7:02] Told-you-so Tabatha * [10:44] Defiant Dan * [13:07] Anchoring Andy * [15:06] Steady Sandy * [18:10] Progress principles
Resources & People Mentioned * Morgan Housel * The 10 Most Dangerous Words In Investing
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Most of us believe we’ll always have more time with our spouse, but when that time is cut short, we’re often left with too many questions and not enough answers.
Video recap: https://youtu.be/2jFmLDB3Xks
On today’s show, we tackle the emotionally challenging subject of losing a spouse.
Between planning a funeral, notifying people, and taking calls, it’s hard to find time to grieve, much less think about the financial consequences and tax changes you have to deal with in the coming weeks. Part of our responsibility during this difficult time is to walk you through the steps of navigating the administrative part of handling a loved one’s resources.
Listen to this episode to learn about the tax changes to consider when dealing with the death of a spouse.
Read more in the show notes here: https://www.financialsymmetry.com/tax-changes-to-consider-after-the-death-of-a-spouse-ep-166/
Do you have an estate plan?
Is it up to date?
Was it prepared by an estate planning professional?
Video link: https://youtu.be/c7XO462BOcg
If you answered "no" to any of these questions, this episode is for you.
On the show this week, we welcome Adam Tarsitano, an estate planning attorney in Raleigh, NC, to discuss why it is so important to have a professionally prepared estate plan in place.
Listen in to hear the difference between a professional estate plan and a DIY estate plan and what could happen to your assets if the state decides what to do with them.
Outline of This Episode * [1:30] The goal of an estate plan is an orderly transfer of assets * [4:26] Why it is important to set up a trust for minor children * [13:57] Make sure to use full names * [16:30] Make sure your goals are the same every few years * [19:27] What is the default? * [23:20] Progress principle
Resources & People Mentioned * Tarsitano Law
Connect With Cameron * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Stocks are now in a bear market. Rising interest rates mean bonds are having a horrible year. Inflation reached a 40-year high. Headlines like these makes it tough to have confidence in your investment strategy.
Youtube video: https://youtu.be/dNb2jmLW_OU
This is why today, we are reviewing how to create a retirement plan that provides peace of mind through an investment roller coaster. If you are worried about the future of your money, our goal this week is to provide you a game plan for volatile markets.
Press play to listen in or check out the video with the slideshow on our YouTube channel.
Outline of This Episode * [2:42] The current economic situation * [6:25] What history can teach us * [13:20] Is this time different? * [14:50] What should you do? * [19:05] The media can cause you to think you can time the market * [22:30] Tax-loss harvesting can help you save on taxes * [24:22] Today’s progress principle
Resources & People Mentioned * Episode 105 - Retirement Regrets * Financial Symmetry YouTube channel
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
If you recently filed your tax return you may have noticed some unexpected surprises.
Video recap: https://youtu.be/G9q8k5fRNdQ
Since tax planning and preparation is an important part of what we do at Financial Symmetry, we wanted to make you all aware of the top 10 tax surprises that we see in our office. Listen in to hear if you are familiar with any of these tax prep surprises.
Outline of This Episode * [2:58] Inheritances * [6:55] Credit card reward points * [7:56] Advanced child tax credit * [10:30] Cryptocurrencies and NFTs * [13:20] 1099K through Venmo or other cash apps * [14:58] Underwithholding on W4s * [16:39] It got lost in the mail * [18:38] Double taxation on backdoor Roth * [22:18] What to do if you receive a K1
Resources & People Mentioned * Episode 95 - The Dreaded IRS Letter: Dealing with a CP2000
Connect With Chad and Allison * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Deciding to retire is just the beginning of your retirement decision-making. From tax planning to Social Security decisions, finding the best strategies for you requires regular analysis.
Video recap: https://youtu.be/TleOZ8CwYXw
Today’s question comes from a client who recently read an article from Rethinking 65 titled Why Trying to Quantify Roth Conversions Is Futile. After reading the article the client wanted to know if they should take advantage of Roth conversions. As we explore this question today, you’ll learn how you can decide whether Roth conversions would be a good fit for your retirement situation.
Outline of This Episode * Cameron’s thoughts on the article [1:42] * When to take the income [3:48] * Look at other areas of your life when considering a Roth conversion [7:48] * Longevity risks that come with retirement [13:38] * How taking Roth conversions could affect Social Security [16:58] * Today’s progress principle [22:20]
Resources & People Mentioned * Rethinking 65 article - Why Trying to Quantify Roth Conversions Is Futile * Episode 140 - Choosing the Right Investment Vehicles to Save for Retirement * Episode 101 - Solving the Social Security Tax Bubble Mystery * Episode 104 - How an IRMAA Appeal Can Save You Thousands of Dollars in Medicare Premiums
Connect With Chad and Cameron * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Many people that listen to retirement podcasts and read financial articles are fantastic savers. If that sounds like you, congratulations!
Video recap: https://youtu.be/pUvfv1815fw
You have done the hard work to accumulate plenty of assets and be on track to reach your financial retirement goals.
However, after a lifetime of accumulation, you may discover that you have a hard time letting go of your assets. I recently came across an article in Barron’s magazine called Retirees Aren’t Spending Enough of Their Nest Eggs. Here's Why. On this episode of Financial Symmetry, Allison Berger and I will discuss the reasons that some retirees are reluctant to spend their savings and explore strategies that you can use to ensure that you have a successful transition into retirement.
Outline of This Episode * [1:33] Retirees aren’t spending enough of their nest eggs and here’s why * [3:30] Why is there a reluctance to spend in retirement? * [6:53] Tactics to spend * [10:20] Create a retirement paycheck * [12:26] Delay taking Social Security * [14:48] Understand the tax tools available to you * [19:31] Estate planning is not only about documents * [22:05] Today’s progress principle
Resources & People Mentioned * Retirees Aren’t Spending Enough of Their Nest Eggs. Here's Why * The Journal of Financial Planning
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Financial planning is a powerful tool that can help you not only anticipate risks and opportunities but also help you envision your future to ensure that you can retire the way you want to retire.
Video recap: https://youtu.be/hKJRvl-_RlM
As Howard Marks says, “You can’t predict but you can prepare.”
As you prepare for retirement it is helpful to stay up to date with the latest retirement trends. This is why we're excited to share our takeaways from the JP Morgan Guide to Retirement with you. You may be curious about how you are doing compared to others in your demographic and guides like this one can help you more deeply understand where you stand in your retirement planning journey.
Outline of This Episode * [2:10] Increased longevity is changing retirement * [5:33] How will you spend your 3rd act? * [9:30] Time is a limited resource * [13:50] How are retirees spending their money * [20:21] The benefits of diversified sources of savings
Resources & People Mentioned * JP Morgan Guide to Retirement * Financial Symmetry Pre-Retirement Checklist FREE Download - https://www.financialsymmetry.com/pre-retirement-checklist/
In honor of International Women’s Day on March 8, we're discussing retirement considerations for women that can help them #BreakTheBias surrounding women and money. Video recap: https://youtu.be/4FjSIJw8a6A
Listen in to discover how you can accelerate women’s equality by overcoming or breaking through these biases.
Bias #1 - Women are afraid of investing This first bias is simply untrue. Actually, women are more likely to take calculated risks than men. Women are also more likely to hold an appropriate amount of investments when compared with their cash savings.
Men and women are equally fearful at the beginning of their investing journeys. However, since women are more cautious about things that they are unfamiliar with they often become more educated about investing so that they feel more comfortable.
In the long term, women’s investments often outperform those of men. This could be due to women having more intentionality, self-control, and a higher savings rate than men. Since women are often playing catch up with their investing, they are usually excited to get started. Investment and retirement planning is especially important for women since there are so many preconceived notions that surround women and money.
Bias #2 - Overcoming compensation bias On average, women make about $0.84 to a man’s dollar. This is often due to the way compensation is structured. Women often ask for less, negotiate less, or don’t negotiate at all. This means that women have less to contribute to their retirement savings.
Knowledge is the power to overcome this bias. To improve your salary it is important to understand the average salaries for your area of the country and, specifically, for your field. Use websites like Glassdoor or Salary.com to help you research. Don’t be ashamed to discuss this topic with friends, family, and colleagues to learn more.
Once you’ve done your research, consider your next salary negotiation. Set a range that works well for you and shoot for the top of that range. Remember that you are selling yourself, so consider the value that you have added to your role. Come up with a list of your accomplishments. Listen in to hear all the tips that this bright group of women brings to the table. With a bit of preparation, you may be pleasantly surprised by your next salary negotiation.
Bias #3 - Women are big spenders We’ve all heard this myth perpetuated; however, spending doesn’t have a gender. Either partner in a relationship can be the big spender, but since women are often the ones buying for the family, it can seem like they spend more than men.
Budgets are an important part of the financial health of any relationship so that both partners understand how much they can safely spend. Typically, one partner is more of a saver and the other is more of a spender, but the ideal is to strike a balance between the two.
Since women have been shut out of the financial conversation for so long, they often don’t know where to begin the conversation. Here at Financial Symmetry, we encourage both partners to come to the table, even if it takes an extra conversation to understand and address all of the issues or concerns.
As you approach International Women’s Day, consider whether any of these financial biases have come up in your life. You can research more biases surrounding women by using the hashtag #BreakTheBias.
Outline of This Episode * [1:39] Are women really afraid of investing? * [5:15] Addressing compensation bias * [9:18] Women are big spenders * [14:56] The progress principles
Resources & People Mentioned * Glassdoor * Salary.com * #BreakTheBias
Connect with Allison, Grace, Haley, and Darian * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
From data breaches to text messages, emails, and phone calls, scammers are always looking for new ways to commit fraud.
Video recap: https://youtu.be/_PwxMMqnjNk
Fraud can devastate retirement plans, so it is important to stay one step ahead of scammers and keep your guard up to protect yourself and your retirement.
On this episode, we discuss types of scams to be on the lookout for and how you can protect yourself from the conmen that are constantly devising new ways to ruin people’s lives.
Outline of This Episode * [2:12] Elder fraud is an egregious form of fraud * [6:47] Victim shaming can make things worse * [9:43] Be cautious about new romantic relationships * [10:58] Ways that you can protect yourself from scams * [18:38] Is a credit freeze a good idea if you have been a victim of fraud? * [19:56] The progress principles
Resources & People Mentioned * Humble Dollar article – Be Suspicious * The Tinder Swindler * Reply All podcast – Episode #102 Long Distance * Common Scam Frauds – www.usa.gov * Credit Karma * Report fraud to the FTC * Dr. Phil episode – International Timeshare scam bankrupts Mom * Be on the Alert for Text Message Scams – Financial Symmetry * Fighting Elderly Fraud – Financial Symmetry
Connect With Allison and Will * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Do you have concentrated stocks in your portfolio?
Video recap: https://youtu.be/g5oDev7Ns84
You may have inherited stocks from a loved one or maybe you receive stock options as part of your pay structure or a compensation package. Whatever the reason you have concentrated stocks, if you own more than you think you should of one company, it is important to understand what you could do with it. You may be surprised to hear all of the options that you have available, so listen in to hear what your choices are.
What is a concentrated stock? You may be wondering if any of the stocks that you own would be considered concentrated stocks. Deciding whether you own any is easy. You don’t need to look at the percentage of the stock in your portfolio. It doesn’t matter if that stock is 5%, 10%, or even 50% of your portfolio. What matters is what would happen if that stock went to zero. If that would affect your financial life then you do own a concentrated stock.
You may argue that the richest people in the world gained their wealth through concentrated stocks, but you don’t hear about all those that have lost their wealth from putting all their eggs in one basket.
Individual stocks are volatile. Over a 40 year time period, 40% of individual stocks experienced negative absolute returns. The reason we choose to have a balanced portfolio is to balance the winners with the losers.
Why do we hold onto concentrated stocks? There are different reasons that people choose to hold on to stocks for longer than they should. If the stock is from their employer, they may have a bit of bias thinking that they know their company and it will outperform the rest. Some people got into a position early and rode the wave. Others feel an emotional attachment to the stock and are hesitant to let it go.
Whatever the reason you may be hanging on, it is important to analyze your holdings to see if they fit into your overall financial plan. If not, it is time to find a strategy to divest from your position.
Strategies to mitigate the risks of owning concentrated stocks Coming up with a strategy that fits into your overall financial plan requires some thought. The easiest thing to do when you aren’t sure of the right choice is to do nothing, but that, of course, is the worst thing you can do.
There are 4 options available to you when you own concentrated stocks: sell, hedge, diversify, or transfer the wealth.
- If you need the money, then you may want to sell all or a portion of your stocks. Listen in to hear all the options available to you if you choose to sell your position.
- Hedging will limit the downside, but it can be very expensive.
- An exchange fund can help to diversify your portfolio which will help you lessen the risk.
- You can gift family and friends up to $16,000 per year before you have to report it to the IRS.
- You may also want to consider setting up a donor-advised fund if you are charitably inclined.
Whatever you choose to do, make sure it fits into your overall financial strategy This episode has some advanced strategies to consider, so if you are wondering what you should do with your concentrated stocks you may want to listen twice or take notes as you listen so that you can discover what to do with your concentrated positions and how it could fit into your overall financial plan.
If you still think you need help coming up with a strategy, reach out to us so that we can help you come up with a financial plan that is right for you.
Outline of This Episode * [1:58] What is concentrated stock? * [5:11] Why do we hold onto concentrated stocks? * [6:47] Strategies to mitigate your risks * [15:43] What you can do with your stock if you are charitably inclined
Resources & People Mentioned * Episode 59 - Tax Solutions for Charitable Giving
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Tis the season to prepare your taxes!
Video recap: https://youtu.be/mWYWaKeP6-o
Whether you do your own taxes or you are gathering information for your tax preparer, you’ll want to make sure that you don’t miss a thing. Listen to this episode to ensure that you think about everything you need to do to prepare this year’s tax documents.
Don’t miss the obvious As you start your tax preparation journey by gathering documents and ensuring that you have everything in order, you may end up forgetting the obvious. Did you move in 2021? You’ll need to report the sale of your prior home if that was the case.
Also, if you use tax preparation software, be careful with the autofill feature. If you have used it before, your tax software will automatically fill in the information that you used last year. It is important to type in the correct address so that you don’t miss any communication with the IRS.
Gather all the pertinent information If you changed jobs in 2021 you may have multiple W2s. Make sure that you have them all together before you start your tax preparations. You’ll also want to look out for the forms if you made any 401K or Roth rollovers.
For the 2021 tax season, you’ll need to look out for the usual documents like W2s, 1099s, 1098s, or K1s, but you’ll also need to be watching out for the letter from the IRS if you received an advanced child tax credit. If you did receive an advance on your child tax credit, you may or may not receive any more or you may have to pay some of it back depending on your income in 2021.
Once you have your list of docs how do you get ready? Once you have all of your documents ready, then it is time to start thinking outside the box. Do you have your receipts or transaction history for charitable donations? What about real estate and property tax forms? Do you have a record of how much you spent on child or dependent care? Make sure to have a record of any crypto transactions and business and rental expenses.
Having this information together will decrease the legwork when the time comes to file your taxes.
Kickstart better record keeping Not all financial advisors focus on tax preparation, but at Financial Symmetry, we see tax season as an opportunity to generate ideas to improve your financial situation. Whether it is through improving your tax situation or taking advantage of missed opportunities, tax preparation is something we focus on to enhance your today and enrich your tomorrow.
Our clients have the opportunity to use the document vault in our Client Center portal as a type of digital file cabinet. Keeping documents together like this takes away some of the anxiety surrounding tax season.
Once you get everything you need together, take a step back and reflect. If you haven’t been keeping the best records now is a good time to implement a system to help you stay organized.
Listen in to hear how we can help you prepare for the upcoming tax season and beyond as Financial Symmetry clients. You’ll also hear why it doesn’t always make sense to file early. Learn why sometimes filing for an extension could be a better option.
Outline of This Episode * Did you move in 2021? [2:21] * Did you receive the child tax credit in 2021? [5:52] * Once you have your list how do you get ready? [9:48] * You don't always have to file as soon as you can [13:27]
Resources & People Mentioned * Episode 146 - Financial Milestones that Create Opportunities * Episode 72 - 7 Tax Reform Opportunities and How to Spot Them
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
The biggest financial threat to your wealth is not the market; it is your brain.
Video clip with Money Egg example: https://youtu.be/PJ4Zryp2w8Y
Human behavior surrounding money varies greatly and can be fascinating to study. Allison Berger has been studying financial behavior in more detail over the past year in the Certified Financial Transitionist coursework.
On this episode of Financial Symmetry, we delve deeper into the common money scripts that drive financial behavior. Our conversation is inspired from the book Wired for Wealth by Brad Klontz, Ted Klontz, and Rick Kahler.
When you listen you’ll learn what a money script is and how it can impact your financial wellbeing. You will also learn 5 steps you can take to help you improve your money mindset.
What is a money script? Markets go up and down but one fact holds true: the money scripts you play in your head will determine your financial well-being. The things we do surrounding money are defined by the money scripts we learned in childhood.
Money scripts come from the explicit or implicit messages we received about money as children as we were trying to make sense of the world. Usually, these ideas are partial truths based on our parents' teachings and actions around money. We have internalized these money scripts and unconsciously follow them as adults as the logical response to what we saw as children.
Here are common examples of money scripts: money doesn’t grow on trees, money can’t buy happiness, rich people are shallow, money is the root of all evil.
Money scripts can keep you poor Your money scripts can become roadblocks in your thinking about money, so it is important to think about how they may be affecting your life. At their worst, money scripts can contribute to financial disorders like financial infidelity, compulsive buying, pathological gambling, compulsive hoarding, financial dependence, and financial enabling.
These are examples of money scripts that will keep you poor: your self-worth equals your net worth, it's ok to keep financial secrets from your partner, if you are good your financial needs will be taken care of.
These negative money scripts can be linked with overspending, compulsive shopping, or workaholism. As people edge closer to retirement the more they tend to stick with the money scripts that have led them through life. However, retirees may need to embrace new ideas to be able to reach their financial goals. If you are struggling with your money mindset, try reaching out to an objective third party for help.
Money scripts may keep you poor in spirit Money should be saved, not spent. You can never have enough financial security. Money that I did not earn is not really mine to spend. These are a few examples of money scripts that can cause people to underspend. Scripts like these can lead to hoarding wealth and workaholism.
A financial plan can help you break free from your money scripts. Without a financial plan in place, you don't know how much you can safely spend. A financial plan will ensure that you look at the details and the reality of your spending situation. You want to make the most of your money and your life especially as you transition into retirement.
5 Steps to change your money mindset You can change your mindset surrounding money and the book recommends 5 steps to overcome your limiting financial beliefs.
- Face your fear. Accept that you have beliefs about money that are not currently serving you. Identify your present reality to see how your money scripts have contributed to your financial situation.
- Visit your past. Ask yourself these questions to help you dig a bit deeper into your money scripts to discover where they stem from. What was your first money memory? What is a positive money memory? What money experience was painful to you?
- Understand your present. What is your current financial situation? What is your current reality? Explore your financial situation deeply to understand it fully.
- Envision your future. What does your future hold? What would you want your life to look like if you had 30 days to live? What are your goals?
- Transform your life. Redefine your priorities and your core values. In light of these changes, what are your new financial goals? What lifestyle or behavioral changes are necessary to take action?
These are not quick, easy steps to take. They require a bit of soul searching to get to the heart of your issues with money. However, if you find yourself with a money mindset that is not serving your goals you’ll want to do what you can to solve your problems.
If you think that you may need help changing your money mindset, reach out to us to see if we can help you. Head over to FinancialSymmetry.com and click talk to an advisor.
Outline of This Episode * [3:30] What is a money script * [7:01] How can you move away from your money script * [10:42] The money scripts that keep you poor * [14:22] The money scripts that promote wealth accumulation * [17:15] How to change your money mindset * [22:15] The progress principle
Resources & People Mentioned * BOOK - Wired for Wealth by Brad Klontz
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
At the start of every year, people are more motivated to get off on the right financial foot. This might mean contacting a financial advisor for the first time.
Video recap: https://www.youtube.com/watch?v=hEB2z530-Zc
So we put together a list of 5 questions we hear from those looking to hire a financial advisor.
If you are considering working with a financial advisor this year, you may want to use these questions to help you understand how the financial advising process works so that you can feel comfortable choosing the right advisor for you. Listen in to hear the most frequently asked questions and our answers.
Is your financial advisor a fiduciary? Thankfully, the word fiduciary has gotten more publicity lately, so more people understand what it means. A fiduciary is a financial advisor that puts their clients’ best interests first. It is important to ensure that your advisor is a fiduciary so that you know that they will put your well-being ahead of the myriad conflicts of interests that can arise in this industry.
How often will you review my situation? The first question most clients have is how often we will review their finances. This usually depends on the client’s situation, but we usually review a specific financial area for every client each quarter. The specific areas that we focus on regularly are taxes, estate documents and financial plans, and of course, portfolios.
We also have an automated system that checks each client’s portfolio every day. Our clients feel comfortable with these automated daily inspections. Our Client Center is another way that Financial Symmetry clients can assess their portfolios at their convenience.
When and how is your fee charged? At Financial Symmetry, we are fee-only financial advisors and completely open about what we charge. All of our fee information is available on our website. Our wealth management clients are charged quarterly whereas other clients choose to work on an hourly basis. Make sure you understand the fee structure of any financial advisor that you choose to work with.
How often do we meet? Typically, in-person client meetings are held once a year, but of course, Covid changed everything. Communication can be had through phone calls, emails, or video conferencing. The frequency of meetings depends on the complexity of the situation.
Who is my primary point of contact? Every advising firm has a different setup and who you meet with initially may not end up being your primary source of information that you work with. At Financial Symmetry, you’ll have the opportunity to work with a team of 2 advisors plus one other staff member. Listen in to hear why we work this way.
If you are thinking of hiring a financial advisor, make sure to add these 5 questions to your list of questions.
Outline of This Episode * [1:27] Are you a fiduciary? * [2:38] How often do you review my financial situation? * [5:50] When and how is the fee charged? * [9:10] How often will we meet? * [10:58] Can I contact you if I have questions? * [13:55] Who is my primary point of contact?
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
2021 has been a wild ride! But like with any roller coaster, we've learned that the most important thing to do is to stay in your seat so that you don't get hurt.
Video recap: https://youtu.be/4fuYYZNDALQ
On this episode, we recap our views on the top 10 economic stories from 2021 and the lessons they hold going forward.
- Social Security to increase COLA at highest rate since 1981 Written by: Allison Berger Social Security remains a critical component of retirement income for most senior citizens. To ensure retirees maintain purchasing power through their golden years Social Security benefits are subject to an annual Cost of Living Adjustment (COLA) based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Due to rising prices and persistent inflation concerns, the COLA for 2022 will be 5.9%, the highest upward adjustment in decades.
If you are 62 or above and delaying benefits for your higher FRA or age 70 payment, you will also benefit from this adjustment. The Social Security COLA applies to estimated future payouts for anyone who is 62 or older in 2022, even if you have not yet filed for benefits.
While the higher COLA for 2022 is positive news for today’s Social Security recipients, retirees also need to consider how inflation may impact their other retirement income sources. Maintaining an investment portfolio with a healthy allocation to assets likely to outpace inflation over the long term remains critical to sustaining your standard of living.
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Housing Market Written by: Will Holt Along with the rapid increase in energy and food prices, housing costs have contributed to an inflation rate that is at its highest level in more than 30 years. Low interest rates, low inventories and a strong increase in demand are driving home prices to record highs. The Raleigh housing market has been one of the hottest in the country. According to Zillow, the price of a home in Raleigh has gone up by 26% over the last twelve months! Large employers like Apple and Google have announced plans to expand their operations in the Triangle area which will add thousands of high paying jobs and bring even more demand to the local housing market. The last time housing prices were rising like this was in 2007 before the housing bubble popped. However, there are fundamental differences this time – lower interest rates, stricter loan underwriting standards and homebuyers with stronger balance sheets. Nonetheless, it’s likely that home price increases will stabilize, especially if we get a spike in interest rates. This will be a story to watch closely in 2022.
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US Gov’t Debt Written by: Bill Ramsay Almost every year there seems to be substantial concern over the amount of US government debt and 2021 was another one. It is notable that concerns tend to become louder when there is pending legislation or upcoming elections, but the concerns tend to involve some fundamental misunderstandings.
One of the most common arguments is that the US government should operate like a household and not have so much debt. Two of the problems with that argument are:
- Many households do have substantial mortgages which most often is the right thing for those households, because it wouldn’t make sense for everyone to be required to pay cash to purchase a home. So, households often run deficits and cover those deficits with debt.
- The US government is more comparable to all households instead of a single household, and just as it would not make sense to expect all households to pay off all mortgages at one time, it also doesn’t make sense for the US government to pay off all it’s debts. After all, investors and savers want a portion of their savings to be in ultra-safe investments and the US government has never defaulted on its debt. Just like with total mortgage debt, we should also expect the debt to grow as the economy grows.
Another misunderstanding is that high government debt leads to hyperinflation. We can see that the argument is weak since Japan has had much higher government debt than the US for the last 20+ years with extremely low inflation.
But there are cases where high government debt and hyperinflation occurred and looking at the difference in those cases compared to Japan demonstrates the misunderstanding.
In Japan’s case, their debts are denominated in their own currency, the Yen. In the hyperinflation cases, the debt is owed in some other country’s currency. When a nation owes debts in another currency, if their own currency declines, the debt becomes bigger when translated back to their own currency.
This can lead to a spiral where the debt becomes harder to pay, which causes more loss of confidence in the borrower’s currency, which leads to falling currency and this spiral can continue until the borrower’s currency becomes effectively worthless and the foreign currency debt cannot be repaid.
Fortunately, the US government is a very reliable borrower, so all US government debt is denominated in US dollars.
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Supply chain problems Written by: Cameron Hendricks Starting all the way back on the run on toilet paper to the shortages at your local Chick-Fil-A , supply chain scares have existed since the beginning of the pandemic. COVID outbreaks at various distribution centers and manufacturing plants sent ripple effects throughout the supply chain system which are continuously being felt to this day. Auto dealers lots have been empty of new cars for over a year now with the chip shortage, loaded cargo ships sit backed up off the coast of California, and basic items at your local grocery randomly seem out of stock (no individual packaged gold fish snacks is really bugging my two toddlers 😊). Of course with high demand and low inventory, prices have risen as you’ve seen if shopping for a car, or even just the increase in value of your current used car sitting in the driveway. The supply chain system that once seemed so smooth is now unpredictable and impacting every aspect of the lives of consumers.
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Build back better plan Written by: Grayson Blazek Ahead of his inauguration, President Joe Biden proposed legislation that addressed funding for COVID-19 relief, social services, welfare, infrastructure, and the reduction of climate change effects – coined the Build Back Better Plan. The underlying components of this plan were much debated in Congress throughout 2021, with some parts of the plan passing through legislation after extensive negotiations from both sides of the political aisle. In March, Congress passed the American Rescue Plan, a COVID-19 relief package. In November, The Infrastructure Investment and Jobs Act was passed and included funding for broadband access, clean water, electric grid renewal and additional infrastructure maintenance and improvements. The Build Back Better Act, seen as the final component to the Build Back Better Plan, was passed by the House in November and now heads to the Senate to debate. In its current form, the Act includes additional funding for climate change provisions, increased funding for childcare, home care, housing and child tax credits, paid family leave, and extended Affordable Care Act subsidies. Much of this proposal would be paid for via a minimum corporate tax of 15% and increased taxes on the wealthiest taxpayers. As has been the case throughout the year, this Act will likely be much debated and revised in the Senate, and if passed, would then head back to the House for a second vote.
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Inflation Written by: Grace Kvantas Inflation was the subject of many conversations in 2021 as well as one source of financial stress for many households. During the summer, monthly inflation started creeping higher, and many economists believed that the higher inflation would be short-lived. By October, 12-month inflation of 6.2% was at the highest rate since 1990 and higher than the Federal Reserve’s target of 2%. Some top contributors to this higher-than-desired inflation include supply chain issues, post-lockdown demand for goods and services, and increased prices on fuel and used cars. The effects of inflation will vary from household to household, with some feeling it more acutely than others. Inflation is a fact of life; no one can avoid it completely. Thankfully, stock growth has outpaced inflation over time. This is why it’s important to have your long-term savings invested in a well-diversified investing strategy to help your money grow faster than inflation.
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Gamestop Written by: Mike Eklund GameStop is a company that sells video games, consoles, and assorted merchandise. It made headlines earlier this year when the stock price went from ~$20 to ~$483 in less than a month (January 2021). As of December 2, 2021, the stock down ~63% from earlier highs. What happened? Short story is a group of retail traders worked together (Redditt forum) to force professional money managers to buy the stock to cover their short position. This resulted in significant demand which drove the price up to levels no one expected. The summary is markets can be crazy and feel unfair in the short-run. The best way to reach your financial goals is not to avoid the markets, but to act and think long-term. Investment success is driven by patience and discipline, not gambling.
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All-Time Highs Written by: Chad Smith Yes, all-time stock market highs aren’t all that uncommon. In fact, we’re in the 9th year where the S&P 500 has set at least 10 new all-time highs during each of those years. In 2021, we’ve now seen 68 new highs as of November 20th. But, for many investors, all-time high prices can be a cause for concern. They worry if they’ve missed the run up. Or shy away because what goes up, must come down. While that tends to happen every six to seven years in the markets, what’s most important to remember is that all declines up to this point have been temporary. This is where evidence can help. Looking at the S&P 500 94 year history, even if you invested at all-time highs, you’d have enjoyed double-digit annualized returns one, three, and 5 years later. Another great example of how a durable, disciplined, and diversified portfolio can help you fight the temptation to try and time the markets based on headlines. We addressed this idea in a recent podcast and video here.
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Delta Variant Written by: Darian Billingsley As we entered round two of the pandemic, headlines of yet another COVID-19 mutation known as the Delta variant took over our news and media feeds and quickly became a major economic topic of discussion for the year.
First detected in March of 2021 the highly infectious Delta variant became the predominant strain, eventually accounting for over 90% of confirmed cases across the globe this year. The variant's impact stretched across multiple economies causing businesses to scale back staffing capacity, delay workers returning to the office, and experience widespread supply chain disruptions worldwide.
Navigating an unprecedented pandemic remains a factor of concern for economic interruption as we adjust to new headlines daily. We look onward into 2022 for signs of improvement as our world economies adapt to strengthen economic resilience.
- Cryptocurrency Written by: Haley Modlin Bitcoin and Ethereum, the two largest cryptocurrencies, recently set new all-time highs in 2021. Although they’ve since experienced substantial drops in price, there is no argument that cryptocurrencies have continued to increase in popularity among investors, pop culture, institutions, as well as criminals. The first Bitcoin linked ETF made its debut on the NYSE in October and BlackRock, a global asset manager, added Bitcoin futures to two of its funds in January. Mainstream companies such as AMC will begin to accept Bitcoin payments and others like PayPal and Square are allowing users to buy it on their platforms while a number of companies have added it to their balance sheets. Lawmakers around the world and in the US continue to try to tackle laws and guidelines to make cryptocurrency safer for investors and less appealing to cyber criminals which could have varying effects on crypto in the future. One could speculate on the value of cryptocurrency could possibly hold for its investors in the short or long term but as a relatively new and speculative investment, its extreme volatility could take investors on a wild and bumpy ride.
Outline of This Episode * [1:42] The Delta Variant has impacted the world * [3:15] Inflation is well above historical averages * [3:53] Retirees are getting a raise next year through a significant COLA increase * [5:41] Supply chain issues have led to shortages * [7:32] The housing market has exploded * [8:34] The Build Back Better Plan is still being debated * [10:31] US government debt has many worried * [12:43] Cryptocurrency have achieved all-time highs * [14:00] Game Stop lovers forced the stock way up * [16:59] Today’s progress principles
Resources & People Mentioned * Episode 149 - Is Now a Good Time to Invest? * US Debt Clock
Connect with Allison and Darian * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Everyone is talking about inflation. You can’t open a newspaper, look at your phone, or go to a barbecue without hearing about it. With all this talk, it can be easy to worry about your financial future.
Video recap: https://youtu.be/iZoqhqEVR1I
On this episode of Financial Symmetry, we’ll explore the causes of inflation, historical inflation, and what you can do to hedge against this silent enemy. Press play to educate yourself and ease your worries.
Why does inflation occur? Inflation is different from market risk: it doesn’t show up in your bank or investment accounts. Instead, inflation presents itself at the gas station and the grocery store, so you do feel it in your pocketbook. Since it eats away at your buying power, inflation is often referred to as retirement’s silent danger.
If you recall your college economy class, you’ll remember that inflation is caused by supply and demand. When there is a limited supply and a high demand, then prices go up. We see that happening now with auto sales due to the offline chip manufacturers and supply chain issues. During inflation, people worry that prices will continue to rise, so they want to rush out and make their purchases now.
Although it is frustrating to see your purchasing power erode so quickly, it is important to remember that there are worse things that can happen in the economy. Deflation is actually worse for the economy than inflation. Stagflation is a type of inflation that occurs when prices go up but the economy is slow and there is high unemployment. Thankfully, we have the opposite happening now since employers are having a hard time finding workers. Even though it is difficult to watch your purchasing power erode, there could be a worse economy.
A historic perspective The question on everyone’s mind is: will this inflation last? Over the past 10 years, we have had historically low inflation that averaged about 2%. When comparing that average to this past year’s average of 6%, it's easy to understand why people are concerned.
One way to contemplate the future is by looking at the past. In the 70s the US experienced some of the highest prolonged inflation rates that were punctuated by the shock in oil supply. After WWI Germany experienced crippling inflation when it had to repay its debts in foreign currency.
The good news about our current situation is that the supply chain issues will eventually be resolved. The bad news is that higher prices are often the best solution to higher prices. Listen in to see how that works out in the long run.
What should you do to hedge against inflation? The reason we invest in companies is to hedge against inflation. A varied investment portfolio with global stocks is one way to ensure that you retain buying power down the road. In addition to creating a diversified portfolio, you should limit the amount of money that you retain in cash. Try to keep your cash to emergency savings since your purchasing power erodes over time. Another way that you can protect against this silent risk is by investing in TIPS, real estate, commodities, or crypto currency.
Whatever you do to protect your wealth, don’t let the media dictate your financial decisions. Stick to your financial plan. If you don’t have a financial plan, reach out to us to see how we can help you weather all kinds of financial storms.
Outline of This Episode * We have had historically low inflation over the past 10 years [1:52] * What drives inflation [3:46] * Why should people care about inflation? [5:45] * A historic perspective [8:38] * Investment options to hedge against inflation [13:32] * Today’s progress principles [20:18]
Resources & People Mentioned * Episode 139 - Investing for Inflation
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
The end of the year is a great time to start tax planning for next year.
Video example: https://youtu.be/lzghkK2iP3Q
This week we are discussing the strategies you can utilize to enhance your tax situation before year-end.
You’ll learn which tools you can use and how the actions you take in one area of your financial life can flow into other areas.
Are you maximizing your retirement account contributions? When considering your pre-tax retirement account contributions there are a couple of aspects that you should consider. These contributions are a great way to reduce your tax burden, but you also need to examine your cash flow.
Do you maximize your employer match? If not, look at your budget to see how you could take advantage of this free money. You could also take your savings a step further to maximize the pre-tax retirement account contribution cap. In 2021, the yearly max was $19,500, but in 2022 that number rises to $20,500.
If you are maximizing your savings, it is important to review whether you are at risk of over-contributing both this year and next. After analyzing the amount that you want to save, then you can consider which account type is best for you to save in.
Harvesting capital losses or capital gains Another tax opportunity is to harvest capital gains and losses. Harvesting capital losses can offset any capital gains that you have realized over the year. This year it may be difficult to find capital losses; however, this is a concept that you can explore so that you can understand how it impacts your tax return. Harvesting capital losses creates an opportunity to reduce your tax burden.
Itemizing vs taking the standard deduction The standard deduction changed in 2017 to $12,500 for singles and $25,100 for married people filing jointly and thus causing 90% of filers to utilize the standard deduction. There are 4 deduction categories to consider when calculating whether to take the standard deduction or to itemize deductions: state and local income taxes, mortgage interest, charitable contributions, and medical deductions.
Listen in to learn if you should take the standard deduction or whether it would make sense to itemize, you’ll also hear how you could receive a tax benefit of $600 for charitable contributions.
Should you utilize Roth conversions? Roth conversions can be an exciting opportunity to take advantage of current tax rates and have your investments grow tax-free. However, you have to be careful about how you take them. The best way to consider whether to make Roth conversions is to zoom out and look at your overall lifetime tax plan.
If you are in a higher tax bracket than you are projected to be in the future then taking a Roth conversion now doesn’t make much sense. You also need to consider how taking a Roth conversion now could trigger other events, especially if you are 63 or older. Listen in to hear how doing a Roth conversion at age 63 could trigger an additional Medicare premium.
Outline of This Episode * [2:42] Your retirement account contributions * [6:00] Harvesting capital losses or capital gains * [8:47] Review your deductions * [14:23] How to utilize Roth conversions * [18:05] Tax withholding for high earners * [20:58] Utilize catch-up contributions to supersize your savings * [27:50] RMDs are back in 2021 * [29:39] Create a checklist of these opportunities
Resources & People Mentioned * Am I Going to Have to Pay More for Medicare? * How an IRMAA Appeal Can Save You Thousands of Dollars in Medicare Premiums
Connect With Chad and Grayson * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on FacebookSubscribe To This Podcast
Welcome to this bonus episode of Financial Symmetry with Allison Berger and Grace Kvantas. Grace and I bring you this episode as a special preview to the upcoming Women: A Force in Business Conference in Raleigh, North Carolina.
This episode and our presentation are targeted toward women professionals looking to build their retirement nest egg. Our goal is to help women achieve success and financial wealth. So if you are a woman or if you love a woman, listen in to hear how women can achieve more success and improve their financial well-being by harnessing their financial superpowers.
Women are stressed about money A recent study has shown that women are more worried than ever about their finances. ⅔ of women worry about money at least once per week and 40% suffer physically due to their financial stress. This is no surprise when you discover that the top emotion that women feel about money is overwhelm whereas for men it is confidence.
The pandemic has made women’s financial worries worse than ever since they were the hardest hit by layoffs. Once you compound women’s stress with the gender pay gap, a longer life expectancy, and a predominantly male financial industry then you realize that the odds are stacked against us.
Women are actually better investors It is a common misconception that men are better investors than women, however, this isn’t true. Women simply don’t talk about money in the same way that men do. Women are actually more likely to do well in the markets for several reasons.
Women typically spend more time researching investment choices which leads to better selections. Women also tend to buy and hold equities longer than men, this leads to less trading costs and fewer taxes on their investment income. Overall, women are more intentional investors than men.
Harness these 5 investing superpowers You don’t have to carry so much financial worry. One way to ease that worry is by using your inner investing superpowers. Grace and I are here to help you to implement these superpowers so that you have a better investing experience and feel less stress when it comes to finances. If you can implement these superpowers you can come ahead financially and position yourself for a more secure retirement.
- Have a plan. We’ve all heard the saying: “Failing to plan is planning to fail.” This is true with your finances as well. Your financial life will run more smoothly when you have a plan. Having a plan in place helps you identify what your life goals are so that you can create a financial road map for how to achieve them. Your investment strategy will stem from your life goals.
- Know your safety net. Make sure you understand what an appropriate emergency fund for your household is and put it in place. This will help build your confidence so that you can take long-term steps to achieve financial success.
- Take calculated risks. Invest for the long term by building a globally diversified investment portfolio of equities (companies you use every day). This will allow you to build wealth and purchasing power over time.
- Automate your savings plan. Pay yourself first. Women are busy, so creating an automated savings structure will help ease your worries about saving. Make sure that you are contributing at least the minimum amount to get an employer match in your 401K. Another way to automate your savings is to set up monthly transfers from your checking account to a savings account. By automating your savings you will build wealth over time.
- Know when to act and when not to. Successful investing is a lot like riding a roller coaster. The only time you will get hurt is if you get out of your seat. Make sure to stay strapped in through times of market turbulence. Bear markets can be as financially dangerous as a bear, so it is important to stay in your place and not try to flee. Instead, when you encounter a bear market, think like an opportunist, not as a victim. This will ensure that you continue to build your wealth over time.
Listen in to hear what action items you need to take now to improve your financial well-being.
Outline of This Episode * [1:45] Women are more stressed about money than ever * [6:03] Why are women better investors than men? * [7:30] 5 Investing superpowers * [14:13] Progress principles
Resources & People Mentioned * Women: A Force in Business Conference
Connect With Allison and Grace * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast
Apple Podcasts <> Stitcher <> Google Play
Anxiety-inducing headlines, all-time stock market highs and an economy still recovering from a pandemic, have left many people hesitant to invest their cash savings.
Video recap: https://youtu.be/YuytDPFD0wQ
None of us can make uncertainty disappear, but considering potential outcomes and evidence can make a huge difference in the returns you receive over your investing lifetime.
This week we are discussing strategies for how to fight the fear that comes when markets are near all-time highs.
Watching the news can be expensive When reading and watching the news, it can be hard to remember that financial headlines are are designed to pull at your insecurities.
Many of our everyday conversations now include inferences to supply chain issues, potential tax hikes, and inflation. The wall of worry can seem higher when crawling out of a pandemic shutdown and continues to impact investor’s confidence.
So naturally, record market highs have people wondering whether now is a good time to invest. The fear of an impending fall in the markets causes some to hold onto their cash instead of investing. Others don’t know what the right choice is for their money and are crippled by analysis paralysis.
By holding too much in cash, you’ll face the erosion of purchasing power over time due to inflation, but also experience the opportunity cost of stock market gains and the FOMO byproduct.
A financial planning process can help you make decisions You don’t want to get stuck with analysis paralysis. A financial plan is key to understanding your investment strategy and helping you answer the question: should I invest my cash?
Walking through the financial planning process can help you create a disciplined and diversified strategy to provide added confidence in making your financial decisions.
By creating a financial plan, you can dial in your specific goals and time horizon. This helps you determine how much you’ll need in the short-run and how much you could afford to risk for the potential of higher expected returns in stock investments.
What if I invest it now and the bottom falls out? The potential for an immediate drop after investing is always a risk investors wrestle with. And if investing in March 2000 or October 2007, you’d have to wait roughly 6 years each time to see a new all-time high.
Alternatively, there have been at least 10 record highs achieved each year over the past 9 years. So if you waited to invest during that time, because what goes up, must come down, you could still be waiting. Paralyzed by the fear of an impending drop.
One way to combat that fear is to analyze the numbers. Let’s look at historical data.
Of the people who invested at all-time highs since 1926, 81% were better off 1 year later and 77% were better off 5 years later. That still leaves a chance that you will lose money in the short-run, which is why it is important to have a safety net. And to this point, all market declines have been temporary.
Investing is like a roller coaster ride. The only time you could get hurt is if you get out of your seat.
Investing pitfalls to watch out for The average investor is susceptible to several common investing pitfalls.
One of these is recency bias. If a stock has performed well in the past then many assume that it will continue to do well. Rather than make this assumption you’ll need to study its performance over time.
Another pitfall is market timing. Many people get a feeling about the market and they try to time their entrance and exit, but history has shown that most people can not time the market accurately. Time in the markets is better than timing the markets.
Listen to this episode of Financial Symmetry to hear all of the perils that could arise by pressing play now.
Outline of This Episode * [3:08] What is it about headlines that make people feel uncertain * [5:51] A financial planning process can help you make decisions * [8:14] What if I invest now and then the bottom falls out? * [12:50] Pitfalls that average investors fall into * [17:25] Today’s progress principle
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
The decumulation stage of retirement is different from all those years you spent accumulating your retirement savings.
Video Recap: https://youtu.be/UyvHGltT1Z0
This is why you need to have a retirement plan in place to help guide you through this transition. Unfortunately, the same plan won’t work for everyone which is why it is important to understand what type of strategy would work best for you.
On this episode of Financial Symmetry, Allison Berger and I will check out the risks and opportunities to consider as you approach the decumulation stage of your life. Listen in to hear what you need to consider to make the most of your personal retirement plan.
What to consider if you are retiring before age 59.5 If you are planning to retire before the age of 59.5 you first need to make sure that you have all your ducks in a row. Before age 59.5 you won’t be able to access your various retirement accounts without a penalty, so you’ll want to make sure that you have access to money for this time period outside of a traditional retirement account. You could obtain funds from a brokerage account, home equity, rental properties, or an inheritance. Before you retire early, think about which funds you could source without having to take a penalty by dipping into your tax-deferred accounts.
You’ll not only need to know where your money is coming from when retiring early, but you’ll also have to think about health insurance. Obtaining health insurance before you are eligible for Medicare can be quite costly. Many people choose to go with COBRA or the ACA. Make sure you consider the costs of health insurance when creating your retirement plan.
The younger you retire the more susceptible you are to sequence of return risk. Sequence of return risk can lead many people to become conservative with their investments, however, this leads to increased inflation risk. To consider these two types of risk it is important to have a balanced portfolio
Retirement between the ages of 59.5 and 65 If you are planning to wait until full retirement age at 67 or beyond then you may be funding the early years of retirement all on your own without the help of Social Security. Once you reach the age of 59.5 you can access your retirement accounts without penalty. However, it is important to remember that income from your IRAs, 401Ks, and 403Bs will be taxed when you access them.
Sequence of returns is still a factor this early on in retirement so make sure that your portfolio can weather the storms that the market could bring. Listen in to discover what you should be thinking about 2 years before you apply for Medicare.
Retirement considerations after age 65 Once you reach 65 you can enroll in Medicare and will no longer have to worry about paying for costly medical insurance. This is a good time to start thinking about when you will take Social Security and the tax ramifications. If you are unfamiliar with the Social Security tax bubble check out episode 101 to learn more.
During retirement, your annual tax plan should always be taken into consideration with your overall retirement tax plan to ensure that you save as much as you can over the course of your lifetime.
Retirement strategies don’t always go according to plan You’ve probably heard of popular retirement strategies like the 4% rule, the guardrails, the bucket strategy, or a systematic withdrawal approach. These strategies are all great on paper but they can often fall apart when life gets in the way. We like to take a flexible approach to retirement planning that is based on your life and your financial plan. We look at the big picture to think about how you can reduce your lifetime tax rate and create a plan that works with your financial goals.
Examine where you are on your retirement journey. Think about your risks and opportunities when creating your retirement plan. Listen to this episode to hear what you need to think about during the different phases of your retirement.
Outline of This Episode * [2:40] What to consider if you are retiring before age 59.5 * [7:30] Considerations for those between the ages of 59.5 and 65 * [9:49] Retirement strategies don’t always go according to plan * [12:10] Retirement between ages 65 and 72 * [16:39] Retirement in the post-RMD age * [22:28] Progress principles
Resources & People Mentioned * Starting Over in Your 50s * How an IRMAA Appeal Can Save You Thousands of Dollars * Solving the Social Security Tax Bubble Mystery
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
The American Families Plan hasn’t yet become law, but that doesn’t mean that you can’t prepare for the changes that may be coming.
Video recap: https://youtu.be/DFVgJZPwEIc
In this episode we consider the planning opportunities that could arise with the changes in tax legislation. Our goal is to ensure that you have all the tools in your toolbox so that you can minimize your tax burden.
Who will most be affected by the tax law changes? The current tax law comes from the Trump administration and dates back to 2017. Prior to the current tax cuts, the marginal tax rate for those making over $400,000 was 39%. The present marginal tax rate is 35% for married couples who earn $650,000 or more.
The American Families Plan essentially reverts the tax cuts back to the pre-2017 rates. Those most affected by the proposed tax plan are higher-income earners. The current administration sees the tax changes as a way for high-income earners to pay their fair share of taxes rather than burdening those at lower income rates.
How will capital gains taxes change? If the American Families Plan passes and becomes law then the new income tax structure would go into effect in January of 2022 which doesn’t leave much time for tax planning.
In addition to the changes in marginal income tax rates and compressing the income brackets, there are proposed changes to the capital gains tax. The original capital gains tax plan had been to keep the capital gains tax at the income tax rate, but new changes to the legislation have dropped that rate to 25% for those who earn $400,000 or more.
Unlike the income tax plan, the capital gains tax proposal would take effect the day it was written which was in September of 2021. This leaves no time for advanced tax planning, however, Grayson Blazek offers plenty of ideas in this episode on how you can best prepare for any upcoming changes in the tax code.
