Get an Early Jump on Charitable Giving

Were Americans as generous with their charitable giving in 2018? A record $410 billion dollars was given by individuals in 2017, according to Giving USA. Two factors may reduce giving: the recent income tax cuts and a rough-and-tumble December for investors.

However, it’s the start of a new year. Meet with your advisers and get a jump on giving strategies for 2019 for three reasons:

  • Be more impactful in your giving: Roughly one-third of the year’s online giving is done in December, according to statistics at What if you took the time to define your charitable mission and did your homework in selecting charities?
  • Consider the “wealth effect”: Investment gains were strong in 2017 and donors felt “wealthier.” The S&P 500 gained 21 percent. It dropped four percent in 2018. Donors tend to sit on their wallets when their portfolios are down. But isn’t that the time when charities need more help?
  • Tax savings: What if giving is the cheaper route?

This article focuses on tax planning opportunities for charitable giving, specifically about the impacts of the Tax Cuts and Jobs Act and Qualified Charitable Distributions (QCD). But first, a review of why people give (note: tax benefits are not the primary reason).

What do you get out of donating? The top five include:

  • Personal experience
  • Making a difference
  • Being proactive in solving a problem or taking a stand on an issue
  • Being otivated by personal recognition and benefits
  • The belief that giving is a good thing to do

Challenges from the Tax Cuts and Jobs Act

The true impact won’t be available until after returns are filed in April. Some – such as Giving USA – feel that charitable giving will decrease. Others say high-income taxpayers will be motivated to donate more.

It’s now harder for individuals to reach the threshold required to qualify for the deduction. Taxpayers have a choice: Take the standard deduction, or itemize their deductions. The standard deduction doubled; state and local taxes are capped at $10,000; and mortgage interest may be limited. Council on Foundations estimates 5 to 12 percent fewer Americans will itemize.

Planning solution: If you can only take the standard deduction, then consider “lumping” contributions into every two or three years in an effort to itemize deductions for that year.

4 questions regarding qualified charity distributions

The impact has changed because more taxpayers are taking the standard deduction. QCDs are direct transfers from IRAs to eligible charities. The IRA account holder must be 70-1/2 years or older, and the beauty of the QCD includes:

  • The distribution goes directly to charity from IRA
  • It’s not includible in your income
  • It counts towards satisfying your required minimum distribution (RMD)

1. Can you make a QCD from a 401(k)?

No. QCDs come only from IRAs and not from employer-sponsored plans (SEP, SIMPLE and 401(k)). You possibly could roll those employer plans to IRAs to be eligible for QCDs.

2. What if you took the RMD earlier in the year — can you take a QCD later to offset the RMD income?

No. This is a key reason to jump-start your charitable giving strategy now rather than waiting until year end. Say your RMD for 2019 will be $20,000 and you will give $10,000 to qualified charities. If you made $10,000 QCDs early in the year, then you’d only report $10,000 in taxable RMD. But if you already took your RMD and waited until year-end to donate, then it gets more expensive. You could take an additional $10,000 as QCD — but you’ll report $20,000 in taxable RMD and your IRA is $10,000 lighter.

3. If you qualify for itemized deductions, is the QCD still better to do?

Yes. It reduces your AGI, which is more favorable than a charitable deduction which reduces taxable income. Reduced AGI might lower the threshold for deductibility of medical expenses.

4. Can you use a donor-advised fund for QCD?

No. Both donor-advised funds and private family foundations are excluded.

There are many ways to be impactful with your generosity. You can give your time or talent, adopt an annual giving campaign, and be part of your estate plan utilizing beneficiary designations and specifying bequests. And you have many resources for due diligence and thinking things through including your trusted advisers, and Community Foundation, to name a few.

Finally, in the words of Andrew Carnegie, “It is more difficult to give money away intelligently that to earn it in the first place.” Good luck.

You can also view this article on the Reno Gazette Journal

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A Guiding Angel’s New Year’s Resolutions

The finer things in life tend to take time. Frank Capra’s film “It’s a Wonderful Life” was released in the winter of 1946. It would take almost three decades before it became a classic.

Senior angel: “A man down on earth needs our help.”

Clarence: “Is he sick?”

Senior angel: “No, worse. He’s discouraged.”

The story’s about a desperately frustrated banker, father and husband who contemplated tossing away God’s greatest gift – his life. Clarence, who hadn’t yet earned his wings in 200 years, was sent to be George Bailey’s guiding angel. Through Clarence, George got to see what the world looked like from a different perspective.

