Archive for Financial Planning

National 529 College Savings Plan Day

Financial Planning, Yusuf Abugideirion May 18th, 2017No Comments

Written By: Yusuf Abugideiri, CFP®

Planning for higher education costs is frequently a topic we discuss with our Clients. It can be tricky to decide when and how to start saving  because of the unknown factors that make estimating college costs challenging. We have used this space before to discuss the pros and cons of using a 529 plan as part of one’s approach to saving for college. Today, in honor of National 529 College Savings Plan Day on the 29th of May, we thought it would be worthwhile to revisit the topic to share more on the two forms of plans and our thoughts on the best available plans.

Let’s start by briefly explaining what a 529 plan is. 529s are tax advantage plans that come in two forms – pre-paid tuition plans and savings plans.

  • Pre-paid tuition plans enable the account owner to pay for the beneficiary’s tuition and fees in advance. The benefit of doing so is “locking in” the beneficiary’s education costs at current rates instead of paying them at higher rates in the future. According to CollegeBoard, in-state tuition and fees at public four-year institutions have increased by about 4% per year over the past 30 years; FinAid.org reviewed every 17-year period from 1958 to 2001 and determined tuition inflation rates were between 6 and 9% per year. Looking forward, Savingforcollege.com projects tuition and fees will increase by 5% per year in the coming decades. Yeske Buie takes a more conservative approach and projects that tuition inflation rates will be 7% in the projections we prepare for our Clients.
  • Savings plans, on the other hand, allow for tax-advantage savings for qualified education expenses. Contributions to a 529 grow on a tax-deferred basis and distributions for tuition, fees, books, and other qualified expenses are tax-free.

For our Clients, we generally recommend Utah’s Educational Savings Plan (UESP) because the investment options available through their program enable us to create robust, diverse, low-cost portfolios that are almost a perfect match to what we can construct in our existing Client accounts. Through UESP, we’re able to select Dimensional Fund Advisors (DFA) mutual funds without paying an additional fee (unlike other states’ plans) and we supplement those investments with a few mutual funds from Vanguard, just as we do in our standard portfolio model. While there are other 529 plans that offer DFA mutual funds, none allow as much flexibility in constructing portfolio models as UESP. We also use customized age-based portfolio models to invest the contributions to the accounts – as the child approaches their college years, we notch the stock allocation down and increase the bond allocation to help ensure the funds are available for their expenses when the time comes, not unlike the approach we take with our Clients as they approach retirement.

If you have more questions about how 529s can be used effectively as a college planning tool, please don’t hesitate to reach out to member of our financial planning team. And if you’d like to take an active role in celebrating National 529 Day, Savingforcollege.com is hosting a webinar on Wednesday, May 24th at 1:00pm ET during which industry experts will offer comments and answer questions. The webinar is free; click here for more information.

Three Questions to Ask Yourself When Saving for a Large Purchase

Financial Planningon May 3rd, 2017No Comments

Written By: Camille Bouvet, CFP®

Saving for your next large purchase gives you an exciting goal to look forward to, although it isn’t always easy. Just like pursuing any goal, there are trade-offs to consider.  Unless you’re expecting to win tomorrow’s lottery, asking yourself these three questions can get you thinking about the aspects of a savings plan to help you achieve your goal.

  1.  What’s my starting point after setting aside an emergency fund?
    • Saving for a large purchase requires your commitment. In general, we recommend our Clients set aside three to six months’ worth of take-home pay in cash before considering other financial goals in the event that you experience a change in job or circumstances. Then you can decide how much you can start with. You can learn more about our thoughts on emergency funds and cash flow planning here.
  2.   When do I want to purchase it?
    • Your purchase date will help you determine when it will make sense to start saving and will inform the other trade-offs to consider.
  3. Which saving system works for me?
    • Finding a saving system that works for you is key to establishing and maintaining your saving habit. Some people respond well to automated saving techniques such as directing a dollar amount or percentage of your paycheck to a separate savings account each month. Or you may find it easier to direct an upcoming lump sum such as a cash bonus or tax refund. Consider using a cash flow tracker as a tool to help you stick to your saving goal.

What is your next large purchase? Let us know! We’re happy to talk to you about your options and share our recommendations for how you can save for that purchase.

Cyber Spring Cleaning

Financial Planning, Yeske Buie Millennialon May 3rd, 2017No Comments

Written By: Lauren Mireles, RP®

With six weeks to go until the first day of summer, there’s still time to complete your spring cleaning projects. A typical list of spring cleaning projects likely includes de-cluttering your living spaces and swapping your winter clothes for a summer variety. But when is the last time you “scrubbed” your digital life? Regular maintenance of your digital devices, profiles, and online identity is key to protecting yourself from the “dirt” of phishers and hackers. Below we offer a cyber spring cleaning checklist to add to your remaining your spring cleaning initiatives.

