Fee-Only Financial Planner

Fee-only financial planner category: A collection of blog posts on fee-only financial planning topics by Holly Donaldson, CFP®.

Certified Financial Planner™ and author Holly Donaldson writes a regular blog on topics for those interested in financial planning. Her speciality is the psychology of money in preparing for and transitioning to retirement. Many people find that, after saving well for a few decades, that the idea of actually spending and enjoying what they have saved requires a much different mentality. It is for these people Holly wrote her book, The Mindful Money Mentality: How to Find Balance in Your Financial Future.

The balance in being sure you have enough for the future, while also enjoying the present, is the highwire act of retirement. With Holly’s guidance, clients find they have greater security and confidence. They learn how to strike the right mix between enjoying the present and investing for the future.

Additionally, they appreciate that as a fee-only financial planner Holly does not sell any products, receive commissions or referral fees. Clients most interested in Holly’s services are those who do not feel well-served by advisors who require an ongoing engagement or fees. They don’t need a chauffeur for their money. Only a financial navigator.

Enjoy a monthly award-winning e-letter on psychology of money in retirement. Subscribe to “The View from the Porch” at https://bit.ly/3t2uwfn.

To speak with Holly about your own circumstances, select a day and time on the calendar below.  She will call you then at the number you provide: https://bit.ly/3GWZNrc

Fall Planning Reminders Before You Click “Renew”

Fall planning reminders before you click “renew.”

When it comes to employer, private health, and Medicare benefits, it’s easy to simply renew last year’s choices.

However, it can be worth the extra time to look closely at all options, and how they might have changed.

“Research shows employees only spend 17 minutes electing their benefits, while Netflix users spend an average of 18 minutes deciding what to watch,” according to Kiplinger’s: http://bit.ly/Kiplingers-Benefits.

Under 65: Health Insurance

If you are under 65, check for HSA (Health Savings Account) eligibility on your policy. Contributing to a family HSA can save roughly $2000/year in taxes (depending on your marginal tax bracket). Plus, if you are relatively healthy and do not use the HSA, your earnings grow tax-free until retirement. Click here [https://www.hollydonaldsonfinancialplanner.com/hsas-over-iras/] for the reasons why HSA’s beat IRA’s as retirement accounts.

HSA eligibility, unlike IRA eligibility, is not dependent upon having earned income. The last year you can contribute to an HSA is the year before you turn 65.

65 or Over: Medicare

If you are 65 or over, your first opportunity to enroll begins 3 months before you turn 65 and continues until 3 months after, unless you are still employed. Sign up for Part B at the first opportunity (after leaving your employer), otherwise your premiums increase 8% – 10% per year.

Enrollment for existing Medicare beneficiaries runs from October 15 – December 7.

If you are on prescriptions, the formulary – the list of drugs that Part D covers – might have changed. Make sure your prescriptions will still be covered. Stories abound of huge jumps in co-pays after January 1. At www.medicare.gov, you can input your prescriptions and the site will advise you which Part D plan covers the meds you need.

Long-Term Care Insurance

Group long-term care offerings through employers are becoming a benefit of the past. Private policies can be bought with better coverage, but premiums are increasing. If you are at least 40 and have access to a group policy, strongly consider enrollment. Most group policies are portable if you leave the employer. Also consider shopping your group coverage against a private policy.

Long-Term Disability

The younger you are, and the more education you have, then the more likely that your potential earnings capacity over your lifetime, known as your “human capital,” is your biggest financial asset. Protect it with LTD coverage.

We are all more likely to be disabled than to die. Most employers provide short-term disability for 90 days.

Long-term disability coverage, if offered, varies from 40% to 80% of compensation until age 65. Some employers provide the opportunity to purchase supplemental coverage; others don’t.

Finally, check whether you are covered for “own-occupation” or “any-occupation.”

Group Life Insurance

Many employers provide one year’s salary as a default for group life insurance, with the option to purchase more for the employee or the employee’s spouse or domestic partner. It’s usually a good deal.

If you didn’t sign up at your initial enrollment, you may need to submit to a paramedic exam if you request more coverage.

Employer Stock Options/Restricted Stock Purchases

The most common error among holders of options and restricted stock is concentration of investments, and future earnings, in that employer. This is usually because those employees own employer stock outright, plus options, plus more stock in a retirement plan through a company match. That’s a lot of eggs in one basket.

You may be highly satisfied with the company’s potential.  (So were Enron employees.) Stuff happens. Before making major moves, consult a CPA or CFP. Employer stock decisions can have major tax consequences.

These are just a few of several benefits options commonly found with larger employers. Walking through elections with your financial planner is a good idea at enrollment time. Make a special appointment to do so in advance of the holiday crunch. (Book a 90-minute planning appointment for a Financial Checkup direct at: https://go.oncehub.com/HollyDMeetings)

For questions about planning services, pick the best time for Holly to call you: https://go.oncehub.com/hollypthomas.

Continue ReadingFall Planning Reminders Before You Click “Renew”

Get a Go-Bag: Lesson from the Hospital

Get a go-bag: lesson from the hospital. A 73-year-old client recently had an unplanned hospital stay and gave permission to share her story.

She originally had an outpatient foot surgery. Subsequently it developed an infection missed by her physicians. Once her foot swelled up and was bursting with pain, only then did they send her immediately to the ER.

As you might expect, it was an ordeal of mixed experiences. Once she got a (semi-private) room, the nursing staff was wonderful. The cleaning staff – not so much. Evidently they had missed cleaning her room’s bathroom after the last patients left. Before getting a room, she spent 15 hours parked on a gurney in the ER hallway. Doctors would walk by, see her foot, stop and simply say, “Wow, that looks painful.” Then keep going.

