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Financial Symmetry: Balancing Today with Retirement

When considering retirement, do you wonder what financial opportunities you may be missing? Busy lives take over and years pass without taking advantage. In this retirement podcast, Chad Smith and Mike Eklund unveil financial opportunities, to help you balance enjoying today so you are ready to retire later. By day, they are fiduciary fee-only financial advisors who answer questions about tax savings, investment decisions, and how to save more. If you’ve been putting off your financial to-do list or are just not sure what you’ve been missing, subscribe to the show and learn more at www.financialsymmetry.com. Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for over 20 years.
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Jun 29, 2020

No one can argue that the stock market has been tumultuous lately. During times of market uncertainty, investors seem to become even more certain about their predictions of the next stock market moves. 

Short YouTube Recap: https://youtu.be/ShmeDGPQ3l4

As people make these predictions over time the stakes get bigger and bigger. Listen to this episode to hear what steps you can take to fight this prediction hubris. 

Wealth isn’t determined by investments selected but by investor behavior

When markets become more volatile, the desire to control our outcomes becomes stronger. Our instincts pressure us to make predictive moves of what we feel is going to happen. This is when the ability to stay disciplined can have the biggest impact.

Otherwise, we find ourselves sweating out extreme buy and sell decisions that could cause you to miss the biggest market moving days. There was a good chance of this with our latest examples over the last 3 months, when you saw 3 of the worst 25 single day losses and 2 of the largest 25 day gains, happened in the S&P 500.

This is why we created a thought exercise to help you reflect on your investment strategy during times of market stress. We’re calling it the “R” Plan, where we provide five steps to fight the inevitable prediction hubris that occurs during these periods.

 The R plan 

  1. Remember your past predictions. Think about the predictions that you made over the past few months. How did those turn out? Do you remember that overwhelming fear we all felt in March? Do you remember 2008? How about the tech bubble? How did your stock market predictions turn out during those tricky times?
  2. Regret - The decisions you make in the short term can have a big impact on your long-term wealth. The day to day swings can be huge when the market is volatile. Retirees often feel that they don’t have the time or ability to make up for losses and many decide to sell and flee to the safety of cash. But deciding not to ride the wave can lead to serious regrets. 
  3. Resilience - We often forget how resilient the stock market is over time. People don’t acknowledge the fact that stock market declines are always temporary and that they advance 75% of the time. It’s also good to remember that bear markets are shorter than bull markets. Declines are temporary but gains are permanent
    1. Be more conservative if you are uncomfortable with the thought of losing half of your asset value.
    2. Diversify - we may have mentioned this a few times before.
    3. Hire a professional an investment planner as well as a financial planner
    4. Consider all your options
    5. Implement an investment strategy based on your financial goals
  4. Review - When markets are volatile take the opportunity to reflect on your portfolio. Think in dollar figures rather than percentages to make potential losses more real to you. Consider these tips as you review your portfolio
  5. Reward - Staying invested in a balanced portfolio with equity exposure has provided long-term rewards. Also, returns are strongest after the steepest declines. Sticking through the rough periods to get to the rewards is the hard part. Because it’s rarely a smooth ride. Returns in any given year have ranged from as high as 54% to as low as -43%. In fact, the S&P 500 had a return within plus or minus 2% points of this 10% average in only 6 of the past 94 calendar years, according to Dimensional research.

Resources

Outline of This Episode

  • [2:06] How can you fight against your instincts of making predictions?
  • [7:04] The decisions you make in the short term can have a big impact
  • [10:21] The stock market is resilient
  • [14:54] Tips to fight stock market worry
  • [20:54] Focus on the reward

Connect With Chad and Mike

Subscribe To This Podcast

Jun 15, 2020

Special needs financial planning is an intricate and delicate process.

Youtube Recap Here: https://tinyurl.com/y7wchxee

A process loaded with challenging emotional and financial decisions. So below we provide 4 steps to think through if planning for your special needs loved one’s future.

More than 40 million individuals or about 10% of total American population are living with a disability according to the US Census. This takes a careful planning approach to assure needs are met.

More Detail Here: https://bit.ly/2BbvxLv

Summary

  • Approach – Highlighting the importance of constructing an experienced team to help guide families through the special needs planning process
  • Benefits Available – What governmental benefits and programs are available to my special needs loved one now and as they age?
  • Consider Your Estate Plan – What steps should be taken to align your estate plan to provide ample financial support to your special needs loved one while making sure their benefits are not negatively affected.
  • Develop Your Savings Strategy – What accounts are available for special needs individuals and which are the best fit for your situation
Jun 1, 2020

In times of crisis and uncertainty, the potential need to access our savings seems to rise to the forefront. However, many of the accounts that we utilize for our savings are tied to certain restrictions. For example, the age 59.5 restriction for retirement account withdrawals without facing a 10% penalty, or HSAs and 529 accounts which must be used for medical expenses and education expenses respectively. These unique accounts are great tools to efficiently invest our savings given the tax deferred or tax-free growth. The issue though is what happens when we need funds to cover items that don’t meet the parameters and restrictions set forth by these accounts.

COVID-19 has me pondering my own finances and how well equipped they are to be flexible in times of need. These circumstances we’re in have produced many implications to our finances and society with a big one being the impact of education from pre-school age all the way through college.

We’ve seen a shift to more online educational resources in recent years and this has only escalated with the impacts of COVID-19. College students have spent the better part of their spring 2020 semester living at home and completing their coursework online. While certainly not the college experience these students anticipated, they’re still able to receive a quality education without the cost of living in a dorm room on campus or 3+ meals per day at the campus dining hall. We’ve even seen some refunds returned to students which if were withdrawn from a 529 account originally, then that money needs to go back into the 529 account to avoid taxes/penalties.

So what does this mean for our college savings strategy? For my two 2.5-year-old boys I’ve been saving monthly in a 529 account since they were born with intention to provide a portion of their college education from the 529 account. However, I’ve reconsidered this strategy this week and am shifting to utilizing a couple other accounts for their future savings. At Financial Symmetry we had many discussions with clients about not over-funding college savings accounts given the high taxes and penalty if not used for education along with discussions about savings for the parents own retirement and financial independence.

Roth IRA

A great savings tool as the contributions can we withdrawn at any time tax-free, and the earnings grow tax free and can be withdrawn after age 59.5. This is the primary account I’ll now be using for future education needs for my twin boys as I’ll be able to withdraw the contributions for the education if needed. If for whatever reason they don’t need those funds for college then no worries as I can retain the Roth IRA for my own future financial needs. With a 529 plan though, I wouldn’t be able to do that as those funds would be restricted to education expenses.

Brokerage Account

I ran the numbers on the actual advantage 529 accounts do provide. Say my monthly contributions add up to $15k and earn $5k over the years to equate a $20k balance. Those earnings would be tax free in a 529 account for education expenses. If those funds were instead in a taxable brokerage account and assuming a 22% federal tax bracket this would be $1,100 of tax due on those earnings. You must weigh the flexibility of a non 529 account vs. the tax savings it can provide. Also consider that with proper tax planning in a brokerage account could mean even less taxes due given accessibility of tax efficient funds, tax loss harvesting, donating earnings to charity as ways to lower that tax bill.

So who should use a 529 account?

  • For those that already are maxing Roth IRA contributions, contributing a large amount to 401ks, and maxing HSA contributions.
  • Those who exceed the AGI limitation of Roth IRAs and are unable to utilize the back-door Roth strategy
  • High probability of attending private grade school as 529 accounts can now be used for earlier education than college.
  • If grandparents or others are making gifts to the child, then a 529 account is still a great vehicle to receive those gifts.
  • If you live in state with tax deduction for 529 contributions (North Carolina does not offer this).

Certainly nothing wrong with using a 529 account as you’re still saving for your children’s future needs, but just consider there are other vehicles that may be more appropriate given your financial situation. Also, depending on your financial situation there are other factors to consider such as financial aid.

Resources and Other Podcast Episodes

Best Tips for Your Young Child’s College Savings

Great Options to Save for Your Child’s College Education

Tax Breaks and Loan Options to Pay for College

My Best Spring Break Ever (The Cost of College)

College Planning Night

 7 Ways to Use Your 529 Plan

May 18, 2020

Why is the stock market doing so well when the economy is not?

Short Youtube recap here: https://youtu.be/QubNZjHHN04

With headlines about skyrocketing unemployment and an impending recession, how has the stock market rebounded so quickly? Despite the historic drops in March, the S&P 500 is only hovering in a range 10-15% from its overall highs. While the stock market and the economy are influenced by each other, there are key differences that emerge during market extremes.

The economy has taken a beating

We have all heard the negative news surrounding the economy. It seems to be one of the only topics that news channels talk about. GDP declined 5% in the first quarter and is expected to decline by 20-30% in the second quarter. Unemployment has shot up at a historic pace from 5% to 15% in just a few short months. However, the Federal Reserve and the CARES Act have helped keep people and companies on their feet.

Why is the stock market doing so well?

