Organizing Finances

Graduation Gift Idea: Legal Documents

Graduation gift idea: legal documents. What's the best graduation gift idea for an 18-year-old? Legal documents! They're not quite as bad as coal in a Christmas stocking. But not quite as much fun as a MacBook Air, either. Think about it - an 18-year-old is a legal adult.   “What this means to each of us is the only individuals that can make financial or health care decisions for us are the individuals we legally appoint.  Mommy and Daddy are no longer the legal guardians,” says Clearwater, Florida attorney Linda Chamberlain in her own blog post on the topic: The Best Gift for the Graduate. But They Don't Own Anything! You might say, "But my 18-year-old doesn't own anything. Why do they need a will?" Other documents become important upon reaching adulthood. For 18-year-olds who don't own anything, they still have rights, such as: to private medical records, to make their own health care decisions, to sign their own lease or to open, close or pay bills on a bank account. If the young adult is incapacitated, parents can no longer legally do those things for them. One worst-case scenario is an accident where the young adult is hospitalized. This is when documents like: a HIPAA designation (allows consent to share medical records), Health Care Surrogate (consents to have health care decisions made), Durable Power of Attorney (for managing money and accounts), and Living Will could be crucial. A financial planning colleague in California shared a wild example: A couple's son attended college in Arizona. The son was in an accident with his girlfriend. The girlfriend was ok but the son was in serious condition. In the time it took for the parents to get to Arizona, the son gave the hospital staff permission to share his medical information with the girlfriend, but did not name (or was not asked about) the parents. He went into surgery and when the parents arrived, the staff would not immediately share information about his condition with them, but would do so with the girlfriend. So the parents had to ask the girlfriend for information about the condition of their own son. Ask Your Own Attorney In Florida, most estate planning attorneys will provide a set of documents for a young adult for a small flat fee, especially for children of their established clients. If it's about time to get your own set of documents reviewed (every 3 - 5 years is good), ask your attorney about preparing a simple set of documents for your adult child. Or, check your local estate planning council directory, or ask your professional advisors for referrals. What other financial concerns might you have for someone becoming a newly-minted adult? Comment below or schedule a call with the online calendar button at our page: Contact.

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New Year: What’s In Your Notebook?

It's a new year: what's in 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 (Kate Hufnagel, the Digital Wrangler, calls this "Your Person") 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. 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 Your Person who is handling things. What Goes in the Notebook? In essence, the Notebook is a central place you keep information that Your Person 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 advisor 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…

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Graduation Gift? How About Legal Documents?

Graduation gift - How about legal documents? Arguments have been made that a set of legal documents are the best gift for a high school graduate. Now that's not quite as bad as coal in a Christmas stocking. But not quite as much fun as a MacBook Air, either. . Think about it - an 18-year-old is a legal adult.   “What this means to each of us is the only individuals that can make financial or health care decisions for us are the individuals we legally appoint.  Mommy and Daddy are no longer the legal guardians,” says Clearwater, Florida attorney Linda Chamberlain in her own blog post on the topic: The Best Gift for the Graduate But They Don't Own Anything! You might say, "But my 18-year-old doesn't own anything. Why do they need a will?" There are other documents that become important upon reaching adulthood. For 18-year-olds who don't own anything, they still have rights, such as: to private medical records, to make their own health care decisions, to sign their own lease or to open, close or pay bills on a bank account. If the young adult is incapacitated, parents can no longer legally do those things for them. The most common worst-case scenario described is an accident where the young adult is hospitalized. This is when documents like: a HIPAA designation (allows consent to share medical records), Health Care Surrogate (consents to have health care decisions made), Durable Power of Attorney (for managing money and accounts), and Living Will could be crucial. In Florida, most estate planning attorneys will provide a set of documents for a small flat fee, especially for children of their established clients. Ask your attorney, check your local estate planning council directory, or ask your professional advisors for referrals. Contact us if you need referrals for Tampa Bay area attorneys or if you have other financial concerns for someone becoming a newly-minted adult. Schedule a call with the online calendar button at our page: Contact.

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New Year: What’s In Your Notebook?

