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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, the Financial Symmetry advisors 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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Now displaying: 2021
Dec 20, 2021

2021 has been a wild ride! But like with any roller coaster, we've learned that the most important thing to do is to stay in your seat so that you don't get hurt.

Video recap: https://youtu.be/4fuYYZNDALQ

On this episode, we recap our views on the top 10 economic stories from 2021 and the lessons they hold going forward. 

1. Social Security to increase COLA at highest rate since 1981

Written by: Allison Berger

Social Security remains a critical component of retirement income for most senior citizens.  To ensure retirees maintain purchasing power through their golden years Social Security benefits are subject to an annual Cost of Living Adjustment (COLA) based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).  Due to rising prices and persistent inflation concerns, the COLA for 2022 will be 5.9%, the highest upward adjustment in decades.

If you are 62 or above and delaying benefits for your higher FRA or age 70 payment, you will also benefit from this adjustment.  The Social Security COLA applies to estimated future payouts for anyone who is 62 or older in 2022, even if you have not yet filed for benefits.

While the higher COLA for 2022 is positive news for today’s Social Security recipients, retirees also need to consider how inflation may impact their other retirement income sources.  Maintaining an investment portfolio with a healthy allocation to assets likely to outpace inflation over the long term remains critical to sustaining your standard of living.

2. Housing Market

Written by: Will Holt

Along with the rapid increase in energy and food prices, housing costs have contributed to an inflation rate that is at its highest level in more than 30 years.   Low interest rates, low inventories and a strong increase in demand are driving home prices to record highs.  The Raleigh housing market has been one of the hottest in the country.  According to Zillow, the price of a home in Raleigh has gone up by 26% over the last twelve months!   Large employers like Apple and Google have announced plans to expand their operations in the Triangle area which will add thousands of high paying jobs and bring even more demand to the local housing market.  The last time housing prices were rising like this was in 2007 before the housing bubble popped.  However, there are fundamental differences this time – lower interest rates, stricter loan underwriting standards and homebuyers with stronger balance sheets.  Nonetheless, it’s likely that home price increases will stabilize, especially if we get a spike in interest rates.  This will be a story to watch closely in 2022.

3. US Gov’t Debt

Written by: Bill Ramsay

Almost every year there seems to be substantial concern over the amount of US government debt and 2021 was another one.  It is notable that concerns tend to become louder when there is pending legislation or upcoming elections, but the concerns tend to involve some fundamental misunderstandings.

One of the most common arguments is that the US government should operate like a household and not have so much debt.   Two of the problems with that argument are:

  • Many households do have substantial mortgages which most often is the right thing for those households, because it wouldn’t make sense for everyone to be required to pay cash to purchase a home. So, households often run deficits and cover those deficits with debt.
  • The US government is more comparable to all households instead of a single household, and just as it would not make sense to expect all households to pay off all mortgages at one time, it also doesn’t make sense for the US government to pay off all it’s debts. After all, investors and savers want a portion of their savings to be in ultra-safe investments and the US government has never defaulted on its debt.  Just like with total mortgage debt, we should also expect the debt to grow as the economy grows.

Another misunderstanding is that high government debt leads to hyperinflation.  We can see that the argument is weak since Japan has had much higher government debt than the US for the last 20+ years with extremely low inflation.

But there are cases where high government debt and hyperinflation occurred and looking at the difference in those cases compared to Japan demonstrates the misunderstanding.

In Japan’s case, their debts are denominated in their own currency, the Yen.  In the hyperinflation cases, the debt is owed in some other country’s currency.  When a nation owes debts in another currency, if their own currency declines, the debt becomes bigger when translated back to their own currency.

This can lead to a spiral where the debt becomes harder to pay, which causes more loss of confidence in the borrower’s currency, which leads to falling currency and this spiral can continue until the borrower’s currency becomes effectively worthless and the foreign currency debt cannot be repaid.

Fortunately, the US government is a very reliable borrower, so all US government debt is denominated in US dollars.

4. Supply chain problems

Written by: Cameron Hendricks

Starting all the way back on the run on toilet paper to the shortages at your local Chick-Fil-A , supply chain scares have existed since the beginning of the pandemic. COVID outbreaks at various distribution centers and manufacturing plants sent ripple effects throughout the supply chain system which are continuously being felt to this day. Auto dealers lots have been empty of new cars for over a year now with the chip shortage, loaded cargo ships sit backed up off the coast of California, and basic items at your local grocery randomly seem out of stock (no individual packaged gold fish snacks is really bugging my two toddlers 😊). Of course with high demand and low inventory, prices have risen as you’ve seen if shopping for a car, or even just the increase in value of your current used car sitting in the driveway. The supply chain system that once seemed so smooth is now unpredictable and impacting every aspect of the lives of consumers.

5. Build back better plan

Written by: Grayson Blazek

Ahead of his inauguration, President Joe Biden proposed legislation that addressed funding for COVID-19 relief, social services, welfare, infrastructure, and the reduction of climate change effects – coined the Build Back Better Plan. The underlying components of this plan were much debated in Congress throughout 2021, with some parts of the plan passing through legislation after extensive negotiations from both sides of the political aisle. In March, Congress passed the American Rescue Plan, a COVID-19 relief package. In November, The Infrastructure Investment and Jobs Act was passed and included funding for broadband access, clean water, electric grid renewal and additional infrastructure maintenance and improvements. The Build Back Better Act, seen as the final component to the Build Back Better Plan, was passed by the House in November and now heads to the Senate to debate. In its current form, the Act includes additional funding for climate change provisions, increased funding for childcare, home care, housing and child tax credits, paid family leave, and extended Affordable Care Act subsidies. Much of this proposal would be paid for via a minimum corporate tax of 15% and increased taxes on the wealthiest taxpayers. As has been the case throughout the year, this Act will likely be much debated and revised in the Senate, and if passed, would then head back to the House for a second vote.

6. Inflation

Written by: Grace Kvantas

Inflation was the subject of many conversations in 2021 as well as one source of financial stress for many households.  During the summer, monthly inflation started creeping higher, and many economists believed that the higher inflation would be short-lived.  By October, 12-month inflation of 6.2% was at the highest rate since 1990 and higher than the Federal Reserve’s target of 2%.  Some top contributors to this higher-than-desired inflation include supply chain issues, post-lockdown demand for goods and services, and increased prices on fuel and used cars.  The effects of inflation will vary from household to household, with some feeling it more acutely than others.  Inflation is a fact of life; no one can avoid it completely.  Thankfully, stock growth has outpaced inflation over time.  This is why it’s important to have your long-term savings invested in a well-diversified investing strategy to help your money grow faster than inflation.

7. Gamestop

Written by: Mike Eklund

GameStop is a company that sells video games, consoles, and assorted merchandise.  It made headlines earlier this year when the stock price went from ~$20 to ~$483 in less than a month (January 2021).  As of December 2, 2021, the stock down ~63% from earlier highs.  What happened?  Short story is a group of retail traders worked together (Redditt forum) to force professional money managers to buy the stock to cover their short position.  This resulted in significant demand which drove the price up to levels no one expected.  The summary is markets can be crazy and feel unfair in the short-run.  The best way to reach your financial goals is not to avoid the markets, but to act and think long-term.   Investment success is driven by patience and discipline, not gambling.

8. All-Time Highs

Written by: Chad Smith

Yes, all-time stock market highs aren’t all that uncommon. In fact, we’re in the 9th year where the S&P 500 has set at least 10 new all-time highs during each of those years. In 2021, we’ve now seen 68 new highs as of November 20th.  But, for many investors, all-time high prices can be a cause for concern. They worry if they’ve missed the run up. Or shy away because what goes up, must come down. While that tends to happen every six to seven years in the markets, what’s most important to remember is that all declines up to this point have been temporary. This is where evidence can help. Looking at the S&P 500 94 year history, even if you invested at all-time highs, you’d have enjoyed double-digit annualized returns one, three, and 5 years later. Another great example of how a durable, disciplined, and diversified portfolio can help you fight the temptation to try and time the markets based on headlines. We addressed this idea in a recent podcast and video here.

9. Delta Variant

Written by: Darian Billingsley

As we entered round two of the pandemic, headlines of yet another COVID-19 mutation known as the Delta variant took over our news and media feeds and quickly became a major economic topic of discussion for the year.

First detected in March of 2021 the highly infectious Delta variant became the predominant strain, eventually accounting for over 90% of confirmed cases across the globe this year. The variant's impact stretched across multiple economies causing businesses to scale back staffing capacity, delay workers returning to the office, and experience widespread supply chain disruptions worldwide.

Navigating an unprecedented pandemic remains a factor of concern for economic interruption as we adjust to new headlines daily. We look onward into 2022 for signs of improvement as our world economies adapt to strengthen economic resilience.

10. Cryptocurrency

Written by: Haley Modlin

Bitcoin and Ethereum, the two largest cryptocurrencies, recently set new all-time highs in 2021. Although they’ve since experienced substantial drops in price, there is no argument that cryptocurrencies have continued to increase in popularity among investors, pop culture, institutions, as well as criminals. The first Bitcoin linked ETF made its debut on the NYSE in October and BlackRock, a global asset manager, added Bitcoin futures to two of its funds in January. Mainstream companies such as AMC will begin to accept Bitcoin payments and others like PayPal and Square are allowing users to buy it on their platforms while a number of companies have added it to their balance sheets. Lawmakers around the world and in the US continue to try to tackle laws and guidelines to make cryptocurrency safer for investors and less appealing to cyber criminals which could have varying effects on crypto in the future. One could speculate on the value of cryptocurrency could possibly hold for its investors in the short or long term but as a relatively new and speculative investment, its extreme volatility could take investors on a wild and bumpy ride.

