Protecting Yourself During Gray Divorce

Divorce, at any age, can present financial issues and challenges. Older, unmarried Americans can be especially disadvantaged when their financial future becomes less secure. There are ways to prepare for this life transition. By understanding the issues that accompany “gray divorce,” overcoming financial and emotional turmoil, and utilizing tips to protect yourself and your assets, you are better able to move forward with confidence.

Gray divorce is a term used for people ages 50 and older going through separation and divorce. The term became mainstream after AARP sponsored a 2004 study to help raise awareness and understanding for people experiencing mid-life divorce. Pew Research reports that the divorce rate for those ages 50 and above has doubled since the 1990s. Contributing factors include a more relaxed attitude toward “until death do us part,” longer life expectancies, greater financial independence of partners because both are working, and higher divorce rates among those who remarried.

There are many financial and emotional differences from divorce at younger ages. To start, people over 50 may accumulate significant wealth after decades of marriage. This makes dividing assets more complicated from business interests, properties, retirement accounts, executive equity compensation to air miles. Additionally, titling of assets is important as parties distinguish between separate and community property and researching records and cost data.

Other important factors include healthcare and aging. Many have spousal medical coverage through employer-sponsored plans. Those over the age of 50 may also experience higher anxiety with concerns about it being too late to start over, recouping financial losses after splitting assets, the ability to retire or meeting one’s support obligations.

While family continues to be one of the largest concerns among older divorcees, custody or guardianship challenges experienced by younger couples are replaced with how to share life events such as weddings and grandchildren. Beneficiary planning and protecting children when one remarries are additional considerations.

Though the challenges associated with gray divorce are never something anyone wants to plan for, preparing yourself beforehand can help ensure the best possible outcomes. First, pre-divorce, gather information and build your support teams – one of friends and family for emotional support and one with professionals for legal, estate planning, tax and financial advice. Negotiate settlements, spousal and child support (if applicable), and alimony buyouts. It is important to be aware of what your post-divorce lifestyle will look like. Women, as an example, face unique challenges including earning less, starting after a divorce with less and living longer. Knowing where you stand financially – assets, income and expenses – and developing a comprehensive plan, will greatly assist in your recovery and strengthen outcomes.

One way to do this is to expand your education, skills and knowledge.  You may be entitled to Social Security benefits on your ex-spouse’s record if you were married at least 10 years and you’re unmarried, age 62 or older, your ex is entitled to Social Security benefits and their benefit is greater than Social Security based on your work history.

While financial housekeeping is never something people enjoy, don’t forget that name or address changes may involve obtaining new Social Security cards, driver’s licenses, accounts, titling of assets, professional licenses, and more. Be sure to close joint credit accounts and look at creating a new will, trust, powers of attorney, to start.

For many, divorce is a fresh start and it can be a time of recovery – but it can introduce new stresses without proper planning. May you have sage advice and secure your future wisely.

Posted in Planning Tips and Goals | Comments Off on Protecting Yourself During Gray Divorce

Inflation Protection – Why it Matters

Do you remember when the Post Office introduced Forever Stamps in 2007? They’re a non-denominated postage stamp used to mail first-class letters regardless of the current postal rate. Since 2007, the postage rate has increased from 41 cents to 58 cents come August. That’s a 41% hike or an average of 2.5% increase annually. Fifty years ago, a first-class stamp cost 8 cents – today’s price is almost seven times higher. There’s a good chance postage rates will continue to increase “forever.”

This is a basic illustration of inflation – a very hot topic right now. It’s important to understand why it matters and how it may factor in your financial planning and investment decisions.

Why is inflation in the news so much? Rising prices are everywhere. Look at the value of your home – plywood costs $100, and shipping costs have almost tripled this past year for a forty-foot container from Asia to the West Coast. The U.S. inflation rate measured by the Consumer Price Index (CPI) for May was 5%, the sharpest year-over-year increase since 2008. Jerome Powell, Federal Reserve chairman, acknowledges that “Inflation has increased notably in recent months.” They’re targeting a 2% inflation rate. Many economists are saying “don’t worry” and inflationary pressures are “transitory.” The Feds are predicting inflation will decrease as more of the economy re-opens and pandemic pressures lessen. Time will tell, but you can still prepare to weather whatever the future holds.

