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How I Work Virtually as a CFP®

How I Work Virtually

Although it’s more common to work virtually with a financial advisor than pre-pandemic, many people still have questions about it.

How secure is it to meet virtually? In the beginning of the pandemic there were security concerns about certain online platforms, more notably for telehealth visits than for financial meetings. But the platforms quickly invested in measures that enabled corporations, medical providers, governments, and everyday users to provide a secure place to meet. That being said, no platform is 100% secure. We began with GoToMeeting but now use the Zoom Pro platform because more clients are familiar with Zoom.

How do you get all the documents you need securely? We provide a secure link. You can upload as many documents as you like. We suggest uploading at least 2 weeks before the scheduled meeting.

Will I be able to see my plan clearly on a small screen? We don’t recommend using a smartphone, however, anything from tablets/iPads to full monitors work just fine. We can manually zoom in and out on our end to make the content more viewable on your screen.

What if I need to share my own documents or spreadsheets during the meeting? We can enable two-way screen-sharing so you can share your own documents.

What if the technology breaks? Hey, it happens! We have a couple of backup plans.

What is the backup plan? If the problem is audio, switching to speakerphone is pretty seamless. If the problem is video on one end, we can usually figure the issue out within a few minutes. When there is a video problem on both ends, that usually indicates an internet or connection problem. Although rare, if that happened, we would suggest rescheduling but proceed as audio-only if that’s your wish.

How are you audited or regulated from your home office? We are regulated by the state of Florida who now conducts audits virtually.

How do you keep distractions to a minimum? It’s difficult when the view of the yard, birds and butterflies is so nice! Fortunately the location is quiet except for the occasional leaf blower.

How can I have the best experience meeting virtually with a financial planner? Great question! In the same way we would have you as a guest in person, we want you to be as comfortable as possible during your meeting. Here are a few tips:

  • Consider crafting the ideal spot for you. That might or might not be your office or desk chair. Couches are cool. So are pillows and pets.
  • Dress more comfortably than you would for a meeting in person. Socks and sweatsuits encouraged.
  • When more than one person is participating, we find it makes for a better experience if you each have your own screen. If you are in the same room, turning off one device’s audio will eliminate echo and still allow for us to hear each other just fine.
  • Grab a beverage and your favorite snack.
  • If you feel uncomfortable at any time, don’t hesitate to ask for a break or a few minutes to change rooms/couches/chairs.

Working Virtually Has Advantages for You

People have shared how much they appreciate:

  • Time savings of not traveling to Seminole (no Howard Frankenstein bridge!)
  • Meeting in the comfort of their own home or office
  • Not feeling the need to get dressed up
  • Having their pets close by

Our hope is that by removing pressures of extra time and effort to meet in person, and being a little more comfortable in your own environment, some of the stress that can come with financial planning and decisionmaking is reduced.

What other questions do you have about meeting virtually? What have been your experiences, positive or negative, with virtual meetings? Share your comments and thoughts below, or tell us first-hand by contacting us.

Continue ReadingHow I Work Virtually as a CFP®

New Year: Got Your Notebook?

Keep important data in a Notebook

It’s a new year: got your notebook? You know, that one with all of your passwords, account numbers, doctor names, and that very important song that must be played at your funeral.

Yeah, that notebook. Where is it? It might reside digitally on your computer or in the cloud, or it might be a pile of papers in a file cabinet, or it might be in an old-fashioned 3-ring binder. The new year is a good time to ask: how easily can someone who needs it find it?

Who Might Need the Notebook and When?

Everyone needs a someone in mind for the notebook. Your someone is who will step in for you and help to handle things when you can’t. If an immediate someone does not spring to mind, consider asking a professional to be that someone – an attorney, accountant, or professional fiduciary, for example.

When will someone step in? At a time when you need the notebook, but can’t get to it. Like the new commercial for disability insurance, we can imagine all kinds of accidents and tragedies that might bring about a need for the notebook. Rather than dwell on those, let’s imagine that you are suddenly swept away on an all-expenses paid trip out of the country to a remote island with spotty cell coverage.

While you are whale-watching and snorkeling the reefs for an indefinite period, things still need to be handled back home. Bills to be paid. Taxes to be filed. Gifts to be given. People to be notified of your absence and introduced to the someone who is handling things.

