Welcome to episode 78 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. In this episode I’ll share why the first wealth is health. 

In the tips, tricks, and strategies portion I will share a tip regarding Health Saving Accounts.

In this episode...

• The Holiday Season [0:57]
• Health vs. Wealth [1:57]
• Health Expenses in Retirement [4:04]
• Exercise and Long-Term Health Benefits [5:38]

MAIN

This episode airs on January 15th when we get a pretty good sense on how well we are doing on the resolutions we made a few weeks back. Often times, those resolutions focus on our health, which makes a lot of sense given all the delicious food we at during the holidays.

According to one medical Journal

Several studies suggest that the holiday season, starting from the last week of November to the first or second week of January, could be critical to gaining weight. 

But it’s not just the holiday foods to blame. As noted in an article by the University of Rochester Medical Center 

Shorter days, longer nights, cold weather, decreased exercise and changes in sleep habits all contribute to winter weight gain. When you add in the abundance associated with holiday meals and our tendency to overeat at special occasions, many of us enter the New Year a few pounds heavier than we were before Thanksgiving.

This may seem like unusual financial planning advice, but as the great American author Ralph Waldo Emerson said,  The first wealth is health. And as Bronnie Ware noted in her Regrets of the dying essay, that health brings a freedom that few realize until it’s gone. 

Years ago, I read an article that featured several prominent financial planners who worked with financially wealthy clients and when asked what was the most important advice they gave their clients, all of them emphasized the importance of health. One of the advisors recommended that for those over 50 you should plan to spend at least 1 hour a day on their physical health. Now some might think, of course these clients were already wealthy so they could in turn focus on their health, but it just goes to show that wealth isn’t anything unless one has their health. Many think you should exercise so you can have a longer enjoyable life but often times, your life can be just as long, but just not enjoyable, as I’ve seen in my own family.  Many in my family have a long life span but sadly a poor health span which are the years in which you have good enough health to enjoy it.

According to growwellthy.com, which is for an exercise physiologist that helps financial planners stay healthy, 96% of retirees say health is more important than wealth. 

The website includes a health check quiz that goes over key elements of one’s health; namely: Nutrition, regular and appropriate exercise, good sleep, ie more than 7 hours a night, taking more than 7000 steps a day, strength train at least 2 times per week, there were also questions regarding one’s physical fitness such as: are you able to get down and up off the floor easily, Can you hang from a bar for at least 30 seconds, do you eat protein at most meals, drink alcohol sparingly and do you drink lots of water? I heard a great quote a while back “A man’s health can be judged by which he takes two at a time — pills or stairs.” 

And it’s not just about feeling great, it’s having more money to spend on other things that you would enjoy. It really is in your long term financial interest to INVEST in your health and to keep exercising. Because health expenses in retirement are far higher than what most people anticipate.

According to Fidelity's latest Retiree Health Care Cost Estimate, while individuals expect to incur $75,000 of healthcare costs in retirement, the actual average is $165,000 (assuming the retiree enrolls in Medicare Parts A, B, and D), that’s a large difference. Medicare Part B and Part D premiums are responsible for 43% of this total, out-of-pocket prescription drug costs account for 10%, and other medical expenses (e.g., co-payments, coinsurance, and deductibles) make up the remaining 47%. And while 63% of Americans approaching retirement say they plan to review their Medicare options annually, a separate survey found that retirees aged 75 and older are the least likely to review their coverage each year (despite the potential for savings by comparing plans, given greater medical needs at this point in their lives).

Assessing your medicare options on an annual basis is a hugely important part of your financial planning. I strongly recommend you invest the time and the experts to help you with that decision each year.

And it’s imperative that we continually invest in our health. In episode 29 of this podcast, I shared information from Dr. Peter Attia, a physician whose medical practice focuses on increasing his clients health span. This doctor doesn’t treat the ill, but helps people get healthier. Something that is sorely needed in our society.

Dr. Attia shared that longevity and life span were impacted through major modifiable behaviors such as exercise, sleep, nutrition, and emotional health. But that Exercise is in a league of its own both on its ability to extend life and reduce all-cause mortality. 

Dr. Attia shared information from Dr. Mike Joyner an exercise physiologist to further demonstrate his point of why exercise is so critical. Dr. Joyner shared a fascinating study regarding the impact of exercise on life expectancy. This study was conducted by a Dr. Jerry Morris in the UK after WW2 where he studied employees that worked on the iconic red double decker buses you see in London. They compared the health of the persons driving the bus vs the conductor, who was on the same bus, that had to walk up and down the stairs getting tickets. These individuals were followed for years and it was determined that the conductors had about a 50% lower levels of drivers of cardiovascular disease. 

Dr. Joyner said that when they studied healthy people that they had a 4-5 year extension in life expectancy but even more interesting is that they also had a 4-5 year extension in health span, meaning how disability free you are. They had 4-5 extra good years and lived a long time and died quickly with minimal disability. Sign me up. I’ll put a link to the podcast in the show notes for those that want to learn more. 

But suffice it to say, exercise doesn’t just buy your more time but it buys you more quality time as well. 