Why Inflation Matters

  • A stable economy generally has stable predictable inflation and activity. Instability comes with runaway inflation – that’s when prices constantly rise and currency is worth less and less – such as what happened in the ’70s and ’80s, or worse, with Venezuela’s hyperinflation.
  • Consumers are concerned because it affects costs, our standard of living and financial decisions. Inflation, the “silent menace,” erodes purchasing power. We try to save for future goals such as retirement, but escalating costs create gaps that need to be filled. If you need $8,000 per month to maintain your desired lifestyle, and inflation averages 3%, then you’ll likely actually need $16,000 per month to maintain that same lifestyle (presuming retirement in 24 years). I know, it can seem like a complex SAT question, but you can feel fairly certain that the cost of your desired lifestyle today will increase by the time you retire, meaning you’ve got to aim for the future amount as you plan now.
  • Businesses watch their costs from raw materials to payroll, and higher costs are often passed to customers (higher prices, more expenses for you as the consumer).

Ways to Protect Yourself

Review your goals and adjust priorities

What if housing prices continue to rise (and mortgage rates) and you’re planning to upgrade, downsize or relocate? How does debt reduction change if interest rates rise 1% or 3%? Review your goals and realign priorities. Consider changing the sequence in retirement funding, education funding, and other goals. Adjust the plan and eat the elephant one bite at a time.

Differentiate inflation from shifts in your spending

There are many unknowns in forecasting the future. One simplifying approach is to create a “Spending Plan.” The report contains your sources (income) and uses (including savings and expenses) with multiple columns labeled current, needed at retirement, desired at retirement, advanced age, etc. Forget inflation for now, and see how items shift over time (e.g. mortgage paid off, kids off the payroll, Social Security starts, travel and costs for care, etc.). A pattern may emerge – we call it the “retirement smile” due to the shape of the curve – higher expenses in the early stages of retirement (projects around the house, travel, etc.), then settle into a groove, then rise for aging.  Now add inflation. Ask your advisor for assistance – more sophisticated calculators may be needed.

“I’ve got guaranteed payments… I’m good”

Be careful not to confuse guaranteed or fixed income with security. You may be trading certainty of payments (e.g. 30-year note receivable, fixed annuity or pension benefit, rental cash flow where your net income doesn’t budge much due to rising costs), but losing purchasing power. You may get the same $5,000 a month today and in 2041, but those future checks may be worth only half as much. Plan to fill the gap.

Don’t invest like an old guy

There are plenty of “in general” guidelines such as “Rule of 100” or buy inflation protection like gold, TIPs and real estate. Rule of 100 suggests aggressively investing when you’re younger and more conservatively as you gray. It’s the allocation between stocks and bonds – subtract your age from 100 and that’s your stock allocation. Regarding inflation hedges, how anxious are you to buy another rental at these prices? And there’s a saying that an ounce of gold has always bought a man a suit and a meal. But gold doesn’t pay dividends. Instead, consider the beauty in a portfolio – including gold in the safe and real estate – that overall capable of providing steady paychecks in retirement, with periodic raises, and a pot at the end of the rainbow to leave my daughter and valued charities. Plus, it’s diversified – we may never make a killing but we’ll never get killed.

In closing, inflation is absolutely something we should prepare for and plan for. However, it’s only one piece of many in your personal financial planning puzzle. And remember a problem with economic forecasting is the things you can predict tend not to matter and the things you can’t predict make all the difference in the world.  May you always have sage advice and secure your future wisely.

Posted in Planning Tips and Goals | Comments Off on Inflation Protection – Why it Matters

Mid-year Review – Four Approaches to Ensure Your Finances are on Track

July is a good time for a financial checkup as it marks the halfway point of the year. Are you on track? What adjustments are needed? Here are a few areas to check in on.

Review Goals and Adjust Priorities 

Generally, it’s wise to stick to the plan, unless an adjustment is needed because of a shift in goals or priorities. What life changes have occurred or are likely to occur? We’ve seen some interesting shifts – some were influenced by the pandemic and others are because life is curly. Here are some of the things we’ve heard:

  • Pivoting within our business or to a new job opportunity.
  • Help a family member buy a home in a red-hot residential market and accelerate their inheritance. (Note: U.S. existing home prices were up 24% in the last year (through May), the highest year-over-year change in the past 20 years – and the Fed continues to purchase $40 billion of mortgage bonds monthly to curb mortgage rates, but fuels surging home prices).
  • Increased desire to retire and stay retired.
  • Resume travel and increase our spending. There have been over 1.9 million airline travelers per day in the U.S. over the last week alone representing the highest amount since March 11, 2020. We were averaging 500k daily a year ago and under 100k daily at the pandemic low, per
  • Assisting elderly parents as long as possible.