The stock market went through record-setting drops back in March but since then it has bounced in the 35-40% range off the lows. We are still nowhere near the all-time highs that preceded those March declines, but the S&P 500 continues to rise and has been trading in a range 10-15% below it's all time highs reach in February. This creates confusion for most in the face of terrible economic headlines. One reason is that companies and investors are constantly looking at what is to come. They aren’t making decisions based just on the next 6 months, instead, they are projecting the growth over the next 5-10 years. It’s also important to remember that for every distressed seller there is a buyer. Investors are considering their bets for the future and if they anticipate we've seen the worst, then better than expected potential outcomes can drive stocks higher.

The stock market recovers before the economy

Historically, the stock market tends to make a recovery before the economy. For example in 2009 the stock market hit its bottom in March, but the country continued in its recession until the second half of that year. World War II is another example. The stock market was up every year during that period, despite all the turmoil going on in the world and the restrictions that were put in place by the war.

What will happen in the stock market going forward?

Well, unfortunately, we don’t have a crystal ball. But there are plenty of opinions you can find from watching the headlines or talking to your neighbors. This type of information can be detrimental not only to your mental state but also to your pocketbook. Allowing your emotions to take the investing wheel, can leave you second-guessing your investment strategy. In fact, the next time you want to look at your investment statements, we'd suggest opening your financial plan instead. You’re better off focusing on what you can control, like your risk tolerance, your rate of saving and spending, and your tax situation. Evaluating how your personal economy has changed, can leave you better positioned for the long-term. This allows you to have the appropriate investment allocations, so your worry can be abated, no matter how wild the stock market or economy gets in the short-run.

Outline of This Episode

  • [1:27] Investments, forecasting, and good investments strategy
  • [5:14] The stock market looks forward
  • [6:24] What will happen with the economy and the stock market going forward?
  • [9:09] The stock market doesn’t trade on good or bad, simply better or worse
  • [11:43] Focus on what you can control

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

May 4, 2020

Today we're taking a deep dive to explore the retirement changes within this landmark piece of legislation. On this episode, you’ll learn what CRD’s are, who are qualified individuals, and how to note CARES Act withdrawals on your tax return. Join us to hear about financial opportunities that you may not have considered.

Short Youtube video recap: https://youtu.be/2QjSpi3op_U

What is the purpose of the CARES Act?

The CARES Act was recently passed to help Americans get through this difficult time that has been filled with job losses, furloughs, lay-offs, and the mandatory closing of workplaces. The goal of the new law was to make it easier for citizens to access their money during these stresses. The CARES Act makes retirement account withdraws easier and more accessible without the standard early withdrawal penalties.

What are Coronavirus Related Distributions (CRD’s)?

Coronavirus related distributions or CRD’s allow for qualified individuals to take up to $100,000 from their retirement accounts during the period of January 2020 to January 2021. This withdrawal for qualified individuals is taxable but you can pay the taxes on these withdrawals over a period of 3 years. It’s easy to remember what the CRD’s offer by thinking of the 3 R’s. 

  1. Relief - The CARES Act offers relief from the standard 10% penalty when you pull money from an IRA or 401K.
  2. Repay - You can repay the withdrawals over a 3 year period. 
  3. Regimented - The taxes from these withdrawals are regimented and can be paid over a 3 year period. 

Who are qualified individuals?

The CRD’s are only available to qualified individuals, but who exactly can qualify for these withdrawals? You can qualify if you or your spouse has been diagnosed with COVID-19 or if you have experienced a loss of income during this time. You may have experienced a job loss, a reduction of hours, or an inability to work due to lack of child care. If you do qualify for a CRD you’ll want to examine all of your options before you make this choice. Make sure to work with a professional to see if this is the best choice for you. 

This year you do not have to take an RMD

The government doesn’t want to force you to sell your stocks at lower prices, so for 2020 RMD’s will not be required for anyone. If you have already taken your RMD for the year you can even pay it back. Listen in to learn how. Instead of taking your RMD, you may want to consider doing a Roth conversion. 

Outline of This Episode

  • [1:27] $100,000 withdrawal for qualified individuals
  • [4:46] Examples of how to use your withdrawals
  • [5:55] Who are qualified individuals?
  • [8:00] This year you do not have to take an RMD
  • [13:10] Make sure to note the CRD on your tax return

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apr 20, 2020

Today we explore some of the most common questions that people ask during a market decline. We discuss what a financial advisor does and doesn't do for their clients in bear markets, whether you should refinance, and the benefits of tax-loss harvesting. Listen in to hear what you could be doing to stay proactive during this market decline. 

Youtube recap here: https://youtu.be/QUCpQcf2vu8

What are the benefits of working with a Financial Advisor during a Stock Market Decline?

Financial advisors can be a great resource during a stock market decline. The fear you feel in these situations can be paralyzing. If you don’t have a financial advisor to help you act in your best interests, you may end up not taking any action at all. So what are some things a financial advisor can do for their clients during these challenging times? 

  • Creating a financial plan and an investment plan. You need to know what your strategy is and why you are investing. Not having a plan is putting yourself at too much risk. Listen to the wise words of Warren Buffett, “risk is not knowing what you are doing.”
  • Rebalancing. When the market takes a dive, it could be an excellent time to rebalance your portfolio.
  • Tax-loss harvesting. Nobody likes to pay taxes and tax loss harvesting is a great way to minimize your current and future taxes. 
  • Help avoid making irrational decisions. It’s hard not to sell when the market drops 10% in a day or 30% in a month. A financial advisor can help talk you down off of that cliff and show you the light

Should I Refinance my Home?

One way to give yourself a bit of control during times when life is feeling out of control is to consider refinancing your home. Since mortgage rates have declined in recent months now may be the right time for you to refinance. You’ll want to analyze what your break-even point is to see if it is worth it. There are many different ways you can go about refinancing. You could use a mortgage broker, you could go through your own bank, or you could use an online mortgage lender. Listen in to hear the differences between those 3 options. 

What is Tax-Loss Harvesting and why is it important during a market decline?

We all feel the urge to do something right now. But instead of doing something that could be detrimental to your wealth, tax-loss harvesting can give you the opportunity to do increase your wealth over time. The biggest question we hear surrounding tax-loss harvesting is why would I want to lock in losses? The answer is don’t think of it as a loss, but an exchange. You are taking that loss to reinvest in something similar. Look at tax-loss harvesting as a one way to help you rebalance. Find out if tax-loss harvesting is right for you by listening to Allison Berger’s excellent analysis. 

Outline of This Episode

  • [0:27] Should I use a financial advisor during a market decline
  • [4:50] Should I refinance my home?
  • [8:36] What is tax-loss harvesting?

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

 

Apr 6, 2020

The CARES Act was just recently passed and the new law will impact just about every American. But do you know how it will affect you?

View Youtube recap here: https://youtu.be/BTaeWH0aEB0

On this episode of Financial Symmetry, Grayson Blazek joins me to give you some actionable information that you can use to help you consider how best to take control of this challenging financial situation. During this stressful time, it will be helpful to learn as much as you can to give you a feeling of empowerment.

Who is eligible for the recovery rebate? 

The most discussed part of the CARES Act is the recovery rebate. The full rebate is eligible for taxpayers that make $150,000 or less when filing jointly with their spouse or $75,000 for single filers. If you make more than that you can use a calculator discover how much you will receive. The full rebate is a one-time payment of $1200 per adult and $500 per qualifying child. The recovery rebate will be directly deposited into the bank account listed on your most recent tax return. Listen to this episode to hear if you should file your taxes right away or if it would be best for you to wait a bit longer. 

What happens if you or your income is impacted directly by Coronavirus?

If you have been impacted directly from the Coronavirus directly or if you have experienced lost wages then you will be able to pull funds out of your retirement accounts in the year 2020 without the usual 10% early withdrawal penalty. These funds will still be taxed, but you can spread the tax burden over a period of 3 years if needed. The CARES Act also changes the maximum 401K loan limit from $50,000 to $100,000. You’ll want to carefully consider before taking the full loan amount. 

What else did the CARES Act change?

There were several other changes that should be noted as well. 

  1. No RMD’s in 2020. The CARES Act waived the required minimum distributions for the year 2020. 
  2. You can take an above the line deduction of up to $300 for charitable giving. To encourage citizens to continue supporting their favorite charities during this crisis the law has created this deduction for one time charitable giving. 
  3. Federal student loans have been suspended until September 2020. This is only for federal student loans, but this was designed to help people free up their cash flow.
  4. There has been an increase in unemployment benefits in both the maximum amount of money you can receive and the amount of time that you can receive it. 
  5. If you have a federally backed mortgage you can extend your loan by up to 6 months.

How did healthcare change with the CARES Act?

This landmark legislation didn’t only affect people’s finances, it made some changes to health care as well. The CARES Act has ensured that health insurance will have to pay for any COVID testing or potential vaccines that are developed. It also expanded qualified medical expenses for HSA’s. What will be the biggest change brought to you by the CARES Act?

Outline of This Episode

  • [1:27] Who qualifies for the recovery rebate?
  • [8:18] What happens if your income is impacted directly by Coronavirus
  • [13:12] What has changed with RMD’s?
  • [14:30] Qualified charitable contributions have changed
  • [17:38] Federal student loans have been suspended until September 2020
  • [20:11] Increase in unemployment
  • [23:44] Will your mortgage payment be delayed?
  • [26:52] What changed in health care?

