Emergency Fund Front and Center Due to COVID-19. When Can You Use It?

On Monday, I got a text from brother saying he understood now why I am always telling people to have an emergency fund. Due to the COVID-19 pandemic, both he and his wife are no longer working. It couldn’t come at a worse time for them, or for the millions of other workers who are no longer considered essential and not in a salaried position. They, along with millions of others, are now questioning what and who to pay.

Yes, you can open your emergency fund.

My brother and his wife were on a plan to eliminate their debt and were building their emergency fund. Let’s just say, timing turned out to not be on their side as they had yet to reach their savings goal and had to start dipping in to the funds they had. Many people don’t even have an emergency fund.

The value of having an emergency fund cannot be overstated. In times of crisis, you may not have time to wait for your government to issue aid, and it may be insufficient at best. For specific details on how much to have, read my post Government Shutdown Highlights Need for Emergency Fund. Keep in mind that you may need more if you have special needs.  

In the current environment, you may be wondering if it’s ok to dip into your emergency fund. Yes, it is! IF, the funds are to be used for a true emergency that your unemployment, or government aid cannot cover. Keep in mind that if you were in the position of being paid hourly and are now not reporting to work, the unemployment benefit being offered by your state may be insufficient to replace your salary, and to cover your basic needs. So, if you are lucky enough to have an emergency fund, it’s ok to now use the fund.

Cover your necessities first: housing, utilities, medical, and insurance. Use what cash you do have coming in to cover your basics such as food, transportation, some form of entertainment, and the things that you rely on but simply cannot cut. However, you should immediately assess to see what items can be cut or reduced such as gym memberships, or entertainment. For example, go from a full cable package to basic only, or even to Internet only with streaming if you can do that. Your emergency fund can make up the shortage on true necessities such as housing.

Raise funds any way you can.

Next, transportation: keep up with your car payment, registration, insurance, and license fees. If you have two or more cars and don’t need all of them, consider selling one. It will be difficult in the current economic environment, but it’s better than continually accruing debt or the car being an on-going expense. In other words, if you don’t truly need it, let it go!

Debt payments should be examined. Are you in a debt repayment plan with your student loans and credit cards where you are using the avalanche or snowball method? Not sure what those are; read my series Five Keys to Financial Freedom: Key 2. If so, temporarily resort to making minimum payments only. For this current crisis, the government is considering whether some federal student loans are eligible for a temporary hiatus. Confirm whether your loans are eligible. If so, and you need to hold onto cash, contact your lender to determine your eligibility, and for how long, you may reduce or skip payments. Do this for other lenders as well. I call it, dialing for dollars.

Use what cash you do have coming in to cover your basics such as food, transportation, some form of entertainment, and the things that you rely on but simply cannot cut. However, you should immediately assess to see what items can be cut or reduced such as gym memberships, or entertainment. For example, go from a full cable package to basic only, or even to Internet only with streaming if you can do that.

Finally, keep the faith. Focus on the future and that this too shall pass. It will be a struggle, and it will be difficult. Over time though, you will get back on track and hopefully have a newfound appreciation for saving. Far too long in the United States we have pooh-poohed people who are savers and looked at cash savings as money doing nothing. Now, it’s front and center and being called up to duty. It’s never too late for you to adopt a saver’s mentality and change your future course of action as we recover from this pandemic.

As an independent Certified Financial Planner™, I can help you focus on your goals and long-term plan. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #letsmakeaplan #CFPPro #savemoney #COVID19 #EmergencyFund

COVID-19 Highlights Importance of Estate Planning

COVID-19 brings a shelter in place order for nearly seven million of us here in the Bay Area. Although disruptive to daily life, it’s a small sacrifice if in the end it truly does save lives. This outbreak is a good reminder of why we plan and why we have key elements of that plan in place. Like estate planning, and more specifically, a health care proxy.

This virus seems to be affecting seniors disproportionately at this point. Regardless of age, or income, we should all have our estate planning documents in place. At a minimum, you need a health care proxy, a will, and power of attorney all up to date. Keep in mind that a will is not a substitute for more thorough estate planning.

Here’s a quick overview of the key documents and terms and what they basically do. If you are creating a multigenerational trust, have a business or need to create a special needs trust, you will likely need more than what is listed here.

Will - the most commonly known document. A will allows you to transfer property at your death in a desired manner. Keep in mind that a will alone does not avoid probate.