What Goes in the Notebook?

In essence, the Notebook is a central place you keep information that your someone will need in case something happens to you.

Common and essential items in the Notebook include:

  • Your five basic estate planning documents: original will (drafted by an attorney in the state where you reside), living will, health care power of attorney, durable power of attorney, and HIPAA designations.
  • Advanced estate planning documents: trusts, partnership agreements, business buy/sell agreements, shareholder agreements, etc.
  • Insurance policies. ALL of them: life, long term care, health, property, car, boat, liability, and any others.
  • Contact information for professional advisers: attorneys, bankers, accountants, investment advisers, insurance agents, and (of course) your Certified Financial Planner™.
  • Also, if your adviser has an assistant or paraprofessional who knows you and your situation, write down their contact information and a little note to that effect. (“Sharon is the assistant and she runs the whole place.”).
  • All of your health care providers – doctors, dentist, optometrist, veterinarian (who is going to take care of Fluffy?). Put similar information by each one – what they helped you with and if any office or nursing staff know you and your history.
  • Important to remember also, anything handled online: digital password manager, online user ids and passwords, bank statements, investment accounts, real estate deeds and mortgages. So much of our financial lives nowadays keys off of our email address. Can they even get into your email? (See: Document Your Digital Assets for more online stuff to consider.)

Extra Items for the Notebook

In addition, not-as-essential items some people include are:

  • An “ethical will” outlining your values. This often gives family members guidance when they are unsure what you would want. Writer Susan Turnbull’s book, The Wealth of Your Life, can help guide you through this process.
  • An end-of-life health care management booklet, like Five Wishes.
  • An Aging Plan – describing your wishes for the potential time of life when you may need assistance with activities of daily living, transportation, and housing transitions.

Notebook Update Season

It’s a good time of year to check in on your notebook. The end of January brings tax notices from bank accounts, investment accounts, mortgage statements, health insurance, employers, IRA providers, and more. Take this opportunity to pull together scattered pieces of your financial life. Consider collecting everything not only for the accountant, but also for your family or special someone.

One way to keep the notebook updated is to check each tax statement and match it up with a corresponding account in the notebook. Perhaps you forgot about those I-bonds you bought on Treasury Direct – no paper statements, all online. Better add that account to the notebook. All those deductions for insurance from your employer – would someone know how to contact the insurance companies if needed? Then would the insurance companies talk to them? That contact info, power of attorney forms, and beneficiary designations are good updates for the notebook too.

Think of your notebook as a bread crumb trail helping your loved ones work backward from that remote island to the place where you are sitting with paid bills, up to date connections, easily-accessed email and your personal address book at your disposal. A little effort each year will save your someone(s) many headaches later.

Got a notebook you love already? Comment below on what makes it uniquely yours. Share your best ideas.

For more on this topic, see The Mindful Money Mentality: How To Find Balance in Your Financial Future. Struggling with issues mentioned here? Tell me more – Schedule a call.

Continue ReadingNew Year: Got Your Notebook?

Holiday Spending Hangovers

holiday hangovers

Holiday spending hangovers: What do holiday overdrinking, overeating, and overspending have in common? We can get stuffed in over our heads before we know it, leading to regret later. The holidays can test our temptation to overcelebrate. While holiday alcohol- or food-induced hangovers are commonly discussed, spending hangovers can bring about equal regret.

Thinking Ahead

To avoid regret, it helps to think ahead. You might call it an “awareness strategy.” What events are coming up that might bring about a temptation to overspend?

Nowadays, that strategy might start in October. Halloween is now the second biggest holiday for consumer spending after Christmas. What used to be a couple hours of candy collection with a homemade costume and a paper grocery bag is now practically a national holiday. Multi day trunk-or-treating. Elaborate costumes. Yard decorations needing extensions upon extension cords. On November 1, where does all the Halloween stuff go? In the attic, the garage, the storage unit, or the garbage? And what about the candy? Halloween often leads to sugar, spending, and stuff hangovers.