Resources & People Mentioned

Connect with Grayson Blazek

Connect With Chad and Mike

Subscribe To This Podcast

Mar 23, 2020

We’re all surprised at the speed of changes the coronavirus has brought in our lives. Working from home, school closures, and social distancing have become our new norms. Stock markets have fallen in to a bear market in less than a month. Uncertainty related to COVID-19 grows daily, as we all know the amount of new cases are destined to rise.

It can be hard to find positives through the barrage of more disappointing news each day. But there are steps you can take to prepare your portfolio during this bear market. In today’s episode, we share 7 tips to help ease your worries during this challenging time.

Behavior Determines Results

We all feel nervous about stock market drops. Despite bear markets happening an average of every 6-7 years, it never gets easier to handle emotionally. During these times, investment behavior determines your returns more than the investments themselves.

Having an investment plan beforehand adds discipline to your decisions amidst the turmoil. If you’re questioning what you should do, then referring back to your plan will remind you of your highest priorities.

When you think about it, you only really have 3 options to choose from.

  1. Sell and go to cash
  2. Hold tight and don’t do anything
  3. Buy and take advantage of the discounts

With the first one, being much more damaging long-term than the others. To cope with this, we’ve put together seven things you can do to help ease your worry so you are better prepared to make more sound financial decisions.

7 things you can do to prepare your portfolio during a bear market

  1. Don’t react to panic – Panic is the enemy of a sound investment strategy. In the heat of a decline, is not the time to rush into irrational thinking. Even though it’s difficult to fight your emotions, your investment behavior will determine your return more than the investments themselves.
  2. Write down how you’re feeling – Do you remember how you felt in 2008? With the passage of time, our brains rewrite our history. If you write down how you are feeling now, then you can reflect back and read how you really felt during that time period rather than reciting stories your brain selectively chooses to remember. This will help you more accurately temper or accelerate your risk once things start to look up again, depending on your situation.
  3. Take advantage of tax-loss harvesting – Help your future tax bill by making some moves now. Tax-loss harvesting is a strategy that is used by selling one holding that has a loss in a taxable account to buy a similar holding, so that your overall allocation doesn’t change. You can then use the realized loss to offset investment income (and up to $3k of ordinary income) in the future. Often there are a few investments that you may have been holding because of large capital gains. This may now allow you to exit those holdings and bank realized losses providing a nice silver lining.
  4. Roth conversions – If you were looking to convert money from a pretax IRA to a Roth IRA then this may be a good time to evaluate. With stock market values lower (currently over 30%), IRA accounts could be significantly discounted. If converted to a Roth IRA, the growth that occurs when the market recovers would then be tax-free. This maneuver takes careful analysis for your specific tax situation as the IRA conversion will be taxable.
  5. Could be good buying opportunity – This might be a good time to think about dipping your toes back into the water. The hardest times to buy are when you typically get the best returns. Depending on your cash flow needs, this could be a very attractive long-term buying opportunity. No one knows where the bottom will be, but by buying now you’ll be saving 30% from just last month.
  6. Focus on what you can control – You can’t control what’s happening in the stock market but you can control your spending. You can also think about other controllable actions like whether you have enough life insurance or if your estate documents in place.
  7. Having a financial advisor can help you – if you are struggling right now and doing it all on your own an advisor can help you talk through your feelings and use the tools you have in your toolbox.

Outline of This Episode

  • [1:27] Don’t rush into irrational thinking
  • [5:58] Record how you feel now so you can reflect on it later
  • [7:23] Take advantage of tax-loss harvesting
  • [10:25] Roth Conversions
  • [14:26] Focus on what you can control
  • [17:36] Having a financial advisor can help you walk through your feelings

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Mar 6, 2020

Cornoavirus concerns continue to impact the financial markets, as have all the numberless crises that have gone before it.

While the potential human and economic effects are very unsettling, what actions should a prudent investor take given this new development?

Short Video Recap Here: https://youtu.be/Wsy6OTuY-yI

It remains impossible to predict when and how this problem will be resolved.  Likewise, it is impossible to know when and how the markets will anticipate (or react to) such a resolution. 

In this episode of the Financial Symmetry show, hosts Chad Smith and Mike Eklund, evaluate all the available information to determine how you should approach your investment strategy.

Market declines are a regular occurrence and happen frequently. Selloffs provide an opportunity for investors to absorb new information, squeeze out excesses and reset values to more attractive levels.

For existing retirees, we set-up portfolios to include 5-7 years’ worth of high-quality bonds/cash to absorb market declines.  For savers, market declines are great news as it allows you to buy stocks at lower prices through regular contributions.

We understand the desire to try to head off market declines by moving into safety. However, our view is that the only way to capture the full permanent returns of equities is to ride out their temporary declines.

The danger of trying to time the market is that you will sabotage your personal investment strategy by getting out at the wrong time and then compounding that by getting back in at the wrong time.

Summary

  • Fear is a natural reaction.
  • It's impossible to predict the future.
  • There is always uncertainty in investing.
  • Disciplined investing is hard.
  • If you are feeling uncertain, review your financial plan before your portfolio.

Other Helpful Links

The Financial Symmetry Podcast is an original podcast from Financial Symmetry in Raleigh, NC. To learn more about the show or the past 105 episodes, visit https://www.financialsymmetry.com/retirement-podcast/.

The hosts and guests in this video do not render or offer to render personalized investment or tax advice in this podcast. This podcast is for informational purposes only and does not constitute individualized advice or a guarantee that you will achieve a desired result. You should consult with appropriate tax and financial advisors for advice specific to your situation.

Feb 24, 2020

Will your retirement regrets list be full of "I wish I would have...?" What if you could use regrets of other retirees to change or improve your current course?

Short Youtube Recap here: https://youtu.be/CiGxXeem2yI

Listening to the wisdom of those that have gone before you, can help you avoid their big mistakes and take advantage of financial opportunities you may have missed.

In our role as financial advisors, we have the unique opportunity of hearing a long list of retirement regrets. In listening to their perspectives, we gain an understanding of the path they took and the things they wish they could have done to prepare for retirement.

In this episode of the Financial Symmetry podcast with Chad Smith and Allison Berger, we break down the top retirement regrets that investors typically experience. Listen in so you can learn from others and ensure that you don’t make the same mistakes they did.

9 Avoidable Retirement Regrets

  1. I wish I had a detailed retirement plan. 3 out of 4 baby boomers don’t have a detailed retirement plan. Without a retirement plan, it makes it hard to anticipate what may come next. You'll need to consider those big purchases, how often will you buy cars, and if you are going to move. Life can feel much more uncertain in retirement, without the dependability of a steady income you’ve relied on your entire working life. Without a plan, opportunities could be passing you by each year.
  2. I wish I hadn’t planned to work so long. There are many people who plan to work until age 70, but due to unforeseen issues, they had to stop working before they were ready. Some had to stop due to family illness, layoffs, or forced early retirement. Whatever the reason, running what-if scenarios could leave you more prepared to face the unknown risks that are lurking.
  3. I wish I would have started saving in a tax-free account earlier. An often overlooked strategy while saving, is your lifetime tax rate. By focusing on tax-free savings, it creates flexibility for future retirement withdrawals. There are many that think they can’t take advantage of a Roth IRA due to having a high income, but there are options. Back-door Roths, after-tax 401k savings and HSA's all offer other opportunities. We've included past detailed episodes on all three in the links below.
  4. I wish I didn’t have such a big house. Many people become enamored with the idea of a mansion. So much that they sacrifice saving in retirement accounts. More expensive homes require more expensive upkeep. The social pressures in higher priced neighborhoods cause extra lifestyle creep. Years pass, and you realize savings isn't where you thought it would be. Once reaching retirement, downsizing becomes the new trend but moving is often delayed due to frustrations of moving and decluttering their homes.
  5. I wish I hadn’t worried so much about market drops. The idea that you could lose half of your savings is scary. There is always a reason you should not invest, but inflation is the silent killer that awaits you, if you don't. Finding the appropriate risk is vital to helping you sleep at night. Research shows a tremendous difference when missing the best days in the market. So while timing market drops is tempting, a buy and hold strategy with appropriate percentages of risk is your best bet.
  6. I wish I hadn’t counted on rental income. Be careful about counting on rental real estate if that is your plan. Assure you are factoring in all expenses to your calculation with forecasting returns on rental real estate. Appreciation rates will suffer, if proper maintenance is not kept up on properties. This could affect the long-term health of your financial plan.
  7. I wish I would have invested more in friendships. Think intentionally about how you will spend your time in retirement. Many people end up socially isolated in retirement. Retiring to something vs. from something can add to happiness levels and improve your odds of a successful retirement with less regret.
  8. I wish I hadn’t taken Social Security so early. Delaying Social Security can be a benefit in multiple ways. An alarming amount of people (57%) take Social Security before their full retirement age. This decreases the amount they could receive and provides more tax flexibility. Less guaranteed income, provides for more IRA/401k withdrawals at lower tax rates potentially.  If you are married, you might also consider the survivor benefit element. Listen in to hear details of the benefits of delaying your Social Security.
  9. I wish I had had more experiences. Many wish they had traveled more while they were healthy or while their kids were still at home. Too many look back with the regret of waiting to late to travel.