Fine-Tune Your Investments

Stocks and home prices are at all-time highs. Core inflation is the highest since 1992, job openings are at an all-time high, junk bond yields are at all-time lows, oil is at $73 a barrel (versus negative oil futures prices in April 2020), cryptocurrencies are down 50% plus since the Elon Musk “Saturday Night Live” appearance and lumber is down 50% from its May high. Are we at a peak or a pause?

  • The required long-term investment return to maintain your financial goals, that is, how hard your money has to work for you, matters. Your financial plan should drive your investment strategy and strategic asset allocation, not the market (although tactical strategies can reflect market opportunities or risks).
  • Review your 401K allocations and adjust accordingly (are you still in cash since the Pandemic Crash in 2020?). Slow and steady wins the race. Keep funding and investing your 401K on a consistent basis – dollar-cost averaging works! And rebalance your portfolio – if your 60% stock allocation has grown to 70% then trim – this is the “buy low/sell high” beauty of rebalancing.

Reduce Your Tax Bill 

Are you paying the minimum amount legally required? Playing it smart tax-wise helps you accumulate more wealth and use it as you wish. Consult your CPA or tax preparer.

  • Are you contributing the maximum to your 401K or at least enough to get the maximum employer match? Are you eligible to fund a Health Savings Account (HSA) that may later be used to fund qualified medical expenses tax-free?
  • What if you don’t have a retirement plan at work? Workers can consider funding an IRA. Employers should explore adopting a retirement plan to help fund employees’ needs – some new plans provide tax credits.
  • Review if you should fund on an after-tax basis (Roth) and explore if Roth conversions make sense in your situation.
  • Watch for potentially new tax legislation that may impact your tax planning.

Protect Yourself 

Check in on your insurance, estate planning and legal areas.

  • Review your insurance with your advisors and agents.
  • Do you have adequate coverage (life, disability, fire/auto, and umbrella liability to name some biggies) and is the coverage cost-competitive? Review healthcare coverage and long-term care considerations.
  • Did you have any family changes (additions, deletions, name changes) that would require updating your policy beneficiaries?
  • Review important documents including wills, living trusts, powers of attorney, etc. to better control your outcomes. Tax law changes may require adjustments in entity and transaction structuring as well as in your estate plan.

It is helpful to have an optimistic view for the future. However, it is also prudent to be balanced. Life isn’t meant to be easy and she has a way of surprising us. May you have sage advice and secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

Posted in Planning Tips and Goals | Comments Off on Mid-year Review – Four Approaches to Ensure Your Finances are on Track

Are You Ready for Potentially Higher Taxes or Costs?

President Biden recently unveiled the American Families and American Jobs Plan proposing that the government spend nearly $2 trillion on infrastructure and another $1.8 trillion on social programs which would be funded by tax hikes on the wealthy. The need for additional stimulus/spending is debatable. However, you may be subject to higher taxes and costs as a result. It’s wise is to be prepared and anticipate what may happen. This article is a summary of some of the major tax proposals, their impact on you and the planning considerations you should review with your family, business partners and trusted advisors.

There are a number of tax law changes on the table. Five areas thought to have a reasonable chance of being enacted and affecting your finances include:

  1. Increase in the long-term capital gains tax on high-income earners
  2. Elimination of the step-up in basis rule
  3. Reduce the estate and gift tax exclusion amount
  4. Raise the top ordinary income tax rate
  5. Increase the corporate income tax rate

However, as I write this article many of the President’s priorities are at risk of stalling with voting, infrastructure and other issues facing Republican resistance and opposition from centrist Democrats. Furthermore, Treasury Secretary Janet Yellen was only able to secure an agreement for a 15% global corporate rate during this weekend’s meeting with the G-7 and the Organization for Economic Cooperation and Development (note: China likely won’t be in agreement). Thus, spending and tax proposals may get watered down. Greg Valliere, Chief U.S. Policy Strategist at AGF Investments, sees enormous implications with Democrats potentially short on votes. Opposing Democrats may agree to modest tax hikes on the very wealthy and a few points on the corporate rate. Additionally, they feel that Biden won’t get much more than $1 trillion and a scaled-back infrastructure bill may emerge later this summer while other major goals face an uphill fight.