Are we saying goodbye to the backdoor Roth IRA? The backdoor Roth has been a strategy that high-income earners have been able to utilize for years to continue to fund Roth IRAs. Under the new proposal, the backdoor Roth would disappear. Rather than lamenting the loss of this useful tax tool, a better outlook is to be thankful that you were able to implement it when you could. To ensure that you take full advantage of what could be the last year of the backdoor Roth, make sure to get all of your backdoor Roth contributions in by January 31, 2021.
How will the American Families Plan affect families? The main way that this proposed legislation will affect families is by the extension of the expanded child tax credit. The American Rescue Plan increased the child tax credit up to $3000 per child and the American Families Plan would ensure the continuation of this credit. In addition, American families would continue to receive the benefit monthly as they have in the latter part of 2021.
Make sure to listen to the entire episode to hear the rest of the highlights of the proposed legislation. We want to keep you informed of all the potential effects of the changes in the tax code so that you can make careful decisions in your tax planning. If you have any questions regarding these changes or are looking for an advisor that stays on top of the latest in tax planning legislation, please reach out to us at FinancialSymmetry.com.
Outline of This Episode * [2:40] Who will be most affected by the tax law changes? * [6:15] How will capital gains change? * [10:50] The death of the backdoor Roth IRA and mega backdoor Roth IRA * [12:44] Who would be affected by a surtax on ultra-high income earners? * [15:33] Changes to RMDs * [20:26] Estate tax changes * [22:55] The child tax credit * [25:52] Today’s progress principle
Connect With Allison and Grayson * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
We all have those milestones in life that we enjoy reflecting on or looking forward to. Graduations, weddings, and births of children are a few that stick out.
Video recap: https://youtu.be/llO9d9DIKs4
However, there are financial milestones that are also important to remember. While maybe not as memorable, they can be just as valuable.
The most important times (financially) in a child’s life 1. Birth - As soon as your child is born you can start contributing to their financial future. Once that child has a Social Security number you can open a 529 account in their name. This is a popular way to save for that little bundle of joy’s education. Another account that you can open for your child at birth is a Uniform Trust for Minors account (UTMA). 2. Age 13 - This is the age when your child is no longer eligible for the dependent care tax credit. The dependent care credit covers after-school care and summer camp. 3. Age 18 - Your baby is no longer a child at this point, so that means you must say goodbye to the child tax credit. Also at age 18 (or 21 in some states), a child’s UTMA will automatically be transferred to their name. This is also an opportune time for you and your child to think about creating a healthcare power of attorney. 4. Age 26 - Yes, technically they are not children at this age, but this is the age when children lose eligibility for their parents’ health insurance.
The years before retirement have plenty of financial milestones There is a lot to remember to stay on track in the years leading up to retirement. By this time in life, you are probably beginning to dream about that upcoming milestone. To make sure that you stay on track for retirement, pay attention to these ages.
- Age 50 - You can now contribute $6,500 more per year to your 401K and $1000 more per year to your IRA accounts.
- Age 55 - You can now make HSA catch-up contributions of an extra $1000 per year. You should also note that some 401k plans allow for penalty-free withdrawal at age 55.
- Age 59.5 - This is when you can finally access your retirement accounts without a 10% penalty. You’ll also have the ability to roll over a portion of 401K to your IRA even if you are still working.
- Age 60 - You are now eligible for Social Security survivor benefits.
- Age 62 - You now can qualify for Social Security benefits. But should you? Listen in to hear why this may not be the best idea.
What’s in store for you once you reach retirement age? Congratulations, you’ve made it to retirement age! Let’s find out what milestones are in store for you next.
- Age 65 - You probably won’t miss this one due to the amount of mail that you’ll be getting. You’ll want to review the literature so that you know what kind of Medicare to sign up for. You can also now withdraw HSA funds for non-medical purposes without a penalty.
- Age 66-67 - Full retirement age for Social Security used to be age 65 but now, depending on your birth year, it is between 66 and 67.
- Age 70.5 - This used to be the time of life when you had to take RMDs. Now the only notable aspect of this age is that you can make qualified charitable distributions (QCD). This is a fantastic way to donate money to your favorite charities if you are so inclined.
- Age 72 - The required minimum distribution age has recently increased from 70.5 to 72.
Who is holding you accountable? You may know about many of these milestones, but it is helpful to have a reminder to take action once you reach these ages. One way to ensure that you are making the most of your financial life is to have someone help hold you accountable. A fee-only financial advisor with Financial Symmetry can do exactly that. Give us a call if you would like to ensure that you are doing everything you can to stay on top of your financial life.
Outline of This Episode * [2:19] What to think about when children are born * [5:52] Why age 26 is important * [12:55] You can take Social Security at 62, but should you? * [16:35] The RMD age has changed * [18:13] Today’s progress principle
Resources & People Mentioned * Table Topics Game * Episode 59 - Tax Solutions for Charitable Giving * Episode 46 - What Tax Strategies Am I Missing? * Episode 72 - 7 Tax Reform Strategies and How to Spot Them
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
With Grandparents day around the corner, we're breaking down helpful financial planning strategies for grandparents. Many grandparents have dreams of sharing the fruits of their labor with their families. However, sharing your wealth effectively takes careful planning.
YouTube recap here: https://youtu.be/eGYLeS_8hNw
Listen to this episode to hear the best ways to plan effectively for your kids and grandkids.
Vacationing Confidently Grandparents love spoiling the grandkids. One of the more memorable ways to do this, is by taking care of planning and paying for the whole family to take a bucket list vacation. After working and saving for years, retirement brings an excellent opportunity for grandparents to take everyone on this epic family trip.
Before taking your trip, understanding how much you have to spend and whether it will be a one-time event or an annual tradition. This is where financial planning can provide priceless perspective to help you understand how much you have to spend and at what level.
Share the wealth Another common planning strategy many grandparents begin to consider is direct gifting to their children and grandchildren. In 2021, the gift tax exemption is $15,000 per person, which means $30,000 per couple. This provides a more meaningful way for grandparents to enjoy seeing their children and grandchildren benefit from their hard work vs. waiting to inherit monies after they were to pass.
If you want to do even more to provide for the grandkids’ education you could contribute to their 529 plan or even start one of your own with the grandchild as the beneficiary. Many grandparents choose to pay the fees directly to the school.
Have you thought about ways to contribute to your grandkids' education?
Leave your affairs in order Too many people put off their basic estate planning documents in place. Before planning anything else, make sure that you have a will, power of attorney, and healthcare power of attorney.
Once you have the basics in place then you can think more strategically about specific ways you can plan your estate.
One way to directly leave your wealth to those you love is by naming them as beneficiaries on your accounts. It’s important to remember that named beneficiaries supersede your will, so check your beneficiaries periodically to assure they still align with your wishes. Listen in to hear about trusts, per stirpes, and whether it’s better to give cash or appreciated stocks.
Common misconceptions to avoid There is a common misconception that you can plan for a long-term care event by giving away your assets and waiting 5 years to be eligible for Medicaid. What many people don’t realize is that your household income could disqualify you from Medicaid. To qualify for Medicaid care, your household income must be less than $17,000 per year in NC and most people’s Social Security benefits would be higher than that.
Listen in to hear how important it is to create a plan to put in place and communicate your wishes to your family.
Outline of This Episode * [2:09] Family travel is one way to show your love * [3:39] How to share your wealth with your family * [6:30] Get your affairs in order * [10:35] Common misconceptions to avoid * [14:44] The progress principles
Resources & People Mentioned * StoryWorth
Connect With Chad and Allison * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
The Mega Backdoor Roth IRA could be the secret weapon you have yet to use in your retirement saving strategy. If you consider yourself a super saver, looking for alternative ways to save tax efficiently, this could be a great option.
This strategy is of most interest to those maxing out all other tax-efficient savings accounts. Including standard employee 401k contributions, Roth IRA, 529, and HSA. In this episode, you'll see why we call this the secret weapon for super savers, as we breakdown who the Mega Backdoor Roth is for, why you might be interested in it, and how it compares to other IRAs.
Who should take advantage of the Mega Backdoor Roth IRA? In order to take advantage of the Mega Backdoor Roth IRA, you first have to have access to a 401k that allows after-tax contributions. These are contributions on top of your regular $19k allowable contributions to a 401k in 2019. Hence the "Mega" moniker. So if you are already maxing out your 401K, Roth IRA, 529, and HSA contributions then the Mega Backdoor Roth IRA could be a great extra additional savings opportunity. Many get confused as to why it's called a Mega Backdoor Roth IRA when we are talking about your 401k. Good question. The name derives from where the money will be after you complete the consolidation process.
You're now seeing more larger companies and solo 401ks allow for "in-service" distributions. Meaning, you could withdraw portions of your 401k savings, while still employed. The real benefit with this savings strategy, is when you can save the extra after-tax contributions and then roll them to a Roth IRA in the same year. Meaning, you could get a larger amount in to a tax-free savings account to grow for years to come.
What’s so great about the Mega Backdoor Roth? If done correctly, the Mega Backdoor Roth can allow you to contribute up to 6X what you can contribute to a regular Roth IRA. With a regular Roth IRA, you can contribute only $6,000 per year in 2019. The Mega Backdoor Roth allows you to contribute up to $37,000 extra each year on top of your normal employee 401k contributions.
Many people don’t know this, but the limit for 401K contributions is $56,000 or $62,000 and for those over 50. Many people assume that the limit is only $19,000. But this $19,000 limit is for pretax contributions. You can actually contribute up to $37,000 more after taxes are withheld (depending on your employer match amount). You can ask your employer if they contribute to after-tax contributions. If you aren’t sure then you should contact your HR department. They may not even know about the Mega Backdoor Roth, but if you communicate with them you could get it started in your company.
What is the difference between the Mega Backdoor Roth and the regular backdoor Roth? If your income for a married couple is over $203,000 then you are ineligible to contribute to a typical Roth IRA. Instead, you can implement the Backdoor Roth IRA strategy. But this strategy has multiple steps to assure it's done correctly which we wrote about in a previous post. To be a good candidate for this strategy, you need to first move existing pretax accounts to an existing 401K, if you have one. The next step is to contribute $6000 to a regular non-deductible IRA. After completing this, you can convert the non-deductible IRA to a Roth IRA. The issue with the Backdoor Roth is that you can only contribute $6,000 per year.
The Mega Backdoor Roth allows you to contribute much more and would be a provision of your 401k account. Essentially, it's the amount above your normal employee contributions ($19k in 2019; or $25k if over age 50) plus your employer match contributions. It’s important to consider all of your options to see if the Mega Backdoor Roth is right for your circumstances.
Download the Pre-Retirement Checklist Download the Pre-Retirement Checklist here to assure you are taking the steps you can now, to retire with confidence.
Outline of This Episode * [2:27] Who is the Mega Backdoor Roth for? * [4:31] What is the difference between the Mega Backdoor Roth and the regular backdoor Roth? * [12:33] How do you know if you can take advantage of the Mega Backdoor Roth? * [17:59] What are the risks?
Resources and Links Mentioned In Show * Thecollegeinvestor.com Article - Understanding the Mega-Backdoor Roth IRA * Morningstar.com Article - Heavy Savers, Meet the Mega-Backdoor Roth * Article - High Earners Can Still Get into a Roth IRA * Article - How to Start a Retirement Plan for Your Small Business
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Follow Our Podcast on Your Favorite Podcast Platform * Apple Podcasts * Spotify * Google Podcasts
Stock options can be one of the most lucrative benefits of your job, but they can also be a tax land mine.
Video recap: https://youtu.be/qBovTreFv7E
Our resident tax professional, Will Holt, joins us this week to help you build a framework to consider your company’s stock options.
You’ll learn 3 key strategies you can use to make better decisions for managing your stock option holdings. Including:
- Managing the risks and benefits around taxation for 2 types of stock options
- Handling the leverage and concentration risk of stock options
- Deciding what to do with the proceeds once choosing to exercise and sell
If stock options are one of the perks of your job, you don’t want to get bit by the tax dog, so don’t miss this episode.
What are the risks and benefits of the two primary stock options? It is important to understand the type of stock options that you have. There are two primary types of company stock options: incentive and non-qualified. The difference between the two is how they are taxed.
Non-qualified stock options have no real risks until they are exercised since they aren’t worth anything until they are above the strike price, or “in the money.” You can exercise your right to purchase these stock options at the strike price, but they first have to vest over a period of time, typically 4 years. If choosing to exercise and not immediately sell, and the stock price is above the strike price, your shares are in the money. If choosing to sell while in the money, any gain would be taxed at ordinary income rates and come through your paystub in most cases.
Incentive stock options alternatively, offer the opportunity for preferential tax treatment compared to non-qualified stock options. To get preferential long-term capital gains tax treatment, you must be 2 years from the grant date and 1 year after you've exercised. This is known as a qualifying disposition.
The big risk if choosing this strategy is the potential for phantom income to be taxed at AMT rates. Before you reach the 12 month timestamp, the stock price could fall dramatically. If this occurs after the end of the calendar year when the exercise occurred, you would still be responsible for alternative minimum tax due on the 'bargain element," the difference between the strike price and fair market value of the stock when exercised. It's called phantom income, because the income effectively disappears, but the tax remains on gains that are no longer there due to a sinking stock price.
Working with a professional can help you make better decisions Understanding strategies to unwind your stock options can be complex, which is why it's helpful to work with a professional. A financial professional can help guide you through the challenging decisions that stock options present. Stock options can be a very valuable part of your net worth and you don’t want to make the wrong moves. Taxes and holding periods aren’t the only challenges that you face by owning stock options; the concentration that you might have can pose further risk.
Are your benefits putting you at risk? The advantage of having stock options in your benefits package could end up being a sizable risk if not managed properly. You may end up holding a supersized concentration of one stock. Having your net worth tied up in one stock can lead to more risk vs. a diversified portfolio. But many people delay selling because of the potential negative tax impact of selling.
There are ways you can manage these risks. One way is to set target prices to time your exit. You won’t always make the right call, but if you set up a framework to help manage your decisions it can help take the emotions out of the sale. You’ll also want to consider the impact of your stock options on other areas of your financial plan.
What do you do with the proceeds when you have been forced to sell There may be times when you are forced to sell before you are ready. This could be a large, infrequent income event that could change your tax situation. One of the best ways to see this impact is running a tax projection for the year.
You may be able to take advantage of tax-loss harvesting to offset some of your tax burden. If you are charitably minded, then another way to reduce your tax liability is to set up a donor-advised fund.
In the end, remember that stock options are a reward for your hard work. You don’t want to ignore them or get caught up in analysis paralysis. You can avoid this by building your decision-making framework or working with a financial professional that can help walk you through your choices.
Outline of This Episode * [2:14] The difference between incentive and non-qualified stock options * [7:40] Your concentration can be another risk * [11:35] What do you do with the proceeds when you have been forced to sell * [16:36] How are you handling your strategies?
Resources & People Mentioned * Tech Worker Stock Options Turn Into Tax Nightmares * Episode 97 - How to Make Decisions About Your Equity Compensation Plans * Episode 59 - Tax Solutions for Charitable Giving
Connect With Chad and Will * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Follow Our Podcast * Apple Podcasts * Stitcher * Google Podcasts
Compared to 2020, the summer of 2021 has been exciting for most people. Many parts of the country are getting back to normal and there is plenty of fun to be had.
Video recap: https://youtu.be/aCuc4zsi3SE
But with that fun can come extra spending. Now that we are halfway through the year, this is a fantastic time to check in with your finances.
This week, we let Chad and Mike have time off to enjoy their summer fun, so Grayson Blazek joins me to discuss 10 financial tasks for you to complete before summer comes to an end. Don’t get caught unprepared, listen to this episode to hear which key financial areas you should focus your attention on before the end of the year.
10 Key financial areas to evaluate mid-year 1. How is your spending changing now that we are (somewhat) post-Covid? Now that life is getting back to normal, how have your spending habits changed? It’s important to be aware of where your money is going. Start tracking what you have been spending on eating out, entertainment, and travel. Becoming aware of these expenditures will help you create a post-Covid spending plan. 2. How has travel impacted your spending plan? Was your travel money previously going towards something else? Can you ease back spending in other areas to increase your travel budget? Make sure to shop around to get an understanding of prices before you rush into a big purchase. Post-Covid, many people are going on ‘one-time’ trips. But ask yourself, is this really a one-time thing? 3. How do your childcare spending habits change in the summer? For many families, summer is more expensive since there are summer camps and extra daycare costs. But for private school families, costs may decrease during the summer. If you have a child that is aging out of daycare to start school, don’t let that money simply enter back into your monthly cash flow. Think about how the money could be better spent. Are you maxing out your 401K or Roth contributions? Consider how you could distribute that money to savings. 4. Check your recurring services. Many of us increased our subscription services during the pandemic. Now is a good time to reevaluate whether you still need them. Do you still need grocery delivery or Doordash? Consider what you could cancel now that other spending areas are starting to creep back into your budget. 5. Revisit your retirement savings. It’s much easier to adjust your savings levels now than to try and play catchup in November or December. Make sure that you utilize your full employer match and consider what to do if you have already hit your yearly max in your Roth or 401K. 6. Are you missing a savings opportunity? Your retirement savings may come directly out of your paycheck, but are you automatically diverting other savings? Think about other areas where you could be saving money: an HSA, college savings fund, or even a brokerage account. Listen in to hear about the changes in the FSA limits. 7. Consider the child tax credit. Many Americans saw the child tax credit hit their bank accounts in July. Before another one hits, reevaluate where you fall on the tax credit spectrum. Consider how your income will change in 2021 and think about if you should opt out or if you may need to pay that tax credit back come tax time. 8. Start constructing your tax plan. Think about how your tax situation may have changed this year. Do you have enough taxes withheld? 9. Have your circumstances changed? Did your goals change from 2020? Have you landed a new job? Have you seen a reduction in income or an increase in income? How may this affect your goals? 10. Review your estate plan. Do you have all of your documents in place? Reevaluate your documents to ensure that they are current and still make sense.
Focusing on these ten areas now can set you off on the right foot for the fall. Listen in to learn how you can enhance today and enrich tomorrow.
Outline of This Episode * How is your spending changing? [2:12] * How does travel impact your plan? [3:15] * How does summer impact your childcare spending [4:24] * Take a look at recurring services [5:45] * Revisit retirement savings [7:28] * Are you missing a savings opportunity? [8:40] * Child tax credit [11:06] * Start constructing your tax plan [13:38] * Have your circumstances changed? [14:40] * Review your estate plan [16:33]
Resources & People Mentioned * Tips for Avoiding a Post-Covid Spending Boom
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
With the turbocharged real estate market, buying a house is not as easy as it once was. We’ve all heard stories of houses getting multiple offers even before they are listed or homes selling well over the asking price. Stories like these have many people thinking about moving.
Short Video recap: https://youtu.be/0GKbITjE9hg
On this episode of Financial Symmetry, we explore whether or not it is worth the effort to buy a home in a seller’s housing market. You’ll learn the reasons why the housing market is so hot, questions to ask yourself, and alternatives to buying a home.
Why is the housing market so hot? If you have talked to your neighbors or seen the news lately, you know how hot the housing market is. Everyone has heard stories about bidding wars and people receiving multiple offers on homes. It is definitely a seller's market, but why?
There are several reasons that home sales are through the roof. As with any economic force, when demand outstrips supply, then the market becomes one-sided. Since people have been spending more time at home and even working from home, they have had an opportunity to evaluate the pros and cons of their place of residence. Couple this with an influx of cash from higher incomes and injections of cash into the economy, and many people are ready for a change of scenery.
Steps you should take before you consider a move But just because the Jones’s are packing up and moving, does that mean that you should too? Before you think of selling your home you should stop and consider a few questions. Since this is such a big financial decision you can take advantage of financial planning to help you analyze this choice.
After you figure out why you want to move, you need to consider what steps you need to take to prepare. Buying a home is not as easy as it once was, so you’ll need to make sure that you have a preapproval letter in hand before looking at any houses. It’s also important to realize that in a hot housing market, contingency offers are off the table. You won’t be able to compete with cash offers if you are trying to buy a home based on the sale of your own home. So if you must sell your current house to come up with a down payment, then you may need to rent for a while after the sale of your home.
Know how much you can afford Your housing costs should be between 28%-36% of your monthly income. Many people know this but they only figure in the mortgage without figuring in the other expenses that come with moving to a new home. It is important to watch out for the lifestyle creep that often comes with moving. You don’t want to end up being house rich and cash poor.
One way to ensure that you don’t get roped into spending too much is by coming up with a maximum number that you can afford and telling the realtor a number that is 20%-30% less. Don’t rely on the bank to decide how much you can afford since they will be happy to lend you more.
Where will your down payment come from? The next consideration is where will you get your down payment? There are 4 primary ways to come up with a down payment. Many people rely on the sale of their home for a down payment. Others have cash set aside in savings.
Another consideration is to use a 60 day IRA rollover. This will allow you to avoid the taxes that come from withdrawing from your IRA if you repay the money in 60 days. Oftentimes, this allows you to close on the home you are selling and replace the money in the account. However, this could backfire if the sale of your home falls through or gets delayed.
The last way to fund a down payment is to take out a HELOC on your existing home. It is important to do this before you put your home on the market. Listen in to hear some alternatives to buying a new home that you should consider before taking the leap and moving.
Outline of This Episode * [1:07] Reasons why the housing market is so hot * [3:10] What considerations should you be thinking about? * [11:34] Where will your down payment come from? * [15:33] What are some alternatives to moving * [17:10] Today’s progress principle
Resources & People Mentioned * Rocket Mortgage * Modern Family * WSJ article on down payments * HGTV * Episode 116 on buying a second home
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Are you a super saver? If so, you may feel like you are doing a lot of the right things to save for retirement, but you are not sure where to go next.
Check out our Youtube channel for a short video recap: https://www.youtube.com/channel/UCw9vXJ3JyO-pHEcQ1p9O-Lw
In this episode of Financial Symmetry, we explore the different ways to save for retirement outside of your 401K. You’ll learn what each type of account is used for, how you should save in each one, when is the best time to save, and how to withdraw. Let’s explore the various ways that you can save for retirement.
Retirement investment vehicles If you have been maxing out your 401K, you are ready to move onto the next step in retirement savings, but with so many different types of accounts to choose from, it can be hard to know which one to choose. All you have to do is learn about them to choose from the different investment vehicles. To make the various types of accounts more memorable, we are equating these investment vehicles to actual vehicles. Listen in to hear how to use the right set of wheels to drive you to retirement.
The health savings account The health savings account can be compared to a Jeep Wrangler. Like the Jeep Wrangler, the health savings account has a specific purpose, but it also has added benefits. The purpose of a health savings account is to be used for medical expenses, however, it also has a triple tax advantage. You must be enrolled in a high deductible health insurance plan to qualify for a health savings account, but if you can use one, this is a fantastic way to save and invest for future healthcare expenses.
The backdoor Roth The backdoor Roth is the Rolls Royce of retirement savings. Like the Rolls Royce, the backdoor Roth is unique and specifically designed for high-income earners. A regular Roth IRA maxes out at $6000 per year. With the Roth and the backdoor Roth, you will save so much in taxes that it will offset any fees that you incur.
The mega backdoor Roth The mega backdoor Roth can be compared to the Koenigsegg Gemera. Similar to the Koenigsegg Gemera, you may not have heard of the mega backdoor Roth. You’ll need to buckle up to drive both of these vehicles because the mega backdoor Roth will turbocharge your retirement savings. The mega backdoor Roth allows you to contribute an extra $35,000 in a Roth. You won’t see any tax savings upfront, but you will see it in retirement since this is a tax-deferred account. This account will provide a huge impact on your long-term saving for retirement. If you want to take your savings to the next level, check out the mega backdoor Roth.
The brokerage account Many people don’t even consider this account a retirement savings account, but like the trusty Honda Accord, a common brokerage account can be just as dependable. You can use a brokerage account like a super-charged savings account. Yes, there are more tax-efficient accounts, but the benefit of a brokerage account is that there are no restrictions which gives you more flexibility. If you feel restricted by the other retirement accounts, you may want to consider saving for retirement in a brokerage account.
You won’t want to miss our last comparison, the DeLorean. Listen in to hear which type of account we compared to this unique car.
Which investment vehicle sounds right for you?
Outline of This Episode * [2:13] The health savings account * [5:22] Backdoor Roth * [9:05] Mega backdoor Roth * [13:45] Brokerage account * [17:27] The 529 account * [20:08] The progress principle
Resources & People Mentioned * Episode 47 - Why Do I Need an HSA? * Episode 91 - The Mega Backdoor Roth * Tax Loss Harvesting in Bear Markets * Cars with suicide doors * The DeLorean * Koenigsegg Gemera
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Recent headlines have people thinking more about investing for inflation.
Video Recap: https://youtu.be/50PlOwAM4OM
It's the most recent economic worry, but there's always something to scare or concern investors. Think about the last 16 months. We've had:
- COVID Crash
- 2020 Election
- Reddit/Robinhood/Gamestop
- Crypto Volatility
Now it's inflation. But it's a good reminder that listening to the media can be expensive.
In this week's episode, we are breaking down how to think about and prepare for inflation as it relates to your investment strategy.
How to Think about Inflationary Scenarios What is inflation?
Increases in prices over time. For example, a gallon of milk cost ~$0.26 in 1926 and has increased to ~$3.00 today. Since 1926, inflation has averaged ~3% per year.
On the other hand, deflation is when prices decline over time. These periods are generally driven by economic downturns such as the depression in the late 1920’s/early 1930’s or a brief period during the financial crisis. While the media can make the threat of inflation sound scary, it is a normal part of time passing.
Hyperinflation, however, can be very damaging. While regular inflation has averaged ~3%/yr, hyperinflation is when prices spike very quickly and at much higher rates. For example, Germany in the early 1920’s and more recently, cases in Venezuela and Zimbabwe.
Hyperinflation it typically driven by two primary causes: Government debt in another currency (Germany after WW1) and supply chain shocks (no access to necessary products).
We are not concerned about hyperinflation today.
Current Situation The last twelve months ending April 30th, 2021 saw an annualized inflation rate of 4.2% after averaging 1-2% over the last 10 years. This is the largest jump in inflation since September 2008.
It is important to keep in mind, however, that these numbers were coming off March/April 2020 lows where inflation declined due to lack of demand for products and services – driven by the COVID crisis.
The big question most are asking: Are these permanent or transitory increases? Transitory increases are those that are shorter-term or temporary. These have been driven by stimulus checks and government support from the $1.9 trillion American Rescue Plan passed in March 2021.
Permanent increases on the other hand are those in which prices are expected to increase materially year over year. Today, this can be seen somewhat in the Real estate markets.
It is too early to tell which route it will take, but keep in mind that the Federal Reserve wants some inflation as that is their mandate and is healthy for the market. If inflation begins to rise too quickly, they can always raise interest rates to slow down the economy.
What should you do about it? Inflation is good for stocks and real estate over the long-term. Companies can raise prices leading to higher gross sales and companies have claims on their real assets (buildings, plant, land, equipment, etc.).
Since 1926, US Large/Small cap stock returns have outpaced inflation by ~7% and 9%, respectively. During that same time period, cash and bonds have barely exceeded inflation.
While cash can feel like a safer option in the short-term, over long periods of time, you can lose purchasing power. For example, if inflation averages 3%/yr while your cash holdings earn 1% or bonds earn 2%, you are losing purchasing power.
Although we can speculate, we don’t know whether we’ll have material or stable inflation over the next decade. Rather than being driven to change strategies based on short term media noise, we recommend sticking to your investment plan and maintain a diversified portfolio constructed based on your capacity and tolerance for risk.
Additional Resources * Article by Ben Carlson - The Simplest Asset To Hedge Against Inflation
You may have heard a lot on the news about President Biden’s tax plan. Are you worried about how it will affect you and your tax situation? In this episode of Financial Symmetry, Grayson Blazek helps to demystify Biden’s tax proposal. You’ll learn how you may be affected and whether or not you should be worried. Don’t wait until April 15 to start your tax planning! Press play to learn what you can expect next year.
Short Video Recap: https://youtu.be/wFzuPLnT9qc
When does the new tax law take effect? Even though you may have heard plenty about Biden’s tax plan, it still isn’t the law--yet. As of May 2021, there has been no bill signed. This much-discussed tax plan still needs to make its way through Congress. There may be changes that take place in the way the plan is structured as part of the negotiation process. Although it hasn’t passed yet, it is still a good idea to learn as much as you can about the proposed tax law so that you can get a jump start on your future tax planning.
Who benefits from the proposed tax law? If your annual income level is at or below $400,000 there are many tax planning opportunities that come with the proposed tax law. The most notable change to the current tax plan is in the child tax credit. This tax credit will rise from $2000 per child to $3000. Additionally, for children under the age of 5, the child tax credit will be even higher--$3600. You may even see your tax credit hit your account early starting in July of 2021. Learn what you should be watching out for as Grayson Blazek explains how the new child tax credit will work.
How will this tax plan affect your retirement accounts? The proposed tax law could turn retirement planning on its head. Many people use a 401K as their preferred retirement savings vehicle, but with the new proposal, the tax benefits of the 401K may no longer be as attractive for high-income earners. The Roth IRA could become the preferred avenue. When the new tax plan takes effect you may want to change your retirement contribution strategy. Press play to learn why.
Don’t let the tax tail wag the dog! Even though it is important to plan ahead when it comes to taxes, you don’t want the tax tail to wag the dog. This means that you don’t want your tax planning to decide everything about your financial planning. Taxes are a big part of financial planning, but it is also important to note that they are simply an inevitable side effect of making money. Now that you know a bit more about the future of tax laws you can begin to think forward to next year and beyond to structure any big liquidation events and consider where you stand financially. Download the Biden Tax Plan Decision Tree at FinancialSymmetry.com.
Outline of This Episode * [2:33] Don’t be in a rush to make any changes to your tax planning--yet * [7:34] Some benefits of the new tax laws * [12:35] What to look out for if you make between $400,000-$1M * [17:45] Retirement account tax planning could change completely * [23:48] Estate planning considerations * [28:08] Today’s progress principle
Resources & People Mentioned * Schitt’s Creek
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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A recent survey discovered that millions of Americans 55 or older are in a rush to retire. The pandemic has many contemplating retiring years earlier than originally imagined after adopting a "life is short" mentality.
Video recap: https://youtu.be/q5r5ZiVw7d4
But before you rush into a decision to retire early you’ll want to consider it carefully. We've listed 6 steps below to analyze if you are ready to retire.
Why retire early?
Since the pandemic has made us all consider how we are spending our time, people have become more and more frustrated with their daily grind. Many people would like to spend more time with their families or pursuing hobbies that they enjoy.
However, if you are in a position to retire early it is important to think about why you really want to retire beyond the initial urge to leave the work world behind. It is important to consider how you will spend your days. Think about your purpose so that you are retiring to something, rather than simply running away from the 9-5. Have a plan, not just a portfolio.
Use the acronym RETIRE to consider early retirement Grayson Blazek and I have come up with 6 strategies to consider when thinking about early retirement. We’re using the word RETIRE as an acronym to help keep it easy to remember.
- Risk - Have you considered the sequence of return risks? You may have good returns now but a bear market could ruin that. You don’t want to have to sell low, so make sure your portfolio is allocated with risk in mind. If you want to retire early, you’ll need to have the upcoming 5-7 years of spending available to avoid the risk of having to sell a position when you aren’t ready to. Everyone has their own risk tolerance, so carefully consider yours. In addition to the sequence of return risk, you’ll also need to think about inflation risk.
- Early retirement account withdrawals - If you are retiring early you won’t want to pull from accounts where there might be a penalty. This means that you’ll have to consider which accounts your income will come from. Be sure to have a diversified mix of accounts to pull from. Give yourself flexibility and make sure you have access to your wealth outside of retirement plans. Have different buckets ready and understand all the tools that you have available.
- Taxes - Take advantage of strategic tax moves. Use Roth conversions to take money from pre-tax accounts and convert it to a Roth IRA. You can take advantage of lower tax rates to fill your buckets with tax-deferred funds. In retirement, you'll want to think about your lifetime tax rate rather than your yearly tax bill.
- Insurance game plan - One of the biggest issues for early retirees is where to get insurance. You’ll need to carefully plan how you will source insurance and how much it will cost. Most early retirees consider 3 choices: COBRA, a spousal healthcare plan, or the Affordable Care Act. You’ll want to ensure that you understand the expenses involved with each of these choices.
- Regular reviews - How will you know if you are on the right track? Have a plan to monitor your situation periodically. Ask yourself these questions: Have your goals changed? Do you want to pivot? Has your financial situation changed?
- Estate loose ends - Nobody likes thinking about end-of-life decisions, but having your estate documents in place will give you peace of mind. Consider the 3 most important ones: a will, a healthcare power of attorney, and financial power of attorney.
Download the Pre-Retirement Checklist The question of whether to retire early is one that should not be taken lightly. You can use these 6 considerations to help you contemplate your retirement readiness, in addition, you can also download our Pre-Retirement Checklist to ensure that you are making the right decision for you and your family.
Outline of This Episode * [1:46] Questions people have about retiring early * [3:48] R is for risk * [8:42] E is for early retirement account withdrawals * [13:06] T is for taxes * [17:52] I is for insurance * [20:56] R is for regular reviews * [23:02] E is for estate loose ends * [25:42] The progress principle
Resources & People Mentioned * Download the Pre-Retirement Checklist * Episode 136 - 3 Not-So-Obvious Retirement Roadblocks
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Have you ever been on your way to an epic summer road trip and then all of a sudden you come upon a roadblock? That can ruin the excitement you feel for the upcoming trip. This can happen in retirement as well. In retirement, you may confront roadblocks on your journey and if you don’t know how to maneuver around them it can leave you feeling stuck.
On this episode of Financial Symmetry, Allison Berger joins me to discuss 3 not so obvious retirement roadblocks that you may encounter along your retirement journey. We want to be your GPS so that if you experience them you can find your way around them without too much hassle.
Sequence of return risk Your first years of retirement are so important when it comes to investment returns. Sequence of return risk is when you have several years of bad returns at the beginning of retirement when you are starting to withdraw your money. There is no way to control your market returns, but there are ways to mitigate this risk.
To combat sequence of return risk, you’ll need to maintain a balanced portfolio the way you maintain a balanced diet. Use the financial food groups! In retirement, you can no longer subsist solely on financial junk food (stocks). You’ll want to make sure that you have a healthy serving of vegetables (bonds and cash) thrown into the mix.
After maintaining a growth mindset in the accumulation stage of life by using mainly stocks, you may be hesitant to reduce your risk load in retirement. However, having a balanced portfolio can ensure that you won’t be forced to sell when prices are down.
Inflation You want to ensure that your money will be worth something in retirement, but inflation reduces purchasing power over time. We can visualize how inflation works by thinking about what the price of milk was 20 years ago. Inflation not only impacts the prices of goods but also impacts your retirement income. Even with the cost of living adjustments, your Social Security may not have the same buying power in 20 years.
Inflation is also known as the silent assassin. It is most dangerous for those who are overly cautious. To fight inflation you’ll need to make sure that there is some growth in your portfolio. You’ll need to take on some risk.
Unforeseen tax bombs It is important to understand how different events can impact your taxes. The best way to combat unforeseen tax bombs is through multi-year tax planning. Most people are used to tax planning one year at a time, but retirement offers an opportunity to plan ahead. You can reduce your lifetime tax burden by thoughtful planning.
Create your retirement road map If you put together a financial plan for retirement you’ll have a road map for the years ahead. In retirement, you’ll want to become flexible and look for opportunities. This is part of what we do with our clients. If you are interested in using us as your GPS to help you through those retirement roadblocks then check out our website and click Learn More.
Outline of This Episode * [3:07] Sequence of return risk can ruin your retirement * [9:45] Inflation is the silent killer of retirements * [14:14] Unforeseen tax bombs can derail your tax strategy * [20:47] Today’s progress principle
Resources & People Mentioned * Episode 89 - Sequence of Return Risk * Kitces article
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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What are you investing for? Many say higher or better returns--but higher or better than what? What do those higher returns make possible for you?
Video recap: https://www.youtube.com/watch?v=tKC2ulw3cz8
To have a successful investment experience you need to have a plan in place. Mike Eklund joins me once again on this episode of Financial Symmetry to discuss our 3 step investing process. This process creates the guideposts for all Financial Symmetry clients. Listen in to learn why failing to plan means you are planning to fail.
Why do you need a plan? Have you ever thought about why you are investing in the first place? Before creating your investment plan you’ll want to set your goals. This way you can understand what kind of returns you need in order to achieve your goals.
We are all often guilty of the lottery mindset--that mindset that thinks if we could choose that one next big thing then we would be set. All we needed to do was buy Apple in 2000, or Tesla in 2012, or Bitcoin at $1000. But the reality is, successful investing requires a plan. Your investment plan can help you understand when to buy and sell or increase or reduce risk in your portfolio.
Our 3 step process At Financial Symmetry, we use a 3 step process to help our clients achieve their financial goals.
- Determine when you need the money. Will you need it sooner or later? When you need the money determines the amount of risk you can take. The longer you own stock the more the risk diminishes, so as investors, we are short-term pessimists and long-term optimists.
- Have a plan in place. Having a plan means that you won’t have to react to market events. This is why the rules-based process is so important. Think about what you can control and implement the plan by using low-cost, high-quality investments. Whether you use index funds or active funds doesn't matter as much as how you plan.
- Monitor your investment plan so that you can stay invested. Take advantage of opportunistic rebalancing and buy and sell based on your target percentage. Many people leave out this step but it is just as important as the other two steps.
5 things you can expect as a Financial Symmetry client You may be wondering what we at Financial Symmetry offer to our clients. Our clients can expect these 5 things from us.
- Our focus is to help you achieve your goals. We focus on long-term success over short-term results.
- Clients can review their investments on a daily basis in the Client Center.
- We know that communication is important, so we make sure to answer your questions. We understand that it's your money we are working with.
- We provide years of experience and do extensive research on all our investments.
- We all invest in the same way as our clients.
We can help you reach your goals What is your investment plan? Do you have a rules-based process? Investing is a lot like fitness. Everyone wants to start, but it can be hard to keep up. We can be your financial personal trainer and help you stay on track to reach your goals.
We can make investing easier for you. If you don’t have the knowledge, experience, and interest to do this all on your own we can help.
Outline of This Episode * Why are you investing in the first place? [3:40] * We follow a rules-based process [6:02] * Monitor your investment plan [15:32] * 5 things to expect as a Financial Symmetry client [18:21] * The progress principle [23:25]
Resources & People Mentioned * Episode 118
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Have you been on the fence about hiring a financial advisor? This indecisiveness can cost you. This episode will help you decide whether hiring a financial advisor is right for you. You’ll learn the 5 C’s that you can expect when hiring a financial advisor. Press play to find out what you should expect from your financial advisor.
Video Recap: https://youtu.be/zuTdjdDkqUI
4 reasons you may be looking for a financial advisor Have you been considering hiring a financial advisor? If so, then you may be seeking assistance in one of several areas.
Competence - You are looking for someone who knows more than you and is an expert in their field.
Coaching - You may know quite a bit, but knowing and doing are 2 different things. A financial advisor can be like a personal trainer and give you the push you need to get things done.
Convenience -A financial advisor can do what you don’t have time for.
Continuity - You may want someone to help you coordinate with others for family or legacy planning.
Do any of these reasons seem familiar to you? Keep listening to hear what a financial planner can do to help you.
What to expect from a financial advisor Collaboration - Your financial advisor will co-create a plan that serves you and helps you reach your financial goals. This should be a collaborative process between the two of you. In your first meeting, you can expect to be asked a lot of questions so that they can learn about you and your goals. You want your financial advisor to lead with a planning focused approach. If you receive a sales pitch instead, this should raise a red flag.
Credentials - Many people are surprised to learn that you don’t have to have any qualifications to be a financial advisor. However, you may see a bit of an alphabet soup after a financial advisor’s name. It is important to understand what these letters mean. Are they real credentials or simply sales designations? Look for the gold standard CFP certification. CFA and CPA are two other certifications that may be relevant to your situation.
Communication - You can expect regular communication from your financial advisor. They may set up a communication calendar with you to help you set expectations in communication. This regular communication will help you stay updated. Your advisor may also reach out to discuss tax opportunities, set goals, and to review progress. Listen in to hear what red flags you should look out for in your advisor communications.
Compounding value - Are you better off after you pay your advisor than you would have been otherwise? This can be hard to quantify and may take a bit of introspection. Look at your return on life as well as the quantitative parts. Consider your investment returns, rebalancing, and tax deferral. If you think that your advisor is providing a free service then make sure to look for the hidden costs in your portfolio. A fee-only financial advisor discloses their costs upfront so that there are no surprises. If you are looking for a fee-only financial advisor you can find out more about our services at FinancialSymmetry.com.
Outline of This Episode * The 4 reasons you may be looking for a financial advisor [2:57] * What to expect from a financial advisor [4:19] * Your financial advisor should communicate with you regularly [14:51] * Is your financial advisor adding value to your life? [18:51] * The progress principle [24:01]
Resources & People Mentioned * Episode 63 - Financial Acronymology, Decoded * Episode 108 - What the CARES Act Means for You * Episode 133 - Tax Planning with the New American Rescue Plan
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
The American Rescue Plan was recently passed, but do you know all the changes it will bring? You probably already know about the stimulus checks, but you may not know how it could affect your taxes and healthcare. This latest economic stimulus package could mean big things for your tax planning.
Video recap here: https://youtu.be/Vq8Y2CFYS6E
Since the American Rescue Plan has a heavy tax focus, I invited tax planning extraordinaire, Grayson Blazek, to brief us all on the risks and opportunities that we should be looking out for with the newest piece of legislation. He simplifies this complex topic down to 5 key areas. If you are looking for tax planning opportunities or want to know the risks to look out for, then make sure to tune into Grayson Blazek’s breakdown of the American Rescue Plan.
Who qualifies for the third installment of stimulus checks? The third round of stimulus checks may be the most widely known part of the American Rescue Plan. These checks are capped at $1400 per person. Although the income range of those who qualify has narrowed, many people who were not previously eligible for stimulus checks will be eligible for round 3.
The age range for dependents has been expanded to those in college and older high school students, whereas with the previous rounds of stimulus, dependents were limited to ages 16 and under. Listen in to find out how the income bracket for stimulus checks has changed and learn how you could use this stimulus package as an opportunity for careful tax planning.
How has the ARP changed health insurance premiums? If you were laid off or terminated like many others last year, your company must continue to offer health insurance through COBRA. The drawback with COBRA is that the full cost of the insurance premium was placed solely on the participant without the employer absorbing a share. The American Rescue Plan will now fully subsidize the premiums of COBRA until September of 2021. This means that if you are on COBRA your premiums will be zero.
That wasn’t the only change in health insurance premiums through the ARP. Find out how the thresholds of the Affordable Care Act have changed with the bill as well. Press play to hear how.
Changes to the child tax credit and the dependent care tax credit may have you rethinking your tax planning strategy Most people don’t pay attention to their taxes until the time comes for them to file. But maybe after listening to this episode you may want to start getting in front of your taxes and plan the year ahead rather than focus on the previous year.
If you have children, then this year is an especially good time to consider tax planning. You’ll want to take advantage of the expanded tax credit that went from $2000 to $3000 and $3600 for children under 6 years old. In addition to the child tax credit, the child dependent care tax credit was expanded to max out at $8000 per child.
Changes to unemployment compensation Lastly, the American Rescue Plan has extended state and federal benefits to unemployment compensation until September 6. Lawmakers also chose to make unemployment compensation tax-free for 2020.
Listen in to hear all the details so that you can develop a plan to utilize these changes in your tax planning efforts. This may be a good year for you to consult a CPA to help you file your taxes.
Outline of This Episode * [1:20] Stimulus checks part 3 * [9:10] Health insurance * [15:54] The new child tax credit * [23:54] The child dependent care tax credit * [27:20] Changes in unemployment compensation * [32:00] You may want to reach out to a CPA this year
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
It’s always fun to peek behind the curtain and see the strategies and process people use for their decision making.
Video recap: https://youtu.be/DDp2dBUhrSg
During this conversation, we review some of my core beliefs around:
- importance of tradeoffs - how every financial decision affects others
- being intentional in being a good steward
- Defining the balance between enjoying today while saving for tomorrow
- Structuring your money management around the give, grow, owe and live philosophy
4 Primary Uses of Money You can use it to live, give, owe or grow. For us, we rank these in the following order: give, grow, live, owe.
Giving is at the top of our budget. Giving first breaks the power of money and releases its hold over people. Therefore, tithing to our church has been at the top of our priority list.
We then focus on the growth aspect. This starts with automating our savings so that we can reach 15% of our income. As for how we invest we focus on various types of accounts from 401K to Roth IRAs to 529s for the kids. We explain in the episode how we've set up a system to where we don't lose sleep over our 90% stock allocation.
With 3 yr old twins, a large part of our spending goes to daycare costs. My spouse and I try to spend our money on the things that create joy, including going to NC State sporting events and going on camping trips.
I've always used debt as a tool for large, low-interest purchases such as his home and car. We only hold one credit card and doesn’t want to open any more accounts than are necessary.
Outline of This Episode * [4:25] What are Cameron’s money influences? * [9:07] How does Cameron divide up his resources? * [15:27] Does he worry about his 90% stock allocation? * [21:26] How does he see debt? * [26:30] What was the best money he spent in 2020? * [31:15] The power of small wins
Resources & People Mentioned * In and of Itself movie * Episode 126 - How a Financial Advisor Invests Their Money: Mike Eklund * BOOK - Happy Money by Elizabeth Dunn
Connect With Cameron * Cameron's book, Where Family and Finance Meet * Connect on Twitter @cam_hendricks @TeamFSINC * Follow Financial Symmetry on Facebook
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Have you wondered if there are any financial mistakes that you may have been making?
Video recap here: https://youtu.be/9fsWlp56R2U
Sometimes our financial mistakes aren’t obvious, so in this episode of Financial Symmetry, we discuss 3 hidden financial mistakes that you may be making and how you can spot them.
Uncertain outcomes cannot be predicted Are you guilty of believing an uncertain outcome is certain? Sometimes we feel confident that things are going to happen. This can be true even with geopolitical events like the Coronavirus. You may have known the virus would happen, but could you have predicted this current situation?
People are naturally overconfident, but the market is smarter than you. Trying to anticipate corrections will cost you money. In fact, trying to anticipate market corrections will end up costing you more money than the market corrections themselves.
One way to prevent overconfidence is by talking through potential outcomes with a financial advisor or a financial accountability partner.
Don’t underestimate the market’s ability for positive surprises Many people have a negative money script or way that we view finances. This scarcity mindset could penalize their financial potential. There will always be reasons to wait it out or not invest, but instead of focusing on those reasons focus on not missing out on opportunities. You don’t want to take a pay cut in retirement because of missed opportunities.
We often delay financial decisions to give ourselves time to think about it more or evaluate the alternatives and to consider all outcomes. But often the best investments are the most difficult ones that you have to make. This is why having an investment plan makes sense.
“Investing is a lifelong journey. Making money slowly is much better than making then losing money quickly.” -- David Booth. Are you missing hidden tax opportunities? There are different tax opportunities that can be taken depending on your phase of life and how the laws change. One opportunity that many retirees were able to take advantage of this year was the lack of required minimum distributions (RMDs). This allowed people to do Roth conversions. Retirement brings on a wealth of tax planning opportunities since you have more control over your income in retirement. Advanced tax planning early in retirement can help you save on your lifetime tax bill. Listen in to hear how long-term tax planning can save you money over your lifetime.
Estate planning pitfalls Estate planning is often the last part of a financial plan that people want to address since it is the least enjoyable part of financial planning. But if you want a say in what happens to your money after you are gone then you’ll need to create an estate plan and review it periodically. Check out episodes 102 and 122 to learn more about estate planning.
Do you have enough? Are you saving enough? When is the best time to invest? Are you missing out? These are all questions that can be answered with the right financial plan. Think about what a financial plan can do for you. If you are looking for a financial advisor to help you create a financial plan click through to our website.