In conclusion, exercise can extend your life and health span, and may greatly reduce the money you have to spend on healthcare during an early retirement. A great quote I read was  this, “Those who think they have not time for bodily exercise will sooner or later have to find time for illness.”Jim Rohn the entrepreneur, author, and motivational speaker also  said “Take care of your body, it’s the only place you have to live.”

TIPS, TRICKS AND STRATEGIES

Welcome to tips, tricks and strategies portion of the podcast where I will share a tip regarding how best to pay for health care expenses.  While staying healthy you may be able to avoid many of these costs when you do have healthcare costs there is a clear advantage on how to pay for them. 

Wouldn’t it be great to get a 20-30% discount on medical expenses? Well the great news is that you can with flexible spending accounts and health savings accounts. Both of these are available regardless of your level of income. Between the two, Health savings accounts have the clear advantage as they don’t need to be used up each year, but if FSA is all that you have, like my wife with her health care plan, it’s still a great way to get a “discount” on any healthcare related expenses. 

HSAs are a powerful tool, especially for early retirees as eligibility for medicare doesn’t begin until age 65. 

Here are why HSA are so great. These are the only investment vehicle that are triple tax free. Yes triple!  The contributions are tax deductible, and both the growth, and distributions (if used for a qualifying medical expense) are tax free and so with HSAs you pay $0 taxes. But not all people are eligible to invest in an HSA.  You must have a qualifying high deductible medical plan.  Additionally, the contributions are limited to the following amounts in 2025: Individual $4150, and Family $8300. For those 55 and older you can contribute an additional $1000.

You can use the money in the HSA at any time to cover health care expenses. That’s why they are ideal for early retirement. But if you don’t need to use these then you can really see the benefit when you let the money grow and pay for current health care expenses from other sources of personal savings when possible.

 But what if you don’t need all of the money for Healthcare Expenses?  It essentially becomes just like a Traditional IRA.  Distributions are taxed at ordinary income rates.

For my clients that are younger or “youngish” who think they can wait until later, remember that the earlier you invest your monies the longer it has time to grow, and that growth can be significant. Just $2000 invested in an HSA each year for 30 years that earns a 7% rate of return would grow to over $200,000. That would go a long way to help offset health care expenses in your early...]]>TRAILER

Welcome to episode 78 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. In this episode I’ll share why the first wealth is health. 

In the tips, tricks, and strategies portion I will share a tip regarding Health Saving Accounts.

In this episode...

• The Holiday Season [0:57]
• Health vs. Wealth [1:57]
• Health Expenses in Retirement [4:04]
• Exercise and Long-Term Health Benefits [5:38]

MAIN

This episode airs on January 15th when we get a pretty good sense on how well we are doing on the resolutions we made a few weeks back. Often times, those resolutions focus on our health, which makes a lot of sense given all the delicious food we at during the holidays.

According to one medical Journal

Several studies suggest that the holiday season, starting from the last week of November to the first or second week of January, could be critical to gaining weight. 

But it’s not just the holiday foods to blame. As noted in an article by the University of Rochester Medical Center 

Shorter days, longer nights, cold weather, decreased exercise and changes in sleep habits all contribute to winter weight gain. When you add in the abundance associated with holiday meals and our tendency to overeat at special occasions, many of us enter the New Year a few pounds heavier than we were before Thanksgiving.

This may seem like unusual financial planning advice, but as the great American author Ralph Waldo Emerson said,  The first wealth is health. And as Bronnie Ware noted in her Regrets of the dying essay, that health brings a freedom that few realize until it’s gone. 

Years ago, I read an article that featured several prominent financial planners who worked with financially wealthy clients and when asked what was the most important advice they gave their clients, all of them emphasized the importance of health. One of the advisors recommended that for those over 50 you should plan to spend at least 1 hour a day on their physical health. Now some might think, of course these clients were already wealthy so they could in turn focus on their health, but it just goes to show that wealth isn’t anything unless one has their health. Many think you should exercise so you can have a longer enjoyable life but often times, your life can be just as long, but just not enjoyable, as I’ve seen in my own family.  Many in my family have a long life span but sadly a poor health span which are the years in which you have good enough health to enjoy it.

According to growwellthy.com, which is for an exercise physiologist that helps financial planners stay healthy, 96% of retirees say health is more important than wealth. 

The website includes a health check quiz that goes over key elements of one’s health; namely: Nutrition, regular and appropriate exercise, good sleep, ie more than 7 hours a night, taking more than 7000 steps a day, strength train at least 2 times per week, there were also questions regarding one’s physical fitness such as: are you able to get down and up off the floor easily, Can you hang from a bar for at least 30 seconds, do you eat protein at most meals, drink alcohol sparingly and do you drink lots of water? I heard a great quote a while back “A man’s health can be judged by which he takes two at a time — pills or stairs.” 

And it’s not just about feeling great, it’s having more money to spend on other things that you would enjoy. It really is in your long term financial interest to INVEST in your health and to keep exercising. Because health expenses in retirement are far higher than what most people anticipate.

According to Fidelity's latest Retiree Health Care Cost Estimate, while individuals expect to incur $75,000 of healthcare costs in retirement, the actual average is $165,000 (assuming the retiree enrolls in Medicare Parts A, B, and D), that’s a large difference. Medicare Part B and Part D premiums are responsible for 43% of this total, out-of-pocket prescription drug costs account for 10%, and other medical expenses (e.g., co-payments, coinsurance, and deductibles) make up the remaining 47%. And while 63% of Americans approaching retirement say they plan to review their Medicare options annually, a separate survey found that retirees aged 75 and older are the least likely to review their coverage each year (despite the potential for savings by comparing plans, given greater medical needs at this point in their lives).