Here’s a brief summary of potential major tax law changes from three plans – President Biden’s Plan, Senators Bernie Sanders and Jimmy Gomez and the “99.5% Act,” and Senator Chris Van Hollen and the “Sensible Taxation and Equity Promotion Act.”

Estate Tax

  • Reduce the current Federal gift and estate exemption of $11.7M to $3.5M.
  • Reduce the gift allowance to $1M.
  • Increase the Federal estate tax rates from current maximum of 40% to 45% over $3.5M, 50% over $10M and 65% over $1B.
  • Very controversial is the elimination of tax-free step-up in basis at death which will tax unrealized appreciation above $1M ($2M for joint filers), plus current law capital gains exclusion of $250,000/$500,000 for a primary residence. Proposes up to 15 years to pay taxes for illiquid assets such as businesses and farms.

Income Tax

  • Nearly doubling the top capital gains tax from 23.8% (including Medicare surcharge) to 43.4% with income over $1M, and possibly retroactive to earlier this year.
  • Increase the top marginal income tax bracket to 39.6% (from 35%) for income over $452,700 single and $509,300 for joint.
  • Limit 1031 like-kind exchanges above $500k in deferred capital gains.
  • Increase U.S. corporate rate to 28% and adoption of a global “minimum” corporate rate of 21%.

Here are a few financial planning strategies you can consider right now:

  • Review beneficiary designations in your family trust versus retirement accounts. Consider naming charities as beneficiaries of your IRAs and 401ks as charities may be tax-exempt while your daughter or nephew would be taxable.
  • Meet with your estate attorney and tax professional. Consider accelerating gifts and review alternative trusts. One type of trust getting increased attention for the high net worth is the Spousal Lifetime Access Trust (SLAT). This may enable you to take advantage of the current Federal exclusion before it expires at the end of 2025 or is reduced to $3.5M (or what may be enacted) while retaining limited access to the assets. Consider restructuring your business entity to a pass-through entity.
  • Review tax-efficient investment and income strategies. Accelerate income (exercise non-qualified options, bonuses, etc.). Earn tax-free income or long-term capital gains over ordinary income, review timing of asset sales, tax-loss harvesting, review Roth IRA conversions, and shoot to earn investment returns in excess of taxes and inflation. And tax deferral (such as 401k contributions, exchanges and installment sales) becomes more attractive if rates do rise.

In summary, control what you can control. Feel free to email your representatives in Washington. However, it’s important to plan ahead, meet with your advisors and make sure you stay on track with your personal financial plan. Occasionally the rules change. Once the new tax rules are released – like an updated Hoyle’s Rules of Games – adjust and play accordingly. May you have sage advice and secure your future wisely.

Posted in Planning Tips and Goals | Comments Off on Are You Ready for Potentially Higher Taxes or Costs?

Take Control: Women Should Consider a Financial Advisor

Even before COVID-19 and the ensuing recession, women faced unique challenges in savings and retirement planning. From gender-based wage and savings gaps to balancing work and family responsibilities to having a longer life expectancy. While a financial advisor can’t single-handedly reverse economic and social disruptions emerging from the pandemic, prudent advice can help you navigate life’s challenges and the next crisis du jour. Having greater confidence in money matters and increasing retirement savings can go a long way toward reaching financial security. I asked Kirstin Griffin of Sage Financial Advisors to join me in discussing these key issues.

Key Challenges – Women have a disadvantage with retirement savings

  • Retirement income gap: According to the National Institute for Retirement Security (NIRS), women age 65 and older have a median household retirement income of $47,200 or 83% of what men have on average with $57,100. Retirement income includes Social Security, pensions, and investment income.
  • Career earnings gap: Women earn about 82% of men across most occupations according to a 2020 Bureau of Labor Statistics survey.
  • 401(k) savings gap:  In a T. Rowe Price survey, women contributed an average of 6% to 401(k) plans (Boomers, Gen X and Millennials) compared to 8% or 10% for men. Median 401(k) balances for 2017-2019 were about $46,200 for women and $83,000 for men.
  • Longevity: Women tend to live longer. Life expectancy for women may reach 87.3 years compared to 83.9 years for men by 2060 per the U.S. Census Bureau. Currently, the gender gap in the US is nearly 4 million more women than men in the 65 to 84 age range and nearly twice as many women as men age 85 and older.
  • Caring for others: Women are more likely to leave the workplace than men for childcare and caregiving. Female caregivers under age 50 have about 30% less retirement wealth than non-caregivers (compared to 14% less for males), and female caregivers over 50 have 58% less retirement wealth (compared to 48% for men).
  • Life transitions: Women aged 80 and above are more likely to experience income challenges as widows or due to healthcare costs. Divorce and its timing can also have significant impacts.