Outline of This Episode

  • [3:07] I wish I would have had a detailed plan earlier
  • [5:06] I wish I hadn’t planned to work so long
  • [7:07] I wish I would have started saving in a tax-free account earlier
  • [10:30] I wish I didn’t have such a big house
  • [12:47] I wish I hadn’t worried so much about market drops
  • [17:45] I wish I hadn’t counted on rental income
  • [20:33] I wish I would have invested more in friendships
  • [22:45] I wish I hadn’t taken Social Security so early
  • [26:00] I wish I had had more experiences

Resources & People Mentioned

The Financial Symmetry Podcast is an original podcast from Financial Symmetry in Raleigh, NC. To learn more about the show or the past 104 episodes, visit https://www.financialsymmetry.com/retirement-podcast/.

Connect with us here:

Subscribe to this Podcast:

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Feb 10, 2020

How closely did you look at your Medicare premium notice letter this past December? If it mentioned an IRMAA adjustment, and you experienced a life-changing event, you may want to look again. There's a few steps you can take that can save you thousands of dollars in Medicare premiums. In this episode, we are breaking down the the tax cliff known as IRMAA and how proper planning can help you avoid overpaying for your Part B and Part D Medicare premiums.

YouTube recap: https://youtu.be/BQ7K_DeJiHs

What is IRMAA?

This often misunderstood or overlooked area of the tax code is how Medicare determines the premiums that are automatically taken from your Social Security check. IRMAA stands for Income Related Monthly Adjustment Amount. Understanding the IRMAA threshold is key to understanding your Medicare premium. 

Watch out for the IRMAA tax cliff

Generally, when you think about Medicare you think about age 65 and above. It’s actually important to begin thinking about Medicare when you are 63. Your Medicare premium at age 65 is actually based on the income that you made 2 years prior. So if you were in one of the higher income brackets before you retired, your Medicare premium will reflect that. There are 5 tiers of IRMAA and if you go even $1 over you will be knocked into the next bracket. If you end up in the highest tier you could be paying over $4000 in extra Medicare Part B premiums. 

How can you plan ahead?

Now that you know about IRMAA you can begin to plan ahead. If your AGI is $87,000 or less for singles or $174,000 or less for a married couple then you will qualify for the Medicare Part B baseline premium which is $144.66 per person per month. It’s important to understand your income sources and whether they are taxable or not. Knowing where you fit in the IRMAA tiers will save you money. Listen in to hear more about IRMAA and how it can affect your retirement plans. 

What can you do to appeal?

If you didn’t plan ahead and are stuck with high premiums you may be able to appeal. You can appeal based on marriage, divorce, death of a spouse, work stoppage, work reduction, or loss of income. If you qualify for an appeal then you’ll need to fill out an SSA44. There are 5 steps to follow to appeal process. Listen in to discover what you can do if IRMAA has got you down. 

Outline of This Episode

  • [3:27] Which parts of Medicare does IRMAA affect?
  • [7:20] An example
  • [9:55] How can you appeal?

Resources & People Mentioned

Connect with Grayson Blazek

Connect With Chad and Mike

Subscribe To This Podcast

Jan 27, 2020

How do you best invest at all-time market highs? In this episode, we are walking through the strategies and disciplines you'll need to be a successful long-term investor. 

Short Youtube recap here: https://youtu.be/fEXnQ8GaCuk

Visit full article notes here: https://wp.me/p6NrVS-3i0

Short-term market forecasting is impossible to predict

We often get the question of whether people should continue to invest given the all-time market highs. Well, let’s take a look back to just a year ago. At the end of 2018, the U.S. stock market declined by 20% and everyone was worried about a potential bear market. But it turned out that 2019 was a fantastic year despite all the worries.

We can’t tell you when will be a good time to invest in the short-term. No one can. No one has a crystal ball that can predict those outcomes. It is important to formulate a decision-making process that is not outcome-based. Financial decisions should always be processed based instead. 

What does the long-term history of investing tell us?

Think about where you were in December 2009. You probably weren’t too optimistic about the economic future. But it turned out the S&P 500 was the best place to invest over the past 10 years. But in the 10 years preceding it was the worst place to invest. 

There is never an easy time to be an investor. Investing always involves risk and many see that risk as a reason not to invest. There is always a risk and plenty of reasons not to invest. But when you look back, you’ll realize recessions, while painful, happen quickly but the market rises over the long run.

A diversified portfolio will always include something you don’t like

After the S&P’s strong run the past 10 years many people wonder why bother to invest internationally or why they should hold any bonds in their portfolio. Even though the S&P 500 performed quite well over the past 10 years, it was the worst place to invest during the previous 10 years. To protect yourself, you’ll need to be diversified. Bonds can not only provide diversification but they can provide income and capital preservation as well. They may not be the most exciting, but bonds will ensure you don’t have all of your eggs in one basket. 

So what is the 2020 market outlook?

Once again we find ourselves in a time of uncertainty. There’s the threat of war, a presidential election, and who knows what else could happen next. Given this time of uncertainty, what changes should we be making to our portfolios? The only sure answer is that you should only be taking as much risk as you can handle. Don’t let recent market performance lull you into taking too much risk.

Listen in to hear the outlook for 2020 and beyond. 

Outline of This Episode

  • [2:27] Short-term market forecasting is impossible to predict
  • [5:35] Let’s look at how the markets have performed in the long-term
  • [10:52] Take a look at bonds
  • [15:10] What has happened with consumer confidence?
  • [17:35] Why hold foreign stocks?
  • [20:15] What changes should we be making to our portfolios given the current climate?
  • [23:54] What do the experts predict to happen over the next 10 years?

Connect With Chad and Mike

Subscribe To This Podcast

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Jan 13, 2020

The SECURE Act is the biggest piece of retirement legislation to pass since 2006.

On this episode, we discuss what the SECURE Act is and how it will affect you and your retirement plans. The acronym SECURE stands for "Setting Every Community Up for Retirement Enhancement." 

Watch corresponding Youtube video here: https://www.youtube.com/watch?v=d0K8KBlCYhs&t=2s

In our breakdown of the new bill, you’ll learn about the highlights including new IRA rules, changes to 401K’s, non-retirement changes, and extenders.

The Stretch IRA is not as stretchy

One of the most impactful changes in the legislation deals with the Stretch IRA provision for non-spouse beneficiaries. Under the old law, upon a person’s death, the non-spouse beneficiaries of their 401K’s and IRA’s could withdraw savings over the span of their entire lifetime.

Now, as of January 1, 2020, the Secure Act compresses that time period to only 10 years after the year of death, thus speeding up the timeframe for taxes to be paid on these pre-tax savings. This complicates some old strategies being used, but creates new planning techniques for others.

There are a few eligible designated beneficiaries that will avoid the 10 year payout. These include:

  • the surviving spouse of the deceased account owner
  • a minor child of the deceased account owner
  • a beneficiary who is no more than 10 years younger than the deceased account owner
  • a chronically-ill individual
  • a disabled individual

Tune in to see how you may need to tweak your retirement withdrawal strategies to best work for you and your heirs.

More changes to IRA’s

The Stretch IRA wasn’t the only thing that changed with IRA’s. The required minimum distribution (RMD) age was raised from age 70 ½ to 72. This means, for those yet to reach 70.5 by 1/1/2020, that you won’t have to take funds out of your IRA until age 72. You’ll have a year and a half longer to convert those funds to a Roth IRA, depending on tax brackets.

Despite the RMD age moving back, you still have the option to make a qualified charitable distribution (QCD) at age 70. If you'd like a refresher for some of these financial acronyms we're mentioning, check out episode 63, our Financial Acronymology guide.

Additionally, those over 70 and still working can now contribute to a traditional IRA if they have earned income. In the old law, this ability stopped at 70.5. But people are living and working longer now (without adequate retirement savings for many), so the SECURE act makes this possible.

Good news for 401K’s

Finally, we get to the part about setting communities up for retirement. With the changes in the Secure Act, more small business owners will be able to offer 401K’s to their employees.

The bill makes it easier to be auto-enrolled to help those people that never get around to setting up their 401K contributions. Part-time employees will also benefit from the new bill. Now part-timers who have worked 500 hours over the past 3 years will have access to 401K’s. These changes are designed to make retirement savings a bit easier.

How will the Secure Act change your financial plans?

The Secure Act is a great reminder of how quickly laws can change. Without close attention, your original intent could no longer be the most optimal strategy for your retirement plans.

One of our primary responsibilities is to help you uncover tax saving or planning opportunities when they become available. Remember, financial planning is like putting together a puzzle. Make sure you have all the pieces by learning as much as you can to improve your financial opportunities.

Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for 20 years.

Outline of This Episode

  • [3:04] The biggest changes with the Secure Act are to IRA’s
  • [11:44] Small businesses will find it easier to offer 401K’s to their employees
  • [17:07] Non-retirement changes
  • [18:55] The extenders

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Spotify <> Google Podcasts

Dec 30, 2019

Are you in the Social Security tax bubble?