Assessing your medicare options on an annual basis is a hugely important part of your financial planning. I strongly recommend you invest the time and the experts to help you with that decision each year.

And it’s imperative that we continually invest in our health. In episode 29 of this podcast, I shared information from Dr. Peter Attia, a physician whose medical practice focuses on increasing his clients health span. This doctor doesn’t treat the ill, but helps people get healthier. Something that is sorely needed in our society.

Dr. Attia shared that longevity and life span were impacted through major modifiable behaviors such as exercise, sleep, nutrition, and emotional health. But that Exercise is in a league of its own both on its ability to extend life and reduce all-cause mortality. 

Dr. Attia shared information from Dr. Mike Joyner an exercise physiologist to further demonstrate his point of why exercise is so critical. Dr. Joyner shared a fascinating study regarding the impact of exercise on life expectancy. This study was conducted by a Dr. Jerry Morris in the UK after WW2 where he studied employees that worked on the iconic red double decker buses you see in London. They compared the health of the persons driving the bus vs the conductor, who was on the same bus, that had to walk up and down the stairs getting tickets. These individuals were followed for years and it was determined that the conductors had about a 50% lower levels of drivers of cardiovascular disease. 

Dr. Joyner said that when they studied healthy people that they had a 4-5 year extension in life expectancy but even more interesting is that they also had a 4-5 year extension in health span, meaning how disability free you are. They had 4-5 extra good years and lived a long time and died quickly with minimal disability. Sign me up. I’ll put a link to the podcast in the show notes for those that want to learn more. 

But suffice it to say, exercise doesn’t just buy your more time but it buys you more quality time as well. 

In conclusion, exercise can extend your life and health span, and may greatly reduce the money you have to spend on healthcare during an early retirement. A great quote I read was  this, “Those who think they have not time for bodily exercise will sooner or later have to find time for illness.”Jim Rohn the entrepreneur, author, and motivational speaker also  said “Take care of your body, it’s the only place you have to live.”

TIPS, TRICKS AND STRATEGIES

Welcome to tips, tricks and strategies portion of the podcast where I will share a tip regarding how best to pay for health care expenses.  While staying healthy you may be able to avoid many of these costs when you do have healthcare costs there is a clear advantage on how to pay for them. 

Wouldn’t it be great to get a 20-30% discount on medical expenses? Well the great news is that you can with flexible spending accounts and health savings accounts. Both of these are available regardless of your level of income. Between the two, Health savings accounts have the clear advantage as they don’t need to be used up each year, but if FSA is all that you have, like my wife with her health care plan, it’s still a great way to get a “discount” on any healthcare related expenses. 

HSAs are a powerful tool, especially for early retirees as eligibility for medicare doesn’t begin until age 65. 

Here are why HSA are so great. These are the only investment vehicle that are triple tax free. Yes triple!  The contributions are tax deductible, and both the growth, and distributions (if used for a qualifying medical expense) are tax free and so with HSAs you pay $0 taxes. But not all people are eligible to invest in an HSA.  You must have a qualifying high deductible medical plan.  Additionally, the contributions are limited to the following amounts in 2025: Individual $4150, and Family $8300. For those 55 and older you can contribute an additional $1000.

You can use the money in the HSA at any time to cover health care expenses. That’s why they are ideal for early retirement. But if you don’t need to use these then you can really see the benefit when you let the money grow and pay for current health care expenses from other sources of personal savings when possible.

 But what if you don’t need all of the money for Healthcare Expenses?  It essentially becomes just like a Traditional IRA.  Distributions are taxed at ordinary income rates.

For my clients that are younger or “youngish” who think they can wait until later, remember that the earlier you invest your monies the longer it has time to grow, and that growth can be significant. Just $2000 invested in an HSA each year for 30 years that earns a 7% rate of return would grow to over $200,000. That would go a long way to help offset health care expenses in your early retirement.

References

Effect of the Holiday Season on Weight Gain: A Narrative Review - PMC.

Fidelity Investments® Releases 2024 Retiree Health Care Cost Estimate as Americans Seek Clarity Around Medicare Selection

Healthy, Wealthy, & Wise, Ep #29 — betterplanning.betterlife.

Winter Weight Gain: Why it Happens, What to Do | URMC Newsroom

#217 ‒ Exercise, VO2 max, and longevity | Mike Joyner, M.D. - Peter Attia

Welcome to episode 77 of the One for the Money podcast. Happy New Year as well as this episode is airing on Jan 1st, 2025. Crazy how time flies. I am both glad and grateful you have taken the time to listen. In this episode, I’ll share the biggest lessons I have learned in over 25 years as an investor.

In the tips, tricks, and strategies portion, I will share a tip regarding setting financial goals.

In this episode...