The year ends with bumpy conditions: an aging bull market, slowing economies, political dysfunction, trade uncertainty and tightening financial conditions, to name a few. These can be distracting or give you reason to pause. However, the New Year offers new beginnings and promise. Sometimes we need a nudge to stay on track or reset our financial plans. I’ll share some New Year’s resolutions to improve financial health.

Stick to your plan

Warren Buffett famously said, “It takes only two things to succeed: first, having a reasonable plan; and second, sticking to it. It’s the ‘sticking to it part’ that most investors struggle with.” Your financial success takes effort and mindfulness.

Have a budget for life

Know where your money goes, and where it’ll likely go as you shift through life’s transitions. Think about budgeting like dieting, where we’re coached to eat less and eat smart. And take a financial snapshot (a balance sheet and cash flow) at least annually to see where you stand and your progress.

Manage debt 

Some abhor debt (“We haven’t paid interest in 32 years!”) Others use it as a tool. Understand what you can borrow versus what you should. The average American now has about $38,000 in personal debt excluding mortgage, and that balance is up a grand this year, according to Northwest Mutual. Consolidate debt where possible and have an aggressive repayment plan.

Beat inflation

It’s tempting to hide in cash (Note: It’s prudent to have three to six months’ living expenses in cash reserves, or one to two years’ worth for retirees). But most investors need to earn a higher return. Social Security retirees get a 2.8 percent pay raise for 2019, and that’s about $39 a month for the average retiree receiving $1,405 (Note: The maximum benefit is about $2,861 a month). It’s the biggest increase in seven years. Would that be sufficient for you? If inflation averages 3 percent a year, a $100 bill is worth about $74 in 10 years and $40 in 30.

Think long-term and rebalance portfolios 

Treasury bills are one of the few major asset classes that are positive this year to date, up 1.8 percent. Bonds are down about 3 percent, U.S. stocks are down 10 percent and international stocks are down 20 percent. Over the last 20 years, Treasury bills have gained about 47 percent, bonds 164 percent, U.S. stocks 286 percent and international stocks 178 percent.

The future is likely to be different; however, the stock market over the long term shows a permanent upward trend interrupted periodically by temporary declines. And stay diversified – you’ll trade “never making a killing” for the blessing of “never getting killed.”

Establish contingency plans 

Life can be curly. Manage your risks.

Some may take New Year’s resolutions as folly. However, planning for a lifetime of financial success has big payoffs. May your list of troubles be shorter than your list of resolutions.

You can also view this article on the Reno Gazette Journal.

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He Tried Christmas – Don’t Let the Grinch Steal Retirement

He was a mean one, that Mr. Grinch. He hated Christmas. The happier the Whos, the angrier he became until he couldn’t take it anymore. He hatched a plan to steal Christmas. Disguised as Santa and his dog Max as a reindeer, they sleighed into Whoville. House by house, they stole all their presents, trees and decorations, and left only crumbs too small for a mouse.


But he didn’t stop there! He also dished out bad retirement advice. He didn’t think of anyone but himself, he lived alone in his cave, and gave no thought to his future.

“He was a selfish and bitter grouch, and a tax cheating slouch.

And if you asked him for financial advice, why would he care? He’d steal Cindy Lou Who’s last candy cane. You better beware.”

He’d pooh-pooh the Whos. Let’s warn them about three Grinch retirement recommendations that can be rotten or should be forgotten so they are not later crying boohoo.

“Billie Who is 66 and wants his investments to grow and last the ages.

But his golf buddy Henry Who says look at this retirement book. It says people with graying hair should play it safe. Here read the pages.”

Don’t get pigeonholed or typecast with investment strategies. People have unique situations, needs and goals. Two households may require different investment approaches despite being similar in age. Yes, there are general rules but focus on what is best for you. For example, a common starting point in allocating between stocks and bonds is subtracting your age from 100 and that’s the percentage you hold in stocks. A 30-year-old would have 70 percent in stocks and 30 percent in bonds. A 70-year-old would have the opposite. In general, the portfolio would become more conservative with age.