In case you’re wondering, she has a the “Cadillac” Medicare Plan F (no longer available to new enrollees) with supplemental coverage.

She spent three days there, which was long enough for this astute patient to think of all the things she would do differently next time before coming. She had her toothbrush, but not her eye mask for sleeping. She had socks, but shower shoes would have been nice. She didn’t have her face soap, so for three days she used the “industrial” hospital hand soap.

Minimalists might think this is minor stuff. But when you are in a most uncomfortable situation and place, isn’t that when comforts are needed the most?

Lesson Learned

She wanted to ask her partner to bring some of these things, but she realized he really wouldn’t know what all the stuff in her medicine cabinet was. It seemed like a big ask. He had already held ice packs on her feet for 4 hours straight. How could she describe which of her many bottles to bring?

If it had been me, once I got home, I would have been relieved to be out of the hospital, get on with my life and try to forget it ever happened. Not this lady. She immediately shopped for everything she wanted to have but missed. Then she assembled everything in two go-bags. Now, if she is unable to grab them herself, she has told her partner about them, written down on the medicine cabinet where to find them, and what needs to be added at the last minute. All he has to do is bring them along.

Comfort and Dignity

When my grandmother, a tall, beautiful, always put-together woman, was in the hospital, dying, she asked for someone to make up her face every morning. At that time I was a teenager. I didn’t understand this request. It seemed so unimportant in the scheme of things. Several decades later, when my mother-in-law was in a similar state, I read on a Hospice brochure how rubbing the feet is one of the best things you can do. Hospice is the authority on being comfortable and retaining dignity at a time of greatest discomfort and indignity. The founder, Dame Cicely Saunders, said, “People matter, even when they are dying. We all need to care for the dying and not let them become reduced to just a set of physical problems or a list of needs.”

Even if you are not dying, for your comfort and dignity, if you need your Lancome set, you need your Lancome set. If you want your hair rollers, you should have your hair rollers. Hospital stays are not the time for even more comfort sacrifices. You are already being subjected to enough.

This client, like my grandmother was at that age, is always beautiful and put together. So when she shared that she had put a go-bag together, I knew it would be the nicest best stuff. She is also frugal, so it’s not the most expensive, either. Here is her list, and a photo of the beautiful bags they are in.

The Go-Bags and List

Get a go-bag
  • Small net bath puff
  • body wash
  • razor
  • Bath wipes
  • Body lotion
  • Aquaphor
  • deodorant
  • Shower shoes 
  • Kleenex
  • Poo-Pourri (sharing a bathroom!!)
  • Mini Brush/Comb
  • hair ties & clips
  • lip balm
  • tweezer
  • Small Mirror
  • Toothpaste
  • Listerine
  • Floss
  • Sleep mask
  • Face cloth
  • Face sponges
  • Cerave Cleanser & Moisturizer
  • Various sample serums
  • Extra copies of medical insurance cards

She says, “The Coach small tote is nice & roomy but nondescript. The black bag is made by Travelon, which I purchased on Amazon. It’s a REALLY nice bag! [My partner] will add cell phone/charger, electric toothbrush & contents of whatever bag I’m using at the time. Obviously, if it’s a trauma situation, this stuff would not be necessary, but it could always be brought later if needed.”

A Few Add-Ons

I advised to add extra copies of her living will and medical directives (HIPAA designation and health care power of attorney documents). Additionally, to reduce having to remember the cell phone charger and electric toothbrush, you could buy an extra of each. For example, I have a cheap travel electric toothbrush which uses AA batteries that could have a permanent home in the go-bag.

What would you add to your hospital go-bag? How would you make it your own? Do you have a parent or family member who could use their own go-bag? It might make a fun shopping trip to put together nice things that they like in a nice bag for them.

Hospital stays aren’t fun to think about. Being prepared with little comforts and reminders of home might help make a rotten situation a little less so.

For monthly tips on money psychology and tax savings mixed with attempts at humor, subscribe to the award-winning monthly e-letter, “The View From the Porch,” at https://bit.ly/3t2uwfn.

Continue ReadingGet a Go-Bag: Lesson from the Hospital

5 Myths about 401(K) Rollovers: What’s the Rush?

5 myths about 401(K) rollovers: Should 401Ks (or 403bs, 457s, or TSPs) always be rolled over? Often, soon-to-be retirees are led to believe their impending retirement forces a deadline or urgency to “do something” about their retirement plan account. 

Several understandable myths surround the mystery of what actually happens to your money when leaving your employer. Below are five of them.

Myth 1: When you separate from your employer, you must take your retirement plan account (401K/403B/457/TSP) with you.

Actually very few employer plans require employees to leave the plan upon retirement. You have a choice to leave the account right where it is. 

This includes if you are widowed and your spouse was the employee. More than likely, you can stay with the retirement plan if you want to.

The rules for your employer can be verified by checking with your human resources department, or obtaining a copy of your plan’s complete document, usually available at your account’s website.

Myth 2: When you separate from your employer, it’s always best to take your retirement plan account with you.

Some people might not have the greatest level of fondness for their employer and want to sever ties with anything having to do with the company. While understandable, it’s important to separate facts from feelings about your money. 

Due to tighter ERISA and Department of Labor regulations, it’s very unwise for employers to have their employees’ retirement plan limited to only high-fee, high-risk, or self-serving fund options. Chances are that what’s available there is worth taking a more in-depth look.

On the question of where you are best served with your retirement funds, here is where you will get a wide range of answers. You can ask friends, family, the internet, co-workers, and even ChatGPT and go in circles.

Whether rolling over your retirement plan account is in your best interest depends on a few different factors. Keep reading to myths 3, 4, and 5 to find out more.