  1. Review your accounts and make it a habit to proactively check them on a regular basis. Make sure to read your Schwab and other financial account statements each month; once you’ve done so, shred them.
  2. Clean out your old email and empty deleted folders. If you need to keep old messages, move them to an archive. You may also consider unsubscribing from newsletters, email alerts and updates you no longer read. A full list of email best practices can be found here.
  3. Turn on two-factor authentication (2FA) on critical accounts like email, banking and social media. Get the 411 on 2FA here.
  4. Refresh your passwords with a structure that is not easy to guess and keep them in a safe location away from your computer. Make unique passwords for important accounts like email, finance and healthcare. Be sure all relevant devices are password, passcode, or fingerprint protected. This includes devices like your phone, tablet, internet router, and more.
  5. Monitor your credit report for early detection of identity fraud. You can learn more about how to conduct A Careful Review of Your Credit Report here on our website.
  6. Own your online presence by reviewing the privacy and security settings on websites you use to be sure they are set at your comfort level for sharing.
  7. Consider enrolling in IdentityForce’s robust and comprehensive service to rest assured that another set of eyes is proactively working to protect your identity, privacy, and credit.

For more healthy technology habits you can adopt this spring and the rest of this year, we encourage you to explore the following posts:

Expert Spotlight: Picking Policies to Meet Insurance Needs

Financial Planningon May 3rd, 2017No Comments

Interview By: Yusuf Abugideiri, CFP®

At Yeske Buie, we believe that successful financial planning captures your life in a big-picture, holistic way. We do this by focusing on the Financial Planning process that includes identifying your goals and resources, establishing steps to harness those resources in pursuit of your Live Big® goals, and implementing and reviewing a plan specifically developed for you. We also do this by engaging with your strategic partners –  the accountants, attorneys, and insurance agents who prepare specific analyses that affect your financial plan.

One of the strategic partners we work with closely in the DC, Maryland, and Virginia area is Kim Natovitz, an insurance associate with over twenty-five years of experience in the industry. Known for her leadership, poise, and excellence at translating complexities into readily accessible explanations for her Clients, Kim excels at supplying them with an incredibly caring and supportive team and going out of her way to remove administrative burdens and obstacles. In this post, Kim shares her expertise on the process and approach she takes as she helps her Clients pick policies to meet their insurance needs.

Yeske Buie: How does your relationship begin with a new Client?

Kim Natovitz: The most important thing we do is collaborate with the Client’s other advisors to really understand what their current financial situation is and what the financial impact would be if they got sick, injured, or died prematurely. Then we look at what coverages they already have in place, where they are in their planning process, and evaluate the planning they’ve already done to make sure those vehicles are performing as they should be.

Yeske Buie: Once you have an understanding of the Client’s needs, what is the next step?

Kim Natovitz: There’s some “housekeeping” work that needs to be done. We look to see if are there existing opportunities of which a Client is not taking advantage, like their employer-provided benefits or a policy through a professional association. Policies provided by an employer can often be obtained at a significant discount because they are group policies. With regards to coverage obtained through a professional association, we spend time reading the contracts carefully because, although they’re generally inexpensive, it can be difficult to receive benefits when the need to file a claim arises. Once we exhaust all of the options a Client can obtain through existing avenues, we look to fill the gaps with products that are available in the market.

Yeske Buie: What do you look for when evaluating insurance policies?

Kim Natovitz: Our process is robust. We look at a number of things, including

  • The Client’s medical history, the state they live in, their hobbies, and other things that make their needs unique – this information ultimately shapes the recommendations because the answers to these questions serve as filters to whittle down the universe of appropriate products
  • Whether one product can do “double-duty”; there are lots of insurance products with great riders that can improve the efficacy of a solution by addressing more than one need (ex. a life insurance policy with a long-term care insurance rider);
  • We will oftentimes go through underwriting with multiple carriers to assess appropriateness, fit, and costs; as the offers come in, we follow up with carriers who may not have been initially interested in providing coverage and see if they’re willing to make a better offer now that someone else has done the “heavy lifting”;
  • Additionally, we look to see if there is someone who can pay the premium on the Client’s behalf (ex. for a Client who needs more disability insurance, we’ll ask if this is an issue that other employees in their organization are experiencing and whether their employer has a willingness to establish a program for the employees).