Outline of This Episode

  • [1:42] The Delta Variant has impacted the world
  • [3:15] Inflation is well above historical averages
  • [3:53] Retirees are getting a raise next year through a significant COLA increase
  • [5:41] Supply chain issues have led to shortages
  • [7:32] The housing market has exploded
  • [8:34] The Build Back Better Plan is still being debated
  • [10:31] US government debt has many worried
  • [12:43] Cryptocurrency have achieved all-time highs
  • [14:00] Game Stop lovers forced the stock way up
  • [16:59] Today’s progress principles

Resources & People Mentioned

Connect with Allison and Darian 

Subscribe To This Podcast

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Dec 6, 2021

Everyone is talking about inflation. You can’t open a newspaper, look at your phone, or go to a barbecue without hearing about it. With all this talk, it can be easy to worry about your financial future.

Video recap: https://youtu.be/iZoqhqEVR1I

On this episode of Financial Symmetry, we’ll explore the causes of inflation, historical inflation, and what you can do to hedge against this silent enemy. Press play to educate yourself and ease your worries.

Why does inflation occur?

Inflation is different from market risk: it doesn’t show up in your bank or investment accounts. Instead, inflation presents itself at the gas station and the grocery store, so you do feel it in your pocketbook. Since it eats away at your buying power, inflation is often referred to as retirement’s silent danger. 

If you recall your college economy class, you’ll remember that inflation is caused by supply and demand. When there is a limited supply and a high demand, then prices go up. We see that happening now with auto sales due to the offline chip manufacturers and supply chain issues. During inflation, people worry that prices will continue to rise, so they want to rush out and make their purchases now.

Although it is frustrating to see your purchasing power erode so quickly, it is important to remember that there are worse things that can happen in the economy. Deflation is actually worse for the economy than inflation. Stagflation is a type of inflation that occurs when prices go up but the economy is slow and there is high unemployment. Thankfully, we have the opposite happening now since employers are having a hard time finding workers. Even though it is difficult to watch your purchasing power erode, there could be a worse economy.

A historic perspective

The question on everyone’s mind is: will this inflation last? Over the past 10 years, we have had historically low inflation that averaged about 2%. When comparing that average to this past year’s average of 6%, it's easy to understand why people are concerned. 

One way to contemplate the future is by looking at the past. In the 70s the US experienced some of the highest prolonged inflation rates that were punctuated by the shock in oil supply. After WWI Germany experienced crippling inflation when it had to repay its debts in foreign currency. 

The good news about our current situation is that the supply chain issues will eventually be resolved. The bad news is that higher prices are often the best solution to higher prices. Listen in to see how that works out in the long run. 

What should you do to hedge against inflation?

The reason we invest in companies is to hedge against inflation. A varied investment portfolio with global stocks is one way to ensure that you retain buying power down the road. In addition to creating a diversified portfolio, you should limit the amount of money that you retain in cash. Try to keep your cash to emergency savings since your purchasing power erodes over time. Another way that you can protect against this silent risk is by investing in TIPS, real estate, commodities, or crypto currency.

Whatever you do to protect your wealth, don’t let the media dictate your financial decisions. Stick to your financial plan. If you don’t have a financial plan, reach out to us to see how we can help you weather all kinds of financial storms. 

Outline of This Episode

  • We have had historically low inflation over the past 10 years [1:52]
  • What drives inflation [3:46]
  • Why should people care about inflation? [5:45]
  • A historic perspective [8:38]
  • Investment options to hedge against inflation [13:32]
  • Today’s progress principles [20:18]

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

Nov 22, 2021

The end of the year is a great time to start tax planning for next year. 

Video example: https://youtu.be/lzghkK2iP3Q

This week we are discussing the strategies you can utilize to enhance your tax situation before year-end.

You’ll learn which tools you can use and how the actions you take in one area of your financial life can flow into other areas.  

Are you maximizing your retirement account contributions?

When considering your pre-tax retirement account contributions there are a couple of aspects that you should consider. These contributions are a great way to reduce your tax burden, but you also need to examine your cash flow. 

Do you maximize your employer match? If not, look at your budget to see how you could take advantage of this free money. You could also take your savings a step further to maximize the pre-tax retirement account contribution cap. In 2021, the yearly max was $19,500, but in 2022 that number rises to $20,500. 

If you are maximizing your savings, it is important to review whether you are at risk of over-contributing both this year and next. After analyzing the amount that you want to save, then you can consider which account type is best for you to save in. 

Harvesting capital losses or capital gains

Another tax opportunity is to harvest capital gains and losses. Harvesting capital losses can offset any capital gains that you have realized over the year. This year it may be difficult to find capital losses; however, this is a concept that you can explore so that you can understand how it impacts your tax return. Harvesting capital losses creates an opportunity to reduce your tax burden. 

Itemizing vs taking the standard deduction

The standard deduction changed in 2017 to $12,500 for singles and $25,100 for married people filing jointly and thus causing 90% of filers to utilize the standard deduction. There are 4 deduction categories to consider when calculating whether to take the standard deduction or to itemize deductions: state and local income taxes, mortgage interest, charitable contributions, and medical deductions.

Listen in to learn if you should take the standard deduction or whether it would make sense to itemize, you’ll also hear how you could receive a tax benefit of $600 for charitable contributions.

Should you utilize Roth conversions?

Roth conversions can be an exciting opportunity to take advantage of current tax rates and have your investments grow tax-free. However, you have to be careful about how you take them. The best way to consider whether to make Roth conversions is to zoom out and look at your overall lifetime tax plan. 

If you are in a higher tax bracket than you are projected to be in the future then taking a Roth conversion now doesn’t make much sense. You also need to consider how taking a Roth conversion now could trigger other events, especially if you are 63 or older. Listen in to hear how doing a Roth conversion at age 63 could trigger an additional Medicare premium. 

Outline of This Episode

  • [2:42] Your retirement account contributions
  • [6:00] Harvesting capital losses or capital gains
  • [8:47] Review your deductions
  • [14:23] How to utilize Roth conversions
  • [18:05] Tax withholding for high earners
  • [20:58] Utilize catch-up contributions to supersize your savings
  • [27:50] RMDs are back in 2021
  • [29:39] Create a checklist of these opportunities

Resources & People Mentioned

Connect With Chad and Grayson

Nov 9, 2021

Welcome to this bonus episode of Financial Symmetry with Allison Berger and Grace Kvantas. Grace and I bring you this episode as a special preview to the upcoming Women: A Force in Business Conference in Raleigh, North Carolina.

This episode and our presentation are targeted toward women professionals looking to build their retirement nest egg. Our goal is to help women achieve success and financial wealth. So if you are a woman or if you love a woman, listen in to hear how women can achieve more success and improve their financial well-being by harnessing their financial superpowers. 

Women are stressed about money

A recent study has shown that women are more worried than ever about their finances. ⅔ of women worry about money at least once per week and 40% suffer physically due to their financial stress. This is no surprise when you discover that the top emotion that women feel about money is overwhelm whereas for men it is confidence. 

The pandemic has made women’s financial worries worse than ever since they were the hardest hit by layoffs. Once you compound women’s stress with the gender pay gap, a longer life expectancy, and a predominantly male financial industry then you realize that the odds are stacked against us.

Women are actually better investors

It is a common misconception that men are better investors than women, however, this isn’t true. Women simply don’t talk about money in the same way that men do. Women are actually more likely to do well in the markets for several reasons.

Women typically spend more time researching investment choices which leads to better selections. Women also tend to buy and hold equities longer than men, this leads to less trading costs and fewer taxes on their investment income. Overall, women are more intentional investors than men. 

Harness these 5 investing superpowers

You don’t have to carry so much financial worry. One way to ease that worry is by using your inner investing superpowers. Grace and I are here to help you to implement these superpowers so that you have a better investing experience and feel less stress when it comes to finances. If you can implement these superpowers you can come ahead financially and position yourself for a more secure retirement.

  1. Have a plan. We’ve all heard the saying: “Failing to plan is planning to fail.” This is true with your finances as well. Your financial life will run more smoothly when you have a plan. Having a plan in place helps you identify what your life goals are so that you can create a financial road map for how to achieve them. Your investment strategy will stem from your life goals. 
  2. Know your safety net. Make sure you understand what an appropriate emergency fund for your household is and put it in place. This will help build your confidence so that you can take long-term steps to achieve financial success. 
  3. Take calculated risks. Invest for the long term by building a globally diversified investment portfolio of equities (companies you use every day). This will allow you to build wealth and purchasing power over time. 
  4. Automate your savings plan. Pay yourself first. Women are busy, so creating an automated savings structure will help ease your worries about saving. Make sure that you are contributing at least the minimum amount to get an employer match in your 401K. Another way to automate your savings is to set up monthly transfers from your checking account to a savings account. By automating your savings you will build wealth over time.
  5. Know when to act and when not to. Successful investing is a lot like riding a roller coaster. The only time you will get hurt is if you get out of your seat. Make sure to stay strapped in through times of market turbulence. Bear markets can be as financially dangerous as a bear, so it is important to stay in your place and not try to flee. Instead, when you encounter a bear market, think like an opportunist, not as a victim. This will ensure that you continue to build your wealth over time. 

Listen in to hear what action items you need to take now to improve your financial well-being. 

Outline of This Episode

  • [1:45] Women are more stressed about money than ever
  • [6:03] Why are women better investors than men?
  • [7:30] 5 Investing superpowers
  • [14:13] Progress principles

Resources & People Mentioned

Connect With Allison and Grace

Subscribe To This Podcast


Apple Podcasts <> Stitcher <> Google Play

Nov 1, 2021

Anxiety-inducing headlines, all-time stock market highs and an economy still recovering from a pandemic, have left many people hesitant to invest their cash savings.

Video recap: https://youtu.be/YuytDPFD0wQ

None of us can make uncertainty disappear, but considering potential outcomes and evidence can make a huge difference in the returns you receive over your investing lifetime.

This week we are discussing strategies for how to fight the fear that comes when markets are near all-time highs.

Watching the news can be expensive

When reading and watching the news, it can be hard to remember that financial headlines are are designed to pull at your insecurities.