.Outline of This Episode * [2:40] Believing an uncertain outcome is certain * [10:16] Missing hidden tax opportunities * [14:50] Are you taking advantage of an HSA? * [17:15] Estate planning pitfalls * [21:18] Today’s progress principle
Resources & People Mentioned * Charlie Munger * Episode 91 - Your Retirement Secret Weapon * Episode 47 - Why Do I Need an HSA? * Episode 102 - How the SECURE Act Will Impact Your Retirement * Episode 122 - Leaving and Receiving an Inheritance by the Decades * Roger Whitney - The Retirement Answer Man podcast
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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Stock market manias have an uncanny way of capturing our attention.
Short video recap: https://youtu.be/wr04xy1pDnU
Not only do they dominate weekly headlines, but create visions of what could be. The most recent example is the rapid rise of meme stocks, including Gamestop, AMC and Blackberry among others.
In this episode, we’ll explore what happened with this most recent mania, and describe the why behind how we can become enamored with this type of approach. We'll then offer three questions to provide a framework for the next time you're facing similar feelings.
What happened with Game Stop? You may have seen a Game Stop store at your local mall or shopping center. Game Stop is a video game retailer whose future did not look promising. Many people compared it to Blockbuster Video.
This uncertain future attracted the interest of short-sellers and the retailer ended up becoming one of the most heavily shorted stocks. When an online Reddit group discovered what was happening to the stock, many people decided to jump in and stop the short. This sudden influx of investors drove the share price up to unprecedented levels.
There’s a difference between gambling and investing Manias are nothing new. We've seen them in many forms including the Nifty Fifty in the 1950s, the tech bubble in the 1990s and BRIC Countries during the 2000s. The speed and size of these rallies can foster a fear of missing out feeling that's is more analogous to gambling.
There's a fine line between gambling and investing. In stock market manias, it's easy for people to throw risk considerations out the window because the possibility of life-changing gains takes over. Subsequently, this mentality could lead to detrimental results when investors are using money they can't afford to lose.
With Game Stop, investing quickly becomes interesting when the stock is increasing like a rocket ship within a week. For many, this strategy looks miles more exciting when compared to a disciplined long-term strategy. This is when the gambling temptation can circumvent the longer-term evidence based approach you may have used up to that point. Enter diversification.
That's because diversification decreases your investment risk. When you diversify, you invest in many different types and sizes of companies all over the world. The goal of diversification is to ensure the performance of one specific stock won’t impact your entire portfolio.
3 Questions to Ponder when Tempted If you find yourself considering a specific stock purchase, there are a few questions that can help your decision.
- What does this strategy claiming to provide that's not already in your portfolio?
- What will this investment reasonably add to your portfolio by including it?
- Could you increase your expected returns?
- Will it reduce volatility in your portfolio?
- Does this help you achieve a goal?
- Are you going to be comfortable with the range of possibilities this purchase creates?
Your investment strategy will be most appropriate for you when it's created in service to your financial plan. A plan that is specifically created for your goals and circumstances. Understanding the interaction between your income and future expenses for the next few years.
- What will you need your savings rate to be?
- How much longer will you plan to work?
- Do you have other resources where this risk won't derail your long-term financial picture?
Carefully considering your investment decisions and ensuring that they align with a cohesive and diversified investment strategy will help you stay on target to reach your long-term goals.
Outline of This Episode * [1:32] What happened with Game Stop? * [6:03] There is a difference between gambling and investing * [9:29] The benefits of diversification are far-reaching * [14:39] Time is the ultimate thief * [17:33] Today’s progress principle
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast * Apple Podcasts * Stitcher * Spotify * Google Podcasts
What is the most important thing you can do for building wealth?
Video recap: https://youtu.be/OVSKtk6TzB0
Recently, Jeff Levine (@CPAPlanner) put this question out into the Twitterverse: Other than saving and investing, what is the one single most important factor to financial success?
Too often when dealing with financial decisions, we try to overcomplicate what is best for us. We liked the simplicity of a single thing to focus on, so this week we are breaking down our version of the most important thing you can do in each decade to improve your financial journey.
Harness the power of compound interest while you’re young If you are starting to build wealth in your teens and 20s you’re in luck. Time is on your side.
An often cited roadblock to getting this started, is the overwhelming debt obligations to student loans. While important to tackle high interest rate debt, carving out a small amount of automated savings can be life-changing.
For many, the first time we see a compound interest example, we are inspired. We included a powerful example below to demonstrate how much investment growth accumulates over 40 years, compared to the amount you are saving.
By saving small amounts early, compound interest becomes your super power. Automating this savings each month in an investment account with exposure to a diversified stock portfolio starting in your 20s, is arguably the single biggest impact decision you'll make in building wealth. Because of the natural discipline it creates, making it harder to stop it down the road.
Continue to pay yourself first During your 30s, life often becomes busier. Between new marriages, job changes and growing families, consequential decisions can pile up. These exciting changes bring curveballs you often don't expect, like childcare for remote school over the past year.
This is when deciding to pay yourself first benefits you behind the scenes when life decisions are taking priority. If your saving and investing decisions are made only after you cover your expenses, then your budget is upside down.
Automating your savings and charitable giving can leave you better positioned as you head in to your 40s.
Don’t compare yourself with those around you During this decade, it's tempting to continue moving the goalposts as you reach certain levels of success.
Comparing your financial situation to others is a common derailment to your long-term success in your 40s. Keeping up with the Joneses can feel like an endless treadmill.
In the The Psychology of Money, Morgan Housel writes, “the ceiling of social comparison is so high that virtually no one will ever hit it, which means it is a battle that can never be won or that the only way to win is to not fight it to begin with, to accept that you might have enough even if it’s less than those around you.”
Determine your definition of enough. Is it a certain amount of money in the bank? A bigger house? Being laser focused on your ultimate financial goals, allows you stick to your financial plan, providing peace of mind along the way.
Be flexible in your 50s Successful financial planning begins with understanding potential high impact risks.
More and more, we see unexpected hurdles for people in their 50s. It could be a layoff or a loss of assets due to grey divorce, but understanding the potential impact with scenario planning beforehand can leave you more agile to adjust.
Investing in your personal and professional relationships through the years, allows for more flexibility when reinventing yourself in these circumstances. Additionally, understanding the impact of withdrawals on your assets can be valuable in the case you need temporary withdrawals to sustain you during a transition.
After building wealth, keep perspective Hopefully, in your 60s you are reflecting on a life well lived. This is a time to gain perspective. Common rules of thumb or family recommendations may not be the best. Some common things we hear related to this are:
- Because I'm retiring soon, shouldn't I reduce the risk in my investment strategy?
- I need to pay off your mortgage before I retire.
- Shouldn't I take Social Security at 62, because I not sure it will be there if I wait?
- Why would I want to make withdrawals from my IRA before I have to?
Having a plan in your 60s provides confidence. Hiring a financial professional can help you develop a plan and to gain perspective so that you can create a long term plan for your money.
Outline of This Episode * [4:06] What is the one thing you can do in your teens and 20s to help build wealth? * [8:23] The one thing in your 30s that you can do to build wealth * [10:57] What should you be doing in your 40s to build wealth? * [14:35] The one thing in your 50s that you can do to build wealth * [17:49] What can you do in your 60s to build wealth? * [21:30] Consider continuity in your 70s * [22:55] What should you be doing in your 80s? * [25:32] The progress principle
Resources & People Mentioned * Jeff Levine on Twitter @CPAPlanner * BOOK - The Psychology of Money by Morgan Housel * BOOK - The Millionaire Next Door by Thomas J. Stanley
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
From a historically quick bear market decline to a speedy rebound, 2020 certainly took us on a wild ride. But there is a lot we can learn from this crazy year.
Short video recap: https://youtu.be/fUfGwGk-gEY
In this episode, we are reflecting on the investment lessons we learned over the past year. What were the lessons you took away in 2020? Listen in to hear if there are any other lessons you can learn from the year.
Optimists make better investments than pessimists Historically, the S&P 500 returns 8-10% per year. Since markets go up in the long term, people who focus on the long-term growth of the stock and bond markets, as well as the growth of the economy, will prosper.
This lesson was put to the test in March of 2020 when we had the shortest bear market in history. Investors that stuck it out profited greatly. From March 23 to the end of 2020 the market went up an astonishing 68%.
Since no one has a crystal ball, buying in a bear market can be scary. This is why we recommend having an investment plan or a rules-based process in place.
If you lost sleep over or sold stocks during the decline then you need to reassess your asset allocation. How did you fare in the market decline? Were you an optimist or pessimist? Did you stick to your investment plan and wait it out?
Listening to the media is expensive These days, the markets move at lightning speed. At this velocity, people often feel like they need to stay on top of all the latest financial news. However, listening to the financial media can hinder your ultimate goal. The media’s job is to sell advertising, not to help you reach your financial goals.
Even if all the uncertainty drives you crazy, step away from the sensationalist news. The number one predictor of long-term investment success is investment behavior, so teach yourself the discipline not to act on every little thing you hear on the news. Turn off your notifications and guard your time instead.
Watch out for fads We all hear the rags to riches stories about the latest fads. Raise your hand if you have a friend who has struck it rich with Bitcoin lately. These stories can be so powerful, however, no one ever talks about the downside.
FOMO (fear of missing out) is real and we often want to jump on the latest bandwagon, whether it be Bitcoin, gold, or whatever the new shiny thing is. At the end of the day, the value of what you own is only what someone else is willing to pay you.
If you still want to jump on the latest bandwagon understand your motive and think about the impact of your investment on your financial plan.
- Produced by Financial Symmetry
- Hosted by Mike Eklund and Chad Smith
- Recorded in Raleigh, NC
As we come upon a new year it is a good time to reflect on your finances and set goals.
Video Recap: https://youtu.be/yKdGYEjhTB0
In this episode, we discuss 12 steps you can take action on to improve your financial outlook. If you’re looking to get off on the right foot in 2021, print out this checklist and run through it to find improvements you can make now.
12 easy steps you can take to improve your finances
Record your financial goals and positive habits. Writing things down is a great way to hold yourself accountable and see how far you have come. When you write down your goals you can refer back to them later. Our clients have the added benefit of using our Global Dashboard to help them keep track of their financial goals and habits.
Check your estate documents. This is something that we all push off until later. Do your heirs a favor and review your estate documents now. Are they up to date? This can save your family a lot of headaches.
Set up an income and expense tracking tool. You need to have an understanding of how much money is coming in and going out each month. When you start tracking your income and expenses you may discover a lot about yourself. It’s also a good idea to compare your cashflow this year with years past. What has changed?
Make sure you have emergency savings. The general recommendation is to have 3-6 months in an emergency fund, however, this can be specific to you and your situation. You may need more. If Covid-19 has taught us anything, it’s that the world can throw you some unexpected situations and it is important to be ready. Where is your emergency savings fund?
Match and max your 401K. Are you taking advantage of the company match in your 401K? Can you amp up your 401K? It is important to remember that the company match amount is not the maximum that you can save. $19,500 is the IRS maximum per year. Are you maxing out your 401K this year? Did you have to make any adjustments to your savings?
Review your investment strategy. There have been so many changes this year in the stock market this year. Your stock allocation may have grown so it is a good time to check whether your allocation is in line with your investment strategy. Remember that investment behavior is much more important than individual stock picks.
Make sure you are maximizing tax efficiency. Are your assets the most tax-efficient? All accounts are taxed differently. Think about what assets are best to hold across which accounts.
Pay down high-interest debt. Many times we tend to ignore our high-interest debt, but it is important to understand how often you use debt. Focus on the interest rate and balance of your debts. What is your overall debt? Is it good debt or bad debt? Listen in to hear what we think of different types of debt. Our thoughts may surprise you.
Order your free credit report. Every year around the holidays there is an increase in fraud. Try using Credit Karma to keep track of your credit score.
Review your insurance policies. Do you still need life insurance, disability, or an umbrella policy? You may be carrying too much insurance.
Show me the money! Understand where your accounts are and how they are structured. Keep an inventory of where your accounts are and consolidate them if needed. Its easier to make decisions when you are organized
Communicate with your spouse. Are you both on the same page financially? Has your financial situation changed this year?
After listening to this episode feel free to download this sheet and print it off to use it as a checklist.
https://www.financialsymmetry.com/wp-content/uploads/FSI-New-Year-Checklist-2020_12_14.pdf
Read the full post here:
https://www.financialsymmetry.com/12-actionable-steps-to-improve-your-financial-outlook-ep-127/
Motivated by the new book, How I Invest My Money, I (Mike Eklund) wanted to communicate how I manage my own money. In our recent podcast, we discuss my approach with investments, savings, spending, debt, insurance, and what the money is for (goals). We also review some of my core beliefs which include:
- Spend less then you earn
- Automate savings, investing, and anything else that you can
- Invest the majority of portfolio in growth assets (stocks)
- Spend money on experiences, relationships and to save time
- Insure against big risks (life/disability)
- Avoid high-cost debt
- Keep it simple. Complicated is the enemy for most individuals.
Near the end of the podcast, we discuss one of the best investments I’ve ever made. As a married father of four kids, it is our purchase of a lake cabin where we create many family memories. This investment return is determined based on actual experiences as they far outweigh any financial return.
Finally, we finish with what the money is for. Primarily three things:
- Time to do the things we enjoy (family, friends, and staying active)
- Freedom (peace of mind that we’re ok)
- Legacy for kids (help them get started)
I hope you enjoy the podcast!
Outline of This Episode * [1:14] What are my belief systems about investing? * [4:45] How did my family shape his views about money? * [6:22] My views on net worth * [10:45] My views on investing * [15:03] Have I been scarred by my investment history? * [20:50] How much spending is too much? * [29:19] How do we manage risk? * [32:58] Creating moments is important
Resources & People Mentioned * BOOK - How I Invest My Money by Joshua Brown * BOOK - The Millionaire Next Door by Thomas J. Stanley * Episode 91 - The Mega Backdoor Roth * BOOK - Happy Money by Elizabeth Dunn * Episode 59 - Tax Solutions for Charitable Giving * BOOK - The Psychology of Money by Morgan Housel * BOOK - Enough by Jack Bogle
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast ApApple Podcasts <> Stitcher <> Google Play
Growth stocks have been on a tear over the past several years. However, traditionally value stocks have been the big performers in the long-term. But with the rapid rise in growth over the last 10 years, are value stocks still worth it?
Video recap: https://youtu.be/qthoQhw9IxA
Today we explore the question: can value stocks still outperform in today’s environment? We’ll look at the data, provide you with the information, and then lay out action steps that you can take to act on what you learn.
What are value and growth stocks? Before we begin to explore our question we need to clarify the difference between growth stocks and value stocks. Growth stocks are faster growing, more expensive, and have a lower dividend yield. They are those stocks that you hear about on the news: Facebook, Tesla, and Google are a few. Value stocks have slower growth, are cheaper, and have a higher dividend yield. These are the ‘boring’ stocks and include Berkshire Hathaway, JP Morgan, and Wal-Mart.
Is this time different? Let’s look back at history to compare the two types of stocks. From 1926-2010 value stocks grew 12.4% per year whereas growth companies returned 9.8% per year. However, the last ten years have been very different.
Over the last 3 years, growth stocks have outperformed value stocks by 21% per year. This is the highest 3-year difference on record. Which begs the question, is this time different? Listen in to hear about a similar time period in history.
Can you really compare this new economy to the 1998-2000 economy? Much of the growth that we have seen over the past 3 years has been driven by FAANG stocks (Facebook, Apple, Amazon, Netflix, Google). It seems like these stocks could keep growing forever without any competition. And most recently they have all accelerated their growth with the Covid situation. On the flip side, value stocks have been hit hard by the pandemic.
But are the growth stocks becoming overvalued? Will this growth end up collapsing like the tech bubble of the late 90s?
How do we adjust our investment strategy? Do you have an investment strategy? It is important to implement a disciplined, rules-based process. Have a process, have a plan, and stick with it. At the end of the day, investor behavior is the key to success.
We’re not saying that you shouldn’t own growth companies, we simply recommend a using diversified approach. We like to say that something in your portfolio should always stink. What does your investment strategy look like? Do you have a hard time hanging on to the losers?
If you are interested in working with a professional to help you come up with an investment strategy, consider using a fee-only financial advisor. Learn what makes fee-only financial advisors different by visiting our website https://www.financialsymmetry.com/.
Outline of This Episode * [1:43] What are value and growth stocks? * [7:12] Why has growth outperformed value by so much over the past 3 years? * [12:25] How can you compare this new economy to the 1998-2000 economy? * [14:10] How do we adjust our investment strategy? * [17:18] Today’s progress principle
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Have you been offered an early retirement package?
Video recap: https://youtu.be/jpIfdhYVx6Y
Early retirement packages are on the rise. Companies are often looking for ways to cut costs and one way to do that is to give highly compensated employees an incentive to ease into retirement. Usually, these packages offer a one-time payment and sometimes they come with a period of additional healthcare coverage.
If you are offered an early retirement package many questions will arise. Is this a good deal? Is the package negotiable? What will I do about health insurance? And, of course, should I take it?
On this episode, Mike and I will give you the tools to create a framework to think about the questions that early retirement packages bring. Listen in to learn how to weigh this huge decision.
How does this early retirement package affect your long-term financial plan? Before you consider anything else you need to think about how this package fits into your long-term financial plan. Receiving a lump sum can give you a lottery mindset, so you’ll need to consider what is most important to you. How would this package fit into the bigger picture of retirement?
This is a good time to ask a professional for help. If you are working with a financial advisor, you’ll definitely want to ask their opinion. A financial advisor can help you spot risks and opportunities that you may not have otherwise seen. Mike has some questions you may not have asked yourself about this early retirement package, so make sure you listen in to hear all the questions.
What about insurance? The main reason that many people decline an early retirement package is due to insurance. You may want to see if health insurance is a negotiable part of the package. Sometimes the company will offer to pay for your health insurance for a certain period of time.
You can also check into COBRA coverage which will guarantee you 18 months of health insurance coverage under your old plan--just be prepared for a bit of sticker shock.
Another way to cover your health insurance is to check into the ACA healthcare exchange. Be sure to weigh all of your healthcare options before signing the deal.
How will this influence your tax picture down the road? So many tax opportunities pop up with an early retirement package. You’ll want to consider all the ways that you can save on taxes if you do decide to accept it. Do you have a health savings account? If so, make sure to max it out. Have you maxed out your 401K for the year? What about your company stock?
If you are under 59 ½, where will your income come from? When do you plan on taking Social Security? Now is the time to plan how to build your ultimate retirement withdrawal strategy.
Ask yourself: what’s next? Will you be able to transition into retirement successfully? The answer to this may be dependent upon whether you are retiring from something or to something. This is why it is important to consider what’s next.
Will you relax on a beach somewhere, find another job, become a consultant, or try your hand at entrepreneurship? An early retirement package can bring about myriad choices, but you need to make sure that you are financially prepared to accept them.
Outline of This Episode * [3:15] How does this decision affect your long term financial plan? * [8:02] Health insurance often makes or breaks this offer * [10:02] How will this influence your tax picture down the road? * [15:04] Ask yourself: what’s next? * [17:43] Alternate scenarios * [18:40] The progress principle
Resources & People Mentioned * Episode 91 - The Mega-Backdoor Roth * Starting Over in Your 50s
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
While the FAANG stocks have been the most obvious enviable stock positions over the past decade, there are always success stories readily available to raise feelings of doubt and FOMO in even the most disciplined long-term investors.
Video recap: https://youtu.be/FN4xHoe8mHE
For example, investors who purchased $100,000 of Zoom stock at its IPO price of $36/share in April of 2019 would have earned a cumulative rate of return of about 590% and built a nest egg of ~$650k.
Zoom is one of the most recent examples of a company whose stock performance has exceeded expectations so wildly over the past 18 months that it is tempting to wish we were a part of the action and predict that those results will continue in the future, making us very wealthy in the process. After all, the path to extreme wealth is often created through very concentrated positions in individual companies. Examples include Bill Gates, Elon Musk, Mark Zuckerberg, Jeff Bezos, and many others. What made them so lucky? And why shouldn’t we be able to identify companies that will post results like these?
While individual stocks might not kill us, they do pose catastrophic risks that have the potential to be detrimental to our wealth. The nature of individual stock returns was studied in detail in Hendrik Besseminder’s 2018 study in the Journal of Financial Economics, “Do Stocks Outperform Treasury Bills?” which covered stock performance from 1926-2015. These are some of the key findings:
- A minority of common stocks have a positive lifetime holding period return, and the median lifetime return is -3.7%
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Only 3.8% of single-stock strategies produced a holding period return greater than the value-weighted market, and only 1.2% beat the equal-weighted market over the full 90-year horizon
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Just 42% of common stocks have a holding period return greater than one-month treasury bills
While the data is compelling that the odds are stacked against us on individual stocks, often the allure is just too strong. There is no reward without risk, right? Some of us may still want to take advantage of the growth potential of an individual stock position for any number of reasons. Maybe you want to have ownership in the company you work for or do business with frequently. You may have also inherited or been gifted individual stock positions. These might even have sentimental value for your family. Or you may just have a feeling about that company. If you find yourself in one of these situations, we recommend setting a decision-making framework for how you will buy, hold, and sell these positions:
- Perform a portfolio Deep Dive. If you are holding a portfolio of diversified mutual funds or ETFs, it’s likely you already hold a position in the stock(s) you are considering. This means you have already been riding the wave of success and benefiting from the stock’s stellar performance. It has simply been less visible, and the return was muted by subpar performance in other areas. Diversification means you will always hate something in your portfolio, but it also gives you the best odds of long-term success.
- Decide how much. If after performing your portfolio analysis you still decide you want to buy an individual stock, you will need to choose a prudent amount. We recommend individual stock positions account for no more than 5-10% of your portfolio. You don’t want to be overexposed to a position that has the potential to kill you, even if it might make you a killing.
- Consider Taxes. While we never want to let taxes guide our investment strategy, it is prudent to consider how tax-efficient the position will be. If the outsized returns you expect come to fruition it may be beneficial to purchase the position inside your Roth or Traditional IRA for tax-free or tax-deferred gains. Conversely, you may be in a high tax bracket now, but expect that to fall in a few years when you retire. This may present the opportunity to realize any capital gains at a lower rate or even 0% in the future. Take a peek at your financial plan for context.
- Set target prices for buys and sells. Often the stocks that feel most attractive are those with fantastic recent past performance. They are also often very expensive relative to their peers and the broader stock market. Researching the company’s current and historical price to earnings ratio as well as estimates of fair market value is informative for making buy, hold, sell decisions.
- Ask: What if I am wrong? Our natural tendency when faced with the prospect of incredible return potential is toward overconfidence. Make sure your answer to #2 is an amount you are willing to say goodbye to if the outcome is not what you hoped for.
- Ask: What if I am right? If your hopes and dreams come true with a winning stock pick it is important to set rules around trimming that position back to target to periodically take profits, diversify, and reduce risk. Recognize that dabbling in individual stocks is a form of gambling, and it is important to know when to walk away.
For further reading on creating a decision-making framework and avoiding common investor pitfalls, we recommend Daniel Kahneman’s “Thinking Fast and Slow,” and“Decisive,” by Chip and Dan Heath. If you find yourself called by the Siren Song of an individual stock or deciding how to manage positions you may already own, please contact us to discuss the best approach for your personal situation in more detail.
Outline of This Episode * [3:03] If others can do it, why can’t I pick a winner? * [6:20] Industrial change can happen very quickly and cause a shift in industries * [10:02] Perform a portfolio deep dive * [12:36] Don’t choose an individual stock to make up lost ground * [15:02] Consider taxes * [17:16] Set target prices to buy and sell * [19:39] Ask yourself “what if I’m wrong?” * [20:39] Ask yourself “what if I’m right?” * [22:34] List the potential scenarios
Connect With Chad and Allison * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Estate planning is one of the most overlooked and procrastinated upon areas of financial planning.
Video recap: https://youtu.be/NB2S1FWWH2s
While your legacy is important, it doesn’t generally take the front seat of your thoughts or your financial plan. There’s more to legacy planning than just having a will, but how much more depends on which stage of life you’re in. Find out what you should be doing to plan your legacy whether you’re in your 30s, 40s, 50s, or 60s by listening to this episode of Financial Symmetry.
What should someone in their 20s and 30s be doing about their estate planning? When you’re in your 20s and 30s legacy planning starts with creating a will. A will gives you a good foundation and will get you thinking about electing your beneficiaries. You’ll also want to select your beneficiaries on your investment accounts.
Once you get married and start having children, then it’s important to keep your plans updated. It’s also a good time to get term life insurance. Make sure to revisit your will and the beneficiaries on your investment accounts periodically or with major life changes like a move or a new baby.
What are the important legacy planning considerations for someone in their 40s? When you’re in your 40s you probably have more accounts and higher balances than you did in your 30s. Have you kept up with all of your retirement accounts from previous employers? The key to staying on the right track is to stay organized. Make sure to check in on your beneficiaries and estate documents from time to time.
Tax planning is important in your 50s and 60s If you are in your 50s and 60s you may be in the sandwich generation. This means you may have elderly parents and your own kids embarking on adulthood. This is an age when many really start thinking about their own legacy. It’s a good time to start thinking of Roth conversions. You can start tax planning not just for yourself but for your entire family. Think about how you can pass on your assets with the most after-tax value.
What should you do if you inherit money? If you receive an inheritance there are different things to consider depending on your age and financial situation. You may want to consider paying off loans, buying a house, or even taking a mini-retirement. Having a financial plan in place can give you the confidence to do exactly what you want with those funds.
Estate planning is usually the last item on your financial planning list of things to do and it often takes another person to spur you on. A professional like an attorney or a financial planner often help guide you through this process. Let us know if you would like some help getting your estate planning in order. Plan today to make the most out of your retirement.
Outline of This Episode * [2:30] What should someone in their 20’s or 30’s be thinking about with estate planning? * [5:31] What are important legacy considerations for someone in their 40s? * [8:03] When you’re in your 50s and 60s it’s a good time to think about tax planning * [13:22] What should you do with an inheritance if you’re in your 20s or 30s? * [17:16] What can people in their 40s do if they know an inheritance is coming? * [21:52] How does your mindset impact how you use an inheritance? * [25:07] Start the conversation with your family
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
We know the COVID-19 global pandemic has affected everyone in unique ways. Today we want to discuss how this health crisis has affected women, specifically financially.
Video recap: https://youtu.be/beT8B1DSKZY
As working mothers, we have felt the impact of these daily changes acutely. According to Goldman Sachs “single parents, parents with young children and parents who can’t work from home are the groups most at risk to stop working entirely because they have no child care.”
Pre-pandemic the US labor force was split roughly 50/50 between men and women. However, women’s participation rate has always been directly tied to accessible childcare and pandemic-related job losses have disproportionately impacted women. With most schools resorting to distance learning and many childcare options off the table, families are struggling. Many solutions include working mothers putting their careers on hold. According to a study by the US Census Bureau, women are 3 times more likely than men to have left their job due to child care issues during the pandemic. This has negative implications for both the economic recovery and women’s future financial health.
We already know women face unique financial challenges due to three main issues:
- Lower lifetime earnings and wages due to the gender pay gap
- Longer life expectancies
- Greater family care giving responsibilities
In the current health crisis, these disparities have had more severe implications for women of color and millennial women. Sadly, these financial differences compound over time and can have devastating effects. As women grow older, they are also more likely to face poverty. According to the Social Security Administration 17.3% of nonmarried elderly women are living in poverty today. The figure below illustrates the higher poverty rates women over 65 experience in almost every category:
An article in the New York Times posited that this “Pandemic Could Scar a Generation of Working Mothers.” If that happens it also has the potential to increase the pre-existing retirement challenges women face later in life. While these trends are discouraging, the stakes are higher than ever for women to take control of their financial futures. The current situation also presents new opportunities as companies are more open to hiring a diverse workforce outside their local network. This is one silver lining of the pandemic: companies now have an expanded talent pool to choose from. If your current employer does not allow the necessary flexibility, you may be able to find a better fit. We recommend the following checklist to help you stay sane, maintain your earning power, and safeguard your finances:
- Have a financial plan in place
- Monitor your spending and budget
- Create, update or review your estate documents
- Fight for your job/flexibility if needed to help you manage job/household/kids/elderly parents
- Drop the ball: let go of the expectation that you must do it all
- Get emotional help/support from friends/family/professionals if needed
- Tune out the negative noise (news/social media/negative people)
- Invest in your future self and, if finances allow, hire additional help
- Find time to recharge – whatever that looks like for you
- Enlist your children in household chores
- Accept help when it is offered
We recognize there are no easy answers right now when it comes to meeting increased care giving demands while balancing career aspirations and financial stress. If you have questions about the best way to balance these changing demands with your long term financial goals, please contact us to speak with one of our financial advisors. We have four female advisors who are passionate about these issues and would love to help you position yourself for financial success.
Outline of This Episode * [1:27] Challenges women are facing during the COVID-19 crisis * [4:30] How has the pandemic affected women’s spending? * [8:32] One benefit of working from home is working from anywhere * [11:22] Work-life balance is a new struggle for many women * [13:32] This checklist can help you stay sane during these trying times * [15:58] What are you doing to stay healthy? * [20:33] It’s okay to accept help
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Every 4 years it happens: an election comes along and threatens everything. Or so it seems.
Video recap: https://youtu.be/7SkvyKEXH6s
Regardless of how you feel about the candidates, we’re here to discourage you from making fear-based financial moves. Learn how to overcome your emotions so that you don’t derail your careful long-term investment strategy.
The media won’t help you achieve your financial goals It’s hard to get away from the drama of the election coverage. It’s everywhere you look: on the TV, in the newspapers, and even from the notifications on your phone. This kind of round the clock, in your face news coverage can heighten your anxiety about the state of the world and even make you worry about your investments. It is important to remember that the media is not there to help you. Its goal is to sell advertising, not to help you achieve your financial goals.
While 2016 may seem like a distant memory, many investors were concerned at the time that a Trump victory would surely tank the stock market. We fielded a lot of calls leading up to the 2016 election discussing if a more conservative approach should be taken, at least until we had more certainty.
While Trump’s victory was a surprise to many 4 years ago, it certainly was not devastating for the stock market. In fact, the S&P 500 with dividends returned 21.83% in the following calendar year of 2017.
Investors who moved into cash to await more clarity would have swiftly regretted their decision. Check out the chart linked below which shows annualized returns for each president dating back to 1969 with the red and blue bars depicting results for Republicans and Democrats.
www.financialsymmetry.com/how-should-i-position-my-portfolio-before-the-election
How to stay focused on long-term financial results during an election year Staying focused on your long-term financial goals can be a challenge when the short-term seems so uncertain. People often feel tempted to time the market when the world feels up in the air. It’s important to remember that the market is influenced by many other events, not solely the election. So even if it seems that the election is the only thing going on, you need to stay focused on your long-term financial goals, stick with your investment plan, and avoid market timing.
Focus on the facts to help you through uncertainty One way to help you stay focused on your long-term financial goals is by looking at the facts. If you were thinking that this might be a good year to sit out the stock market, you may want to think again. On average, the stock market return in an election year is 11%, which is well above average.
Another surprising fact is that it doesn’t matter to your portfolio who is in the White House. There is actually no correlation between stock market performance and which party leads the country. Listen in to find out which two presidents saw the same economic growth during their first three years in the Oval Office, the answer will surprise you.
Focus on what you can control In investing, there are many factors that are beyond your control. However, that does not mean that your entire financial life is uncontrollable. Actually, the factors that you can control have a lot more to do with your financial success than which investments you choose. Think about all you can control: your cash flow, when you need money, when you stop earning income, what your income sources in retirement will be, how you pay for healthcare, and your estate planning. These controllables are much more important to your financial well being.
Outline of This Episode * [1:42] We go through this emotional roller coaster every 4 years * [7:35] Sometimes the best thing to do is nothing * [10:24] Have an investment plan and stick with it * [13:14] Focus on what you can control * [14:44] Today’s progress principle
Resources & People Mentioned * Episode 118
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
2020 has been a year of change. The pandemic has given people an opportunity to rethink their lives and many have been rethinking their career.
Video recap: https://youtu.be/0RCME_Y8bdI
Whether you are one of the millions of people that have been forced into a job change or whether you are considering a professional pivot on your own, there is a lot to think about when changing jobs.
On this episode, Grayson Blazek and I will walk you through all the considerations when taking on a new job. If you are rethinking your career listen in to hear how you can take advantage of your human capital.
Think about the total compensation not just the salary Often when we consider a job offer there is only one number we look at. But there is more to a job than the base salary; it is important to consider the total compensation. The base salary helps you plan your monthly expenses but understanding the bonus and stock compensation is also important.
When thinking about the bonus structure of a potential job you’ll want to consider the target. Ask what the confidence in that target is. You’ll also need to understand how the bonus incentive works. How often does it payout? Is the bonus based on your personal performance or on the performance of the team?
Some other financial considerations are the stock options and the sign-on bonus. That hiring bonus can be enticing, but don’t let it cloud your judgment. Remember a hiring bonus is only a one-time payment.
Consider the benefits package When comparing job offers you’ll also want to compare the benefits package. Make sure to request an employee benefits brochure if they haven’t given you one. The benefits package is often seen as secondary to the financial compensation but those benefits can add a lot of value to your life.
First of all, you’ll want to consider the healthcare plan. Does the company offer one? How does it compare with your current plan? How much of the plan is covered by the employer? Do they offer an HSA?
Healthcare isn’t the only benefit to consider. What about life insurance and disability? Does the company offer a student loan repayment program? How about a fitness membership. Consider the entire benefits package and how it could add value to your life.
What is the retirement plan like? In addition to the health benefits and salary, you’ll also want to investigate the retirement plan that comes with this new position. Do they offer a 401K? Will they match your contribution? What are the plan costs? What about vesting, will you actually realize that vesting period? Do they offer other ways to save for retirement?
Your human capital is one of the biggest assets you have and the way you spend it will greatly impact your financial future. So when considering a job transition, there is much more to think about than the base salary. Tune in to this episode to discover all the details you need to consider when evaluating a job change.
Outline of This Episode * [2:50] Think about the total compensation not just the salary * [8:30] What is included in the benefits package? * [13:42] What is the retirement plan like? * [20:22] Does the position include an employee stock purchase plan? * [24:31] What about the flexibility factor? * [27:54] Consider all your details
Resources & People Mentioned * Episode 97 - How to Make Decisions About Your Equity Compensation Plans * Episode 47 - Why Do I Need an HSA? * Episode 91 - Your Retirement Secret Weapon
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
We know how important it is to save for retirement, but at the same time, it’s important to enjoy life now. In this episode, we’ll walk you through how to set up a framework for your investment strategy.
Short Youtube Recap: https://youtu.be/LRcH7hwbUYY
You’ll learn how important your behavior is to your investment success, how to think through your asset allocation choices and finally how to select the investments themselves.
Investment behavior matters more than any investment you pick What is your investment approach? How you make decisions with your investments can make or break your investment success. You may think that your returns are solely based upon which investments you choose, but the reality is that your investment behavior figures into your returns much more than any specific investment that you choose.
Think about last March. What was your reaction to that volatile market? Did you buy, sell, or do nothing? Even though it’s challenging to know how to react in those moments, in a volatile market every move you make counts.
The dominant determinant of long-term, real-life financial outcomes isn’t investment performance; it’s investor behavior. –Around The Year with Nick Murray
Asset allocation is also important to your investment strategy The second driver to success in investing is your asset allocation. Asset allocation is simply the measure of how your portfolio is dispersed. How much do you have invested in stock and bonds? What percentage of your stocks are US-based? What percentage are international? Asset allocation also takes into account whether your stocks are large-cap, small-cap, etc. Your asset allocation is an important part of realizing your investment returns.
How we pick investments It’s important to have an independent mindset to help you pick your stocks. You don’t want to just follow the pack and do what everyone else is doing. There are several key areas that help us choose stocks at Financial Symmetry. The areas are ethical company culture, low costs, evidence-based, tax-efficient, and whether it is repeatable. We continually ask questions about the investments we choose. And if we don’t like the answers, we don’t invest in those companies.
Do you have an investment plan in place? What is your investment plan? Think about the strategy that you have used to make decisions about investing. An investment plan includes more than investments, it encompasses behavior and asset allocation. If you don’t have one consider working with a fee-only financial advisor. Having an investment plan could be the difference between a successful retirement and an uncertain one. What is your investment strategy? Try taking the quiz in our blog post to determine your investment composure.
https://www.financialsymmetry.com/do-you-ask-these-questions-when-selecting-investments/
Outline of This Episode * [2:25] Investment behavior matters much more than any investment that you pick * [5:28] How to pick investments * [9:41] Active funds vs passive funds * [14:41] Process is important * [19:50] Think about the strategy that you have used to make decisions about investing * [20:12] Progress principle of the day - take the quiz
Resources & People Mentioned * Dimensional Investing
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
There are fundamental principles that we all need reminders of from time to time. As kids and grandkids are heading off to college, we're talking through 6 core principles to getting off on the right financial footing. We also include a chart demonstrating the power of saving 15% of your income.
Youtube video recap: https://youtu.be/LLlJjITn6B8
If you can follow these 6 steps, it's very likely your future self will thank you.
6 Tips to Begin on the Right Financial Foot 1. Know where your money is going. Track your spending. Review your spending periodically so that you can hold yourself accountable. Budgeting brings awareness to your spending and money habits. There are many online tools that you can use to help yourself with this task. 2. Don’t underestimate the impact of a large purchase on your finances. People often underestimate the impact of a large purchase such as a large house or car. Big purchases that you aren’t ready for can really impact your future self. The payments you make toward these purchases add up over time. Give yourself more freedom by buying smaller. It’s also important to keep in mind the total costs associated with those large purchases. Maintenance and insurance increase the costs of those big purchases. When contemplating a large purchase think about the time value of your money. This exercise can really help you make these decisions. 3. Sign up for your employer-sponsored retirement plan. It’s important to take full advantage of the retirement plan that your company offers. Make sure that you are signed up for the company matching option if it is available. You want to take full advantage of compounding interest over the course of your working life. 4. Invest in a Roth IRA. The Roth IRA gives you 30-40 years of tax-free growth. You may not have access to a Roth as you get older due to income limitations, so it is a good idea to take advantage of it while you can. 5. Don’t skip risk planning. Young people often think of themselves as invincible, but life carries risks. Plan for those risks accordingly by utilizing health insurance, life insurance, and disability insurance. It is also important to create estate documents like a will as well as a financial and healthcare power of attorney. 6. Discuss money in relationships. Discuss goals and financial expectations with your partner. Don’t shy away from discussing your feelings about gifts, debt, saving, and investing.
Visualize your future self Your ability to create wealth impacted by your ability to earn as well as understanding how you spend money. If you have had trouble saving and investing, visualize your future self. When you are making a decision think about how it will affect you and your finances, not just now, but 20 or 30 years from now. What are you doing now to help your future self?
Outline of This Episode * [2:35] Know where your money is going * [5:15] Don’t underestimate the weight of bigger purchases * [7:23] Sign up for your employer-sponsored retirement plan * [9:27] Invest in a Roth IRA * [11:23] Don’t skip risk planning * [14:00] Discuss money in relationships * [16:38] Today’s progress principle
Resources & People Mentioned * BOOK - Happy Money by Elizabeth Dunn * BOOK - The Next Millionaire Next Door by Thomas J. Stanley
Connect with Haley Modin Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
2020 has brought us a new reality with our vacation mindsets. With many vacation plans put on hold or completely cancelled, the pandemic has become the impetus for second homes becoming more of a reality.
Short Youtube video recap: https://youtu.be/dZvXxmFmDxM
If you have been considering purchasing a second home, we lay out 5 questions to consider as you're analyzing your purchase decision.
Questions to ask yourself before buying a second home Have you ever considered buying a lake house, beach house, or mountain house? Vacation home purchases have surged this year, quadrupling the sales of last year. After an amazing vacation, some people want to jump right in and buy. But before you apply for that second mortgage there are some questions you need to consider.
How much can you afford? Many people only consider the cost of the mortgage, but with a second home, there is much more to consider. Where will you get the down payment? How will you pay 2 sets of utilities? Will you have 2 HOA’s to pay for? If you or your spouse lost a job, how would you continue to pay for this second home? Remember, typically a second home is not a great investment. They can be hard to sell and generally do poorly in recessions. Another important consideration is: how will this purchase impact your other financial goals?
How often will you use it? When will you use your new home? Every weekend? Winters? Summers? Will you rent it out? Consider whether you really want a second home, or 2 nice beach vacations a year.
How much time will you use it? Will you feel like you have to go there? Will it limit other vacations? Is this really where you want to spend all of your time?
Many people end up selling their vacation home because they realize that they didn’t use it as much as they had envisioned. How close is it to your primary residence? Oftentimes, the amount of use a vacation home gets is based on proximity to one’s house.
How will your life be affected by a second home purchase? Remember there are not only the financial costs to consider but the time cost as well. Another house means more maintenance. This upkeep requires a financial cost but it could also mean that you have to spend your own personal time fixing up the place. What will you be giving up in return for the new house?
If you are still keen on the idea of purchasing a vacation home after answering all of these questions, listen in to hear what steps you should take next are.
Outline of This Episode * [2:37] This year second home purchases have increased * [4:19] How much can you afford? * [7:40] How often will you use it? * [9:16] How will your life and kids’ lives be affected by this purchase? * [10:32] What about the ongoing maintenance? * [13:07] Describe your ideal second home * [13:45] How far is it from your home? * [15:47] Do you plan to rent it out? * [20:57] The key takeaways from today
Resources & People Mentioned * Michael Hyatt’s Vacation Optimizer
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
You spend half your life preparing for retirement, but that doesn’t mean that there won’t be surprises when you get there.
YouTube Recap here: https://youtu.be/zzEnHR9Qv8I
Retirement can bring on both positive and negative surprises, so it's important to prepare the best you can beforehand. So in this episode we breakdown the different kinds of surprises you may experience in retirement and how you can be ready.
A year of surprises 2020 has been a year of surprises. It seems that every time we turn around the world has something new in store for us. Life has changed substantially and we are all dealing with a new reality. A changing reality amidst retirement can be scary if you aren’t prepared. If you want to be prepared for any eventuality during retirement then listen to this episode now.
5 positive retirement surprises In retirement, there could be good surprises or bad ones. We like to start out with the potentially beneficial surprises. You’ll want to hear which surprises might start out negative but could lead to positive changes.
- A second career - Some people find that retirement brings them into a second career. They may find this second round more fulfilling or it could be a way to give back to their community. Being able to contribute and still earn an income is an unexpected surprise for many.
- An unexpected inheritance - While the situation may not be that positive, an unexpected inheritance could completely change your retirement plans. Coming into money unexpectedly requires careful consideration and planning
- A layoff - Not everyone retires when they want to. If you get laid off close to retirement age you could turn that negative into a positive especially if it includes a severance package.
- Increased travel - If you have family that moved across the country or even across the world this could bring more travel into your retirement itinerary. Although seeing new places is always exciting, it’s important to prepare for the added expenditure.
- A change in family dynamics - You may be surprised by taking on a caregiving role in retirement. This role could be for aging parents or even raising the grandkids. Another way that family dynamics change in retirement is through grey divorce. Listen in to discover how changes in family dynamics can change your financial outlook as well.
Don’t let negative changes in retirement surprise you Unfortunately, retirement doesn’t always bring sunshine and rainbows. It’s important to be prepared for negative surprises in retirement as well.
- A decline in health - Health changes can change your finances as well. You may find that your Medicare premiums are higher than expected. Find out how you can rectify that by listening to episode 104. Long term care can also have a huge impact on your retirement finances.
- Downsizing didn’t have the expected effect. Sometimes we think that downsizing in retirement will bring substantial financial benefits but that isn’t always the case.
- Inflation can be the silent killer of retirement savings. Even if you pay off your home taxes and insurance are still there and they tend to increase over time. Is your portfolio prepared to battle inflation?
- Taxes continually surprise us. Many people discover that in retirement they are still paying high tax rates.
- A market correction - sometimes the timing of market corrections can come as a surprise (although it shouldn’t!) How you respond to a market correction matters. Learn how to factor your risk tolerance into your portfolio so that you can be prepared for any eventuality.
Outline of This Episode * [2:30] What are you going to do in retirement? * [4:38] You receive an unexpected inheritance * [6:01] Turn a negative into a positive * [10:12] A caregiving role can be a surprise * [13:42] Healthcare costs can be surprising in retirement * [16:02] Sometimes downsizing doesn’t provide the expected financial benefits * [19:35] Taxes can be surprising * [20:21] Market corrections can come as a surprise
Resources & People Mentioned * BOOK - The New Retire Mentality by Mitch Anthony * Episode 104 on IRMAA * Episode 98 on Long term care
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
No one can argue that the stock market has been tumultuous lately. During times of market uncertainty, investors seem to become even more certain about their predictions of the next stock market moves.
Short YouTube Recap: https://youtu.be/ShmeDGPQ3l4
As people make these predictions over time the stakes get bigger and bigger. Listen to this episode to hear what steps you can take to fight this prediction hubris.
Wealth isn’t determined by investments selected but by investor behavior When markets become more volatile, the desire to control our outcomes becomes stronger. Our instincts pressure us to make predictive moves of what we feel is going to happen. This is when the ability to stay disciplined can have the biggest impact.
Otherwise, we find ourselves sweating out extreme buy and sell decisions that could cause you to miss the biggest market moving days. There was a good chance of this with our latest examples over the last 3 months, when you saw 3 of the worst 25 single day losses and 2 of the largest 25 day gains, happened in the S&P 500.
This is why we created a thought exercise to help you reflect on your investment strategy during times of market stress. We’re calling it the “R” Plan, where we provide five steps to fight the inevitable prediction hubris that occurs during these periods.
The R plan
- Remember your past predictions. Think about the predictions that you made over the past few months. How did those turn out? Do you remember that overwhelming fear we all felt in March? Do you remember 2008? How about the tech bubble? How did your stock market predictions turn out during those tricky times?
- Regret - The decisions you make in the short term can have a big impact on your long-term wealth. The day to day swings can be huge when the market is volatile. Retirees often feel that they don’t have the time or ability to make up for losses and many decide to sell and flee to the safety of cash. But deciding not to ride the wave can lead to serious regrets.
- Resilience - We often forget how resilient the stock market is over time. People don’t acknowledge the fact that stock market declines are always temporary and that they advance 75% of the time. It’s also good to remember that bear markets are shorter than bull markets. Declines are temporary but gains are permanent
- Be more conservative if you are uncomfortable with the thought of losing half of your asset value.
- Diversify - we may have mentioned this a few times before.
- Hire a professional an investment planner as well as a financial planner
- Consider all your options
- Implement an investment strategy based on your financial goals
- Review - When markets are volatile take the opportunity to reflect on your portfolio. Think in dollar figures rather than percentages to make potential losses more real to you. Consider these tips as you review your portfolio
- Reward - Staying invested in a balanced portfolio with equity exposure has provided long-term rewards. Also, returns are strongest after the steepest declines. Sticking through the rough periods to get to the rewards is the hard part. Because it’s rarely a smooth ride. Returns in any given year have ranged from as high as 54% to as low as -43%. In fact, the S&P 500 had a return within plus or minus 2% points of this 10% average in only 6 of the past 94 calendar years, according to Dimensional research.
Resources * Worst Investing Dilemma - Blair Belle Curve * Guide to Market Recoveries – Capital Group * Investors Approaching Retirement Face Painful Decisions - WSJ * Investing in Uncertain Times – Ally Bank * When Stocks Are In the Red Don't Make This Mistake - CNBC * Episode 27 - A Financial Advisor's Worst Investment Mistakes
Outline of This Episode * [2:06] How can you fight against your instincts of making predictions? * [7:04] The decisions you make in the short term can have a big impact * [10:21] The stock market is resilient * [14:54] Tips to fight stock market worry * [20:54] Focus on the reward
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast * Apple Podcasts * Stitcher * Spotify * Google Podcasts
Special needs financial planning is an intricate and delicate process.
Youtube Recap Here: https://tinyurl.com/y7wchxee
A process loaded with challenging emotional and financial decisions. So below we provide 4 steps to think through if planning for your special needs loved one’s future.
More than 40 million individuals or about 10% of total American population are living with a disability according to the US Census. This takes a careful planning approach to assure needs are met.
More Detail Here: https://bit.ly/2BbvxLv
Summary
- Approach – Highlighting the importance of constructing an experienced team to help guide families through the special needs planning process
- Benefits Available – What governmental benefits and programs are available to my special needs loved one now and as they age?