Yeske Buie: Once a Client selects a policy, what happens next?

Kim Natovitz: Our job is to make sure of two things:

  1. The Client’s coverage stays in force – we help our Clients keep track of their premium payments and will reach out to the Client and/or their advisors if we learn of a missed or late payment to confirm everything is ok and that the policy is still the best fit for the Client’s needs.
  2. When a claim is filed, we work to remove as much of the administrative burden as possible for the Client and their family – we’ll follow up with the carrier on their behalf because we know what to look for and what questions to ask, and we make sure to explain everything to the Client so that they can concentrate their energy on taking care of themselves and their loved ones.

Yeske Buie: What is an interesting observation you can share from your experience working with Clients?

Kim Natovitz: Virtually every Client we’ve worked with can tell us exactly how much life insurance they have, but very few can tell us what would happen if they became disabled or, post-retirement, if they have a plan for what would happen if they needed custodial care as they get older. So, although we spend a lot of time making sure a Client’s life insurance needs are met, we also focus on their disability and long term care insurance needs.

More About Kim Natovitz:

Kim is a member of the Individual Solutions team at TriBridge Partners. She has over twenty-five years of experience in the insurance industry, with a background in individual planning.

Kim Natovitz is the founder and president of The Natovitz Group, which she started in 1992. Known for her leadership, poise, and excellence at translating complexities into readily accessible explanations for her clients, she excels at supplying them with an incredibly caring and supportive team and going out of her way to remove administrative burdens and obstacles.

Kim serves both the Financial Advisor community as well as individual clients, and is constantly increasing her knowledge and education to better serve them. In 2012, Kim received her Certification in Long-Term Care (CLTC) designation providing training.

Professional Affiliations & Education:

  • Chartered Life Underwriter (CLU)
  • Certification in Long-Term Care (CLTC)

To contact Kim, please feel free to connect with our Financial Planning Team or email Kim directly at kim.natovitz@tribridgepartners.com.

Financial Decisions During a Divorce

Financial Planningon April 19th, 2017No Comments

Written By: Ryan Klemm

Dealing with your finances may be the last thing on your mind when going through a divorce, or it may be the first. Regardless of the order, deciding how the couple’s assets will be split is one of the biggest decisions the two parties will face. As such, it is important to have a strong understanding of the financial rules that are applicable during a divorce to help ensure both individuals’ financial stability before the process has been finalized. With this in mind, we share our thoughts on important considerations to keep in mind if you or someone you know finds themselves faced with the financial decisions of a divorce.

One of the most important areas to consider when deciding how to split a couple’s assets is the difference between retirement assets held in employer plans vs. assets held on an individual basis and the applicable tax rules of each account type. As long as the appropriate steps are followed, transfers incident to divorce are tax-free scenarios and will not trigger a transfer of value (recognition of tax). For accounts that are held individually, assets can be separated immediately after the divorce is finalized but should be done so carefully to avoid tax ramifications. For example, if you take a portion of your former spouse’s retirement account(s) and do not direct that amount to an IRA, you will create a tax liability based on your marginal tax rate. A way to avoid this tax liability is to use a direct rollover to transfer the funds from your former spouse’s account to yours. This method will qualify as a tax free transfer as there is no constructive receipt by the receiving party. After this transfer occurs, it is important to know that the receiver assumes the tax responsibility going forward and must adhere to IRA tax rules. For couples who split both pre-tax and post-tax accounts, the receivers can expect to maintain the benefits of the more advantageous tax situation when they start taking distributions during retirement.

When it comes to assets held in employer plans, it can be beneficial to request a Qualified Domestic Relations Order (QDRO) as part of the divorce agreement to establish your legal right to receive a designated percentage of your former spouse’s qualified plan. In the eyes of the law, any retirement assets accumulated by a working spouse during marriage are recognized as earned by both spouses. As employer provided retirement accounts predominately receive the majority of a couples shared retirement funding, it is therefore an important order to consider as part of a divorce settlement.

No matter the account type, one of the first things to be done once the assets are transferred is to update your beneficiary information on all retirement accounts. This update will allow post-death control of where your assets are directed and if left unchanged will most likely revert back to your former spouse.

The second area to pay attention to in regards to assets after divorce is the ability to utilize your former spouse’s Social Security benefits. Federal law mandates that a former spouse has a right to Social Security earnings much in the same way as they view accumulated retirement assets as shared earnings. You are entitled to 50% of your former spouse’s full retirement social security benefit if you were married to your former spouse for more than 10 years, have reached age 62 and have not remarried. The federal law also mandates that if you remarry at any time, you will lose the benefit amount.