Myth 3: Retirement plan accounts have no impact on the ability to do a Roth conversion.

False. This particularly applies to people who have IRAs outside of their employer retirement plan. If you are considering converting part of an IRA you already own outside of a retirement plan to a Roth, the amount you can convert is subject to an arcane concept called the “pro-rata rule.” 

In general, under this rule, the amount you can convert is subject to a ratio that includes all IRAs, but does not include monies in employer retirement plans.

Therefore, if you roll over your retirement plan before doing a Roth conversion, you will likely limit the amount of outside IRAs you can convert. For many people retiring in their 60s and delaying Social Security, Roth conversion opportunities abound. It might very well make sense to wait to roll over at least until age 70 so that you can leave the Roth conversion option more open.

Conversely, if all of your retirement money is in the employer retirement plan and you are considering Roth conversions, then a total or partial rollover might make sense in order to then accomplish a “Back-Door Roth.”

If Roth conversions are something you are considering, it’s imperative to talk to a tax professional first before doing any rollovers, and before doing any Roth conversions.

Myth 4: Qualified Charitable Distributions (QCDs) can be made directly from a retirement plan account.

False. Qualified charitable distributions are distributions made directly from an IRA to a charity by anyone over age 70 1/2. They can only be made from IRAs, not employer retirement plans.

The reason to make a QCD is to reduce the taxability of IRA distributions. QCDs work very well for people over 70 1/2 who already have the intention and ability to give to charity, but are not able to itemize their charitable deductions.

If this is you, then you may indeed want to roll over your employer retirement plan account to an IRA so that you can accomplish QCDs from the rollover IRA. But if you’re a few years away from age 70 1/2, there’s no hurry.

Myth 5: Any investment options that you have in your retirement plan, you can also get in a rollover IRA or annuity.

False again. Some employer retirement plans offer institutional shares (often seen as “I” “R” “Y” or “Q” shares) of mutual funds, which have lower fees inside them. The minimum investment for many institutional shares is $1,000,000. Thus, the only way to access them for most retirement plan participants is to be in the plan, where your purchasing power is aggregated with other employees and retirees. Once you roll out of the plan, you may not have institutional shares available. Instead you might be limited to higher fee options common with the retail shares of funds.

Another type of fund only offered in employer retirement plans are stable value funds. Although not FDIC-insured, they are principal-guaranteed by an insurance company and generally pay a more competitive rate of interest. In some market environments a stable value fund makes a good substitute option for a short-term bond fund because it has the guaranteed principal and generally pays more than a money market fund (though not always). Nevertheless, by leaving the plan behind, this important option might be left behind, as well.

In short, rolling over your 401K is rarely a time-sensitive decision. Most people have enough going on already at a time of life transition. Take your time to talk to professionals who have no conflict of interest in advising you which way to go. For a decision this big, there’s no need to rush.

If you can relate to anything in this post and would like to talk more, we would love to listen. Schedule a call with Holly here: Contact.

Continue Reading5 Myths about 401(K) Rollovers: What’s the Rush?

How To Make Worry Melt

How to make worry melt: As an expert worrier, I often wonder why I worry, even when I know the answer: Worry gives me a (false) sense that I will be prepared and in control. It’s my fallback when I feel out of my league.

Take this example. One of my biggest worrying times happens before I head to the airport. What am I so worried about? Unlike many, it’s not the actual flight. It’s about missing the plane. It feels silly to even write this.

And yet,

Butterflies in my stomach.

Little waves of nausea.

Tight chest.

It happens nearly every time.

And I have coping mechanisms: I tell myself things like, “Breathe.“ “Calm down.” “It’s going to be ok.” I even have a special spirit animal – a deer – that I think about to help me feel better.

Additionally, as a result of this predictable worry, I have an irrational need to leave home at least two hours ahead, get to the gate an hour before the flight, and, when I get there, to sit where I can see the gate agent and the boarding door.

Then there is this acute physical transformation. Once I can see the gate and hear the agent, my entire nervous system relaxes. It feels like the worry just melts.

Expected and Unexpected Worries

How silly this feels. And yet, it seems I am not the only one to worry about expected and routine things like a departing plane. It’s expected and routine, yet a source of great worry, that teenage children will start driving, and that 90-year-old parents should probably stop. In working with money, it’s a source of great worry, yet expected and routine, that stockmarkets, interest rates, and gas prices will rise and fall repeatedly.

Upcoming retirement is expected and routine, yet a source of great worry (and excitement). Understandably, it’s a big step into an unknown future. That can especially bring on the jitters.

Adding to everyday events are unexpected random ones, like pandemics. Further, sudden market meltdowns, tsunamis, cancer, dementia, layoffs, election surprises, terrorists, and hacker attacks are all things we know aren’t probable, but are possible.

Just checking in – how’s your heart rate now? Butterflies? Tight chest?

Although we might prepare as best we can, worry on top of preparation helps some feel as though we are doing something about the problem. But what toll does worry take? Does it help us to prepare that much better? As a result of worry, I’m quite sure I have shortened telomeres and life expectancy. That’s a pretty high cost.

How To Melt the Worry Away

When I get to the gate and see the agent, I feel the worry melt away.

But it’s strange – I don’t think too many airline employees worry about the same thing I worry about. There’s something about having exposure every day to systems and knowledge that produces confidence. Aviation is now one of the safest modes of travel in the world. While airplanes are subject to all kinds of random threats, there are protections in place against as many as possible. Some are fairly simple, such as passengers wearing seatbelts. Others are fairly complex, like running through a 57-item cockpit checklist before every takeoff and landing. That’s what professionals of many stripes get paid to do – develop and run proven processes, and then amend them as lessons arise.