But take Billie Who and Henry Who – their age is the only similarity. The bulk of Henry’s living costs are covered by pension and Social Security, and he has a modest amount saved. Billie has Social Security, no pension and a substantial 401(k) balance to fund the bulk of his lifestyle. Henry has the option of going “safe” with his investments or can be more growth-oriented. His savings can either supplement income or pass to heirs. Billie needs his investments to work hard to beat inflation and pay income taxes.

Another example, is how two elderly women might answer “What’s important to you about money?”

One says, “I don’t have time to earn it again, so I want it safely invested.” The other says, “We worked hard for this money and we want it working relatively hard for us and our heirs.”

Drop the stereotypes of age, and instead, focus on purpose.

“Donna Who says we’re staying put. The home is old and big. But it’s paid for.

Her girlfriend Susie Who says our home situation is similar. But we’re looking for something simpler. While we are able, we’re ready to explore.”

It may be hard to pry the Grinch from his dark cave. However, Baby Boomers and the Silent Generation are active residential buyers per a National Association of Realtors survey on home buyer and seller generational trends. Those generations comprise about 38 percent of homes purchased and the top three reasons for buying include the desire to be closer to family and friends, smaller home and retirement. Some found themselves house rich and cash poor. A house is one of, if not, the largest asset people own, and equity is idle unless sold or borrowed (including reverse mortgages). Others resize their home – downsize or upsize – for quality of life issues.

“An estate plan? I say every Grinch for himself. Why worry?

But Whoville is a community of families. The Guy Whos think what if something happens to me? Will the She Whos stay single or will they remarry?”

Thinking about end of life and preparing for it can be two different things. A survey referenced in an article in It found that only four in 10 Americans had an estate plan. Estate planning becomes a higher priority with age with 58 percent of Boomers and 81 percent of those age 72 and above. However, estate planning is not one and done. It needs to be updated to reflect changing situations and life dynamics.

There are at least four reasons the Whos should visit with their estate planners and refresh. They include understanding the estate plan, updating beneficiaries, funding the trusts and titling newly acquired assets properly, and reviewing the designated players – including agents, executors and trustees. They are aging and changing like us.

The Grinch story ends well. It’s about his redemption.

“He brought back the toys! And the food and the feast!

And he… he himself…

The Grinch carved the roast beast!”

Merry Christmas and Happy Holidays to you and your family.

You can also view this article on the Reno Gazette Journal.

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Retirement Planning Challenges for Age-Gap Relationships

How do you plan retirement for a couple who is 10, 15 or 30 years different in age? Retirement planning is personal – no two couples are alike. However, “May-December” relationships pose unique retirement planning challenges.

Most married couples have a small age difference (less than three years). About five percent of first marriages and 20 percent of second marriages involve couples with an age difference of at least 10 years according to Pew Research. The average age disparity is higher for LGBTQ couples per a Facebook Data survey.

Financial planning implications for age-gap relationships include retirement funding and health care.


The math game becomes more complicated. You’ll fill the gap between your lifestyle needs versus social security and pension with savings – 401 (k) plans, after-tax investing, inheritance, business sale, etc. Normally, we’re planning for three decades of retirement at 65. However, longevity is increasing. Add a significantly younger spouse and two things happen – required wealth rises and your withdrawal rate declines. Wealth required to fund a $50k annual withdrawal for 30 years is about $1.1M assuming five percent return and three percent inflation and about $1.34M for 40 years. If the age disparity is very big thereby making the savings requirement too aggressive, perhaps you only partially fund the younger spouse’s retirement and assume he or she would remarry.

Social Security Timing

Generally, it’s advantageous to defer social security retirement benefits to lock in higher rates and survivor benefits (6.5 percent to eight percent per year between age 62 and 70). However, one of the spouses might prefer to take their benefits sooner. The survivor may collect the deceased’s benefits at full retirement age or reduced benefits at 60. The survivor may qualify for benefits on their own earnings history. Remarriage after age 60 might not affect survivor benefits. A surviving divorced spouse may be eligible for a benefit if married for 10 years or more. Contact for more specific details.

Pension Benefit Elections

Defined benefit pensions such as PERS provides a monthly benefit based on average compensation and length of service. Terms are also specific when you’re eligible to draw benefits. Survivor benefits for your spouse are reduced and she’ll get 50 percent, for example. The discounts increase the greater the age difference.


The older retiree is probably close to Medicare eligibility (age 65). However, the younger spouse may need to obtain their own healthcare insurance (e.g. employer, Exchange or explore if eligible for association coverage). Consider funding Health Savings Accounts to the maximum if eligible (to pay qualified expenses on a tax-advantaged basis). And factor in the future needs for caregivers and assisted living – issues include financial, hands on assistance and legal.