Many of our everyday conversations now include inferences to supply chain issues, potential tax hikes, and inflation.  The wall of worry can seem higher when crawling out of a pandemic shutdown and continues to impact investor’s confidence.

So naturally, record market highs have people wondering whether now is a good time to invest. The fear of an impending fall in the markets causes some to hold onto their cash instead of investing. Others don’t know what the right choice is for their money and are crippled by analysis paralysis.

By holding too much in cash, you’ll face the erosion of purchasing power over time due to inflation, but also experience the opportunity cost of stock market gains and the FOMO byproduct.

A financial planning process can help you make decisions

You don’t want to get stuck with analysis paralysis. A financial plan is key to understanding your investment strategy and helping you answer the question: should I invest my cash?

Walking through the financial planning process can help you create a disciplined and diversified strategy to provide added confidence in making your financial decisions.

By creating a financial plan, you can dial in your specific goals and time horizon. This helps you determine how much you’ll need in the short-run and how much you could afford to risk for the potential of higher expected returns in stock investments.

What if I invest it now and the bottom falls out?

The potential for an immediate drop after investing is always a risk investors wrestle with. And if investing in March 2000 or October 2007, you’d have to wait roughly 6 years each time to see a new all-time high.

Alternatively, there have been at least 10 record highs achieved each year over the past 9 years. So if you waited to invest during that time, because what goes up, must come down, you could still be waiting. Paralyzed by the fear of an impending drop.

One way to combat that fear is to analyze the numbers. Let’s look at historical data.

Of the people who invested at all-time highs since 1926, 81% were better off 1 year later and 77% were better off 5 years later. That still leaves a chance that you will lose money in the short-run, which is why it is important to have a safety net. And to this point, all market declines have been temporary.

Investing is like a roller coaster ride. The only time you could get hurt is if you get out of your seat.

Investing pitfalls to watch out for

The average investor is susceptible to several common investing pitfalls.

One of these is recency bias. If a stock has performed well in the past then many assume that it will continue to do well. Rather than make this assumption you’ll need to study its performance over time.

Another pitfall is market timing. Many people get a feeling about the market and they try to time their entrance and exit, but history has shown that most people can not time the market accurately. Time in the markets is better than timing the markets.

Listen to this episode of Financial Symmetry to hear all of the perils that could arise by pressing play now.

Outline of This Episode

  • [3:08] What is it about headlines that make people feel uncertain
  • [5:51] A financial planning process can help you make decisions
  • [8:14] What if I invest now and then the bottom falls out?
  • [12:50] Pitfalls that average investors fall into
  • [17:25] Today’s progress principle

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

Oct 18, 2021

The decumulation stage of retirement is different from all those years you spent accumulating your retirement savings.

Video Recap: https://youtu.be/UyvHGltT1Z0

This is why you need to have a retirement plan in place to help guide you through this transition. Unfortunately, the same plan won’t work for everyone which is why it is important to understand what type of strategy would work best for you. 

On this episode of Financial Symmetry, Allison Berger and I will check out the risks and opportunities to consider as you approach the decumulation stage of your life. Listen in to hear what you need to consider to make the most of your personal retirement plan. 

What to consider if you are retiring before age 59.5 

If you are planning to retire before the age of 59.5 you first need to make sure that you have all your ducks in a row. Before age 59.5 you won’t be able to access your various retirement accounts without a penalty, so you’ll want to make sure that you have access to money for this time period outside of a traditional retirement account. You could obtain funds from a brokerage account, home equity, rental properties, or an inheritance. Before you retire early, think about which funds you could source without having to take a penalty by dipping into your tax-deferred accounts. 

You’ll not only need to know where your money is coming from when retiring early, but you’ll also have to think about health insurance. Obtaining health insurance before you are eligible for Medicare can be quite costly. Many people choose to go with COBRA or the ACA. Make sure you consider the costs of health insurance when creating your retirement plan. 

The younger you retire the more susceptible you are to sequence of return risk. Sequence of return risk can lead many people to become conservative with their investments, however, this leads to increased inflation risk. To consider these two types of risk it is important to have a balanced portfolio

Retirement between the ages of 59.5 and 65

If you are planning to wait until full retirement age at 67 or beyond then you may be funding the early years of retirement all on your own without the help of Social Security. Once you reach the age of 59.5 you can access your retirement accounts without penalty. However, it is important to remember that income from your IRAs, 401Ks, and 403Bs will be taxed when you access them. 

Sequence of returns is still a factor this early on in retirement so make sure that your portfolio can weather the storms that the market could bring. Listen in to discover what you should be thinking about 2 years before you apply for Medicare. 

Retirement considerations after age 65

Once you reach 65 you can enroll in Medicare and will no longer have to worry about paying for costly medical insurance. This is a good time to start thinking about when you will take Social Security and the tax ramifications. If you are unfamiliar with the Social Security tax bubble check out episode 101 to learn more. 

During retirement, your annual tax plan should always be taken into consideration with your overall retirement tax plan to ensure that you save as much as you can over the course of your lifetime.

Retirement strategies don’t always go according to plan

You’ve probably heard of popular retirement strategies like the 4% rule, the guardrails, the bucket strategy, or a systematic withdrawal approach. These strategies are all great on paper but they can often fall apart when life gets in the way. We like to take a flexible approach to retirement planning that is based on your life and your financial plan. We look at the big picture to think about how you can reduce your lifetime tax rate and create a plan that works with your financial goals. 

Examine where you are on your retirement journey. Think about your risks and opportunities when creating your retirement plan. Listen to this episode to hear what you need to think about during the different phases of your retirement. 

Outline of This Episode

  • [2:40] What to consider if you are retiring before age 59.5 
  • [7:30] Considerations for those between the ages of 59.5 and 65
  • [9:49] Retirement strategies don’t always go according to plan
  • [12:10] Retirement between ages 65 and 72
  • [16:39] Retirement in the post-RMD age
  • [22:28] Progress principles

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

Apple Podcasts <> Stitcher <> Google Play

Oct 4, 2021

The American Families Plan hasn’t yet become law, but that doesn’t mean that you can’t prepare for the changes that may be coming.

Video recap: https://youtu.be/DFVgJZPwEIc

In this episode we consider the planning opportunities that could arise with the changes in tax legislation. Our goal is to ensure that you have all the tools in your toolbox so that you can minimize your tax burden. 

Who will most be affected by the tax law changes? 

The current tax law comes from the Trump administration and dates back to 2017. Prior to the current tax cuts, the marginal tax rate for those making over $400,000 was 39%. The present marginal tax rate is 35% for married couples who earn $650,000 or more.

The American Families Plan essentially reverts the tax cuts back to the pre-2017 rates. Those most affected by the proposed tax plan are higher-income earners. The current administration sees the tax changes as a way for high-income earners to pay their fair share of taxes rather than burdening those at lower income rates.

How will capital gains taxes change?

If the American Families Plan passes and becomes law then the new income tax structure would go into effect in January of 2022 which doesn’t leave much time for tax planning. 

In addition to the changes in marginal income tax rates and compressing the income brackets, there are proposed changes to the capital gains tax. The original capital gains tax plan had been to keep the capital gains tax at the income tax rate, but new changes to the legislation have dropped that rate to 25% for those who earn $400,000 or more.

Unlike the income tax plan, the capital gains tax proposal would take effect the day it was written which was in September of 2021. This leaves no time for advanced tax planning, however, Grayson Blazek offers plenty of ideas in this episode on how you can best prepare for any upcoming changes in the tax code.

Are we saying goodbye to the backdoor Roth IRA?

The backdoor Roth has been a strategy that high-income earners have been able to utilize for years to continue to fund Roth IRAs. Under the new proposal, the backdoor Roth would disappear. Rather than lamenting the loss of this useful tax tool, a better outlook is to be thankful that you were able to implement it when you could. To ensure that you take full advantage of what could be the last year of the backdoor Roth, make sure to get all of your backdoor Roth contributions in by January 31, 2021.

How will the American Families Plan affect families?

The main way that this proposed legislation will affect families is by the extension of the expanded child tax credit. The American Rescue Plan increased the child tax credit up to $3000 per child and the American Families Plan would ensure the continuation of this credit. In addition, American families would continue to receive the benefit monthly as they have in the latter part of 2021. 

Make sure to listen to the entire episode to hear the rest of the highlights of the proposed legislation. We want to keep you informed of all the potential effects of the changes in the tax code so that you can make careful decisions in your tax planning. If you have any questions regarding these changes or are looking for an advisor that stays on top of the latest in tax planning legislation, please reach out to us at FinancialSymmetry.com.

Outline of This Episode

  • [2:40] Who will be most affected by the tax law changes?
  • [6:15] How will capital gains change?
  • [10:50] The death of the backdoor Roth IRA and mega backdoor Roth IRA
  • [12:44] Who would be affected by a surtax on ultra-high income earners?
  • [15:33] Changes to RMDs
  • [20:26] Estate tax changes
  • [22:55] The child tax credit
  • [25:52] Today’s progress principle

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Sep 20, 2021

We all have those milestones in life that we enjoy reflecting on or looking forward to. Graduations, weddings, and births of children are a few that stick out.

Video recap: https://youtu.be/llO9d9DIKs4

However, there are financial milestones that are also important to remember. While maybe not as memorable, they can be just as valuable.

The most important times (financially) in a child’s life

  1. Birth - As soon as your child is born you can start contributing to their financial future. Once that child has a Social Security number you can open a 529 account in their name. This is a popular way to save for that little bundle of joy’s education. Another account that you can open for your child at birth is a Uniform Trust for Minors account (UTMA). 
  2. Age 13 - This is the age when your child is no longer eligible for the dependent care tax credit. The dependent care credit covers after-school care and summer camp.
  3. Age 18 - Your baby is no longer a child at this point, so that means you must say goodbye to the child tax credit. Also at age 18 (or 21 in some states), a child’s UTMA will automatically be transferred to their name. This is also an opportune time for you and your child to think about creating a healthcare power of attorney. 
  4. Age 26 - Yes, technically they are not children at this age, but this is the age when children lose eligibility for their parents’ health insurance. 