- Consider Your Estate Plan – What steps should be taken to align your estate plan to provide ample financial support to your special needs loved one while making sure their benefits are not negatively affected.
- Develop Your Savings Strategy – What accounts are available for special needs individuals and which are the best fit for your situation
In times of crisis and uncertainty, the potential need to access our savings seems to rise to the forefront. However, many of the accounts that we utilize for our savings are tied to certain restrictions. For example, the age 59.5 restriction for retirement account withdrawals without facing a 10% penalty, or HSAs and 529 accounts which must be used for medical expenses and education expenses respectively. These unique accounts are great tools to efficiently invest our savings given the tax deferred or tax-free growth. The issue though is what happens when we need funds to cover items that don’t meet the parameters and restrictions set forth by these accounts.
COVID-19 has me pondering my own finances and how well equipped they are to be flexible in times of need. These circumstances we’re in have produced many implications to our finances and society with a big one being the impact of education from pre-school age all the way through college.
We’ve seen a shift to more online educational resources in recent years and this has only escalated with the impacts of COVID-19. College students have spent the better part of their spring 2020 semester living at home and completing their coursework online. While certainly not the college experience these students anticipated, they’re still able to receive a quality education without the cost of living in a dorm room on campus or 3+ meals per day at the campus dining hall. We’ve even seen some refunds returned to students which if were withdrawn from a 529 account originally, then that money needs to go back into the 529 account to avoid taxes/penalties.
So what does this mean for our college savings strategy? For my two 2.5-year-old boys I’ve been saving monthly in a 529 account since they were born with intention to provide a portion of their college education from the 529 account. However, I’ve reconsidered this strategy this week and am shifting to utilizing a couple other accounts for their future savings. At Financial Symmetry we had many discussions with clients about not over-funding college savings accounts given the high taxes and penalty if not used for education along with discussions about savings for the parents own retirement and financial independence.
Roth IRA A great savings tool as the contributions can we withdrawn at any time tax-free, and the earnings grow tax free and can be withdrawn after age 59.5. This is the primary account I’ll now be using for future education needs for my twin boys as I’ll be able to withdraw the contributions for the education if needed. If for whatever reason they don’t need those funds for college then no worries as I can retain the Roth IRA for my own future financial needs. With a 529 plan though, I wouldn’t be able to do that as those funds would be restricted to education expenses.
Brokerage Account I ran the numbers on the actual advantage 529 accounts do provide. Say my monthly contributions add up to $15k and earn $5k over the years to equate a $20k balance. Those earnings would be tax free in a 529 account for education expenses. If those funds were instead in a taxable brokerage account and assuming a 22% federal tax bracket this would be $1,100 of tax due on those earnings. You must weigh the flexibility of a non 529 account vs. the tax savings it can provide. Also consider that with proper tax planning in a brokerage account could mean even less taxes due given accessibility of tax efficient funds, tax loss harvesting, donating earnings to charity as ways to lower that tax bill.
So who should use a 529 account? * For those that already are maxing Roth IRA contributions, contributing a large amount to 401ks, and maxing HSA contributions. * Those who exceed the AGI limitation of Roth IRAs and are unable to utilize the back-door Roth strategy * High probability of attending private grade school as 529 accounts can now be used for earlier education than college. * If grandparents or others are making gifts to the child, then a 529 account is still a great vehicle to receive those gifts. * If you live in state with tax deduction for 529 contributions (North Carolina does not offer this).
Certainly nothing wrong with using a 529 account as you’re still saving for your children’s future needs, but just consider there are other vehicles that may be more appropriate given your financial situation. Also, depending on your financial situation there are other factors to consider such as financial aid.
Resources and Other Podcast Episodes Best Tips for Your Young Child’s College Savings
Great Options to Save for Your Child’s College Education
Tax Breaks and Loan Options to Pay for College
My Best Spring Break Ever (The Cost of College)
College Planning Night
7 Ways to Use Your 529 Plan
Why is the stock market doing so well when the economy is not?
Short Youtube recap here: https://youtu.be/QubNZjHHN04
With headlines about skyrocketing unemployment and an impending recession, how has the stock market rebounded so quickly? Despite the historic drops in March, the S&P 500 is only hovering in a range 10-15% from its overall highs. While the stock market and the economy are influenced by each other, there are key differences that emerge during market extremes.
The economy has taken a beating We have all heard the negative news surrounding the economy. It seems to be one of the only topics that news channels talk about. GDP declined 5% in the first quarter and is expected to decline by 20-30% in the second quarter. Unemployment has shot up at a historic pace from 5% to 15% in just a few short months. However, the Federal Reserve and the CARES Act have helped keep people and companies on their feet.
Why is the stock market doing so well? The stock market went through record-setting drops back in March but since then it has bounced in the 35-40% range off the lows. We are still nowhere near the all-time highs that preceded those March declines, but the S&P 500 continues to rise and has been trading in a range 10-15% below it's all time highs reach in February. This creates confusion for most in the face of terrible economic headlines. One reason is that companies and investors are constantly looking at what is to come. They aren’t making decisions based just on the next 6 months, instead, they are projecting the growth over the next 5-10 years. It’s also important to remember that for every distressed seller there is a buyer. Investors are considering their bets for the future and if they anticipate we've seen the worst, then better than expected potential outcomes can drive stocks higher.
The stock market recovers before the economy Historically, the stock market tends to make a recovery before the economy. For example in 2009 the stock market hit its bottom in March, but the country continued in its recession until the second half of that year. World War II is another example. The stock market was up every year during that period, despite all the turmoil going on in the world and the restrictions that were put in place by the war.
What will happen in the stock market going forward? Well, unfortunately, we don’t have a crystal ball. But there are plenty of opinions you can find from watching the headlines or talking to your neighbors. This type of information can be detrimental not only to your mental state but also to your pocketbook. Allowing your emotions to take the investing wheel, can leave you second-guessing your investment strategy. In fact, the next time you want to look at your investment statements, we'd suggest opening your financial plan instead. You’re better off focusing on what you can control, like your risk tolerance, your rate of saving and spending, and your tax situation. Evaluating how your personal economy has changed, can leave you better positioned for the long-term. This allows you to have the appropriate investment allocations, so your worry can be abated, no matter how wild the stock market or economy gets in the short-run.
Outline of This Episode * [1:27] Investments, forecasting, and good investments strategy * [5:14] The stock market looks forward * [6:24] What will happen with the economy and the stock market going forward? * [9:09] The stock market doesn’t trade on good or bad, simply better or worse * [11:43] Focus on what you can control
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Today we're taking a deep dive to explore the retirement changes within this landmark piece of legislation. On this episode, you’ll learn what CRD’s are, who are qualified individuals, and how to note CARES Act withdrawals on your tax return. Join us to hear about financial opportunities that you may not have considered.
Short Youtube video recap: https://youtu.be/2QjSpi3op_U
What is the purpose of the CARES Act? The CARES Act was recently passed to help Americans get through this difficult time that has been filled with job losses, furloughs, lay-offs, and the mandatory closing of workplaces. The goal of the new law was to make it easier for citizens to access their money during these stresses. The CARES Act makes retirement account withdraws easier and more accessible without the standard early withdrawal penalties.
What are Coronavirus Related Distributions (CRD’s)? Coronavirus related distributions or CRD’s allow for qualified individuals to take up to $100,000 from their retirement accounts during the period of January 2020 to January 2021. This withdrawal for qualified individuals is taxable but you can pay the taxes on these withdrawals over a period of 3 years. It’s easy to remember what the CRD’s offer by thinking of the 3 R’s.
- Relief - The CARES Act offers relief from the standard 10% penalty when you pull money from an IRA or 401K.
- Repay - You can repay the withdrawals over a 3 year period.
- Regimented - The taxes from these withdrawals are regimented and can be paid over a 3 year period.
Who are qualified individuals? The CRD’s are only available to qualified individuals, but who exactly can qualify for these withdrawals? You can qualify if you or your spouse has been diagnosed with COVID-19 or if you have experienced a loss of income during this time. You may have experienced a job loss, a reduction of hours, or an inability to work due to lack of child care. If you do qualify for a CRD you’ll want to examine all of your options before you make this choice. Make sure to work with a professional to see if this is the best choice for you.
This year you do not have to take an RMD The government doesn’t want to force you to sell your stocks at lower prices, so for 2020 RMD’s will not be required for anyone. If you have already taken your RMD for the year you can even pay it back. Listen in to learn how. Instead of taking your RMD, you may want to consider doing a Roth conversion.
Outline of This Episode * [1:27] $100,000 withdrawal for qualified individuals * [4:46] Examples of how to use your withdrawals * [5:55] Who are qualified individuals? * [8:00] This year you do not have to take an RMD * [13:10] Make sure to note the CRD on your tax return
Resources & People Mentioned * Episode 108
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast * Apple Podcasts * Stitcher * Google Play
Today we explore some of the most common questions that people ask during a market decline. We discuss what a financial advisor does and doesn't do for their clients in bear markets, whether you should refinance, and the benefits of tax-loss harvesting. Listen in to hear what you could be doing to stay proactive during this market decline.
Youtube recap here: https://youtu.be/QUCpQcf2vu8
What are the benefits of working with a Financial Advisor during a Stock Market Decline? Financial advisors can be a great resource during a stock market decline. The fear you feel in these situations can be paralyzing. If you don’t have a financial advisor to help you act in your best interests, you may end up not taking any action at all. So what are some things a financial advisor can do for their clients during these challenging times?
- Creating a financial plan and an investment plan. You need to know what your strategy is and why you are investing. Not having a plan is putting yourself at too much risk. Listen to the wise words of Warren Buffett, “risk is not knowing what you are doing.”
- Rebalancing. When the market takes a dive, it could be an excellent time to rebalance your portfolio.
- Tax-loss harvesting. Nobody likes to pay taxes and tax loss harvesting is a great way to minimize your current and future taxes.
- Help avoid making irrational decisions. It’s hard not to sell when the market drops 10% in a day or 30% in a month. A financial advisor can help talk you down off of that cliff and show you the light
Should I Refinance my Home? One way to give yourself a bit of control during times when life is feeling out of control is to consider refinancing your home. Since mortgage rates have declined in recent months now may be the right time for you to refinance. You’ll want to analyze what your break-even point is to see if it is worth it. There are many different ways you can go about refinancing. You could use a mortgage broker, you could go through your own bank, or you could use an online mortgage lender. Listen in to hear the differences between those 3 options.
What is Tax-Loss Harvesting and why is it important during a market decline? We all feel the urge to do something right now. But instead of doing something that could be detrimental to your wealth, tax-loss harvesting can give you the opportunity to do increase your wealth over time. The biggest question we hear surrounding tax-loss harvesting is why would I want to lock in losses? The answer is don’t think of it as a loss, but an exchange. You are taking that loss to reinvest in something similar. Look at tax-loss harvesting as a one way to help you rebalance. Find out if tax-loss harvesting is right for you by listening to Allison Berger’s excellent analysis.
Outline of This Episode * [0:27] Should I use a financial advisor during a market decline * [4:50] Should I refinance my home? * [8:36] What is tax-loss harvesting?
Resources & People Mentioned * Preparing Your Portfolio for a Bear Market
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast * Apple Podcasts * Stitcher * Spotify * Google Podcasts
The CARES Act was just recently passed and the new law will impact just about every American. But do you know how it will affect you?
View Youtube recap here: https://youtu.be/BTaeWH0aEB0
On this episode of Financial Symmetry, Grayson Blazek joins me to give you some actionable information that you can use to help you consider how best to take control of this challenging financial situation. During this stressful time, it will be helpful to learn as much as you can to give you a feeling of empowerment.
Who is eligible for the recovery rebate? The most discussed part of the CARES Act is the recovery rebate. The full rebate is eligible for taxpayers that make $150,000 or less when filing jointly with their spouse or $75,000 for single filers. If you make more than that you can use a calculator discover how much you will receive. The full rebate is a one-time payment of $1200 per adult and $500 per qualifying child. The recovery rebate will be directly deposited into the bank account listed on your most recent tax return. Listen to this episode to hear if you should file your taxes right away or if it would be best for you to wait a bit longer.
What happens if you or your income is impacted directly by Coronavirus? If you have been impacted directly from the Coronavirus directly or if you have experienced lost wages then you will be able to pull funds out of your retirement accounts in the year 2020 without the usual 10% early withdrawal penalty. These funds will still be taxed, but you can spread the tax burden over a period of 3 years if needed. The CARES Act also changes the maximum 401K loan limit from $50,000 to $100,000. You’ll want to carefully consider before taking the full loan amount.
What else did the CARES Act change? There were several other changes that should be noted as well.
- No RMD’s in 2020. The CARES Act waived the required minimum distributions for the year 2020.
- You can take an above the line deduction of up to $300 for charitable giving. To encourage citizens to continue supporting their favorite charities during this crisis the law has created this deduction for one time charitable giving.
- Federal student loans have been suspended until September 2020. This is only for federal student loans, but this was designed to help people free up their cash flow.
- There has been an increase in unemployment benefits in both the maximum amount of money you can receive and the amount of time that you can receive it.
- If you have a federally backed mortgage you can extend your loan by up to 6 months.
How did healthcare change with the CARES Act? This landmark legislation didn’t only affect people’s finances, it made some changes to health care as well. The CARES Act has ensured that health insurance will have to pay for any COVID testing or potential vaccines that are developed. It also expanded qualified medical expenses for HSA’s. What will be the biggest change brought to you by the CARES Act?
Outline of This Episode * [1:27] Who qualifies for the recovery rebate? * [8:18] What happens if your income is impacted directly by Coronavirus * [13:12] What has changed with RMD’s? * [14:30] Qualified charitable contributions have changed * [17:38] Federal student loans have been suspended until September 2020 * [20:11] Increase in unemployment * [23:44] Will your mortgage payment be delayed? * [26:52] What changed in health care?
Resources & People Mentioned * Stimulus check calculator
Connect with Grayson Blazek Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast * Apple Podcasts * Stitcher * Google Podcasts
We’re all surprised at the speed of changes the coronavirus has brought in our lives. Working from home, school closures, and social distancing have become our new norms. Stock markets have fallen in to a bear market in less than a month. Uncertainty related to COVID-19 grows daily, as we all know the amount of new cases are destined to rise.
It can be hard to find positives through the barrage of more disappointing news each day. But there are steps you can take to prepare your portfolio during this bear market. In today’s episode, we share 7 tips to help ease your worries during this challenging time.
Behavior Determines Results We all feel nervous about stock market drops. Despite bear markets happening an average of every 6-7 years, it never gets easier to handle emotionally. During these times, investment behavior determines your returns more than the investments themselves.
Having an investment plan beforehand adds discipline to your decisions amidst the turmoil. If you’re questioning what you should do, then referring back to your plan will remind you of your highest priorities.
When you think about it, you only really have 3 options to choose from.
- Sell and go to cash
- Hold tight and don’t do anything
- Buy and take advantage of the discounts
With the first one, being much more damaging long-term than the others. To cope with this, we’ve put together seven things you can do to help ease your worry so you are better prepared to make more sound financial decisions.
7 things you can do to prepare your portfolio during a bear market 1. Don’t react to panic – Panic is the enemy of a sound investment strategy. In the heat of a decline, is not the time to rush into irrational thinking. Even though it’s difficult to fight your emotions, your investment behavior will determine your return more than the investments themselves. 2. Write down how you’re feeling – Do you remember how you felt in 2008? With the passage of time, our brains rewrite our history. If you write down how you are feeling now, then you can reflect back and read how you really felt during that time period rather than reciting stories your brain selectively chooses to remember. This will help you more accurately temper or accelerate your risk once things start to look up again, depending on your situation. 3. Take advantage of tax-loss harvesting – Help your future tax bill by making some moves now. Tax-loss harvesting is a strategy that is used by selling one holding that has a loss in a taxable account to buy a similar holding, so that your overall allocation doesn’t change. You can then use the realized loss to offset investment income (and up to $3k of ordinary income) in the future. Often there are a few investments that you may have been holding because of large capital gains. This may now allow you to exit those holdings and bank realized losses providing a nice silver lining. 4. Roth conversions – If you were looking to convert money from a pretax IRA to a Roth IRA then this may be a good time to evaluate. With stock market values lower (currently over 30%), IRA accounts could be significantly discounted. If converted to a Roth IRA, the growth that occurs when the market recovers would then be tax-free. This maneuver takes careful analysis for your specific tax situation as the IRA conversion will be taxable. 5. Could be good buying opportunity – This might be a good time to think about dipping your toes back into the water. The hardest times to buy are when you typically get the best returns. Depending on your cash flow needs, this could be a very attractive long-term buying opportunity. No one knows where the bottom will be, but by buying now you’ll be saving 30% from just last month. 6. Focus on what you can control – You can’t control what’s happening in the stock market but you can control your spending. You can also think about other controllable actions like whether you have enough life insurance or if your estate documents in place. 7. Having a financial advisor can help you – if you are struggling right now and doing it all on your own an advisor can help you talk through your feelings and use the tools you have in your toolbox.
Outline of This Episode * [1:27] Don’t rush into irrational thinking * [5:58] Record how you feel now so you can reflect on it later * [7:23] Take advantage of tax-loss harvesting * [10:25] Roth Conversions * [14:26] Focus on what you can control * [17:36] Having a financial advisor can help you walk through your feelings
Resources & People Mentioned * Tax Loss Harvesting: When Investment Losses are a Plus * Your Bear Market Survival Guide
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast * Apple Podcasts * Stitcher * Google Podcast
Cornoavirus concerns continue to impact the financial markets, as have all the numberless crises that have gone before it.
While the potential human and economic effects are very unsettling, what actions should a prudent investor take given this new development?
Short Video Recap Here: https://youtu.be/Wsy6OTuY-yI
It remains impossible to predict when and how this problem will be resolved. Likewise, it is impossible to know when and how the markets will anticipate (or react to) such a resolution.
In this episode of the Financial Symmetry show, hosts Chad Smith and Mike Eklund, evaluate all the available information to determine how you should approach your investment strategy.
Market declines are a regular occurrence and happen frequently. Selloffs provide an opportunity for investors to absorb new information, squeeze out excesses and reset values to more attractive levels.
For existing retirees, we set-up portfolios to include 5-7 years’ worth of high-quality bonds/cash to absorb market declines. For savers, market declines are great news as it allows you to buy stocks at lower prices through regular contributions.
We understand the desire to try to head off market declines by moving into safety. However, our view is that the only way to capture the full permanent returns of equities is to ride out their temporary declines.
The danger of trying to time the market is that you will sabotage your personal investment strategy by getting out at the wrong time and then compounding that by getting back in at the wrong time.
Summary * Fear is a natural reaction. * It's impossible to predict the future. * There is always uncertainty in investing. * Disciplined investing is hard. * If you are feeling uncertain, review your financial plan before your portfolio.
Other Helpful Links * Capital Group: Coronavirus Rattles Markets: What's Next for Global Growth? * Dimensional Fund: The Coronavirus and Market Declines * Our Ebola commentary from 2014 * CNBC: Avoid this investing mistake as coronavirus fears grip the markets * Episode 71: How to Ignore Stock Market Noise * Episode 75: The Bear Market Survival Guide * A Wealth of Common Sense: What If You Only Invested at Market Peaks?
The Financial Symmetry Podcast is an original podcast from Financial Symmetry in Raleigh, NC. To learn more about the show or the past 105 episodes, visit https://www.financialsymmetry.com/retirement-podcast/.
The hosts and guests in this video do not render or offer to render personalized investment or tax advice in this podcast. This podcast is for informational purposes only and does not constitute individualized advice or a guarantee that you will achieve a desired result. You should consult with appropriate tax and financial advisors for advice specific to your situation.
Will your retirement regrets list be full of "I wish I would have...?" What if you could use regrets of other retirees to change or improve your current course?
Short Youtube Recap here: https://youtu.be/CiGxXeem2yI
Listening to the wisdom of those that have gone before you, can help you avoid their big mistakes and take advantage of financial opportunities you may have missed.
In our role as financial advisors, we have the unique opportunity of hearing a long list of retirement regrets. In listening to their perspectives, we gain an understanding of the path they took and the things they wish they could have done to prepare for retirement.
In this episode of the Financial Symmetry podcast with Chad Smith and Allison Berger, we break down the top retirement regrets that investors typically experience. Listen in so you can learn from others and ensure that you don’t make the same mistakes they did.
9 Avoidable Retirement Regrets 1. I wish I had a detailed retirement plan. 3 out of 4 baby boomers don’t have a detailed retirement plan. Without a retirement plan, it makes it hard to anticipate what may come next. You'll need to consider those big purchases, how often will you buy cars, and if you are going to move. Life can feel much more uncertain in retirement, without the dependability of a steady income you’ve relied on your entire working life. Without a plan, opportunities could be passing you by each year. 2. I wish I hadn’t planned to work so long. There are many people who plan to work until age 70, but due to unforeseen issues, they had to stop working before they were ready. Some had to stop due to family illness, layoffs, or forced early retirement. Whatever the reason, running what-if scenarios could leave you more prepared to face the unknown risks that are lurking. 3. I wish I would have started saving in a tax-free account earlier. An often overlooked strategy while saving, is your lifetime tax rate. By focusing on tax-free savings, it creates flexibility for future retirement withdrawals. There are many that think they can’t take advantage of a Roth IRA due to having a high income, but there are options. Back-door Roths, after-tax 401k savings and HSA's all offer other opportunities. We've included past detailed episodes on all three in the links below. 4. I wish I didn’t have such a big house. Many people become enamored with the idea of a mansion. So much that they sacrifice saving in retirement accounts. More expensive homes require more expensive upkeep. The social pressures in higher priced neighborhoods cause extra lifestyle creep. Years pass, and you realize savings isn't where you thought it would be. Once reaching retirement, downsizing becomes the new trend but moving is often delayed due to frustrations of moving and decluttering their homes. 5. I wish I hadn’t worried so much about market drops. The idea that you could lose half of your savings is scary. There is always a reason you should not invest, but inflation is the silent killer that awaits you, if you don't. Finding the appropriate risk is vital to helping you sleep at night. Research shows a tremendous difference when missing the best days in the market. So while timing market drops is tempting, a buy and hold strategy with appropriate percentages of risk is your best bet. 6. I wish I hadn’t counted on rental income. Be careful about counting on rental real estate if that is your plan. Assure you are factoring in all expenses to your calculation with forecasting returns on rental real estate. Appreciation rates will suffer, if proper maintenance is not kept up on properties. This could affect the long-term health of your financial plan. 7. I wish I would have invested more in friendships. Think intentionally about how you will spend your time in retirement. Many people end up socially isolated in retirement. Retiring to something vs. from something can add to happiness levels and improve your odds of a successful retirement with less regret. 8. I wish I hadn’t taken Social Security so early. Delaying Social Security can be a benefit in multiple ways. An alarming amount of people (57%) take Social Security before their full retirement age. This decreases the amount they could receive and provides more tax flexibility. Less guaranteed income, provides for more IRA/401k withdrawals at lower tax rates potentially. If you are married, you might also consider the survivor benefit element. Listen in to hear details of the benefits of delaying your Social Security. 9. I wish I had had more experiences. Many wish they had traveled more while they were healthy or while their kids were still at home. Too many look back with the regret of waiting to late to travel.
Outline of This Episode * [3:07] I wish I would have had a detailed plan earlier * [5:06] I wish I hadn’t planned to work so long * [7:07] I wish I would have started saving in a tax-free account earlier * [10:30] I wish I didn’t have such a big house * [12:47] I wish I hadn’t worried so much about market drops * [17:45] I wish I hadn’t counted on rental income * [20:33] I wish I would have invested more in friendships * [22:45] I wish I hadn’t taken Social Security so early * [26:00] I wish I had had more experiences
Resources & People Mentioned * Episode 47 - Why do I need an HSA? * Episode 101 - The Social Security Tax Bubble * Episode 22 - Don’t Fail in Retirement * Episode 36 - Money Can Buy Happiness * Episode 91 - Your Retirement Secret Weapon: After Tax 401k * Article - High Earners Can Still Save in a Back-door Roth IRA * Nerdwallet - How to have a "no regrets" retirement * BOOK - The New Retirement Mentality by Mitch Anthony * Book - Your Retirement Quest by Alan Spector * BOOK - Happy Money by Elizabeth Dunn
The Financial Symmetry Podcast is an original podcast from Financial Symmetry in Raleigh, NC. To learn more about the show or the past 104 episodes, visit https://www.financialsymmetry.com/retirement-podcast/.
Connect with us here:
- Allison Berger on Twitter @AbergerCFP
- Chad Smith on Twitter @csmithraleigh@TeamFSINC
- Follow Financial Symmetry on Facebook
Subscribe to this Podcast:
Apple Podcasts <> Stitcher <> Google Play
How closely did you look at your Medicare premium notice letter this past December? If it mentioned an IRMAA adjustment, and you experienced a life-changing event, you may want to look again. There's a few steps you can take that can save you thousands of dollars in Medicare premiums. In this episode, we are breaking down the the tax cliff known as IRMAA and how proper planning can help you avoid overpaying for your Part B and Part D Medicare premiums.
YouTube recap: https://youtu.be/BQ7K_DeJiHs
What is IRMAA? This often misunderstood or overlooked area of the tax code is how Medicare determines the premiums that are automatically taken from your Social Security check. IRMAA stands for Income Related Monthly Adjustment Amount. Understanding the IRMAA threshold is key to understanding your Medicare premium.
Watch out for the IRMAA tax cliff Generally, when you think about Medicare you think about age 65 and above. It’s actually important to begin thinking about Medicare when you are 63. Your Medicare premium at age 65 is actually based on the income that you made 2 years prior. So if you were in one of the higher income brackets before you retired, your Medicare premium will reflect that. There are 5 tiers of IRMAA and if you go even $1 over you will be knocked into the next bracket. If you end up in the highest tier you could be paying over $4000 in extra Medicare Part B premiums.
How can you plan ahead? Now that you know about IRMAA you can begin to plan ahead. If your AGI is $87,000 or less for singles or $174,000 or less for a married couple then you will qualify for the Medicare Part B baseline premium which is $144.66 per person per month. It’s important to understand your income sources and whether they are taxable or not. Knowing where you fit in the IRMAA tiers will save you money. Listen in to hear more about IRMAA and how it can affect your retirement plans.
What can you do to appeal? If you didn’t plan ahead and are stuck with high premiums you may be able to appeal. You can appeal based on marriage, divorce, death of a spouse, work stoppage, work reduction, or loss of income. If you qualify for an appeal then you’ll need to fill out an SSA44. There are 5 steps to follow to appeal process. Listen in to discover what you can do if IRMAA has got you down.
Outline of This Episode * [3:27] Which parts of Medicare does IRMAA affect? * [7:20] An example * [9:55] How can you appeal?
Resources & People Mentioned * IRMAA Tables
Connect with Grayson Blazek Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast
How do you best invest at all-time market highs? In this episode, we are walking through the strategies and disciplines you'll need to be a successful long-term investor.
Short Youtube recap here: https://youtu.be/fEXnQ8GaCuk
Visit full article notes here: https://wp.me/p6NrVS-3i0
Short-term market forecasting is impossible to predict We often get the question of whether people should continue to invest given the all-time market highs. Well, let’s take a look back to just a year ago. At the end of 2018, the U.S. stock market declined by 20% and everyone was worried about a potential bear market. But it turned out that 2019 was a fantastic year despite all the worries.
We can’t tell you when will be a good time to invest in the short-term. No one can. No one has a crystal ball that can predict those outcomes. It is important to formulate a decision-making process that is not outcome-based. Financial decisions should always be processed based instead.
What does the long-term history of investing tell us? Think about where you were in December 2009. You probably weren’t too optimistic about the economic future. But it turned out the S&P 500 was the best place to invest over the past 10 years. But in the 10 years preceding it was the worst place to invest.
There is never an easy time to be an investor. Investing always involves risk and many see that risk as a reason not to invest. There is always a risk and plenty of reasons not to invest. But when you look back, you’ll realize recessions, while painful, happen quickly but the market rises over the long run.
A diversified portfolio will always include something you don’t like After the S&P’s strong run the past 10 years many people wonder why bother to invest internationally or why they should hold any bonds in their portfolio. Even though the S&P 500 performed quite well over the past 10 years, it was the worst place to invest during the previous 10 years. To protect yourself, you’ll need to be diversified. Bonds can not only provide diversification but they can provide income and capital preservation as well. They may not be the most exciting, but bonds will ensure you don’t have all of your eggs in one basket.
So what is the 2020 market outlook? Once again we find ourselves in a time of uncertainty. There’s the threat of war, a presidential election, and who knows what else could happen next. Given this time of uncertainty, what changes should we be making to our portfolios? The only sure answer is that you should only be taking as much risk as you can handle. Don’t let recent market performance lull you into taking too much risk.
Listen in to hear the outlook for 2020 and beyond.
Outline of This Episode * [2:27] Short-term market forecasting is impossible to predict * [5:35] Let’s look at how the markets have performed in the long-term * [10:52] Take a look at bonds * [15:10] What has happened with consumer confidence? * [17:35] Why hold foreign stocks? * [20:15] What changes should we be making to our portfolios given the current climate? * [23:54] What do the experts predict to happen over the next 10 years?
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Spotify <> Google Podcasts
The SECURE Act is the biggest piece of retirement legislation to pass since 2006.
On this episode, we discuss what the SECURE Act is and how it will affect you and your retirement plans. The acronym SECURE stands for "Setting Every Community Up for Retirement Enhancement."
Watch corresponding Youtube video here: https://www.youtube.com/watch?v=d0K8KBlCYhs&t=2s
In our breakdown of the new bill, you’ll learn about the highlights including new IRA rules, changes to 401K’s, non-retirement changes, and extenders.
The Stretch IRA is not as stretchy One of the most impactful changes in the legislation deals with the Stretch IRA provision for non-spouse beneficiaries. Under the old law, upon a person’s death, the non-spouse beneficiaries of their 401K’s and IRA’s could withdraw savings over the span of their entire lifetime.
Now, as of January 1, 2020, the Secure Act compresses that time period to only 10 years after the year of death, thus speeding up the timeframe for taxes to be paid on these pre-tax savings. This complicates some old strategies being used, but creates new planning techniques for others.
There are a few eligible designated beneficiaries that will avoid the 10 year payout. These include:
- the surviving spouse of the deceased account owner
- a minor child of the deceased account owner
- a beneficiary who is no more than 10 years younger than the deceased account owner
- a chronically-ill individual
- a disabled individual
Tune in to see how you may need to tweak your retirement withdrawal strategies to best work for you and your heirs.
More changes to IRA’s The Stretch IRA wasn’t the only thing that changed with IRA’s. The required minimum distribution (RMD) age was raised from age 70 ½ to 72. This means, for those yet to reach 70.5 by 1/1/2020, that you won’t have to take funds out of your IRA until age 72. You’ll have a year and a half longer to convert those funds to a Roth IRA, depending on tax brackets.
Despite the RMD age moving back, you still have the option to make a qualified charitable distribution (QCD) at age 70. If you'd like a refresher for some of these financial acronyms we're mentioning, check out episode 63, our Financial Acronymology guide.
Additionally, those over 70 and still working can now contribute to a traditional IRA if they have earned income. In the old law, this ability stopped at 70.5. But people are living and working longer now (without adequate retirement savings for many), so the SECURE act makes this possible.
Good news for 401K’s Finally, we get to the part about setting communities up for retirement. With the changes in the Secure Act, more small business owners will be able to offer 401K’s to their employees.
The bill makes it easier to be auto-enrolled to help those people that never get around to setting up their 401K contributions. Part-time employees will also benefit from the new bill. Now part-timers who have worked 500 hours over the past 3 years will have access to 401K’s. These changes are designed to make retirement savings a bit easier.
How will the Secure Act change your financial plans? The Secure Act is a great reminder of how quickly laws can change. Without close attention, your original intent could no longer be the most optimal strategy for your retirement plans.
One of our primary responsibilities is to help you uncover tax saving or planning opportunities when they become available. Remember, financial planning is like putting together a puzzle. Make sure you have all the pieces by learning as much as you can to improve your financial opportunities.
Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for 20 years.
Outline of This Episode * [3:04] The biggest changes with the Secure Act are to IRA’s * [11:44] Small businesses will find it easier to offer 401K’s to their employees * [17:07] Non-retirement changes * [18:55] The extenders
Resources & People Mentioned * Fidelity – The SECURE Act and You * Fidelity – SECURE Act FAQ’s * Lexicology – The Good News and Really Bad News for IRA Owners Under the SECURE Act * Kitces.com – SECURE Act and Tax Extenders * Episode 63 – Financial Acronymology
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast
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Are you in the Social Security tax bubble?
Tax rules are complicated enough, and Social Security benefits during retirement years add another layer of complexity.
Watch corresponding Youtube video here: https://www.youtube.com/watch?v=0RnQY0NxhSM&t=39s
Your Social Security income can cause your actual tax rate to be much higher than expected. Not understanding how and when Social Security benefits are taxed can lead to an unpleasant surprise when Uncle Sam comes calling.
You’ll also learn why multi-year tax planning is so important in retirement.
How should you decide when to take Social Security? If you are approaching age 62 you may be considering when to take Social Security. It can be tempting to take that low hanging fruit as soon as possible. But we often recommend that you delay taking your Social Security benefit for as long as you can. If you don’t take Social Security early then you need to think about how you’ll make enough money to cover the costs of your lifestyle. Do you have IRA’s, 401K’s, or even an old-fashioned pension? When planning your retirement income you’ll also want to think ahead to age 70 ½ when you’ll have to take the required minimum distribution or RMD. Have you decided when to take your Social Security benefit?
Social Security tax bubble or tax torpedo? Your Social Security benefit can be taxed like any other income source. But there is a way to determine if and how your benefit will be taxed. You can use a special calculation that is determined by the IRS. To do this, add up your taxable income and add half of your projected benefit. If it is over a certain threshold then it will be taxed. You’ll need to be careful when determining your income since tax rates increase slowly and then suddenly jump from 22% to 41%. You don’t want those taxes to torpedo your retirement planning. Listen in to find out how to plan ahead.
It pays to plan ahead Sure, you want to pay the lowest amount in taxes each year, but retirement tax planning is a bit more complicated. You’ll want to consider your lifetime tax bill. You don’t want to pay 0% in taxes this year only to be stuck with a 24% tax bill next year. You’ll want to have a comprehensive retirement plan which considers when to take out more money for those big-ticket items that will inevitably come up. With a little bit of planning, you can spread your tax burden out over multiple years. You also need to consider that your 60’s provide you with a unique opportunity to name the income that you won’t have in your 70’s. Discover why your 60’s may be the most important tax planning decade by listening to Will Holt’s tax expertise.
Understand all the tax opportunities and risks that are out there There are plenty of risks involved with retirement tax planning but there are also lots of opportunities to save on taxes as well. One tax opportunity you shouldn’t miss is topping out your tax bracket with Roth conversions to help minimize your RMD once you turn 70 ½.
If you are planning to retire early the Affordable Care Act could throw you another curveball. It is important to understand the income levels needed to qualify for the subsidies available. There is a lot to consider when in retirement tax planning.
Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients by providing financial planning to the Triangle residents of North Carolina for 20 years.
Outline of This Episode * [1:27] When should you take Social Security? * [4:12] A brief overview of the Social Security tax bubble * [9:00] Why you should not only consider this year’s tax bracket * [13:22] Can you change your mind when to take Social Security? * [15:44] Why would someone take Social Security early? * [17:32] What are other considerations?
Resources & People Mentioned * Episode 99
Connect with Will Holt Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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What does it take to get to 100 podcast episodes?
In his book, Shoe Dog, Phil Knight describes his emotions upon starting the company that became Nike, as a crazy idea. When describing how he felt, he realized that many of the world’s greatest achievements started as crazy ideas.
Watch corresponding Youtube video here.
What seemed like a crazy idea for us 4 years ago, has turned into more than we could have ever imagined. We recently shared about what motivated us to start the show in our review of FINCON.
In this episode, we’re pulling back the curtain, as we reflect on our 4 year journey to episode 100. We discuss lessons learned, surprises we encountered along the way, and mistakes we made. We also reveal some of our favorite episodes and you’ll also hear what’s next for the Financial Symmetry show. But this exciting milestone wouldn’t have been possible without you!
What we have learned over the past 100 episodes We were fortunate to start our passion project at a good time. The strong tailwind of meteoric growth for all podcasts propelled our show to a 600% growth rate in downloads since our first year. Most of our listeners find us on Apple Podcasts currently, but we included an article below discussing the growing popularity of Spotify as a podcast deliverer. Podcasts also allow for listeners that would otherwise never hear about us. To that point, 20% of our listeners are in California. The magic of a technical tool that will continue to expand and grow.
We’ve enjoyed using this medium to share our views about unique financial planning opportunities and uncover risks that our listeners may not be aware of. We’ve also learned how much fun creating a podcast can be. After overcoming the difficulties of getting started, we were reminded that consistency is key.
We have learned from our mistakes Mistakes are inevitable part of any journey. The key is to use them to propel you to be something better. Our podcast was a treasure trove of bumps in the road when getting started. Just dial up our a few of our first episodes, especially if you enjoy hearing someone reading directly from a blog post. Thankfully we learned fairly quickly to ad-lib and play off of each other.
Listening to yourself, also provides a great opportunity to critique your communication style. Inviting other experts in the firm, added a nice potpourri of voices as well. I’m sure our listeners appreciate the fact that we have learned to use an audio editor to improve the quality of our material. A key truth that translates to many areas of life. Bring your expertise to your specialties and find experts in other fields to do the rest.
Our favorite episodes, and yours Inevitably, some episodes are better than others. Regardless, our aim is to always provide you with content that plants a seed that might motivate you to dig a little deeper on a specific planning topic. But we also try to present the content in an entertaining and engaging way. A few of our favorite episodes include episode 20 where we drew comparisons of common financial planning conversations to one of our favorite movies, The Usual Suspects. Another favorite was episode 27, where we broke down Mike’s top 10 investment lessons he’d learned just after turning 40. We share a few more along with the top 4 most listened episodes since we started.
What’s next for the Financial Symmetry show? We’re continually learning how to improve our content and provide you with material that you can learn from and implement. We are excited to make better use of an editorial calendar to plan future episodes. Is there a topic that interests you that you think we should cover on the show? Let us know what you would like to hear by sending us an email with your suggestions.
Outline of This Episode * [2:27] Some listener statistics * [6:27] What we have learned along the way * [14:17] Surprises we have encountered * [15:35] Mistakes we have made * [19:26] Our favorite episodes * [25:24] Most listened to episodes * [29:12] What is to come on Financial Symmetry?
Resources & People Mentioned * Shoe Dog by Bill Knight * Atomic Habits by James Clear * Happy Money by Elizabeth Dunn * Article – 20 Podcast Predictions for 2020 from Top Industry Leaders * Episode 99 – Don’t miss out on the Social Security joke! * Episode 20 – The Usual Suspects episode (Chad’s favorite) * Episode 27 – Top Ten Investment Mistakes (Mike’s favorite) * Episode 4 – Setting Goals * Episode 45 – How Likely You Are to Build Wealth * Episode 24 – Investing Your Year-End Bonus Listen in to find out how! * Episode 36 – Money Can Buy Happiness – the best ways to spend your money * Episode 91 – The Retirement Secret Weapon * Episode 60 – 5 Ways to Improve your financial decision making * Episode 75 – The bear market survival guide * Episode 61 – Planning a more enjoyable summer vacation * Episode 48 – Making better decisions with the laws of wealth
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Who you gonna call? Retirement Mythbusters!
Short Youtube recap here: https://bit.ly/2R0QJcA
Visit Full Article Here: https://wp.me/p6NrVS-3g5
Not as catchy as Ghostbusters, we know, but these retirement myths can be much more hazardous to your long-term financial health. Many of us have certain beliefs, internet rumors or family hearsay that are passed down about retirement rules of thumb. But believing in these stories could be detrimental to the long-term success of your retirement. On this episode, we do our best Mythbusters imitation (of Discovery Channel fame) to bust these common retirement myths. Listen in to hear why you may want to challenge conventional thinking, and discover what it could cost you to continue to buy in to the hype.
8 common retirement myths 1. I’m not going to live that long. So many people don’t think they will live until age 90. But the truth is, men who are 65 today have a 20% chance of living until 90 and women have a 33% chance. Couples have a 48% chance of one of them making it to age 90. You need to make sure your money will last as long as you do. Does your financial plan cover you until age 90? 2. I’ll work until age 65. The actual median retirement age is 62. Many people plan to work longer, but they are forced into retirement early. Some people try out a second act. Whenever you do choose to retire, be sure that you are retiring to something, not away from something. Do you have big plans for your retirement? 3. Social Security will run out. Some people use this myth as an excuse to claim their Social Security benefit early. But claiming Social Security below your retirement age greatly reduces your lifetime benefit. If you delay until age 70 will result in an 8% increase per year! 4. Once I reach X amount of money I can retire. The reality is that everyone’s situation is different. There is no magic number! There is so much more to retirement planning. What magic retirement number did you have in mind? 5. Paying the lowest amount of tax is always best. Are you trying to be too tax efficient? Think about optimizing your tax situation rather than minimizing your taxes. Consider working with a financial planner and an accountant to help you consider long-term tax planning. 6. When I retire my investments should be conservative. This isn’t always the case. People are living longer than ever so you may need your investment portfolio to last you 30 or 40 years. There is actually a bigger risk of being too conservative rather than risky. 7. I need to pay off my mortgage now. A mortgage is the cheapest money you can get in a loan. So not paying it off and investing the difference actually makes more sense financially. But for some people paying off their mortgage provides them with peace of mind. Which camp do you fall into? Would you prefer the peace of mind that a paid-for house provides? 8. Retirement spending is the same throughout retirement. Retirement planning is more complicated than you think. Your spending in retirement changes throughout the years. In the first 5 years of retirement, people spend a huge amount of money. You may spend it on travel, fixing up your home, eating out, or whatever it is that interests you. You finally have the time to spend all the wealth that you have built. Then spending slows down as you do. Unfortunately, retirement spending tends to increase the older you get, but this time it’s on medical expenses. Have you planned to spend the same amount each year in retirement?
Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for 20 years.
Outline of This Episode * [2:47] I’m not going to live that long * [5:30] I’ll work until age 65 * [9:22] Social Security will run out * [13:12] I can retire after I have $1 million saved * [15:10] Paying the lowest amount of tax is best * [18:00] When I retire my investments should be conservative * [21:00] I need to pay off my mortgage now * [23:55] Retirement planning is more complicated than you think
Resources & People Mentioned * Episode 52 * BOOK - The New Retire-Mentality by Mitch Anthony * BOOK - Your Retirement Quest by Alan Spector and Keith Lawrence * Article – Starting Over in your 50’s – What to do when you’re laid off
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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How do you know if long term care insurance is worth it?
Short Youtube video here: https://bit.ly/3akBTVZ
This is a topic we discuss with our clients regularly. With an aging population comes increased options for retirement living, assisted living and nursing care options. Along with increased options come increased costs as well which can be exorbitant in some cases. If long-term care insurance has been on your mind, you’ll want to have a listen to our objective viewpoints as we consider if long-term care insurance is really worth it.
Why do people consider long-term care insurance? There are 3 different ways that people may fund their long-term care needs. They may self-insure, or use their savings. They buy long-term care insurance, or they may rely on government funding. Many of our listeners are in the sandwich generation, where they are both helping their kids and helping their parents at the same time. As they watch their parents age they begin to see the emotional and financial stress that can arise and it affects the way they think about aging. 70% of people will need some sort of long-term care. Usually, a stay in long-term care is only a couple of years but 1 in 10 men will require a stay of more than 5 years and 2 out of 10 women will stay more than 5 years in long-term care.
At what age should you buy long-term care insurance? As you probably know, long-term care insurance only gets more expensive as you age. But you probably don’t want to buy into it too early, what if the insurance company goes out of business? We think the best time to buy long-term care insurance is in your mid-50s. Costs tend to jump about 6-8% each year that you wait. But even if you do buy early the premiums could increase. Often times the actuaries don’t fully understand the risk and end up raising premiums for current policyholders.
What does long-term care insurance cover? Generally speaking, people go into long-term care when they can no longer perform the activities of daily living or ADL. This includes going to the bathroom alone, eating, moving about the home, or they experience a decline in mental state. Often the long-term care insurance covers a maximum period of 6 years or less. There is a daily benefit amount that you can choose from. Often that benefit is between $100-$200 per day. Many long-term care insurance packages come with an inflation rider. Your premiums will be related to the variables that you choose.
So, how much does it cost? Long-term care is not cheap. A private room with skilled nursing can cost $100K per year. Going down the scale, assisted living averages about $75K per year. And home health can be about $50K per year, but you do have to factor in household expenses as well.
A 65-year-old couple can buy a long-term care insurance policy for $4800 per year with basic benefits totaling $180K. If that same couple waits until 75 to purchase a policy that amount will increase to $8700. You also need to consider the fact that not everyone gets approved. The longer you wait to buy a policy the harder it is to get approved.
It’s important to have as much information as possible before making costly decisions. You need to understand all of the factors before you commit. We’re here to help you make informed choices. Listen in to hear all of the factors that you should examine when considering whether to buy long-term care insurance.
Outline of This Episode * [4:27] Why do people consider long-term care insurance? * [6:57] At what age should you buy long-term care insurance? * [10:14] Won’t Medicare cover this? * [10:50] What am I paying for? * [13:47] How much does it cost? * [16:46] A case study about self-insuring * [20:07] What types of policies are there? * [23:25] What questions should you be asking yourself?
Resources & People Mentioned * Kiplinger - How to Afford Long-Term Care * Genworth - Cost of Care Survey * CNBC - Not having it can be serious * Morningstar - An Action Plan for LTC * Vanguard (PDF) – Planning for health care costs in retirement * AALTCI – Long-Term Care Statistics
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Does your place of employment offer an equity compensation plan? Are you one of the 76% of people who have not exercised their stock options or sold shares of their company stocks? Mike Eklund is back after a hiatus and he is jumping in with both feet. He dives deep into the nitty-gritty of equity compensation plans. Since this can be a complicated subject you may want to consult a financial professional before making any big decisions about what to do with your company stock options.
Watch corresponding Youtube video here.
Why do companies offer equity compensation plans? Many companies offer equity compensation plans as a part of an overall hiring package. The main reason is to align the company and employees. If the stock price goes up then you make more money. These compensation plans can be a big draw when you are trying to decide where to work. There are 4 main types of plans offered by companies.
- Employee stock purchase plans (ESPP)
- Owning stocks directly
- Restricted stock
- Incentive stock options (ISO). These are non-qualified stock options.
It is important to know how these types of plans differ and what their advantages are. What kind of equity compensation plan does your company offer?
Don’t let taxes wag the dog The biggest question of owning stocks is when to sell. Don’t let the taxes wag the dog means don’t let taxes impact your investment decisions. So many people choose not to sell a position simply because they don’t want to pay taxes on it. It helps if you understand how the taxes work in each situation.
If you own stocks outright for over a year and sell then that is a long term gain and you will be subject to capital gains tax at the rate of 20% at most. If you own for less than a year then it is considered a short term stock and is subject to a higher tax rate of 37%. In this case, you’ll want to own for over a year for the best result.
If you own ESPP stocks then it is important to know whether you hold a qualifying or disqualifying disposition. A qualifying disposition is better. It is tied to how long you own the stock. You’ll want to own for at least a year before you sell.
Restricted stock is taxable when it is vested. Although restricted stocks are pretty straight forward your financial advisor can really help you with saving money in taxes.
ISOs can provide significant tax savings but they have many requirements. They are more tax advantageous than nonqualified stock options. You have more control over when the tax event occurs.
Ask these questions of yourself to discover how much company stock you are comfortable owning * What percentage of my net worth is tied to the company stock today? * How secure is the company? * How long do you plan to stay with the company? * Are you willing to wait it out? * Am I comfortable with the risk of owning a large share of company stock? * Think about your limits. How will you feel when the stock rises or falls?
What can you do if you own a lot in company stock? If you own a lot in company stocks you’ll want to lower your risk and make sure that you are protecting yourself from a potential downturn. You can use these tools to think about how to create a framework for making better investing decisions.
- Purchase a put option. This will ensure the stock sells at an agreed-upon price.
- Trading plans allow corporate insiders to diversify stocks through prearranged stock selling plans.