Next comes Thanksgiving, where we stuff ourselves with, literally, stuffing. Some then stuff our brains with football and TV. Some families stuff all the important conversations for the past year into a few hours at the table. The air is stuffed with emotions. And spending can often be a coping mechanism for difficult emotions. It seems all the Thanksgiving hangovers – food, football, TV, and feelings – start with stuffing.

And finally if you celebrate it, Christmas, the king of holiday hangover potential. Must-have new decorations, the tallest tree, fancy food, family gatherings, parties, gotta-get gifts, candy, cake, and alcohol all stuffed into a few short weeks. Moderation choices might start out strong. But decision fatigue can quickly take over. Come January, depleted bank statements and depleted emotions can bring on the same headaches as too much cookies and eggnog.

Thinking ahead to all of the opportunities to spend gives you a head start on avoiding regret later. Ask

  • What is coming up where I will want or need to spend on a holiday?
  • What does the spending event entail?
  • What are alternative ways to achieve my goal for the spending event?
  • Imagine it’s January. When you look at your bank and/or credit card balances, what’s a reasonable figure for you to be at then? Start with that as your goal.

Release Self-Judgment

Before launching into ways to criticize decisions before you have even made them, remember that it’s ok to splurge. It just takes a little thinking ahead, strategy, self-care and balance. Deprivation generally doesn’t work.

Mindful Spending Strategies

For some people, simply having a January bank balance goal is enough to help them stay focused throughout the season.

Others need more concrete ideas. Here are a couple:

  • Plan most or all of your shopping at one or two stores. Buy yourself a gift card for that store with the total amount you can spend that allows you to make your January goal. Ask for your remaining balance with each purchase. When the gift card is spent, you have made your goal.
  • The old-fashioned envelope approach. Withdraw the amount of cash that allows you to make your January goal. Put it in one or more envelopes, organizing by spending category. For some people, watching the physical cash dwindle is the best way to stay focused.

Keep Track

The gift card and envelope approaches are one way to keep physical track of how you are doing on your spending goal.

If you find yourself resisting or unsure about the idea of having a January goal, simply keeping track of your spending as you go can work, too, as a reminder to rein in overspending.

Weight Watchers has used this approach for decades. The best tool of the program for me was the daily journal. Logging what I ate every day had more impact on my diet decision making than any other single factor.

Similarly, when a group of experimental homeowners were given an electric meter next to their thermostat, they used 7% to 19% less electricity than those with outside meters.

So writing down what you spent each day can take the form of a note on your phone, or a physical notepad or journal.

Every bit of awareness can help.

Credit Cards and Overspending

What if you must use credit cards, or really like getting the points? (Although the points rarely work as well as cash back, but that’s another blog post.)

Using a credit card is like having the electric meter on the outside of the house. You never get to compare what you have spent to a predetermined goal. Additionally, psychology studies show that when used in stores, as the credit card is handed back to us it reduces the feeling that we have spent anything. Our wallet looks the same afterward.

To build spending awareness and still use credit cards, sign up for a daily or weekly reminder of your charges and the current balance. (Not all companies will do this, tragically.) Each day or week, transfer your charges for that period from your bank account. At the extreme, you might make 30 payments on your credit card over the holidays, but so what? It’s helping you avoid the hangover.

Public Service Announcement

And a final Public Service Announcement: if you’re concerned about hangovers of a different kind, you’re not alone. There is help. AA.org helps with all kinds of addiction. Al-anon.org is for friends and families of alcoholics or addicts. Or, call a local Certified Addiction Professional for more one-on-one advice.

See our Resources page for recommended books on the psychology of money.

Imagine getting through January with no hangovers!

Continue ReadingHoliday Spending Hangovers

Free Financial Mentoring: Savvy Ladies

empowered women

Free financial mentoring from Savvy Ladies

Savvy Ladies is a not-for-profit organization formed to provide free financial mentoring to women.

How does it do this?

An army of volunteers, to start. Any woman can sign up for a pro bono 1 hour mentoring consultation with a Certified Financial Planner™ on a wide variety of topics. Volunteers have also written blog posts and recorded webinars on specialized topics. All are available on the organization’s website, https://www.savvyladies.org.

What kind of topics?

Cash flow, investing, divorce, widowhood, caregiving, budgeting, debt, college, careers and more.