• The Importance of Starting Early [3:27]
• The Power of Paying Yourself First [4:19]
• Market Timing is a Fool’s Errand [5:36]
• The Need for Proper Planning & Tax Strategy [8:02]
• Spending While You Are Healthy [12:11]

MAIN

I’ve been investing in the stock market for a little more than 25 years and I’ve learned a lot about investing and building wealth during that time so I thought it might be helpful for me to share the biggest lessons I’ve learned at my silver jubilee investing anniversary. 

But first, I should share that I was introduced to the stock market by accident. I was told by a university guidance counselor that graduate schools and future employers expected those they accepted to be well-read and that one should read the paper every day. After that guidance every day I would grab our local paper and read the current events in the world which would feature such things as natural disasters, politics, wars, etc. I would then skip over the business section to review the sports section. However, as I turned the pages on the business section I often wondered what all of these abbreviations and numbers represented. I learned later that these represented companies that the general public could invest into. Well, one day the newspaper advertised a free investing seminar at the public library in the city closest to my small town. I attended the presentation and it was incredibly interesting. The gentleman who presented spoke of one Warren Buffett and how the stock market was the way to build wealth. At the time of this investing seminar, Warren Buffet’s company Berkshire Hathaway had a stock price of a whopping ~$60,000 per share. If you think that’s amazing today a single share of Berkshire Hathaway stock is over $700,000.

A short time after I was introduced to investing, it seemed the rest of America became interested due to the dot com era. At the time the World Wide Web was a new phenomenon and the stock market rocketed higher. The stock market eventually crashed down to earth, but despite the volatility, I became very interested in investing. 

These experiences started my journey into investing and here a little over 25 years later are the biggest lessons I have learned about investing and building wealth. 

The first lesson I’ve learned in my 25 years is that little actions have massive consequences when given time. In other words, it is WAY more important to start investing than the actual amount you have to invest. Every little dollar can grow to mind-boggling sums given time. One of the best examples I share with clients is that of an apple seed. It’s hard to conceive that this tiny little seed could grow into a large tree that could produce thousands of apples, and yet that’s exactly what it can do, of course, given the critical ingredient of time. But your wealth can’t grow if you don’t plant the seeds to start with.

As the old proverb goes - The best time to plant a tree was 20 years ago; the second best time is now. As you get older you usually can make more money but you can never get more time!

The second lesson I’ve learned in my 25 years is understanding how paying yourself first makes all the difference. As Warren Buffett said so well “Do not save what is left after spending; spend what is left after saving.” People who know how to manage their cash flow have the best life in the future. They have more freedom, more experiences, and way less stress. As a certified financial planner, I’ve seen this firsthand. I’ve met with 50 and 60-year-olds who have accumulated millions and are excited about retirement but I’ve also met 50 and 60-year-olds who have minimal to no net worth and are scared of what the future holds. These are sobering meetings when I tell them that they have to work for way more years than they want to and their retirement will still be challenging. My heart aches for them. It’s the reason, I teach financial literacy classes in the community and why I teach financial literacy to the teenagers and young adults of my clients. Just doing for them what I wished was done for me. I like to remind people that you will turn 65 regardless of what planning you put in place.

The good news is that many already pay themselves first with their automatic contributions to their 401ks, IRAs, and HSAs.

The third lesson I’ve learned in my 25 years is an investor is that no one can accurately predict the future and despite such an obvious statement, we continue to digest the predictions about the economy, the stock market, or even who will win the Super Bowl for American Football fans or the Champions League for those European football fans.

And yet many investors try to time the market based on certain predictions. The famous investor Peter Lynch explained the fools errand of market timing best when he said- “More people lost money waiting for corrections and anticipating corrections than the actual corrections.”

Another great quote regarding predictions is from Warren Buffet when he said “We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, we continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

In a fabulous and equally free resource from JP Morgan entitled Guide to Retirement, it highlights the perils of trying to time the market and why it doesn’t work. The guide uses a 20-year investment period for the S&P 500, from Jan 1, 20004 to December 31, 2023. During that time there were over 5000 trading days. And if you were invested for all 5000+ days a $10,000 dollar investment in the S&P500 would have grown to over $63,000. But if you would have missed just ten of the best days of those 5000+ days. Your investments would have only grown to just over $29,000 instead of over 63,000. In other words, if you were invested for 99.8% of the days your investments would be 54% less. If you had missed just the 20 best days of approximately 5000 trading days, your investments would have only grown to just over $17,000. Too many people believe they can time the market and know when to sell and when to buy, but it’s impossible. Here is why seven of the 10 best days occurred within two weeks of the 10 worst days and Six of the seven best days occurred after the worst days. 

This leads to the fourth lesson I’ve learned in my 25 years is an investor. Which is fear is not your friend. As the famous investment Advisor Nick Murray has said so well "All successful investing is goal-focused and planning driven. All failed investing is market-focused and performance-driven.”All successful investors are continuously acting on a plan. All failed investors are continually reacting to the markets. Everything else is commentary.”

The reason why planning-driven investing is so important is because it takes the emotions out of investing. Those emotions can have a huge impact. Nick Murray also said, “Wealth isn’t primarily determined by investment performance, but by investor behavior.” How true that is I know this from personal experience when very early in my time as an investor, I purchased a stock that then dropped 50%. I sold out only for the stock since that time to increased over 7,900%. that’s right, instead of selling I should have bought more and enjoyed a nearly 8 thousand percent gain. For more details on this painful lesson see episode 18 of this podcast entitled, When Life Gives You Lemons, Stay Invested.