Planning Opportunities – Overcoming gender pay gaps, increasing retirement savings and being more comfortable in financial matters can play important roles

  • Negotiate compensation: Value your work enough to advocate for it in a negotiation.
  • Budgeting and reducing debt: Work in tandem to create more savings and make the money last longer.
  • Create an emergency fund: It is recommended you have three to six months’ worth of expenses saved.
  • Prepare for life’s changes: Should childcare and caregiving be shared responsibilities? Can you work part-time or consult, continue to network and keep skills sharp? What will it take to be more knowledgeable and comfortable with financial matters? For example, T. Rowe Price estimates that 33% of women will be widowed or divorced within the first 5 or 10 years of retirement versus 8% of men.

Types of Advisors – How much personal interaction do you desire?

  • Robo advisors: Digital services are available online to help create automated portfolios based on your stated preferences and needs. They’re better for people who prefer limited human interaction and the services are generally cheaper.
  • Financial advisors: Services can be more comprehensive and personal. Few planning issues can be solved by an algorithm – e.g. how do I decide when and where to draw from during retirement, should I remarry and how should I allocate my estate? Advisors come in all styles, colors and sizes – find the one that best fits you. Some provide a combination of personal and digital services. Ask your accountant or attorney or go online (e.g. and

These issues are real. Living longer, having less income or retirement assets or figuring out who’s going to care for you can have a major impact on your quality of life. It’s seldom too early or late to plan. May you have sage advice and secure your future wisely.

Posted in Planning Tips and Goals | Comments Off on Take Control: Women Should Consider a Financial Advisor

Rising Home Prices and Your Financial Plan

Housing prices continue to be on the upswing. If you’re looking to buy a home, should you wait with the hope of a price drop or should you jump in because prices are going higher and pickings are slim? Is it still an attractive investment or are we in a bubble? Trends in the rise of residential real estate have several planning implications you should discuss with your family and advisors.

It’s virtually a seller’s market throughout the country with bidding wars, offers made sight unseen and a lack of inventory. Home prices are 15.8% higher on average throughout the country per a recent National Association of Realtor’s report. In some red-hot markets, buyers are eliminating contingencies in fear of losing out on another offer. Some buyers are getting priced out, and rental and apartment markets are tightening.

Locally, housing is a boom market. Bryan Drakulich of Drakulich Realty shared some statistics for the Reno/Sparks area. There are 1,203 active listings of homes up to $1 million in which 84% of those are pending, leaving 258 homes available. For $1 million and higher, there are 153 active listings, 85 of which are pending and 68 homes available.

Drakulich says that “Normally there are 12-18 months’ worth of inventory of luxury homes ($1 million and above). We currently have less than a month’s worth.” Since April 2020, the median sales price is up 19% and active inventory has declined 69%. In his 41 years of real estate, he can’t recall a time similar to this.

Several factors are driving the surge in prices nationally (and locally) including:

  • Millennial homebuyers are increasing. They are seeing the value in owning their space.
  • Low interest rates have been attractive, however, rising home prices and concern for higher rates are headwinds for “affordability.”
  • The so-called “Great Reshuffling” – Work from home became the new norm. Internet connections allowed some workers to live where they wanted. This includes moving to more affordable and medium-sized metro areas as well as a shift to more tax-friendly states.

Home-buying fears center around affordability, per the 2021 Millennial Home Buyer Survey by Clever Real Estate. Millennials’ worries include:

  • Unexpected or hidden costs (47%)
  • Lack of affordable homes (44%)
  • Prospect of major repairs (38%)
  • Possibility home values will decline (31%)
  • Not being able to qualify for a mortgage (29%)

Here are some relevant planning tips related to real estate to keep in mind:

Budget cash flow needs

Include the costs of repairs and maintenance of your home when saving and planning for your retirement. Costs rise as both you and your home age. Rental properties have their expenses as well including maintenance, downtime between renters and property managers.