At Yeske Buie, our goal in supporting any Client going through the divorce process is to help ensure that the financial assets they receive are handled in the most appropriate and unbiased way. It is our hope that removing the stress of finances from this emotional process will provide some peace of mind to focus on the other considerations that arise at this time. If you have any questions related to the financial decisions during a divorce either for yourself or for someone you know, please do not hesitate to contact us.

Don’t Fall For The Imposter

Financial Planning, Yeske Buie Millennialon April 5th, 2017No Comments

Written By: Cristin Etheredge, RP®

The Federal Trade Commission (FTC) recently released their annual summary of consumer complaints and consumer protection statistics for 2016. For the first time in the 20 years that the FTC has been keeping records, imposter scams surpassed identity theft among reported consumer complaints. When you combine these two issues, the FTC complaints exceeded 800,000 in 2016.

Imposter scams are situations where a hacker pretends to be someone that they are not. The imposter usually poses as someone you are likely to trust like a government official, bank representative or computer technician; and then they fraudulently seek money.

Statistics show that one of the primary ways fraudsters will likely try to reach you is by telephone. The complaint data that the FTC collected showed 77% of reported fraud was done by phone, 8% by email, 6% through the internet and 3% through postal mail. These scams cost consumers a reported $744.5 million dollars last year, or an average of $1,124 per complaint – and these numbers are only from the fraud that was reported to the FTC.

Despite the rise in reported scams, identity theft complaints dropped by 19% when compared to 2015, and the drop is largely attributed to the public becoming more knowledgeable and diligent with safeguarding their personal information. With that in mind, we share a few of the most common scams that fraudsters are using right now to provide you with ways to safeguard yourself against imposter scams and help ensure that you don’t fall for the imposter.

  • IRS Scam 
    • Fraudsters contact you and claim that you owe money. Typically, imposters will threaten legal action unless you make an immediate payment through a money order, cashier’s check or prepaid debit card. Keep in mind, real IRS agents will always first contact you by postal mail before any other source, and the agency accepts both checks and credit cards. Read more in Tips to Thwart Tax Thieves.
  • Other Government Officials 
    • As more people learned of the fraudulent IRS scams, fraudsters broadened their horizons. Claims have been made that imposters have been posing as any federal government employee to “verify” personal information via phone, including the US Dept. of Health and Human Services. Scammers are able to fake people into believing they are legitimate, because they are able to “spoof” the caller-id to appear legitimate. Common tales that they will say are you’ve ‘won’ a lottery or sweepstakes or that you owe a fake debt. Keep in mind, like the IRS, the federal government will likely contact you via postal mail first, and federal employees will not demand personal information.
  • Tech Support 
    • In these instances, either you get a phone call or a popup on your screen that a problem or security issue with your computer has been “detected”. The scammer’s goal here is to convince you to download malicious software or create a remote session to give them the ability to control the machine. In both of these cases, the fraudster is trying to either steal your data or hold it hostage until you pay a ransom. Keep in mind, legitimate tech support is not going to contact you unless you have previously contacted them about an issue.
  • Can you hear me now? 
    • The phone rings from an unknown number, and the first thing you hear is “Can you hear me now?” These are pre-recorded calls, and the aim is to record your voice saying “yes” and other things that fraudsters could potentially use to obtain money. Do not say anything, just hang up. If your numbers are not currently on the Do Not Call registry, consider adding them. Also consider becoming familiar with blocking unwanted calls. Keep in mind, if you respond to these calls in any way (like pressing 1 to speak to someone), it is likely to lead to more robocalls.
  • Virtual Kidnapping 
    • Using social media as their tool, fraudsters have taken up the task of claiming that they have kidnapped a loved one and demand immediate payment. The FBI calls this virtual kidnapping. This scam has been around for a while, but it recently has resurfaced. Read more from the FTC. Keep in mind, if the call feels real, hang up and get in touch with the relative or friend in question.
  • Grandkid 
    • Fraudsters purchase marketing lists just like large retailers do, but fraudsters use the lists to find vulnerable populations they might be able to exploit. 37% of imposter scam victims last year were over the age of 60, and fraudsters are using tactics like the love of grandchildren to scare their victims. What tends to happen in these scams is a person will receive a call from an unknown number and the person will pretend to be a young relative out of town and in trouble. The caller will plead with the grandparent not to tell anyone and claims that the only way to get out of the bind is to receive a wire transfer. Keep in mind, much like the last section, call or text the grandchild directly (how often are they without their mobile?)!
  • Online Romance
    • While online dating has become commonplace, so has the ability for con-artists to take advantage of those looking for love. Typically what happens in this scenario is that a person a distance away contacts you. Quickly, they become enamored, claiming that you’re the man/woman of their dreams and they would love to meet, BUT… (they are out of town/country, have a sick or dying relative, stationed abroad). Shortly after, requests for money will start. Keep in mind, if you provide cash to someone you have not met yet, often another emergency will require more.