Another fairly recent example, was during the Covid correction. Fidelity who manages over $4 trillion said that one third of their investors over 65 got out of the market during that correction. Since that time the market is up over 137%. 

The fifth lesson I’ve learned in my 25 years as an investor is that no one has their stuff together. Almost everyone needs help when it comes to investing. I was a do-it-yourselfer myself before I became a financial advisor but now that I have been investing for over 25 years and have been a financial planner for nearly 10. I’ve realized that no one is coming close to optimizing their investments. I’ve seen literally hundreds of portfolios and most were not in alignment with the clients' goals. Here are just a few examples:

• During downturns in the stock market, I’ve kept clients in the market. This increased their returns by hundreds of thousands
• I have had numerous clients with hundreds of thousands and in some cases millions of dollars sitting in cash at the bank making hardly any interest but investing these funds I’ve been able to help them earn tens to hundreds o thousands more than they would have. 
•   So many clients had the wrong allocations in their portfolios, too much allocated to a single company, or a single sector (technology for example) or a single country (the US) or in the wrong size (too much small cap or too much large cap)
• Too many clients weren’t pursuing the right type of retirement plans. Instead of saving $50-60,000 on a pre-tax basis, I’ve helped clients save hundreds of thousands on a pre-tax basis through Cash balance retirement plans.

Another example leads to the sixth lesson I’ve learned in my 25 years as an investor and that is...]]>TRAILER

Welcome to episode 77 of the One for the Money podcast. Happy New Year as well as this episode is airing on Jan 1st, 2025. Crazy how time flies. I am both glad and grateful you have taken the time to listen. In this episode, I’ll share the biggest lessons I have learned in over 25 years as an investor.

In the tips, tricks, and strategies portion, I will share a tip regarding setting financial goals.

In this episode...

• The Importance of Starting Early [3:27]
• The Power of Paying Yourself First [4:19]
• Market Timing is a Fool’s Errand [5:36]
• The Need for Proper Planning & Tax Strategy [8:02]
• Spending While You Are Healthy [12:11]

MAIN

I’ve been investing in the stock market for a little more than 25 years and I’ve learned a lot about investing and building wealth during that time so I thought it might be helpful for me to share the biggest lessons I’ve learned at my silver jubilee investing anniversary. 

But first, I should share that I was introduced to the stock market by accident. I was told by a university guidance counselor that graduate schools and future employers expected those they accepted to be well-read and that one should read the paper every day. After that guidance every day I would grab our local paper and read the current events in the world which would feature such things as natural disasters, politics, wars, etc. I would then skip over the business section to review the sports section. However, as I turned the pages on the business section I often wondered what all of these abbreviations and numbers represented. I learned later that these represented companies that the general public could invest into. Well, one day the newspaper advertised a free investing seminar at the public library in the city closest to my small town. I attended the presentation and it was incredibly interesting. The gentleman who presented spoke of one Warren Buffett and how the stock market was the way to build wealth. At the time of this investing seminar, Warren Buffet’s company Berkshire Hathaway had a stock price of a whopping ~$60,000 per share. If you think that’s amazing today a single share of Berkshire Hathaway stock is over $700,000.

A short time after I was introduced to investing, it seemed the rest of America became interested due to the dot com era. At the time the World Wide Web was a new phenomenon and the stock market rocketed higher. The stock market eventually crashed down to earth, but despite the volatility, I became very interested in investing. 

These experiences started my journey into investing and here a little over 25 years later are the biggest lessons I have learned about investing and building wealth. 

The first lesson I’ve learned in my 25 years is that little actions have massive consequences when given time. In other words, it is WAY more important to start investing than the actual amount you have to invest. Every little dollar can grow to mind-boggling sums given time. One of the best examples I share with clients is that of an apple seed. It’s hard to conceive that this tiny little seed could grow into a large tree that could produce thousands of apples, and yet that’s exactly what it can do, of course, given the critical ingredient of time. But your wealth can’t grow if you don’t plant the seeds to start with.

As the old proverb goes - The best time to plant a tree was 20 years ago; the second best time is now. As you get older you usually can make more money but you can never get more time!

The second lesson I’ve learned in my 25 years is understanding how paying yourself first makes all the difference. As Warren Buffett said so well “Do not save what is left after spending; spend what is left after saving.” People who know how to manage their cash flow have the best life in the future. They have more freedom, more experiences, and way less stress. As a certified financial planner, I’ve seen this firsthand. I’ve met with 50 and 60-year-olds who have accumulated millions and are excited about retirement but I’ve also met 50 and 60-year-olds who have minimal to no net worth and are scared of what the future holds. These are sobering meetings when I tell them that they have to work for way more years than they want to and their retirement will still be challenging. My heart aches for them. It’s the reason, I teach financial literacy classes in the community and why I teach financial literacy to the teenagers and young adults of my clients. Just doing for them what I wished was done for me. I like to remind people that you will turn 65 regardless of what planning you put in place.

The good news is that many already pay themselves first with their automatic contributions to their 401ks, IRAs, and HSAs.