In other words, having a specialized understanding and process makes it easier to

  • distinguish what’s actually controllable,
  • accept what’s not, and
  • feel confident the process will handle 90% – 95% of unexpected random events.

Airlines have meticulous training and checklists, but accept there will be equipment failures, unruly passengers, weather delays, technological shutdowns, and other events we haven’t yet seen.

Melting Money Worry

Similarly, what most people worry about with money isn’t what most financial professionals worry about for them.

Most financial professionals know what can be done to reduce risks, and what can’t. While we might make client-specific plans, we also know there will be unexpected random events. We put plans in place to prepare for both as best we can. For some people, having that kind of professional help and confidence helps money worry melt away.

For me, worry melts upon seeing that I’m part of the boarding process. For others, it’s being part of a financial planning process.

Either way, the exhalation of a deep sigh, unwrinkling eyebrows, and shoulders unhooking from our earlobes send the signal the professional and the process have provided what we come for after all – the feeling it will be ok and we will get where we want to go.

When have you felt worry melt away? Who were you with? What seemed to be the key for you?

Leave a comment for readers below.

For more psychology of money, tax, and funny video tips, subscribe to the award-winning monthly e-letter, “The View From the Porch,” at https://bit.ly/3t2uwfn. Or check out Chapter 6 of the book, The Mindful Money Mentality: How To Find Balance in Your Financial Future.

Continue ReadingHow To Make Worry Melt

You Might Want a Trust If….

Trust Legal documents

You might want a trust if….

“Do I need a trust?” Although it’s a legal question, it’s frequently asked of financial advisors. What do they say? 

  • “Hey, I’m not an attorney,” is one possible—but maybe not the most helpful—answer. 
  • “Hey, I’m not an attorney, but I can play one,” may be polite, but inadvisable. 
  • “That’s interesting you bring that up. I’m curious how you heard about trusts.” This reply seems a little better. It keeps the focus on the questioner, and it’s pretty safe legally. 

Pros and Cons of Trusts 

Answers people may give for curiosity about trusts range from, “I dunno,” to citations of articles, websites, conversations with friends, family members, or even an estate planning attorney. All of the mixed messages about them can get pretty confusing. 

For some people, trusts are a mysterious-yet-evil domain of the ultra-rich. This belief isn’t surprising. When was the last time you saw positive media coverage of a trust? It typically pops up when a billionaire’s “trust fund baby” is arrested. 

There are dozens of kinds of trusts. For this post, “trust” means a revocable living trust. They tend to be the most common and relevant. 

Trusts aren’t for everyone. They are costly to set up. Some people have difficulty implementing and maintaining them. They are powerful. Scary powerful, sometimes.

Rather than answering, “Do I need a trust?” directly, I prefer to channel comedian Jeff Foxworthy’s famous phrase, “You might be a redneck if …” (anyone under 40 may have to look him up). It seems to help people discover for themselves whether a trust might be useful.

7 Reasons You Might Want a Trust

1. If you own property in more than one state or country, you might want a trust.

Trusts avoid probate—if drafted, executed, and implemented properly. Property in two states/countries means probate in two states/countries. In many states, probate attorneys charge a percentage of the probated asset value. Dollars spent now on a trust could seem small compared to the dollars spent on lawyers and court fees in two places later.

2. If you are concerned about a grown child’s ability to handle money, you might want a trust.

A child gets the money with no strings attached if left through a joint account, will, payable-on-death (POD) designation, or beneficiary designation. Trusts let you build strings. One common example is to pay one-third of principal at age 30, one-third at age 35, and the remainder at age 40. As your family ages and changes, you can revise trust provisions like these. Revocable living trusts are amendable.

3. If you have a concern about a child’s current marriage, you might want a trust.

Trusts can be written so that inherited assets can be protected in a divorce. Assets inherited other ways, especially if commingled with other marital assets, can be harder to protect.

4. If you have a concern about a child’s future marriage, you might want a trust.

Trust provisions can be written for future spouses, too.

5. If you aren’t as concerned about dying so much as living a long time with chronic illness or dementia, you might want a trust.

What happens if you’re unable to manage your finances? People often don’t consider that a will only applies upon death. That’s why they should have a power of attorney (POA). Although much work has been done to get institutional agreement on POAs, your designated POA person might still face a custodian, attorney, or title company who won’t recognize it, or who at least gives your person a hard time about it.

If an asset is in a trust, your person—the trustee or co-trustee—generally faces fewer roadblocks than with the POA.

6. If you are in a second (or more) marriage and have children from a previous one, you might want a trust.

Let’s say you both agree that the spouse gets the house, but the kids get the money you brought to the marriage. With a will and beneficiary designations, this basic idea can be accomplished. Sometimes life (and death) work out that simply. Yet sometimes they don’t. (See points 4 and 5.)

It’s possible your spouse could be left without enough money to live in the house, or the kids could be left with nothing. If either of those scenarios bothers you, a trust can allow for changing circumstances as you both age.

7. If you are concerned about a loved one’s vulnerability in their time of grief, you might want a trust.

Probate is public. If you’ve ever known someone who has been through it, then you are familiar with the annoying phone calls and direct mail received after losing someone. If you haven’t, you might be shocked to know that … people troll public records.

Some trolls, I mean, people, especially like the records that declare which investment account(s) and which beach condo go to whom. Then, out of the goodness of their hearts, they find the grieving loved one and offer to provide assistance and support in their time of need. (Ahem.)

Unlike probate, transferring property through a trust happens privately.

Ask Your Attorney

In summary, these are only seven of several reasons you might want a trust. But the best person to ask is a board-certified estate planning attorney. Find one through your local estate planning council (www.naepc.org) or ask your financial advisor for references.