 Tips to Remember

  • Consider how the person on the phone is asking you to pay. 58% of fraud victims last year paid via wire transfer and some fraudsters were able to get their victims to pay with prepaid debit cards (7%), which is difficult to trace or to reimburse victims.
  • If possible, let unknown numbers go to your voicemail. Fraudsters are unlikely to leave you a voicemail. Consider services like Hiya or Nomorobo to have no more “robo calls”.

For more information on these scams, feel free to review the FTC’s entire 104 page report which includes a breakdown by state, complaint type and age of victims.

Cash Flow Trackers: How to Make Them Work for You

Financial Planningon March 23rd, 2017No Comments

Written By: Zach Bennedsen

How much did you spend at the grocery store last week? What about at restaurants last month? Or on clothes this year? You probably have only a very general idea of the answers to these questions. And frankly, that’s ok. Life is often too busy to record and categorize every expense. Luckily, technology can help do all of that for you. But is such a granular analysis even worthwhile? Today, we take a look at one of the more popular cash flow tracking apps – Mint – and provide our take on the service and on using cash flow trackers.

Heightened Awareness

Most people are aware, in a general sense, of their cash flow situation. That is, they know if they are cash flow positive or negative. However, most do not know the composition of their expenses. A cash flow tracking app brings awareness to how we are spending our money.

Even if you are happy with your level of (hopefully) positive cash flow, it can be a valuable exercise to take a closer look at where exactly your money is going. A mere heightened awareness of how you are spending your dollars can often be enough to change your behavior. Furthermore, the idea that someone, even if that someone is really an app on your phone, can see your spending habits can further alter behavior. The Hawthorne effect, also known as the observation bias, states that people will change their behavior simply because they are being observed. This phenomenon is intuitively true; think of how much harder you exercise when an instructor is present versus when you are on your own. A cash flow tracker can serve to activate this psychological effect and help motivate us to improve our spending habits.

Categorization & Trend-Tracking

One of the most touted features of cash flow trackers is their ability to categorize your expenses. Mint has at least 17 categories with over 75 different descriptions, ranging from groceries to spas. In theory this feature sounds convenient, but it often proves complicated in practice. For example, if you use public transportation (such as BART) to get to work, how would you categorize such an expense? There is an auto and transport category, but no specific “public transportation” description. You could categorize it as “Gas & Fuel” and just remember why you place the expense there, but now your fully automated system is not so automatic. Plus, a non-trivial percentage of your transactions may be uncategorized, and it will be up to you to manually assign a category. Some may find the exercise helpful, as the process of manually assigning expenses to a category increase the salience of the expense. And for many, that salience is the best outcome of using a cash flow tracker. Regardless, we question the importance to categorize every expense. Instead, Mint, or other services, can help serve to identify general trends. By looking at spending over time, you can begin to understand patterns about your spending. Does your spending spike around the holidays? Do you splurge on big purchases right after payday? Setting custom date ranges can allow you to make those kind of observations. We argue that those observations and trends are more important than exactly how much you spent on dinner last Friday.

Security & Trust

One of the main concerns raised when someone mentions using an app like Mint.com is the security risk. People are generally wary (and for good reason) of handing over usernames and passwords for bank accounts. While the convenience of a cash flow tracking app sounds enticing, for many, the fear of identity theft outweighs that convenience. It is important to realize that, at least in the case of Mint.com, there is no ability to actually access your bank account and make transactions via the app (unless you use the Mint billing feature). To help protect your data, Mint stores your user name and passwords in separate encrypted databases. You can also enable two factor authentication, which we are big fans of. Finally, Mint also has some security clout behind them; the service is owned by Intuit, owners of QuickBooks and TurboTax. To read more about Intuit’s security features, visit their online security center.

We certainly do not mean to discount the importance of security. Even with extensive security features, there is inherent risk with sharing sensitive information that could be avoided simply by not sharing that info. In modern society, it is virtually impossible to function without sharing sensitive financial information with some third parties. As a reminder of what Yeske Buie does to protect your data, here’s a refresher, courtesy of a previous Digest Post. Additionally, we share some other previous posts to serve as reminders for good financial security habits.