- Gift it to a donor-advised fund
- Gift the stock to family or friends.
Listen in to hear how you can use a combination of these strategies to help you decide what to do when you own company stock.
Outline of This Episode * [4:17] Why do companies offer equity compensation plans? * [7:25] Don’t let taxes wag the dog * [14:26] What can you do if you own a lot in company stock? * [19:51] Some important questions to consider
Resources & People Mentioned * CNBC article on the risks of company stock options * Things to know before exercising your stock options * ESPPs and taxes
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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There’s a lot of conflicting information about buying a timeshare. Some call it the worst financial decision you could make. But is that true? On this episode, we invite Allison Berger to discuss the pros and cons of buying a timeshare. If you’ve ever been roped into one of those high-pressure sales meetings you’ll want to listen to consider if you made the right decision.
Short YouTube video: https://youtu.be/RqfiAvdPS-I
In this episode of Financial Symmetry, host Chad Smith talks with Allison Berger about strategies for spotting timeshare scams and thinking through decisions about timeshares.
If you have ever been on vacation at a nice resort you may have sat in on a timeshare presentation. These high-pressure sales meetings are designed to make you a buyer and they pull out all of the stops to get you to sign on the dotted line. They claim to only need 90 minutes of your time, but those 90 minutes can be pretty intense. According to the American Resort Development Corporation, 2018 was the 9th consecutive year of growth for timeshare sales. Out of 127 million households in America, 9 million own at least 1 shared vacation product. So 7% of families are also timeshare owners. That means they must not be too bad, right? But what exactly are you buying? What is a timeshare?
If you have ever stayed at an upscale resort, you may have sat in on a timeshare presentation. These high-pressure sales meetings are designed to make you a buyer and they pull out all of the stops to get you to sign on the dotted line. They claim to only need 90 minutes of your time, but those 90 minutes can be pretty intense.
According to the American Resort Development Corporation, 2018 was the 9th consecutive year of growth for timeshare sales. Out of 127 million households in America, 9 million own at least 1 shared vacation product. That means they must not be too bad, right? But what exactly are you buying?
We all know about the incentives to get you to buy a timeshare (or even just to sit in on the sales meeting), but what other positive experiences can be had from buying a timeshare? You will guarantee yourself a vacation each year if you buy a timeshare. The accommodations are typically very nice and often include two-bedroom suites with a kitchen. This beats staying in a cramped hotel room. Typically the break-even point of buying a timeshare is between 8-14 years, so if you vacation every year for 20-30 years you’ll come out ahead.
But there are many negatives that come along with timeshares. Even though the average maintenance fees are only about $1000 a year, the average sales price is $21,000. If you change your mind and wish to resell the timeshare you may be out of luck. There isn’t much of a market for timeshare resales. Timeshares are complicated and can be challenging to book. If you don’t know the jargon of the timeshare company you could be lost and stuck vacationing somewhere you never wanted to be. Tell us about your experiences with timeshares. Shoot us an email, we’d love to hear your stories.
Resources Mentioned in the Episode
- Consumer Reports: Why inheriting that beautiful timeshare can bust your wallet
- Don't Fall for Timeshare Exit Scams
- Article - Considering a Timeshare? Don't You Ever
- What is a timeshare and how does it work?
- Breakdown of Sales Process using Robert Cialdini's book - Influence
Every year there are approximately 140 million tax returns filed with the IRS and of those, 4 million will receive an IRS letter stating that there is a discrepancy. Your first instinct might be to panic, but don’t overreact. Grayson Blayzek is here to help us understand what you can do if you receive the dreaded CP2000. You’ll want to listen in not only if you have received a letter, but also to learn what you can do to prevent receiving one in the first place.
Short Youtube video recap here: https://bit.ly/2NBiVkm
You can take a proactive approach or a reactive approach to receiving an IRS letter There are 2 different approaches when dealing with an IRS letter. You can take a proactive approach or a reactive approach. The reactive approach happens after you receive the letter, but a proactive approach helps you get in front of any tax confusion and reduce the chances that you will receive a letter. Here’s what you can do to take the proactive approach.
- Keep accurate and complete tax records, including W2’s, 1099’s, and investment documents.
- Make sure you receive all the tax information before you submit your tax return. Be patient as you go through the filing process.
- Check your records as they come through. Make sure the information looks accurate.
- Include all of your income. Make sure you don’t underreport any income
- Follow the instructions when you fill out the 1040 and fill it out completely and accurately.
How can you amend your tax return? The first step to amending your tax return is to realize where your mistake was. Did you transpose a number? Did you receive a tax document after your return? A tax professional can help you look at your return and find the problem. Sometimes a backdoor Roth strategy is the culprit in a tax return error. Funds that were converted to IRA’s might get reported on the tax return when they shouldn’t. The process of filing an amended tax return is similar to filing an original return. But instead of filing a 1040, you’ll file a 1040X.
What should you do if you do receive the dreaded IRS letter? If you do receive a letter from the IRS it will come via snail mail. They will never email you, text you, or send you any other type of message. The letter you will probably receive is a CP2000. 4 million taxpayers receive a CP2000 each year. Basically this form is stating that something in your tax return doesn’t match the IRS records. It isn’t a bill, but do realize the burden of proof is on you to correct the error. Here’s what to do if you receive the CP2000:
- Review the letter and determine what the IRS is saying and make a note of the response date.
- You typically have 30 days to respond. If you don’t respond to the 30-day letter they will issue a notice of deficiency or 90 day letter. At this point, you’ll have fewer rights to appeal, so it’s very important to respond to the first letter in a timely manner.
- You can agree or disagree with the letter. If you agree, then complete the response form, send in the taxes due and you’re done.
- If you disagree you’ll need to gather the relevant information and mail it to the IRS.
- After you have responded to the notice it will typically take 6-12 weeks before you get a response.
Don't overreact Taxpayers spend the first 3-4 months of the year gathering documents and working through the tax filing process so it can be frustrating to receive an IRS letter stating that there is a discrepancy. But make sure that you don’t ignore it. Read it carefully and don’t overreact. Take time to digest the information to get a clear understanding of what the IRS is proposing. Get tax advice if you need it. No one likes paying taxes but it is a function of our society. Annual tax planning can reduce your tax burden but we still have to pay the appropriate level of tax fro our level of income. Maintaining appropriate tax records is a great way to avoid a tax notice from the IRS.
Outline of This Episode * [1:40] Every year there are approximately 140 million tax returns are filed with the IRS * [3:22] What should you do if you get a letter? * [8:40] How do you amend your tax return? * [12:54] All information you receive from the IRS will be through the mail * [15:30] What steps should you take if you receive a CP2000?
Resources & People Mentioned * Do’s and Don’ts for Taxpayers * Understanding Your CP2000 * Episode 81
Connect with Grayson Blazek Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Many of you are inching closer to retirement and the decisions you make now will have a big impact on your retirement lifestyle. It’s time to start thinking ahead and seriously consider your retirement strategy. Are you concentrating on the best ways to save to set up for the life you want in retirement?
This is why we have created a pre-retirement checklist with 8 key wealth builder areas for you to consider. Listen in now to discover what you need to think about now that you are rounding the final stretch in this race to retirement.
Your pre-retirement checklist 1. How will you spend your time in retirement? Explore what you might enjoy doing and give it some practice. Try to structure a calendar of your average week. How might you allocate your time? How will you challenge yourself? What new skills will you learn? 2. How will your income change? What will it take for you to retire? How much will you need and where will that money come from? Most people have a combination of 6 sources of income to provide for their retirement which includes: social security, pensions, deferred compensation, withdrawing from savings, part-time work, and passive income. 3. What will your retirement lifestyle be like? The more you spend the more income you’ll need and the less you spend the less income you’ll need. Think about how much you plan to spend and how will you spend it. 4. What is your current net worth? In retirement, your accounts will no longer grow and they may start to fall in value. Take an inventory of what accounts you have. Are they pre-tax or post-tax? Do you have an HSA? Brokerage accounts? Annuities? Where do you stand financially? Lay it all out on paper so that you can decide what you need to do next. 5. Tax diversification is as important as investment diversification in retirement. How tax-efficient are your savings? A 401K conversion is a great way to save in taxes. You should also consider what your tax bracket will be in retirement. 6. What is your investment strategy? How do your emotions play a role in investing? What is your risk capacity? What is your risk tolerance? You will need to understand when and how much you will need from your investments and have the appropriate asset allocation. Know what your expected returns will be. This will help you understand how long your portfolio will last you. 7. Healthcare can be the deciding factor for how and when you retire. If you are planning to retire before the age of 65 you’ll want to factor in healthcare costs. How will you bridge the gap until Medicare kicks in? Will you take COBRA or use your state’s health insurance exchange? You should also consider whether you want to get long-term care insurance. 8. Do an annual review of your estate. Block off some time each year to check if your estate plan still reflects your wishes.
Are you in your catch-up years? Your 50’s are often referred to as the catch-up years when it comes to retirement planning. There are lots of opportunities to think about as you approach retirement. Successful retirees look at all of these considerations as they make decisions. The decisions you make now can have a major impact on your retirement lifestyle. Use this pre-retirement checklist to help you begin to plan your retirement strategy.
Outline of This Episode * [2:27] Are you on the final stretch to retirement? * [6:33] How will you spend your time in retirement? * [7:37] How much income will you need? * [11:35] What is your net worth? * [14:24] What is your investment strategy? * [20:11] What kind of insurance do you have? * [23:45] Do an estate review
Resources & People Mentioned * BOOK - The New Retire-Mentality by Mitch Anthony * BOOK - Your Retirement Quest by Alan Spector and Keith Lawrence
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Are you looking for money and/or time-saving tips now that the summer is over and the kids are back to school? Summer can always feel expensive with summer camps, vacations, and then back to school shopping. With fall approaching and the kids back in school, we put together a list of ways you can save time and money to make this year better than the rest.
Time-saving tips 1. Look at how you spend your time at home and see what you can contract out. Can you hire someone to clean or cut the yard? The more you can hire out the more quality time you’ll have with your family. 2. Back to school means back to fundraising. If you have a volunteer requirement at your kids’ school get the volunteer hours in early. You could also see if the grandparents would be willing to volunteer. It’s a great way for them to get involved in their grandkids' lives. You can also check if you can donate goods rather than time. 3. Online grocery shopping saves lots of time. Oftentimes online shopping will save you money as well since there is less impulse buying. Another bonus is your kids won’t be asking for sugary snacks. Have you tried online shopping? 4. Try meal planning. Some people use traditional meal planning using pen and paper, but you can also utilize services like Clean Eats or Donavon's Dish. These services will save plenty of time while still managing to feed the family a healthy meal. Have you tried using a meal planning service or a subscription service? 5. Get the kids to help. Kids can pitch in from a young age. They can help set the table, make a salad, sweep up or wash the dishes. You may get pushback at the beginning, but after making dinner chores a regular habit they will feel proud of their hard work. 6. Skip the carpool line. The morning and afternoon carpool line can suck up to an hour out of your day! You can utilize before or after school programs to help you get more out of your time at work. Another idea is to have local grandparents help pick the kids up after school. 7. Strategically work from home. You can skip additional time in the car by occasionally working from home. This may not work out for the whole day. But you could come home after lunch and work before having to go pick up the kids for their after school activities.
Money-saving tips 1. Think about the holidays now. Consider how much you want to spend and create a budget. Do you want to travel? Plan out the travel in advance so that you know what you are going to spend. You can use an Amazon Wishlist to help you plan the gift-giving. Make sure to start saving for the holidays now. 2. Reassess your monthly expenses. Fall is a great time to think about your expenses. If you have any decrease in your monthly expenses you can think about increasing your savings. Up your 401K contributions or max out your Roth. It always helps to have an automatic draft to savings. Focus on putting more toward long-term goals rather than short-term.
What do you do to save time and money at home? Have you started any new routines this school year? What is working for you? Let us know your money and time-saving tricks. Send us an email at aberger@financialsymmetry.com or csmith@financialsymmetry.com.
Outline of This Episode * [2:47] Look at how you spend your time at home * [4:08] Back to school means back to fundraising * [7:37] Meal planning * [11:38] Skip the carpool line * [13:02] Strategically work from home * [15:15] Think about the holidays now * [16:27] Reassess your monthly expenses
Connect with Allison Berger Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
DISCLAIMER: This podcast is property of Financial Symmetry Inc. The hosts and guests of the show do not render or offer to render personalized investment or tax advice through this podcast. This production is for informational purposes only and does not constitute financial, tax, investment, or legal advice. Listeners should consult with appropriate advisors for advice specific to your situation.
How do you make financial decisions? Are you intentional with your money?
Short Youtube recap here: https://youtu.be/9g3s36KPm9E
Most people have trouble articulating their framework for making financial decisions. It begins with finding a healthy balance between spending and saving. After these short-term decisions, examining your longer-term goals will have more meaning. So in this episode, we asked Cameron Hendricks to join us to help you understand how to create an intentional framework to make the right financial decisions for you and your family.
There are only 5 ways to use your money in the short-term When planning to use your money, you need to consider what your options are and whether you are facing short-term or long-term decisions. Many people will be surprised to discover that there are only 5 ways to use your money in the short-term.
- Lifestyle
- Give it away
- Pay taxes
- Pay debt
- Save
Each one of these short-term ways to use money impacts the other. Think about your spending as a pie chart. If your lifestyle expenses increase then one of the other options has to decrease. If you increase your savings then another option has to give.
You can start your planning by considering your long-term goals Making intentional decisions means your short-term decisions should be driven by your long-term goals. It’s a good idea to start with long-term planning and work your way back to your short-term goals. There are 6 items to think of working towards from a long-term perspective.
- Financial independence - are you looking to retire or leave your job with its security?
- Charitable giving - this is more than just short-term charitable giving. You will need to have a process to achieve a higher goal.
- Freedom from debt - how much do you pay toward your debt? Pay down your miscellaneous debt first before tackling the mortgage.
- Lifestyle desires - this could include a second home or a boat
- Family needs - Many people want to save for their children’s college but also feel the need to help their elder parents.
- Starting a business - This takes planning and capital.
Find ways to simplify your financial decisions Many people think that financial planning has to be complicated. But actually the more simple you can make your planning the better. Complexity gives a comforting impression of control while simplicity is hard to distinguish from cluelessness. You may seem like you are missing out on things when you plan simply, but it’s really about understanding the flow of money. Understand how your cash flow looks now and how it will impact the long-term financial decisions. You know there will be trouble ahead if you haven’t planned for the long-term.
Create a financial framework to plan your financial decisions Financial decisions can seem daunting but if you have an intentional decision framework to help you walk through your financial choices then your choices will be more clear. We all have the temptation to spend, especially if we get a lump-sum payment or a bonus from work. But we need to find a way to balance our short-term satisfaction with delayed gratification. When you layout your long-term financial plans you can then start planning how to spend your money in the short-term.
Outline of This Episode * [2:27] What are your options? * [5:44] Find ways to automate * [10:40] There are 6 items to think of from a long-term perspective * [14:35] What should you do with a large one-time increase in income?
Resources & People Mentioned * BOOK - Happy Money by Elizabeth Dunn
Connect with Cameron Hendricks Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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The Mega Backdoor Roth IRA could be the secret weapon you have yet to use in your retirement saving strategy. If you consider yourself a super saver, looking for alternative ways to save tax efficiently, this could be a great option. This strategy is of most interest to those maxing out all other tax-efficient savings accounts. Including standard employee 401k contributions, Roth IRA, 529, and HSA. In this episode, you'll see why we call this the secret weapon for super savers, as we breakdown who the Mega Backdoor Roth is for, why you might be interested in it, and how it compares to other IRAs.
Who should take advantage of the Mega Backdoor Roth IRA? In order to take advantage of the Mega Backdoor Roth IRA, you first have to have access to a 401k that allows after-tax contributions. These are contributions on top of your regular $19k allowable contributions to a 401k in 2019. Hence the "Mega" moniker. So if you are already maxing out your 401K, Roth IRA, 529, and HSA contributions then the Mega Backdoor Roth IRA could be a great extra additional savings opportunity. Many get confused as to why it's called a Mega Backdoor Roth IRA when we are talking about your 401k. Good question. The name derives from where the money will be after you complete the consolidation process.
You're now seeing more larger companies and solo 401ks allow for "in-service" distributions. Meaning, you could withdraw portions of your 401k savings, while still employed. The real benefit with this savings strategy, is when you can save the extra after-tax contributions and then roll them to a Roth IRA in the same year. Meaning, you could get a larger amount in to a tax-free savings account to grow for years to come.
What’s so great about the Mega Backdoor Roth? If done correctly, the Mega Backdoor Roth can allow you to contribute up to 6X what you can contribute to a regular Roth IRA. With a regular Roth IRA, you can contribute only $6,000 per year in 2019. The Mega Backdoor Roth allows you to contribute up to $37,000 extra each year on top of your normal employee 401k contributions.
Many people don’t know this, but the limit for 401K contributions is $56,000 or $62,000 and for those over 50. Many people assume that the limit is only $19,000. But this $19,000 limit is for pretax contributions. You can actually contribute up to $37,000 more after taxes are withheld (depending on your employer match amount). You can ask your employer if they contribute to after-tax contributions. If you aren’t sure then you should contact your HR department. They may not even know about the Mega Backdoor Roth, but if you communicate with them you could get it started in your company.
What is the difference between the Mega Backdoor Roth and the regular backdoor Roth? If your income for a married couple is over $203,000 then you are ineligible to contribute to a typical Roth IRA. Instead, you can implement the Backdoor Roth IRA strategy. But this strategy has multiple steps to assure it's done correctly which we wrote about in a previous post. To be a good candidate for this strategy, you need to first move existing pretax accounts to an existing 401K, if you have one. The next step is to contribute $6000 to a regular non-deductible IRA. After completing this, you can convert the non-deductible IRA to a Roth IRA. The issue with the Backdoor Roth is that you can only contribute $6,000 per year.
The Mega Backdoor Roth allows you to contribute much more and would be a provision of your 401k account. Essentially, is the amount above your normal employee contributions ($19k in 2019; or $25k if over age 50) plus your employer match contributions. It’s important to consider all of your options to see if the Mega Backdoor Roth is right for your circumstances.
Outline of This Episode * [2:27] Who is the Mega Backdoor Roth for? * [4:31] What is the difference between the Mega Backdoor Roth and the regular backdoor Roth? * [12:33] How do you know if you can take advantage of the Mega Backdoor Roth? * [17:59] What are the risks?
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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How do you pick the books you read? Do you get book recommendations from friends or are you in a book group? Do you use an Amazon Wishlist or social media to help you discover what you want to read next? In today’s episode, we have some book recommendations for you to consider. We try to bring you a variety of genres ranging from finance to self-help, to fiction. Check out our favorite books of the year and let us know which ones you have read or plan to read.
Digital Minimalism Digital Minimalism might be the book for you if you are addicted to your smartphone or tablet. If you feel the need to constantly check your notifications you might want to check this book out. The idea behind Digital Minimalism is to help reduce the time you spend attached to yan electronic device. It discusses the psychology surrounding our need to constantly check those notifications and offers tips to scale back your tech usage. If you enjoy this book you also might enjoy Cal Newport’s other book called Deep Work.
Chop Wood Carry Water Chop Wood Carry Water is a quick, 110-page read that offers life lessons that are learned by a kid who wants to become a samurai warrior (think Karate Kid). This book is about learning to appreciate the process behind the mundane work you have to do in life. The thesis is that if you can focus on doing the boring everyday work with excellence then you can make great things happen. The book encourages you to take each challenge you face not as a test but as an opportunity to learn and grow.
Redemption Redemption is a work of fiction by David Baldacci which is a mystery-thriller. The main character is a Baldacci favorite, Amos Decker. Redemption makes for an exciting beach or vacation read. Like binge-watching a tv series, you’ll want to rush through it quickly to discover how it ends.
Principles The book Principles is another self-help book written by Ray Dalio. It is essentially laying out his 5 step process for building success. He encourages readers on how to deal with setbacks and continue to move forward. These are the 5 steps that he covers in the book:
- Step 1 - instead of feeling frustrated and overwhelmed see pain as nature’s reminder that there is something important to learn.
- Step 2 - potential problems are actually potential improvements
- Step 3 - diagnose problems to get to their root cause
- Step 4 - design a plan
- Step 5 - push through to completion
Books we haven’t read yet but plan to We also have several books on our wishlist or that we plan to read soon. Mike is looking forward to reading Personal Financial Planning for Executives and Entrepreneurs to help him provide the best service possible for his clients. The Happiness Advantage is another book Mike would like to read that redefines success and happiness.
Chad is looking forward to reading Messy Marketplace which is about buying companies. He thinks this will help him serve his clients who are in the process of selling businesses. The Family Board Meeting is a book that encourages people to enjoy the experiences they have with their children. The Algebra of Happiness and 30 Lessons for Living are 2 more books that he’d like to read.
Outline of This Episode * [2:17] Digital Minimalism * [6:05] Chop Wood Carry Water * [10:54] Redemption * [13:38] Principles * [16:01] Books we plan to read
Resources & People Mentioned * BOOK - Digital Minimalism by Cal Newport * BOOK - Deep Work by Cal Newport * BOOK - Chop Wood Carry Water by Joshua Medcalf * BOOK - Redemption by David Baldacci * BOOK - Principles by Ray Dalio * BOOK - Personal Financial Planning for Executives and Entrepreneurs by Michael J Nathanson * BOOK - The Happiness Advantage by Shawn Achor * BOOK - Messy Marketplace by Brent Beshore * BOOK - The Family Board Meeting by Jim Sheils * BOOK - The Algebra of Happiness by Scott Galloway * BOOK - 30 Lessons for Living by Karl Pillemer
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Most people know little or nothing about sequence of returns risk. The subject doesn’t make for the most interesting topic for cocktail party discussions. Some refer to it as your biggest retirement risk. Reason being, sequence of returns risk can have a major impact on how long your hard-earned savings will last through retirement. This week's episode we dive in to examples of how you could be affected and steps you could use to fight against it.
Dollar-weighted returns vs time-weighted returns Many people aren’t familiar with the difference between dollar-weighted returns and time-weighted returns. Dollar-weighted returns are the actual returns you get. The dollar-weighted return is a more accurate representation of your actual return. A time-weighted return impacts your cash flow. A time-weighted return assumes you don’t contribute or withdraw any money during a period of time. If you put a lot of money in the bottom of the stock market and pull the money out at the top of the stock market then you will have a better dollar rated return than a time-weighted return.
An example of sequence of returns risk Let’s consider a couple that is 60 years old with a million dollars who just retired. In the first example, they earn 8% each year over the next 30 years. They withdraw at 6% which leads them to the ideal scenario and after 30 years in which they end at zero dollars. Their money ran out just as they did. The second example takes the same couple but rather than earning 8% each year they had great returns of 25% for the first 2 years, then they averaged 8% and then the last 2 years they averaged 0%. This scenario left the couple with a million dollars at the end of 30 years. The last scenario has the couple experience a bad market the first few years then 8% returns and then a great market at the end. This scenario leads the couple to run out of money. Although all of these examples had the same average return the end results were completely different. The first few years have a big impact on your long term success.
Why did Chad and Mike end up with different balances at the end of their careers? Chad and Mike work for the same amount of years, they make the same pay and save the same amount each year. One of them begins their career before the other and they retire at different times. The last years before retirement Mike experienced poor returns. Chad had poor returns when he was just starting out. This is an example of a good sequence of returns for Chad and a bad sequence of returns for Mike. The difference ended up being a $300,000 difference between Chad and Mike’s final balance. When you are younger your balance isn’t that big so how the market performs doesn’t matter as much. When you are older it is important to your balance sheet that the market rate of returns are high.
What strategies can you implement to protect yourself from the sequence of returns risk? 1. Diversification is important. Think about a globally diversified portfolio. U.S. stocks, international stocks, large and small cap investments. 2. Consider your asset allocation. The time right before and right after you retire is not a time to take on a lot of stock risk. 3. Adjust your spending based on portfolio performance. 4. Adjust the amount of stock you own based on market valuations. If the market is expensive you should own less in stocks, if the market is cheap you can own more. 5. Don’t get nervous and go to cash and bonds. Stocks are a good hedge against rising costs of inflation. Remember that people are living longer, you may need that money to stretch farther than you thought.
Outline of This Episode * [4:27] What constitutes good or bad returns? * [8:56] The first few years have a big impact on your long term success * [11:15] Why did Chad and Mike end up with different balances at the end of their careers? * [14:23] What strategies can you implement to protect yourself from the sequence of returns risk?
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Often in social conversations, it’s not uncommon to hear us say, “That reminds me of a scene in the movie…” to emphasize a point. Movies have a powerful way of presenting memorable situations where real life decisions and money intersect. Given the financial lens we view the world through, these financial themes jump off the screen to us.
So in today’s episode, we put on our movie critic hats and have some fun discussing lessons we’ve spotted in films that we all can learn from. Some are obvious but in others, you have to dig a bit deeper. Allison Berger joins us in this fun-filled episode to discover financial influences in the best and worst that Hollywood has to offer.
Financial references from the best and worst Hollywood films Many times, the large financial outcomes in life are a result of a lot of little decisions along the way in emotionally-charged environments. The circumstances range from pressure-filled decisions amidst a tragedy to pre-conceived notions of long-held family belief systems around money. Some can seem more cliche, like always have a plan B or pay attention to the small print, but paying attention to the emotions that lead to these moments can provide the most intriguing insights. Other messages reinforce strong values that help position you for long-term success, like the benefit of hard work and having an open mind.
Here’s a summary of the movies we discussed:
Gone Girl – This is an intense 2014 thriller with loads of money themes. The movie begins during the 2008 financial crisis and the featured couple loses their jobs. A twisted and circuitous journey ensues from there.
Money themes: This couple could benefit from better financial communication. Strangely, a financial advisor wasn’t around to help (wink, wink). Separately, she keeps all her money in a money belt after she goes on the run. This is a terrible idea! It’s no wonder her money gets stolen as you should never keep all of your money in one place, even when on the run. Finally, do your best to set yourself up so you are not forced to rely on someone else financially.
Edge of Tomorrow – Tom Cruise stars in this 2014 Sci-Fi film. He plays a public relations guy thrown into the battle who gets stuck in a time loop.
Financial lessons: You may not see a financial theme here but we can’t help but think about what we might do financially if we could do yesterday over again with the knowledge that we have today. There are so many uncertainties when dealing with investing which is why balance is so important. When you have a process to help you deal with all the options that are out there. We all have 20/20 hindsight but this movie can be a great thought exercise. What would you learn from today? Would you invest more? Spend differently? Or maybe create an automatic savings plan to make sure you’re saving?
Crazy Rich Asians– This 2018 film is rich with money themes. It is basically set in a rich fantasyland in Singapore.
Financial themes: Money alone will not make you happy, it’s the experiences money buys that can provide lasting happiness. Related, it’s dangerous to have your identity attached to money. Communicating openly with your partner about finances can prevent larger emotional disagreements along the line. Even further, the pressure of misplaced expectations around money can be problematic between spouses. This is why it’s important to choose your spouse wisely as research shows in The Next Millionaire Next Door.
Miracle – This is a family-friendly 2004 Disney movie. Miracle is the story of an Olympic hockey team before Olympians were allowed to be professionals in their fields.
Money lessons: The movie shows the value of hard work without money attached. At the end of the film, it showed what each character’s career was after their hockey career. This movie holds powerful lessons to show kids not to rely on one thing, especially a sport, to provide income for the rest of their lives.
Be sure and listen to the rest for the our takeaways from 3 other movies, including one in Allison’s favorite classic series of movies.
Resources & People Mentioned * Episode 84 * Episode 80 * Book – The Next Millionaire Next Door
Connect with Allison Berger Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Nobody likes to talk about the 2 certainties of life: death and taxes. So much so that we delay important decisions on how to deal with our assets for our heirs. On this episode, Cameron Hendricks and Grayson Blazek join in to discuss specifics on how to handle accounts and property, filing taxes and how to better prepare for passing on your estate to your loved ones. Find out how to handle all of this now to save your loved ones added stress during a difficult time.
Ensure that your loved ones are prepared to understand your financial life To ensure that others are prepared for your own passing, make sure that your loved ones understand your financial life as a whole. This will make your passing a much smoother process. It is important to ensure your will is readily available and is up to date. Another way to be prepared is to have your assets properly titled. It's also important to periodically check all of your accounts’ beneficiaries to ensure that you have the right beneficiaries named and that you don’t have too many. The more information that you provide up front will really help along the way.
How to help your loved ones prepare for your passing Taxes can be confusing enough, but doing the taxes of for the deceased is even more challenging. This is why it is so important to ensure that your loved ones have all the information that they need to prepare your final tax return during this time. Before making someone an executor of your estate it is important to talk to them and give them all of the information that they may need. This will make sure that everything transitions as smoothly as possible. If you are the executor of the estate make sure that you know where all of these income sources are. The more information that you provide up front will really help along the way.
How to prepare taxes for the deceased Preparing taxes for the deceased isn’t as complicated as you may think. A person that has passed is called the decedent. Whether you are the surviving spouse or the child of a parent that has recently passed someone will need to work through a couple of tax returns for the decedent. You will have to fill out the final 1040. It is similar to every other tax return that you have filled out. You can continue to file as married filing jointly if you don’t remarry within the year and you will include any income received. The second form you may encounter is the estate income tax return. The last tax form you may need is the gift tax return. Listen to this episode to hear Cameron Hendricks and Grayson Blazek provide their expertise on preparing taxes for the deceased.
What are some common financial questions people ask about death? There is a myth that people think everything is going to be taxed upon death, but that is untrue. Life insurance is not taxed and 401K’s and IRA’s will not be taxed in the way you think. When passing wealth to your heirs think about whether they are ready to be heirs. You can set up a testamentary trust and create rules around the trust to prepare your heirs for receiving an inheritance. You want to make sure to have an estate plan. The default estate plan will certainly not be what you actually want. Remember, you won’t be around to clarify your wishes so make sure you clearly state your intentions.
Outline of This Episode * [2:47] Ensure that your loved ones are prepared to understand your financial life * [7:17] What kind of income tax return will you need? * [18:28] The estate income tax return * [21:48] How to handle the 709 * [26:58] What are the common questions people ask?
Resources & People Mentioned * Episode 57
Connect with Grayson Blazek Connect with Cameron Hendricks Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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You may have seen more news stories mentioning Opportunity Zones of late, but there are still plenty of questions surrounding this part of the latest tax reform. Today we're discussing the ins and outs of investing in Opportunity Zones to help you understand how, in the right circumstances, they could help you save thousands on your taxes. We’ll discuss what opportunity zones are, why they were created, what the tax benefits are and how to spot the risks involved when investing in opportunity zones.
What are opportunity zones under the new tax law? The new tax law was created to spur economic investment in low-income areas throughout the U.S. by providing individual investors with tax incentives for investing in impoverished communities. The low-income areas are called opportunity zones and are identified by governors of each state. Although it was rolled out in 2017 it wasn’t until recently that the IRS updated investors on how the program is actually going to work. This program is geared toward long-term private investors with a high net worth. There are 3 benefits to the tax side of this law: tax deferral, tax reduction, and tax elimination for an investment held for more than 10 years. The primary purpose of the reform is to help economically distressed communities and in turn, it can help you save thousands in taxes. Find out how by listening to this episode of Financial Symmetry.
What are the benefits of the new tax reform law? Under the new tax reform law, you can defer capital gain tax from the sale of real estate, a business, or stock. You can also reduce your taxes on something you recently sold and even completely eliminate taxes by reinvesting.
Here’s an example:
You sell something and earn a million in capital gain. Normally you would pay $240,000 in taxes on that capital gain. Now with the opportunity zones if you reinvest your capital gains into a qualified opportunity zone fund within 180 days you get to defer the capital gain tax on the million dollar sale. So instead of paying those $240,000 in taxes in 2019, you won’t have to pay that until 2026. Then in 2026 if you continue to hold that investment in the opportunity zone then you only pay tax on $850,000 of the million dollar original capital gain. So you’ll save about $36,000 there. But the biggest benefit overall for the program is that if you put that money into a new investment for 10 years or more you’ll pay no capital gains tax on the original investment.
What can you do to do to take advantage of the new tax reform? To invest in opportunity zones and save on capital gains taxes you can invest in a qualified opportunity fund. A qualified opportunity fund is a corporation or partnership that is created for the purpose of investing in qualified opportunity zone property and holds at least 90% of its assets in qualified opportunity zones. The typical investment options are real estate, such as multi-unit apartment buildings, or a business located in a qualified opportunity zone.
You have to spend 100% of the purchase price in the first 30 months. So if you purchase a property for $800,000 then you have to spend another $800,000 within 30 months. The idea is that you are substantially improving the property for the amount that it is valued at. If you buy a business the same rules apply. You have to improve it somehow for that purchase amount. Remember, this is not an investment in the stock market, there is a higher degree of research involved.
What are the different risks involved? There are different risks involved in taking advantage of the new tax reform law. As with all investing situations, attention to detail is key. Here are some of the risks with this type of investment.
- What happens if there is a political change? If Congress changes its course over the next few years they could overturn this law.
- You are invested in a limited partnership so you have to pay fees to the managers of the funds. They may charge 2% or you may pay a percentage of the profit. The fees involved may eliminate the tax benefits completely.
- The money isn’t liquid. You have to hold it in the investment for at least 10 years and you won’t receive the benefits if you pull out early.
- You’ll have to be an accredited investor.
- You must not only buy but improve the property.
- The 180-day rule may spur some people to rush into an investment rather than do their research into the options.
Many people don’t take advantage of things because they don’t know about it. We’re here to give you ideas and strategies that you may not be aware of. The overall goal of the new tax law is a great cause but the investment options are still pretty new. This was just an overview of rules and regulations, so do your own research. Don’t let taxes decide your investment decisions. Remember a bad investment is still a bad investment no matter what the tax benefits are.
Outline of This Episode * [4:07] How should the tax strategy be implemented * [9:19] What do you need to do to take advantage of the new tax reform? * [12:03] There are 3 benefits to the tax side * [13:45] What are the risks involved? * [20:27] What are other alternatives for capital gains?
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Rolling over your 401K is a complicated process so we brought in a few experts that have helped our clients rollover hundreds of 401K’s. Understanding the unexpected roadblocks surrounding a 401K rollover is a vital step in making the best decisions with your money. So listen to this episode to hear steps of how to properly rollover a 401K quickly and efficiently.
How to rollover a 401K? Maybe you just left a job or maybe you need an in-service rollover but you are at the point that you need to rollover your 401K. So how do you do it? Unfortunately, there isn’t only one way. It depends on the type of account you have and where you want the money to go. If you have a brokerage account linked to your 401K it will make the task a bit easier. Brokerage links give you the opportunity to invest in funds at a lower cost. If you have just quit or left your job you need to ensure that all of your contributions and your employer contributions have settled before you move your 401K or you will have to redo the process again once it does settle.
How do you tackle the 401K rollover paperwork? 401K rollover paperwork can be quite daunting. Nowadays there are many forms that you can fill out online, but there are still actual papers that must be completed in person. The paperwork can be a bit confusing and overwhelming, but it is important to fill everything out correctly. Even if you mis-check just one box they won’t process your rollover and you’ll have to start the process all over again. Oftentimes you may need your spouse to sign, a notary to sign, and you’ll also need your plan administrator to sign. Sometimes finding the plan administrator can be tricky. If you know the right people to call the paperwork really doesn’t take much time. It can take a few days or even a few weeks to complete the paperwork. If you feel daunted by all the paperwork you might want to consider hiring a professional to help you out.
What are some problems that can arise with a 401K rollover? It's important to reduce your risk of being out of the market. You want to ensure that your money is out of the market for as little time as possible. Pay careful attention to the timing and ensure that you have all your ducks in a row first. This means that you need to have the accounts where the money is going set up beforehand. If you have a brokerage link you can reduce the time out of the market. You’ll also want to double check where your allocations are in case you need to change those settings. There are many steps involved in moving your 401K and you may have to contact different service representatives to get all of your questions answered.
How can you reduce your risk? Having your money pulled out of the market for any amount of time can be costly. If there is a way to expedite getting your check you’ll want to do it. Think about it, if you have your money out of the market and it goes up a few points you’ll be losing out trying to get it all back in. Getting the money back in as quickly as possible is important. Having a brokerage account linked to your 401K can give you the opportunity to invest in funds at a lower cost. Listen to the experts, Heather and Angela, to help you understand how to rollover a 401K to make your transition run as smoothly as possible.
Outline of This Episode * [1:27] How do I rollover my 401K is one of the most frequent questions * [6:16] How do you tackle the paperwork? * [7:24] How much time does it take? * [11:03] What are some problems that can arise? * [17:05] Where does the money go? * [27:07] What can go wrong?
Resources & People Mentioned * Should I Make a Roth IRA Conversion?
Connect with Heather Gudac and Angela Keeley-White Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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What does your financial future look like? Do you feel it is secure and well planned out or are you just winging it? Winging it is a great idea for a Sunday afternoon drive or deciding to what to eat for dinner, but winging your financial future is a dangerous decision that will put your future stability at stake. Learn why people decide to wing it and what you should be doing instead, on this episode of the Financial Symmetry show.
Short video recap here: https://www.youtube.com/watch?v=UCFFhFpRpVc
What are the numbers and why are people winging their financial future? We love numbers on this show. They help to illustrate the point we are trying to make and sometimes they are truly shocking.
- 75% of Americans are winging it when it comes to their financial future
- Less than half of Americans cannot cover a $1000 emergency
- Most people feel they make about $1200 worth of financial mistakes per year
- 4 out of 10 Americans simply guess how much they will need to retire.
Why do people do this to themselves? Why do they choose to leave their financial future up to chance? I think there are 3 main reasons.
- They don’t want to pay for professional advice.
- They can’t afford professional advice (or think they can’t afford it).
- They think they can handle the work themselves
Are you letting overconfidence power your financial decision making? Are you overconfident about your ability to handle your finances? 57% of adults feel more confident today than they felt 3 years ago about their finances. Do you feel a bit overconfident due to the recent success of the financial markets? Overconfidence is a villain when it comes to good decision making. Usually the more intelligent you are the more overconfident you are. Mark Twain had a powerful quote that sums up overconfidence well, “It ain’t what you don’t know that gets you in trouble. It’s what you know for sure that just ain’t so.” A great way to ensure that you aren’t being too overconfident in your financial decisions is to hire a financial advisor. Having an objective 3rd party view of things can really help you keep things in perspective.
Is your confirmation bias affecting your financial future? The internet is starting to play a major role in creating greater confirmation bias. People tend to follow their own views and they will seek out news that confirms what they already think about something. If someone has a negative worldview and they read an article about how the market will be crashing they will nod their heads and think, yes this is the truth. To combat confirmation bias think of the acronym WRAP from the book Decisive by Chip and Dan Heath.
- Widen your options
- Reality test your assumptions
- Attain distance before deciding
- Prepare to be wrong
Recency bias can affect your thinking about the future People think they know more than they do about how the future will unfold. More often than not, the future will surprise us. Our conclusions about the future are often based on our emotions. They can also be affected by recency bias. Recency bias is a bias based on the fact that people tend to think that what happened to them recently will happen to them in the future. This can be seen frequently with finances for instance, if you have received a big bonus, or especially when it comes to stocks. Are you allowing recency bias to affect your financial future?
Outline of This Episode * [5:27] Overconfidence can spoil your financial decisions * [11:15] Are you allowing confirmation bias to affect your financial future? * [13:46] Recency bias affects many financial decisions
Resources & People Mentioned * BOOK - Decisive by Chip and Dan Heath * BOOK - The Little Book of Behavioral Investing by James Montier * The Role of Confidence article * Most People are Winging It article from CNBC
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Financial advice has long been a male dominated industry. Women represent 51% of the US population, but only 23% of CFP® professionals are women and this percentage has stagnated over the past decade. Why is there a feminine famine in financial planning? Today we’ve invited Allison Berger and Grace Kvantas back on the show to discuss the 6 main challenges that prevent women from becoming financial advisors. As we shed light on these topics, we share ways we are fighting against these stigmas. We also celebrate Grace as the latest partner of Financial Symmetry. Listen to this episode to hear why there aren’t many women in financial planning but also why that should change.
See show notes here: https://wp.me/p6NrVS-3ar
Why did Grace become a financial advisor? Grace is a rarity among women in the field. She knew that she wanted to become a financial advisor at the age of 15. Her dad was a CFP® and it was at that young age that she realized that she was taught money lessons at home that many others never received. She wanted to help others learn what her dad had taught her. In college, she learned so much more about finance, but she still didn’t understand the depth of what one learns as a CFP®. It was only on the job that she began to understand all that a financial advisor really does. Listen to this episode to hear about Grace’s journey to becoming a CFP®.
What does it take to become a CFP®? Many people don’t know the difference between a financial advisor and a CFP®. The CFP® designation is the standard of excellence in financial planning. Becoming a CFP® takes a bit of work. You must have a bachelor’s degree and take the coursework first prior to taking the CFP exam. Candidates also need to have 3 years of qualifying experience or 2 years working directly with CFP professionals. After obtaining the CFP designation, Certified Financial Planners must maintain continuing education.
Why is financial planning a great field for women? Now is a fantastic time to become a financial advisor. The average age of financial planners is over 50 and ⅓ of advisors are projected to retire within the next 10 years. Women are uniquely positioned to excel as financial advisors in the years ahead. Listen to this episode to hear why 72% of women who pursue the CFP® designation report high levels of career satisfaction.
Why aren’t more women in financial planning? We walk through the CFP Board whitepaper detailing recommendations to increase the number of women CFP® professionals and the reasons women are not pursuing this career path.
- You can’t be what you can’t see. Financial planning is not top of mind as a career path for many women. Grace and Allison discuss their efforts to increase awareness and encourage others to consider financial planning.
- There are misperceptions about the work. Most think that this career path is very math heavy. Make no mistake, the CFP® exam and coursework require math skills and you will use math every day in this field. However, math is only one tool in the process toward helping clients reach their goals. Successful financial advisors also require the ability to build relationships and counsel clients as life changes.
- Women’s own behaviors may be holding them back. This phenomenon was detailed in Sheryl Sandberg’s book “Lean In,” which we discussed in Episode 73. Women may not feel as comfortable taking the career risk this industry may require. This is a multi-faceted issue but learning more about the inner workings of the career can help break down these barriers.
- Gender discrimination and bias exist in the field. Unfortunately, there are still biases and many women don’t feel welcome in the industry. Both Allison and Grace are sometimes asked if they are someone’s wife or secretary. The good old boys’ network is still alive and well in financial planning, but this is changing, and it is easier than ever to connect with other women on this journey.
- Work/Life Balance is not an issue. When asked to respond to the statement, “Financial planning offers good work/life balance,” only nine percent of Men and 10 percent of women disagreed. Contrary to popular belief, work-life balance is no longer a predominantly women’s issue.
- There are not enough female role models. Grace and Allison are working to change that. Listen to this episode to find out where to turn for helpful advice and encouragement.
Resources & People Mentioned * WIN CFP - The CFP Board’s women’s initiative
Connect with Grace Kvantas and Allison Berger Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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You've just sold your business. Or maybe you received an inheritance. Making decisions on how to handle the lump sum proceeds can be paralyzing. We all have that fear of making a mistake with the money and when the stakes are high, the fear is heightened. You might be wondering how wise it is to invest a big chunk of money with the markets near all time highs. When dealing with a lump sum, there is more to consider than just investment decisions. Listen to this episode to hear about the things you may not have thought about when considering your lump sum investment options.
You have 3 options when you come into a large sum of money You may have received an inheritance, sold a business, or received stock options or restricted stock. However you received the money, there are really only three things you can do with it. You can spend it, pay down debt, or invest it. In fact, spending a portion of your newfound wealth to treat yourself is a good first step. Then take a step back and analyze your new financial picture. How have your goals changed? Is retirement now just around the corner? How will you need to invest to accomplish your new objectives? Many people are quick to want to pay off all debt. But first analyze the kind of debt you have before rushing to pay it all off. Paying off credit card debt is generally a good idea, but you might want to rethink paying off your mortgage. Before you make any decisions on what to do with the money you should take some time and consider all of your options carefully.
Analyze the tax implications When receiving a lump sum of money, it is important to estimate the tax burden that comes with it. You don’t want to spend all of the money and then discover that you owe a large amount in taxes. No one likes to pay penalties so it is important to do some tax planning first. Take a comprehensive view of your tax strategies with a professional to help you consider all the options. There are many strategies you can consider to help ease the tax burden. A donor-advised fund is a great choice for the charitably inclined. Are their retirement accounts (SEP-IRA, 401k, Roth IRA, HSA's) you haven't been maxing prior to the lump sum? Could front-loading a 529 account be right for you? What's your plan for health insurance and how will the premium tax credit affect you? You also want to consider the timing to ensure that your strategies are used in the same calendar year that you receive the lump sum.
What are some lump sum investment options? We would all love to have a crystal ball to tell us the perfect time and place to invest our money. Instead, we ask questions like, should you invest it all at once? Should you invest in small increments over time? Or do what too many people do, and don’t do anything. Vanguard had an article which analyzed these lump sum investment options from a historical perspective. It turned out that about two-thirds of the time it was better to invest all at once. But, if you were prone to sell if experiencing a big loss in first few months, then investing over the next year may be best. Bottom line was that if you wait too long, you could end up regretting it. We all have that fear of making a mistake, but that fear of missing out in a rising market compounds the difficulty of long-term decision making. Understand that your decisions won’t be perfect but at the end of the day, it's all about the big picture. Think about your investment strategy. What assets make the most sense for your goals? Implementing a customized strategy for your specific desires will give you the comfort of being able to sleep at night, knowing you have a plan in place.
Outline of This Episode * [3:27] What are your options if you come into a large sum of money? * [7:53] Analyze the tax implications * [10:55] How to invest the lump sum * [16:08] Update your estate documents * [20:05] What is your cash flow?
Resources & People Mentioned * Episode 24 * Episode 59 - Tax Solutions for Charitable Giving
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Have you checked out the new federal tax forms? You probably don’t want to wait until the last minute to prepare your taxes this year. With the new tax code here you’ll want to give yourself plenty of time to get familiar with the new federal tax forms. But before you get started you need to arm yourself with as much information as you can about the new tax code. That’s why today we brought our very own tax extraordinaire, Grayson Blazek to share his extensive knowledge of the new federal tax forms. Listen to this episode as Grayson helps us understand what the new tax forms look like, what’s changed, how to save and be more efficient on taxes, and what planning opportunities there are to prepare for next year.
What’s different on the new federal tax forms? Well, that time of year is here again, everyone’s favorite season: tax season! You may have heard that there are many new changes this year to the 1040. The idea behind the new federal tax form is to simplify the tax filing process. The new 1040 is touted as a postcard, while not exactly postcard sized, it is down from 79 lines to 23. Although there are only 23 lines on the new tax form there are several addendums which utilize a building block approach. There might be a touch of confusion for the first few years, but the new tax forms should be pretty easy to get used to. Listen as Grayson explains the new federal tax forms and takes us on a tour of the new 1040.
Here is the lowdown on the new schedules 1-6 * Schedule 1 is similar to lines 10-36 of the old 1040. It is used to report extra income items like rental income and real estate and other above the line deductions. * Schedule 2 generally covers the old lines 45-47. It is used for the alternative minimum tax. You may not even see this one since most people won’t come across it. * Schedule 3 replaces lines 48-55 on the previous tax form. Schedule 3 covers child tax credits and dependent care credits. * Schedule 4 is a replacement for lines 57-63 and covers self-employment. * Schedule 5 is used for estimated tax payments and amounts paid with extensions * Schedule 6 is the 3rd party designee.
Besides the new federal tax forms, what else has changed? Obviously, the changes in the tax code are not only in the format. There are several other changes made as well. They eliminated personal exemptions which were $4500 per taxpayer on the 2017 return as well as dependents. The child tax credit used to be $1000 per child but has been increased to $2000 per child. The income threshold has been increased. There has also been a substantial change to standard and itemized deductions. And it is estimated that the number of people that will itemize their deductions will lower from 20% to 5%. Although there are fewer deductions your overall tax burden may be similar. Listen to this episode to hear what else has changed with the new tax code.