For a simple list of 25 steps to complete for estate planning, click here.

For monthly tips on managing your money in retirement, taxes, and typical snafus, subscribe to the award-winning e-letter, “The View From the Porch.”

Continue ReadingYou Might Want a Trust If….

What Does Qualify for Florida’s Back to School Sales Tax Holiday?

What does qualify for Florida’s Back to School Sales Tax Holiday this year? The sales-tax-free dates run from Monday, July 24 to Sunday, August 6.

The list of items you can save on is long; more than simple pencils and paper. Before you think you know what qualifies, though, check twice.

Here is the general description of items that qualify:
– “clothing, footwear, and accessories selling for $100 or less”;
– “certain school supplies selling for $50 or less”;
– “and the first $1500 of personal computers and computer-related accessories.”

Read The Fine Print

Before shopping, you may want to know what actually counts, and what doesn’t, under the three general categories.

You can find all the details in Tax Information Publication #23A01-06, issued 6/15/23: https://floridarevenue.com/taxes/tips/Documents/TIP_23A01-06.pdf

Following are a few examples.

What counts as “clothing”? Lingerie – yes. Athletic pads – no.

“School supplies”? Backpacks – yes. Briefcases – no.

“Computers”? Tablet – yes. Smartphone – no.

How about payment terms? Layaway – yes. Rain checks and gift cards – no.

All of the above probably make some sense. Yet, other qualifiers/non-starters might make shoppers scratch their heads:

Kindle- Yes. Books- No.
Hunting vests – Yep. Life jackets – Nope.
Snow ski suits – Yeah. Scuba suits – Nah.
Youth bicycle helmet – Uh-huh. Youth motorcycle helmet – Uh-uh.
Rain poncho – Check. Umbrella – Not.
Garden gloves – You got it. Athletic gloves – Not a chance.
Receiving blankets – Yep. Crib blankets – Nope.
Notebook paper – For sure. Computer paper – Not.
Scotch tape – Si si. Masking tape – No no.
Computer batteries – Yes. All other batteries – No.
Blank CD – Ok. Recorded CD – Not ok.
All-in-one printer – Yep. Copy machine – Nope. Fax machine – Nope.
Docking station – Yes. Surge protector – No.
Monitor – You’re in. Television – Sorry.
Bowling shoes, purchased – Strike. Bowling shoes, rented – Gutter ball.
Lab coat – Of course. Hard hat – Are you kidding?
Book bag – Yep. Computer bag – Nope.
Cleats – Score. Skates – Robbed.
Hat – Oui. Wig – No.
Karate gi – Ha! Shin guards – Ouch!

And really,
Bowties – Yes. Masks – No.

How Did They Derive This List?

A sales tax holiday is a nice way to give families a break and provide economic stimulus. One wonders, though, how these qualifying decisions were made. “Let’s make it necessities only.” Clearly that wasn’t it. “Only things Florida schools can use.” Snow suits rule that one out. Got any ideas? Leave them in the comments below.

Nevertheless, make your list, save up until July 24 and go to town to save 6% – 7%. Or maybe don’t go to town. Maybe work your list from your favorite special shopping chair or couch and wait for the boxes to show up. And leave something nice for the delivery driver, like, I don’t know, a lab coat. Or a sales-tax-free snow suit.

Continue ReadingWhat Does Qualify for Florida’s Back to School Sales Tax Holiday?

What’s Your Closet Type? Thrifty Penny, Generous J-Lo, Savvy Suze or Imelda Galore

What’s your closet type? Thrifty Penny, Generous J-Lo, Savvy Suze or Imelda Galore

On a 2004 visit to Ghana, a west African country, I noticed lots of people wearing second-hand Western clothes. While others donned beautiful traditional garments of their country, it was equally common to see second-hand t-shirts, khakis and jeans. The second hand clothes were sold in nearly every street market. My hosts told me these were commonly called obruni waawu, which literally means, “dead white people’s clothes.”

I understood that the clothes looked like those of white Westerners, but “Why dead?” I wondered. Before long, an answer dawned on me. Maybe to Ghanians, many of whom don’t have closets, the only reason a white Westerner would give away perfectly wearable clothes would be because they are dead. To them, clothes might be something you use up until the day they are no longer needed at all.

I don’t know if this is the actual reason, but it led me to compare and wonder how often we buy new clothes and get rid of old ones. For some, it’s quite frequent, and not so much for others. Having seen over 400 budgets in my lifetime, I’ve noticed spending on new clothes that ranged from $2,000 to $50,000 a year. But what I have not asked and do not know is, how often are the old clothes being thrown out or given away?

Money Velocity and Money Supply: Closet Velocity and Clothing Supply

There are two concepts in economics that come to mind – money velocity and money supply. Money velocity refers to how many times a dollar changes hands in an economy. There is also money supply, which is the amount of money available in an economy to be spent at any time.

Taking this to the closet analogy, what would closet velocity and clothing supply be? Let’s say closet velocity refers to how often the clothes on hand are changing. This would mean not only how often new ones are bought, but how often old ones are discarded or donated. Correspondingly, the amount of clothes we have on hand at any point in time would be our clothing supply.

Taking four combinations from these two concepts and having some fun with the names, what’s your closet type?

Closet Type: Thrifty Penny, Generous J-Lo, Savvy Suze or Imelda Galore

If you have a low clothing supply and low closet velocity, you might be a Thrifty Penny closet type. This means:

  • you have a small number of clothes that you wear until they have holes, stains, or are otherwise unusable before you replace them
  • you feel ok not being trendy
  • there aren’t a lot of choices of what to wear, and
  • you don’t require a large closet.