The years before retirement have plenty of financial milestones

There is a lot to remember to stay on track in the years leading up to retirement. By this time in life, you are probably beginning to dream about that upcoming milestone. To make sure that you stay on track for retirement, pay attention to these ages. 

  1. Age 50 - You can now contribute $6,500 more per year to your 401K and $1000 more per year to your IRA accounts. 
  2. Age 55 - You can now make HSA catch-up contributions of an extra $1000 per year. You should also note that some 401k plans allow for penalty-free withdrawal at age 55.
  3. Age 59.5 - This is when you can finally access your retirement accounts without a 10% penalty. You’ll also have the ability to roll over a portion of 401K to your IRA even if you are still working.
  4. Age 60 - You are now eligible for Social Security survivor benefits.
  5. Age 62 - You now can qualify for Social Security benefits. But should you? Listen in to hear why this may not be the best idea. 

What’s in store for you once you reach retirement age?

Congratulations, you’ve made it to retirement age! Let’s find out what milestones are in store for you next. 

  1. Age 65 - You probably won’t miss this one due to the amount of mail that you’ll be getting. You’ll want to review the literature so that you know what kind of Medicare to sign up for. You can also now withdraw HSA funds for non-medical purposes without a penalty.
  2. Age 66-67 - Full retirement age for Social Security used to be age 65 but now, depending on your birth year, it is between 66 and 67. 
  3. Age 70.5 - This used to be the time of life when you had to take RMDs. Now the only notable aspect of this age is that you can make qualified charitable distributions (QCD). This is a fantastic way to donate money to your favorite charities if you are so inclined. 
  4. Age 72 - The required minimum distribution age has recently increased from 70.5 to 72. 

Who is holding you accountable?

You may know about many of these milestones, but it is helpful to have a reminder to take action once you reach these ages. One way to ensure that you are making the most of your financial life is to have someone help hold you accountable. A fee-only financial advisor with Financial Symmetry can do exactly that. Give us a call if you would like to ensure that you are doing everything you can to stay on top of your financial life. 

Outline of This Episode

  • [2:19] What to think about when children are born
  • [5:52] Why age 26 is important
  • [12:55] You can take Social Security at 62, but should you?
  • [16:35] The RMD age has changed
  • [18:13] Today’s progress principle

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Sep 6, 2021

With Grandparents day around the corner, we're breaking down helpful financial planning strategies for grandparents.  Many grandparents have dreams of sharing the fruits of their labor with their families. However, sharing your wealth effectively takes careful planning.

YouTube recap here: https://youtu.be/eGYLeS_8hNw

Listen to this episode to hear the best ways to plan effectively for your kids and grandkids.

Vacationing Confidently

Grandparents love spoiling the grandkids. One of the more memorable ways to do this, is by taking care of planning and paying for the whole family to take a bucket list vacation. After working and saving for years, retirement brings an excellent opportunity for grandparents to take everyone on this epic family trip.

Before taking your trip, understanding how much you have to spend and whether it will be a one-time event or an annual tradition. This is where financial planning can provide priceless perspective to help you understand how much you have to spend and at what level.

Share the wealth

Another common planning strategy many grandparents begin to consider is direct gifting to their children and grandchildren. In 2021, the gift tax exemption is $15,000 per person, which means $30,000 per couple. This provides a more meaningful way for grandparents to enjoy seeing their children and grandchildren benefit from their hard work vs. waiting to inherit monies after they were to pass.

If you want to do even more to provide for the grandkids’ education you could contribute to their 529 plan or even start one of your own with the grandchild as the beneficiary. Many grandparents choose to pay the fees directly to the school.

Have you thought about ways to contribute to your grandkids' education?

Leave your affairs in order

Too many people put off their basic estate planning documents in place. Before planning anything else, make sure that you have a will, power of attorney, and healthcare power of attorney.

Once you have the basics in place then you can think more strategically about specific ways you can plan your estate.

One way to directly leave your wealth to those you love is by naming them as beneficiaries on your accounts. It’s important to remember that named beneficiaries supersede your will, so check your beneficiaries periodically to assure they still align with your wishes. Listen in to hear about trusts, per stirpes, and whether it’s better to give cash or appreciated stocks.

Common misconceptions to avoid

There is a common misconception that you can plan for a long-term care event by giving away your assets and waiting 5 years to be eligible for Medicaid. What many people don’t realize is that your household income could disqualify you from Medicaid. To qualify for Medicaid care, your household income must be less than $17,000 per year in NC and most people’s Social Security benefits would be higher than that.

Listen in to hear how important it is to create a plan to put in place and communicate your wishes to your family.

Outline of This Episode

  • [2:09] Family travel is one way to show your love
  • [3:39] How to share your wealth with your family
  • [6:30] Get your affairs in order
  • [10:35] Common misconceptions to avoid
  • [14:44] The progress principles

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Aug 23, 2021

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, it's 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.

Download the Pre-Retirement Checklist

Download the Pre-Retirement Checklist here to assure you are taking the steps you can now, to retire with confidence.

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?

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Aug 9, 2021

Stock options can be one of the most lucrative benefits of your job, but they can also be a tax land mine.

Video recap: https://youtu.be/qBovTreFv7E

Our resident tax professional, Will Holt, joins us this week to help you build a framework to consider your company’s stock options.

You’ll learn 3 key strategies you can use to make better decisions for managing your stock option holdings. Including:

  1. Managing the risks and benefits around taxation for 2 types of stock options
  2. Handling the leverage and concentration risk of stock options
  3. Deciding what to do with the proceeds once choosing to exercise and sell

If stock options are one of the perks of your job, you don’t want to get bit by the tax dog, so don’t miss this episode.

What are the risks and benefits of the two primary stock options?

It is important to understand the type of stock options that you have. There are two primary types of company stock options: incentive and non-qualified. The difference between the two is how they are taxed.

Non-qualified stock options have no real risks until they are exercised since they aren’t worth anything until they are above the strike price, or “in the money.” You can exercise your right to purchase these stock options at the strike price, but they first have to vest over a period of time, typically 4 years. If choosing to exercise and not immediately sell, and the stock price is above the strike price, your shares are in the money. If choosing to sell while in the money, any gain would be taxed at ordinary income rates and come through your paystub in most cases.

Incentive stock options alternatively, offer the opportunity for preferential tax treatment compared to non-qualified stock options.  To get preferential long-term capital gains tax treatment, you must be 2 years from the grant date and 1 year after you've exercised. This is known as a qualifying disposition.

The big risk if choosing this strategy is the potential for phantom income to be taxed at AMT rates. Before you reach the 12 month timestamp, the stock price could fall dramatically. If this occurs after the end of the calendar year when the exercise occurred, you would still be responsible for alternative minimum tax due on the 'bargain element," the difference between the strike price and fair market value of the stock when exercised. It's called phantom income, because the income effectively disappears, but the tax remains on gains that are no longer there due to a sinking stock price.

Working with a professional can help you make better decisions

Understanding strategies to unwind your stock options can be complex, which is why it's helpful to work with a professional. A financial professional can help guide you through the challenging decisions that stock options present. Stock options can be a very valuable part of your net worth and you don’t want to make the wrong moves. Taxes and holding periods aren’t the only challenges that you face by owning stock options; the concentration that you might have can pose further risk.

Are your benefits putting you at risk?

The advantage of having stock options in your benefits package could end up being a sizable risk if not managed properly. You may end up holding a supersized concentration of one stock. Having your net worth tied up in one stock can lead to more risk vs. a diversified portfolio. But many people delay selling because of the potential negative tax impact of selling.

There are ways you can manage these risks. One way is to set target prices to time your exit. You won’t always make the right call, but if you set up a framework to help manage your decisions it can help take the emotions out of the sale. You’ll also want to consider the impact of your stock options on other areas of your financial plan.

What do you do with the proceeds when you have been forced to sell

There may be times when you are forced to sell before you are ready. This could be a large, infrequent income event that could change your tax situation. One of the best ways to see this impact is running a tax projection for the year.

You may be able to take advantage of tax-loss harvesting to offset some of your tax burden. If you are charitably minded, then another way to reduce your tax liability is to set up a donor-advised fund.

In the end, remember that stock options are a reward for your hard work. You don’t want to ignore them or get caught up in analysis paralysis. You can avoid this by building your decision-making framework or working with a financial professional that can help walk you through your choices.

Outline of This Episode

  • [2:14] The difference between incentive and non-qualified stock options
  • [7:40] Your concentration can be another risk
  • [11:35] What do you do with the proceeds when you have been forced to sell
  • [16:36] How are you handling your strategies?

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Jul 26, 2021

Compared to 2020, the summer of 2021 has been exciting for most people. Many parts of the country are getting back to normal and there is plenty of fun to be had.

Video recap: https://youtu.be/aCuc4zsi3SE

But with that fun can come extra spending. Now that we are halfway through the year, this is a fantastic time to check in with your finances. 

This week, we let Chad and Mike have time off to enjoy their summer fun, so Grayson Blazek joins me to discuss 10 financial tasks for you to complete before summer comes to an end. Don’t get caught unprepared, listen to this episode to hear which key financial areas you should focus your attention on before the end of the year. 