Living Will - different than a will. A living will makes your wishes known if you are unable to communicate. The living will is where you outline who you want to care for children for example.

Power of Attorney - appoints someone of your choosing to speak and act on your behalf for financial and/or health matters. This is a key document and cannot be overstated.

Health Care Proxy - or, medical power of attorney, appoints someone to make health care decisions for you if you are unable.

Living Trust - also called a revocable, or inter vivos trust, is a legal arrangement that holds your assets during your life, and transfers them to your desired beneficiaries upon death. A living trust is one method used to avoid probate.

Beneficiary Designation - allows you to name an heir to receive certain types of assets thus avoiding probate by contract or operation of law. Think about accounts like your retirement plan, an IRA, or a life insurance policy. You can name an heir and the asset passes directly to the person you name.

Keep in mind that you are allowed to make changes to your plan. Your decisions are not set in stone and your estate planning documents should be reviewed for necessary changes every three to five years, and especially at major life events such as marriage, divorce, or the birth of a new child. Your estate planning complexity may also grow and change over time as your assets grow and your situation changes.

As an independent Certified Financial Planner™, I can help you prepare for meeting with an estate planning attorney.  Contact me and let’s get started. #talktometuesday #education #Hireaplanner #estateplanning #estate #legacy #stressfree #taxsavings #COVID-19 #pandemic

Three Ways to Use Your Tax Refund

Many folks are about to come into a windfall of cash. If you’ve been complaining about not being able to save, and not being able to fund your IRA, or add to your investments, or pay down debt, this is your opportunity. That mini-windfall is your tax refund. Instead of envisioning all of the lovely, disposable, soon-to-be-forgotten things you could buy with your refund, consider buying some financial peace of mind. Here are three things you can do with this windfall that will financially benefit you.

First, use this windfall to pay off debt. Look at your debts and see if the refund you are getting is enough to completely payoff a high interest debt. If it is, do that! Then use the monthly payment amount you were making on that debt to make a larger payment on another debt. Work with your financial planner and pay off the debt that gives you the greatest bang for your buck and you’ll be debt free in no time. Your financial planner can tell you which debts to pay and in what order that will provide the shortest payoff time, or save the most in interest.

Second, build your emergency fund. If you are a two-income household, the emergency fund should be the equivalent of six months of total expenses. If you are a single-income household, you should really consider having up to nine months of total expenses as an emergency fund. This includes all discretionary and non-discretionary spending. Your tax refund can add nicely to your cash stash.

Third, start or add to your investments. If you have your debt under control, and your emergency fund is sufficient, add to your investments. Your tax refund could be just the ticket. Consult your financial planner and decide whether you should be starting, or adding to an IRA, a taxable fund, or topping up an existing investment account.

A note about tax refunds; if you are receiving an unusually large refund (and tend to do so every year) now is a great time to meet with a financial planner to figure out why. You should be receiving a smallish-to-zero refund. That way, you are enjoying the benefit of your hard-earned cash all year and not making a free loan to Uncle Sam.

Keep in mind that using your refund for one of the recommended tips does not have to be an “all or nothing” approach. You should use a small amount to reward yourself and do something like a nice dinner, a day retreat, a spa, or take a cooking class with a friend or significant other. Just don’t blow your windfall on things you don’t need and won’t notice in a few weeks.

As an independent Certified Financial Planner™, I can help you decide how to put your windfall to work for you. Contact me and let’s get started! #talktometuesday  #refund #Hireaplanner #bonus #income #cash #taxrefund

Market Correction Highlights Need for Planning

Last week was America Saves Week 2020. Ironically, the universe sent us a massive market drop to remind us that we should be saving in cash as well as stocks and bonds. America Saves Week focuses on ways to save and the various tools to use. This includes saving for retirement. Most of us do this by investing through our 401(k), IRA, or taxable investment account. But when the market drops and sheds nearly $6 trillion dollars in one week, it can be very nauseating.

Yesterday (on March 2, 2020), however, the market rebounded nearly 1,300 points. Can you say whipsaw? The best thing to do if you are an investor is to not get caught-up in the media hype; especially if you are still working. Stick to your investment plan.

Here are some pointers for dealing with market madness:

First, ignore the media hype – keep in mind that that’s all it is, hype. Wild headlines about market gyrations sell stories and give talking heads something to blab about.

