CFP

Reminders Before You Click “Renew” on Insurance and Benefits

Reminders before you click "renew" at enrollment time. When it comes to employer, private health, and Medicare benefits, it's easy to click "renew last year's choices" and move on. However, it can be worth the extra time to look closely at all options, and how they might have changed. Consider this amusing statistic: "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. What kind of areas produce tricky choices? Health Insurance - Under 65 and over 65 Long term care insurance - if you can get it Long term disability insurance Life insurance Employer Stock Options and Restricted Stock Employer Retirement Plan Matching Employee Assistance Programs - (which sometimes cover financial planning fees :)) 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 can increase 8% – 10% per year, permanently. 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 have access to a group policy, strongly consider enrollment. Most group policies are portable if you leave the employer, or if the employer stops offering it. Also consider shopping existing group coverage against a private policy. Long-Term Disability This tends to be the most overlooked benefit. 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. Most employees I speak with are either not sure whether they have enrolled in this coverage, or how much they have. Additionally, check whether…

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“Do I Need a Trust?” 7 Considerations

“Do I need a trust?” 7 considerations: 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 think of a few reasons why you might, and others why you might not. 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…

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Read more about the article Good Retirement Planning Involves More than Money

Good Retirement Planning Involves More than Money

The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. 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.

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What is This Tax Form Arriving in May?

What is this tax form arriving in May? You just gathered all your forms two months ago and now a new one arrives after the deadline. What gives? Do you have to call your accountant again? Hold the calls. You may remember reporting to your accountant (or TurboTax) that you made some contributions to a Health Savings Account (HSA) or Individual Retirement Account (IRA). Perhaps you made them last year, or perhaps you made them before this year's deadline and had them count for last year. Or, you took money out of these accounts, or are getting ready to start your required minimum distributions (RMDs). These are reasons why you are receiving Form 5498. What's Form 5498 for? One purpose of the Form 5498 is for the financial institution that holds your account (called a “custodian”) to verify to the IRS that you did indeed make the contribution that you claim you did on your tax return. Since everyone usually has until the tax filing deadline to make contributions, the IRS gives custodians until May 31 to send Form 5498 to account holders. 2. Another is to verify distributions. If you are over the age for required minimum distributions (RMDs), Form 5498 also tells the IRS what your RMD will be for the current year. The RMD is determined by the account balance on December 31 of the previous year. What you need to do: Check that what's reported on the form matches up with what actually happened and also with what you actually reported on your return. Check Form 5498 For Errors Seriously, make sure it’s correct. Mistakes are common. In 2018, my husband and I both received erroneous 5498’s for our Health Savings Accounts (HSAs). Mine showed $0 contributions for 2017 and his showed 2 years’ worth. What the....? So we called the bank, got the records straight, and had them send corrected 5498s to the IRS. Why go to the trouble? If your 5498 contribution or distribution differs from what you reported on your 1040, at some point it could get noticed. One fantastic sunny day after skipping down to your mailbox, you may find inside a skinny white envelope with “Internal Revenue Service” in the return address. Fantastic day ruined. More than likely, all the letter will say is, “Hey, we noticed your 5498 doesn’t match your 1040. Whassup?” But still. It will be in IRS-Speak and look and sound and feel serious, with a deadline for giving them an answer. Save yourself the trouble of having to answer (or pay your accountant to answer for you) and do a quick check now. It only takes a few minutes. Does your contribution amount for last year look correct? Did you take any HSA or IRA distributions, and if so, do those look correct? (If not, make sure the distributions say $0.) Does the reported year-end account balance look accurate? Is your SSN correct? How about your name, including your middle initial? If anything looks amiss, contact…

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Fall Benefits Reminders Before You Click “Renew”

Fall benefits reminders before you click "renew." When it comes to employer, private health, and Medicare benefits, it's easy to click "renew last year's choices" and move on. However, it can be worth the extra time to look closely at all options, and how they might have changed. Consider this amusing statistic: "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. What kind of areas produce tricky choices? Health Insurance - Under 65 and over 65 Long term care insurance - if you can get it Long term disability insurance Life insurance Employer Stock Options and Restricted Stock Employer Retirement Plan Matching Employee Assistance Programs - (which sometimes cover financial planning fees :)) 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 can increase 8% – 10% per year, permanently. 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, or if the employer stops offering it. Also consider shopping existing group coverage against a private policy. Long-Term Disability This tends to be the most overlooked benefit. 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. Most employees I speak with are either not sure whether they have enrolled in this coverage, or how much…

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Read more about the article 3 Myths About Retirement Life: There’s More Than Money at Stake

3 Myths About Retirement Life: There’s More Than Money at Stake

The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. 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.

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What is this IRS Form 5498 Arriving in May?