The third lesson I’ve learned in my 25 years is an investor is that no one can accurately predict the future and despite such an obvious statement, we continue to digest the predictions about the economy, the stock market, or even who will win the Super Bowl for American Football fans or the Champions League for those European football fans.

And yet many investors try to time the market based on certain predictions. The famous investor Peter Lynch explained the fools errand of market timing best when he said- “More people lost money waiting for corrections and anticipating corrections than the actual corrections.”

Another great quote regarding predictions is from Warren Buffet when he said “We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, we continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

In a fabulous and equally free resource from JP Morgan entitled Guide to Retirement, it highlights the perils of trying to time the market and why it doesn’t work. The guide uses a 20-year investment period for the S&P 500, from Jan 1, 20004 to December 31, 2023. During that time there were over 5000 trading days. And if you were invested for all 5000+ days a $10,000 dollar investment in the S&P500 would have grown to over $63,000. But if you would have missed just ten of the best days of those 5000+ days. Your investments would have only grown to just over $29,000 instead of over 63,000. In other words, if you were invested for 99.8% of the days your investments would be 54% less. If you had missed just the 20 best days of approximately 5000 trading days, your investments would have only grown to just over $17,000. Too many people believe they can time the market and know when to sell and when to buy, but it’s impossible. Here is why seven of the 10 best days occurred within two weeks of the 10 worst days and Six of the seven best days occurred after the worst days. 

This leads to the fourth lesson I’ve learned in my 25 years is an investor. Which is fear is not your friend. As the famous investment Advisor Nick Murray has said so well "All successful investing is goal-focused and planning driven. All failed investing is market-focused and performance-driven.”All successful investors are continuously acting on a plan. All failed investors are continually reacting to the markets. Everything else is commentary.”

The reason why planning-driven investing is so important is because it takes the emotions out of investing. Those emotions can have a huge impact. Nick Murray also said, “Wealth isn’t primarily determined by investment performance, but by investor behavior.” How true that is I know this from personal experience when very early in my time as an investor, I purchased a stock that then dropped 50%. I sold out only for the stock since that time to increased over 7,900%. that’s right, instead of selling I should have bought more and enjoyed a nearly 8 thousand percent gain. For more details on this painful lesson see episode 18 of this podcast entitled, When Life Gives You Lemons, Stay Invested.

Another fairly recent example, was during the Covid correction. Fidelity who manages over $4 trillion said that one third of their investors over 65 got out of the market during that correction. Since that time the market is up over 137%. 

The fifth lesson I’ve learned in my 25 years as an investor is that no one has their stuff together. Almost everyone needs help when it comes to investing. I was a do-it-yourselfer myself before I became a financial advisor but now that I have been investing for over 25 years and have been a financial planner for nearly 10. I’ve realized that no one is coming close to optimizing their investments. I’ve seen literally hundreds of portfolios and most were not in alignment with the clients' goals. Here are just a few examples:

• During downturns in the stock market, I’ve kept clients in the market. This increased their returns by hundreds of thousands
• I have had numerous clients with hundreds of thousands and in some cases millions of dollars sitting in cash at the bank making hardly any interest but investing these funds I’ve been able to help them earn tens to hundreds o thousands more than they would have. 
•   So many clients had the wrong allocations in their portfolios, too much allocated to a single company, or a single sector (technology for example) or a single country (the US) or in the wrong size (too much small cap or too much large cap)
• Too many clients weren’t pursuing the right type of retirement plans. Instead of saving $50-60,000 on a pre-tax basis, I’ve helped clients save hundreds of thousands on a pre-tax basis through Cash balance retirement plans.

Another example leads to the sixth lesson I’ve learned in my 25 years as an investor and that is taxes matter. It’s imperative that people implement strategies to reduce taxes because otherwise, they end up giving WAY more to the government instead. My clients do a way better job of spending their money than the government. You must pay taxes, but there’s no law that say’s you gotta leave a tip. Or as Judge Hand said so well “In America there are two tax systems; one for the informed and one for the uninformed. Both are legal.”

That’s why investors need to pursue Roth IRAs, Roth 401ks, Roth Conversions, Pre-Tax IRAs, Regular 401ks, Cash Balance Plans, 529 plans, and Health Savings accounts and pursue these when the time is right. In addition, they need to consider gifting strategies and tax loss harvesting just to name a few more.

I could share many other lessons but I leave with one last lesson I’ve learned in my 25 years as an investor and that lesson that the primary purpose for investing is so we can spend later, and yet far too many struggle with making that switch from saving to spending. For my clients that have struggled with this concept I’ve given them the book called Die with Zero which is written by Bill Perkins. One of the most significant learnings for me from the book was his explanation regarding the intersection of time, money, and health and how too many worked too long to the point where they had plenty of time and money but didn’t have the health to truly enjoy it. He argued that people should be spending more money when their health is better. More money to be spent in the 40s 50s and 60s than after 65 during the typical retirement.

I often tell clients that there are two significant risks in retirement. The first is running out of money and the second is dying with too much. So many are fixated on the first risk, that the vast majority succumb to the second. Research has shown that 84% of retirees have MORE money in their account at the end of retirement than they started with and 66% of retirees over a 30-year retirement will have 2 TIMES MORE money at the end than what they started with using traditional spending amounts. Ultimately Your life is a sum of your experiences and so to maximize your life you need to maximize your experiences. Memories are an investment in our future selves. Buying an experience just doesn’t buy you the experience itself–it also buys you the sum of all the dividends that experience will bring for the rest of your life. 