Who does Savvy Ladies serve?

Any woman of any background who has a question about money. Founder Stacy Francis recognized that, as women, we are more often in-the-dark about money issues than men. Many women have no one to talk to about it. Savvy Ladies creates a safe place where those questions can be asked and answered.

What is its goal?

More self-reliant, financially educated women. In psychological terms, “financial self-efficacy.” Having self-efficacy means feeling confident and resourceful enough to handle a problem or question. Note this does not mean having or knowing all the answers. It means having the confidence to know where you might find the answers, and that you will be successful.

Who are the volunteers?

The website features several of the many volunteer professionals. Recently as a volunteer I have spoken with women as far away as Colorado and as close as my home state of Florida.

What’s the catch?

No catch. Volunteer professionals do not solicit for business. After the one hour consultation, the recipient fills out a survey asking how well their question was answered. The volunteer also fills out a survey asking how well they thought the consultation went.

Importantly, Savvy Ladies has received the GuideStar Seal of Transparency. Not all charities are what they appear. For more information on checking up on charities, see: https://www.hollydonaldsonfinancialplanner.com/charities-and-giving/.

Want to see more ladies get financially savvy?

If so, here are a few ways you can help.

Donate or Sponsor. Savvy Ladies relies on donations and sponsorships to keep the website, small staff, and operation running smoothly.

Refer. Refer a woman you know to the free financial helpline for a consultation. Or, refer a financial professional you know to volunteer.

Volunteer. If you are a financial professional, apply to be a Savvy Ladies volunteer. It’s up to you how much time you spend. Of course, men are welcome, too!

Continue ReadingFree Financial Mentoring: Savvy Ladies

November Thinking About Taxes: Really?

autumn leaves

November thinking about taxes: In general, November is not the normal time to think about tax planning.

Tax planning is considered an annual drudgery beginning around January 15 and ending on April 15. Not something to ruin the holiday spirit.

Yet actually, there are tax-savings tasks to think about at year-end. Doing so can make the January – April slog much smoother.

Why is Planning to Save Taxes So Loathed?

But I get it – no one wants to think about taxes at the holidays, or at all. And why is that? Here are several reasons given by Roger Pine, Founder of Holistiplan, a tax analysis software for financial advisors:

1) It’s a bill for one of the biggest expenses all year (most times exceeded only by housing costs).

2) You are responsible for preparing your own bill, or hiring someone to do it for you.

3) The bill forms are a design disaster with unintelligible instructions that take years of schooling beyond a college degree to completely understand.

4) Even when the bill is done correctly, it’s difficult to see why you got charged what you did.

5) If you don’t prepare the bill, or do it wrong, there are serious legal consequences.

6) If you want a smaller bill next year, you have to know how to decipher the forms for clues. (That’s why it’s called the tax “code.”)

7) It stinks to hear afterward, “If you had only done X, you would have saved Y,” if it’s too late to do X.

As a result, how do taxes make most of us feel? Helpless and uninformed. Not the most empowering feelings from a financial standpoint.

Tax planning and preparation does not help us achieve that sense of financial wellness, or as they say in financial therapy circles, financial “self-efficacy.” 

Worth Taking the Time

In fact, November is a great time to consider a few year-end moves like:

  • Roth conversions,
  • taking capital losses or capital gains,
  • doubling up on property taxes and charitable contributions, or
  • making IRA and HSA contributions.

Sound like a lot? It could be, but it could also save hundreds or thousands on April 15. If you have a CPA and/or CFP®, all you have to do is gather a few documents and let them do the rest. Gather these:

1) Your September or October brokerage statements (the whole statement, not just screenshots);

2) Your latest paystubs, Social Security statements, or other items showing regular income; and

3) Any large one-time transactions that happened or will happen this year, like a real estate closing statement or estimate.

After reviewing these, be ready to answer more specific questions, such as any changes in your deductions. Don’t worry about exact figures – it’s ok to estimate right now.

Why is November So Important for Tax Planning?

One important goal is to make sure you don’t end up with a taxable income figure that’s just barely over some kind of threshold or bracket. This can cost a lot more than necessary.