Conversely, if you have a high clothing supply and high closet velocity, you started with lots of clothes, are buying lots of new clothes, and are also giving or throwing away old or never-worn ones fairly frequently. This would be the Generous J-Lo closet type.

  • You have a large closet with lots of choices and
  • the latest looks, and
  • you feel ok only wearing a few items a few times, once, or never because you are going to give them away anyway.

If you have a low clothing supply and high closet velocity, you have a small, actively-traded closet. This would be the Savvy Suze closet type (after Suze Orman, who claimed to own one pair of earrings, her signature diamond studs.)

  • New clothes are entering constantly, getting worn, and old clothes are constantly going out.
  • You always look up to date from a carefully curated closet.

If you have a high clothing supply and low closet velocity,

  • you have a large closet of seldom-worn items, with plenty to choose from, and
  • not many clothes going out.

This would be the Imelda Galore closet type, as in Imelda Marcos, the in?famous Phillippine first lady with an enormous shoe collection.

What Could Closet Type Say About Your Money Attitudes?

How we spend on clothes can indicate one aspect of our attitudes about money. In her work with Money Habitudes(TM), Dr. Syble Solomon identified six primary attitudes toward money: spontaneous, selfless, targeted (as in with goals), security, free spirit, and status.

Anyone with a puritanical upbringing might see the last one – “status” – as a negative. Status is something many people want but are supposed to pretend not to, right?

Rather than taking a strictly negative view toward status, though, Solomon recognizes that status purchases like clothing are needed to help us make a good impression. However, if you tend to spend lavishly on clothes you will never wear, or spend more than you can afford for the sake of trendiness, you may have a tendency toward status overspending. Conversely, if you show up in old or frayed clothes a lot, you may have a problem with status underspending. Spending enough so you can suit up and show up when it matters, with care, fun and spontaneity, shows a healthy attitude about status spending.

What About You?

With Dr. Solomon’s more balanced view in mind, I am going to take a second look at my closet. I don’t plan on being a dead white person anytime soon, but I may find potential obruni waawu destined for Goodwill or, ultimately, Ghana.

Which closet type do you best relate to? Did you find yourself spending more or less on clothes during the pandemic? How did the pandemic change your closet? Have you changed your donation or throwing-out patterns? Leave a comment below.

For more on conscious spending patterns and balancing old with new, read Chapters 2 and 4 of The Mindful Money Mentality: How to Find Balance in Your Financial Future.

And for monthly tips on money psychology, tax savings, and good humor, subscribe to the award-winning e-letter, “The View From the Porch.”

Continue ReadingWhat’s Your Closet Type? Thrifty Penny, Generous J-Lo, Savvy Suze or Imelda Galore
Read more about the article Using A Retirement Income Buckets Approach

Using A Retirement Income Buckets Approach

buckets

Using a retirement income buckets approach: One of the most common questions financial planners receive from soon-to-be-retirees is, “What’s the safest way to give myself a paycheck once I quit working?”

The question often stems from the knowledge that needing to withdraw funds in a down market can be both ill-advised and scary.

Those who have been around long enough probably know someone who retired close to a particularly bad market year, like 2001, 2007, 2008, or now 2022. Because that someone had to, or chose to, sell some investments at that terrible time, they ended up living off of much less than they originally thought. This can be a scary thing to watch. It makes one wonder, “How do I make sure that doesn’t happen to me?”

A Buckets Approach

Enter a buckets approach to retirement income. Below is a link to a video excerpt from the online course, “Retirement Readiness,” outlining the approach in more detail. (A link to the course can be found at the bottom of this article and here.) A description for each of the buckets follows below.

https://youtu.be/mkeqzgJfeFc

Bucket 1 – Cash and Money Market Accounts

The first bucket will provide your paycheck. Here is how it works.

  1. Calculate any retirement income you will have (pension, Social Security, dividends, interest, rental property, for examples);
  2. Figure your annual recurring expenses (do not include one-time expenses such as replacing a car, roof, or paying for a special trip or wedding);
  3. Subtract 2 from 1 to come up with the difference; and
  4. Keep 1 to 2 years of that difference in Bucket 1.

For example, Justine retires at 65. She expects to live past age 82 so she is waiting until 70 to claim Social Security. She has a pension of $800/month ($9600/year). Her recurring expenses are $70,000 annually. The annual difference is $70,000 – $9,600 = $60,400. To start retirement, she decides to keep 1.5 years of the difference in Bucket 1 so $60,400 x 1.5 = $90,600. She puts that in a high-yield money market account and sets up an automatic transfer of $5833.33 monthly to her checking account. Voila – she has a new paycheck.

When she turns 70, she will collect $45,000 in Social Security. At that time the annual difference will fall to $70,000 – ($9,600 + $45,000) = $15,400. She decides to keep 2 years of the new difference in Bucket 1, so $15,400 x 2 = $30,800. She reduces the monthly transfer from the money market to $1283.33 per month.

Bucket 2 – Bonds, CDs, and Bond Funds

The second bucket replenishes Bucket 1. As the paychecks come out, the principal in the money market account will naturally decrease. Eventually it will decrease to a level that makes you say, “Yikes! I only have xx in my checking and money market.” Everyone has a different level of “Yikes.” When the balance approaches your unique Yikes level, a transfer is made from Bucket 2 into Bucket 1.

Bucket 2 is comprised of a combination of CDs, bonds, and/or bond funds. CDs and bonds have maturity dates, so they are structured in a ladder (staggered maturity dates usually 6 to 12 months apart into the future). As each one in the ladder matures, the principal is either transferred to Bucket 1, or, if Bucket 1 is comfortably above the Yikes level, redeployed into a new CD or bond with a maturity date at the end of the ladder. If bond funds are used, they are laddered according to the duration in the fund, and funds are sold as needed to replenish Bucket 1. Using bond funds is a bit riskier due to the lack of maturity dates, so at least some portion in CD and individual bonds are recommended.