Second, do nothing! That’s right, do nothing. If you have a solid financial plan and have been keeping an eye on your asset allocation, you likely need to do nothing. You and your financial planner should already be monitoring your plan and asset allocation on an on-going basis. If you need reassurance, give your planner a call, send a text or an email and talk to them about how you are feeling. Your financial planner most likely feels what you feel. After all, they are also involved somehow in the investment markets and their own retirement and savings are affected to some degree.

Third, check with your financial planner and see if the market downturn is a good time to buy. Chances are it is.  A correction can be a good time to add to your diversification whether you are purchasing individual stocks, mutual funds, or bonds. Do not buy a stock, bond or fund just because it dropped in price; work with your planner to make sure it fits into your overall investment plan and goals.

Finally, if you are older and approaching retirement, you and your financial planner should have already planned your drawdown strategy several years before your retirement. You want to make sure you have appropriate cash holdings, fixed-income and equities that match your retirement goal.

Keep in mind that time and volatility work to your advantage when it comes to long-term financial planning and investing, so stay the course! As mentioned, a downturn may be a great time to add to your holdings. Consider upping your 401(k) contribution, putting more money into your IRA, or even adding to funds you already hold. Conversely, a considerable run-up in the market may be the perfect opportunity to take some profit and build on your cash position or fixed-income allocation.  Your adviser can hold your hand and walk you through these market changes and be a sounding board for your concerns. ‪A good financial planner will also remind you of your goals and timeline and why the day-to-day gyrations of the market shouldn’t affect your long-term plan.

As an independent Certified Financial Planner™, I can help you focus on your goals and long-term plan. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #letsmakeaplan #CFPPro #savemoney

America Saves Week 2020 is Here!

Today is the second day of America Saves Week 2020, #ASW20. Today’s theme is Save With a Plan. Yesterday’s theme was Save Automatically. If you are asking yourself where I got these themes, head on over to the America Saves Week website (americasavesweek.org) and check out all of the cool stuff they have to offer.

Saving money is key to building wealth. Not everyone is on the same path or at the same place with their savings journey. Whether you are just starting your savings journey, or you are an advanced saver looking for additional ways to save, the America Saves Week site has tips to get you going.

For beginners, just getting started can be a challenge. But in the end, you’ll be glad you did. Be sure to use the tools provided from the America Saves Week website to get you going. Don’t worry about the amount you can save in the beginning. Just get started. For example, starting early in your teens or twenties will mean you can save smaller amounts over a longer period of time. If you are late to the savings party and in your fifties, for example, you may have to make tougher decisions, but it’s still not too late to save!

Intermediate savers have an edge. You are already started on your savings goals and can use this week to review your goals, tweak them, and then adjust your savings path accordingly. Maybe you are on-track so you just need to keep an eye on spending. Maybe you need to up your savings amount by a small percentage, or cut out a service or subscription you no longer need. Just stay vigilant and keep monitoring your progress.

Advanced savers, you can participate as well. If you are an advanced saver, it’s time to review how and where you are saving. Of course, you need to have that cash emergency fund, but don’t keep too much cash in an account not earning interest. Talk with your financial planner and see if there are other ways to save that match your risk tolerance. For example, you may have enough cash and be able to save in CDs, a money market fund, or have access to other accounts that better suit your needs.

You can read my tips on The Importance of an Emergency Fund, and also how to determine how  much to have in an emergency fund. My post, Government Shutdown Highlights Need for Emergency Fund explains in more detail how much to have on hand.

I am providing a link to a free digital toolkit, America Saves Week 2020 Digital Toolkit, that you can access and share with friends and family. If you cannot access the toolkit online, email me and I’ll send you information.

Here are the different daily themes for America Saves Week 2020:

Monday: Save Automatically

Tuesday: Save with a Plan

Wednesday: Save for the Unexpected

Thursday: Save to Retire

Friday: Save by Reducing Debt

Saturday: Save as a Family

As an independent Certified Financial Planner™, I can help you start saving, manage debt, and begin your wealth-building journey.  Contact me and let’s get started on a savings plan! #talktometuesday #education #Hireaplanner #AmericaSaves #AmericaSavesWeek #savings #ASW20

Saving a Million Takes Time – Not So Much Cash!

Given that America Saves Week 2020 is coming up, a fun exercise that many folks like is to figure out how to save that magical million dollars. A lot of factors go into hitting that magic number, but the biggest factor of all is time! Let’s revisit some info from a previous post to see how time works for savers.