An extreme but could-easily-happen example: A couple in their 60s with one spouse still working and one over 65 on Medicare reported $195,000 in 2021 modified adjusted gross income (MAGI). That was $1,000 over the threshold of $194,000 for the first (of 6) Medicare surcharge brackets. The additional $1,000 in income cost the couple an additional $936 in 2023 Medicare premium surcharges. That’s a marginal tax rate of 93.6%!

If it’s year-end and you determine that you’re close to the edge of a threshold, you have a few weeks to strategize. A few easy moves:

  • If you’re employed with a 401K, or you have a deductible IRA, make sure you have maxed out your contributions. If you turned 50 this year, remember you now get an extra catch-up contribution.
  • If you have a Health Savings Account, make sure you have maxed out your contributions. If you turned 55 this year, you now get an extra $1000 catchup contribution.
  • If you have a business, can you push income to January or accelerate expenses into December?
  • If you are over 70 1/2, you can make a Qualified Charitable Distribution (QCD) from your IRA. (more info here: https://www.hollydonaldsonfinancialplanner.com/keep-charitable-deduction/)
  • Instead of giving cash to charities, you can give them an asset (like stock) with a large capital gain. Depending on whether you itemize, you might get a deduction instead of showing the gain.
  • If you believe you are in a lower tax bracket now than you will be in retirement, and additional income won’t bump you up against any of the other thresholds, consider a Roth or partial Roth conversion. (But do it soon. It can take several weeks to accomplish, depending upon which company holds your accounts.)

Based upon a November estimate of your income and deductions, your professional can begin to strategize in other ways, too. (Schedule a 30-minute call with us if you’d like to talk more about tax planning or other money topics: https://bit.ly/3GWZNrc)

Being proactive on taxes can be a vaccine against stress. Imagine feeling more in control in April once you see how much you helped shrink your tax bill at year-end.

If you haven’t wanted to think about taxes in November before, it might be worth your while to think again.

Continue ReadingNovember Thinking About Taxes: Really?

Veterans Day, Wartime, and Money Messages

Veterans Day, Wartime and Money Messages

On Veterans Day, we honor veterans of all wartime eras. The oldest living veterans are members of the “Greatest Generation” – famous for many distinctive character traits. When it comes to money, it’s often been about their famous frugality. Where did that frugality come from?

“Money messages” are beliefs and attitudes about money. They form during our early years and times of hardship, like war. Those messages lead to regular money habits.

For example, to Baby Boomers and Gen X, it could be hard to understand why Mom or Dad cleaned and re-used Ziploc bags or hoarded empty shoeboxes. It might have been frustrating that they would not buy themselves something nice. However, an explanation arises if we examine their wartime money messages.

Indeed, many recognize that frugality habits evolved during a time before WWII of true scarcity – the Great Depression. (Interesting side note: Depressions are often followed by wars.) When the U.S. entered the war, this frugality was reinforced by the government, as demonstrated by rationing. Below is a historic relic: a war ration coupon book, issued in 1943. It belonged to my late mother-in-law, Betty Bates Donaldson, born in 1925.

What Are Ration Books?

What are ration books? Because so many of the U.S.’s resources were diverted to producing military hardware, shortages arose in everyday food and household goods. The government issued ration coupon books to fairly distribute food and goods.

Actually, you might wonder, “Americans accepted being told by the government how much food they could buy?” Remember that at the time, government programs had brought tens of millions out of starvation. We had been attacked by Japan. German U-boats were off our coastlines. More Americans felt they were “in this together,” and the government, whether trusted or not, was the only option to coordinate the national response.

To a Depression-battered generation, a wartime message of scarcity and frugality must have seemed not only logical, but patriotic.

Government and Scarcity

Indeed, on the ration book, the language and tone is striking. If you had been an 18-year-old like Betty, holding this ration book, what money messages might you have received?

“Rationing is a vital part of your country’s war effort. Any attempt to violate the rules is an effort to deny someone his share and will create hardship and help the enemy.”

(Money Message: Scarcity. There is only so much to go around. Taking more than your fair share is selfish and downright dangerous.)

“This book is your Government’s assurance of your right to buy your fair share of certain goods made scarce by war. Price ceilings have been established for your protection. Dealers must post these prices conspicuously. Don’t pay more.”