Tax rules are complicated enough, and Social Security benefits during retirement years add another layer of complexity.

Watch corresponding Youtube video here: https://www.youtube.com/watch?v=0RnQY0NxhSM&t=39s

Your Social Security income can cause your actual tax rate to be much higher than expected. Not understanding how and when Social Security benefits are taxed can lead to an unpleasant surprise when Uncle Sam comes calling.

You’ll also learn why multi-year tax planning is so important in retirement. 

How should you decide when to take Social Security?

If you are approaching age 62 you may be considering when to take Social Security. It can be tempting to take that low hanging fruit as soon as possible. But we often recommend that you delay taking your Social Security benefit for as long as you can. If you don’t take Social Security early then you need to think about how you’ll make enough money to cover the costs of your lifestyle. Do you have IRA’s, 401K’s, or even an old-fashioned pension? When planning your retirement income you’ll also want to think ahead to age 70 ½ when you’ll have to take the required minimum distribution or RMD. Have you decided when to take your Social Security benefit? 

Social Security tax bubble or tax torpedo?

Your Social Security benefit can be taxed like any other income source. But there is a way to determine if and how your benefit will be taxed. You can use a special calculation that is determined by the IRS. To do this, add up your taxable income and add half of your projected benefit. If it is over a certain threshold then it will be taxed. You’ll need to be careful when determining your income since tax rates increase slowly and then suddenly jump from 22% to 41%. You don’t want those taxes to torpedo your retirement planning. Listen in to find out how to plan ahead.

It pays to plan ahead

Sure, you want to pay the lowest amount in taxes each year, but retirement tax planning is a bit more complicated. You’ll want to consider your lifetime tax bill. You don’t want to pay 0% in taxes this year only to be stuck with a 24% tax bill next year. You’ll want to have a comprehensive retirement plan which considers when to take out more money for those big-ticket items that will inevitably come up. With a little bit of planning, you can spread your tax burden out over multiple years. You also need to consider that your 60’s provide you with a unique opportunity to name the income that you won’t have in your 70’s. Discover why your 60’s may be the most important tax planning decade by listening to Will Holt’s tax expertise. 

Understand all the tax opportunities and risks that are out there

There are plenty of risks involved with retirement tax planning but there are also lots of opportunities to save on taxes as well. One tax opportunity you shouldn’t miss is topping out your tax bracket with Roth conversions to help minimize your RMD once you turn 70 ½. 

If you are planning to retire early the Affordable Care Act could throw you another curveball. It is important to understand the income levels needed to qualify for the subsidies available. There is a lot to consider when in retirement tax planning. 

Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients by providing financial planning to the Triangle residents of North Carolina for 20 years.

Outline of This Episode

  • [1:27] When should you take Social Security?
  • [4:12] A brief overview of the Social Security tax bubble
  • [9:00] Why you should not only consider this year’s tax bracket
  • [13:22] Can you change your mind when to take Social Security?
  • [15:44] Why would someone take Social Security early?
  • [17:32] What are other considerations?

Resources & People Mentioned

Connect with Will Holt

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

Dec 16, 2019

What does it take to get to 100 podcast episodes?

In his book, Shoe Dog, Phil Knight describes his emotions upon starting the company that became Nike, as a crazy idea. When describing how he felt, he realized that many of the world’s greatest achievements started as crazy ideas.

Watch corresponding Youtube video here.

What seemed like a crazy idea for us 4 years ago, has turned into more than we could have ever imagined. We recently shared about what motivated us to start the show in our review of FINCON.

In this episode, we’re pulling back the curtain, as we reflect on our 4 year journey to episode 100. We discuss lessons learned, surprises we encountered along the way, and mistakes we made. We also reveal some of our favorite episodes and you’ll also hear what’s next for the Financial Symmetry show. But this exciting milestone wouldn’t have been possible without you!

What we have learned over the past 100 episodes

We were fortunate to start our passion project at a good time. The strong tailwind of meteoric growth for all podcasts propelled our show to a 600% growth rate in downloads since our first year. Most of our listeners find us on Apple Podcasts currently, but we included an article below discussing the growing popularity of Spotify as a podcast deliverer. Podcasts also allow for listeners that would otherwise never hear about us. To that point, 20% of our listeners are in California. The magic of a technical tool that will continue to expand and grow.

We’ve enjoyed using this medium to share our views about unique financial planning opportunities and uncover risks that our listeners may not be aware of. We’ve also learned how much fun creating a podcast can be. After overcoming the difficulties of getting started, we were reminded that consistency is key.

We have learned from our mistakes

Mistakes are inevitable part of any journey. The key is to use them to propel you to be something better. Our podcast was a treasure trove of bumps in the road when getting started. Just dial up our a few of our first episodes, especially if you enjoy hearing someone reading directly from a blog post. Thankfully we learned fairly quickly to ad-lib and play off of each other.

Listening to yourself, also provides a great opportunity to critique your communication style. Inviting other experts in the firm, added a nice potpourri of voices as well. I’m sure our listeners appreciate the fact that we have learned to use an audio editor to improve the quality of our material. A key truth that translates to many areas of life. Bring your expertise to your specialties and find experts in other fields to do the rest.

Our favorite episodes, and yours

Inevitably, some episodes are better than others. Regardless, our aim is to always provide you with content that plants a seed that might motivate you to dig a little deeper on a specific planning topic. But we also try to present the content in an entertaining and engaging way. A few of our favorite episodes include episode 20 where we drew comparisons of common financial planning conversations to one of our favorite movies, The Usual Suspects. Another favorite was episode 27, where we broke down Mike’s top 10 investment lessons he’d learned just after turning 40. We share a few more along with the top 4 most listened episodes since we started.

What’s next for the Financial Symmetry show?

We’re continually learning how to improve our content and provide you with material that you can learn from and implement. We are excited to make better use of an editorial calendar to plan future episodes. Is there a topic that interests you that you think we should cover on the show? Let us know what you would like to hear by sending us an email with your suggestions.

Outline of This Episode

  • [2:27] Some listener statistics
  • [6:27] What we have learned along the way
  • [14:17] Surprises we have encountered
  • [15:35] Mistakes we have made
  • [19:26] Our favorite episodes
  • [25:24] Most listened to episodes
  • [29:12] What is to come on Financial Symmetry?

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Spotify <> Google Podcasts

Dec 2, 2019

Who you gonna call? Retirement Mythbusters!

Short Youtube recap here: https://bit.ly/2R0QJcA

Visit Full Article Here: https://wp.me/p6NrVS-3g5

Not as catchy as Ghostbusters, we know, but these retirement myths can be much more hazardous to your long-term financial health. Many of us have certain beliefs, internet rumors or family hearsay that are passed down about retirement rules of thumb. But believing in these stories could be detrimental to the long-term success of your retirement. On this episode, we do our best Mythbusters imitation (of Discovery Channel fame) to bust these common retirement myths. Listen in to hear why you may want to challenge conventional thinking, and discover what it could cost you to continue to buy in to the hype. 

8 common retirement myths

  1. I’m not going to live that long. So many people don’t think they will live until age 90. But the truth is, men who are 65 today have a 20% chance of living until 90 and women have a 33% chance. Couples have a 48% chance of one of them making it to age 90. You need to make sure your money will last as long as you do. Does your financial plan cover you until age 90?
  2. I’ll work until age 65. The actual median retirement age is 62. Many people plan to work longer, but they are forced into retirement early. Some people try out a second act. Whenever you do choose to retire, be sure that you are retiring to something, not away from something. Do you have big plans for your retirement? 
  3. Social Security will run out. Some people use this myth as an excuse to claim their Social Security benefit early. But claiming Social Security below your retirement age greatly reduces your lifetime benefit. If you delay until age 70 will result in an 8% increase per year!
  4. Once I reach X amount of money I can retire. The reality is that everyone’s situation is different. There is no magic number! There is so much more to retirement planning. What magic retirement number did you have in mind?
  5. Paying the lowest amount of tax is always best. Are you trying to be too tax efficient? Think about optimizing your tax situation rather than minimizing your taxes. Consider working with a financial planner and an accountant to help you consider long-term tax planning. 
  6. When I retire my investments should be conservative. This isn’t always the case. People are living longer than ever so you may need your investment portfolio to last you 30 or 40 years. There is actually a bigger risk of being too conservative rather than risky. 
  7. I need to pay off my mortgage now. A mortgage is the cheapest money you can get in a loan. So not paying it off and investing the difference actually makes more sense financially. But for some people paying off their mortgage provides them with peace of mind. Which camp do you fall into? Would you prefer the peace of mind that a paid-for house provides?
  8. Retirement spending is the same throughout retirement. Retirement planning is more complicated than you think. Your spending in retirement changes throughout the years. In the first 5 years of retirement, people spend a huge amount of money. You may spend it on travel, fixing up your home, eating out, or whatever it is that interests you. You finally have the time to spend all the wealth that you have built. Then spending slows down as you do. Unfortunately, retirement spending tends to increase the older you get, but this time it’s on medical expenses. Have you planned to spend the same amount each year in retirement?

Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for 20 years.