What many fail to understand is that you need to have a plan to spend your money just as much as you need a plan to build the wealth you have to spend. 3 people will spend your retirement money: You, Your beneficiaries or The Government. We employ a dynamic distribution strategy that makes adjustments based on the stock market. Consequently clients get to spend as much as 62% more than they would under traditional distribution strategies.

I’ve invested now for over 25 years and the blessings I have received from attending that first investment seminar nearly 26 years ago are nothing short of remarkable. That one investment presentation sparked an interest that led to me to max out Roth IRAs for my wife and I, max out my 401k, start 529s for my boys and ultimately establish a company that enables me to help others make the most of their money. This has taught me some of the most valuable lessons I’ve learned from the importance of getting started, paying yourself first, not trying to predict market movement, not succumbing to fear, why tax planning is critical, and ensuring one plan so they can spend on the things that matter most. 

TIPS, TRICKS AND STRATEGIES

Welcome to the tips, tricks, and strategies portion of the podcast where I will share a tip regarding setting financial goals. This podcast airs on January 1st when we typically make resolutions for the new year. Interestingly, the month of January is named after the Roman God Janus who is the God of beginnings and endings and as such is usually depicted as having two faces. One facing forward and one facing backward. This is a great analogy for our financial goals. We should look back at 2024, see what we did well, look forward to 2025, and make improvements. Personally, I plan to automate the savings into my kids' Roth IRA accounts. I also plan to establish a sole proprietorship to pay my kids to eliminate certain taxes. I’m also finalizing vacation plans for 2025 and 2026. 

References

When Life Gives you Lemons, Stay Invested

JP Morgan's Guide to Retirement

Welcome to episode 76 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. In this episode I’ll share how you can use a drop in the stock market to your advantage.

In the tips, tricks, and strategies portion I will share a tip regarding year end planning strategies.

In this episode...

• Opportunities in Down Markets [0:59]
• Investment Strategies During Market Declines [2:55]
• The Historical Behavior of the Stock Market [11:10]

MAIN

Better Planning Leads to a Better Life, and that can especially be the case in down markets. Many people fear stock market downturns but hopefully at the end of this episode you are able to see the silver linings amongst the rain clouds. In fact that reminds me of a fantastic quote by one of the worlds most famous investors, Mr. Warren Buffett. 

He said and I quote ““Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

This speaks to the tremendous opportunities that a down market can present, but you have to have the stomach to handle them. During such times it’s easy to get gripped by fear and I don’t blame people as losses are incredibly hard to stomach. In fact losses are twice as impactful for investors than equivalent gains.  Studies have shown that a 10% loss hurts twice as much as a 10% gain. I know this from personal experience when very early in my time as an investor, I purchased a stock which then dropped 50%. I sold out only for the stock since that time to increase over 7,900%. that’s right, instead of selling I should have bought more and enjoyed a nearly 8 thousand percent gain. For more details on this painful lesson see episode 18 of this podcast entitled, when life gives you lemons, stay invested.

With a pessimistic mindset, you can make really poor decisions and miss incredibly once-in-a-generation type of opportunities, like I did, but with the right mindset you can see the economic rain storms and instead of running for cover you grab a bucket as Warrant Buffett said so well. And when you employ these better investment strategies it will make for an even better life.

Here are the strategies to consider based on how far down the market is. I’ll use each calendar year, January 1st, as the starting point.

Here is what one should do when the stock markets are down 5%.

If the stock markets are down 5% from where there were on January 1st, there really is nothing one should do other than stay the course. Drops in this magnitude are far more typical than one might imagine. In fact in the last 44 years, the stock market has been down on average 14.2% at some point during the calendar year. So at one point between January 1st and December 31st of every year since 1980, the stock market was down around 14% on average and yet, 33 of those 44 years, the markets ended up higher on December 31st than where it had started on New years day. 

Most times the best thing you can do is nothing at all. 

Here is what one should do when the stock markets are down 10% , the definition of a correction. 

Your first option is to do nothing and stay the course but there are also some ways to take advantage of these likely temporarily lower prices. 

The first consideration is to rebalance your accounts. For example, let’s say you have identified a portfolio of 80% stocks and 20% bonds to be your ideal portfolio to help achieve your goals.  Now let’s also say there is a drop in the stock market of ~10% and this causes the stock holdings to go down to 70% from 80%.  Alternatively the bonds portion of your portfolio rises by from 20% to 30% in this hypothetical example. Rebalancing merely, shifts your portfolio back to it’s initial distribution, so 10% of bonds or bond funds are sold and 10% stock funds are purchased to get back to your original ratio of 80% to stocks and 20% to bonds. This enables you to buy stocks while they are lower priced. This was a huge win for my clients during the Covid crash because I rebalance client accounts on a quarterly basis. We were fortunate in the market low just happened to occur on March 23rd. Stocks had crashed as much as 34% on that date and so when clients accounts were rebalanced on March 30, they were able to purchase stock at these very low prices. In fact stocks, represented by the S&P500 were up 50% at the end of 2020 from the low point on March 23rd, 2020. 