(Money Message: Watch out. Businesspeople can be greedy. Be vigilant about prices.)

“Be guided by the rule: ‘If you don’t need it, DON’T BUY IT.’ ”

(Money Message: Only buy what you need. Your wants and wishes must be suppressed right now.)

The word “ration” is used nine times on the outside of the book, plus on every stamp in the book. Other scarcity messages pervade:

“This book is valuable. Do not lose it.”

“Without the stamps you will be unable to purchase those goods.”

“Do not throw this book away…You may be required to present it…”

“Persons who violate rationing regulations are subject to $10,000 fine, (in 1943?!?), imprisonment, or both.

Contrasting Messages to Spend

In contrast, compare the ration book messages to ones heard today:

“Go shopping.”

“We need consumers to spend.”

Pile on rampant consumer advertising and social media “influencers”, and we’re hardly lacking messages telling us to want more and spend more.

Handling Our Money Messages

As we grow, we adapt the best money habits we can, based on a foundation of money messages reflecting beliefs and values. It’s important to continue to ask ourselves, as times change, are these money habits still serving us well? Do they help us lead a happy, fulfilling life in the midst of strife? Are they keeping us safe? Do they enhance relationships? Or do they keep us trapped by unhealthy attachments to money, possessions, or to fear itself?

What Messages Will Today’s Youngest Absorb?

Money messages make the most impact at two times: in our formative years, and in times of fear. They sink in from authority figures: government leaders, parents, teachers, coaches, or spiritual leaders.

The Greatest Generation saw their parents and authority figures succeed through the roaring 1920s only to be humbled in 1929 and struggle through the 1930s. Might we see generational money messages come full circle? Given today’s tumultuous times and their disdain for Baby Boomers, might Gen Z turn out to be the most frugal, least materialistic, best savers to come along in 90 years? Or will TikTok-raised kids hang on to money messages glorifying consumption and spending?

Share your thoughts below.

Continue ReadingVeterans Day, Wartime, and Money Messages

What Is Retired Husband Syndrome?

What is retired husband syndrome?

I first heard of Retired Husband Syndrome (RHS) at a book signing in 2013. From across the book section in the exhibit hall, I saw a young man with jet black hair staring at the back of my newly-published book, The Mindful Money Mentality: How to Find Balance in Your Financial Future. He turned it over, opened to the table of contents, flipped a few pages, and turned it over again.

Until that point, he acted like other book-browsers – look at back, flip to front, open to table of contents, flip to back, flip again. Some would then take the book to the register. Others set it back on the shelf. The whole decision took less than 2 minutes.

But this young man took so long reading, I wondered if he might consume the whole book right there. Then I quit watching, distracted by conversation with another attendee.

When I turned back to look for him, he was gone. Figuring he had decided against it, I was surprised a couple of hours later to see he was the first in line at the book signing.

Retired Husband Syndrome – in South Korea

Approaching with an enthusiastic smile, he said “Hello” in a heavy Asian accent. He was from Seoul, South Korea, and said that he thought my book would be helpful to his male clients. Unsure why he was excluding the female ones, I readied my pen to sign, but asked him to tell me more.

“In Asia, we have Retired Husband Syndrome (RHS),” he said.

“I’ve never heard of that. What is it?” I asked, putting the pen down.

“Some husbands spend their whole lives working for a company, and when they retire, they are at home, and it is not good for the marriage. The husband loses his identity because he is not in his job anymore, and he wants to be home with his wife. The wife has been at home her whole life, but she doesn’t like the husband being there, doing nothing.”

“So sometimes the retired husbands do…nothing? They don’t have hobbies or hang out with their friends?”

“Yes, that’s right.”

“Wow. So you must see a lot of marriage problems in your practice?”

“Yes! And it is too bad. They have a pension, but the couples never spend time planning what they will do.” He explained more about the strain on the marriage; the sadness he sees at a time when there could be great joy and celebration; and the effect on their children and the families.

“This makes me sad. Sometimes I am going to be the only person outside of the family who might see it. All of the financial advisors in Seoul could help people with this. This is preventable.”