What are the planning opportunities? When preparing your taxes each year you have the opportunity to reflect on what you could have done to decrease your overall tax burden and what you can do in the future to ease your tax burden. Consider whether you should be taking advantage of your retirement savings accounts or health savings accounts. You can also think about your deductions and how efficiently you can space your charitable deductions. Decide whether you could donate every other year to get past the new threshold for itemized deductions. A donor-advised fund is a great tool to use when planning for your taxes. There are many other planning opportunities to consider so listen in to discover how you can begin planning next year’s taxes.
Outline of This Episode * [1:47] A tour of the new 1040 * [7:01] Besides the form what else has changed? * [9:31] Changes to the schedule A were the main overhaul * [14:26] How has the overall tax rate changed? * [18:17] What are the planning opportunities? * [27:20] What has changed with the qualified business income deduction?
Connect with Grayson Blazek Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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It wasn't that long ago that the most popular television show in America was named "Who wants to be a Millionaire?" Before that, in the 1980s, we were enamored with "Lifestyles of the Rich and Famous." There's something about the idea of becoming a Millionaire that fascinates us. But what is it about the wealthy that sets them apart from the rest of the population? How are their choices different from the average investor? If you've ever read Thomas J. Stanley’s The Millionaire Next Door, you might have a bit of an idea. We recently read The Next Millionaire Next Door by Dr. Stanley's daughter, Dr. Sarah Stanley Fallow, to learn about new insights into the minds of the next generation of millionaires. If you're curious about the strategies, discipline, and characteristics of millionaires and how they may have changed over the past 20 years, you'll want to listen to this episode.
See the full show notes here: https://wp.me/p6NrVS-39r
What does today’s millionaire look like? It may be surprising to find out that wealthy people are just like you and me. Most millionaires that were surveyed drive practical cars like Toyotas, Hondas, and Fords that are about 3 years old. Remember millionaire is a term that describes wealth, not income. Your income is what you have today, and wealth is what you have tomorrow. In the U.S. in 2018 there were 11 million households with a net wealth greater than a million dollars. The book separated the wealthy into 3 groups, under accumulators of wealth (UAW’s), average accumulators of wealth (AAW’s), and prodigious accumulators of wealth (PAW’s).
What Are the Most Common Characteristics of the Wealthy? There are 5 important characteristics of the wealthy.
- Wealthy people are well-disciplined.
- Millionaires are resilient and can persevere.
- Rich people are honest with others.
- Millionaires understand how to get along with others and work well with others.
- 90% surveyed were married and had a supportive spouse. (Divorce decreases wealth by 70%!)
Do you have these characteristics of rich people?
What are some success factors that lead to wealth? There were many interesting findings of the characteristics of millionaires in the book. Not surprisingly, education was critical to the success of most millionaires. 93% of those surveyed had a college degree and 60% had a graduate degree. What may be surprising to some, is that attending a private school or even a top-rated school was not important. The ability to focus is a key factor in the success of the wealthy. Another important characteristic mentioned, is the ability to track spending. The vast majority understand where their money goes.
These are the least important success factors of the wealthy.
- Attending private school
- Attending a top-rated college
- Graduating at the top of the class
- Undertaking an internship in college
How do millionaires spend their time? It sounds like wealthy people spend their time just as carefully as they spend their money. Wealthy people work more than the average American. They work about 38 hours a week on average, whereas the rest of Americans average 32 hours a week. Millionaires read more too. Books build a framework of knowledge for you to look back upon and analyze. Wealthy spend much less time on social media than the average Joe. They average only 2 hours a week and other Americans average 14 hours a week. Rich people also exercise more and spend more time caring for their family. How do you compare to the millionaires around you?
Outline of This Episode * [6:07] What are the different groups of millionaires? * [6:29]What are some characteristics of the wealthy? * [14:08] What are some success factors that lead to wealth? * [18:52] How do millionaires spend their time? * [22:06] Where is rich people's money invested? * [26:08] What is Chad’s takeaway from the book?
Resources & People Mentioned * BOOK -The Next Millionaire Next Door by Thomas J. Stanley * BOOK - The Millionaire Next Door by Thomas J. Stanley * BOOK - Deep Work by Cal Newport * Article - Lessons from the Millionaire Next Door * Article - Top 5 Millionaire Investing Mistakes * Episode 79
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Money and relationships don’t always go hand in hand. Making you wonder if you and your partner are speaking the same financial language. If money is causing stress in your relationship, you are not alone. 31% of couples say that the biggest cause of stress in their relationship is money. We want to help you communicate better with your partner about money. On this episode, Allison Berger joins us to discuss four common financial disagreements in couples. Listen in to learn how to better your relationship with your partner and with money.
You spent how much on that? Does one person in your relationship spend more than the other? Oftentimes one partner feels that the other spends too much. This is so common since opposites attract in relationships. Our partners help to balance us out. So what can you do if you feel that your partner spends too much? Communication is key. It is important to be on the same team and make sure that you have the same financial goals. You can create a financial plan to keep you in check and keep you both on the same page. This way you can see if you are meeting your financial goals. Having a financial advisor can also be a great way to get a 3rd party’s view on the situation. The advisor can help take an objective opinion when there are arguments about spending that arise.
Saving and investing takes coordination One spouse generally enjoys security more than the other and the other prefers to spend more money. When you have a financial plan in place, you can coordinate how best to save and invest for your specific objectives. Paying yourself first is a great first step. Automating your savings makes life so much easier. One way to easily increase your savings is by doing so when your income goes up. You can simply increase your 401K contribution whenever you get a raise. Another way to save more is to look for opportunities to increase your savings. If you pay off a car you can use the money you used to pay each month for savings instead.
Deciding on how much risk to take with Investments The most common question we hear centers around people wondering if they will have enough? To best answer this question, the amount of risk in your strategy will play a tremendous role. Everyone has a different risk tolerance when it comes to investing. Sometimes one partner prefers to take risky investments and the other prefers to play it safe. Once again communication is key to understanding how your partner feels about investing. First, you should think about what your financial goals are as a couple. Open communication and education can help you understand each other’s feelings about risk tolerance. Learning about investments can also help you feel more comfortable about investing.
Differing philosophies on debt Debt can be an unnerving issue for some causing some to lose sleep at night. Understanding your feelings on debt as well as your partner’s feelings can help defuse arguments before they even pop up. People have different feelings about money based on past experiences. Often our concerns about money manifest in childhood. Learning both why you and your partner feel the way you do about money can help you better communicate your needs and come up with a financial plan that you can both agree upon.
Outline of This Episode * [1:27] The biggest cause of arguments in relationships is money * [3:22] What are the biggest disagreements with couples related to money? * [6:12] Does one person in the relationship think the other is too spendy? * [12:14] How much to save and invest and how much to spend? * [17:33] What is the best practice on the difference in risk in investment strategy? * [21:18] There can be a lot of emotions around debt
Resources & People Mentioned * VIDEO - Finding Confidence in Conflict - TED Talk * BOOK - The Next Millionaire Next Door by Thomas J. Stanley * BOOK - The Five Love Languages by Gary Chapman * Article - Can Finance and Romance Go Hand in Hand? * Article - Navigating the Financial Side of a Relationship - NY Times * Article - Millions of Couples Keep This a Secret - Marketwatch
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Our listeners and clients often ask: Is now a good time to invest? Or what should I invest in? We give feedback on both these questions in our 2019 Investment Outlook episode. Be sure to check out the show notes for this episode in particular as we provide detailed charts to help demonstrate our discussion. If you are curious as to whether now is the time to jump into the stock market, what role bonds play in your portfolio, or what the experts say about the future of the markets then you'll want to listen to this episode.
2008 Review After logging strong returns in 2017, global equity markets delivered negative returns in US dollar terms in 2018. Common news stories in 2018 included reports on global economic growth, corporate earnings, record low unemployment in the US, the implementation of Brexit, US trade wars, and a flattening US Treasury yield curve.
Many are still wondering why should we invest overseas given returns in the US have been so strong? Investors should remember that non-US stocks help provide valuable diversification benefits, and that recent performance is not a reliable indicator of future returns. It is worth noting that if we look at the past 20 years going back to 1999, US equity markets have only outperformed in 10 of those years—the same expected by chance. We can examine the potential opportunity cost associated with failing to diversify globally by reflecting on the period in global markets from 2000-2009, commonly known as the “lost decade” among US investors. While the S&P 500 recorded its worst ever 10-year cumulative total return of –9.1%, the MSCI World ex USA Index returned 17.5%, and the MSCI Emerging Markets Index returned 154.3%. In periods such as this, investors were rewarded for holding a globally diversified portfolio.
Stocks Are there risks today to invest in the stock market? Yes. Have their been risks in the past? Yes. Through all these risks the global stock market has gone from $1 to $59 from 1970 to 2017
History has found certain periods have resulted in higher returns than others. Part of this can be explained by starting valuation. Valuation is one of the best indicators of long-term returns (i.e. 10 years), but it is a horrible short-term timing strategy. One popular valuation metric we’ve discussed in the past is the cyclically-adjusted price-to-earnings (CAPE) ratio. Instead of dividing price by the past 12 months of earnings, the CAPE ratio divides price by the average inflation-adjusted earnings of the past ten years. The idea is to smooth out the good and bad years created by the business cycle.
Is the CAPE Ratio a good predictor of future returns? According to a study by Research Affiliates titled CAPE Fear: Why CAPE Naysayers are Wrong, starting CAPE Ratio has between a 48% to 91% correlation to future 10-year returns across 12 countries. So yes, starting valuations do matter over the subsequent 10-year period.
In addition, below Exhibit 4 is the average future 10-year real return based on starting US CAPE Ratio. As of December 31, 2018, below are the current CAPE ratios of the major equity markets:
- US Stock Market = 29
- MSCI EAFE (int’l developed) = 15.5
- MSCI Emerging = 12.5
Source: https://interactive.researchaffiliates.com/asset-allocation#!/?currency=USD&expanded=tertiary&group=core&model=ER⊧=ER&scale=LINEAR&terms=REAL&tertiary=shiller-pe-cape-ratio-box&type=Equities
As noted in our recent blog, Crystal Balls and CAPE, when one market (US or foreign) was trading at a material premium (such as today), the other market stock market outperformed over the subsequent 10-year period.
What is the purpose of bonds in your portfolio? Our belief is that high quality bonds in your portfolio provide the following benefits:
- Balance – diversification from equities
- Safety – capital preservation
- Income – interest payments
Bond returns are largely driven by the term and credit quality of a bond. Long-term bonds experience bigger price movements for a given change in interest rates. Investor are expected to be compensated for taking that extra risk as a result. The same can be said for lower credit quality bonds such as high yield bonds. As the current time the spreads – the gap between the yield on credit and Treasuries – have remained narrow by historical standards. For bond investors, that means the compensation for taking on credit risk is relatively low, and the upside from here could be quite limited.
Future returns of bonds are highly correlated to the starting yield. Therefore, as of 12/31/2018 the yield on the Barclays U.S. Aggregate Index was approximately 3.28% which is depicted in the exhibit below. Therefore, over the next 7-10 years investors can expect returns similar to starting yield levels. Overall, bond yields have increased over the last couple years, but remain low compared to historical levels.
How about Cash? The Federal Reserve raised rates four times in 2018 and nine total adjustments over the past four years. The benchmark interest rate is in a range of 2.25% to 2.5%. The benefit of this is many investors have seen higher returns from their bank accounts but borrowing costs have also increased. What will the Federal Reserve do next? I have no idea, but below are the current market/Fed expectations as of December 31, 2018. You’ll notice the Federal Reserve and market is not expecting material rate increases from this point forward.
Summary To summarize, with low returns expected for US stocks and bonds many investors allocated primarily to US stocks will be disappointed with returns over the next ten years. As a result, individuals may need to either work longer or spend less than expected to reach their financial goals.
For current savers a market decline should be viewed positively as it allows them to buy stocks at cheaper prices. For existing or soon-to-be-retirees it is important to understand your risk capacity and risk tolerance and adjust your asset allocation accordingly. You’ll need equity for long-term growth, but it is important to have high-quality bonds for current spending.
What can you do about potential lower returns? First, focus on what you can control (spending, taxes, estate planning, etc.) and your long-term financial plan. If you don’t have a financial plan in place, it’s the perfect time to contact a fee-only financial planner such as Financial Symmetry. Second, implement a long-term, disciplined investment strategy. And no, buying the mutual fund/ETF/stock that has done the best over the last three years is not a strategy. If you don’t have a disciplined strategy or want to learn more about our process click here to download our white paper.
Outline of This Episode * [1:37] Is now a good time to invest in the stock market? * [4:41] How do you evaluate when the best time to invest is? * [12:22] What is the purpose of bonds in your portfolio? * [16:53] What is the role of cash in a portfolio? * [18:20] What do the experts say? * [20:35] How do you prepare for lower returns?
Resources & People Mentioned * Episode 24 * Blog Post - Crystal Balls and CAPE
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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What are the habits of successful investors? You may think that there are big differences between successful and unsuccessful investors. In the book Atomic Habits, by James Clear, he identifies the small habits that lead to success in life, these habits apply to investors just like anyone else. We all have intentions of doing the right thing, but there is a big gap between intention and action. Only about half of our intentions turn into actions. Join us on this episode to find out what sets successful investors apart from the rest of us.
See the Full Show Notes Here:
https://www.financialsymmetry.com/6-habits-of-successful-investors-ep-77/
Small Habits Make a Lifetime of Difference 1. Successful investors bridge the knowledge and action gap. They understand delayed gratification. Successful investors realize that small changes compound over time. The difference between success and failure is that the cost of good habits is in the present and the cost of bad ones is in the future. If you can delay your gratification to the future it will benefit you greatly down the road. This is true for exercise, eating well, saving, and investing.Successful investors don’t let emotions derail their strategy. In fact, successful investors find a way to deal with the boredom when most people don’t because the greatest threat to success is not failure, but boredom. 2. Successful investors minimize the valleys of disappointment. These are the times when you don’t feel like you’re going anywhere. It’s a hallmark of any compounding process: the most powerful outcomes are delayed. Most people know that delaying gratification is the wise approach and all of us want the benefits of good habits, but those benefits are seldom top-of-mind at the decisive moment. For successful investors, that’s not the case. 3. Successful investors possess the ability to implement their intentions. When one says they are going to do something, it’s not a general idea. The successful investor creates a specific plan with an actionable timeframe. 4. Successful investors know how to track their habits. We all know that life is a balancing act. It is hard enough to balance work and family life. If you throw in exercise and fun then investing can quickly take a backseat. Tracking your habits can allow you to recover quicker after a time of difficulty. A good investor can compare their investing with planting a tree. You don’t go out and check on your tree daily to look for growth. Simply set up a system for care and watch it grow over time. 5. Successful investors practice self-control. Self-control can be challenging in times of uncertainty. Luckily there are plenty of ways to automate investing. Hiring a professional is another way to help you practice self-control. You don’t have to try and be an expert at everything, put your investments on autopilot or ask for help. 6. Successful investors refine and reflect on their strategy. Small changes can greatly improve your success at investing. When you make small changes it makes you more aware of your mistakes and opens paths to improvement. Small improvements now can lead to major improvements in the future.
Are you ready to implement these habits for success? Making small changes can really make the difference in your life. When you bridge the gap between your intentions and actions you begin to change your habits and start on a path to success. Implementing these strategies can help to make you a better investor and they can be applied to many other areas of your life as well. Listen to this episode of Financial Symmetry to hear how you can create successful habits as an investor and these can bleed over to other areas of your life.
Outline of This Episode * [1:27] Half of all intentions actually turn into action * [5:45] Understand delayed gratification * [7:18] Minimize the valleys of disappointment * [11:00] Implement intentions * [13:14] Habit tracking * [15:20] Controlling your self-control * [19:11] Refine and reflect * [21:57] A recap of the 6 habits
Resources & People Mentioned * BOOK - Atomic Habits by James Clear * BOOK - Essentialism by Greg McKeown * Article - Stop Teaching, Start Coaching in Morningstar Magazine April 2018
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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If asked, most people are hopeful they will have a happy retirement. They're just not sure they are taking all the necessary steps to get there. We all have those moments in our busy lives where we stop and ponder, am I doing what I need to enjoy retirement? But then our busyness continues and takes over any productive changes we considered. As financial advisors, we work with people in all phases of life and often chat with retirees that have walked this path. The happiest of them agree, there are 4 main areas that contribute to their happiness. If you want to prepare for a happy retirement then listen to this episode to hear 4 secrets to a happy retirement.
Happy retirees take their health seriously The happiest retirees are able to move their bodies so that they can remain active. Physical exercise has the benefit of getting the endorphins going and creating joy. Staying active is an important part of maintaining a healthy lifestyle as you age. You can’t wait until you retire to become active or it will be too late. Part of creating a healthy body is by moving more now. Even though it can be a challenge to find the time to create a healthy exercise habit, this is an important part of ensuring that your body will work the way you want as you age. Are you doing what you can now to make sure your body will still function the way you want in your golden years?
Happy retirees have enough money because they had a financial plan Happy retirees have enough money to retire with and are financially independent. Are you doing everything you can to ensure that you will have a comfortable retirement? What savings rates do you need to have to have a comfortable retirement? How do you know that your money won’t run out when you retire? There are so many questions about money and retirement. A financial advisor can help ease your concerns about finances in retirement.
Having enough money means you will have less stress. A financial plan will help you make sure that you are saving enough. This may be obvious to some, but the fact is, only 35% of pre-retirees have a written financial plan. If you are unsure if you are saving enough now is the time to meet with a professional that can give you peace of mind. We recommend finding a fee-only financial planner to help you make sure you are doing all that you can to have the savings you need so that you won’t have to worry your way through retirement.
A strong sense of purpose can ensure a happy retirement You need not only have a financial plan but a personal plan as well. If you have a strong sense of purpose that drives you this will help you to spend your retirement in a fulfilling way. Volunteering your time is a great way to further your knowledge and pass on your wisdom. Creating a life of purpose doesn’t just ensure that you aren’t sitting at home watching tv all day, it can result in leaving a legacy behind. What are your retirement plans? Are you planning to retire to something rather than away from something?
Relationships are important to a happy retirement Happy retirees have friends. The happiest retirees interviewed have stated that they have a sufficient amount of friendships. Those with fewer friends are 3 times less likely to be happy. Are you developing friendships right now that will transcend the test of time? Creating friendships through common interests is a great way to ensure that you will have a number of friendships when you finally leave the work world behind. So how are you doing in these 4 areas? Do you feel like you are setting yourself up for a happy retirement?
Outline of This Episode * [2:17] Happy retirees take their health and wealth seriously * [4:52] Happy retirees have enough money to retire on and are financially independent * [9:22] Happy retirees have a strong sense of purpose * [13:03] The importance of friendships
Resources & People Mentioned * BOOK - Your Retirement Quest by Alan Specter and Keith Lawrence * Episode 22 - Don’t Fail in Retirement * Episode 68 - Your Pre-Retirement Checklist
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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2018 gave us a December to remember, with the S&P 500 index losing 9% for the month, locking in the worst December performance since 1931.
From peak to the most recent bottom, the S&P 500 has fallen more than 20%, marking the first bear market since 2008-09. Now the bear market is here, are you prepared to deal with it?
This most recent drop has given us all a scare. Does the drop have you worried?
Did you prepare for the bear market beforehand?
Preparing for stock market drops prior to experiencing one, helps you digest results when it occurs. It doesn't change the fact that disciplined investing is difficult. And while you'll never be excited about stock market declines, you can be prepared.
On this episode, we clue you in on the tricks for surviving a bear market. You’ll learn what a bear market is, the questions people typically ask when the markets drop, how to prepare for a bear market, and how to recognize a bargain when you see one. The markets are always changing, are you ready for what’s ahead? Listen to this episode to help you weather the storms that bear markets bring.
What do people ask when the markets drop? In long and strong bull markets, overconfidence is plentiful as positive returns inflate our perception of our investing skill-sets. But when the markets drop, we are quick to question our investment strategy. People ask themselves:
- Should I be doing something different?
- Should I be buying?
- Should I be selling?
- Should I buy cryptocurrency or gold?
We feel the need to act when we see our nest egg evaporating. The biggest question people ask is: what do I need to do to preserve my money? If you feel like you need to sell and go to cash then you could be taking to much risk. Risk tolerance can be thrown out the window when things are going well. It’s when things go south, you learn your true risk tolerance levels. A poor decision in a bear market can often take years or even decades to recover from. Listen to this episode to help you learn how to make the right decisions in a bear market.
What is a bear market? A bear market occurs when there’s a drop of 20% in a particular stock market. This differs from a recession which is declared after there are 2 consecutive quarters of negative GDP. Many people think there must be a recession to have a bear market, but not every bear market results in a recession. However, they do tend to work together. There’s about a 50/50 chance of having a bear market coincide with a recession. As painful, as bear markets can feel, they do happen much quicker than bull markets. The average length of your typical bear market is 1.4 years, contrasted with an average bull market at 4.5 years.
How can you prepare for a bear market? Bear markets can be scary to watch and unfortunately, the news channels cover them constantly. People pay more attention to bear markets since they are sensationalized by the news media. The most important thing to remember is to follow your strategy. If you feel like you need to get out immediately and go to cash then you are likely taking too much risk. Unfortunately, we can’t follow our intellect and instinct when it comes to investing. Our instincts influence us to stop the bleeding and sell stocks to hold more cash. The problem with that strategy is big up days occur very close to big down days. So when volatility spikes, your time in the market matters than trying to time the market.
How do you recognize a bargain? The silver lining of a bear market, is the buying opportunity they create. For many investors that are steadily saving in their investment accounts, bear markets present bargains for higher long-term returns. But how do you know the best time to invest more in stock? How do you ensure that you are not buying too early? Studies show the best strategy is to invest a lump sum upon receiving, as your average long-term returns are higher with stocks vs. other alternatives. Our emotions tell a different story. Catching a falling knife is a risky game. This is where personal circumstances matter most. What does your future income, spending and savings rates look like? When will you need your savings? Answering questions like these gives you a head start on the best choices for your life. Because “knowing” what will happen in the short-term is a fool’s game. Understanding the historical context can help, if it gives you the confidence to begin and stay invested through potential worsening conditions.
Warren Buffet once said, “widespread fear is your friend as an investor because it serves up bargain purchases. Personal fear is your enemy and it will also be unwarranted.”
Outline of This Episode * [2:27] What do people ask when the markets drop? * [5:48] What is a bear market in stocks? * [10:22] How can you prepare for a bear market? * [16:10] How do you recognize a bargain? * [20:36] 5 Points to remember in a bear market
Resources & People Mentioned * Episode 71 – How to Ignore the Stock Market Noise * Article – Burned by Bubbles
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Welcome to Financial Symmetry, the podcast to help you discover financial opportunities that you may be missing as well as to warn you about many financial mistakes that you can make. We are here to help you improve your life through finances. Finances are so complicated which is why we are here to help you answer questions about your daily financial life. We are here to give helpful hints and education rather than financial advice. On this episode, we discuss our top 4 most popular podcasts of 2018. Listen to this episode to hear what our top 4 most popular podcasts were, as well as many of our favorite podcasts.
Our most popular podcasts are quite diverse Our 4th most popular podcast aired relatively recently and we discussed why you should bother diversifying your portfolio with international stocks. On that episode, we highlighted why the U.S. has done so well and why you would want to have a mediocre portfolio by mixing it up with international stocks. We discussed the risks of investing internationally as well as our tendency toward home country bias. Episode 67 discussed the long-term benefits and how they can shine through our short-sighted viewpoints. Have you listened to the Why Bother Diversifying episode?
What investment decision process should you implement? Episode 52 was the 3rd most popular podcast of 2018. The markets had just dropped when this one aired which makes everyone nervous. It’s important to remember that the markets frequently fluctuate. We often forget the rough times in the financial world which is why it is so important to have an investment plan. An investment plan isn’t there for the easy times when all is well, it’s there to help you through the hard times. That episode mentioned how to get through the emotional part of investing. We love to give you a glimpse behind the curtain so to speak so that you can see our own details and strategy that we use here at Financial Symmetry. Do you have a financial plan in place?
5 Easy ways to improve your financial decisions I’m glad this was the 2nd most popular episode in 2018. It discussed how we often act against our own best judgment. We tend to place more value in small rewards now rather than larger rewards in the future. This episode included easy steps that anyone can implement to improve their financial situation. We talked about small wins, automation, accountability, and how to have a bigger awareness of spending. Check out episode 60 to find out how to improve your financial decisions.
The top episode took us by surprise We were surprised by the number one episode of 2018. Episode 61 was our most downloaded episode. This one aired in June and discussed how to plan a more enjoyable vacation. We love encouraging experiences over things. Experiences create lasting memories and things are easily forgotten. Check out episode 61 if you are planning your next vacation. Find out which episode didn’t make it into the final 4 as well as which podcasts we really enjoy listening to on this episode of Financial Symmetry.
Outline of This Episode * [3:27] What are our top 4 podcasts of 2018? * [4:42] Why bother diversifying with international stocks * [7:04] What investment decision process should you implement * [10:25] 5 Easy ways to improve your financial decisions * [15:20] Planning a more enjoyable summer vacation * [17:58] What is the one that didn’t make it * [19:28] Some other podcasts you might enjoy
Resources & People Mentioned * Episode 67 - Why Bother Diversifying * Episode 52 - What Investment Decision Process Should You Implement? * Episode 60 - 5 Easy Ways to Improve Your Financial Decisions * Episode 61 - Planning a More Enjoyable Vacation * Episode 62 - The Tumultuous Journey of Bitcoin and How Cryptocurrencies Work * Psychology of Persuasion Podcast with Robert Cialdini * Serial Podcast * Planet Money Podcast * Money for the Rest of Us Podcast - Why Health Insurance is a Mess * No Laying Up Podcast (a golf podcast) * What’s Good Podcast About the Beastie Boys * Bill Simmons Podcast * BOOK - Atomic Habits by James Clear * BOOK - Happy Money by Elizabeth Dunn * BOOK - Influence by Robert Cialdini
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Working moms face a difficult balance. People often feel that most women have a choice whether to work outside the home, but the reality is, 65% of families need both parents to work. Women in the workforce is a family issue, not simply a women’s issue, so this episode is useful for more than just women. Allison and Grace join us again to dive into the topics of gender bias, women in the workforce, and they provide helpful strategies and resources to help anyone that is struggling with how to balance it all.
Women face both internal and external gender bias Studies have found that as women achieve more success in the workplace they lose their likeability. This can make it a challenge for women who want to chase success. Even directly out of college women seem to start out behind men as they begin their careers. Only 7% of women negotiate their first salary whereas 57% of men do. Men are often rewarded for their drive and ambition while those same traits in women are considered self-serving and greedy. In Sheryl Sandberg’s book Lean In, she gives useful advice on how to make the most of your career and motherhood. Discover how to overcome your own gender bias on this episode of Financial Symmetry.
What is truly essential to you? Working moms aren’t the only ones that seek the perfect work-life balance. But is work-life balance a myth? One way to bring more balance into your life is to consider what is truly essential to you. Once you give yourself permission to stop trying to do it all then you can make your highest contribution to the things that really matter. The book Essentialism by Greg McKeown inspires readers to prioritize what they really need. This book can help you reconsider what is essential in your life. How can you reconsider what is important to you? Listen to this episode to hear more about this book and other resources for working moms.
How do successful women spend their time? Some people seem to be so great at managing their time. What Laura Vanderkam discovered is that when you focus on what matters to you then you will make time for what you want. She emphasizes that time is elastic and you can stretch it to get what you need out of life if you prioritize what is important to you. We are all given the same amount of time in a week, it’s how we use our time that counts. Successful women get paid for the quality of work that they do, not the hours that they put in. How do you prioritize your schedule and make time for what you really want?
Discover resources for working moms As you come back to work after having a child your life changes immensely while that of your husband doesn’t change much at all. Even though men often take time off of work, they are not faced with the same kinds of difficult decisions that women face. When returning to work you have to consider how much you will miss your kids when you go back. You have to decide whether you should you stop your career and stay at home or continue to work. Those that normally cheer you on now question all of your decisions. Listen to this episode of Financial Symmetry to find some fantastic resources for working moms.
Outline of This Episode * [3:49] There are gender biases both internally and externally * [12:45] What is essential to you? * [17:12] How do you strike a balance with your spouse? * [23:50] Can you achieve more by doing less? * [30:10] How do successful women make the most of their time?
Resources & People Mentioned * Episode 51: Financial Savvy for Women * BOOK - Lean In by Sheryl Sandberg * BOOK - My Mother My Mentor by Pamela Lenehan-- for the guilt complex * BOOK - Bossy Pants by Tina Fey -- for comic relief * BOOK - Essentialism by Greg McKeown * BOOK - Getting to 50-50 by Sharon Meers * TV SHOW - Big Little Lies * BOOK - Porn For Womenby Susan Anderson -- for comic relief * BOOK - Drop the Ball by Tiffany Dufu * BOOK - I Know How She Does Itby Laura Vanderkam * TED TALK -Laura Vanderkam How to Gain Control of Your Free Time
Connect with Grace and Allison * Email Grace Kvantas * Email Allison Berger
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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As the holidays near, visions of new tax savings dance in our heads. But knowing how to spot them is what really matters. With all the new tax law changes, Will Holt joins us again to guide you through seven tax opportunities you can take advantage of before year-end. Some of these tips can save you thousands of dollars, so listen in to see how you they may benefit your personal situation.
7 Tax Opportunities to Take Advantage Of 1. Tax Harvesting (Loss or Gain) – This hasn’t changed with the new tax law, but depending on your tax bracket, that percentage of tax you pay may have. If you’re facing a significant amount of capital gains or expect large capital gain distributions, with the rough October performance, you may want to consider tax loss harvesting. This allows you to offset some of those gains and even go a step further, by using $3,000 of net losses against your income. It may seem counterintuitive to sell at a loss, but it could be an opportunity to offset high taxes. If you are in the new 12% federal tax bracket and lower, realizing more gains could be an opportunity instead, as these could be realized at 0%. But knowing your tax rate and all expected income is required. Discuss with a professional to know for sure.
2. Max Retirement Contributions – Understanding how close you are to the max of your retirement accounts, could present extra tax-advantaged savings at the end of the year. Maxing your 401K contribution is the first place to check. If you get a big year-end bonus, this could be a good trigger. Don’t forget your HSA, as this account provides a triple threat of tax savings (tax deduction, tax deferral, tax-free withdrawals).
3. Convert a Roth IRA? – Doing a Roth conversion can help you stay in your tax bracket by moving an IRA into a Roth. With the new lower tax rates, this could be an opportunity to lower the inevitable tax you were going to pay on this savings. Additionally, you will be taking money out of a tax-deferred account and moving it into a tax-free account. This is a good option for early retirees with large taxable accounts. But you’ll need to be more precise going forward, as the opportunity to recharacterize if you overshoot is gone.
4. Bunching Charitable Contributions – The new tax law has increased the standard deduction for individuals to $12,000 and for married couples from $12,000 to $24,000. This means around 90% of people will now be taking the standard deduction according to the Tax Policy Center. If you forecast your itemized deductions could be higher than the standard amount, consider bunching your charitable contributions into 2-year bundles. One way to do that is by using a bunching tool called a donor-advised fund. The donor-advised fund allows for more flexibility in taking the deduction now, but still allowing for spreading contributions throughout the year. For more information about donor-advised funds, refer to episode 59 for more details.
5. Look at a Qualified Charitable Distribution Early in the Year – One of the opportunities, that hasn’t changed but is getting more attention, is the QCD or qualified charitable distribution. To enjoy this opportunity you are required to be age 70.5 and older as you can designate a portion of your required annual distribution directly to a charity. This takes some precision and should be targeted for earlier in the year when the RMD still needs to be taken as it must come directly out of an IRA and go directly to the charity of your choice.
6. 20% Deduction for Qualified Business Income – If you are a small business owner or entrepreneur the qualified business income deduction will be of interest. What’s come to be called the QBI deduction, or 199A deduction, is used for any business that is not a C corporation. If you have self-employed income or are an S Corporation, you can receive a deduction of 20% on your profit. However, there are income limitations. After you listen to this tip you’ll want to sit down with your tax professional and plan your taxes. We wrote a more detailed article on potential savings with QBI here.
7. Watch the Tax Torpedos – To truly understand your own tax planning, you have to watch specific income thresholds. We refer to these as tax torpedos. For example, if receiving a premium tax credit for health insurance, you could lose your entire subsidy if you surpass the income limitations by even $1. These are set according to the amount of family members (up to 4). A great example of why tax planning matters throughout the year as well. We discuss other important income thresholds dealing with the medicare premium surcharges, child tax credit cutoffs, and roth IRA limits.
As you prepare for the holiday season, make sure you take a second look at your tax planning. By watching out for these financial opportunities, you could end up saving yourself thousands of dollars in taxes. It’s important to have a multi-year tax strategy and always consider the big picture, not just what is happening now. Being financially smart means considering all aspects of your financial life. This time of year, that begins with looking for ways take advantage of new tax laws for your personal situation.
Outline of This Episode * [2:47] Tax loss harvesting * [6:51] Retirement accounts tax savings * [9:00] The Roth conversion * [12:09] The new tax law increased the standard deduction * [15:36] Qualified charitable distribution * [19:43] The qualified business income deduction * [22:37] Specific thresholds to look out for
Resources & People Mentioned * Episode 59 Tax Solutions for Charitable Giving * Episode 63 – QCD’s * Qualified Business Income Flowchart
Connect with Will Holt * wholt@financialsymmetry.com
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
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If you've paid any attention to financial news recently, then you didn't have to look far, as stock market noise was at a peak. Media headlines were filled with phrases like: epic turmoil, getting crushed and no place to hide.
Emotionally charged words that make you feel like you need to do something to prevent losing more of your nest egg. But following our instincts when investing, can lead to dangerous outcomes.
In times like this, we need a strategy to give us proper perspective. On this episode of the Financial Symmetry podcast, we’ll discuss why market fluctuations are incredibly normal and provide techniques to help you cope with short-term volatility and keep your focus on long-term goals instead. If you’re getting nervous about the direction the market is taking, you’ll want to listen for steps to confront the inevitable next occurrence.
How to Deal with the Emotional Roller Coaster of Investing When listening to financial news it's important to remember that the media’s ultimate job is to sell advertisements. It's not their job to help you see the long-term picture or help you reach your financial goals. Easier said than done when markets around the world experience a 10-15% drops.
But if we back up, history provides a different perspective. Market volatility is reliably normal, but it can still make you feel nervous. To truly understand the ups and downs, take a look at the chart below from the Capital Group. There have been 12 full-blown bear markets since 1945. A 5% or more decline in the market typically occurs 3 times a year. And a 20% drop usually occurs about every 4 years. The past 10 years have actually been the anomaly. It is important to remember that a bear market isn’t a bad thing.
It’s actually a great time to reassess your investment plan and evaluate your risk tolerance.
Fight Stock Market Noise with Facts With breaking news coming at us as quick as we want it with social media, it's even harder to block out the noise. Whether tweets or 24 hour cable news, today's financial news is near immediate compared to 30 years ago when you may not hear it until the next day.
In Jason Zweig's book, Your Money and Your Brain, he provides some powerful questions to prevent your feelings from overwhelming the facts. Instead of listening and reacting to the financial news du jour, stop to pause and think about if anything else has changed in your financial picture, other than price of your investment.
- Consider if your reasons for investing in that investment is still valid?
- If I liked this investment enough to buy it at a much higher price, shouldn't I like it even more now that the price is lower?
- What other evidence do I need to evaluate in order to tell whether this is really bad news?
- Has this investment ever gone down this much before?
- If so, would I have done better if I had sold out-or if I had bought more?
What Should you Do Next? To successfully navigate a bear market, you have a long-term strategy in place. Cliche? Sure, but considering where you are in life now is instructive in developing your treatment plan for market short-term sickness.
If you're in your 20’s and 30’s don’t worry, there is still plenty of time. Investment choices still matter at these ages, but not nearly as much as your actual savings amounts. Choose and stick with an investment plan so you can steadily take advantage of the drop in stock prices, a fantastic long-term sale.
If in your 50's and 60's, it's much more important to focus on your overall investment strategy. How does your asset allocation match your retirement timeline? For many in this walk of life, investment returns will be larger than your annual savings amounts. You'll also be facing the sequence of return risk which can eat a big portion of your retirement without a strategy.
Professional help at this point, can help you respond accordingly to market events and more importantly, act as an accountability partner. Having a buffer between your emotions and the markets may be the most important financial decision you can make.
Outline of This Episode * [1:17] Examples of fearful headlines in the news this month * [4:01] Why you should not be worried about market fluctuations * [7:32] Stick to your strategy and investment plan * [12:26] What are your emotions telling you to do? * [18:26] What should you do next? * [23:45] Fight fear with facts * [29:04] Next time on Financial Symmetry. . .
Resources & People Mentioned * BOOK - Your Money and Your Brain by Jason Zweig * Warren Buffet * Video - DFA's Tuning Out the Noise * Capital Group - How to Handle Market Declines * Episode 67 - Why Bother Diversifying with International Stocks * Article - How Fear May Be Hurting Your Investment Strategy * CBS Marketwatch - Ignore the Noise and Let the Market Do Its Thing * Episode 48 - Making Better Decisions with the Laws of Wealth
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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October is here so time to gather around the campfire. With Halloween around the corner, we are highlighting a few spooky financial stories that have scary circumstances. These feelings typically bleed in to stock markets as well. October is often wrongly characterized as the worst month for people to invest. Primarily because people remember the big historical market drops that happen during October. But scary moves for your portfolio aren't the only thing to fear in your financial planning. For all our listeners who love movies, you're in for a treat. We've picked 5 spooky financial stories that pair up with some classic Halloween movies. Listen in for some truly terrifying financial stories.
Not Seeing the Forest for the Trees Remember Jack Nicholson’s classic movie, The Shining? "All work and no play makes Jack a dull boy.” Finding a work-life balance is difficult for so many of us. We had a client that saved diligently over a hard-working career. While building an impressive savings for retirement, he put off vacations, opting for promotions up the corporate ladder. But once he was finally ready to retire and enjoy his savings, he was diagnosed with a nebulous nerve condition that required daily care and limited physical motor functions preventing him from enjoying his hard earned savings. While we can't prevent crippling medical conditions, we can build in balance to our financial plans. Understanding how your savings and spending will transform throughout your life helps you make more confident decisions while enjoying time with those most important to you.
Seeing Something Others Can’t “I see dead people.” A now infamous quote from The Sixth Sense. This is because Haley Jo Osmond's character can see things others can’t. Similar scenarios occur when life is full of busyness that blinds us to opportunities that could make a noticeable long-term differences. Instead, by surrounding yourself with people who can spot things you can't see, you set yourself up for new opportunities to bolster your financial progress. The back-door Roth provides a great example. You may think you make too much money to enjoy the benefits of a Roth IRA, but maybe you didn't have enough time to fully understand and follow through with it.
How to Avoid the Blair Witch Scenario The Blair Witch Project is a frightening scenario about a group of friends that wander into the woods without a plan. They lose their map and this leads them into trouble. Don’t let this be you. If you don’t have a plan you can swerve off course and lose your way to retirement. Many pre-retirees lose sleep over not having enough money because they didn’t set spending limits. You need to have a plan in place and know how much you can afford to spend and how much to save. Do you have a specific and customized plan for your life and your retirement?
Nightmares that Bring Confusion Some employees are confused about how best to handle employee income incentives. This is much like the people in Tim Burton’s The Nightmare Before Christmas who are confused when Christmas comes to Halloween Town. Many employees don’t have the time or expertise of how best to deal with RSUs, ESPPs, and Stock Options. Partly due to the tough decisions of when to exercise, sell or hold. So many tend to hold, where positions build and concentration risk grows. This is breeding ground for nightmare scenarios of holding too long and not diversifying. Listen to this episode to learn how to deal with the familiarity bias and ensure that all your financial eggs are not in one basket.
Don’t Neglect to Invest in your Human Capital Ghostbusters 2 is a classic tale of reinvention. The Ghostbusters are forced to reinvent themselves after their business goes bust at the end of the first movie. But their is beauty in their resilience and how they trust in their expertise. This is a good metaphor for our own lives. It is important to invest in your own human capital and have the resilience to face negative events that can happen in your own life. If you continually improve your knowledge you will be able to bounce back from challenges and change the trajectory of your life. Investing in yourself will always bring a high return on your investment.
Outline of This Episode * [2:57] Not being able to see the forest for the trees * [7:16] Seeing something others can’t * [12:21] How to avoid the Blair Witch scenario * [17:50] The nightmares that bring confusion * [22:11] The neglect to invest in human capital
Resources & People Mentioned * Staking Benjamins Podcast - 5 Tales of Financial Horror with Chad * Bloomberg - October is the Scariest Month for Investors, Along with All the Others * BOOK - Happy Money by Elizabeth Dunn * Episode 45 * Top 5 Reasons to Fill Out the FAFSA
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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If you're a mid-career professional, life is full of demands. You've worked incredibly hard to get here. You're sandwiched between young kids and aging parents. Your job is challenging and life is busy. Be it a technology company, medical practice or your own small business, stress comes with the territory during this season of life. This is fertile ground for growing a financial mid-life crisis. With all that's going on, it’s hard to know if you are making the right financial choices, because you don't have time to stop and focus on the financial considerations of the moment. Understanding this, we've compiled a list of the 8 most important wealth builders for all of you hard-working mid-career professionals.
Saving vs. Enjoying Life? As income increases to it's highest point in life so far, higher spending follows suit during these years. Deciding how much to save brings new challenges as bigger questions come in to focus. Things like when you really want to retire, changing careers, buying a bigger home for kids, or just remodeling your current home. When entertaining life-changing transitions, taking inventory is the first step. Where have you saved to this point? How will a major life change impact the long-term picture. Weighing alternative lifestyles are ripe with complexity that only becomes clear when comparing planning customized scenarios.
What Are Your Tax Options? Everyone loves finding more tax savings. The best way to ensure you don’t have unwelcome surprises come tax day is to dissect your tax planning at the end of each year. Many tax saving opportunities are left on the table when other priorities dominate your time. Longer work hours, traveling, and shuttling kids to events take all our attention in our 40s. Without proper attention, you never know when potential tax savings are missed.
How Are You Invested? When starting out, how much you are saving matters much more than the returns you can earn on those savings. But upon reaching mid-career higher earnings, your investment returns could become larger than the actual annual savings. At this point, your asset allocation moves front and center. Choosing how to divide your investments could pay off if busy lives don’t get in the way. Even an increase of 1.5%/year has a huge impact over time. As with many other things in personal finance, building wealth should be boring with little things adding up in a surprising way over time.
What kind of plans do you have in place for your estate? When the mid-career attention is divided, important items get ignored. Several of these include life, disability and health insurance for your family. We all know insurance can be expensive, but not having the right kind of insurance when you need it can be detrimental. Many people set up their beneficiaries when they first set up their accounts and then forget to ever update it. Part of your estate planning is choosing a guardian for your children and ensuring that the right people are the beneficiaries of your estate. Working with a professional can assure your estate is in order regardless of any eventuality.
Outline of This Episode * [4:27] How much should you be saving vs. enjoying life? * [8:55] Should you buy a new home? * [11:01] Are you saving enough? * [13:09] What are your tax options? * [14:35] What is your investing process? * [19:15] Life insurance * [21:02] Health insurance * [22:03] Estate planning
Resources Mentioned * BOOK - Essentialism by Greg McKeown * Kitces.com - The Four Phases of Saving and Investing for Retirement
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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When making your retirement decision, you likely get one chance to get it right. These type of situations are where checklists can shine. Understanding all your financial opportunities pre-retirement can make life-changing differences in your retirement journey. Which is why on today’s episode, we are giving you our beautifully detailed Pre-Retirement Checklist to help you make the best of your transition. Because the decisions you make now will have a lasting impact on when and how you can retire. This checklist provides you with a detailed step by step approach to giving you the tools to prepare for your best retirement.
“Good checklists...are precise. They are efficient, to the point, and easy to use even in the most difficult situations. They do not try to spell out everything--a checklist cannot fly a plane. Instead, they provide reminders of only the most critical and important steps--the ones that even the highly skilled professional using them could miss. Good checklists are, above all, practical.”
― Atul Gawande, The Checklist Manifesto
What Will Retirement Look Like?
Answering this question brings a smile to most people, as they secretly picture the time they'll have to do all the things they've put off. But the biggest secret is some of the biggest financial opportunities occur just before and a few years after retirement. Lowering taxes in your highest earning years, and maxing low tax brackets in the first few years of retirement helps you hold on to more of your hard-earned savings. With so many things to focus on during the retirement transition, maximizing all opportunities is difficult without reminders. Enter the pre-retirement checklist. With 60 items highlighted, you're sure to find something to look in to for your own situation. With a plan this detailed, you can be assured you will feel confidence in your retirement transition.
We are not built for discipline. We are built for novelty and excitement, not for careful attention to detail. Discipline is something we have to work at.”
― Atul Gawande, The Checklist Manifesto
How Much Can You Spend?
Surveys show when planning for retirement, a major concern is knowing how much you'll have to spend in retirement. Figuring out where income will come from is a significant part of retirement planning. Retirement income can come from social security, pensions, retirement savings, part-time work, and passive income. Knowing how you spend your money informs how much income you will need. Tracking 12 months of spending prior to retirement gives you a great start, but when forecasting you'll want to understand how your priorities will change throughout retirement. Taking time to work through the pre-retirement checklist helps spur thinking how spending may change. Taking a tour through the full pre-retirement checklist will help your achieve the most successful retirement for you and your family.
The Tax Diversification of Your Net Worth
Before you retire, taking inventory of assets and debts gives you meaningful feedback. You're now planning to start taking money out of all the accounts that you have nurtured and grown for so long. This actually may be challenging to watch as your savings begin to diminish. One of the more popular (and longest) sections of the pre-retirement checklist helps you understand how you can save more in taxes. Tax diversification helps structure your assets to be as tax efficient as possible.
Insurance Decisions
Insurance may be the biggest question in retirement these days, especially health insurance. Planning to retire before you are eligible for Medicare is creating a conundrum of choices for pre-retirees. For many COBRA will be your choice for up to 18 months after you leave your job. However, if you've diversified your savings effectively, you could find cheaper health insurance on the federal exchange via a subsidy. This takes specific tax planning annually. Outside of health insurance, you may not have thought about long-term care insurance, but it's something you should consider with the rising costs of long-term care. Working with a financial advisor, allows you to model potential scenarios of extended skilled nursing situations providing feedback if you can self-insure or not.
Outline of This Episode
- [1:27] Our pre-retirement checklist
- [4:29] What are the big decisions that you have to make in retirement?
- [9:30] Where is your income going to come from?
- [15:00] What is your net worth?
- [21:41] How can you save more in taxes?
- [23:49] Where will you get insurance?
Resources & People Mentioned
- BOOK - The New Retirement Mentality by Mitch Anthony
- Bucket List episode
- Health Insurance Tax Cliff Blog post
- Healthcare.gov
Connect With Chad and Mike
- https://www.financialsymmetry.com/podcast-archive/
- Connect on Twitter @csmithraleigh@TeamFSINC
- Follow Financial Symmetry on Facebook
Subscribe To This Podcast
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It's easy to stick with investments that are leaving all other assets in the dust. In fact, logic tells us because they're performing so well, we should buy more of it. While you're at it, shouldn't you go ahead and dump the lousy performers in your portfolio? These emotions are what makes investing so difficult. Additionally, when you diversify your investments, mediocrity is inevitable. Given the tear U.S. Stocks have been on, it's a good time to talk through the risks and benefits of diversifying away from areas that have been the top performers. Despite how cliche it's become at this point, the phrase "past performance is no guarantee of future results" is still a truth. Memories of previous bubbles seem like the distant past. Some of us don't want to believe and others don't want to miss out on gains any longer. Whatever the reason, it's inherently difficult to diversify away from seemingly never-ending profits. So in this episode, we discuss the answer to why you even want to bother diversifying with international and emerging market stocks and what the results could be going forward.
Why have U.S. stocks been so tempting? The U.S. stock market has enjoyed outstanding results over the past ten years, earning around 10.7% per year (S&P 500 with dividends through August 2018). With numbers that consistent, it's hard to find a reason to diversify with international equities when U.S. stocks are on such a hot streak. But we live in an interconnected world, our coffee, cars, electronics, are all created across the globe. While US stocks represent just 50% of global market values, 70-75% of Americans invest solely in U.S. stocks, influenced by home country bias which is common throughout the world. Furthermore, out of the last 20 calendar years through 2016, no country had the best-performing equity market for more than two years. As Howard Marks once said, "There’s little I’m certain of, but these things are true: cycles always prevail eventually."