Age-Gap Families

Hopefully relationships endure the test of time and are long-lasting. However, AARP posted an article “Do May-December Romances Work?” It referenced an Australian study that said the bigger the age gap, the more likely the breakup of those relationships. Age-gap relationships can cause family friction and complicate family dynamics. Pressures may come if it’s a second marriage and your children fear they’ll be cut off. It’s why your advisors likely recommended legal protection including prenuptials, separate assets, trusts and possibly independent trustees, beneficiary designation reviews, and other estate planning actions.

Finding the Right Balance

According to a Fidelity study, about one in three couples haven’t well-communicated their retirement hopes and expectations. Now’s the time to hash things out. Will there be guilt or frustration if one retires and the other continues to work? What if you wait too long, the younger one is ready to retire and see the world, but the older one no longer has the legs to make the trek? Or consider that the older partner is ready to spend money (travel, gifts, or care) and the younger one is concerned “What if I need it?”

If “love knows no age” holds true and as longevity increases, then age-gap couples face multiple planning issues – financial and emotional. There’s much to think through and objective and independent advice can be valuable. Secure your future wisely.

You can also view this article on the Reno Gazette Journal.

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Yes, Even Celebrities Make Estate Planning Mistakes

Americans are drawn to celebrities. We read about their lives, gossip about their deeds and ogle their pictures. Perhaps it is admiration of glamour, fascination with royalty or learning their tricks of the trade. However, celebrities often make the same mistakes as us “commoners.” Let’s use their stories as lessons learned in protecting our wealth and values.

Here are the top four estate planning mistakes by celebrities we want you to avoid:

No will.

We want our affairs to be properly handled and loved ones protected when we are gone. However, neither Aretha Franklin nor Amy Winehouse had a will. The Queen of Soul left behind four sons with some financial headaches. Winehouse left an unwritten song about her finances. How did she want her $6.7 million estate to be distributed? To her brother, ex-husband and charity? Absent her written instructions, her estate went through probate and was distributed to her parents. Only one in four Americans have wills according to a 2018 survey by The main purposes of a will are to name guardians of minor children, an executor of your estate and which beneficiaries are to get what assets.

Failing to set up a trust.

Glamorous photographs are one thing, but do you really want your financial affairs given red carpet treatment? A will is a public document. With a living trust, your wishes remain private. Several tragedies followed Whitney Houston’s death at age 48. First, Houston’s will named her daughter Bobbi Kristina Brown as sole beneficiary. Second, her daughter unfortunately died three years later at age 22. Third, Houston’s estate was involved in a battle with the IRS over the valuation of recording royalties and was assessed an additional tax bill of $2.2 million. Finally, and ironically, her ex, Bobby Brown, may be the heir of the Houston estate.

A living trust can help keep your estate plan private. It designates who is entitled to your assets and how they are to receive them. The document names trustees and the trust may provide estate tax benefits. In the Houston case, a living trust may have helped by providing guidance to Bobbi following her mother’s death. A trust can help leave the legacy you want including harmony in the family.

Not updating the plan.

Life changes. Shifting financial conditions, health, family dynamics and relationships may signal the time for an estate plan tune-up or overhaul. Michael Crichton, author of Jurassic Park, was an unfortunate example. He was diagnosed with throat cancer, his sixth wife was pregnant and he didn’t update his estate plan to include his eventual son. His wife sued to include the baby as an heir, and Crichton’s daughter from a prior marriage opposed. Ultimately, the judge ruled the baby could inherit. However, anguish and expense could have been avoided by simply updating the documents. Is it time to contact your attorney to account for important life transitions and reflect your current wishes and situation?

Disabled before death.

Also, consider planning for living before you pass. You may be disabled and require assistance in managing your affairs. For example, one out of 10 people aged 65 is diagnosed with Alzheimer’s. The rate grows to one out of three at age 85 and quickly moves to one out of two. Powers of attorney and living wills help protect you and your loved ones in case of incapacity. They too need to be reviewed and updated. The last years of blues singer Etta James, known for “At Last” and “Tell Mama,” were mired in court. The legal battle was between her husband of 42 years and her son from a prior marriage. Etta James signed power of attorney over to the son in 2008, at a time her husband argued that she suffered from dementia and was incompetent. The son wanted to limit the amount of money the singer’s husband spent for her medical care. They finally settled, and the husband was named as conservator, however, he was limited to $350,000 for medical care for his wife. Etta James passed shortly thereafter.