Another question we have received regarding Mint is, what is in it for them? What does Mint get for offering this “free” service? Most people know that consumers of a free product are the actual product. Mint creates revenue through lead generation via targeted ads to credit cards and banks accounts, which create a referral fee for Mint every time a user follows a link and purchases that product. This means that they may share your information with other financial institutions. However, Mint does give you the ability to opt out of marketing with non-affiliates (non-Intuit products). For more information on Mint’s privacy policies, you can read their privacy statement here.

Using a cash flow tracker such as Mint is not for everyone. Some prefer to create their own budgeting tools in Excel, or would rather use rules of thumb in place of data tracking. Whatever way you approach your cash flow, Yeske Buie is excited to have a conversation about your methods.

Five Things to Know about Required Minimum Distributions

Financial Planningon February 22nd, 2017No Comments

Written By:Camille Bouvet, CFP®

You may not think twice about acknowledging your 70 ½ “birthday” but in fact, this is an important milestone as it marks the time when you must begin taking required minimum distributions (RMD). Your RMD is the mandatory minimum withdrawal you’re subject to distribute from your retirement accounts; the amount is calculated based on your age and account balance. Every year you contributed to your IRA or 401(k), your assets were growing tax-deferred. As such, once you begin taking distributions from these tax-deferred accounts, you must pay the required taxes. To help you feel confident in understanding the considerations associated with RMDs, we share a list of five things to keep in mind before you’re subject to taking the distributions.

  • Timing matters 
    • You may not have anything planned for your 70 ½ birthday but it is an important milestone to acknowledge as it marks the time that you must begin taking you required minimum distributions. While this date marks the beginning of your RMD requirements, you can choose to wait to take your first RMD as late as April 1st of the year after you turn 70 ½, which can be advantageous if you’re expecting lower income in the following year. For example, for those who turned 70 ½ in 2016, it is possible that you could save in taxes by taking your first distribution in 2017 considering the possible tax reform pending the new administration.
  • Cash isn’t always king 
    • Most RMDs are distributed in cash, but they don’t have to be. You can transfer shares from your tax-deferred IRA to a taxable account, as along as the value of the shares transferred is equal to your RMD. You’ll still owe taxes on the distribution but you can save on any subsequent gains. This strategy makes sense when you transfer shares that have decreased in value because if you sell them out of your IRA, the entire value will be treated as ordinary income. However, if you transfer them to your taxable account, any subsequent gain will be taxed at the favorable capital gains rate when sold.
  • You must take RMDs from IRAs and 401(k)s – and there are differences
    • If you have a 401(k) or other qualified retirement plan that you haven’t yet rolled over, you’ll want to remember that they are also subject to RMDs, and there are some differences to keep in mind. First, if you have multiple IRAs you have the flexibility to take your entire RMD from one IRA or split the amounts strategically.  With 401(k) plans, however, you must take separately calculated RMDs from each account.  On the other hand, if you’re still working at age 70 ½ (and you don’t own more than 5% of the company), you can delay RMDs from your 401(k) until the year you stop working, which you can’t do with IRAs.
  • Tax withholding isn’t actually mandatory
    • As a default, the custodian or plan sponsor will usually withhold 10% of your distribution for taxes but you’re allowed to elect 0% withholdings, which can make sense for different reasons depending on your tax situation and personal preference. Furthermore, it’s an easy change to make – simply let us know if you’d like to make a change or would like to explore the withholding elections that make sense for you.
  • You can donate your RMD at any time of the year
    • Thanks to Congress’ firm decision that allows taxpayers over 70 ½ to donate up to $100,000 from their IRA and have it count as a RMD, you can save money in taxes and support the causes you care about. You can do this by transferring the money directly from your IRA to the charity for it to count as a tax-free transfer and if you have check-writing privileges on your IRA you can simply write a check to the charity.  However, if you take a cash distribution and then donate it to charity, the distribution will be included in your adjusted gross income (and thus reducing your eligibility for AGI-triggered benefits). Although, you can still benefit by taking a charitable deduction and lowering your taxable income.

As always, we’re available to answer any questions you have about required minimum distributions or other considerations you encounter while planning for retirement.

Assembling Your Financial First Aid Kit

Financial Planning, Yeske Buie Millennialon February 22nd, 2017No Comments

Written By: Lauren Mireles, RP®

We’ve talked to our Clients many times about the importance of emergency preparedness. Preparing for an emergency can take the form of kits with food, water, and supplies, plans for what you and your family will do in an emergency, or the often overlooked financial first aid kit. Having a financial first aid kit helps to ensure that the tangible pieces of your financial life are safe and easily accessible at any moment.