Outline of This Episode

  • [2:47] I’m not going to live that long
  • [5:30] I’ll work until age 65
  • [9:22] Social Security will run out
  • [13:12] I can retire after I have $1 million saved
  • [15:10] Paying the lowest amount of tax is best
  • [18:00] When I retire my investments should be conservative
  • [21:00] I need to pay off my mortgage now
  • [23:55] Retirement planning is more complicated than you think 

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Spotify <> Google Podcasts

Nov 18, 2019

How do you know if long term care insurance is worth it?

Short Youtube video here: https://bit.ly/3akBTVZ

This is a topic we discuss with our clients regularly.  With an aging population comes increased options for retirement living, assisted living and nursing care options.  Along with increased options come increased costs as well which can be exorbitant in some cases. If long-term care insurance has been on your mind, you’ll want to have a listen to our objective viewpoints as we consider if long-term care insurance is really worth it. 

Why do people consider long-term care insurance?

There are 3 different ways that people may fund their long-term care needs. They may self-insure, or use their savings. They buy long-term care insurance, or they may rely on government funding. Many of our listeners are in the sandwich generation, where they are both helping their kids and helping their parents at the same time. As they watch their parents age they begin to see the emotional and financial stress that can arise and it affects the way they think about aging. 70% of people will need some sort of long-term care. Usually, a stay in long-term care is only a couple of years but 1 in 10 men will require a stay of more than 5 years and 2 out of 10 women will stay more than 5 years in long-term care. 

At what age should you buy long-term care insurance? 

As you probably know, long-term care insurance only gets more expensive as you age. But you probably don’t want to buy into it too early, what if the insurance company goes out of business? We think the best time to buy long-term care insurance is in your mid-50s. Costs tend to jump about 6-8% each year that you wait. But even if you do buy early the premiums could increase. Often times the actuaries don’t fully understand the risk and end up raising premiums for current policyholders. 

What does long-term care insurance cover?

Generally speaking, people go into long-term care when they can no longer perform the activities of daily living or ADL. This includes going to the bathroom alone, eating, moving about the home, or they experience a decline in mental state. Often the long-term care insurance covers a maximum period of 6 years or less. There is a daily benefit amount that you can choose from. Often that benefit is between $100-$200 per day. Many long-term care insurance packages come with an inflation rider. Your premiums will be related to the variables that you choose. 

So, how much does it cost?

Long-term care is not cheap. A private room with skilled nursing can cost $100K per year. Going down the scale, assisted living averages about $75K per year. And home health can be about $50K per year, but you do have to factor in household expenses as well. 

A 65-year-old couple can buy a long-term care insurance policy for $4800 per year with basic benefits totaling $180K. If that same couple waits until 75 to purchase a policy that amount will increase to $8700. You also need to consider the fact that not everyone gets approved. The longer you wait to buy a policy the harder it is to get approved. 

It’s important to have as much information as possible before making costly decisions. You need to understand all of the factors before you commit. We’re here to help you make informed choices. Listen in to hear all of the factors that you should examine when considering whether to buy long-term care insurance.

Outline of This Episode

  • [4:27] Why do people consider long-term care insurance?
  • [6:57] At what age should you buy long-term care insurance?
  • [10:14] Won’t Medicare cover this?
  • [10:50] What am I paying for?
  • [13:47] How much does it cost?
  • [16:46] A case study about self-insuring
  • [20:07] What types of policies are there?
  • [23:25] What questions should you be asking yourself?

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

Nov 4, 2019

Does your place of employment offer an equity compensation plan? Are you one of the 76% of people who have not exercised their stock options or sold shares of their company stocks? Mike Eklund is back after a hiatus and he is jumping in with both feet. He dives deep into the nitty-gritty of equity compensation plans. Since this can be a complicated subject you may want to consult a financial professional before making any big decisions about what to do with your company stock options. 

Watch corresponding Youtube video here.

Why do companies offer equity compensation plans? 

Many companies offer equity compensation plans as a part of an overall hiring package. The main reason is to align the company and employees. If the stock price goes up then you make more money. These compensation plans can be a big draw when you are trying to decide where to work. There are 4 main types of plans offered by companies. 

  1. Employee stock purchase plans (ESPP)
  2. Owning stocks directly
  3. Restricted stock
  4. Incentive stock options (ISO). These are non-qualified stock options. 

It is important to know how these types of plans differ and what their advantages are. What kind of equity compensation plan does your company offer?

Don’t let taxes wag the dog

The biggest question of owning stocks is when to sell. Don’t let the taxes wag the dog means don’t let taxes impact your investment decisions. So many people choose not to sell a position simply because they don’t want to pay taxes on it. It helps if you understand how the taxes work in each situation. 

If you own stocks outright for over a year and sell then that is a long term gain and you will be subject to capital gains tax at the rate of 20% at most. If you own for less than a year then it is considered a short term stock and is subject to a higher tax rate of 37%. In this case, you’ll want to own for over a year for the best result. 

If you own ESPP stocks then it is important to know whether you hold a qualifying or disqualifying disposition. A qualifying disposition is better. It is tied to how long you own the stock. You’ll want to own for at least a year before you sell. 

Restricted stock is taxable when it is vested. Although restricted stocks are pretty straight forward your financial advisor can really help you with saving money in taxes. 

ISOs can provide significant tax savings but they have many requirements. They are more tax advantageous than nonqualified stock options. You have more control over when the tax event occurs.

Ask these questions of yourself to discover how much company stock you are comfortable owning

  • What percentage of my net worth is tied to the company stock today?
  • How secure is the company?
  • How long do you plan to stay with the company?
  • Are you willing to wait it out?
  • Am I comfortable with the risk of owning a large share of company stock?
  • Think about your limits. How will you feel when the stock rises or falls? 

What can you do if you own a lot in company stock?

If you own a lot in company stocks you’ll want to lower your risk and make sure that you are protecting yourself from a potential downturn. You can use these tools to think about how to create a framework for making better investing decisions. 

  1. Purchase a put option. This will ensure the stock sells at an agreed-upon price.
  2. Trading plans allow corporate insiders to diversify stocks through prearranged stock selling plans.
  3. Gift it to a donor-advised fund
  4. Gift the stock to family or friends. 

Listen in to hear how you can use a combination of these strategies to help you decide what to do when you own company stock. 

Outline of This Episode

  • [4:17] Why do companies offer equity compensation plans?
  • [7:25] Don’t let taxes wag the dog
  • [14:26] What can you do if you own a lot in company stock?
  • [19:51] Some important questions to consider

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

 

Oct 21, 2019

There’s a lot of conflicting information about buying a timeshare. Some call it the worst financial decision you could make. But is that true? On this episode, we invite Allison Berger to discuss the pros and cons of buying a timeshare. If you’ve ever been roped into one of those high-pressure sales meetings you’ll want to listen to consider if you made the right decision.

Short YouTube video: https://youtu.be/RqfiAvdPS-I

In this episode of Financial Symmetry, host Chad Smith talks with Allison Berger about strategies for spotting timeshare scams and thinking through decisions about timeshares.

If you have ever been on vacation at a nice resort you may have sat in on a timeshare presentation. These high-pressure sales meetings are designed to make you a buyer and they pull out all of the stops to get you to sign on the dotted line. They claim to only need 90 minutes of your time, but those 90 minutes can be pretty intense. According to the American Resort Development Corporation, 2018 was the 9th consecutive year of growth for timeshare sales. Out of 127 million households in America, 9 million own at least 1 shared vacation product. So 7% of families are also timeshare owners. That means they must not be too bad, right? But what exactly are you buying? What is a timeshare?

If you have ever stayed at an upscale resort, you may have sat in on a timeshare presentation. These high-pressure sales meetings are designed to make you a buyer and they pull out all of the stops to get you to sign on the dotted line. They claim to only need 90 minutes of your time, but those 90 minutes can be pretty intense.

According to the American Resort Development Corporation, 2018 was the 9th consecutive year of growth for timeshare sales. Out of 127 million households in America, 9 million own at least 1 shared vacation product. That means they must not be too bad, right? But what exactly are you buying?

We all know about the incentives to get you to buy a timeshare (or even just to sit in on the sales meeting), but what other positive experiences can be had from buying a timeshare? You will guarantee yourself a vacation each year if you buy a timeshare. The accommodations are typically very nice and often include two-bedroom suites with a kitchen. This beats staying in a cramped hotel room. Typically the break-even point of buying a timeshare is between 8-14 years, so if you vacation every year for 20-30 years you’ll come out ahead. 

But there are many negatives that come along with timeshares. Even though the average maintenance fees are only about $1000 a year, the average sales price is $21,000. If you change your mind and wish to resell the timeshare you may be out of luck. There isn’t much of a market for timeshare resales. Timeshares are complicated and can be challenging to book. If you don’t know the jargon of the timeshare company you could be lost and stuck vacationing somewhere you never wanted to be. Tell us about your experiences with timeshares. Shoot us an email, we’d love to hear your stories. 

Resources Mentioned in the Episode

Oct 7, 2019

Every year there are approximately 140 million tax returns filed with the IRS and of those, 4 million will receive an IRS letter stating that there is a discrepancy. Your first instinct might be to panic, but don’t overreact. Grayson Blayzek is here to help us understand what you can do if you receive the dreaded CP2000. You’ll want to listen in not only if you have received a letter, but also to learn what you can do to prevent receiving one in the first place.