What is this IRS Form 5498 arriving in May? You just gathered all your forms two months ago and now a new one arrives after the deadline. What gives? Do you have to call your accountant again? Hold the calls. You may remember reporting to your accountant (or TurboTax) that you made some contributions to a Health Savings Account (HSA) or Individual Retirement Account (IRA). Perhaps you made them last year, or perhaps you made them before this year's deadline and had them count for last year. Or, you took money out of these accounts, or are getting ready to start your required minimum distributions (RMDs). These are reasons why you are receiving the form. What's Form 5498 for? One purpose of the Form 5498 is for the financial institution that holds your account (called a “custodian”) to verify to the IRS that you did indeed make the contribution that you claim you did on your tax return. Since everyone usually has until the tax filing deadline to make contributions, the IRS gives custodians until May 31 to send Form 5498 to account holders. Another is to verify distributions. If you are over the age for required minimum distributions (RMDs), Form 5498 also tells the IRS what your RMD will be for the current year. The RMD is determined by the account balance on the final day of the previous year (December 31, 2023 for 2024). What you need to do with the form is check that what's reported on the form matches up with what actually happened and also with what you actually reported on your return. Check Form 5498 For Errors Seriously, make sure it’s correct. Mistakes are common. In 2018, my husband and I both received erroneous 5498’s for our Health Savings Accounts (HSAs). Mine showed $0 contributions for 2017 and his showed 2 years’ worth. What the....? So we called the bank, got the records straight, and had them send corrected 5498s to the IRS. Why go to the trouble? If your 5498 contribution or distribution differs from what you reported on your 1040, at some point it could get noticed. One fantastic sunny day after skipping down to your mailbox, you may find inside a skinny white envelope with “Internal Revenue Service” in the return address. Fantastic day ruined. More than likely, all the letter will say is, “Hey, we noticed your 5498 doesn’t match your 1040. Whassup?” But still. It will be in IRS-Speak and look and sound and feel serious, with a deadline for giving them an answer. Save yourself the trouble of having to answer (or pay your accountant to answer for you) and do a quick check now. It only takes a few minutes. Does your contribution amount for last year look correct? Did you take any HSA or IRA distributions, and if so, do those look correct? (If not, make sure the distributions say $0.) Does the reported year-end account balance look accurate? Is your SSN correct? How about your…

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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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A CFP® Wrote a Bad IRS Check

A CFP® wrote a bad IRS check. That would be me. Yes, I bounced a check to the IRS. Accidentally, of course, but still. Behind my name are the initials "CFP," for CERTIFIED FINANCIAL PLANNER™, so supposedly I'm some kind of financial expert. And yet, I did a very un-expert thing that even most financial non-experts do not do. Brain Fog The bad check was written in April 2014. The tax year in question was 2013, which was the same year I got an unexpected biopsy (which came out clean after several weeks), an unexpected audit by state regulators (which came out clean after several weeks), and an unexpected divorce (which took "only" several weeks and much of it wasn't clean). All of these - the biopsy, the audit, and the unexpected divorce - happened between August and November. If you've ever been through one or more of the above, perhaps you can relate to the feeling of going through the rollercoaster of life, trying to act like a rational person, but constantly getting hijacked by these human things like emotions. Wishing you could concentrate better, focus like you used to, but the brain just won't cooperate. I wasn't aware I was in that much of a fog. I thought I was keeping it all together pretty well, considering. Until the IRS notice showed up. "Check Payment Not Accepted By Bank: The bank did not accept the enclosed check for the following reason: INSUFFICIENT FUNDS. Please return the bottom portion of this form with a certified check...The PENALTY amount is...The current Interest Charge is..." Shock and Shame "Wut?" I thought. My first reaction was to get mad at the bank. It only took a few minutes, though, to research there was no mistake. Shock, embarrassment, humiliation, shame. My jaw and knees dropped to the floor simultaneously. I bounced a check to the IRS?!? That's when it dawned on me that the events of 2013 were still affecting me or I wouldn't have written a check on one of my new post-divorce checking accounts without putting any money in it first. So, the next paragraph caught my eye. "You can request penalty relief by explaining why you believed the bank would accept the Check and by providing any supporting evidence." My backbone straightened up. Although it was not the bank's error, I needed to plead my case to keep my sanity. Making the Case for Penalty Relief It turns out the IRS (back then) would seriously consider applications for relief, although that doesn't mean they will grant them. First, I immediately deposited more money in the account and had the cashier's check, including the penalty and interest, sent. Then, I sat down to write to the human who would be reading my request. I crossed my fingers that it would be a 40- or 50-something who had been unexpectedly divorced after a 20+ year marriage and perhaps had a biopsy scare plus an audit of some kind. I fell on my…

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Retired Husband Syndrome (RHS)

What is retired husband syndrome (RHS)? I first heard of Retired Husband Syndrome 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 the back, flip to the front, open to the table of contents, flip to the back, flip it 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 got 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, (which, considering English was his second language, might explain why he took longer examining the book). He said that he thought the 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 financial planner say, “We spend…

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