The first consideration for your financial first aid kit is where to keep your valuable documents. We find that safes that are waterproof, fire-resistant, and easy-to-carry make the best vessel for storing your financial documents. A variety of well-reviewed safes are available on sites like Amazon and Staples including the SentrySafe Waterproof Fire-Resistant Chest or the SentrySafe Fire-Safe Waterproof File Safe. For an added layer of protection, you may consider purchasing a fire-resistant, fiberglass envelope pouch, like this one, which adds additional heat resistance in the case of a fire.

With your container in place, you can now focus your attention on assembling all of your important documents. Below is a comprehensive list of items to consider gathering to ensure your financial first aid kit is well-stocked for any emergency. While you collect these items, it’s also a good idea to give them a quick review to ensure the documents are up-to-date and accurate. Furthermore, it’s helpful to make a habit of revisiting these important documents on a regular schedule. You can use specific yearly events like tax preparation time, the start or end of daylight savings, your birthday, or the start of a new year to trigger your reminder to review the information. Finally, it’s recommended that you keep a second copy of this kit with someone you trust that is not in close proximity to your geographic location. This way, you can rest assured knowing that the information can be accessed elsewhere in the event that your copy is unavailable in an emergency.

We hope you find these tips empowering! Having a well-stocked financial first aid kit can help you be confident that your financial life is safe in the event of any challenges and complexity that may come your way. If you’d like our assistance in helping you collect any of the information below, please do not hesitate to contact us. Happy Prepping!

  • Identification Documents
    • Driver’s license, Passport, and other Photo ID (for yourself and your children)
    • Birth Certificates and Adoption Papers
    • Marriage/Divorce License
    • Social Security Cards
    • Military ID or Military Discharge Records
  • Housing Payments
    • Lease or Rental Agreement
    • Mortgage, Real Estate Deeds, and HELOC Information
  • Financial Obligations
    • Utility Bills
    • Vehicle Loan Payments and Registration Documents
    • Photo Copy of Credit Card Numbers and Phone Numbers to Report Lost Cards
    • Student Loan Agreements
    • Alimony/Child Support Payments
    • Retirement Account and Investment Account Custodians and Numbers
  • Insurance Policies
    • Property, Homeowners or Renters Insurance Documents
    • Photos or Video of Property Inventory
    • Copies of Auto Insurance, Life Insurance, and Health Insurance Policies
    • Appraisals of Personal Property
  • Sources of Income
    • Recent Pay Stubs
    • Government Benefits Information (including Social Security and Veterans Benefits)
  • Tax Statements
    • Previous Year’s Tax Returns (it is recommended to keep tax returns for seven years)
    • Property Tax Statements
    • Personal Property Tax
  • Estate Planning
    • Copy of Living Will
    • Copy of Trust(s)
    • Copy of All Medial/Durable Power of Attorney
    • List of Account Beneficiaries with Contact Information
  • Medical Information
    • Contact Information for Physicians and Medical Specialists
    • Copies of Medicare or Medicaid Cards
    • Immunization Records
    • List of Medications
    • List of Current Prescriptions
    • Disability Documentation
  • Emergency Points of Contact
    • Name, Phone, and Address Information for the Following Points of Contact
      • Financial Advisors
      • Health Professionals
      • Service Providers
      • Lawyers
      • Insurance Agents
      • Mortgage Representative
      • Work Contacts
      • Extended Family
  • Passwords to Financial Accounts
    • List of Up-to-Date Usernames and Passwords for Important Accounts
  • Small Amount of Cash
    • In the event that ATMs and credit cards are not operational, it’s smart to have a small amount of cash available

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Reviewing the Benefits: Renting and Buying

Financial Planning, Yeske Buie Millennialon February 8th, 20172 Comments

Written By: Lauren Grove, CFP®

We have frequent discussions with Clients asking whether they should rent or buy – they may be asking for themselves, for their aging parents or for their children or grandchildren. As with almost every strategic planning opportunity we discuss with Clients, there are many factors to be considered. The monthly costs of a mortgage payment that adds to your equity versus a rent payment are what often come to mind first, and most times we hear that a mortgage payment will be less than a monthly rent payment so buying must be the answer. But there’s more to consider for the potential homebuyer – where do you see yourself in five years? Are you planning to relocate or look for a new job? Start a family? Have family members come to live with you? Are you looking to downsize? How do you feel about home maintenance? What does your emergency fund look like? The questions and tradeoffs are plentiful – and that’s why we’re here: to help you think about the many different tradeoffs and ‘walk it around the block’, something we pride ourselves in doing.