Nate, Ashley, and Sohn are all concerned about having some cash in the future. They each have a different approach as to how to save. The one thing that is constant is that they can each earn 8% on their contributions until age 65. Nate is working during high school and wants to save $5,000 per year, every year, starting at age 15 and making his last contribution at age 21. Nate doesn’t think he’ll need to save after that.

Ashley thinks she has the better approach. Ashley wants to save $5,000 per year starting in college at age 21 and save $5,000 per year, every year, until age 30. At that point, she thinks she can stop and not save any money after that.

Sohn wants to enjoy life and doesn’t want to start saving until age 30. Sohn plans to save $5,000 per year starting at age 30 and save that amount every year through age 65. Sohn feels this will be the best way to approach saving for the future.

So, who has the most at age 65? Nate only put away a total of $35,000 of his own money. Ashley did better and put away a tidy sum of $50,000. Sohn managed to put away a whopping $180,000 by age 65. Have you figured out who has the most at age 65? It’s Nate.

Wait, what? Yes. Even though Nate only put away $35,000, with the miracle of compound interest his total contributions had more time to grow at our hypothetical 8% rate. This is the miracle of compound interest and the time value of money. Nate ended up with just over $1,424,000 at age 65. Ashley and Sohn did alright as well, but they didn’t earn as much as Nate due to not being invested as long. Ashley ended up with just over $1,156,600 and Sohn ended up with just over $1,010,300 (figures rounded down to nearest whole dollar).

All three were smart to save, and smart to stick to their savings plan. Nate however, started the earliest, contributed the least, and wound up in the lead at age 65. Nate also contributed less of his lifetime earnings so he ended up with a nice savings balance and the use of his money during his life. Ashley was a close second. However, Sohn had to contribute a very sizeable amount to his savings during his working years.

The moral is to start saving and investing as early as possible. This example assumes a set amount of $5,000 per year and a hypothetical 8% growth rate. Your goal may be different. You may be able to save more, or less, and your growth rate could be very different. Remember, the return is hypothetical for illustrative purposes only and is not a guarantee of any future performance. You should work with a financial planner to set personal goals.

As an independent Certified Financial Planner™, I can help you start saving, manage debt, and begin your wealth-building journey.  Contact me and let’s get started on a savings plan! #talktometuesday #education #Hireaplanner #AmericaSaves #AmericaSavesWeek #savings #ASW20

Cash is Still King, So Make Sure to Save Some

Given that America Saves Week 2020 starts next Monday, February 24, I want to give you some savings tips. Cash is still king, and given that ABC reported in 2019 that 40% of Americans still don’t have $400 in savings for an emergency, it seems we all need to be better at saving and getting back to the old concept of delayed gratification.

Saving can be difficult, especially when cash flow is challenging. The biggest hurdle to saving is our own mindset. We have to make the shift mentally that we are going to save, and that saving in and of itself is a worthy goal. Start small, but make saving a habit.  

Be sure to pay yourself first from every dollar earned. Start slow, and build up. Generally speaking, your goal should be to save 15% of every dollar you earn. If you can make savings a habit and aim for 15% of your earnings, your savings will begin to build in no time. Keep in mind that you may not be alone. For example, many qualified employer plans, such as your 401(k) plan, match a percentage of your personal contribution. Make sure you are not missing out on this free money. It counts!

Savings should be as easy as possible. If in the beginning, you need to keep it low tech, simply put money into an envelope, jar, or container to get started. Pick a day of the week or month that works best for you and start with an amount that works for you. Whatever you do, be consistent, get used to savings, and build up the amount saved over time.

Once you are saving, step up your game and make savings automatic. Have a percentage of your paycheck deposited directly to your savings account every pay period. Utilize technology to make it easier for you to save, such as a spending app. Cut services and expenses you no longer need or use. Take your lunch to work or cut back on that second afternoon coffee. These may seem like small steps, but they do add up – quickly!

As an independent Certified Financial Planner™, I can help you start saving, manage debt, and begin your wealth-building journey.  Contact me and let’s get started on a savings plan! #talktometuesday #education #Hireaplanner #AmericaSaves #AmericaSavesWeek #savings #ASW20

America Saves Week #ASW2020

America Saves Week 2020 is February 24 - 29. America Saves motivates and encourages people to save money, reduce debt, and build wealth with a different theme or tool each day. This is a week you can access free resources and focus on your saving, spending, debt, and wealth building.