Upsizing or downsizing

Resizing a home (or moving to a different neighborhood) can be very challenging in a hot market. You may need your equity for the new purchase, and you don’t have the option of sell home, then rent and search, then buy new place. Here’s where you may need to get creative with financing with your realtor and lender. Or consider options with your family from getting an advance on your inheritance to temporarily moving into their basement.

Getting aggressive with your purchase

Drakulich offered three tips to a winning offer:

  • Get pre-qualified for a mortgage
  • Have the cash ready – documented, account statements, gifts, etc.
  • Be ready to go. When your realtor finds you “the place” you’ve got to be ready to move on it.

Home prices can’t keep going up forever. However, be prepared and try to make the right decision for your financial future. May you have sage advice and secure your future wisely.

Posted in Planning Tips and Goals | Comments Off on Rising Home Prices and Your Financial Plan

Retirement: Preparing for the Challenges (and They’re Not Only Financial)

I used to think that 10,000 Baby Boomers turning 65-years-old every day until 2030 was astounding. However, that rate is only going to increase with subsequent generations from 11,000 a day for Gen-X, to 12,500 a day for Millennials then tapering to 11,300 a day for Gen-Z until 2085. Policymakers will need to address issues unique to the aging of America including Social Security, Medicare, lifestyle, healthcare, living centers and more. However, we’ve got to individually do our share to prepare for retirement, live life on our terms and not be a burden to others as we age. Here are three potential challenges:

Do You Have Enough to Retire and Stay Retired?

Online calculators can be helpful to evaluate your “retirement readiness” but they have limitations. The general guidance of funding for 80% of your pre-retirement earnings may not be relevant to you.

  • Retirement cash needs aren’t generally a straight line, trends may resemble a “smile” – high at the beginning, then settle into a groove, then increase from healthcare needs.
  • Will a major expense be gone such as mortgage payment? Or will you move residences?
  • What about inflation or additional costs such as travel, family support, home maintenance, auto repairs, healthcare or caregivers?
  • Business owners: Will some business expenses become personal (e.g. health insurance, vehicles and continuing education)?
  • What if you or your partner live longer than expected?
  • You’re great at saving money but how do you convert your accumulated nest egg into cash flow that will last a lifetime?
  • When do you take Social Security benefits or if you have a pension, which survivor option?

What Are You Retiring To?

Some retirees have full calendars and find it hard to believe they could hold down a job full-time and pursue their other interests including family, travel, hobbies and volunteering. Others find retirement one of the most challenging transitions one makes in life – shifts in control and sense of purpose, social connections and engagement. In his book “New Retirementality,” Mitch Anthony discusses the importance of practice and mental preparation, and that the advertised life of leisure isn’t what it’s cracked up to be. He writes about the dangers of golfing every day (my apologies to avid golfers) – “First you get bored. Then worse, you become boring.” The moral is not about golf, but rather don’t become boring.

What About…?

There are a number of other considerations and wildcards that may be in your future.

  • Expecting an inheritance? Baby Boomers are estimated to transfer $3 trillion to heirs and charities.
  • Running a family business, managing out-of-state property, have more than you’ve ever managed (think Lottery winners five years later) or your marriage gets shaky?
  • How about an obligation? Kids or grandkids moving home or caregiving for a loved one? Or you’ve been delegated the thankless job as successor trustee or executor for a friend or family member?
  • If you have more wealth than you need, then what about transferring wealth during your lifetime to family and charities? You can’t take it with you.
  • Who is your back up if something happens and you’re the primary money person in the family? How will your spouse be assisted to steer the ship if she or he finds themselves suddenly alone?
  • What actions do you take to reduce your tax bill?

Have a Plan and Periodically Update It Because Life is Curly

Life can get complicated. Think about your life and the different pieces that need to be woven together – such as cash flow, taxes, legal, investing, insurance, debt, and benefits. You may require experts. Get your chiefs at the fire and develop a coordinated plan to help you make the best financial decisions for your present and your future.

Know where you’re at and where you’re going. Once you have your roadmap, periodically check your progress and make adjustments along the way. Sound overly simplified? That’s what your trusted advisors are for. May you have sage advice and secure your future wisely.