Retirement Planning Is About More Than Money

I once heard a conference speaker say, “We spend more time planning what we’re going to eat for lunch than how we will spend a 30-year period of our lives.” In the U.S., it’s not only pre-retiree husbands, but also wives, singles, straight, and LGBT pre-retirees, admitting they are at risk for something like RHS.

It helps to clarify how you might spend the bounty of time that increased longevity will likely bring. If you need help planning a fulfilling retirement, find a financial professional or coach who takes as much interest in your time as they do in your money.

You can help stop the spread of one type of preventable international syndrome, and help your future happiness even more.

For more on the psychology of money prior to retirement, tax tips, and a monthly dose of fun, enjoy the free award-winning e-letter, “The View From the Porch.” Subscribe at this link: https://bit.ly/3t2uwfn

Continue ReadingWhat Is Retired Husband Syndrome?

IRA RMD? Try ABC

IRA RMD? Try ABC

Studies show more RMD’s (Required Minimum Distributions) are taken in the fourth quarter than the first nine months of the year.

What are RMDs?

Required Minimum Distributions (RMD’s) are familiar to almost anyone with a retirement account – 401K, 403B, 457, or IRA. RMDs are a minimum annual withdrawal requirement from the account. For your own account, they begin at age 72. For an account inherited before 2020, annual RMDs began right away. Both of these types of RMDs are calculated using IRS-provided tables. The company where you keep your account will calculate the RMD in January each year for you.

For an account inherited in or after 2020, there is no annual distribution requirement. Instead, the new requirement is to distribute the entire account within 10 years.

When to Take RMDs?

There are varied reasons people wait to take their RMDs. They may not need the income and prefer to keep the money invested all year. They may not be comfortable with the logistics of requesting it from the company holding the account (called the “custodian.”) They may not want to decide what investments to use to accomplish the RMD. All of these reasons can be perfectly rational reasons to delay.

Turning a Task into a Gift

Yet all of these reasons also focus on the RMD as a financial task to be accomplished.

Unless the RMD is a significantly large amount, any financial strategy involving the “best” timing of it is purely a guess. Rather than viewing it as a financial task, it’s possible to turn it into a memorable or even fun opportunity.

Try these A-B-C ways to make a Required Minimum Distribution more intentional, or something special.

A is for Anniversary

Especially if you inherited the account, taking the RMD on the anniversary of your loved one’s loss can be a way to remember the gift they left you.

If it’s from your own retirement account, consider taking it on the anniversary of your last day at work.

B is for Birthday present

Whether it’s your own money or inherited, what about using the RMD during your birthday month to do or buy something special only for you?

With most custodians, this can be set up as an automatic distribution to your checking account. Imagine, you open your bank account on your birthday and, voila’, birthday money to spend as you like.

C is for Charitable donation

The 2017 tax law means far fewer people itemize deductions now. To maintain the tax-favored status of a donation, sending all or part of an IRA RMD directly to a qualified charity can be a wise move. This is called a QCD – Qualified Charitable Distribution.

There are several rules to keep in mind, though.

First, you have to be at least 70 1/2 years old.

Second, do not distribute to yourself first and then donate it. The donation must go directly from your account to the qualified charity.

Next, QCDs can only happen from IRAs, not employer retirement accounts like 401Ks, 403Bs, or 457s.

Before making the distribution, it’s a good practice to contact the charity to make sure they qualify. For example, donor advised funds and some private foundations will not be eligible for a QCD donation.

Conveniently, some custodians provide a checkbook for IRAs. If you are going to do QCDs, you might call this your “Charity Checkbook.” Be sure to write the check in plenty of time for it to clear before December 31.

Using your RMD this way can be both financially and emotionally valuable – you might get a deduction you otherwise would not. Plus, you get to see the impact of your gift on a cause you care about. Ask your CPA or tax planner whether it would work for you.

ABC Combinations

Some people combine two of the three ABC’s. They might give a direct charitable donation as a birthday present to themselves, or donate the RMD in memory of their loved one on their loss anniversary.

Whether you are taking them now or will in the future, be intentional about RMD’s. Rather than feeling like a last-minute task of the year, use the requirement to make some fun or meaningful memories.

Reach us here to talk more about year-end tax planning.

What year-end tax tips do you have?