In thinking through the choice to rent or buy, here are a few of the many pieces to keep in mind:

Near- and Long-Term Plans and Goals

  • One of the most important roles of our job as financial planners is to help our Clients recognize their unique goals and create policies to help them use their resources in ways that support these goals. Accordingly, it is imperative to consider the benefits of renting and buying in conjunction with your overall goals to ensure you make the best decision for you.
  • As you think about your near- and long-term plans and goals, ask yourself questions like the following: where do you see yourself in the next one to seven years (or more)? Do you know you want to stay in the same location long-term? Or do you think you might consider moving or getting a new job? Do you want the flexibility of having that option? Do you not yet know what your plans may be?
    • It’s hard to say for sure what may transpire in the future, but in cases where general desires and plans aren’t yet known, it likely makes sense to rent to provide you with flexibility until you figure out your plans.
    • If you know that you would like to stay in the same place long-term and the idea of home ownership is appealing, however, buying may be your favored option.

Flexibility

  • To expand upon the notion of flexibility, the ability to have fluid living arrangements is one of the advantages to renting that often goes unacknowledged or unappreciated. As a renter, you can pretty much pick up and move whenever you want or need to. There are, of course, some expenses to getting out of a lease early, but these expenses are often lower than the time, money and energy required to sell a home.

Upfront Costs

  • Just as there are associated costs with getting out of a lease or selling a home, the costs of securing a home should also be considered when making your decision. A down payment on a home (in addition to realtor fees and closing costs) is no small expense compared to a security deposit for an apartment.
  • Furthermore, with expensive housing and rental prices in many areas of the country, it can be difficult for someone to rent and save for a down payment at the same time – or at least it takes longer to save enough.
    • This is likely one reason that we’re seeing a shift away from buying in the millennial generation. According to the Zillow January 2016 Housing Confidence Index (quoted here in USA Today), between 56.9% and 65.3% of people surveyed associate owning a home with the American Dream (the highest percentage belonging to the millennials interviewed), but only 9.2% of millennials surveyed expected to buy a home within a year.
  • Nevertheless, if owning a home is a personal goal of yours, the down payment is certainly something that can be saved up for or planned for, or perhaps funded from the proceeds of selling your prior home – it doesn’t have to derail your financial plan!

Monthly Budget & Maintenance

  • In addition to the initial down payment or security deposit, there are, of course, other monthly costs and payments to consider. Rent payments and mortgage payments are known and stable costs in general, so in both cases you can plan your budget around these known costs.
  • The difference comes about when we think about potential maintenance and repair costs. When renting an apartment, the landlord takes care of (both physically and monetarily) most maintenance expenses, from replacing a broken appliance to painting the exterior of the building. When you’re the homeowner, you’re the landlord. You must either find contractors to complete projects or complete them on your own time. Neither option is “right” or “wrong”, but it’s important to ask yourself – do you enjoy being handy and taking on home design projects or would you prefer that someone else be responsible?
  • Another monthly cost to consider is insurance – renter’s insurance is generally much cheaper than homeowner’s insurance. Of course, this shouldn’t be the determining factor in your decision, it is simply something to be considered and planned for.

Equity and Ownership

  • One of the most common arguments in favor of buying over renting is that all of these costs are an investment into your home equity rather than payments to a rental agency. For some, the other benefits of renting outweigh this disadvantage but for others, building equity by owning a home is a personal goal to take great pride in! Additional well-known benefits of home ownership include the ability to fully customize the space to your liking and to enjoy any price appreciation in the home if or when you sell it.

Tax Deductions

  • Finally, one of the big points we hear from Clients in this conversation is related to the tax deduction for mortgage interest. Based on your tax situation, the deduction could certainly be a great advantage. But, we don’t believe it should be the biggest or sole factor in the decision. As we like to say – we don’t want the tax tail to wag the investment dog (or decision dog).

In summary, there are many things to discuss and consider when you’re wondering whether to rent or buy. And all of these discussions depend on you, your situation, and your desires, goals and Live Big® dreams. Financial planning is all about tradeoffs, and we love discussing them with you! So, if you would like to ‘walk it around the block’ on this topic or any other, we would be happy to schedule time to talk.


“Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves, Who am I to be brilliant, gorgeous, talented, fabulous? Actually, who are you not to be? Your playing small does not serve the world. There is nothing enlightened about shrinking so that others won't feel insecure around you. We are all meant to shine. And as we let our own light shine, we unconsciously give others permission to do the same. As we are liberated from our own fear, our presence automatically liberates others.” ~Marianne Williamson