Why would you want a mediocre portfolio? Having diversified investments means there's always something you'll despise in your portfolio. This amplifies the fear of missing out on a high flying tech performer. Especially the past 10 years, where U.S. stocks outpaced foreign and emerging stocks by over 6% per year during that period, which is why it's a challenge to remember the Lost Decade from the 10 years prior (2000-2009). Investing often makes us shortsighted. Creating pressure that tempts us to pick winners when markets aren't going our way. Even if diversification feels mediocre, it increases the reliability of longer-term outcomes. Allowing you to have winners in all types of market cycles.
What are the risks of investing internationally? We highlight 4 major risks when dealing with international investments in this episode. Tariffs and trade wars have dominated the news cycles of late, but so far it's more talk than action. Equity markets often react to short-term noise based on overblown fears and exuberant hopes. Currency fluctuations will affect the value of your foreign returns as well. A rising dollar against other currencies will hurt foreign stocks. We also discuss economic and geopolitical risks in many areas of the world. Yes, there's always a reason to avoid investing in poorly performing areas, but valuations should be considered. We mention and link an article below discussing the historically high correlation of valuation metrics with 10 year future returns. So despite the risks, this research raises some interesting questions about the prospects for international and emerging stocks going forward. But this requires discipline and diversification. The type of discipline that you could question for years. Likely the same way most investors were questioning U.S. stocks prospects in 2009. We've all seen how that's turned out.
Outline of This Episode * [1:27] How and why you should diversify your portfolio * [6:30] When you diversify you will have a more mediocre portfolio * [11:32] Why aren’t people investing in international stocks? * [17:55] What are the benefits to investing internationally? * [22:05] We have no idea what will happen in the future * [25:22] Have a disciplined approach to investing
Resources & People Mentioned * Article - Research Affiliates - CAPE FEAR: Why Cape Naysayers Are Wrong * Article - Capital Group - The State of Global Trade Tariffs in 6 Charts * Article - Should I Own International Stocks? * Article - A Wealth of Common Sense - Diversification is No Fun
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook
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On this episode of Financial Symmetry, Chad and Mike revisit a few previous episodes to cover some important financial questions that frequently come up. Taken from episode 6 is the question: Do I need a financial plan? With this question comes further questions. You’ll want to listen in to hear what the answers are. Episode 11 asks the question: What little things can you do to improve your financial life? There are so many little things you can do to improve your finances, listen to this episode to hear what they are. The last question is taken from episode 13. How will you pay for your child’s college? You won’t want to miss this episode to discover the answers to these financial questions.
Do you really need a financial plan? Many people, including our clients, wonder if they really need a financial plan. Is it worth your time and money to create a financial plan? People that have a financial plan discover more opportunities to save money which is a great way to make the plan pay for itself and then some! Compare a financial plan to a doctor’s checkup. Revisiting your planner and your financial plan each year is a great way to stay on track and focused on your financial goals. A financial plan is not just for retirement, it is something you should begin when you start your career. Listen to this episode to hear why you wouldn’t want to live your life without a financial plan.
What are some little things you can do to improve your financial life? Improving your finances doesn’t necessarily mean that you need to let go of all little luxuries you have become accustomed to. There are actually quite a few things that you can implement now that are relatively painless. The most challenging part of implementing these action steps are simply setting them up. One simple way you can improve your financial future is to set up an automatic monthly deposit into your investment account. This used to be something difficult, but with the advent of mobile banking, it can literally be done with the push of a few buttons on your phone. Listen to this episode to hear simple steps you can take to improve your finances.
How to improve your financial future with your 401K Another way people to improve your financial situation is to make the most of your 401K. Some people don’t even have this set up to take advantage of their employer match. They are leaving a 100% return on the table! Make sure that your 401k is set up to deposit the most that you can each month. When setting up your 401K it is important to diversify. Many people are afraid to do anything with their 401K account and simply leave it all in cash or employer stocks. They are missing out on a great way to grow their money. Listen to this episode to hear how important it is to set up your 401K properly so that you can get the most out of your retirement savings.
How to pay for college? Paying for college can seem like such a daunting task. A state university education can cost $100K and a private university can be more than double that. There are a few things you can do right now to help you figure out how to pay for your children’s education. There are many different ways to pay for college, but the important thing is to have a strategy. It is important to choose the right school for your child, one that has the right fit. By knowing what you can afford this can be a great way to limit your child’s choices and help you choose the best fit. It is important to remember not to focus on the sticker price of the school because there are many ways to reduce the costs of tuition. Listen to this episode to hear some great ways to create a strategy for paying for college.
Outline of This Episode * [1:27] Do you really need a financial plan? * [11:32] Little things you can do to improve your financial life * [19:39] How to pay for college?
Resources & People Mentioned * BOOK - Tipping Point by Malcolm Gladwell * MOVIE - Money Ball
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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All of us have a subconscious financial bucket list of things we want to accomplish. After having meetings with thousands of clients collectively over the years, we have a pretty good sample size of the biggest checklist items people would include on their financial to-do list. Now it’s Chad’s turn to share reflections on his 40th birthday. While Mike looked back highlighting lessons he’d learned, Chad looks forward describing the biggest bucket list items people hope to accomplish within their personal finances. Everyone has different things that they worry about or financial goals they are trying to achieve. On this episode, we explore what really gets people excited about financial planning.
When should you retire? Most people have entertained thoughts about retiring early. It is a dream for most when starting out. The retire early movement is about having the financial freedom to spend your time as you choose. To retire early you need to understand what you spend, what you save, and how your investment portfolio should be allocated as a result. But many people don’t realize what they’re spending. Important points when considering an early retirement is finding the best way to withdraw your money from a tax perspective, having a disciplined investment strategy, and planning how to best pay for health insurance. Having a plan for these will help you decide if you can retire early.
Elevating Milestones Along The Way How do you balance delaying gratification and celebrating achievements? Many people pencil in becoming a millionaire near the top of their bucket list. Despite being an arbitrary number, it’s one that is concrete and still a significant symbol of consistent savings over a working career. If you’ve ever read The Millionaire Next Door, you know the simplest way to reach this goal is to live below your means. By delaying gratification you can invest more in your future. Sometimes you may miss opportunities but your rewards will come later. Try to sustain your momentum by celebrating milestones along the way. According to the book, The Power of Moments, elevating smaller milestones on the journey can speed up your progress.
Taking a Life-Changing Vacation Not sure the Bucket List would exist if it weren’t for vacations. Thinking, planning, and sharing the trips we hope to take gives color to financial planning in unforgettable ways. Are you able to spend whatever you want on a vacation without guilt or worry? Steward Butterfield, the creator of Flickr and Slack, shared a great definition of levels of wealth related to vacations in a recent episode of the podcast How I Built This. Many clients rely on a financial advisor to give an objective third-party view of how much they should spend on a vacations. When talking through this with clients, we set up a customized yearly cash-flow plan that helps you see the longer-term effects of your vacation dreams. As we discussed in previous episodes, lasting experiences hold great value of their own, especially when planned for appropriately.
Eliminating the Mortgage Searching for security creates a wave of emotions when dealing with money. For many, this manifests in the desire to pay off their mortgage. Many feel that true financial independence can only come from living completely debt free. But before you write that check to pay off the mortgage you may want to think twice. Is there value in having a mortgage? Could it be a good financial move to keep a mortgage even if you can pay it off? You have liquidity and equity even if you do carry a mortgage. Paying off a mortgage is an important level of security for many. If you are going to pay it off, you need to think first where the money will come from.
Outline of This Episode * [3:27] 5 financial goals people have * [4:20] Retiring early * [7:40] Understand how much tax diversity you have in your accounts * [8:19] Have a disciplined investment strategy * [9:35] Health insurance * [12:02] Becoming a millionaire * [18:18] What about vacations? * [22:45] Becoming debt-free * [25:17] Creating a legacy for your children
Resources & People Mentioned * BOOK – The Power of Moments by Chip and Dan Heath * BOOK – The Millionaire Next Door by Thomas J. Stanley * PODCAST – How I Built This – Stewart Butterfield * Episode 57 What Happens When You Have No Estate Plan?
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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One of the difficulties in decisions around retirement, is most people only get one chance. One of the more essential decisions centers around when and how you choose to take Social Security. Maximizing your benefit has huge impacts to you retiring well. So this is not a subject that should be independent of your complete retirement financial plan. Carefully analyzing the best options could mean hundreds of thousands dollar differences for you throughout retirement. So in this episode, we answered 8 of the top questions we hear about social security in less than 30 minutes. Our hope is that you'll have a desire to dig deeper in your on analysis, to assure you are making the best decisions for you and your family.
Who is eligible for social security? The social security program was created in 1935 to promote the economic security of the American people. It takes about 10 years of work history for someone to become eligible for the benefits. The system works on credits and you need 40 credits over your lifetime (earn up to 4 a year). If you're married, you're eligible for spousal benefits especially if you don’t have as much of a robust work history. There are also disability and widower benefits. If you land in the latter category you should work with a CFP to help you understand your best filing options. Social security benefits are calculated by taking your highest 35 years of earnings and your benefits are calculated by these.
When should I claim social security? The big question that everyone wants to know is, when should I claim social security benefits? The trick is, the answer is different for everyone. You can start claiming social security at age 62, which 34% of people do, or you could wait until age 70, which only 4% of claimers do. Full retirement age ranges from ages 65-67. Claiming your benefit before your full retirement age reduces your benefits by 5-6% annually. So claiming at age 62 could be a reduction of 25%. On the flip side, every year you wait to claim social security after full retirement age, your benefit grows by 8%. When deciding when to claim your benefit, health and life expectancy also should play a role in your decision. The decision about when to claim is an important one that can have significant financial ramifications.
Married couples have more benefit strategies to consider A married couple has a lot to consider when it comes to thinking about filing for social security benefits. A spouse that hasn’t worked as much as the other is entitled to 50% of the higher earner’s social security benefit. For those born before January 1, 1954, the restricted benefit is still an option. Where one spouse, can take a "restricted" benefit equal to half their spouses monthly benefit. If one spouse passes early then the other spouse is entitled to the higher earner’s benefit amount. There are 3 main options for couples to consider: both spouses delaying, the higher earner delaying, or both taking early benefits. With singles, it is much easier to decide when to get your benefits, but still should be weighed with other income sources and current market environments.
When will Social Security run out? A big influence on why people take Social Security early is the fear that it won't be there in the years to come. We've heard for years that the social security fund will eventually run dry. While it's true that the worker to retiree ratio is getting smaller, we shouldn’t have to worry about the program completely running dry in our lifetimes. Current projections show that social security will not be able to fully fund retirees beginning between 2033-2035. But, the system won’t run out completely and it could fund 70% if nothing is done to solve the problem. A few of the potential solutions include:
- Pushing the claiming age out (last extension in 1983 only affected those 45 and younger at the time)
- Increasing Social Security taxes through payroll deductions
- Benefit Cuts to certain income levels
Listen in to hear the rest of the questions chocked full of useful information to help you uncover the mysteries behind the social security system.
Outline of This Episode * [2:07] What is social security? * [3:07] Who is eligible? * [7:00] When should I claim social security? * [13:05] Married couples have more social security strategies to consider than singles * [17:37] What about widows and divorcees * [19:07] Social security taxes * [21:49] When will social security run out?
Resources & People Mentioned * How to Avoid the Social Security Tax Bubble
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Do you ever feel financial advisors speaks a different language? Many clients feel their advisors throw around financial terminology that creates more confusion than clarity. Financial planners use mnemonics and acronyms since they are a great way to remember things. But the shorthand can be confusing to those that are unfamiliar with them. According to Investopedia, there are around 1900 financial acronyms, and more being created daily. Join us on this episode as we decode 10 of the most common to give you a head start in the next meeting with your advisor.
Do you let FOMO direct your investment decisions? FAANG and FOMO go hand in hand. FAANG refers to the hot tech stocks like Apple, Netflix, and Google. This acronym is reminiscent of the late 90's tech stock boom when there were only 5 or 6 tech stocks that were sustaining the entire market. FOMO (the fear of missing out) leaves you feeling like you are getting left behind if a decent portion of your portfolio is not invested in these stocks. This is where it's important to recognize how your emotions are influencing your investing decisions. History shows us the slippery slope letting your emotions drive your investing can be.
How BPS is just as important as GPS BPS is how a mutual fund expense ratio or financial advisor's fee is often quoted. BPS simply stands for Basis Points, the number of decimals after a whole number. For example, 50 BPS is 0.50%. Understanding the total annual cost of your investing strategies can help you more accurately compare the value you are getting from your investment strategy or financial planning relationship.
In the third slot is the CAPE ratio. This is an acronym for the Cyclically Adjusted Price Earnings ratio, a popular measure to help judge whether the stock market is cheap or expensive according to historical averages. A highly correlated long-term indicator of future returns, the CAPE ratio continues to be a good measure for understanding the stage of the market cycle.
Are you part of the FIRE generation? FIRE is a newer movement, developing more over the last 10-15 years. It stands for Financially Independent, Retire Early. Many people are looking for the flexibility to work less or retire earlier in life. Folks that attempt to drastically limit spending or save considerably may be trying to achieve FIRE. Given the gravity of these decisions and the length of low to little expected income, it's most important to understand the risks. This is where evaluating your full financial picture with annual cash flow comparisons and tax planning opportunities can add extra benefits at the margins.
Should you do a QCD from your RMD or use your DAF? Does your financial advisor speak like this? Do you just nod your head and play along? Understanding these terms could shave your tax burden considerably if used correctly. QCD, DAF, and RMD are important acronyms for the charitably inclined which can also lower your annual tax burdens. RMD is the Required Minimum Distribution that you are required to take at age 70 ½ each year. QCD is the Qualified Charitable Distribution if you are over the age of 70 ½ which sends a percentage of the RMD directly to charity, therefore, reducing your taxable income.
Listen to this episode to hear all 10 financial acronyms decoded (plus a few bonus ones) to be fully engaged at the next meeting with your financial advisor.
Outline of This Episode * [1:27] Acronyms are a great way to remember things * [5:17] FAANG * [6:21] FOMO * [7:40] CAPE * [8:51] BPS * [9:56] FIRE * [12:10] RMD * [13:58] QCD * [14:38] DAF * [15:52] NAPFA * [17:48] ACH * [19:39] REIT * [20:44] ETF
Resources & People Mentioned * 12 Steps to Your Financial Health blog post * Listen to Episode 59 to learn more about DAF * BOOK - The Devil’s Financial Dictionary by Jason Zweig
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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You have been hearing about Bitcoin and other cryptocurrencies for the past few years now. Nothing attracts the attention of the public like the possibility of missing out on the latest craze. The fear of missing out or “FOMO” can be extremely powerful. So you may be wondering whether Bitcoin or another cryptocurrency might be worthwhile to invest in. Like anything money related, it is important to understand what you are getting yourself and your money invested in. Listen to this episode to learn more about what Bitcoin is, the risks involved, and how cryptocurrencies work.
What is Bitcoin and how do cryptocurrencies work? Bitcoin is a worldwide cryptocurrency and digital payment system. It was invented in 2009 by a person or group of people named Satoshi Nakamoto, and it is still unknown who exactly the founder was. There are now more than 1500 cryptocurrencies in the virtual world today. Cryptocurrencies are different than regular currency because there is no bank or government backing them. Cryptocurrencies are created by mining. Like gold, cryptocurrencies have a limited supply which is where their value comes from. Listen to this episode to learn more about Bitcoin and how cryptocurrencies work.
What are the risks of Bitcoin? There are many risks to buying Bitcoin and other cryptocurrencies including, regulatory, security, insurance, fraud, security, and market risks. The government can essentially outlaw cryptocurrencies if it so chooses. There is a security risk in protecting your purse or online wallet. Someone can hack into your wallet and steal your coins. Your money at the bank is insured by the FDIC, but cryptocurrencies are not. So if someone does steal your coins you will not be insured. How do you know that you are buying real Bitcoin? The risk of fraud when buying cryptocurrencies is real. The price has see-sawed up and down dramatically over the past 8 years so along with all the other risks, there are substantial market risks. Listen to this episode to become informed on all the risks associated with Bitcoin and other cryptocurrencies
Is Bitcoin an investment or a speculation? Investments are something you can estimate the expected returns of by reading up on the background of the stock or bond. By researching the growth rate and fundamental value of an investment you can get an idea of what you may think the future return will be. The value of Bitcoin is dependent upon what someone else is willing to pay you and the history of it is all over the map. For this reason, we feel that cryptocurrencies are a speculation rather than an investment. Listen to this episode to hear why we feel that cryptocurrencies are not something you should invest a significant amount of money in and why you should not try to use Bitcoin to fund your retirement.
What is blockchain and why is it important? Although cryptocurrencies are tumultuous and it can be difficult to see what their future may bring, blockchain technology may have a big role to play in the future. Bitcoin is distributed by a blockchain which is a publicly distributed ledger. The technology of blockchain may completely change over time. The future of blockchain may include payment processing, money transfers, digital voting, and real estate or title transactions. Cryptocurrencies may not be the best investment but they have opened a new frontier in digital money and accounting. Listen to this episode to hear why blockchain technology could be so important to the future of money.
Outline of This Episode * [0:27] Why you need to know about Bitcoin and cryptocurrency * [4:17] What is cryptocurrency? * [8:07] What are the risks of Bitcoin? * [13:40] What are the tax implications? * [14:20] Is Bitcoin an investment or a speculation? * [16:11] What is blockchain?
Resources Mentioned * The Top 10 Economic Stories of 2013 included a story about Bitcoin * Burned by Bubbles article
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Next to the weather, vacation questions are in the small talk hall of fame. Each year, as summer approaches, more time is spent thinking, talking and planning for the perfect summer getaway. For most of us, the joy of some relaxation can make us all daydream. After all, most people choose to spend more time planning their vacations than their finances.
This makes sense because the greatest amount of happiness around vacations, peaks in the anticipation period. Looking forward to your travels boosts the pleasure factor positioning you for the highest return on that vacation.
With summer now in full swing, we love hearing about the tricks and tactics of how people are planning their vacations. In this episode, we've compiled 5 steps that draw parallels between your vacations and your financial planning. Taking these steps should deliver more enjoyable vacations.
What You'll Learn in This Episode * Examples of research strategies for planning vacations and financial planning. * Why paying for vacation in advance can add more enjoyment and make it more memorable. * Identifying goals and objectives makes for more successful vacations and financial planning. * How and when a professional can be helpful and actually save cost and free up time. * What's the all-in-cost? Considering what you may be missing can help identify blind spots. * Nearly two-thirds (64 percent) of those planning a family trip are expected to hit the roads this year.
Links Mentioned In the Show * The Affordable, and Therefore Enjoyable, Vacation – Carl Richards * What a Ski Vacation and Investing Have In Common * Money Can Buy Happiness Ep 36 * Top Vacation Destinations Domestically and Internationally - AAA
Did you know that your natural human behavior could be affecting your finances in a negative way? Behaviors may seem like small decisions but they build up over time. Human behavior makes a big difference in whether you are able to reach your financial goals. On this episode, Mike and I explore how human behavior impacts your financial choices. We have discovered 5 secrets to improve the way you go about making financial decisions. Are you looking for new ways to improve your finances? If so, then listen to this episode to hear 5 ways to improve your financial decisions.
Automate your financial systems According to the book Thinking Fast and Slow, your brain has two systems. One system is automated, and the other is for deeper thought. What does this have to do with your finances, you ask? If you have ever tried to make a financial choice you could get to the point of analysis paralysis with all the options. One way to make decisions easier is by limiting choices. You can get overloaded by having too many choices. If you set things up to automatically happen, like an automatic withdrawal to savings or an IRA this can really help ease your financial decisions. Listen to this episode to hear five great tips to modify your behavior to positively impact your finances.
Be aware of where your money is going This seems so easy. Of course, you are aware of how you spend your money. But are you really? Studies have shown that simply having an expense tracking app on your phone makes you more conscious of the way that you spend money. Whether you compare your receipts to your budget each month, track your spending with an app, or simply take a moment to process what you just spent on that ice cream, take time to be aware of your financial choices. To hear all five tips on how you can change your behavior to improve your financial decisions listen to episode sixty of Financial Symmetry.
Small wins do matter The power of momentum can get you over big financial hurdles. It can seem that some financial goals are completely unattainable when you are just starting out. This can feel incredibly frustrating and make some people give up hope of attaining their goals. Rather than focusing on the big picture, focus your energy on achieving small goals. If you can get some small wins under your belt this can help you achieve the momentum you need to achieve your financial goals. Listen to his episode to hear how you can improve your behaviors to make better financial decisions.
Accountability works wonders There is power in accountability. This may be the most powerful tool that we mention on this episode. It is important to have a human accountability partner rather than a technological one. If you rely on an app to try and help you with accountability, you could simply turn it off. A human is harder to ignore. Having a friend or financial counselor can help you achieve your goals. When you have an accountability partner to help you with your financial decisions this could be the most effective way to reach your goals. Listen to this episode to hear how having an accountability partner could help you with your financial decisions.
Outline of This Episode * [3:07] The human behavior decisions are actually the most interesting side of financial planning * [6:45] Choice architecture * [10:45] Saliency and self-correcting behaviors * [15:02] Follow through by writing things down * [17:56] Small wins matter * [22:05] The power of accountability
Resources & People Mentioned * BOOK - Thinking Fast and Slow by Daniel Kahneman
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Charitable giving fills a need in our society and betters it as a whole. And until recently, donating to nonprofits helped people receive attractive deductions on their tax bills. With the recent tax law change, it’s important to understand how your charitable contributions will affect your next tax return. We want to make sure that you continue to get the biggest tax benefit possible when giving to your favorite charities. So in this episode, we discuss a strategy to help you find the best tax solutions for your charitable gifting going forward.
How charitable giving has been reshaped The newest update to the tax law could limit charitable giving due to the increase in the standard deduction. For many, it may be challenging to find ways receive a similar tax benefits for giving they were already doing. But there are solutions out there. The first is to do nothing. With the 2018 tax law changes, most will no longer receive the same benefit for giving to their favorite non-profits. Your second option is to give the same amount to your favorite charities and lump your contributions so that you give a larger amount every other year rather than annually. This will allow a bigger tax benefit biannually this way. The downside to gifting directly to the charity is the disruption in annual cash flow for their regular operations. Nonprofits often rely on yearly contributions to stay afloat and this strategy could lead to financial problems for the charity.
What is a donor-advised fund? A donor-advised fund may be one of the best tax solutions for the newest tax law changes. You can set up a donor-advised fund with Fidelity, Vanguard, or Charles Schwab. This is an account where you can contribute the same amount that you usually do each year and realize the biggest tax savings over a period of time. This way the charity can still receive the same amount that you would normally give within the same timeframe. You can then distribute smaller amounts throughout the year to smooth your charitable contributions, so operations of the charity are not affected. A Donor-Advised fund can receive many kinds of capital and turn your investment into cash for your favorite nonprofits to use.
What are the best strategies for giving to a donor-advised fund? It is best to start planning your tax year in November. With a donor-advised fund, you can give to your favorite nonprofit in many different ways, whether it be stocks, private equity, hedge fund interest, real estate, or cash. Your donor-advised fund will then give your favorite charity cash that they can use. You are able to set up your charitable donation to be gifted whenever you choose, whether it is weekly, monthly, quarterly, or yearly. Using a donor-advised fund is a great long-term tax strategy to use as part of the changing laws’ tax solutions.
Outline of This Episode * [0:27] Changes in the new tax law * [3:33] The new standard deduction for charitable giving has changed * [5:30] What are your options? * [6:45] What is a donor-advised fund? * [10:48] How can you plan your estate with a donor-advised fund? * [13:10] What are the best strategies for giving to a donor-advised fund?
Resources & People Mentioned * Ep 49 How Tax Reform May Affect You * Donor Advised Fund vs. Private Foundations * Ep 55 Tax Mistakes
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Heather Gudac and Haley Modlin join Mike and me on this episode of the Financial Symmetry podcast to discuss how to become a financially successful millennial. We have had targeted advice toward other age groups in the past, and now we’re excited to find ways to help out the younger generation. Heather and Haley have worked hard to put together a fantastic list of five money tips for millennials to help them become financially savvy. Be sure to listen to this episode to hear excellent ideas to get you or your favorite millennial on the road to financial success!
Create and update a financial plan that reflects your goals This is perhaps the most important of the money tips for millennials. It is so important to come up with a plan, not just for now but for the future as well. Planning can help you discover how to pay off student loans, how and where to save money, and how to make a budget. The sooner you can start making smart financial decisions the better off you will be later on in life. Remember you don’t have to have money to have a plan. Having a financial plan will help you to save efficiently. As you take on more responsibilities in your career and in your life, be sure to periodically adjust your financial plan to stay on track. To hear more about creating a financial plan to help you succeed financially, listen to episode 58 of Financial Symmetry.
Take any financial advice you receive with a grain of salt When you are just starting out in life all kinds of people want to give you financial advice. This is usually well-meaning advice from people that care, but it may not be the best advice for your life. Some things to consider are: have they done this themselves, and are they people you really want to be taking advice from. Sometimes people may give you advice that was applicable twenty years ago but may no longer apply today. Listen to this episode of Financial Symmetry to hear important money tips for millennials to get a head start on a strong financial future.
When you get married should you join your bank accounts? Joint bank accounts can be a touchy issue for some people, especially millennials. The most important thing to remember when you are getting married or embarking on a serious relationship is not to keep financial secrets. Many relationships fail due to finances, so money should be an ongoing conversation. Whether or not you have equal incomes your money is a joint effort and what you do with it now affects both of you and your future. We discuss many of the available options when joining money, so be sure to listen to this episode to hear fantastic money tips for millennials.
How do you spend your money? What are your financial values? Millennials think differently and spend their money differently than previous generations. Studies have shown that 75% of millennials would prefer to have a great experience rather than buy goods. Knowing how you prefer to spend your money will help you plan your budget. Make sure that you are getting the most from your dollars by planning how you spend them. Use this episode to help you learn how to plan your budget, listen to Heather and Haley as they give us the top money tips for millennials.
Outline of This Episode * [2:27] What is a millennial? * [4:04] Have a plan and keep it updated * [8:36] Take into consideration the advice you get * [13:20] Whether or not to join your money * [17:38] How you spend your money is important * [22:11] How does the fear of missing out affect your plans
Resources & People Mentioned * Financial Symmetry episode 51: Financial Savvy for Women: The Top Ten Tips * Atlantic article: Why More Young Married Couples are Keeping Separate Bank Accounts * BOOK - Happy MoneyMichael Norton
Connect with Haley Modlin and Heather Gudac * hmodlin@financialsymmetry.com * hgudac@financialsymmetry.com
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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Do you know what the number one most avoided financial subject is? On this episode of The Financial Symmetry Podcast, we are diving deep into estate planning where you'll learn why it is so avoided and why you really shouldn't avoid it. Cameron Hendricks joins us on the show today to help us navigate this touchy subject. Estate planning is easy to forget to do and so many people end up putting it off so that it is actually the most avoided subject when it comes to financial planning. If you don’t have a proper estate plan you need to be sure to listen to this episode as Cameron lays out many of the possibilities that could happen if you have no will in place.
Why have an estate plan? What is the purpose of an estate plan? The purpose is to look out for your family and loved ones. You want to make sure that the people you want to receive your inheritance actually receive it. This also simplifies matters for your beneficiaries. It reduces family conflicts and confusion during an already emotional time. Because of this emotional roller coaster, planning your estate can be very challenging, but it's arguably one of the most expensive financial mistakes you can make.
What happens to your estate if you have no will in place? Cameron Hendricks joins us to walk us through different scenarios so that we can understand what happens to our estates if we don't even have a simple will in place. You may be at a time of life where you don’t have any dependents and so you may think that it doesn’t matter if you have a will in place. Would you like to leave your money to the state? If so, then there’s no need to do anything, but if you want to have any say in where you’re money will go when you are gone then you need to have proper beneficiaries named. Listen to this episode to hear what could happen to your money after you are gone.
When is the most important time in life to have a will in place? Many people that have families still avoid proper planning of their estate. The reasons are usually emotional. No one wants to think about what will happen to their children when they pass. If you are a stepparent, you probably haven’t thought about what might happen to your estate regarding your stepchildren if you haven't planned your estate properly. You’ll definitely need to hear this episode if you are the parent of a blended family. Make sure you don’t miss this episode on estate planning so that you can understand all the ramifications of improper estate planning.
Family conflicts are the biggest threat to estate planning No one wants to think about what life will be like after they are gone. Making decisions about what happens after your passing is emotional and not much fun. Estate planning is one of those difficult tasks that we just have to get done for the sake of our families. After a loved one’s passing many families experience rough times. Family relationships are already challenging enough. Don’t let your lack of estate planning make them worse. Listen to this episode to hear how important it is to properly plan your estate no matter what stage of life you’re in.
Outline of This Episode * [3:18] Estate planning is usually the number one thing that people haven’t done yet * [4:19] Why have an estate plan? * [9:00] Unmarried individual with no children * [12:25] Married couple with no children * [15:45] Married couple with children * [21:11] Blended families * [24:06] No spouse, no children, no parents
Resources & People Mentioned * Episode 11 - What Happens to Prince’s Estate?
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Allison Berger and Grace Kvantas are stepping in for Mike on this episode. They join us to talk about how to navigate through a life crisis, specifically financial considerations after the death of a spouse. It’s hard to think financially after such a terrible emotional blow, but proper financial planning can help ensure that you will have less to worry about in the years to come. Listen to this episode to hear our top 5 financial planning opportunities to think about after the death of a spouse.
How to prepare your taxes after the death of a spouse There are so many financial questions after the death of a spouse. This is an overwhelming time and it can be scary to move forward on your own. Having a checklist of things that need to be done is a fantastic idea. One area of confusion for widows and widowers is how to file your taxes. In the year of the death of a spouse, it is important to continue to file married filing jointly to take advantage of the lower taxable income rate. If you are interested in hearing about how to save money on your taxes for two more years after the death of a spouse then listen to this episode of Financial Symmetry.
This exemption often goes overlooked Many people don’t even realize that they should file for portability of the deceased spousal exemption, but even if you’re not a millionaire you should still file. This exemption doubles the rate that your heirs will be taxed so that when you pass they have a larger amount of tax-free inheritance. You may not have this kind of money now, but you never know what the future may bring. It’s always a good idea to be on the safe side and file this exemption while you have the opportunity. Listen to this episode to hear all the details why and how you should file for this exemption.
What should you do with life insurance proceeds? It can be tempting to pay off all your bills and even the house with the proceeds of life insurance. But before you do this, you should look at some alternatives. What kind of savings do you have set up for your future? Would the proceeds be more beneficial to you by maxing out your 401k contributions or even a put into a 403b? This is a good time to build your net worth as tax-free as possible. If you have surviving minor children ensure that there is a trust provision in place for them so that they don’t receive a large sum at the still so young age of 18. If you are wondering what you should do with life insurance proceeds, then listen to this episode of Financial Symmetry to get some ideas.
How much are you eligible to receive through social security? You can never assume that the social security administration is giving you the right amount of money so it is important that you ensure that you are receiving the correct amount of spousal social security benefits. If you have surviving children many widows and widowers feel the need to save this money for when they are older. But the social security administration would actually prefer that you use the money to care for your children’s needs right now. If you have any questions about social security, this episode of Financial Symmetry may provide the answer. Make sure you listen in to hear all about social security as well as 4 other important financial concerns to consider after the death of a spouse.
Outline of This Episode * [1:27] What are the top 5 planning opportunities for widows * [3:40] How to file your taxes * [5:48] File for portability * [9:48] Life insurance proceeds * [14:29] Survivor benefits for social security * [18:49] To pay off the house or not?
Resources & People Mentioned * IRS Form 706 * BOOK - Moving Forward on Your Own by Kathleen M. Rehl * BOOK - Happy Money by Elizabeth Dunn
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
On this episode of Financial Symmetry, we’re getting you ready for tax time! We've been helping clients check their taxes for many years and we know that there are two types of people that file their tax returns. The optimists try and get their taxes done as quickly as possible and probably have already filed their taxes. Those of you that are pessimists are waiting until the last minute and probably haven’t filed yet. If you fall into the latter category then you will definitely want to listen to this episode before you file your taxes. On this episode, we cover the top ten tax return filing mistakes. Remember, the IRS will never send you money that you missed on your tax return. Make sure you listen to this episode to avoid these common tax return mistakes.
What can you do to become more organized in your tax returns? Many times people make tax return mistakes simply because they are disorganized. They misplace paperwork and often do not have all the data at hand to complete their 1040 correctly. One thing you can do to avoid making costly mistakes on your tax return is to keep a file handy where you can put all of your tax documents for the coming year. That way as you receive documents throughout the year you can just place them into the file and have them ready when it is time to prepare your taxes. Getting your tax documents organized is one way to avoid tax return mistakes. Listen to this episode to hear other ways to avoid making mistakes on your taxes this year.
Do you have a checklist to keep track of new tax rules and help to avoid tax return mistakes? Having a checklist can help you become organized and avoid costly tax return mistakes. This can help you not to overlook anything. Without a checklist, you may forget to enter correct data or follow up on new tax rules. Some capital gains rules have changed and the custodian of your accounts does not have to keep track of all of the costs. These new changes could lead to costly mistakes. Listen to this episode to hear how these changes could affect you and your tax return. If you are looking to avoid costly tax return mistakes you will want to hear the best ways to avoid them!
What should small business owners be doing to avoid tax return mistakes? Are you a small business owner? Do you do any side work that involves a 1099? If so, that means you are! When you begin your small business or even if you simply have a couple of side gigs to bring in extra income then you need to pay attention to all the rules for filing your 1099 so that you can complete your tax return correctly and save money. Knowing what is taxable income and what isn’t is important and can save you thousands of dollars on your tax return. Listen to this episode of Financial Symmetry to hear about all the ways you can save money by avoiding these tax return mistakes.
Did you know that credits are more important than deductions? Many people think that finding deductions is the best way to save money on their tax returns, but that is not the case. Finding relevant tax credits is actually more important than finding deductions. You need to understand all the credits that apply to you and your family to make the most out of your tax return. If you have a college student you may be making a big mistake when filing your tax return. On this episode of Financial Symmetry, we discuss the top ten most common tax return mistakes that we see on our clients’ taxes. If you want to get the most out of your tax return, you’ll want to listen in.
Outline of This Episode * [1:11] What are the two types of people that file tax returns? * [3:44] What can you do to become more organized? * [5:00] Do you have new dependents this tax year? * [6:58] Capital gains rules have changed! * [9:31] Your 1099R may not be taxable, here’s why * [11:32] Why is it so important to keep good records? * [14:55] What should small business owners be doing? * [16:30] What can you be doing for your non-working spouse? * [19:05] So many people miss this credit!
Resources & People Mentioned * Episode 47 - Why Do I Need an HSA? * Episode 41 - How to Pick the Best Retirement Plan for Your Small business * The College Episodes: Episode 17, Episode 18, Episode 39
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
We’re jumping into the March Madness spirit by seeding our top 8 big financial life decisions. We have weeded through all the challenging financial decisions that you will come across in your life and ranked the top 8. By carefully choosing how you decide these 8 factors you could change the trajectory of your potential to build wealth over your lifetime. These decisions can make differences in the millions of dollars! Problem is, you don’t get a lot of practice at many of these decisions, making most of them only a few times over your life. So listen in, to hear a few ideas on many of these decisions that you’ve already, are currently or plan to make.
These 2 big financial decisions may surprise you! Number eight on the list affects everyone differently since the type of car you drive can say a lot about the type of person you are. With the average cost of a car at $31,400, this is often the second largest purchase that most people make. What does the type of car you drive say about you? Spend some time carefully deciding what to drive, how often to replace your vehicle and whether to lease or buy. Number 7 is a costly choice, but it is a gamble that can bring the ultimate return on investment. You’ll want to listen in to hear how to bring about the best return on this important family investment.
How and why you borrow money is always an important financial decision How much and how you borrow money over your lifetime will have a lasting effect on your ability to create wealth. How you get a loan, how much can you afford, and what the overall cost of the loan are all critical factors when borrowing money. You’ll also want to be able to decipher between what is good and bad debt? How much debt to take on is an important factor when trying to build wealth over a lifetime. Everyone has a different opinion about debt, listen to this episode to hear ours and to learn how debt can affect your financial stability.
Have you considered all the factors when thinking of purchasing a home? Buying a home is laden with emotional influences that can hijack your rational decision making. When you buy a home, you’re not just purchasing a house so what are all the factors you should consider? What part of the country you live in can drastically affect how much you may spend on a home. Even further, choosing a neighborhood will have a larger impact than you may initially think. Choosing some neighborhoods could leave you feeling he pressure to keep up with the Jones. This is where it’s important to remember that the less house you buy, the more disposable income you will have to spend on your hobbies, your family, and your savings. Listen to this episode to hear all the considerations that you need to think about when purchasing a home.
How do you save your money? The fourth item in our top eight ranking is how you choose to save your money. Many of today’s headlines are ripe with reasons to not invest in stocks, nine years in to a bull market. But investing in stocks is an important way to build wealth over a lifetime. Having a diversified portfolio increases the cumulative returns that you will see over time. So why do so many struggle to maintain an appropriate allocation to stocks? Many understand that investing early in your life can more than double your investment returns over a lifetime. But our emotions often have different plans when tough times surface. Listen to this episode to hear how important stock returns are to your wealth accumulation. I’m sure you’re wondering what our top 3 picks are, but you’ll have to listen in to find out!
Outline of This Episode * [0:27] It’s March Madness! Here are our top 8 financial life decisions * [3:39] What kind of car you drive * [6:26] How many children will you have? * [8:38] How much and how you borrow money over your lifetime * [12:07] The home purchase * [15:26] The average allocation to stocks that you have * [20:48] Having a compatible spouse * [24:00] Your savings rate * [27:47] Your human capital
Resources & People Mentioned * JP Morgan Guide to Retirement * BOOK – How to Win Friends and Influence People by Dale Carnegie * Farnam Street Blog – Decision Journal * Episode 45 – How Likely Are You To Build Wealth? * Episode 30 – Buying a Car * Lessons from the Millionaire Next Door
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * csmith@financialsymmetry.com * meklund@financialsymmetry.com * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
On this episode, we’re jumping into the March Madness spirit by seeding some of your biggest financial life decisions. We have weeded through all the challenging financial decisions that you will come across in life and ranked the top 8. By carefully choosing how you decide these 8 factors you could change the trajectory of your potential to build wealth over your lifetime. These decisions can make differences in the millions of dollars! Problem is, you don’t get a lot of practice at many of these decisions, making most of them only a few times over your life. So listen in, to hear a few ideas on many of these decisions that you’ve already, are currently or plan to make.
These 2 big financial decisions may surprise you! Number eight on the list affects everyone differently since the type of car you drive says a lot about the type of person you are. With the average cost of a car at $31,000, this is the second largest purchase that most people make. What does the type of car you drive say about you? Spend some time carefully deciding what to drive, how often to replace your vehicle and whether to lease or buy. Number 7 is a costly choice, but it is a gamble that can bring the ultimate return on investment. You’ll want to listen in to hear how to bring about the best return on this important family investment.
How and why you borrow money is always an important financial decision How much and how you borrow money over your lifetime will have a lasting effect on your ability to create wealth. How you get a loan, how much can you afford, and what the overall cost of the loan are all critical factors when borrowing money. You’ll also want to be able to decipher between what is good and bad debt? How much debt to take on is an important factor when trying to build wealth over a lifetime. Everyone has a different opinion about debt, listen to this episode to hear ours and to learn how debt can affect your financial stability.
Have you considered all the factors when thinking of purchasing a home? Buying a home is laden with emotional influences that can hijack your rational decision making. When you buy a home, you’re not just purchasing a house so what are all the factors you should consider? What part of the country you live in can drastically affect how much you may spend on a home. Even further, choosing a neighborhood will have a larger impact than you may initially think. Choosing some neighborhoods could leave you feeling he pressure to keep up with the Joneses. This is where it’s important to remember that the less house you buy, the more disposable income you will have to spend on your hobbies, your family, and your savings. Listen to this episode to hear all the considerations that you need to think about when purchasing a home.
How do you save your money? The fourth item in our top eight ranking is how you choose to save your money. Many of today’s headlines are ripe with reasons to not invest in stocks, nine years in to a bull market. But investing in stocks is an important way to build wealth over a lifetime. Having a diversified portfolio increases the cumulative returns that you will see over time. So why do so many struggle to maintain an appropriate allocation to stocks? Many understand that investing early in your life can more than double your investment returns over a lifetime. But our emotions often have different plans when tough times surface. Listen to this episode to hear how important stock returns are to your wealth accumulation. I’m sure you’re wondering what our top 3 picks are, but you’ll have to listen in to find out!
Outline of This Episode * [0:27] It’s March Madness! Here are our top 8 financial life decisions * [3:39] What kind of car you drive * [6:26] How many children will you have? * [8:38] How much and how you borrow money over your lifetime * [12:07] The home purchase * [15:26] The average allocation to stocks that you have * [20:48] Having a compatible spouse * [24:00] Your savings rate * [27:47] Your human capital
Resources & People Mentioned * JP Morgan Guide to Retirement * BOOK – How to Win Friends and Influence People by Dale Carnegie * Farnam Street Blog – Decision Journal * Episode 45 – How Likely Are You To Build Wealth? * Episode 30 – Buying a Car * Lessons from the Millionaire Next Door
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * csmith@financialsymmetry.com * meklund@financialsymmetry.com * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
When it comes to investments, too many people take a haphazard approach when what they need is an investment decision process that makes the most of a number of different available resources. This episode of the podcast is aimed at helping you understand what goes into a good investment decision process and how the team at Financial Symmetry approaches investments for its clients. Chad and Mike discuss market indicators and how they impact a good investing strategy, how consumer sentiment figures in, and why it's important to make use of the technical data available. You're going to get an inside look into the way the Financial Symmetry team helps their clients make the best investment decisions possible.
A good investment decision process helps you avoid big mistakes that destroy long-term benefits Too often, individuals make their financial planning decisions based only on what looks attractive in the moment. The fear of missing out is real. But there are many resources and data points available that take historical trends and other factors into consideration in a way that could enable your investment decision process to be much more helpful. One of the points that Chad and Mike make in this episode is that a good investment decision process can help you avoid the big mistakes that will sink your long-term strategy. It's those spontaneous decisions based on what looks hot at the moment that we're talking about, so make sure you listen and learn what you can do to avoid those kinds of pitfalls.
What IS a short-term market indicator and why does it matter? One of the things that should be a part of every investment decision process in consideration of short-term market indicators. What are they? They are the things we can see at the present moment that give us clues as to where the economy might be headed. For example: Are we coming out of or going into a recession? What is the current consumer sentiment about the economy? Are there technical trends and stats that inform us of what may be coming? These are things the average person doesn't take time to look into or consider but are vital components of the investment strategy that the Financial Symmetry team brings to bear on its client's investment decisions. You can hear the unique approach that the team takes, on this episode.
It’s easy to sell fear - but it's not a sound way to make investment decisions On many of the talk news programs and in some of the high-profile financial publications you hear talk about warning signs that the economy may be about to go down the tubes. Of course, they could be right with their predictions but making decisions based on fear is one of the weakest options for the smart investor. It's easy to sell fear, but it's not always the best way to determine how to invest your hard-earned money. In this episode of the podcast, Mike and Chad discuss why fear is not the best motivator for good financial decisions and how you can take a different approach that enables you to create a long-term strategy that actually works.
The best investment strategy won’t help if the rest of your financial life is a mess Even though this episode is focused on making the best investment decisions possible through a good investment decision process, that process and strategy won't do you much good if the rest of your financial life is a mess. What are those areas? - Do you have enough life insurance? How are you spending compared to the spending plan you've made? Do you have an adequate estate plan in place? Are you being tax-efficient? These are only some of the fundamental questions you need to address before you get too involved in making a long-term investment strategy. If you don't, you can wind up wasting a lot of time with no benefit to show for it.
CHART TO GO INTO SHOW NOTES?
Outline of This Episode * [0:27] Investments, forecasting, and good investments strategy * [2:50] Summary of 2017: Extremely strong markets worldwide * [6:01] The process the Financial Symmetry team uses - it’s a bit unique * [9:08] Where are the different market indicators today (2/1/2018) * [12:05] How is consumer sentiment these days? * [17:14] How do we use the technical data to make better investment decisions * [21:11] Valuations: what are they and how do they work? * [31:07] What you really need to do is to focus on things you can control
Resources & People Mentioned * The Financial Symmetry Approach to Financial Planning * Blog Post: Should I Own International Stocks * Episode 44: What Behavioral Economics Means To You * Meb Faber’s article about Moving Averages * Jack Bogle’s forecast of the next 4 years * Vanguard’s outlook summary * Morningstar’s Forecast
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh @TeamFSINC * Follow Financial Symmetry on Facebook * cSmith(at)FinancialSymmetry.com * eEckland(at)FinancialSymmetry.com
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Studies show that most women don't think of themselves as having financial savvy. Honestly, it's a very sad situation but one that is improving as years go by. In this conversation, you will hear some of the latest statistics about the improving state of women's finances, the causes behind these improvements, and what any woman can do to grow to be savvier when it comes to financial planning. But the Financial Symmetry team isn't going to stop there. Allison Berger and Grace Kvantas present their Top 10 Financial Tips For Women and explain why each one is important.
If there are women listening who have a goal to increase their financial savvy, this is the episode they should listen to.
Women Face Financial Challenges Men Don't It's not an exaggeration at all to say that women face unique challenges when it comes to building wealth and managing their finances in a way that leads toward a secure retirement. In this conversation, Allison and Grace highlight 3 challenges women face that men do not. First, nationwide, women tend to be paid less than men. Second, women tend to live longer which means the finances needed over their lifetime and retirement is greater than that of men. Third, women have the opportunity to become mothers, which means time out of the workforce that men don't experience. Don't miss this insightful episode that highlights how women can address the challenges effectively and increase their financial savvy.
Analysis Paralysis: Road Block to Wealth Building for Women We are coming out of a cultural period when women were not typically encouraged or expected to be very savvy when it comes to finances. That leftover mindset has caused many women to feel overwhelmed at the thought of understanding or managing finances which in turn, causes analysis paralysis to set in. But the good news is that women don't have to be paralyzed with overwhelming fear when it comes to building wealth and planning for a secure future. This episode highlights 10 of the first steps women can take to grow their financial knowledge, so be sure you take the time to listen.
Struggling With Guilt Many women struggle with guilt regarding finances: “If I have less, someone else will have more.” The reality is that the opposite is almost always true. In general, women tend to be empathetic and helpful toward the people in their lives. That wonderful trait can take a bad turn though when it causes them to believe that making a meager living will enable someone else to have more. That is an entirely false belief in light of the facts. Building wealth for yourself and your family enables you to have the resources to be a benefit to the people who truly have needs. Being wealthy doesn't take from others, it enables you to be a blessing. Find out more about this backward mindset and how to reverse it, on this episode.
Tracking Cash Flow is Vital Knowing what your earning and spending allows for more control. It's one of the basic principles of budgeting and money-management but many women are not diligent about doing it: Track your cash flow. You can't grow to be savvy when managing your finances if you don't know what is coming in and what is going out. In this conversation, Allison and Grace provide a number of financial tips for women in hopes that the things that keep them from being confident about building wealth and a secure future can be overcome through practical steps that anyone can accomplish. You will enjoy the practical and common sense approach they take on this episode.