Posted in Planning Tips and Goals | Comments Off on Retirement: Preparing for the Challenges (and They’re Not Only Financial)

Money and Relationships: There’s No One-Size-Fits-All Solution

Money tends to be a taboo subject regardless of where you are in life. But it can become a much more complex issue when you’re in a serious relationship. It’s not just about deciding whether to “go Dutch” and splitting the bill every time you go out to dinner, it’s about learning how to make financial decisions together. It also involves much larger topics such as power, trust and many more. Like most things in life, not every relationship is the same and not every couple will have the same money rules.

Issues of income or expense inequality can lead to conflict

  • Guilt or resentment – When one partner feels they’re not paying their fair share it can create emotional tension. However, there may be true income inequality. The median household income in America in 2019 was about $68,700 – income from wages, investments and benefits – and in many cases the income between couples wasn’t 50/50. Some may feel resentment of helping keep the others afloat by keeping a job they disliked, an inflated mortgage, or the like.
  • Money infidelity – Hiding spending can occur when the partner earning less wants to avoid being confronted for “non-essential” spending. Another example is a partner who doesn’t share in the common bills thinking their money is “their money” in a sense of entitlement or hoarding money as a means of security.
  • Power – Does the partner who makes more decide where the family is going for vacation? It might lead to conversations about who controls the financial decisions and why.

Closing the gaps in your relationship: Eliminate finances as a source of conflict

  • Discuss financial decisions together – Money is a leading topic that couples fight about. And at no surprise, because you each have different perspectives and experiences, and money matters can be emotional. Financial matters deserve time at the table. Successful couples have shared objectives, a mutual vision for the future and alignment of priorities and responsibilities.
  • Budget – You can only do two things with money – spend or save – and knowing where your money goes and who pays for what greatly simplifies the puzzle. It’s good to have my, your and our accounts. However, joint accounts are where two become one, things become much more transparent and you have a backup plan – each other!
  • Non-financial contributions – Recognize that you each bring contributions to the relationship. Housekeeping, childcare, landscaping and caregiving are valuable services.

Where inequality is OK – Things don’t always have to be “equal,” but they should be “fair”

  • Separate assets and accounts – Reasons to keep things separate could include not being married, legal issues, and inheritances. For example, one partner might own the home and pay the mortgage and the other pays rent.
  • Blended families – This can occur when one or both partners have children from a previous relationship. More significant estate planning may be needed if you wish to protect the interest of your children rather than simply naming your significant other as the beneficiary of an asset.
  • Different life expectancies – Having life expectancy stamped on our foreheads would greatly simplify financial planning. But life is meant to be interesting and sometimes a couple has a significant age difference and one may outlive the other by ten or more years. They may retire the same time or stagger retirement. Or if they’re both eligible for pension benefits, the older person might elect a 50% joint and survivor benefit option and the younger one a single life payout.

Cultivating solid relationships takes time and effort. Communication can be awkward, but it’s necessary. Discuss your money matters in a safe space where both partners are heard, follow sage advice and secure your future wisely.

Posted in Planning Tips and Goals | Comments Off on Money and Relationships: There’s No One-Size-Fits-All Solution

Spring Clean Your Finances

The traditional ritual of spring cleaning can take on a new meaning this year. Just as your home doesn’t declutter itself, your finances don’t either. Northwest Mutual, an American financial institution, commissions an annual survey to explore Americans’ attitudes and behaviors around money and personal finances. Even prior to the pandemic, they found about one in three households was within three missed paychecks of borrowing money or skipping bill payments. I share this to remind you not to wait too long before breaking out your financial dustpan and getting things cleaned up.

Here are six tips to discuss with your family and financial advisor as you spring clean your financial house:

  1. Realign your financial and investment plans. Changes in your situation, goals and outlooks may require financial plan updates. And investment plan changes may be prudent from shifting investment, tax and policy landscapes. Lower expected returns and heightened volatility may warrant diversification into foreign investments, small or mid-caps, “value,” and adjusting for higher interest rates and potential inflation.
  2. Increase your income and savings. Easier said than done, but you can make plans for growth. Higher incomes come from job skill enhancement, training, education, and side hustles. And no fancy investment strategy will offset inadequate savings. Revisit your budget and find additional savings. And if you refinanced your mortgage, think twice about plowing the savings into a new truck or kitchen. The average refinance generated a $400 per month savings. Investing that for 30 years at 6% return would accumulate to about $404,000 which is equivalent to about $16,000 a year in retirement.
  3. Get your risk tolerance right. Risk tolerance is a nebulous term, is hard to measure and changes over time. What is important is how you are going to react when the next market meltdown occurs. Can you stay the course? Now’s the time to adjust when the markets are up rather than trying to switch horses midstream.
  4. Check your insurance. Do you have sufficient coverage and is it competitively priced? Your house value and net worth may have risen. Are your homeowner’s and umbrella liability policies due for a review? Are you and your family adequately covered for life and disability insurance? What about health insurance? Talk to your agent and get competitive bids.
  5. Update your estate plan. Changes in your health, family and financial conditions warrant reviews and updates of estate plans, trustee designations, powers of attorney to name a few. Are beneficiary designations up to date and living trusts funded? Would it be more tax-efficient to name your charities as beneficiaries of your IRAs and leave your home to your kids with its stepped-up cost basis (if tax laws remain)?
  6. Prepare to withdraw from 529 plans. Congratulations if you have a kid or grandkid graduating this spring, and better yet if you had a dedicated savings plan. Requesting checks is a little like retirement where you get to enjoy the fruits of your labor and dedicated savings. Maybe ask the young graduate to show you a copy of the receipts and their grade reports if they expect to see more checks.

The important things in life don’t often come without a little work. Your financial house doesn’t have to be spotless, but planning and assistance go a long way in getting things in order. May you secure your future wisely and have sage advice.

Posted in Personal Financial Planning, Planning Tips and Goals | Comments Off on Spring Clean Your Finances

American Rescue Plan Act of 2021: What You Need To Know

The $1.9 trillion American Rescue Plan Act of 2021 was recently signed by President Biden. Federal aid for the health and economic crisis now tops a record $6 trillion in the form of fiscal and monetary support and represents about 26 percent of gross domestic product (GDP). This is a brief summary of the new legislation. Some are extensions of last year’s CARES Act and some reflect changes in the tax law that should be discussed with your tax advisor. If you filed your 2020 return early, you might want to discuss filing an amended return. And as with any new legislation, patience is warranted. Additional planning issues and opportunities may emerge as the Act is studied and clarified.

About a quarter of the bill was focused on four elements – expanding vaccinations, containing the pandemic, reopening schools and extending unemployment benefits. A little over half was for state and local aid, broad rebates for many households, and other long-standing priorities. And the balance reflected a combination of tax and spending policies.

$1,400 Stimulus Checks

Third round of checks will be distributed to adults and dependents for people making under $75,000 ($150,000 for couples) and it’s estimated that 280 million people would receive full or partial payments. However, this round contains more restrictive cutoffs – there will be no checks for those with Adjusted Gross Income (AGI) over $80,000 (individuals) or $160,000 (couples).

Extended Unemployment

Pandemic benefits of up to $300 a week are extended to September 6, 2021. The first $10,200 in benefits for 2020 is tax-exempt for families making $150,000 or less. And the Feds will subsidize COBRA health benefits through the end of this September.

Child Tax Credit

There’s a one-year expansion to $3,000 (from $2,000) for kids age 6 – 17 and to $3,600 for kids under 6. The AGI limits are $150,000 (couples) and $112,500 (single parents).

State and Local Governments

$350 billion in aid to cities, States, Tribal governments and U.S. Territories.

Schools and Childcare Block Grants

$130 billion for K-12 education, $40 billion for colleges for emergency student financial aid grants, $40 billion for childcare providers through the block grant program and $1 billion for Head Start.

Pandemic Response

$50 billion for COVID testing and contact tracing, $19 billion for public health workforce expansion and $16 billion for vaccine distribution.

Help for Businesses

$25 billion for pandemic assistance grants for bars and restaurants and an additional $7.25 billion into the Paycheck Protection Program (PPP). Hurry up because the PPP application deadline is the end of this month. A significant provision is the extension of the Employee Retention Credit through the end of this year – review the interplay between ERC and PPP with your CPA.

Federal Moratoriums Remain

These remain for evictions and foreclosures until the end of this month. However, they expanded housing assistance by about $32 billion.

Student Loan Forgiveness

While they didn’t forgive student loans, there is a provision that any student loan forgiveness passed between 12/20/2020 and 1/1/2026 will be tax-free. Normally, loan forgiveness is taxable income.

A global pandemic, shutdowns, new policies, and the reactions to all are good reminders that financial planning is a work in progress. May you secure your future wisely and always have sage advice.

Posted in Economy and Markets, Planning Tips and Goals | Comments Off on American Rescue Plan Act of 2021: What You Need To Know