Bucket 3 – Stocks and Stock Funds

Bucket 3 replenishes Bucket 2 through harvesting gains in stocks. Here is how that works.

  1. Review Bucket 3 on a regular but infrequent schedule (at most quarterly and at least annually).
  2. If there are gains, transfer those to replenish Bucket 2.
  3. If there are no gains (i.e. the market is in a correction), then do nothing until the next scheduled review.

In this way, stocks are not sold at the most inopportune time. With up to 5 years of paychecks in hand in Buckets 1 and 2, you have provided yourself a secure cushion from market corrections.

Final Notes

Whether each bucket is held in a tax-deferred account or a taxable account makes a big difference. Buckets may be spread across accounts in different combinations to minimize taxes.

You can find many varieties of Bucket approaches online. The goal of this particular Bucket approach is not to generate the best returns of any retirement portfolio ever on record, but rather to help prevent retirees from selling during downturns by providing security in Buckets 1 and 2. It works best for people who want the feeling of security from retirement income but don’ t need the high cost of an annuity to get it.

For monthly tips on retirement income, taxes, and psychology of money in retirement, subscribe to the free e-letter, “The View from the Porch, ” at https://bit.ly/3t2uwfn. And for a short online course on retirement readiness, see Simple Finance Retirement Readiness: https://bit.ly/3p3BkXE.

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Read more about the article 3 Myths About Ideal Retirement: More Than Money at Stake

3 Myths About Ideal Retirement: More Than Money at Stake

view from the porch

3 myths about ideal retirement: more than money at stake.

I knew a man who couldn’t wait to retire from his government job. With a good financial plan, a few decades of hard work and wise money decisions, he was able to call it quits at 55. Thrilled with his newfound financial freedom, he immediately took to cooking, golf, dating, traveling, fishing, and having fun. For the first few years, every time I saw him, it appeared the lifted burden of work had lightened his step and his heart.

At 65, he moved to a Florida retirement community. It’s the kind with restrictions on residents’ age (55+), house colors, landscaping, and mailbox designs. One of the few ways to stand out is by the cover on your golf cart. To outsiders, everyone looks the same, dresses the same, exercises the same, and seems to adore their life in the sunshine.

No One to Talk To?

Yet, one day on the phone he said, “Y’know, I really like talking with you. I don’t have anybody to talk to here.”

This was a shock. “What?” I said, “What about golf and pickleball friends? Aren’t there some retired CEOs, executives, people that think like you, that you have something in common with?”

“Nah,” he said, “I don’t have that much in common with anybody here.”

I thought that was crazy. He talked like them, dressed like them, shopped like them, and exercised like them. He probably was just as well off, financially, as any of them. How could he not have someone to talk to?

Unfortunately at that time, I was unfamiliar with the signs of depression. Five years later, it took his life.

Three Myths About the Ideal Retirement Life

According to Mitch Anthony, author of many books on retirement, there are three myths about the ideal retirement life.

Myth 1: “This part of my life is going to be about ME.”
Anthony says, “This is a formula for emptiness.”

Myth 2: “I am going to surround myself with people like ME.”
Anthony’s reply: “This is a formula for stagnation.”

Myth 3: “I am going to do nothing but relax.”
Anthony: “This is a formula for boredom.”

Emptiness, stagnation, and boredom don’t sound much like the ideal retirement. Yet, these three myths form the basis of a lot of financial plans.

A Mayo Clinic gerontologist told Anthony, “A life of total ease is two steps removed from a life of total disease. The first step is they get bored, the second step is they grow pessimistic, and then they get ill.”

I’m afraid that’s what happened to the man who appeared to have the ideal retirement plan, but ended up having no one to talk to.

The Dark Side of Retirement Plans

Writer Robert Laura describes the “dark side” of retirement. For some who don’t think about how to bring meaning and purpose to their life after work, serious mental health maladies like depression and addiction await. Surprisingly to some, the U.S. age group with the highest suicide rate is adults over age 75. In fact, Florida retirement communities have some of the highest suicide rates in the country.

Of course not everyone in retirement communities is depressed. It’s more common to see residents who live vibrantly, filling time with volunteering, mentoring, and close social circles. Ironically, few of these things require much money.

5 Parts to Plan For More Than Money

For those like the man above, jumping from the work treadmill onto the retirement scene with only the financial part of a plan can be risky. Instead, consider suggestions for the non-financial parts of a well-thought-out plan:

  • Ask yourself how much of your identity is tied up in what you do, rather than who you are.
  • Start creating a life to retire “to” rather than simply a job or business to retire “from.”
  • Consider gradually reducing to part time and taking extended vacations, rather than showing up one day, and having nowhere to go the next.
  • In your ideal week, identify how would you spend your time, and with whom?
  • Have a diverse social network outside of work.

The best retirement plans start with a plan for a fulfilling life first in order to match up those parts with money decisions. Many people go at it the other way around, asking “How much income can I get with the amount of money I have?” and assuming that answer will dictate their lifestyle.

That’s why good planners ask first how you want to spend your time, before asking about your money. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.

Dedication to Mental Health Awareness

Following May’s Mental Health Awareness month, every June I republish this story in memory of the man who inspired it. Retirement is a life transition that has an under appreciated impact on mental health.

Resources for Ideal Retirement Plans:

Dori Mintzer, Ph.D. has a weekly live interview series and podcast called “Revolutionize Retirement.” In it, she interviews experts on retirement life.

See, The Mindful Money Mentality: How To Find Balance in Your Financial Future (Porchview Publishing, 2013).