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Fourth Quarter Tax Tip: Check Your Fund Distributions

Fourth quarter tax tip: If you hold any mutual funds in non-retirement, taxable accounts, now is the time to begin checking on “projected capital gain distributions.”

What are projected capital gains distributions?

When mutual funds sell securities for capital gains, they don’t pay taxes on them. Their shareholders do. The funds pass the gains through to shareholders each year through reporting them on Form 1099. For many shareholders, the 1099 gains come as a surprise tax bite. The value of the fund may not have increased at all in the past year, but yet, they still have to pay tax on capital gains.

Why are these important?

Because of 2022’s roller coaster market ride, many funds are going to show larger-than-normal capital gains, regardless of what happens to their value between October and December. For the funds’ shareholders, that could mean lots of extra taxes. Even if you bought the fund mid-year, you may still get a capital gain distribution.

What To Do About Large Distributions

You can look up your fund’s projected distributions at the fund’s website, or, use this site to take you directly to your fund(s)’ relevant page: https://mutualfundobserver.com/discuss/discussion/60074/2022-year-end-capital-gains-distribution-estimates

More helpful information on the nature of capital gain distributions is provided by this article, too:

https://humbledollar.com/2019/11/the-unwanted-payday/

If you would like help in the fourth quarter – figuring out 2022 taxable income while there is still time to make adjustments before year-end, schedule a tax planning appointment with your CPA or schedule a 30-minute call to talk with us here: https://go.oncehub.com/HollyPThomas.

Continue ReadingFourth Quarter Tax Tip: Check Your Fund Distributions

The Retirement Answer? A Blank Stare

blank stare emoji

The Retirement Answer? A Blank Stare

I had just asked a 59-year-old, “You said you can retire in 3 years. How will you spend your time after that?” Expressionless, all he gave was a blank stare.

“I never thought about it,” he replied.

Unfortunately, he wasn’t the first 59-year-old with that answer. “I don’t know” is a more common answer than most think. 

More To Retirement Life Than Money 

According to a study by United Capital, when asked about their financial life stories, most people talked about working and spending, not saving and investing.

Over the decades of our working lives, we tend to follow a formula: Work. Spend. (Save). Repeat. We do this knowing one day those (savings we try not to think about or touch) should equal a nice sum, hopefully enough to reach the nirvana of “financial independence.”

Along the way, we can get trapped into planning meals and vacations, but not a potential 25-year chapter of our life. If nothing trips up the formula (divorce, premature death, disability), then a milestone birthday, the loss of a parent, or the arrival of a new boss may cause one to someday dial up a financial planner and ask, “Am I there yet?”  

Are You “There” Yet?

To which the answer is usually, “That depends.”

That depends…on where “there” is. “There” = how, with whom, and where you will find purpose, meaning, and happiness in life after Work-Spend-(Save)-Repeat.

Once that’s known, “there” can be translated into real financial goals. If you don’t know what “there” looks like, then attempts to answer the question are merely rough guesses. More importantly, if you don’t know, you’re not likely to enjoy that supposed nirvana time nearly as much.  

There are many thought leaders contributing to discoveries about the time of life past “Working” and before “Old.” That time of life, which will be 25 or 30 years for a lucky few, goes by many names: Your Third Age. The Third Stage. The Encore Years. Your Life’s Next Chapter.

Examples of such leaders include Dori Mintzer and Mitch Anthony.

According to experts like these, retirement planned well has the potential to be a time of peak fulfillment and meaning. Not planned well or planned at all, potential paths lead to boredom and, in the worst cases, clinical depression.

Real Retirement Planning 

Many people think “retirement planning” means “IRA investments” or “401K rollovers” or “pension options.” Those are certainly part of it. But the best, yet sometimes the most difficult, kind of retirement planning is not found on your retirement account statements. It’s found inside of you. 

Begin with a blank stare, and build your “There.”

Not sure where to begin? Check out this free download: https://www.hollydonaldsonfinancialplanner.com/wp-content/uploads/2018/11/Beyond-the-Numbers-Whats-Retirement-Money-For.pdf for a questionnaire about what kind of retirement lifestyle choices are ideal for you.  

Continue ReadingThe Retirement Answer? A Blank Stare