10 Key financial areas to evaluate mid-year

  1. How is your spending changing now that we are (somewhat) post-Covid? Now that life is getting back to normal, how have your spending habits changed? It’s important to be aware of where your money is going. Start tracking what you have been spending on eating out, entertainment, and travel. Becoming aware of these expenditures will help you create a post-Covid spending plan.
  2. How has travel impacted your spending plan? Was your travel money previously going towards something else? Can you ease back spending in other areas to increase your travel budget? Make sure to shop around to get an understanding of prices before you rush into a big purchase. Post-Covid, many people are going on ‘one-time’ trips. But ask yourself, is this really a one-time thing? 
  3. How do your childcare spending habits change in the summer? For many families, summer is more expensive since there are summer camps and extra daycare costs. But for private school families, costs may decrease during the summer. If you have a child that is aging out of daycare to start school, don’t let that money simply enter back into your monthly cash flow. Think about how the money could be better spent. Are you maxing out your 401K or Roth contributions? Consider how you could distribute that money to savings. 
  4. Check your recurring services. Many of us increased our subscription services during the pandemic. Now is a good time to reevaluate whether you still need them. Do you still need grocery delivery or Doordash? Consider what you could cancel now that other spending areas are starting to creep back into your budget.
  5. Revisit your retirement savings. It’s much easier to adjust your savings levels now than to try and play catchup in November or December. Make sure that you utilize your full employer match and consider what to do if you have already hit your yearly max in your Roth or 401K.
  6. Are you missing a savings opportunity? Your retirement savings may come directly out of your paycheck, but are you automatically diverting other savings? Think about other areas where you could be saving money: an HSA, college savings fund, or even a brokerage account. Listen in to hear about the changes in the FSA limits.
  7. Consider the child tax credit. Many Americans saw the child tax credit hit their bank accounts in July. Before another one hits, reevaluate where you fall on the tax credit spectrum. Consider how your income will change in 2021 and think about if you should opt out or if you may need to pay that tax credit back come tax time. 
  8. Start constructing your tax plan. Think about how your tax situation may have changed this year. Do you have enough taxes withheld? 
  9. Have your circumstances changed? Did your goals change from 2020? Have you landed a new job? Have you seen a reduction in income or an increase in income? How may this affect your goals?
  10. Review your estate plan. Do you have all of your documents in place? Reevaluate your documents to ensure that they are current and still make sense. 

Focusing on these ten areas now can set you off on the right foot for the fall. Listen in to learn how you can enhance today and enrich tomorrow.

Outline of This Episode

  • How is your spending changing? [2:12]
  • How does travel impact your plan? [3:15]
  • How does summer impact your childcare spending [4:24]
  • Take a look at recurring services [5:45]
  • Revisit retirement savings [7:28]
  • Are you missing a savings opportunity? [8:40]
  • Child tax credit [11:06] 
  • Start constructing your tax plan [13:38]
  • Have your circumstances changed? [14:40]
  • Review your estate plan [16:33]

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Jul 12, 2021

With the turbocharged real estate market, buying a house is not as easy as it once was. We’ve all heard stories of houses getting multiple offers even before they are listed or homes selling well over the asking price. Stories like these have many people thinking about moving. 

Short Video recap: https://youtu.be/0GKbITjE9hg

On this episode of Financial Symmetry, we explore whether or not it is worth the effort to buy a home in a seller’s housing market. You’ll learn the reasons why the housing market is so hot, questions to ask yourself, and alternatives to buying a home. 

Why is the housing market so hot?

If you have talked to your neighbors or seen the news lately, you know how hot the housing market is. Everyone has heard stories about bidding wars and people receiving multiple offers on homes. It is definitely a seller's market, but why? 

There are several reasons that home sales are through the roof. As with any economic force, when demand outstrips supply, then the market becomes one-sided. Since people have been spending more time at home and even working from home, they have had an opportunity to evaluate the pros and cons of their place of residence. Couple this with an influx of cash from higher incomes and injections of cash into the economy, and many people are ready for a change of scenery. 

Steps you should take before you consider a move

But just because the Jones’s are packing up and moving, does that mean that you should too? Before you think of selling your home you should stop and consider a few questions. Since this is such a big financial decision you can take advantage of financial planning to help you analyze this choice. 

After you figure out why you want to move, you need to consider what steps you need to take to prepare. Buying a home is not as easy as it once was, so you’ll need to make sure that you have a preapproval letter in hand before looking at any houses. It’s also important to realize that in a hot housing market, contingency offers are off the table. You won’t be able to compete with cash offers if you are trying to buy a home based on the sale of your own home. So if you must sell your current house to come up with a down payment, then you may need to rent for a while after the sale of your home. 

Know how much you can afford

Your housing costs should be between 28%-36% of your monthly income. Many people know this but they only figure in the mortgage without figuring in the other expenses that come with moving to a new home. It is important to watch out for the lifestyle creep that often comes with moving. You don’t want to end up being house rich and cash poor.

One way to ensure that you don’t get roped into spending too much is by coming up with a maximum number that you can afford and telling the realtor a number that is 20%-30% less. Don’t rely on the bank to decide how much you can afford since they will be happy to lend you more.

Where will your down payment come from?

The next consideration is where will you get your down payment? There are 4 primary ways to come up with a down payment. Many people rely on the sale of their home for a down payment. Others have cash set aside in savings.

Another consideration is to use a 60 day IRA rollover. This will allow you to avoid the taxes that come from withdrawing from your IRA if you repay the money in 60 days. Oftentimes, this allows you to close on the home you are selling and replace the money in the account. However, this could backfire if the sale of your home falls through or gets delayed.

The last way to fund a down payment is to take out a HELOC on your existing home. It is important to do this before you put your home on the market. Listen in to hear some alternatives to buying a new home that you should consider before taking the leap and moving. 

Outline of This Episode

  • [1:07] Reasons why the housing market is so hot
  • [3:10] What considerations should you be thinking about?
  • [11:34] Where will your down payment come from?
  • [15:33] What are some alternatives to moving
  • [17:10] Today’s progress principle

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Jun 28, 2021

Are you a super saver? If so, you may feel like you are doing a lot of the right things to save for retirement, but you are not sure where to go next.

Check out our Youtube channel for a short video recap: https://www.youtube.com/channel/UCw9vXJ3JyO-pHEcQ1p9O-Lw

In this episode of Financial Symmetry, we explore the different ways to save for retirement outside of your 401K. You’ll learn what each type of account is used for, how you should save in each one, when is the best time to save, and how to withdraw. Let’s explore the various ways that you can save for retirement. 

Retirement investment vehicles

If you have been maxing out your 401K, you are ready to move onto the next step in retirement savings, but with so many different types of accounts to choose from, it can be hard to know which one to choose. All you have to do is learn about them to choose from the different investment vehicles. To make the various types of accounts more memorable, we are equating these investment vehicles to actual vehicles. Listen in to hear how to use the right set of wheels to drive you to retirement. 

The health savings account 

The health savings account can be compared to a Jeep Wrangler. Like the Jeep Wrangler, the health savings account has a specific purpose, but it also has added benefits. The purpose of a health savings account is to be used for medical expenses, however, it also has a triple tax advantage. You must be enrolled in a high deductible health insurance plan to qualify for a health savings account, but if you can use one, this is a fantastic way to save and invest for future healthcare expenses. 

The backdoor Roth 

The backdoor Roth is the Rolls Royce of retirement savings. Like the Rolls Royce, the backdoor Roth is unique and specifically designed for high-income earners. A regular Roth IRA maxes out at $6000 per year. With the Roth and the backdoor Roth, you will save so much in taxes that it will offset any fees that you incur. 

The mega backdoor Roth

The mega backdoor Roth can be compared to the Koenigsegg Gemera. Similar to the Koenigsegg Gemera, you may not have heard of the mega backdoor Roth. You’ll need to buckle up to drive both of these vehicles because the mega backdoor Roth will turbocharge your retirement savings. The mega backdoor Roth allows you to contribute an extra $35,000 in a Roth. You won’t see any tax savings upfront, but you will see it in retirement since this is a tax-deferred account. This account will provide a huge impact on your long-term saving for retirement. If you want to take your savings to the next level, check out the mega backdoor Roth.

The brokerage account

Many people don’t even consider this account a retirement savings account, but like the trusty Honda Accord, a common brokerage account can be just as dependable. You can use a brokerage account like a super-charged savings account. Yes, there are more tax-efficient accounts, but the benefit of a brokerage account is that there are no restrictions which gives you more flexibility. If you feel restricted by the other retirement accounts, you may want to consider saving for retirement in a brokerage account. 

You won’t want to miss our last comparison, the DeLorean. Listen in to hear which type of account we compared to this unique car.

Which investment vehicle sounds right for you? 

Outline of This Episode

  • [2:13] The health savings account
  • [5:22] Backdoor Roth
  • [9:05] Mega backdoor Roth
  • [13:45] Brokerage account
  • [17:27] The 529 account
  • [20:08] The progress principle

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Jun 14, 2021

Recent headlines have people thinking more about investing for inflation.

Video Recap: https://youtu.be/50PlOwAM4OM

It's the most recent economic worry, but there's always something to scare or concern investors. Think about the last 16 months. We've had:

  • COVID Crash
  • 2020 Election
  • Reddit/Robinhood/Gamestop
  • Crypto Volatility

Now it's inflation. But it's a good reminder that listening to the media can be expensive.

In this week's episode, we are breaking down how to think about and prepare for inflation as it relates to your investment strategy.

How to Think about Inflationary Scenarios

What is inflation?

Increases in prices over time. For example, a gallon of milk cost ~$0.26 in 1926 and has increased to ~$3.00 today. Since 1926, inflation has averaged ~3% per year.

On the other hand, deflation is when prices decline over time. These periods are generally driven by economic downturns such as the depression in the late 1920’s/early 1930’s or a brief period during the financial crisis. While the media can make the threat of inflation sound scary, it is a normal part of time passing.

Hyperinflation, however, can be very damaging. While regular inflation has averaged ~3%/yr, hyperinflation is when prices spike very quickly and at much higher rates. For example, Germany in the early 1920’s and more recently, cases in Venezuela and Zimbabwe.

Hyperinflation it typically driven by two primary causes: Government debt in another currency (Germany after WW1) and supply chain shocks (no access to necessary products).

We are not concerned about hyperinflation today.

Current Situation

The last twelve months ending April 30th, 2021 saw an annualized inflation rate of 4.2% after averaging 1-2% over the last 10 years. This is the largest jump in inflation since September 2008.