It's a new year: what's in 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 (Kate Hufnagel, the Digital Wrangler, calls this Your Person) 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. 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 Your Person 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…

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Roth: To Convert Or Not To Convert

Roth: to convert or not to convert. Converting to a Roth IRA might be worth consideration if you have been saving for retirement in a traditional IRA (TIRA) As you may know, when it's time to take the money out of your TIRA, you will owe tax on the amount you withdraw (called a "distribution"). So when you think of the balance in your TIRAs, give that number a haircut of 10% - 40% (using current tax rates) that will be sent to Uncle Sam. Further, when you reach age 73 or 75 (depending on your birth year) whether you need money or not, you will be required to take an IRS-calculated required minimum distribution (RMD). The RMD income can push you into the next tax bracket or, more commonly, into a higher bracket for Medicare premium surcharges. Surcharges mean you could pay up to several hundred dollars more per month for Medicare. Finally, if you are married and leave TIRAs to your spouse, he or she must eventually take RMDs. When they start filing as single the year after you die, there is a greater likelihood the RMD will push them into the higher income tax or Medicare surcharge brackets. Review of Roth Advantages Roth's have several advantages over traditional retirement accounts (TRAs). 1) When you think of the balance in a Roth IRA, there is no tax haircut. Money in a Roth grows tax-free forever. That's a bigger balance to spend on world cruises, grandchildren, or a Winnebago. 2) Your heirs will have to withdraw the Roth money if you don't, but they won't owe tax then, either. 3) Roths have no RMDs. So that might save you from Medicare surcharges and other additional taxes such as the Net Investment Income tax (NIIT). 4) If you are married and die before your spouse, your spouse will not have to take RMDs from them. 5) If you have a trust, it may be much more beneficial to leave a Roth to the trust than a TIRA. Ask your CPA or tax attorney about this one. What's the Catch with Roths? What's the catch? The amount of TIRA that you convert to a Roth gets taxed in the year you make the conversion. If you convert $100,000 this year, that's $100,000 added to your income. So if you are still working, and you convert some or all of your retirement money to a Roth, you will be paying tax on the converted amount at today's tax rates, hoping/betting that the growth in the Roth will make the extra tax bite today worthwhile later. For the hope/bet to have the best chance to work, a few things help: - You expect to be in a the same or higher tax bracket after you quit working. Otherwise you could wait and pay less tax on the conversion at a lower tax bracket later. - You don't expect to need the money in the Roth for many years. To reap the biggest benefit,…

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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…

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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…

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Read more about the article Using A Retirement Income Buckets Approach

Using A Retirement Income Buckets Approach

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. Calculate any retirement income you will have (pension, Social Security, dividends, interest, rental property, for examples); 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); Subtract 2 from 1 to come up with the difference; and 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…

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As a Child-Free Elder, Who Will Be On Your Team?

“Who will take care of you when you’re old?” someone once asked me when I told her I had no children. It seemed like an old-fashioned kind of question. Nevertheless, it caused a mini panic attack. Knowing the statistics, I had made the vague assumption that I would need to make arrangements for care, but something about her question made that statistical probability more real. About 14 percent of 40- to 44-year-old women had no children in 2018 – up from about 10 percent in 1980, U.S. Census data shows. This is and will be an issue for millions of Americans. As anyone who has served as a caregiver knows, there are four main questions to ask from the beginning. Answering these can lead to the formation of an elder care support team. The team members may come from two areas - friends and family, professionals, or both. Where will I live? Who will make medical decisions for me? Who will handle my finances? How will I get transportation? Team Member 1: Where will I live? The first part of figuring out the team is to know where you will be living. The vast majority of Americans want to age in their homes. For some people that home might be the place they have lived for several decades. If so, then the team member will likely be a home health care company. For others, home might be a place they move to - with a supportive community, but not a facility (perhaps at first). If that's you, building a network of friends and professionals in the community can be one of the best ways to reinforce your support team. Although it's not in many people's plans, sometimes aging at home isn't an option. For people aging without children, it's more important to get to know assisted living and continuing care facilities, and figure out how you would pay for them. (For myself, I purchased a traditional long-term care policy. But that doesn't mean that is the right solution for everyone.) Team Member 2: Who will make medical decisions for me if I can’t? Preferably someone close by. Ideally this person could be available at a moment's notice and will not have to travel far to attend appointments with you. Having a strong primary care physician relationship is also highly beneficial. Some doctors, especially those who specialize in concierge medicine, can and will serve as your legal health care surrogate. Team Member 3: Who will handle my financial affairs? Many attorneys recommend having a different person named for financial matters than for health care decisions. As aging progresses, it's a lot to ask of one person to handle bill paying, money management, and doctor appointments (as anyone who has served as a sole caregiver can attest). Money management involves several duties. To name a few, Paying bills and making renewal decisions (such as memberships, subscriptions, and/or insurance policies) Making gifts Making transfers between accounts, such as taking IRA withdrawals Managing investments…

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