Short Youtube video recap here: https://bit.ly/2NBiVkm 

You can take a proactive approach or a reactive approach to receiving an IRS letter

There are 2 different approaches when dealing with an IRS letter. You can take a proactive approach or a reactive approach. The reactive approach happens after you receive the letter, but a proactive approach helps you get in front of any tax confusion and reduce the chances that you will receive a letter. Here’s what you can do to take the proactive approach. 

  1. Keep accurate and complete tax records, including W2’s, 1099’s, and investment documents. 
  2. Make sure you receive all the tax information before you submit your tax return. Be patient as you go through the filing process.
  3. Check your records as they come through. Make sure the information looks accurate.
  4. Include all of your income. Make sure you don’t underreport any income
  5. Follow the instructions when you fill out the 1040 and fill it out completely and accurately. 

How can you amend your tax return? 

The first step to amending your tax return is to realize where your mistake was. Did you transpose a number? Did you receive a tax document after your return? A tax professional can help you look at your return and find the problem. Sometimes a backdoor Roth strategy is the culprit in a tax return error. Funds that were converted to IRA’s might get reported on the tax return when they shouldn’t. The process of filing an amended tax return is similar to filing an original return. But instead of filing a 1040, you’ll file a 1040X. 

What should you do if you do receive the dreaded IRS letter?

If you do receive a letter from the IRS it will come via snail mail. They will never email you, text you, or send you any other type of message. The letter you will probably receive is a CP2000. 4 million taxpayers receive a CP2000 each year. Basically this form is stating that something in your tax return doesn’t match the IRS records. It isn’t a bill, but do realize the burden of proof is on you to correct the error. Here’s what to do if you receive the CP2000:

  1. Review the letter and determine what the IRS is saying and make a note of the response date. 
  2. You typically have 30 days to respond. If you don’t respond to the 30-day letter they will issue a notice of deficiency or 90 day letter. At this point, you’ll have fewer rights to appeal, so it’s very important to respond to the first letter in a timely manner.
  3. You can agree or disagree with the letter. If you agree, then complete the response form, send in the taxes due and you’re done.
  4. If you disagree you’ll need to gather the relevant information and mail it to the IRS. 
  5. After you have responded to the notice it will typically take 6-12 weeks before you get a response. 

Don't overreact

Taxpayers spend the first 3-4 months of the year gathering documents and working through the tax filing process so it can be frustrating to receive an IRS letter stating that there is a discrepancy. But make sure that you don’t ignore it. Read it carefully and don’t overreact. Take time to digest the information to get a clear understanding of what the IRS is proposing. Get tax advice if you need it. No one likes paying taxes but it is a function of our society. Annual tax planning can reduce your tax burden but we still have to pay the appropriate level of tax fro our level of income. Maintaining appropriate tax records is a great way to avoid a tax notice from the IRS.

Outline of This Episode

  • [1:40] Every year there are approximately 140 million tax returns are filed with the IRS
  • [3:22] What should you do if you get a letter?
  • [8:40] How do you amend your tax return?
  • [12:54] All information you receive from the IRS will be through the mail
  • [15:30] What steps should you take if you receive a CP2000?

Resources & People Mentioned

Connect with Grayson Blazek

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

Sep 23, 2019

Many of you are inching closer to retirement and the decisions you make now will have a big impact on your retirement lifestyle. It’s time to start thinking ahead and seriously consider your retirement strategy. Are you concentrating on the best ways to save to set up for the life you want in retirement?

This is why we have created a pre-retirement checklist with 8 key wealth builder areas for you to consider. Listen in now to discover what you need to think about now that you are rounding the final stretch in this race to retirement. 

Your pre-retirement checklist

  1. How will you spend your time in retirement? Explore what you might enjoy doing and give it some practice. Try to structure a calendar of your average week. How might you allocate your time? How will you challenge yourself? What new skills will you learn?
  2. How will your income change? What will it take for you to retire? How much will you need and where will that money come from? Most people have a combination of 6 sources of income to provide for their retirement which includes: social security, pensions, deferred compensation, withdrawing from savings, part-time work, and passive income.
  3. What will your retirement lifestyle be like? The more you spend the more income you’ll need and the less you spend the less income you’ll need. Think about how much you plan to spend and how will you spend it. 
  4. What is your current net worth? In retirement, your accounts will no longer grow and they may start to fall in value. Take an inventory of what accounts you have. Are they pre-tax or post-tax? Do you have an HSA? Brokerage accounts? Annuities? Where do you stand financially? Lay it all out on paper so that you can decide what you need to do next. 
  5. Tax diversification is as important as investment diversification in retirement. How tax-efficient are your savings? A 401K conversion is a great way to save in taxes. You should also consider what your tax bracket will be in retirement. 
  6. What is your investment strategy? How do your emotions play a role in investing? What is your risk capacity? What is your risk tolerance? You will need to understand when and how much you will need from your investments and have the appropriate asset allocation. Know what your expected returns will be. This will help you understand how long your portfolio will last you.
  7. Healthcare can be the deciding factor for how and when you retire. If you are planning to retire before the age of 65 you’ll want to factor in healthcare costs. How will you bridge the gap until Medicare kicks in? Will you take COBRA or use your state’s health insurance exchange? You should also consider whether you want to get long-term care insurance. 
  8. Do an annual review of your estate. Block off some time each year to check if your estate plan still reflects your wishes. 

Are you in your catch-up years?

Your 50’s are often referred to as the catch-up years when it comes to retirement planning. There are lots of opportunities to think about as you approach retirement. Successful retirees look at all of these considerations as they make decisions. The decisions you make now can have a major impact on your retirement lifestyle. Use this pre-retirement checklist to help you begin to plan your retirement strategy.

Outline of This Episode

  • [2:27] Are you on the final stretch to retirement?
  • [6:33] How will you spend your time in retirement?
  • [7:37] How much income will you need?
  • [11:35] What is your net worth?
  • [14:24] What is your investment strategy?
  • [20:11] What kind of insurance do you have?
  • [23:45] Do an estate review

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

 

Sep 9, 2019

Are you looking for money and/or time-saving tips now that the summer is over and the kids are back to school? Summer can always feel expensive with summer camps, vacations, and then back to school shopping. With fall approaching and the kids back in school, we put together a list of ways you can save time and money to make this year better than the rest.

Time-saving tips

  1. Look at how you spend your time at home and see what you can contract out. Can you hire someone to clean or cut the yard? The more you can hire out the more quality time you’ll have with your family.
  2. Back to school means back to fundraising. If you have a volunteer requirement at your kids’ school get the volunteer hours in early. You could also see if the grandparents would be willing to volunteer. It’s a great way for them to get involved in their grandkids' lives. You can also check if you can donate goods rather than time. 
  3. Online grocery shopping saves lots of time. Oftentimes online shopping will save you money as well since there is less impulse buying. Another bonus is your kids won’t be asking for sugary snacks. Have you tried online shopping?
  4. Try meal planning. Some people use traditional meal planning using pen and paper, but you can also utilize services like Clean Eats or Donavon's Dish. These services will save plenty of time while still managing to feed the family a healthy meal. Have you tried using a meal planning service or a subscription service?
  5. Get the kids to help. Kids can pitch in from a young age. They can help set the table, make a salad, sweep up or wash the dishes. You may get pushback at the beginning, but after making dinner chores a regular habit they will feel proud of their hard work. 
  6. Skip the carpool line. The morning and afternoon carpool line can suck up to an hour out of your day! You can utilize before or after school programs to help you get more out of your time at work. Another idea is to have local grandparents help pick the kids up after school. 
  7. Strategically work from home. You can skip additional time in the car by occasionally working from home. This may not work out for the whole day. But you could come home after lunch and work before having to go pick up the kids for their after school activities. 

Money-saving tips

  1. Think about the holidays now. Consider how much you want to spend and create a budget. Do you want to travel? Plan out the travel in advance so that you know what you are going to spend. You can use an Amazon Wishlist to help you plan the gift-giving. Make sure to start saving for the holidays now.
  2. Reassess your monthly expenses. Fall is a great time to think about your expenses. If you have any decrease in your monthly expenses you can think about increasing your savings. Up your 401K contributions or max out your Roth. It always helps to have an automatic draft to savings. Focus on putting more toward long-term goals rather than short-term. 

What do you do to save time and money at home? Have you started any new routines this school year? What is working for you? Let us know your money and time-saving tricks. Send us an email at aberger@financialsymmetry.com or csmith@financialsymmetry.com.

Outline of This Episode

  • [2:47] Look at how you spend your time at home
  • [4:08] Back to school means back to fundraising
  • [7:37] Meal planning
  • [11:38] Skip the carpool line
  • [13:02] Strategically work from home
  • [15:15] Think about the holidays now
  • [16:27] Reassess your monthly expenses

Connect with Allison Berger

Connect With Chad and Mike

DISCLAIMER:

This podcast is property of Financial Symmetry Inc. The hosts and guests of the show do not render or offer to render personalized investment or tax advice through this podcast. This production is for informational purposes only and does not constitute financial, tax, investment, or legal advice. Listeners should consult with appropriate advisors for advice specific to your situation.