Celebrity misfortunes with their estate planning could be our very own. Avoiding them shouldn’t be left to divinity or luck. Your financial successes in life require a dedicated process of setting goals, making decisions, adapting the plan, and repeating the process. Secure your future wisely.

You can view this article on the Reno Gazette Journal.

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End-of-year financial checklist, pt. 2

Vincent Price’s rap at the beginning of Thriller was a warning: “Darkness falls across the land. The midnight hour is close at hand …” October certainly has been a spooky month for some investors. Nevertheless, fall is time to wrap up your personal finances for the year.

Here are five additional items to include on you end-of-year financial checklist:

30-minute family financial report card

How do you want your personal State of the Union address to read? Two planning mantras are “control what you can control” and “have a written plan.” However, long-term planning can be frustrating – delaying gratification and fuzziness of the future. It can feel like walking to the horizon – and you never get there. What if you periodically paused to assess your situation and celebrate the year’s achievements? Did you meet your financial goals? Are you on track with your budget? What adjustments should you make for the New Year?

Stay on your debt diet

What if you approached debt reduction like a weight-loss program? The average American with personal debt (excluding mortgages) holds the following balances according to – credit cards ($15,482), auto loans ($27,669) and student loans ($46,950). On a parallel path, many of us eat too much and about 70.7 percent of Americans are overweight or obese, according to NBC. Similar analogies between excess pounds and debt include how easy it is to add but difficult to shed, how it can grow with little effort, and how it can cause problems later in life if left untreated. The programs for weight loss and debt reduction often include setting reasonable goals, changing one’s lifestyle, avoiding temptation and having a buddy or cheerleader. Stay in shape!

Tax reduction

Are you paying the minimum amount legally required? Profitable companies tend to command higher stock prices. Two ways to increase the bottom line include growing revenue or reducing expenses (including income taxes).

Financially successful households run their personal finances like a business. Common tax reduction strategies include:

  1. Deferment: Pushing income into future tax years and accelerating deductions (e.g. retirement plan contributions, buying business equipment and installment sales).
  2. Tax-free income: i.e., municipal bond interest).
  3. Preferential capital gains treatment and matching gains with losses.

Taxes are complicated and the biggest tax law changes in over 30 years took effect this year. Review your situation with your CPA, enrolled agent and trusted financial advisers.

Charitable giving

Would you consider making a charitable gift, or possibly one in the name of a family member? People share their wealth (or volunteer their time) for many reasons, including trust (making a difference), altruism (helping others in need), social (couples make giving decisions together or the cause benefits someone close to you) and egoism (it feels good, or you enjoy the recognition).

Year-end giving for tax reasons might be straightforward or not. Writing checks is pretty simple. However, you may be giving appreciated stocks, real estate or collectibles, or distributions from your IRA (if you’re 70 1/2 or older) that require paperwork or special services (tax, legal, appraisers, etc.). Give yourself sufficient time.

Protecting loved ones

When’s the last time you updated your estate plan? Estate plans can be magical – helping you maintain control of your assets and protect you should you become incapacitated. They can take care of family and pets, and can save you time, money and stress. Estate plans can protect your privacy and help keep harmony in the family. However, they can’t update themselves.

Have your estate plan reviewed if your situation has changed — for example: marriage, divorce or death; financial status; a new baby or grandchild; moving to another state; or other circumstances. Maybe your successor trustee is your college buddy and he or she is as old as you. Kids get older and can serve in trusted helper roles. Relationships change or you feel the need to protect beneficiaries from bad habits or overspending.

Life is full of opportunities and distractions. And as humans we are influenced more by psychological factors in making financial decisions – fear, overconfidence and biases – than by rational factors.

Don’t get spooked! Plan out your finances with your trusted financial advisers.

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End-of-year financial checklist, pt. 1

Fall is a busy time at home and in the office. You’re wrapping up the quarter at work, preparing for the holidays and ensuring your home is ready for the upcoming winter season. It’s also time to get serious with year-end financial planning. Prioritizing responsibilities can get tricky, but some items have hard deadlines or deserve immediate attention. End-of-year financial planning is one of those items.