I am providing a link to a free digital toolkit, America Saves Week 2020 Digital Toolkit, that you can access and share with friends and family. If you cannot access the toolkit online, email me and I’ll send you information.

Here are the different daily themes for America Saves Week 2020:

Monday: Save Automatically

Tuesday: Save with a Plan

Wednesday: Save for the Unexpected

Thursday: Save to Retire

Friday: Save by Reducing Debt

Saturday: Save as a Family

You can also explore the America Saves Week website for more information and free resources. I’ll also be posting savings tips on our Engage Advising Facebook page all week, Facebook.com/EngageAdvising.

What will you save for? Small amounts in weekly, bi-weekly, or monthly amounts can add up faster than you realize. Get started today and your future self will thank you!

As an independent Certified Financial Planner™, I can help you start saving, manage debt, and begin your wealth-building journey.  Contact me and let’s get started on a savings plan! #talktometuesday #education #Hireaplanner #AmericaSaves #AmericaSavesWeek #savings #ASW20

2020 Key Contribution Updates

This time of year, it is good to know about key updates for contribution levels to various types of plans. That way, you can plan for your goals and know how much more you are eligible to contribute to a specific account. The following are updates for the most common plan types.  

For qualified plans such as 401(k), 403(b), 457, and SARSEP participant elective deferrals for 2020 are as follows. You can now defer up to $19,500, if eligible. This is a $500 increase over 2019. The catch-up contribution for those age 50 and over is $6,500.  So, if you are age 50 or over, your maximum contribution total is $26,000. You should note that additional guidelines and rules apply for SARSEP contributions and calculations. For qualified plans, the maximum employee and employer contribution total for those under age 50 is $57,000 for 2020, or 100% of employee compensation (whichever is lower). If you are over age 50, this amount can rise to $63,500 when you add in the catch-up contribution.  

For IRA participants, the contribution limits remain unchanged. You can still contribute $6,000 to your IRA or Roth IRA, and for those age 50 and over the catch-up contribution is $1,000. Remember, even though it’s possible to contribute simultaneously to a Roth IRA and a traditional IRA, if eligible, you can only contribute a combined total of $6,000 ($7,00, if over age 50). Remember also that you (or your spouse) need earned income to contribute to an IRA and that earned income level may change the amount you can contribute, or whether you can take a deduction for a traditional IRA contribution.

As with most guidelines, these limits can vary depending on your income level, tax filing status, and personal situation. The limits may vary in your personal situation so speak with your CFP® professional before implementing your final decision.

As an independent Certified Financial Planner™, I can help you focus on your finances every month. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney #planforretirement #FIRE

Tax Time is a Great Time for a Financial Review

For the majority of folks who file taxes, it’s now crunch time. Between January and the filing deadline in April (for the majority of filers), we will all be hit with W-2s, 1099s, 1095-Bs, 1098s, annual giving statements, investment statements, and a plethora of other forms. All the statements arriving by post and online can be overwhelming.

People focus on their financial situation around tax time. With all of the forms arriving, it’s a good time to organize and take stock of your situation and schedule a meeting with your financial planner. Here are a few things you can do.

Organize for the current tax year! While you are receiving all of last year’s tax documents, go ahead and make a file for the current tax year. That way, as you accumulate tax documents during the current year, your file is ready. This makes filing easier for next season.

Assess your financial position. Tax time is perfect for reviewing your ongoing expenses. It’s also a great time to take a look at your investment holdings. Most likely you are receiving bank, brokerage, or investment statements so give them some attention.

Don’t go it alone - hire a pro!

Make changes if needed. For example, you find you owe taxes for the past year, and you owed a similar amount the previous tax filing season. Identify why. In many cases, you may simply need to adjust your W-4 withholding allowance through your employer. Early in the year is a good time to do this if you need to have additional taxes withheld.

Schedule time with a Certified Financial Planner™ to get started aligning your goals with your resources and putting yourself on-track to a brighter financial year. The advice can be invaluable. You should know that the IRS will begin accepting returns for the 2019 tax year on January 27, 2020.

Having so many financial documents arriving at one time and preparing to finalize your taxes is a great time for a financial review. You’ll have most of what you need readily available. As an independent Certified Financial Planner™, I can help you focus on your finances month-to-month and not just at tax time. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney #tax #taxtime

For 2020 Vision, Start SMART

We all make New Year’s resolutions and most of us abandon them by the end of January, or sometimes mid-February. Just ask any fitness center employee and they can tell you the new member drop off rate by Valentine’s Day.