Sign up for a free monthly e-letter with retirement readiness tips, “The View From the Porch.”

Continue Reading3 Myths About Ideal Retirement: More Than Money at Stake

Florida’s 2023 Sales Tax Holidays

Florida’s 2023 Sales Tax Holidays. Florida sales tax runs anywhere from 6% to 8%, depending upon the county where you are making the purchase. Several years ago the Florida legislature started sales tax “holidays,” beginning with the back-to-school season.

Flush with a budget surplus again this year, the legislature passed several more holidays which begin in May. Some of them last a week, while others last up to 2 years. For a major purchase you might be considering, it pays to know the timetables.

Because the legislature waited until May 5 to pass this year’s changes, the Department of Revenue has not yet published all of the changes. Below are a few of the immediate changes as we know it from the bill passed 5 days ago.

Disaster Preparedness: May 27 – June 9 and August 26 – September 8

There has been an annual sales tax holiday for disaster preparedness for a few years now. If you are in or near Florida, and getting low on batteries, bungee cords, coolers, tarps, portable generator(s?), or several other items listed in the link below, you can save the sales tax by waiting until the week of the holiday to stock up.

In 2023, a second week has been added in late August, right before the busiest part of hurricane season.

Of note, the holiday includes all kinds of pet provisions – pet food, pet kennels, pet beds, leashes, and even pet waste disposal bags.

Also new for 2023, consumable household goods like paper goods, soap, hand sanitizer, and trash bags.

Here is the link to the 2022 list of exempted disaster preparedness items: (as of post time the updated list of 2023 items had not yet been published)

https://revenuelaw.floridarevenue.com/LawLibraryDocuments/2020/05/TIP-123007_TIP_20A01-02_FINAL_RLL.pdf

Big Deal – Home Hardening Disaster Preparedness: July 1, 2022 – June 30, 2024

This one is a bigger deal and can save major bucks. Impact-resistant windows, doors, and garage doors will be fully exempt from sales tax until June 2024.

So if you are planning a major home improvement, talk to your contractor about placing the order. On a $5,000 order, in a 7% sales tax county, that’s a $350 savings.

Unlike most of the other holidays, this exemption also applies to commercial orders.

More detail on home hardening exemptions here: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-07.pdf

Also Big Deal – Appliances: July 1, 2022 – June 30, 2023

Thinking about replacing appliances? The tax exemption was scheduled to expire in June. With this exemption you can save the sales tax on Energy Star appliances. High-end appliances are not included, and the definition of “high-end” appears to be about $1500 ($3000 for refrigerators). $1500 x 7% = $105 in possible savings.

More detail on appliance exemptions here: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-05.pdf

Fun Events, Outdoor Supplies and Annual Passes: Usually the week of July 4

This sales tax holiday began during the pandemic in 2020. Event tickets, camping supplies, paddle boards, kayaks, binoculars, grills, and bicycles are some of the larger ticket items included in the holiday.

Of note also – annual or season passes for museums, theater series, ballet, and state parks.

New for 2022: pool supplies and parts. Stay tuned for 2023 changes

The complete list for events and supplies during “Freedom Week” is here: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-04.pdf

Children’s Diapers, Clothing and Shoes: July 1, 2022 – June 30, 2023

This has been proposed but blocked in the past. Finally parents and guardians of young kids got a little relief in 2022.

But this is one of two holidays (the other being back-to-school) where the state outlines what is excluded, in addition to what is included. And, as I wrote in 2021, the inclusions and exclusions aren’t always easy to guess.

What constitutes “clothing” and “shoes” for this holiday for toddlers and babies? A few head-scratchers:

Snow ski boots – Yes; Fishing boots/waders – No

Snow ski suits – Yes; Skin diving suits – No

Hunting vests – Yes; Life jackets – No

Garden gloves – Yes; Bicycle gloves – No

Click for the complete list of diapers, clothing and shoes: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-06.pdf

Back-to-School: Usually late July – early August

See 2022’s complete back-to-school list: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-08.pdf

Labor Day/Skilled Workers

Larger-ticket items on the “Tool Time” holiday include power tools under $300, power tool batteries, toolboxes, and work boots. It also includes shop lights, plumbing tools, and duffle bags.

More detail on “Tool Time” exemptions from 2022 here: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-09.pdf

A Lack of Preparation Story

During Hurricane Irma in 2017, the middle of the spaghetti models 5 days out showed the storm was likely going up Florida’s east coast. This is the opposite coast from where we live. My husband and I got double-busy with clients who wanted to squeeze in appointments before it hit. We got caught up in the work and ignored our own preparations. I didn’t fill up my car, and we didn’t check our stock of Coleman stove propane canisters. By the time the forecast shifted, there was no gas to be found – for the car, for the stove – of any kind, anywhere.

Irma left us without power for 7 days. Cooking on a tiny charcoal grill in the backyard got old quickly. After 3 days, when the charcoal started getting low, the temperature inside climbed to 83 with humidity of 100, and the frozen fish was rotting, we called it quits and found a hotel with electricity that had managed to reopen.

For a Florida native, experienced with hurricanes, whose job title includes the word “planner,” it felt like I should have done better.

Lesson Learned

For Ian in 2023, I paid more attention to all the strings on the spaghetti model, not just the ones in the middle. We stocked up, and I evacuated to a location outside of the projected storm surge zone. Although we ended up safe from storm surge, it was nice to feel better prepared this time around.

The sales tax waiver was a nice nudge for procrastinators like me. Disasters of all different sorts happen. Take advantage of the holidays to prepare yourself, and enjoy a little inflation relief.

Have you found a great deal using a sales tax holiday? Please share by leaving a comment.

Continue ReadingFlorida’s 2023 Sales Tax Holidays