What You’ll Learn In This Episode * [2:13] The alarming stats surrounding women and wealth * [3:33] 3 particular challenges for women when it comes to building wealth * [7:06] Underconfidence bias: how it impacts women building wealth * [8:52] Characteristics of women investors and societal trends that impact wealth building * [17:21] Stats that demonstrate the problem women face when attempting to build wealth * [18:57] Things are changing in culture, education, and earnings * [21:58] The benefits of having a 3rd party in a couple’s financial conversations * [25:33] 10 Tips for women when it comes to finances
Links Mentioned In The Show * Fidelity: Money Fit Women Study * Business Insider Article: Highest Paid Women In Every State * BOOK: Prince Charming Isn’t Coming: How Women Get Smart About Money * Downton Abbey * Interact: Non-profit dedicated to ending sexual and domestic abuse * BOOK: I Don’t Know How She Does It * BOOK: I Know How She Does It * BOOK: Drop the Ball: Achieving More By Doing Less * The Mindy Project
The Top 10 Financial Tips for Women 1. Get started today - don’t wait for a crisis to force you into it 2. Have a way to view all of your accounts and account statements 3. Know your benefits: it’s not only up to your spouse, become informed 4. Make sure you have your name on at least one account (checking and credit cards) 5. Think long term: investing your money, investing in yourself, planning for success 6. Track your cash flow: know what’s coming in and what’s going out 7. Drop the ball: let go of the expectation that you have to do everything 8. Don’t be afraid to ask questions or to ask for help 9. Maintain your network. You’ll need it throughout your life 10. Know your estate scenarios: What will happen if someone passes away?
Subscribe To This Podcast Apple Podcasts <> Stitcher <> Google Play
Connect With The Financial Symmetry Team * Allison Berger: ABerger@FinancialSymmetry.com - Allison’s blog posts * Grace Kvantes: GKvantas@FinancialSymmetry.com - Grace’s blog posts * Chad Smith: csmith@financialsymmetry.com - Chad's blog posts * https://www.financialsymmetry.com * On Facebook * On Twitter * On LinkedIn
Checklists make life easier. Research has demonstrated the value of checklists in all industries from medicine to construction. Often our financial to-do lists are scattered tasks we think about often but struggle to complete due to the multiple steps involved. Most of us start the year with hope that this year will be different from this perspective. How much easier could tackling these tasks be if we had a checklist to follow?
In this episode, we’ve compiled 12 steps to make sure you are starting the year on the right foot. We also discuss how powerful these things can be longer-term due to the value of compounding. Albert Einstein knew this, calling compound interest the eigth wonder of the world. But how much does compounding matter in other financial areas outside of strictly math. Tune in to assure you have worked through this checklist, and if not, find ways to get help.
What You’ll Learn in This Episode * The connection between compounding and habits. * Your habits produce more compounding * Quote: “People often overestimate what they can accomplish in one year, but they greatly underestimate what can be accomplished in five years.” Peter Drucker. * Quote: “The one thing we can always control in this unpredictable life is our effort. Effort creates action, action creates momentum, and momentum creates success.” Dwayne “The Rock” Johnson. * 12 Useful Steps for your New Year financial checklist.
Check out the detailed show notes here: https://wp.me/p6NrVS-2UR
As we approach year end, we now have the first major tax overhaul in over 30 years, which became effective January 1, 2018. As financial planners, we are focusing a great deal of our attention on the changes that are coming and how they are going to affect each of our clients in the coming years. The reform creates new opportunities for some, and closes the door on others. So, what are the major changes that are coming and how do they affect you? Join us in this episode as we discuss the biggest likely impacts that will influence your personal situation.
Some of the biggest changes are in these areas:
- Tax Cuts for Most
- Increased Standard Deduction
- Key Itemized Deductions Changes and Limitations
- IRA Recharacterizations
- Child Tax Credit Expansion
- 529 Plan Usage Expanded
- Home Office Deduction Elimination
- AMT Changes
Read more detail in the show notes here: https://wp.me/p6NrVS-2UU
We read, write and talk a lot about better ways to build wealth, and after reading Dr. Daniel Crosby's latest book, The Laws of Wealth, we wanted to dive deeper on his 10 rules of wealth building. Daniel does a great job of weaving relevant stories in to topics that often can be overly complicated.
In this episode, we walk through our favorite rules along with steps you can take to put these rules in to practice in your own life. Daniel's examples of why so many of us are overconfident will provide a laugh along with some head-nodding. This discussion will help you take a step back and evaluate potential flaws in your current wealth building journey. Understanding why we have trouble doing this on our own could be the best Christmas gift you receive this year.
One of the most asked questions we receive centers around the HSA. It's also one of the largest missed opportunities for tax savings we see people are missing, if they are eligible. Health Savings Accounts, known also as HSA, are gaining more and more popularity. But there is still a lot of confusion on how this account is different.
Join us this week, as we break down the ins and outs of all you need to know about how an HSA can benefit you and your family. We address why so many are still not using these accounts to their full capacity. Also, we break down how the HSA provides triple tax savings, or the hat trick as Mike likes to call it.
What You'll Learn in This Episode * What is an HSA and why do I need one? * How do you know if you are eligible for one? * Why people confuse the HSA and the FSA? * The incredible benefit within an HSA that only 4% of people are taking advantage of. * Why the beneficiary matters on your Health Savings Account. * 4 out of 5 HSA accounts have been opened since 2011. * 7.3 million people who are enrolled in HSA-eligible plans haven't opened an HSA. * Only 48% of those with an HSA contributed to it.
For more, check out show notes here.
Near tax time each year, do you find yourself wondering what other tax strategies you may be missing? Many people have a goal of paying less in taxes but are missing opportunities to be as tax efficient as possible with their entire financial picture. Fact is, there are things you can do between now and the end of the year that could be a nice benefit when filing your tax return this year.
Join us this week, as we are interviewing a seasoned CPA expert on tax strategies people miss. Will Holt has spent 25 years preparing, reviewing and revising tax returns for clients. It was fun picking his brain to tease out seven tips for people to better position their tax situation next year.
What You'll Learn In This Episode
- How important decisions during open enrollment could be for next year.
- The impact of missing out of employer contributions in your 401(k) or HSA.
- Why contributing to an account for your non-working spouse can be a better move.
- The ins and outs of gifting the right type of asset
- Understand the difference between taxable income and AGI as it relates to tax brackets
- Don't let the tax tail wag the investment dog.
- Education credits are powerful if used correctly
What if you knew the secret to building wealth? For many, asking that question alone is part of the problem. That's because it's less of a secret, and more of a discipline of small habits and behaviors we are programmed to ignore. Whether it's how easy we get distracted or our propensity to keep up with the Joneses, understanding our thought patterns around these topics is informative and can lead to trans-formative long-term behavior change. Join us for this episode, as we discuss the specific researched backed factors it takes for each of us to build wealth. The mindsets, habits and predispositions we all experience that set us up to build (or not build) our wealth. You'll also hear Chad and Mike's surprise, as they reveal each others results to a Building Wealth assessment they took.
Find out more and discover links mentioned in the show here: http://bit.ly/2lWyxn5
Did you realize that we are hardwired to make irrational financial choices? The incentives to spend now vs. save are difficult to overcome on our own.
On this episode, we break down six key behavioral biases we all share at some point around our finances. The good news is that human accountability and automated savings programs can go a long way to fight against these instinctual biases.
So join us as we celebrate the recognition of Dr. Richard Thaler winning the Nobel Prize in Economics for his Behavioral Economics research and what it means to your financial situation.
Find out more and discover links mentioned in the show here: http://bit.ly/2zvzyVe
Interest remains high of how to protect yourself after the Equifax Credit scandal. The good news is there are steps to take to mitigate your risks to guard your credit reputation. The bad news is that similar breaches have happened before and will happen again.
Listen this week as Chad and Mike discuss ways thieves will try and take advantage and the details on steps you can take to decrease your risk of having your credit compromised.
For many, the open enrollment period is just another email you quickly delete thinking nothing has really changed since last year. But this passive approach can be extremely costly if new benefits are being offered or life changes you forget about throughout the year may have happened. On this episode we share some of our unique perspectives given how many different employee benefit packages we see regularly. We also reveal some of the more unique benefits companies are now offering that could be a nice benefit for you this fall. Find out how to assure you are picking the best options for your employee benefits this year.
You can find show notes and more information here: http://bit.ly/2xqX7kR
Picking out a small business retirement plan can be daunting. This is why we see many small business owners, or those with side hustles, not taking advantage of a retirement plan for them or their employees. This is often because they are overwhelmed by the number of plan options, plan administration requirements, fiduciary responsibilities or they think they are too expensive. On this episode we share some insights to potential options that are not as complicated or as expensive as you might think. Making this decision could put you on the fast track to significant tax savings while also saving more for your retirement goals.
You can find show notes and more information here: http://bit.ly/2xqX7kR
Once you hit your 40s, it becomes more important than ever to evaluate your financial plan and fill in any gaps in your future. Many of the planning tasks can be tedious or seem unimportant now, but you will thank yourself later when you look back on your conscious and careful financial decisions. Life throws a lot of curveballs and it’s easy to get busy and forget to keep your plan up to date. But taking time to get your ducks in a row will save you a lot of stress later on.
You can find show notes and more information here: http://bit.ly/2vdPDBd
It doesn’t get much more stressful than preparing your child for college. From the testing and forms to the outrageous tuition prices, the process can truly be a nightmare without the right strategy. Cozy Whittman from College Inside Track joins us on the show today to share some really valuable information that could save your family tens of thousands of dollars over the course of the college process.
You can find show notes and more information here: http://bit.ly/2wMLyAp
You know those things you know you should do - eat healthy, work out every day, sleep eight hours - but struggle to get done? We all do it, and skipping over financially healthy habits is another common way to cut corners.
Overlooking seemingly small aspects of your financial life now is just like skipping floss or skimping on sleep - they don't have a huge impact immediately, but can really affect you down the road. Tuning up your financial habits is a good way to keep yourself in good shape for the long run.
On another note, we'd love to see and hear how you're listening to the podcast. Walking the dog? On your commute? Let us know!
You can find show notes and more information here: http://bit.ly/2vekwVO
There’s always more to learn when it comes to the world of finance. A great way to squeeze in some extra know-how this summer is through reading. So on this episode, we have a list of 13 great titles that you may want to add to your reading list, no matter where you are financially or what interests you have.
You can find show notes and more information by clicking here: http://bit.ly/2ukGIgu
When was the last time you asked yourself: what purchases have I made in the last month that really made me happy? It might sound like a silly question, but as we'll reveal in this episode, the answer is key to making sure you spend money in a way that supports short- and long-term happiness.
In this episode, we're switching it up a bit and giving you a rundown of one of our favorite books: Happy Money: The Science of Happier Spending. Happy Money gives you the tools to spend in ways that can help you build and sustain happiness over a lifetime. And to make it even more fun, we're talking about popular movies that align with each of the book's five principles.
You can find show notes and more information by clicking here: http://bit.ly/2tOcm2r
How you take your retirement pension can be a more consequential decision than many people realize. The debate over whether to take your pension as a lump sum or as monthly payments can be tricky.
On this episode, Chad and Michael share 5 things you should keep in mind when making decisions about your retirement pension. They cover some of the key terms you should know, and point out the importance of finding what age is the breakeven point in your calculations. Inflation is also key to factor into your decision, as well as how your pension will affect your spouse.
You can find show notes and more information by clicking here: http://bit.ly/2sBJw8f
We are so excited to welcome back Cameron Hendricks to the Financial Symmetry Podcast! He is back to discuss the journey of writing a book about financial decisions and how they affect your family dynamics. We chart his growth in thinking about financial planning and helping people achieve their financial goals.
You can find show notes and more information by clicking here: http://bit.ly/2rfNp0z
As with any financial decision, investing in real estate requires a lot of thought and planning. We've pulled together five of the most important things you should consider before you buy any time of investment property, be it residential or commercial.
You should also consider whether you're passionate enough about maintaining property to dedicate significant time and money to the endeavor. Real estate is no small undertaking, but can be fulfilling if you enjoy the process.
You can find show notes and more information by clicking here: http://bit.ly/2q5NC5T
Everyone has a unique road to financial literacy. One common trait we all share is that we hope to pass our wisdom on to the next generation, and that they will learn valuable lessons while they are young. In today’s episode, Chad and Mike share their best tips and tricks for educating your children about money.
You can find show notes and more information by clicking here: http://bit.ly/2oTSL1K
Saving for retirement often feels like the biggest and most-talked about goal of financial planning. And while there's a lot that goes into successful retirement planning - healthcare costs, keeping track of spending, and tax planning - there are some pitfalls that a comprehensive financial plan can help you avoid.
Today we're doing one of our famous Top 10 episodes and counting down the top ten retirement mistakes to avoid. We cover everything from how you should budget your spending, to unanticipated costs, to the tens of thousands you could save with intelligent tax planning.
You can find show notes and more information by clicking here: http://bit.ly/2oypJDI
Today we're talking about one of the larger purchases you might make: buying a car. 90% of consumers say that price is their most important consideration when buying a car, and that negotiating is the most painful part of the process. Big purchases can be stressful and confusing, but there's no reason your financial planner shouldn't be able to make them easier.
We walk step-by-step through the process of buying a car, beginning with determining what you can afford. You'll also have to consider the functionality of your new purchase, and what owning a car really means to you. We also cover the question of buying vs. leasing, and where to go to get independent consumer reports about cars you're considering.
You can find show notes and more information by clicking here: http://bit.ly/2nxfDAj
The word "fiduciary" is being tossed around a lot lately, largely because of the Department of Labor's oncoming regulations. We thought it would be a good idea to talk about what fiduciary advisors don't look like, so you can choose an advisor that always puts your interests first.
First we talk about what fiduciary means and why it only applies to retirement advice. Then we go through a list of five examples of non-fiduciary advice so you'll know it when you see it. We cover the importance of transparency, duty of care, and the difference between suitable and fiduciary advisors.
You can find show notes and more information by clicking here: http://bit.ly/2na4Iif
For many of us, our parents getting older is a tricky situation to navigate. How do you respectfully offer your help? Ensure they get the best care? Know what to do with their bills and other finances?
For our first-ever interview, we're speaking with Cheryl Theriault of LifeLinks Care, a group of nurses, social workers, care managers, and other professionals that specialize in helping families navigate elder care. We've worked with Cheryl and her team in the past, and thought she would be an excellent guest to talk about this sometimes-sensitive topic.
You can find show notes and more information by clicking here: http://bit.ly/2kBFFiW
Mike's turning 40! As he hits this milestone, they guys explore the lessons he learned over more than 17 years in the financial services industry. Mike and Chad will reflect on the top 10 lessons learned from these experiences in this week's episode of the Financial Symmetry Podcast.
Top 10 Investment Lessons Learned
- Following the crowd is not a recipe for investment success. It’s OK to be different.
- Sometimes saying no is the best decision.
- Making yourself more marketable and attractive to employers through personal development will only help you in the long term through increased earnings and job security.
- Limit your employer’s stock to no more than 5% to 10% of your portfolio.
- Take the emotion out of investing by setting up an automated investing schedule.
- Don’t get caught up in the short-term noise; focus on the things you can control.
- A diversified mix of stocks and bonds gives you a better chance of sticking with your investment plan than a 100% stock portfolio. Stocks may provide a greater long-term return, but if you sell at the bottom it doesn’t matter.
- Implement and follow an investment strategy and stick with it in good times and bad. If you don’t have a strategy, implement one or have a financial planner help you.
- If you can avoid pouring too much money into equities when the market is riding high (March 2009) or too little when it’s sinking low (October 2007), you’ll be better off. Studies by Vanguard, Morningstar and Dalbar show the average investor trails the market by 1.5% to 3% per year due to poor decisions caused by wanting to jump on the latest fad.
- Time is your best friend: Implement a disciplined investment strategy, be patient, focus on what you can control (savings, taxes, and so on) and avoid a big mistake. If you can’t do this, hire a fee-only financial planner to help you stay on track.
Did you meet your New Year's Resolutions last year? Have you set goals for the New Year? In this episode, Chad and Mike discuss the five small steps you can take to make your resolutions attainable.
You likely would rather think about ANYTHING other than their taxes. And even though you want more tax savings, you rarely follow through with proper tax planning. Most people don’t realize the large amount of tax savings they could have by making a few simple tweaks. Instead they operate under the “penny wise, pound foolish” mantra. Missing substantial savings to save the cost of a professional. By performing professional tax planning towards the end of the year, there is often thousands in tax savings available. You can read more about our 10 tips to help you save more when filing your taxes this year.
Many people don't have a great idea of what do do with their bonus at the end of the year. Should you spend it? Invest it all immediately? Invest it over the coming year? In this week's podcast, Chad and Mike explore your options and help you decide how to end your year.
Music this week:
Celebration (Single Version) – Kool & The Gang from the Album Celebrate! (1980)
Don't Stop Believin' – Journey from the Album Greatest Hits (1988)
Used under Fair Use.
Two-thirds of people admit to procrastinating when it comes to their retirement planning. In fact, the average person spends more time planning a vacation then than do planning for retirement.
Non-urgent financial tasks love to find cracks in our to-do list, falling to the bottom fast. Mark Twain humorized this concept well with his quote, “Why do today what you can put off till tomorrow?”
Jason Zweig captured these problems in his book Your Money and Your Brain. He wrote “Unpleasant tasks often lead to pleasant results down the road. We often procrastinate the worst on things that are good for us [with] saving more in our 401(k)” being near the top. “So the problem is not that we don’t know what’s good for us. It’s just that tomorrow seems like a better time to do it than today.”
In this episode, we share some of the best reasons we’ve read, personal stories, and tips we’ve used to combat financial procrastination.
Strategies to Fight Financial Procrastination 1. Research on why we procrastinate financially 2. The implications & cost of continuing to procrastinate 3. Quick ways to combat putting off what you know you need to do today financially
Facts and Links Mentioned In the Show 1. People check email an average of 150 times a day. Peak amounts are 900 times a day. [Art of Charm Podcast with Greg McKeown] 2. More than 2/3 of adults age 55+ admit to procrastinating on retirement planning. [Financial Engines Study 2015] 3. This survey shows people say that 25 is the right age to start financial planning but in reality they started planning 10.6 years later. [Financial Engines Study 2015] 4. Top 5 Reasons We Procrastinate * 50% blamed stress for their procrastinating * 40% said they had higher priorities, even though they were interested in retirement planning * 24% were worried about being taken advantage of * 23% were not sure how to go about it * 20% believed it was too difficult 5. How to Beat Procrastination by Dr. Travis Bradbury [LinkedIn Pulse] 6. Why Investors Keep Repeating Their Mistakes [ETF.com interview with Wait Buy Why Founder]
Stacking Benjamins Podcast You can also check out Chad on the Stacking Benjamins Podcast on a special Halloween edition. He shared 5 horror stories we see regularly from when we first meet with people.
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
Subscribe To This Podcast Apple Podcasts <> Spotify <> Google Podcasts
Can you really fail in retirement?
For most people, retirement is that time on the horizon when you get to do what you want, when you want. But surprisingly, it's not all that uncommon for people to retire only to go back to work or face other unexpected negative events that occur which people are not prepared for.
You spend a boatload of time planning the financial side of retirement (at least we hope you did). But how much time do you spend planning how you'll spend your time.
In this episode, we share ideas from an intriguing presentation given at NAPFA National 2016 where Mitch Anthony spoke about his new book The New Retirementality. He describes 10 components in the "Return on Life Index" he developed. This index details all the other areas you get a return in life that you may not regularly think about through those lenses. This includes your contribution after work, leisure, health, education, and relationship building opportunities.
Remember, you don't stop investing after you stop working. You just find different areas of your life to invest in, besides your portfolio. Take a listen to find out more of what we learned during Mitch's presentation.
Ways You Can Fail at Retirement 1. Facts that back up our claim that many people fail at retirement 2. 4 Key Success factors that have been found to result in a successful retirement. 3. Resources to help you as you decide if and how to retire.
Facts and Links Mentioned In the Show 1. For those over 65, the official number of suicides is 14.9 out of 100,000 people per the Centers for Disease Control and Prevention. These numbers for over 65 may be under reported as overdoses are assumed to be an error. 2. In 2014, people over 50 were twice as likely to get divorced than in 1990. 3. The book Your Retirement Quest: 10 Secrets of Creating and Living a Fulfilling Retirement by Alan Spector and Keith Lawrence 4. Retirement Mythbusters Presentation
Two Questions to Help Avoid Failing at Retirement 1. Think through how are you going to spend your time? 2. Secondly, how are you going to pay for it?
Connect With Chad and Mike * https://www.financialsymmetry.com/podcast-archive/ * Connect on Twitter @csmithraleigh@TeamFSINC * Follow Financial Symmetry on Facebook
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New regulations for 401k regulations are putting even more responsibility on the employer. Understanding these new laws can be a complex, and time-consuming task. Join Chad and Mike as they walk through the basics of what employers need to know to ensure they are ready for the changes.
In this episode, Chad and Mike take another look at the 401k, and how important it is to your retirement plan.
Much is made about keeping our physical fitness in good shape. But what about your financial fitness? In this episode, Chad and Mike discuss why its important to regularly take a survey of your financial fitness, and how you can improve it once you do.
This week, we're back up with the conclusion of our college planning episode! Mike takes a look at financial strategies for the final few years before your child goes to school, and what you can do to maximize your funding during this time.
This week, we're covering one of Mike's favorite topics: college planning. Learn what to do during the early years of your child's life to ensure you have the resources you need to support their education.
This week, Chad brings on special guest Cameron Hendricks, CFP® to discuss his recent experience at the FPA NexGen conference, and why it is important for your financial advisors to attend conferences in general.
One thing is certain, there are always going to be panics in the market. Political turmoil, natural disasters and other factors will cause markets to move, and can make you wonder: should I sell all my investments and hope that it gets better? Chad and Mike discuss these issues to discover how you can avoid making common investment mistakes with uncertainty in the markets.
In this episode Chad and Mike discuss managing your 401k, and how to avoid common mistakes when saving in your retirement account.
In this episode Chad and Mike discuss the top 5 questions they hear from their prospects, with special guest Allison Berger, CFP®.
In this episode, Chad and Mike do a "Top 10 Ode to David Letterman" of little things you can do immediately to get your finances back on track.
In this episode, Chad and Mike discuss Prince's lack of estate documents, and offer advice for listeners who may not yet have considered the importance of preparing a will. You can read a text version of this post on Nasdaq.com.
This week, Mike and Chad take a look at the best financial gifts you can give a graduating high school or college student.
Think about the last time you felt something surprised you. If it was a pleasant surprise, the event likely exceeded expectations. Then there’s the surprises that catch us off guard. A great example occurs around tax time each year as many people are surprised when they owe a large tax bill. It’s tough to find anyone that would describe that as a positive feeling.
If it stops at feelings, bad outcomes are generally avoided. It’s when events fall short of our expectations where our patience can run thin and our “do something” alarm begins sounding. When this type of decision making is applied to investing, it’s likely you find an average investor.
Who is the Average Investor? The average investor is best described as a person attempting to time the market intentionally or unintentionally based on emotional influence. By allowing their emotions to rule decision making, selling and buying of investments tends to follow the crowd. This phenomenon is tied to research around the psychology from Daniel Kahneman who found that losses produce twice the mental anguish as an equivalent sized gain.
Cash flow data backs this up. Studies show investors have more money invested in funds when they are doing poorly and fewer when they are doing well.
Most of us have either a personal story or a friend or family member experience of getting overly-exuberant in the tech markets of the late 1990’s or buying real estate just before the housing crisis in 2007. The fact is we all have some of the average investor in us, which is why having a disciplined process in place is so important.
Common Behavior of the Average Investor One of the most common identifiers around an average investor is the desire to chase performance of a hot area. This plays out by investing in the best performing asset class over the last 12 months or selling all of your stock investments because a financial celebrity predicts a crash ahead.
This is one of the reasons, investor returns in Morningstar trail fund returns. A recent article by Morgan Housel, You May Be A Better Investor Than You Think, discusses how average investors don’t earn anywhere close to a benchmark. The article uses the S&P 500 fund example and demonstrates how the 10 yr annual return is 6.3% while investor return is 4.4%. Even further many are unfairly comparing their portfolio to the S&P 500 only when their portfolio is diversified across multiple asset classes.
A recent Vanguard study titled “Reframing investor choices: Right mindset, wrong market”, that demonstrates how behavioral performance chasing has a negative effect when investing across all asset classes.
Past performance has a huge impact on the average investor’s decision making. This is demonstrated in every market bubble that’s existed from tulips in the 1600’s to technology stocks in the late 1990’s. Many of us remember this vividly, as the excitement around the S&P 500 peaked after investors experienced 15-20 years of earning double digit percentage returns every year in 1999 only to experience a much lower result in the next 15 years (ending 12/31/2015).
There are many studies that demonstrate how the average investor typically is penalized anywhere from 1.2% to 3% annually by making emotional decisions around their investments.
Requires Discipline Even mutual fund managers experience poor investor returns at points. But the best ones, trust their research strategy and stick it out. Another study demonstrated that outperformance over the long term goes hand in hand with shorter periods of underperformance as 96% of 10 year outperforming mutual fund managers had at least one three year period when they underperformed, and 47% were actually in the bottom 10% over at least one three year period.
Average investors tend to throw in the towel at some point during that 3 year period of underperformance. This is when their FOMO or FOLIA takes control– the Fear of Missing Out or the Fear of Losing it All.
Learning how to manage these emotions and implement a disciplined process is the first step in minimizing average investor type behavior.
How Do You Avoid Being The Average Investor? Avoid short-term temptations or reactions and focus long-term – Studies demonstrate the average individual stock could move 47% to -39% over the next year but that range shrinks to 7% to 17% annualized over a 20 year period. Many investors capitulate at the wrong time, resulting in a mistake that can be detrimental to their long-term picture.
Start with a plan – Implementing a savings strategy with a disciplined investment approach helps avoid ebbs and flows in short-run. By focusing on what you can control, the daily headlines become easier to digest.
Hire an advisor – This gives you a calming voice that can ease the uncertainty by providing historical perspective. There’s a reason even our financial advisors aren’t their own advisors. Finding an independent, objective fee-only financial advisor is a great step to helping you minimize average investor like thinking when it comes to your investments.
Young advisors often have more passion, technical knowledge and a longer runway than older financial advisors.
If we look like we could be your son or daughter, then you are likely on the right track to finding a financial advisor to form a relationship with. While we may look young, that doesn’t mean we are inexperienced or harder to relate to. Let me explain:
We entered the financial planning profession during the age of the rise of the comprehensive financial planner and we’ve had the unique opportunity of learning from a team of high quality financial planners. Many firms over the last few years have emphasized the hiring and developing of young talent. Financial Symmetry is no different and has been hiring and promoting advisors from within throughout the 15 year history of the firm. Young advisors are developed through an increased level of responsibility as well as the chance to benefit from years of observing older advisors in the firm. We have seen what type of advisor we want to be and have determined what approach best fits our personality and goals. We therefore know what we want to communicate with our clients and how to do it.
Think about those you are associated with that you trust the most…likely friends and family top the list. You have built a relationship with these individuals over time and have trusted their recommendations whenever you seek their advice. I can attest that the FSI advisors strive for this type of relationship with their clients. We want to get to know you on a personal level as well as your family so we can best see and understand your financial goals.
It is also easier to relate to us than you may think. After all our parents are just a few years from retirement themselves. We have observed firsthand from them as well as their friends and co-workers what their needs and concerns involving retirement and overall financial planning include. We are accustomed to conversing and socializing with people older than us as well as our clients are accustomed to communicating and interacting with individuals of the younger generation such as their children.
Benefits of A Young Advisor There are some common differences you will find though, but I think they actually benefit us in a way that they won’t for older advisors.
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Technology: Yes, the amount of time we check our phones and social media sites may be unimaginable to you. However given this new technology age, knowledge and industry influencers are right at our finger tips. Every day we learn new and innovative ways to help us serve our clients better through reading of blogs, market commentary, and even sharing and learning ideas with other financial advisors. We are able to improve our processes utilizing the latest financial industry technology in order to better serve our clients.
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Retirement: We aren’t retiring soon…and that’s a good thing! As a result of this when we engage in a relationship with a client, we intend it to be for the long haul. If you are closing in on your retirement and are working with an advisor who is in the same stage of life as you then “guess what?”…they are going to retire soon as well! The years prior to and immediately after retirement can be some of the most challenging years as you juggle financial decisions and you want to make sure you have a reliable advisor by your side throughout this process, not one that is thinking about their own retirement and may pass you off to a new advisor during this time of need.
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Passion and Knowledgeable: No client wants to feel as if they are just a number, which can often happen when there is a lull in the advisor/client relationship. With a younger advisor we are “hungry” and “passionate” and helping our clients achieve their best financial life is our primary goal.
When you combine this passion with knowledge this can be a dynamite combination that can truly be the defining mark of an advisor/client relationship. At Financial Symmetry all of our advisors have obtained the CERTIFIED FINANCIAL PLANNER™ designation. As a result we have spent years in study, obtaining experience, and practicing in a fiduciary manner in order to engage in practices that are in the best interest of our clients.
I’m not sure about you, but we haven’t met many people that wouldn’t love to lower their tax payments.
As we move in to the heart of tax season, do you find yourself wondering every year around this time, what other opportunities you may be missing?
Millions of people who file their tax return themselves overlook tax opportunities each year that could save them extra money in April but they hesitate to pay to have a professional prepare them. The hidden secret is that tax planning should be done year round. So we put together a list of a few things we see most often missed on tax returns.
Maxing Tax-Deferred Savings One of the easier ways of avoiding tax now, is to save the maximum amount in all your tax-deferred accounts (401k/403b). Many have a tough time reaching the maximum savings limit ($18k per person in 2016). This often brings the focus back to your cash flow as overspending keeps many from hitting the maximum amount. Those over age 50 have an extra benefit where they can save $6,000 more each year until they stop working.
Not Funding HSA accounts This is an excellent retirement account that offers a triple tax saving opportunity. Problem is many aren’t taking advantage of it. If you have a high-deductible health insurance plan, you have an opportunity to sock away savings tax-free, that can grow tax-free and then be withdrawn tax-free.
Non-deductible IRA contributions & Roth conversions High income earners still have a way to make Roth contributions. It just takes a few extra steps and involves some monitoring to do it successfully. If you already have nondeductible IRA contributions, this is a great opportunity to get these contributions in to a Roth IRA, assuming you don’t have a larger deductible portion already built up (consider the pro rata rule in this case). Don’t forget to fill out form 8606 to keep an accurate record of your nondeductible IRA contributions.
Charitable Deduction Opportunities If you have large capital gains from appreciated stock, it may benefit you to donate these shares instead of making cash charitable contributions. Another opportunity for those who are over age 70 ½, is to make a Qualified IRA Charitable Distribution which also qualifies as Required Minimum Distribution. This benefits you by not increasing Adjusted Gross Income on your tax return which in turn helps with medical expense deductions, social security taxation and Medicare rates to name a few.
Missing Any Deductions? Some of the more common we see left off of Schedule A are car taxes, investment fees, and charitable donations. Go through your potential itemized deductions. Look at the prior year return for some guidance. Also, if you made a 2014 estimated payment to the state in January of this year and/or owed when you filed your 2014 state tax return then you can add those payments as a federal tax deduction on this year’s return.
If in a low bracket, you may want to delay deductions and accelerate income instead. When your AGI ends up in the 15% tax bracket, capital gains are taxed at 0%. So realizing gains could be beneficial here.
High tax bracket earners have an opposite focus as they are looking to reduce income. Word of warning: watch the Medicare Surcharge (3.8%) on income over $200k for individuals and $250k for joint filers. If you find yourself in this area, you may want to look for ways to delay income depending on the control you have in your income.
AGI thresholds You Don’t Want to Miss * Child tax credit (begins phasing out at $110k). Can you make a deductible traditional IRA contribution? This could actually reduce your tax bracket from a boosted higher rate as you are not only reducing the ordinary income tax but getting an extra benefit due to the credit. * Itemized deduction limitations over $309k (single $258,250) – especially if restricted stock or stock options are vesting and you are selling in that tax year. * American Opportunity Tax Credit phases out at $160k AGI ($80k single). If you pay for the first $4k of college expenses, you can use this credit (mentioned below).
ACA subsidy tax bubble Many retirees who no longer have an employer continued health plan and haven’t yet reached 65 now have a new option – buying medical insurance through the health insurance marketplace. Depending on the tax diversification in your investment accounts, some early retirees are receiving premium tax credits. But be careful, if receiving the credit and your income rises above 400% of the Federal Poverty Level for the number of people in your household, you could lose all the credit.
In this situation, managing tax brackets become vital. But to do so, you need to have saved in accounts with tax flexibility. Tara Signal Benard summarized a breakdown of this strategy in a New York Times article titled, “Devising a Tax Strategy After the Paycheck Is No More.”
Don’t Forget About Other Credits * Pay for first $4k of tuition first to get AOTC – 3 million people missed this credit in 2014. * Residential energy credit for any HVAC replacement or energy efficient upgrade to house * Foreign Tax Credit – you lose this credit with foreign stock in IRA accounts. This is why asset location is important. Vanguard found this can add up to 0.75% per year in performance. $7,500 for a $1 million portfolio. * Dependent care credit – If both spouses are working, don’t forget to include summer camp costs as this is very likely a deduction.
Feeling Like you Missed Something? If you feel a bit lost after reading these examples then look to hire a professional. Tax return for families can range from $300 to $500 depending on your situation. Could be money well spent if they find tax savings you overlooked.
When digging in to the numbers CNBC found the more you make the more interesting IRS auditors find you. The IRS begins to get more interested in those earning more than $200k. According to turbotax – only 1 percent earning less than that are audited. If you are over the $200k threshold, then 4% of your group will be audited. It’s not until you begin earning more than a million, to where 12.5% get an audit notification letter.
If you feel like you would like a second look, we’d encourage you to find a fee-only financial planner who has knowledge in the tax planning area. It’s very likely it could be worth it.
Other Links Mentioned During the Show * Mike’s NerdWallet Article: Are Advisors Worth the Fee? * Article: The Best Ways to Pay for College * NY Times Article: Devising a Tax Strategy After the Paycheck Is No More
Do you have a mapped-out plan for your future? Do you know the best steps to take to achieve your goals? In a world in which 75% of America is winging it when it comes to their financial future, a holistic financial plan will set you ahead of the crowd. Having a dynamic and workable financial plan helps you look at all aspects of your finances and project what things will look like on your current trajectory and if you make improvements.
With the help of a fee-only, fiduciary Certified Financial Planner™, you can have a 3rd party evaluate where you stand financially and help you set up realistic next steps to get you the direction you want to go to achieve the things you want to in life.
Examples of next steps you might receive include making sure you stay at a healthy spending level, saving the necessary amounts in the right types of accounts to prepare for retirement or future college tuition, getting estate documents updated to make sure you’re in control of your assets and body no matter the circumstance, and making adjustments to save on taxes.
A CFP Board 2012 survey found that over half of people with a holistic financial plan feel “very confident” about their financial picture vs. those who’ve never had financial planning completed. And a 2016 study showed that simple online financial calculators are often wrong when predicting retirement readiness.
When Should You Have a Financial Plan Made? If you have no plan in place, the best time for you to have one made is now. It’s rare to accomplish a goal (and even more rare to accomplish multiple goals) without a plan of attack to get you there.
A financial plan is beneficial at any point in life, although the benefits can at times be more evident when preparing for major life events or going through life transitions.
Major life events that prompt one to seek a financial plan include the following:
- Marriage
- Planning for children
- Planning to pay for college
- Receiving an inheritance
- Selling a company
- Purchasing a new home
- Divorce
- Retirement
- Death of a Spouse
- Claiming social security
Even if major life changes are not around the corner, financial planning will help you see if you are on the right path. It’s like going to see the doctor. You realize the need to visit a doctor when changes in your health occur. But just as you should go see a doctor for regular health checkups because there could be something wrong you’re unaware of, financial checkups are also very important.
No matter where life has you, a financial plan can make sure you are reaching your peak financial fitness.
What Should You Do Once Your Financial Plan Has Been Created? Once your financial plan has been made, monitor it. This is the most important step! We find that many clients who only have a financial plan created but do not move forward with an ongoing relationship with us typically do not implement all of the recommended changes, mostly because life is busy and the plan gets forgotten.
Having the regular accountability of a financial advisor is the best way to make sure you stay on track.
There’s no better time to start than now.
What if you could save an additional $1,500 each year? After 30 years you would have $119,000, assuming the money was invested and you got a 6% return. That $1,500 each year — just $125 a month — can add up to quite a bit of money.
Of course, to save more money each month you likely need to cut your spending. But if you are like most people, you probably don’t want to drastically change your lifestyle. Fortunately, there are smart and simple steps you can take to trim spending without a major overhaul.
Use the 72-hour rule for purchases How many purchases have you made on Amazon or at the store that you later regretted? Limit your impulse purchases using what personal financial author Carl Richards has called the 72-hour rule. Instead of buying an item you want immediately, wait 72 hours to see whether you still want it. You’ll be surprised at how much less you end up deciding to buy. I find this works all the time with my kids. They think they can’t live without a certain toy, and then after 72 hours they forget it even existed.
Analyze big purchases Major purchases may have the biggest impact on your spending and ability to save. I’m often amazed that the same person who will drive across town to save money on gas will buy a new expensive car without analyzing the implications. The same goes for housing costs or big-ticket vacations. Here are some tips on how to analyze and save on each of these purchases:
- Car: The Internet has been a huge help for consumers in finding car deals. With online sales you often can negotiate through email, and sites like TrueCar provide transparency about what other car buyers have paid. But when buying a new car, it’s important to consider the ongoing costs and not just the upfront purchase price. For instance, many people prefer luxury cars, but premium gas and maintenance typically will cost more for these cars. Finally, a simple rule is that the longer you keep the car, the cheaper the cost.
- House: Housing tends to be the biggest expense for most people. As a financial planner, I’m a fan of homeownership if you plan to live in your home for more than five years. However, the larger and more expensive the home you purchase, the more it limits your ability to spend within the rest of your budget. One family I work with, a couple with one child, decided to downsize because they just didn’t need the space. This was a good move financially because it gives them greater flexibility to save more, spend in other areas or retire sooner.
- Vacation: Research locations and potential deals on sites like Kayak.com. If you can, be flexible when selecting travel dates to maximize savings. Also, compare multiple locations to determine the best fit for you and your family — and where you can get the most bang for your buck.
Rethink ongoing phone and cable plans Most people look only at their monthly payments and often are shocked by how much they spend annually on cell phone and cable bills. When shopping for a phone plan, try MyRatePlan.com to compare plans based on the minutes, texts and data you need. Another option is to consider no-contract cell phones. The monthly cost is much lower, but you do have to buy the cell phone upfront.
With cable, the average monthly bill is $100, or $1,200 a year. “Cutting the cord” has become more popular recently as many people decide they don’t need the 100+ channels on cable. If you can do with a limited number of channels, then a streaming device and a good HDTV antenna for local channels may be all you need — and it can save you a lot of money.
Review your insurance policies Many people are paying too much for property and casualty insurance. Every few years you should shop around your auto insurance and home insurance policies to confirm you are getting a good price. You also can see how your auto and home insurance providers rank based on consumer satisfaction by checking out the yearly report from market research firm J.D. Power.
Additionally, one way to lower premiums for home or auto policies is to raise your deductible if you have cash in the bank and you rarely make any claims. Larger deductibles typically range from $1,000 to $2,500, depending on the type of insurance you have. However, note that this does create risks if you don’t have money available or in an emergency fund if a large claim does occur.
Pick high-quality products that last Sometimes it makes sense to spend a little more money for items you will use for a long time. A good example is men’s shoes. A high-quality pair of shoes will last almost forever and, though more expensive in the short term, will be a lot cheaper over the long run than repeatedly buying the cheapest pair. Think about the items in your life that you will use for a very long time and are worth the extra expense upfront.
Stick to a budget First, automate your savings. It’s hard to spend what you don’t see, so automatically transferring money out of your checking account will help you keep spending down. Determine how much you should be contributing to or withdrawing from your accounts, and set up automatic monthly transfers. I like to call this forced scarcity, in that you can spend only what is in your bank account.
If this is not working and you start running up debt, try using online budgeting tools to help you create and monitor your budget. It may be more time-consuming, but you’ll know where every dollar is being spent. And if you are still having issues, consider working with a fee-only financial planner to help you develop and stick to a budget so you can reach your goals.
Hire a professional Sometimes spending money can save you money. This can be true for home repairs, taxes, college planning and many other areas. For instance, I see many people miss important deductions or credits they could have claimed when they complete their own tax returns instead of working with a professional. And for me, it makes sense to pay someone to help when it comes to house repairs. I can try to fix the problem, but I only make it worse.
So how do you decide whether to hire a professional or go it alone? If the risk of mistake is greater than the cost to hire someone, it is worth the investment. Of course, if you don’t have the time or knowledge to take care of the task at hand, it makes sense to get help, too. If you’re not sure where to look, ask for referrals from friends or co-workers, or check Angie’s List for service providers and the National Association of Personal Financial Advisors for fee-only financial planners.
Spend wisely Ultimately, the goal is not to disrupt your lifestyle dramatically, but to make sure you spend your money wisely and efficiently. In short, it’s important to think about what you are spending your money on and what you really get out of it.
Perhaps even more important than drastically cutting your spending is thinking about the non-monetary value of your money. In a longitudinal study following 268 men for over 70 years, researchers for the Grant Study found that good relationships are key to leading a long and happy life — not how much money you have, the newest tech gadget or a certain high-profile job, but the people in your life.
Instead of spending money on more stuff, why not spend it on personal experiences with your friends and family?
So many of us get charged up and rattle off an impressive list of goals but then struggle to follow through.
The disconnect between creating and accomplishing is where life change gets stuck. Months pass and we realize our lives are no different.
Where did progress stop (or never begin)?
Often, it's when life's curveballs throw us off our game. Even though we know the surprises will come, we're not prepared when they show up.
I thought about this recently on a Saturday morning, when my mind drifted to how enjoyable it would be to extend our screened porch. Wait, did this just become a goal? What about the 10 year anniversary trip we want to take next year? We also know one of our cars will need replacing in a few years. If we do all three of those things, will we be able to hit our charitable and retirement savings targets as well?
That’s just it. Financial goal planning is a fluid process. You have to place a value on how important that thing on your mind right now is to the list of other priorities you've thought about on other Saturday mornings.
Without prioritization of goals, we allow our impulses to rule our decision-making. This thought process ignores your plan, pushing the things that aren't as much "fun" to the bottom of your list.
Having an effective monitoring process increases your odds that follow through will happen.
Recording Your Goals Many of us don't keep a running list of things we want to accomplish. This is why when asked about our goals, we freeze and find it hard to get specific other than "to assure we are maximizing our investment returns."
Knowing why you want to get the best investment return helps keep the focus in the right direction. It also helps identify quantifiable steps that will help you get there.
Goal setting begins with recording. So often, I will be talking with someone that triggers an idea I want to pursue. If I don't get it down quickly, the idea is forgotten.
One of the most practical digital tools for this is Evernote. This helps create a central location of all the ideas that are up next on the to do list. From small goals to large goals.
Having a list, helps compare the newest goal to all the other goals you have in the queue. For example, is the next home project more important than maxing your 401k this year? Depends on the person and what your long-term plan is. If retiring early is important to you, then 401k savings matters more now than a kitchen remodel.
We also know our desires can change quickly, which is why prioritizing regularly is vital.
This is why we encourage setting a few different lists.
- Immediate - now to 3 months
- Short-Term - within 2 years
- Longer-Term - 3+ years
Some people like to add a lifetime category which helps shape more vision type of actions. Are you doing the small (and sometimes mundane) things today that get you closer to the lifetime goals?
Assigning time-frames and dollar amounts helps you measure success.
Once you create the ideas of where you want to go, we discuss the best way to implement goals. Even though we all are incentivized differently, a process keeps us moving forward.
Monitoring Some things are easy to implement and can be done very quickly (setting up Roth IRA contributions for example). But not every goal can be tackled quickly.
If your main goal is lowering spending, then it’s more of a gradual process that takes tracking and regular review. While a future large purchase requires diligence in hitting saving targets.
Consequently, we set up our systems so the top goals for each client are displayed each time we interact with them.
Some examples include next car purchases, home projects, inheritances, or retiring early.
But setting the goals is not enough. It requires consistent accountability partners. This is why we have automated follow ups along with scheduled phone calls to follow up. Checking in after 2 weeks, 2 months, 6 months and a year keeps the focus front and center.
Adjustments Goals that are not measurable tend to fizzle out.
So after recording and monitoring, if a goal was too vague, it's time for an adjustment.
Personally, I like to revisit my goals every 90 days, which allows for any adjustments as changes arise. At a minimum, reviewing your objectives at least annually will allow you to refocus any goals that are growing stale.
How Did You Do? The end of a year presents a great opportunity to look back and see where you stand. Seeing progress motivates you to continue progress.
Personally, this process starts during the year. I keep a document in Evernote, that is called “Key Accomplishments.” During my quarterly review, I take a moment to record all the things I can think of that were steps forward.
This list includes it all (small and big accomplishments). From wakeboarding for the first time to reading a book I've wanted to read. You'll be surprised how fulfilling it is to look back after a year and see all you've done.
For next year, I plan to set a few stretch goals (from Steve Sanduski's podcast "Between Now and Success"). Goals that I know I won't meet but will motivate me to try. I'm betting I will be surprised by the progress.
So what goals will you focus on this year?
Links Mentioned in Podcast: * Evernote * Publications in Press by Financial Symmetry during 2015 * A Financial Planner's Estate Planning Journey * Creating 3 Words for New Year - Steve Sanduski Belay Advisor Podcast
As we've done in years past, we compiled our view of the top 10 economic stories from 2015, and what these stories may mean for 2016.
You can find show notes and more information by clicking here: https://wp.me/p6NrVS-2uI
Is paying a fee for a financial advisor worth it? According to Vanguard, the leader in do-it-yourself (DIY) investing, they believe a financial advisor can add approximately three percentage points to a client’s investment returns per year. The study (link here) found five separate ways (below) advisors add value (alpha) in working with their clients.
You can find show notes and more information by clicking here: https://wp.me/p6NrVS-20z
It's the question we hear most often: "Am I saving enough for retirement?" “How do you think we’re doing for people our age?
These are good questions. People want to know how they measure up.
They hope to hear, they are doing better than most. In their minds, this means things are moving in the right direction. But “keeping up with the Joneses” has never been a bankable strategy. So we need to dig deeper to determine what the question is really about.
What many people are really asking is whether it would be possible for them to retire early based on their current savings. But for a young couple just having kids, the same question is likely to center on saving for college or moving into a bigger house.
People ultimately want to know if they will have enough money to do the things they still hope to do.
Digging Deeper To begin answering this question for yourself, you first need to know the type of life you want to live. You must understand how much you are spending versus how much you are earning. But determining your spending needs is a tough nut to crack.
That’s because spending decisions are heavily influenced by quality-of-life considerations. Some people hire house cleaners and lawn services, while others prefer doing it themselves. Eating nice meals out frequently may be the spice of life for you, but others enjoy cooking at home.
Decisions on the bigger-ticket items have the greatest impact. A large house will require a larger down payment, meaning less liquid savings. Some people aspire to drive nicer cars for short periods, while others want to drive cars until the wheels fall off. Then there’s that little decision about having kids, which will have more than a slight impact on your financial trajectory.
Acknowledging the things you consider important to your quality of life can give you a great blueprint for the amount it will take to sustain that life.
Struggling to Save While some who ask “Am I saving enough?” are seeking validation, others are worried that they haven’t saved enough.
Recent research finds that 68% of people believe they’ve saved too little — but only 3% are actually following through by saving more. This isn’t surprising. It’s the same disconnect you find in all endeavors that require consistent action. We can all get charged up on a jolt of motivation, but when it’s time to implement, we freeze.
Thoughts bubble up about the big trips we want to take this summer, or that luxury car we’ve always wanted (and deserve). We start thinking about putting more money into our 401(k), and we realize we need to limit our current spending to make it work. Then it doesn’t sound like such a good idea.
This is when what seems simple in theory (saving more) becomes hard. Making choices that change our quality of life now is more painful than we originally thought and often results in inaction.
The Answer The only way to know if you are saving enough is to piece together your financial puzzle.
Take inventory of what you’ve saved and how much you anticipate you can still save. Set up automatic transfers of money from checking to savings — but watch the credit card bills. Automating savings while accumulating credit card debt is counterproductive.
Working with a qualified advisor can make an enormous difference. Studies have shown the effect that good advice can produce. Often, this advice helps prevent you from ratcheting up your lifestyle too quickly in the first place.
Some questions have easy answers. Unfortunately, “Have I saved enough?” is not one of them. With successful financial planning, you can find your answer — and if it’s no, you can devise a way to get to yes.
You can find show notes and more information by clicking here: https://wp.me/p6NrVS-2qu