It is important to keep in mind, however, that these numbers were coming off March/April 2020 lows where inflation declined due to lack of demand for products and services – driven by the COVID crisis.

The big question most are asking: Are these permanent or transitory increases?

Transitory increases are those that are shorter-term or temporary. These have been driven by stimulus checks and government support from the $1.9 trillion American Rescue Plan passed in March 2021.

Permanent increases on the other hand are those in which prices are expected to increase materially year over year. Today, this can be seen somewhat in the Real estate markets.

It is too early to tell which route it will take, but keep in mind that the Federal Reserve wants some inflation as that is their mandate and is healthy for the market. If inflation begins to rise too quickly, they can always raise interest rates to slow down the economy.

What should you do about it?

Inflation is good for stocks and real estate over the long-term. Companies can raise prices leading to higher gross sales and companies have claims on their real assets (buildings, plant, land, equipment, etc.).

Since 1926, US Large/Small cap stock returns have outpaced inflation by ~7% and 9%, respectively. During that same time period, cash and bonds have barely exceeded inflation.

While cash can feel like a safer option in the short-term, over long periods of time, you can lose purchasing power. For example, if inflation averages 3%/yr while your cash holdings earn 1% or bonds earn 2%, you are losing purchasing power.

Although we can speculate, we don’t know whether we’ll have material or stable inflation over the next decade. Rather than being driven to change strategies based on short term media noise, we recommend sticking to your investment plan and maintain a diversified portfolio constructed based on your capacity and tolerance for risk.

Additional Resources

May 31, 2021

You may have heard a lot on the news about President Biden’s tax plan. Are you worried about how it will affect you and your tax situation? In this episode of Financial Symmetry, Grayson Blazek helps to demystify Biden’s tax proposal. You’ll learn how you may be affected and whether or not you should be worried. Don’t wait until April 15 to start your tax planning! Press play to learn what you can expect next year. 

Short Video Recap: https://youtu.be/wFzuPLnT9qc

When does the new tax law take effect?

Even though you may have heard plenty about Biden’s tax plan, it still isn’t the law--yet. As of May 2021, there has been no bill signed. This much-discussed tax plan still needs to make its way through Congress. There may be changes that take place in the way the plan is structured as part of the negotiation process. Although it hasn’t passed yet, it is still a good idea to learn as much as you can about the proposed tax law so that you can get a jump start on your future tax planning. 

Who benefits from the proposed tax law?

If your annual income level is at or below $400,000 there are many tax planning opportunities that come with the proposed tax law. The most notable change to the current tax plan is in the child tax credit. This tax credit will rise from $2000 per child to $3000. Additionally, for children under the age of 5, the child tax credit will be even higher--$3600. You may even see your tax credit hit your account early starting in July of 2021. Learn what you should be watching out for as Grayson Blazek explains how the new child tax credit will work. 

How will this tax plan affect your retirement accounts?

The proposed tax law could turn retirement planning on its head. Many people use a 401K as their preferred retirement savings vehicle, but with the new proposal, the tax benefits of the 401K may no longer be as attractive for high-income earners. The Roth IRA could become the preferred avenue. When the new tax plan takes effect you may want to change your retirement contribution strategy. Press play to learn why.

Don’t let the tax tail wag the dog!

Even though it is important to plan ahead when it comes to taxes, you don’t want the tax tail to wag the dog. This means that you don’t want your tax planning to decide everything about your financial planning. Taxes are a big part of financial planning, but it is also important to note that they are simply an inevitable side effect of making money. Now that you know a bit more about the future of tax laws you can begin to think forward to next year and beyond to structure any big liquidation events and consider where you stand financially. Download the Biden Tax Plan Decision Tree at FinancialSymmetry.com.

Outline of This Episode

  • [2:33] Don’t be in a rush to make any changes to your tax planning--yet
  • [7:34] Some benefits of the new tax laws
  • [12:35] What to look out for if you make between $400,000-$1M
  • [17:45] Retirement account tax planning could change completely
  • [23:48] Estate planning considerations
  • [28:08] Today’s progress principle

Resources & People Mentioned

Connect With Chad and Mike

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May 17, 2021

A recent survey discovered that millions of Americans 55 or older are in a rush to retire.  The pandemic has many contemplating retiring years earlier than originally imagined after adopting a "life is short" mentality.

Video recap: https://youtu.be/q5r5ZiVw7d4

But before you rush into a decision to retire early you’ll want to consider it carefully. We've listed 6 steps below to analyze if you are ready to retire.

Why retire early?

Since the pandemic has made us all consider how we are spending our time, people have become more and more frustrated with their daily grind. Many people would like to spend more time with their families or pursuing hobbies that they enjoy. 

However, if you are in a position to retire early it is important to think about why you really want to retire beyond the initial urge to leave the work world behind. It is important to consider how you will spend your days. Think about your purpose so that you are retiring to something, rather than simply running away from the 9-5. Have a plan, not just a portfolio.

Use the acronym RETIRE to consider early retirement

Grayson Blazek and I have come up with 6 strategies to consider when thinking about early retirement. We’re using the word RETIRE as an acronym to help keep it easy to remember.

  • Risk - Have you considered the sequence of return risks? You may have good returns now but a bear market could ruin that. You don’t want to have to sell low, so make sure your portfolio is allocated with risk in mind. If you want to retire early, you’ll need to have the upcoming 5-7 years of spending available to avoid the risk of having to sell a position when you aren’t ready to. Everyone has their own risk tolerance, so carefully consider yours. In addition to the sequence of return risk, you’ll also need to think about inflation risk. 
  • Early retirement account withdrawals - If you are retiring early you won’t want to pull from accounts where there might be a penalty. This means that you’ll have to consider which accounts your income will come from. Be sure to have a diversified mix of accounts to pull from. Give yourself flexibility and make sure you have access to your wealth outside of retirement plans. Have different buckets ready and understand all the tools that you have available.
  • Taxes - Take advantage of strategic tax moves. Use Roth conversions to take money from pre-tax accounts and convert it to a Roth IRA. You can take advantage of lower tax rates to fill your buckets with tax-deferred funds. In retirement, you'll want to think about your lifetime tax rate rather than your yearly tax bill.
  • Insurance game plan - One of the biggest issues for early retirees is where to get insurance. You’ll need to carefully plan how you will source insurance and how much it will cost. Most early retirees consider 3 choices: COBRA, a spousal healthcare plan, or the Affordable Care Act. You’ll want to ensure that you understand the expenses involved with each of these choices.
  • Regular reviews - How will you know if you are on the right track? Have a plan to monitor your situation periodically. Ask yourself these questions: Have your goals changed? Do you want to pivot? Has your financial situation changed? 
  • Estate loose ends - Nobody likes thinking about end-of-life decisions, but having your estate documents in place will give you peace of mind. Consider the 3 most important ones: a will, a healthcare power of attorney, and financial power of attorney. 

Download the Pre-Retirement Checklist

The question of whether to retire early is one that should not be taken lightly. You can use these 6 considerations to help you contemplate your retirement readiness, in addition, you can also download our Pre-Retirement Checklist to ensure that you are making the right decision for you and your family.

Outline of This Episode

  • [1:46] Questions people have about retiring early
  • [3:48] R is for risk
  • [8:42] E is for early retirement account withdrawals
  • [13:06] T is for taxes
  • [17:52] I is for insurance
  • [20:56] R is for regular reviews
  • [23:02] E is for estate loose ends
  • [25:42] The progress principle

Resources & People Mentioned

Connect With Chad and Mike

 

May 3, 2021

Have you ever been on your way to an epic summer road trip and then all of a sudden you come upon a roadblock? That can ruin the excitement you feel for the upcoming trip. This can happen in retirement as well. In retirement, you may confront roadblocks on your journey and if you don’t know how to maneuver around them it can leave you feeling stuck. 

On this episode of Financial Symmetry, Allison Berger joins me to discuss 3 not so obvious retirement roadblocks that you may encounter along your retirement journey. We want to be your GPS so that if you experience them you can find your way around them without too much hassle. 

Sequence of return risk 

Your first years of retirement are so important when it comes to investment returns. Sequence of return risk is when you have several years of bad returns at the beginning of retirement when you are starting to withdraw your money. There is no way to control your market returns, but there are ways to mitigate this risk. 

To combat sequence of return risk, you’ll need to maintain a balanced portfolio the way you maintain a balanced diet. Use the financial food groups! In retirement, you can no longer subsist solely on financial junk food (stocks). You’ll want to make sure that you have a healthy serving of vegetables (bonds and cash) thrown into the mix. 

After maintaining a growth mindset in the accumulation stage of life by using mainly stocks, you may be hesitant to reduce your risk load in retirement. However, having a balanced portfolio can ensure that you won’t be forced to sell when prices are down. 

Inflation

You want to ensure that your money will be worth something in retirement, but inflation reduces purchasing power over time. We can visualize how inflation works by thinking about what the price of milk was 20 years ago. Inflation not only impacts the prices of goods but also impacts your retirement income. Even with the cost of living adjustments, your Social Security may not have the same buying power in 20 years. 

Inflation is also known as the silent assassin. It is most dangerous for those who are overly cautious. To fight inflation you’ll need to make sure that there is some growth in your portfolio. You’ll need to take on some risk. 

Unforeseen tax bombs 

It is important to understand how different events can impact your taxes. The best way to combat unforeseen tax bombs is through multi-year tax planning. Most people are used to tax planning one year at a time, but retirement offers an opportunity to plan ahead. You can reduce your lifetime tax burden by thoughtful planning.

Create your retirement road map

If you put together a financial plan for retirement you’ll have a road map for the years ahead. In retirement, you’ll want to become flexible and look for opportunities. This is part of what we do with our clients. If you are interested in using us as your GPS to help you through those retirement roadblocks then check out our website and click Learn More.