2020 provides us a unique opportunity. Since it’s a ‘zero’ year, you can easily track progress on your goals. You can also use the calendar as a daily reminder to set those very short-term, short-term, intermediate, and long-term goals. For example, this year you can tackle those very short-term goals (12 months or less). You can use 2021 as the marker for your short-term goals, and a mid-decade year such as 2025 for your intermediate goals. Ten years out, use 2030 for your long-term goals.

Let’s take a look at goal setting. The first thing to know is that you shouldn’t set too many simultaneous goals. Pick between one and three goals so you are not overwhelmed. It’s easier to reach those goals if you have fewer, specific goals.

However, it is ok to have multiple goals with overlapping periods. For example, you could have two very short-term goals, one intermediate goal, and maybe one long-term goal. These goals would yield calendar dates of 2020, 2025, and 2030. For example, let’s say your two very short-term goals are to organize all financial documents in a single location, and to increase your savings rate. You could set a date for the first goal of March 2020 and the second goal, more immediate, to raise your 401(k) contribution rate by 2% by next pay period. Done! You’ve set two goals and given yourself time to achieve them.

An intermediate goal might be to buy a new car in 2025. You could pick December 2025 since dealerships provide lots of incentives end of year and get started by calendaring what you need to do between now and 2025. Start a monthly savings car fund and set a calendar reminder to check your progress every quarter. For the long-term goal, maybe paying off your mortgage in ten years, work with an adviser to determine exactly how much you need to increase your annual payments to hit that goal.

For any goal, use SMART. Be sure your goal is Specific (save 5% more), Measurable (how much per week, month, or year), Achievable (but challenging), Realistic (does it fit your overall plan), and Timely (have a beginning, and a target end date).

I’m linking you to a 2020 Vision sheet that you can use. It is very simple. You enter your goal, a target date, and SMART description. You can then either print or save the form. I recommend you print it out and post it somewhere you can see it. I also recommend that you use a journal, a digital calendar, or Smartphone task app to keep you on track reaching your goal. Whatever it takes and whatever works for you. Here’s the link: https://form.jotform.com/200125960786154

As an independent Certified Financial Planner™, I can help you plan for the new year and be on top of your goals.  Contact me and let’s get started on a savings plan or a hike! #talktometuesday #education #Hireaplanner #stressfree #newyear #savings #goals #2020vision #debtfree #budget

SECURE Act Brings Changes to Financial Planning

The new year brings new rules for retirement planning curtesy of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The SECURE Act was actually passed by the House in early 2019, approved by the Senate in December 2019 and signed into law December 20, 2019 just in time for 2020.

The SECURE Act ushers in several new tweaks (reverting the Kiddie Tax back to the parents’ top marginal rate) but most notably, the elimination of what planners refer to as the “Stretch IRA”. Prior to the SECURE Act, a non-spouse beneficiary of an inherited IRA could generally “stretch” the payout of that IRA over their life expectancy. That’s gone! Heirs must now empty the account in ten years. There are, of course, exceptions to this new law. Spouses and minor children are generally exempt, as are heirs that are not more than ten years younger than the deceased.

Eliminating the stretch provision can cause problems for heirs. If the inherited IRA is large, and must be paid out over ten years, this could force you into a higher income tax bracket. Consider if you are an older heir, this could increase your income and cause you to pay higher Medicare premiums. Another problem, what to do with the extra income if you don’t need it?

The rules for required minimum distributions (RMDs) also changed under the SECURE Act. Previously, one had to begin taking RMDs at age 70 ½ from a traditional IRA or qualified retirement plan. Starting in 2020, that age is now 72. This gives your account more time to grow. If you turned 70 ½ by the end of 2019, you follow the old rule.

A bit of good news for those working into their early 70s. Previously, if you worked and had earned income, you could not contribute to a tax-deductible IRA after age 70 ½. Now, you can. This gives you more of a chance to build up your retirement funds if you are still working and trying to save.

The SECURE Act changes affect qualified retirement plans, ROTH accounts, trusts, and more. One thing you should do, is check your beneficiaries on qualified plans and traditional IRAs to make certain the person in line to receive your account still fits in with your financial plan. Remember, these changes could alter your heir’s financial plan as well. As an independent Certified Financial Planner™, I can help you plan for the new year and be on top of your goals.  Contact me and let’s get started! #talktometuesday #education #Hireaplanner #stressfree #newyear #savings #planning #SECUREAct

Are You Ready for the Twenties?