 

Aug 26, 2019

How do you make financial decisions? Are you intentional with your money?

Short Youtube recap here: https://youtu.be/9g3s36KPm9E

Most people have trouble articulating their framework for making financial decisions. It begins with finding a healthy balance between spending and saving. After these short-term decisions, examining your longer-term goals will have more meaning. So in this episode, we asked Cameron Hendricks to join us to help you understand how to create an intentional framework to make the right financial decisions for you and your family. 

There are only 5 ways to use your money in the short-term

When planning to use your money, you need to consider what your options are and whether you are facing short-term or long-term decisions. Many people will be surprised to discover that there are only 5 ways to use your money in the short-term. 

  1. Lifestyle
  2. Give it away
  3. Pay taxes 
  4. Pay debt
  5. Save

Each one of these short-term ways to use money impacts the other. Think about your spending as a pie chart. If your lifestyle expenses increase then one of the other options has to decrease. If you increase your savings then another option has to give. 

You can start your planning by considering your long-term goals

Making intentional decisions means your short-term decisions should be driven by your long-term goals. It’s a good idea to start with long-term planning and work your way back to your short-term goals. There are 6 items to think of working towards from a long-term perspective. 

  1. Financial independence - are you looking to retire or leave your job with its security?
  2. Charitable giving - this is more than just short-term charitable giving. You will need to have a process to achieve a higher goal.
  3. Freedom from debt - how much do you pay toward your debt? Pay down your miscellaneous debt first before tackling the mortgage.
  4. Lifestyle desires - this could include a second home or a boat
  5. Family needs - Many people want to save for their children’s college but also feel the need to help their elder parents.
  6. Starting a business - This takes planning and capital.

Find ways to simplify your financial decisions

Many people think that financial planning has to be complicated. But actually the more simple you can make your planning the better. Complexity gives a comforting impression of control while simplicity is hard to distinguish from cluelessness. You may seem like you are missing out on things when you plan simply, but it’s really about understanding the flow of money. Understand how your cash flow looks now and how it will impact the long-term financial decisions. You know there will be trouble ahead if you haven’t planned for the long-term. 

Create a financial framework to plan your financial decisions

Financial decisions can seem daunting but if you have an intentional decision framework to help you walk through your financial choices then your choices will be more clear. We all have the temptation to spend, especially if we get a lump-sum payment or a bonus from work. But we need to find a way to balance our short-term satisfaction with delayed gratification. When you layout your long-term financial plans you can then start planning how to spend your money in the short-term. 

Outline of This Episode

  • [2:27] What are your options?
  • [5:44] Find ways to automate
  • [10:40] There are 6 items to think of from a long-term perspective
  • [14:35] What should you do with a large one-time increase in income?

Resources & People Mentioned

Connect with Cameron Hendricks

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

 

Aug 12, 2019

The Mega Backdoor Roth IRA could be the secret weapon you have yet to use in your retirement saving strategy. If you consider yourself a super saver, looking for alternative ways to save tax efficiently, this could be a great option. This strategy is of most interest to those maxing out all other tax-efficient savings accounts. Including standard employee 401k contributions, Roth IRA, 529, and HSA. In this episode, you'll see why we call this the secret weapon for super savers, as we breakdown who the Mega Backdoor Roth is for, why you might be interested in it, and how it compares to other IRAs.

Who should take advantage of the Mega Backdoor Roth IRA?

In order to take advantage of the Mega Backdoor Roth IRA, you first have to have access to a 401k that allows after-tax contributions. These are contributions on top of your regular $19k allowable contributions to a 401k in 2019. Hence the "Mega" moniker. So if you are already maxing out your 401K, Roth IRA, 529, and HSA contributions then the Mega Backdoor Roth IRA could be a great extra additional savings opportunity. Many get confused as to why it's called a Mega Backdoor Roth IRA when we are talking about your 401k. Good question. The name derives from where the money will be after you complete the consolidation process.

You're now seeing more larger companies and solo 401ks allow for "in-service" distributions. Meaning, you could withdraw portions of your 401k savings, while still employed. The real benefit with this savings strategy, is when you can save the extra after-tax contributions and then roll them to a Roth IRA in the same year. Meaning, you could get a larger amount in to a tax-free savings account to grow for years to come.

What’s so great about the Mega Backdoor Roth?

If done correctly, the Mega Backdoor Roth can allow you to contribute up to 6X what you can contribute to a regular Roth IRA. With a regular Roth IRA, you can contribute only $6,000 per year in 2019. The Mega Backdoor Roth allows you to contribute up to $37,000 extra each year on top of your normal employee 401k contributions.

Many people don’t know this, but the limit for 401K contributions is $56,000 or $62,000 and for those over 50. Many people assume that the limit is only $19,000. But this $19,000 limit is for pretax contributions. You can actually contribute up to $37,000 more after taxes are withheld (depending on your employer match amount). You can ask your employer if they contribute to after-tax contributions. If you aren’t sure then you should contact your HR department. They may not even know about the Mega Backdoor Roth, but if you communicate with them you could get it started in your company.

What is the difference between the Mega Backdoor Roth and the regular backdoor Roth?

If your income for a married couple is over $203,000 then you are ineligible to contribute to a typical Roth IRA. Instead, you can implement the Backdoor Roth IRA strategy. But this strategy has multiple steps to assure it's done correctly which we wrote about in a previous post. To be a good candidate for this strategy, you need to first move existing pretax accounts to an existing 401K, if you have one. The next step is to contribute $6000 to a regular non-deductible IRA. After completing this, you can convert the non-deductible IRA to a Roth IRA. The issue with the Backdoor Roth is that you can only contribute $6,000 per year.

The Mega Backdoor Roth allows you to contribute much more and would be a provision of your 401k account. Essentially, is the amount above your normal employee contributions ($19k in 2019; or $25k if over age 50) plus your employer match contributions. It’s important to consider all of your options to see if the Mega Backdoor Roth is right for your circumstances.

Outline of This Episode

  • [2:27] Who is the Mega Backdoor Roth for?
  • [4:31] What is the difference between the Mega Backdoor Roth and the regular backdoor Roth?
  • [12:33] How do you know if you can take advantage of the Mega Backdoor Roth?
  • [17:59] What are the risks?

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

Jul 29, 2019

How do you pick the books you read? Do you get book recommendations from friends or are you in a book group? Do you use an Amazon Wishlist or social media to help you discover what you want to read next? In today’s episode, we have some book recommendations for you to consider. We try to bring you a variety of genres ranging from finance to self-help, to fiction. Check out our favorite books of the year and let us know which ones you have read or plan to read. 

Digital Minimalism

Digital Minimalism might be the book for you if you are addicted to your smartphone or tablet. If you feel the need to constantly check your notifications you might want to check this book out. The idea behind Digital Minimalism is to help reduce the time you spend attached to yan electronic device. It discusses the psychology surrounding our need to constantly check those notifications and offers tips to scale back your tech usage. If you enjoy this book you also might enjoy Cal Newport’s other book called Deep Work.

Chop Wood Carry Water 

Chop Wood Carry Water is a quick, 110-page read that offers life lessons that are learned by a kid who wants to become a samurai warrior (think Karate Kid). This book is about learning to appreciate the process behind the mundane work you have to do in life. The thesis is that if you can focus on doing the boring everyday work with excellence then you can make great things happen. The book encourages you to take each challenge you face not as a test but as an opportunity to learn and grow. 

Redemption

Redemption is a work of fiction by David Baldacci which is a mystery-thriller. The main character is a Baldacci favorite, Amos Decker. Redemption makes for an exciting beach or vacation read. Like binge-watching a tv series, you’ll want to rush through it quickly to discover how it ends. 

Principles

The book Principles is another self-help book written by Ray Dalio. It is essentially laying out his 5 step process for building success. He encourages readers on how to deal with setbacks and continue to move forward. These are the 5 steps that he covers in the book:

  • Step 1 - instead of feeling frustrated and overwhelmed see pain as nature’s reminder that there is something important to learn. 
  • Step 2 - potential problems are actually potential improvements
  • Step 3 - diagnose problems to get to their root cause
  • Step 4 - design a plan
  • Step 5 - push through to completion

Books we haven’t read yet but plan to

We also have several books on our wishlist or that we plan to read soon. Mike is looking forward to reading Personal Financial Planning for Executives and Entrepreneurs to help him provide the best service possible for his clients. The Happiness Advantage is another book Mike would like to read that redefines success and happiness. 

Chad is looking forward to reading Messy Marketplace which is about buying companies. He thinks this will help him serve his clients who are in the process of selling businesses. The Family Board Meeting is a book that encourages people to enjoy the experiences they have with their children. The Algebra of Happiness and 30 Lessons for Living are 2 more books that he’d like to read.

Outline of This Episode

  • [2:17] Digital Minimalism
  • [6:05] Chop Wood Carry Water
  • [10:54] Redemption
  • [13:38] Principles
  • [16:01] Books we plan to read

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

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