Outline of This Episode

  • [3:07] Sequence of return risk can ruin your retirement
  • [9:45] Inflation is the silent killer of retirements
  • [14:14] Unforeseen tax bombs can derail your tax strategy
  • [20:47] Today’s progress principle

Resources & People Mentioned

  • Episode 89 - Sequence of Return Risk
  • Kitces article

Connect With Chad and Mike

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Apr 19, 2021

What are you investing for? Many say higher or better returns--but higher or better than what? What do those higher returns make possible for you? 

Video recap: https://www.youtube.com/watch?v=tKC2ulw3cz8

To have a successful investment experience you need to have a plan in place. Mike Eklund joins me once again on this episode of Financial Symmetry to discuss our 3 step investing process. This process creates the guideposts for all Financial Symmetry clients. Listen in to learn why failing to plan means you are planning to fail. 

Why do you need a plan?

Have you ever thought about why you are investing in the first place? Before creating your investment plan you’ll want to set your goals. This way you can understand what kind of returns you need in order to achieve your goals. 

We are all often guilty of the lottery mindset--that mindset that thinks if we could choose that one next big thing then we would be set. All we needed to do was buy Apple in 2000, or Tesla in 2012, or Bitcoin at $1000. But the reality is, successful investing requires a plan. Your investment plan can help you understand when to buy and sell or increase or reduce risk in your portfolio. 

Our 3 step process

At Financial Symmetry, we use a 3 step process to help our clients achieve their financial goals.

  1. Determine when you need the money. Will you need it sooner or later? When you need the money determines the amount of risk you can take. The longer you own stock the more the risk diminishes, so as investors, we are short-term pessimists and long-term optimists. 
  2. Have a plan in place. Having a plan means that you won’t have to react to market events. This is why the rules-based process is so important. Think about what you can control and implement the plan by using low-cost, high-quality investments. Whether you use index funds or active funds doesn't matter as much as how you plan. 
  3. Monitor your investment plan so that you can stay invested. Take advantage of opportunistic rebalancing and buy and sell based on your target percentage. Many people leave out this step but it is just as important as the other two steps. 

5 things you can expect as a Financial Symmetry client

You may be wondering what we at Financial Symmetry offer to our clients. Our clients can expect these 5 things from us.

  1. Our focus is to help you achieve your goals. We focus on long-term success over short-term results. 
  2. Clients can review their investments on a daily basis in the Client Center. 
  3. We know that communication is important, so we make sure to answer your questions. We understand that it's your money we are working with.
  4. We provide years of experience and do extensive research on all our investments. 
  5. We all invest in the same way as our clients.

We can help you reach your goals

What is your investment plan? Do you have a rules-based process? Investing is a lot like fitness. Everyone wants to start, but it can be hard to keep up. We can be your financial personal trainer and help you stay on track to reach your goals.

We can make investing easier for you. If you don’t have the knowledge, experience, and interest to do this all on your own we can help.

Outline of This Episode

  • Why are you investing in the first place? [3:40]
  • We follow a rules-based process [6:02]
  • Monitor your investment plan [15:32]
  • 5 things to expect as a Financial Symmetry client [18:21]
  • The progress principle [23:25]

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

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Apr 5, 2021

Have you been on the fence about hiring a financial advisor? This indecisiveness can cost you. This episode will help you decide whether hiring a financial advisor is right for you. You’ll learn the 5 C’s that you can expect when hiring a financial advisor. Press play to find out what you should expect from your financial advisor.

Video Recap: https://youtu.be/zuTdjdDkqUI

4 reasons you may be looking for a financial advisor

Have you been considering hiring a financial advisor? If so, then you may be seeking assistance in one of several areas. 

Competence - You are looking for someone who knows more than you and is an expert in their field.

Coaching - You may know quite a bit, but knowing and doing are 2 different things. A financial advisor can be like a personal trainer and give you the push you need to get things done. 

Convenience -A financial advisor can do what you don’t have time for. 

Continuity - You may want someone to help you coordinate with others for family or legacy planning. 

Do any of these reasons seem familiar to you? Keep listening to hear what a financial planner can do to help you.

What to expect from a financial advisor

Collaboration - Your financial advisor will co-create a plan that serves you and helps you reach your financial goals. This should be a collaborative process between the two of you. In your first meeting, you can expect to be asked a lot of questions so that they can learn about you and your goals. You want your financial advisor to lead with a planning focused approach. If you receive a sales pitch instead, this should raise a red flag.

Credentials - Many people are surprised to learn that you don’t have to have any qualifications to be a financial advisor. However, you may see a bit of an alphabet soup after a financial advisor’s name. It is important to understand what these letters mean. Are they real credentials or simply sales designations? Look for the gold standard CFP certification. CFA and CPA are two other certifications that may be relevant to your situation.

Communication - You can expect regular communication from your financial advisor. They may set up a communication calendar with you to help you set expectations in communication. This regular communication will help you stay updated. Your advisor may also reach out to discuss tax opportunities, set goals, and to review progress. Listen in to hear what red flags you should look out for in your advisor communications.

Compounding value - Are you better off after you pay your advisor than you would have been otherwise? This can be hard to quantify and may take a bit of introspection. Look at your return on life as well as the quantitative parts. Consider your investment returns, rebalancing, and tax deferral. If you think that your advisor is providing a free service then make sure to look for the hidden costs in your portfolio. A fee-only financial advisor discloses their costs upfront so that there are no surprises. If you are looking for a fee-only financial advisor you can find out more about our services at FinancialSymmetry.com.

Outline of This Episode

  • The 4 reasons you may be looking for a financial advisor [2:57]
  • What to expect from a financial advisor [4:19]
  • Your financial advisor should communicate with you regularly [14:51] 
  • Is your financial advisor adding value to your life? [18:51]
  • The progress principle [24:01]

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

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Mar 22, 2021

The American Rescue Plan was recently passed, but do you know all the changes it will bring? You probably already know about the stimulus checks, but you may not know how it could affect your taxes and healthcare. This latest economic stimulus package could mean big things for your tax planning. 

Video recap here: https://youtu.be/Vq8Y2CFYS6E

Since the American Rescue Plan has a heavy tax focus, I invited tax planning extraordinaire, Grayson Blazek, to brief us all on the risks and opportunities that we should be looking out for with the newest piece of legislation. He simplifies this complex topic down to 5 key areas. If you are looking for tax planning opportunities or want to know the risks to look out for, then make sure to tune into Grayson Blazek’s breakdown of the American Rescue Plan. 

Who qualifies for the third installment of stimulus checks?

The third round of stimulus checks may be the most widely known part of the American Rescue Plan. These checks are capped at $1400 per person. Although the income range of those who qualify has narrowed, many people who were not previously eligible for stimulus checks will be eligible for round 3. 

The age range for dependents has been expanded to those in college and older high school students, whereas with the previous rounds of stimulus, dependents were limited to ages 16 and under. Listen in to find out how the income bracket for stimulus checks has changed and learn how you could use this stimulus package as an opportunity for careful tax planning.

How has the ARP changed health insurance premiums?

If you were laid off or terminated like many others last year, your company must continue to offer health insurance through COBRA. The drawback with COBRA is that the full cost of the insurance premium was placed solely on the participant without the employer absorbing a share. The American Rescue Plan will now fully subsidize the premiums of COBRA until September of 2021. This means that if you are on COBRA your premiums will be zero.

That wasn’t the only change in health insurance premiums through the ARP. Find out how the thresholds of the Affordable Care Act have changed with the bill as well. Press play to hear how. 

Changes to the child tax credit and the dependent care tax credit may have you rethinking your tax planning strategy

Most people don’t pay attention to their taxes until the time comes for them to file. But maybe after listening to this episode you may want to start getting in front of your taxes and plan the year ahead rather than focus on the previous year. 

If you have children, then this year is an especially good time to consider tax planning. You’ll want to take advantage of the expanded tax credit that went from $2000 to $3000 and $3600 for children under 6 years old. In addition to the child tax credit, the child dependent care tax credit was expanded to max out at $8000 per child.

Changes to unemployment compensation

Lastly, the American Rescue Plan has extended state and federal benefits to unemployment compensation until September 6. Lawmakers also chose to make unemployment compensation tax-free for 2020. 

Listen in to hear all the details so that you can develop a plan to utilize these changes in your tax planning efforts. This may be a good year for you to consult a CPA to help you file your taxes.

Outline of This Episode

  • [1:20] Stimulus checks part 3
  • [9:10] Health insurance
  • [15:54] The new child tax credit
  • [23:54] The child dependent care tax credit
  • [27:20] Changes in unemployment compensation
  • [32:00] You may want to reach out to a CPA this year

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Mar 8, 2021

It’s always fun to peek behind the curtain and see the strategies and process people use for their decision making.

Video recap: https://youtu.be/DDp2dBUhrSg

During this conversation, we review some of my core beliefs around:

  • importance of tradeoffs - how every financial decision affects others
  • being intentional in being a good steward
  • Defining the balance between enjoying today while saving for tomorrow
  • Structuring your money management around the give, grow, owe and live philosophy

4 Primary Uses of Money

You can use it to live, give, owe or grow. For us, we rank these in the following order: give, grow, live, owe.

Giving is at the top of our budget. Giving first breaks the power of money and releases its hold over people. Therefore, tithing to our church has been at the top of our priority list.

We then focus on the growth aspect. This starts with automating our savings so that we can reach 15% of our income. As for how we invest we focus on various types of accounts from 401K to Roth IRAs to 529s for the kids. We explain in the episode how we've set up a system to where we don't lose sleep over our 90% stock allocation.

With 3 yr old twins, a large part of our spending goes to daycare costs. My spouse and I try to spend our money on the things that create joy, including going to NC State sporting events and going on camping trips.

I've always used debt as a tool for large, low-interest purchases such as his home and car. We only hold one credit card and doesn’t want to open any more accounts than are necessary.