This will be the final post for 2019. We’ve reached the end of a decade and the next two Tuesdays are Christmas Eve and New Year’s Eve. Yep, the end of the decade and the end of the year. Take those days to enjoy time with family, I plan to.

It does bring up whether you are ready for the decade of 2020. Will it be peaceful, serene, and calm like next year’s official color PANTONE 19-4052 Classic Blue, or will we experience our very own Roaring Twenties?

Regardless, it’s a year starting in zero and your perfect opportunity to think about a one-year, five-year, and ten-year plan. For yourself, your finances, and even professionally. The calendar lines up and cooperates nicely making for an easy way to track your progress.

Think about what you want to accomplish. You have the next two weeks to mull over any changes. Write them done and make them real. Once you have them written down, you can always tweak the goal and refine it. For now, just get it down. Even if that means electronically. In fact, using the digital calendar on your phone or laptop is perfect. You can even set reminders at key points in the year to help keep yourself on track.

Build in some flexibility. Don’t beat yourself up if you haven’t found your dream job, lost ten pounds, or earned thirty percent more than last year by January 31. In fact, making that goal and timeline too tight could be self-sabotage. Look at what’s realistic, what you are able to start with and take it one step at a time. Just keep it simple and keep working toward your goal and you’ll make progress. It may come in starts and fits but be ready for that and just keep your end target in mind. There’s no shame in refining, reshaping, and course correcting on your way to your goal. If financial planning is on your list, of course we need to talk so your first step is to contact me and let’s set up a time.

As an independent Certified Financial Planner™, I can help you plan for the new year and be on top of your goals.  Contact me and let’s get started on a savings plan or even a hike! #talktometuesday #education #Hireaplanner #goal #2020 #stressfree #newyear

Three Tips to Keep Christmas Spending in Check

Christmas spending can leave you with a financial hangover! So, here are three tips to remind you to stick to your goals and keep your spending in check. Many people struggle with budgeting this time of year and tend to go overboard feeling the need to give to everyone. Keep your goals in mind and your cash flow in check by following Santa’s age-old advice of making a list and checking it twice.

Don’t overspend on gag gifts, Secret Santa and don’t feel compelled to buy gifts for everyone in your circle or at work. Definitely heed Santa’s advice about that list! If you think you still have people to buy for write their names down. Put the list away, think about it for a day or two, and then cross off the ones you really do not need to buy for.

Don’t feel pressured to give beyond your means. Generosity is a great thing and should be encouraged. However, you should know in advance to which charities you want to send a monetary donation. Ideally, this is already part of your annual spending plan. If you do feel the generosity bug, focus on food banks, senior centers, and places where your money goes to help people immediately.

Do set a spending amount in advance. The amount you plan to spend this holiday season should be already accounted for in your annual budget.

Year-end giving and spending really begins in January, so December shouldn’t come as a surprise since it happens every year. Start in January saving monthly for the additional expenditures you have this time of year. Make those charity donations monthly or quarterly; after all, they need the money year around, not just in December.

Being proactive and setting aside smaller cash amounts monthly can help your budget and be a reminder to carry the good cheer of the holidays with you daily and not just at year-end. It can also keep you from having a financial hangover after the holidays.

If you need budgeting help, or a spending plan, call me! As an independent Certified Financial Planner™, I can help you make decisions and layout a plan for year-end giving and holiday spending. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #holidayspending #income #debt #savings #CFPPro #moneyhabits #giving #charity

Made Whole is Not Always What It Seems With Insurance

It doesn’t look bad but the cost of repairing the park assist, the body work, the tailgate, the punctured radiator, the cracked lights, etc., all adds up!

Near the end of November my husband and I learned about the mess and financial havoc a small collision can have on your financial plan. We were car number two in a three-car pile-up. While driving to the theater with some friends, we had to slow to pass a two-car collision. As traffic worked its way around the collision and accelerated, it once again had to slow and stop due to yet another collision about a mile ahead. The cars in front of us stopped, I stopped and the person behind decided she wasn’t going to stop. In an instant my beloved Volvo XC90 that was paid off, well-maintained, and had no prior incidents became incapacitated. The collision pushed us into the car in front, and the car that hit us from behind did extensive, although not very visible, damage to my car. Oh, you should know that a car can be totaled if the damage is in the range at or above 51% to 80% of its pre-collision value. Each insurer has a different metric, but states usually set guidelines.