Here are five items that you should include on your end-of-year financial checklist:

Max out your 401(k) contributions

Hit your savings goals. Most people prepare and save for retirement. Others can live off Social Security benefits alone or may have married rich. Retirement plans – 401(k), thrift savings, deferred compensation and others – can be excellent vehicles. They provide forced savings, convenience, matching employer contributions and tax benefits. If you’re in the 22 percent federal tax bracket, each $100 you contribute to your 401(k) plan only “costs” you $78 out-of-pocket with the balance coming from tax savings. Plans are subject to maximum funding limits, so be sure to check the rules.

Rebalance portfolios

What is more important to you: maximizing returns or minimizing risk? Prudent investors diversify asset allocation — how you “slice the pie” among asset classes such as equities, fixed income and cash — drives the risk-return characteristic of the portfolio. Assume the target allocation was a third to each. The assets will produce different returns over time and if left alone, the portfolio becomes unbalanced. Rebalancing can pay you big dividends. You’re reducing risk, selling high (trimming equities in this market) and buying low (adding to cash and or fixed income). Rebalncing helps you emotionally handle midterm elections and other uncertainties.

Review tax planning strategies

Trim your tax bill or avoid surprises. Your income may be higher from a good economy, selling a home or rebalancing your investments, or required minimum distributions (RMD) from an IRA. Are you eligible to fund a different type of retirement account? Will you contribute to charity or increase your donations? If so, would you donate appreciated investments or use your RMD in a special way to reduce taxes?

What are you going to owe in taxes? The Tax Cuts and Job Act represents the biggest change to the US tax code in more than 30 years. Most taxpayers will pay lower income taxes, but not everyone. Tax brackets are lower, fewer taxpayers might itemize (since the standard deduction roughly doubled), the personal exemption was eliminated, state and local tax deductions are capped to $10,000, and mortgage deduction may be limited. More dramatic changes were on the business side, including a 21 percent corporate tax rate, incentives to repatriate foreign assets and elimination of the corporate alternative minimum tax. And some business expense deductions are gone (i.e., tickets to sporting events) or harder to take (business interest and net operating losses).

Update beneficiary designations

Protect your loved ones and favorite organizations. A lot can happen between Thanksgiving and Christmas dinners, including your preferred heirs. Two popular stories illustrate the benefits of periodic updates, and being on your best behavior during the holidays.

The first is about Warren Hillman, who was married three times. He named his then-wife Judy as beneficiary of a $125,000 life insurance policy, divorced her and later remarried Jacqueline. Warren didn’t update his policy and died 10 years later. Ex-wife Judy filed for and received the $125,000. Widow Jacqueline sued in state court, and the case eventually went to the U.S. Supreme Court, which ruled in favor of the ex-spouse.

The other story is about a 17-year-old waitress named Cara. Bill Cruxton, an 82-year-old widower with no children, was a frequent customer. They became friends, she ran errands for him and helped him at home. He rewrote his will, naming her as primary beneficiary. Bill died later that year and left her half a million dollars.

Schedule medical and dental appointments

Take care of yourself. Schedule tests and procedures before the end of th year. It may save you insurance plan deductibles and co-pays that reset Jan. 1. Also, remember to use your FSA (flexible spending account) because unspent balances may be subject to a “use it or lose it” feature. (Note: HSA, or health spending accounts, generally allow balances to carry forward).

Make time to celebrate the arrival of fall with your family’s personal traditions but don’t neglect your end-of-year finances. Also, tax planning issues can be complicated, so be sure to contact your CPA or enrolled agent earlier rather than later. Trusted advisers are always available to help!

You can view this article on the Reno Gazette Journal.

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Capture financial gains, or prepare for stormy weather?

What do you do when you get conflicting advice? There are two choices when the sun is shining. One person remembers the saying as “you build an ark when the sun shines.” Another says no, the saying is “make hay when the sun shines.” Market conditions have been sunny this year. Should an investor prepare for stormy weather, or should he or she stay invested and capture more gains?

We’re entering the fourth quarter, which traditionally has a remarkable track record. For example, the S&P 500 has been positive for 25 of the past 30 years, ranging from a high of plus 21 percent (1998) and a low of minus 22 percent (2008), and averaged 5.3 percent for the quarter. However, there is a wide range of forecasts and interpretations of current conditions. The “hay makers” talk about slow but growing economies, low inflation and low unemployment. And on average, election outcomes have little relationship to S&P market performance – so best to separate investment decisions and politics.