Outline of This Episode

  • [4:25] What are Cameron’s money influences?
  • [9:07] How does Cameron divide up his resources?
  • [15:27] Does he worry about his 90% stock allocation?
  • [21:26] How does he see debt?
  • [26:30] What was the best money he spent in 2020?
  • [31:15] The power of small wins

Resources & People Mentioned

Connect With Cameron

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Feb 22, 2021

Have you wondered if there are any financial mistakes that you may have been making?

Video recap here: https://youtu.be/9fsWlp56R2U

Sometimes our financial mistakes aren’t obvious, so in this episode of Financial Symmetry, we discuss 3 hidden financial mistakes that you may be making and how you can spot them. 

Uncertain outcomes cannot be predicted

Are you guilty of believing an uncertain outcome is certain? Sometimes we feel confident that things are going to happen. This can be true even with geopolitical events like the Coronavirus. You may have known the virus would happen, but could you have predicted this current situation? 

People are naturally overconfident, but the market is smarter than you. Trying to anticipate corrections will cost you money. In fact, trying to anticipate market corrections will end up costing you more money than the market corrections themselves.

One way to prevent overconfidence is by talking through potential outcomes with a financial advisor or a financial accountability partner. 

Don’t underestimate the market’s ability for positive surprises

Many people have a negative money script or way that we view finances. This scarcity mindset could penalize their financial potential. There will always be reasons to wait it out or not invest, but instead of focusing on those reasons focus on not missing out on opportunities. You don’t want to take a pay cut in retirement because of missed opportunities. 

We often delay financial decisions to give ourselves time to think about it more or evaluate the alternatives and to consider all outcomes. But often the best investments are the most difficult ones that you have to make. This is why having an investment plan makes sense. 

“Investing is a lifelong journey. Making money slowly is much better than making then losing money quickly.” -- David Booth

Are you missing hidden tax opportunities?

There are different tax opportunities that can be taken depending on your phase of life and how the laws change. One opportunity that many retirees were able to take advantage of this year was the lack of required minimum distributions (RMDs). This allowed people to do Roth conversions. Retirement brings on a wealth of tax planning opportunities since you have more control over your income in retirement. Advanced tax planning early in retirement can help you save on your lifetime tax bill. Listen in to hear how long-term tax planning can save you money over your lifetime. 

Estate planning pitfalls

Estate planning is often the last part of a financial plan that people want to address since it is the least enjoyable part of financial planning. But if you want a say in what happens to your money after you are gone then you’ll need to create an estate plan and review it periodically. Check out episodes 102 and 122 to learn more about estate planning. 

Do you have enough? Are you saving enough? When is the best time to invest? Are you missing out? These are all questions that can be answered with the right financial plan. Think about what a financial plan can do for you. If you are looking for a financial advisor to help you create a financial plan click through to our website.

.Outline of This Episode

  • [2:40] Believing an uncertain outcome is certain 
  • [10:16] Missing hidden tax opportunities 
  • [14:50] Are you taking advantage of an HSA?
  • [17:15] Estate planning pitfalls
  • [21:18] Today’s progress principle

Resources & People Mentioned

Connect With Chad and Mike

Subscribe To This Podcast

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Feb 8, 2021

Stock market manias have an uncanny way of capturing our attention.

Short video recap: https://youtu.be/wr04xy1pDnU

Not only do they dominate weekly headlines, but create visions of what could be. The most recent example is the rapid rise of meme stocks, including Gamestop, AMC and Blackberry among others.

In this episode, we’ll explore what happened with this most recent mania, and describe the why behind how we can become enamored with this type of approach. We'll then offer three questions to provide a framework for the next time you're facing similar feelings.

What happened with Game Stop?

You may have seen a Game Stop store at your local mall or shopping center. Game Stop is a video game retailer whose future did not look promising. Many people compared it to Blockbuster Video.

This uncertain future attracted the interest of short-sellers and the retailer ended up becoming one of the most heavily shorted stocks. When an online Reddit group discovered what was happening to the stock, many people decided to jump in and stop the short. This sudden influx of investors drove the share price up to unprecedented levels.

There’s a difference between gambling and investing

Manias are nothing new. We've seen them in many forms including the Nifty Fifty in the 1950s, the tech bubble in the 1990s and BRIC Countries during the 2000s. The speed and size of these rallies can foster a fear of missing out feeling that's is more analogous to gambling.

There's a fine line between gambling and investing. In stock market manias, it's easy for people to throw risk considerations out the window because the possibility of life-changing gains takes over. Subsequently, this mentality could lead to detrimental results when investors are using money they can't afford to lose.

With Game Stop, investing quickly becomes interesting when the stock is increasing like a rocket ship within a week. For many, this strategy looks miles more exciting when compared to a disciplined long-term strategy. This is when the gambling temptation can circumvent the longer-term evidence based approach you may have used up to that point. Enter diversification.

That's because diversification decreases your investment risk. When you diversify, you invest in many different types and sizes of companies all over the world. The goal of diversification is to ensure the performance of one specific stock won’t impact your entire portfolio.

3 Questions to Ponder when Tempted

If you find yourself considering a specific stock purchase, there are a few questions that can help your decision.

  1. What does this strategy claiming to provide that's not already in your portfolio?
  2. What will this investment reasonably add to your portfolio by including it?
    • Could you increase your expected returns?
    • Will it reduce volatility in your portfolio?
    • Does this help you achieve a goal?
  3. Are you going to be comfortable with the range of possibilities this purchase creates?

Your investment strategy will be most appropriate for you when it's created in service to your financial plan. A plan that is specifically created for your goals and circumstances. Understanding the interaction between your income and future expenses for the next few years.

  • What will you need your savings rate to be?
  • How much longer will you plan to work?
  • Do you have other resources where this risk won't derail your long-term financial picture?

Carefully considering your investment decisions and ensuring that they align with a cohesive and diversified investment strategy will help you stay on target to reach your long-term goals.

Outline of This Episode

  • [1:32] What happened with Game Stop?
  • [6:03] There is a difference between gambling and investing
  • [9:29] The benefits of diversification are far-reaching
  • [14:39] Time is the ultimate thief 
  • [17:33] Today’s progress principle

Connect With Chad and Mike

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Jan 25, 2021

What is the most important thing you can do for building wealth?

Video recap: https://youtu.be/OVSKtk6TzB0

Recently, Jeff Levine (@CPAPlanner) put this question out into the Twitterverse: Other than saving and investing, what is the one single most important factor to financial success?

Too often when dealing with financial decisions, we try to overcomplicate what is best for us. We liked the simplicity of a single thing to focus on, so this week we are breaking down our version of the most important thing you can do in each decade to improve your financial journey.

Harness the power of compound interest while you’re young

If you are starting to build wealth in your teens and 20s you’re in luck. Time is on your side.

An often cited roadblock to getting this started, is the overwhelming debt obligations to student loans. While important to tackle high interest rate debt, carving out a small amount of automated savings can be life-changing.

For many, the first time we see a compound interest example, we are inspired. We included a powerful example below to demonstrate how much investment growth accumulates over 40 years, compared to the amount you are saving.

By saving small amounts early, compound interest becomes your super power. Automating this savings each month in an investment account with exposure to a diversified stock portfolio starting in your 20s, is arguably the single biggest impact decision you'll make in building wealth. Because of the natural discipline it creates, making it harder to stop it down the road.

Continue to pay yourself first

During your 30s, life often becomes busier. Between new marriages, job changes and growing families, consequential decisions can pile up. These exciting changes bring curveballs you often don't expect, like childcare for remote school over the past year.

This is when deciding to pay yourself first benefits you behind the scenes when life decisions are taking priority. If your saving and investing decisions are made only after you cover your expenses, then your budget is upside down.

Automating your savings and charitable giving can leave you better positioned as you head in to your 40s.

Don’t compare yourself with those around you

During this decade, it's tempting to continue moving the goalposts as you reach certain levels of success.

Comparing your financial situation to others is a common derailment to your long-term success in your 40s. Keeping up with the Joneses can feel like an endless treadmill.

In the The Psychology of Money, Morgan Housel writes, “the ceiling of social comparison is so high that virtually no one will ever hit it, which means it is a battle that can never be won or that the only way to win is to not fight it to begin with, to accept that you might have enough even if it’s less than those around you.”

Determine your definition of enough. Is it a certain amount of money in the bank? A bigger house? Being laser focused on your ultimate financial goals, allows you stick to your financial plan, providing peace of mind along the way.

Be flexible in your 50s

Successful financial planning begins with understanding potential high impact risks.

More and more, we see unexpected hurdles for people in their 50s. It could be a layoff or a loss of assets due to grey divorce, but understanding the potential impact with scenario planning beforehand can leave you more agile to adjust.

Investing in your personal and professional relationships through the years, allows for more flexibility when reinventing yourself in these circumstances. Additionally, understanding the impact of withdrawals on your assets can be valuable in the case you need temporary withdrawals to sustain you during a transition.

After building wealth, keep perspective

Hopefully, in your 60s you are reflecting on a life well lived. This is a time to gain perspective. Common rules of thumb or family recommendations may not be the best. Some common things we hear related to this are:

  • Because I'm retiring soon, shouldn't I reduce the risk in my investment strategy?
  • I need to pay off your mortgage before I retire.
  • Shouldn't I take Social Security at 62, because I not sure it will be there if I wait?
  • Why would I want to make withdrawals from my IRA before I have to?

Having a plan in your 60s provides confidence. Hiring a financial professional can help you develop a plan and to gain perspective so that you can create a long term plan for your money.

Outline of This Episode

  • [4:06] What is the one thing you can do in your teens and 20s to help build wealth?
  • [8:23] The one thing in your 30s that you can do to build wealth 
  • [10:57] What should you be doing in your 40s to build wealth?
  • [14:35] The one thing in your 50s that you can do to build wealth
  • [17:49] What can you do in your 60s to build wealth?
  • [21:30] Consider continuity in your 70s
  • [22:55] What should you be doing in your 80s?
  • [25:32] The progress principle

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