Enter the insurance companies and two terms you should be aware of: made whole, and subrogation. Let’s look at each of these.

Made whole is a legal doctrine that means the insurance companies have to pay you first, before they can collect any money. Your damages and injuries come before those of the insurance company’s. One thing to keep in mind is that it does not guarantee you are actually in a financially similar, or better, position as you were prior to your claim. For example, my Volvo had low mileage, had been well cared for, maintained at the dealer, and had no car payment. However, it was just old enough that repairing all of the damage would have exceeded the current book value of the car. I received a settlement on the higher end of the book value so I was made whole according to the insurance company based on the pre-collision value of the car. That is of little consolation for people who plan diligently, have no on-going payment, and intend to get a much longer life out of their car. In this instance, the book value will not come close to replacing the car. That is what you should keep in mind. You are being compensated based on the value of the car at the time of the collision, not the perceived long-term value, sentimental value, or actual state of your car. I could scour the earth and not find a similar car for the amount received.

Subrogation is another term to know. This is when insurance companies are legally able to recover monies from you, they have paid out if, for instance, you were to file a claim for damages and also win a legal settlement. Let’s say you are in an accident and you file a claim for $25,000 in medical bills and it is paid by your insurance company. Let’s also assume you have a legal victory in which you win $50,000 for your medical claim. The insurance company may be able to collect $25,000 of your court award to recover their claim amount paid. The insurer can only subrogate an amount that does not prevent you from being made whole.  These two terms can work hand in hand.

This may seem unfair to you and in a way it can be. After all, you were responsible, paid off your car, had no plans to replace it, and now you have to dip into savings, get a loan, or sell other assets to replace your car even if you were not negligent. The same with possibly winning a lawsuit, you won the money. However, without these concepts, insurers would struggle to stay afloat and we would most likely not be able to get car insurance. It’s not a perfect system by any stretch of the imagination, but it is an important system to guard against and mitigate risk.

For the record, my insurance company was wonderful to work with. If you need an insurance review or risk analysis, reach out to me. As an independent Certified Financial Planner™, I can help you identify risk areas and coverage gaps. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #vacation #CFPPro #savemoney #insurance

Thanksgiving is Here!

It’s Thanksgiving week here in America, and for many that means spending on travel, food, family, and friends. It may mean overspending in addition to eating a bit too much as well. After all, this holiday is famous for vast amounts of food and consumption thereof. It is also famous for spending money to visit family and friends and especially on that day after Thanksgiving, namely Black Friday.

Since it is Thanksgiving week, I’ll keep this post short and simply use it as a reminder that you try to keep your spending in check among all the festivities. If you do spend, spend on people and experiences and consider taking a hike on Black Friday this year instead of giving your credit card a workout.

Bird is the word!

Don’t need the whole fixins’ for Thanksgiving dinner? If it’s just you, or you and your mate, think about scaling down, but still having the traditional dishes. Just buy smaller portions. Your waistline and wallet will both thank you. For example, you can now buy half-sized pies or even single slices! You can also buy your favorite turkey parts as well. No need to thaw and roast a whole bird. Just head over to your local butcher or meat counter and pick out a couple of drumsticks if you like dark meat, or a turkey breast if you are fan of white meat. It’s much easier to prepare and more affordable as well.

Don’t feel pressured to shop on Black Friday or Cyber Monday. If those hot deal items are not already on your list, you likely don’t need them. Afraid of FOMO? Don’t worry, between now and the end of the year, many of those same items will be on sale. If you are caught up in the madness, check the model number or description of your item to make sure it is the exact one you have been coveting. Retailers sometimes substitute a lesser item with a lower price as a loss leader to lure you in.

Do spend time with people. Suze Orman famously said, ‘people first, then money, then things’ and this is true. Most of your friends and family don’t need things from you, they need you. Consider spending more time together. Even with your ideologically different cousin or uncle.

Do keep things civil. If you have to be around family and friends that are politically or ideologically opposite of you, maybe institute a no politics rule. We do this and it works great! We actually talk about each other, the ranch, the market, the grape harvest, wine futures and vintages, etc. You name it, there are dozens of things you can cover without raising hackles.

Above all, have a safe, enjoyable Thanksgiving. As an independent Certified Financial Planner™, I can help you plan for the next year and be on top of your goals.  Contact me and let’s get started! #talktometuesday #Thanksgiving #Hireaplanner #stressfree #savings