However, the “ark builders” talk about slowing economies, rising interest rates, and “Katy bar the door!” if both the House and Senate go blue and impeachment talks go viral.

Thus, the dilemma. You and I are standing on the same street corner; one’s advised to turn right, the other left. I have yet to meet a consistent and accurate forecaster. As much as we expect the best and plan for the worst, prepare to be surprised. Should an investor “make hay” or “build an ark” in this relatively sunny weather?

You are right – the prudent answer is a bit of both.

We each face issues today. They run the gamut – simple, complex, emotional and some that are polarizing and divisive. However, I’m reminded daily to focus on things that we control, prioritize what will have the greatest impacts, and seek objective and qualified feedback. Isn’t it better to get help in thinking things through? We benefit from expertise, different perspectives, and checking our blind spots and biases, to name a few.

One of the reasons you invest wisely is to adequately fund retirement. Retirement age is a key variable in planning. There are several studies that show a noticeable gap between expected and actual retirement date. It is wise to make planning adjustments for the potential for early retirement. I’ll highlight some of the findings of David Blanchett of Morningstar and share some planning implications you might discuss with your family and team of trusted advisers.

  • Major variables in retirement planning include age of retirement, annual funds needed, returns and life expectancy. (These factors themselves may change throughout retirement.)
  • People tend to retire earlier than expected by about four years; the average age of retirement has increased to 62 (from 59) as has the expected age to 66 (from 63). (Waiting until Medicare eligibility makes sense!)
  • Earlier retirement can have negative impacts — less time to save, reduced Social Security benefits, higher medical insurance costs, and money needs to last longer assuming health stays the same. But 28 percent of retirees still work!
  • A driver of early retirement is health. It can impact life satisfaction and ability to adapt; and bad health can shorten life expectancy and increase costs of care.
  • Postponing happens in economic downturns; work also serves to provide purpose and meaning.

Goals are an important part of planning; however, they’re not the central conversation. There’s a big difference between goals and transitions. Goals are what we want to happen (i.e., retiring at age 65). Transitions are what’s happening anyway: my health declined; my company restructured and I’m retiring at 62; my daughter’s getting married; my nephew is graduating from college. And who has a goal of Dad getting Parkinson’s?

That’s life. Transitions are important because they often have financial implications. And it’s much better to prepare than to repair.

Good luck!

You can also view this article on the Reno Gazette Journal.

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Mine, Yours and Ours: Guidance for Unmarried Couples on Joint Banking Accounts, Co-Signing Loans and Buying a House

Unmarried couples face unique money issues and financial planning opportunities. For example, how do you own your assets?  There’s a shared joy from living together and a temptation to own things “together.” There are going to be expenses – some shared and others where you find yourself saying, “I’m not paying for that!”

Here are three financial planning areas for unmarried couples.

  1. Are we ready to have a joint bank account? Most individuals will find it safer to maintain a “what’s mine is mine and what’s yours is yours” attitude early in the relationship – keep your bank accounts, investments, credit cards and debt separate. Uncertainty and finances create stress in relationships. Until you develop trust, are comfortable in talking about goals and expectations, and work closely as a team, it makes sense to keep financial accounts separate. Even after the relationship blossoms and you’re finishing each other’s sentences, having separate bank accounts can save you from squabbles.

    An important discussion is deciding how to split joint expenses and who pays the bills. Some couples split expenses 50/50. Others pay for things in proportion to their income – I’ll pay A and C and you’ll pay B and D. It becomes a matter of communication and compromise. However, in other cases it may make sense for couples to contribute monies to a joint account to pay certain bills.

    The key advantages about joint accounts are convenience and building trust about your shared finances, spending and saving habits. However, there are disadvantages. There’s a loss of privacy – you both see what the other is spending. Second, your finances could be at risk if one partner is financially irresponsible. If one has debt problems, his or her creditors could go after a joint account regardless of who contributed funds. And third, either party can clean out that account without the other’s permission. You may want to limit the balance of that account to a month or two of expenses.

  1. Thinking twice before co-signing on a loan. This includes co-signing a lease, applying for a joint credit card, or taking out a mortgage as an unmarried couple. It might sound like a good idea to help out your partner with bad credit. However there are many reasons not to co-sign a loan per It’s high risk and low reward. The individual with a bad credit score has little to lose and you assume all the risk if the loan isn’t repaid timely. Your ability to get credit when needed may be restricted due to excessive credit. And life happens – what if the other party loses their job or you break up? The banker’s not going to care, and you’ll get a call. There’s a reason why a 200-ton sculpture of black marble at the Bank of America Plaza at 555 California Street in San Francisco is also known as “The Banker’s Heart of Stone.”
  2. Purchasing a house. Weigh your options before making the plunge in three primary areas. First is title of ownership. It might be single ownership simply because one party has more substantial assets; or it can be joint tenancy or tenants in common (TIC). A major distinction upon death – if joint then the other party inherits, and if TIC the decedent’s ownership will pass by his or her will or trust. Second is how you split the costs including down payment, closing costs, utilities, taxes and repairs. If it’s single ownership, why would the other party pay property taxes? In that case, he or she pays “rent.” And finally, negotiate and write down your break–up plan for the house. Who gets to keep the house? And what are the buyout terms?

As young relationships blossom, we hope couples grow together personally and financially. However, life throws curve balls. Plan accordingly. It may be prudent to have written agreements, and get legal advice, especially when the stakes are high.

Good luck.

You can also view this article on Reno Gazette Journal.

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Getting Hitched? Ask These 9 Financial Questions Before Living Together

Millennials experience more stress and don’t manage it well, according to a survey by the American Psychological Association. Compared to other generations, they’re the most stressed, followed by Gen Xers, Boomers and finally, Matures. Over half of millennials report lying awake at night worried during the past month. Primary stress culprits include money and work. At Sage Financial Advisors, debt and planning for the future are some of the most common worries we hear from young adults.

Additionally, millennials dominate the ranks of renters, are less likely to own a home or marry than prior generations at a similar age, according to Pew Research. Young adults aged 25 to 29 cohabitate almost four times the rate of Boomers at a similar age.

This is the second in a series of articles focused on helping young adults have less financial stress and plan a successful path ahead.

Here are questions that young adults should ask before moving in together or marrying:

  1. Discuss reasons for moving in together. The list should be long. The phrase “makes financial sense” should be one of the benefits, not the primary one. Yes, a break up between non-spouses is less legally complicated than a divorce. However, how much more stress do you want and why enter a problem relationship? Separate living arrangements might be preferred.
  2. What are your expectations of each other? How will chores and bills be split? Will it be okay to hang out late with your co-workers? Who will cook and who does the dishes?
  3. Talk about finances. It’s good to know upfront about each other’s current financial condition – prior bankruptcies, significant debt and poor credit scores. Whose name is on the lease? Is the bill pay schedule manageable for both of you? Should you have mine, yours and our bank accounts? Here’s a sample couples money worksheet.
  4. Agree on the address. Does it provide equal commutes? Is it affordable and match your needs?
  5. Prepare for the good, the bad and the ugly. A mentor taught me how to read a contract – if you can live with the “come hell or high water” provisions (consequences of breaching the contract), then it’s probably an okay deal. This includes piled dishes, sleeping in until noon, snoring, and slow pays after the courting days are over. And have a break-up plan in advance.

What about marrying? Add these to the list:

  1. Discuss your money views and saving/spending habits. Money talks are emotional and personal. Openness and transparency take priority. What would you do if given a million dollars? How do you feel about money?
  2. Discuss family plans. More women are waiting longer to be mothers. It’s not unique to millennials – it’s been a trend since 1970 with a shift away from marriage and increasing educational attainment. Delaying parenthood is not due to a lack of interest though. Pew Research says over half of millennials say being a good parent is one of the most important goals in life – higher than having a successful marriage.
  3. Open the financial kimonos. Full disclosure becomes more critical with the legal issues of combining assets, pre-nuptial agreements, wills, trusts and life insurance.
  4. Negotiate priorities. I met an interesting gentleman years ago at a business retreat. He shared his key to marriage: Learn when to negotiate your priorities. For example, if the topic was where to dine that night, he’d ask his wife, “How important is that to you?” On a scale of one to 10, if she said “8” and he ranked it a “3” then she gets to decide. When deciding where to vacation and your destination ranks highly for both of you, then it’s time to sit down, discuss and negotiate. It’s a mindset of working together and compromise.

Remember to treasure your relationships more than your possessions and ask the hard questions before moving in with your significant other.

Good luck!

You can also view this article on Reno Gazette Journal.

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