Other strategies you can consider when markets are down 10% that are specific to retirement accounts are as follows. You could accelerate retirement plan contributions. Instead of spreading contributions over the year, you could increase those contributions when markets are down 10%. Of course the stock market could go down further so you could also keep your recurring contributions as they are. However, one additional consideration is to initiate partial Roth conversions. 

Roth conversions work just as they sound, you convert portions of your not-yet-taxed retirement accounts to never again taxed accounts. There are no income limitations but since you will be paying income taxes in the year of the conversion it makes the most sense to complete Roth conversions in the years when your income is lower. For example if you work part time in the years prior to full retirement that would be a great time to consider Roth Conversions.There are many factors to consider so be sure to speak with the right CFP. 

For those with Non-Retirement Accounts  you can consider Tax Loss Harvesting. That’s where you sell investments with gains to offset those with losses. For example, let’s say you purchased stock ABC for $5000 and it’s now worth $10,000. Let’s say you also purchased stock DEF for $7500 and it’s now worth $5000. You could sell both stocks and the $5000 gain in ABC would be offset by the $2500 loss in DEF so you’d only be taxed on $2500. Please note, that you have to wait more than 30 calendar days before you purchase stock DEF otherwise it would negate the offset due to wash sale rules.  

I usually conduct tax loss harvesting in the fall each year and occasionally during the year if conditions allow for it. 

What strategies should one consider if stock markets are down 20% or more, which is the definition of a bear market. 

Generally they are the same strategies you would consider when the stock market was down 10%. If the stock market was down 20% from where it was on January 1st again you will want to definitely consider Rebalancing to increase your exposure to stocks. In retirement accounts it’s straight forward as there are no taxable implications but with non-retirement accounts those need to be considered. Also regarding retirement Accounts  you will want to further expedite Roth Conversions and/or accelerate retirement account contributions (Roth or Traditional). Again for those with Non-Retirement Accounts  you will want to consider tax Loss Harvesting.

And for those that are already retired, you will want to assess if you need to make adjustments to your income distributions and only take distributions from dedicated income sources (ie conservative investments). We implement income guardrails for our clients and adjust their income lower or higher based on market events. Clients are often surprised how much their investments drop before they would have a drop in their income. 

What if stock markets are down 30%, One of those rare moments when it can rain gold.

If markets are Down 30%, this may surprise you but it really is more of the same. Rebalance your stock and bond ratio to increase your exposure to stocks. With Retirement Accounts - Expedite Roth Conversions &/or Contributions and with Non-Retirement Accounts - Tax Loss Harvesting. For those that are Retired take distributions from dedicated income sources and Confirm one hasn’t hit your Income Guardrails.

All of this of course is easier said than done. When markets drop, especially when they do so steeply it can be a challenging time. For this reason one should always invest according to ones goals and in alignment with time-tested investment principles but that shouldn’t prevent you from taking advantage of when the market provides opportunities. As Warren Buffett also said, when people are greedy get fearful but when people are fearful get greedy or better yet, get planning for a better life. 

This is a way better option than the alternative, which is selling your stocks. 

The last few years have offered more than enough unprecedented events, the stock market included. Back in 2020, with the global pandemic shutting the world down we had the fastest bear market which is more than a 20%, it just took 16 days for that to happen and then dropped further still. But only a short time later the stock market rocketed higher with the fastest 50 day rally in history, and later still with one of the fastest 100 day rallies in history. 

But it was those that reacted to the losses that really were impacted financially. Fidelity manages over $4 trillion dollars and they found that close to one-third of their investors over the age of 65 sold all of their stocks during the Coronavirus meltdown*.  Unfortunately because they sold, their investments missed out on these significant rallies to the upside. Here’s a great quote from the WSJ article at that time “people tend to sell after an economic downturn is already priced into equity markets, By selling at this time, investors are locking in their losses”

Maybe these facts regarding stocks will be helpful to people to take advantage of stock market downturns:

Over the...]]>TRAILER

Welcome to episode 76 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. In this episode I’ll share how you can use a drop in the stock market to your advantage.

In the tips, tricks, and strategies portion I will share a tip regarding year end planning strategies.

In this episode...

• Opportunities in Down Markets [0:59]
• Investment Strategies During Market Declines [2:55]
• The Historical Behavior of the Stock Market [11:10]

MAIN

Better Planning Leads to a Better Life, and that can especially be the case in down markets. Many people fear stock market downturns but hopefully at the end of this episode you are able to see the silver linings amongst the rain clouds. In fact that reminds me of a fantastic quote by one of the worlds most famous investors, Mr. Warren Buffett. 

He said and I quote ““Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

This speaks to the tremendous opportunities that a down market can present, but you have to have the stomach to handle them. During such times it’s easy to get gripped by fear and I don’t blame people as losses are incredibly hard to stomach. In fact losses are twice as impactful for investors than equivalent gains.  Studies have shown that a 10% loss hurts twice as much as a 10% gain. I know this from personal experience when very early in my time as an investor, I purchased a stock which then dropped 50%. I sold out only for the stock since that time to increase over 7,900%. that’s right, instead of selling I should have bought more and enjoyed a nearly 8 thousand percent gain. For more details on this painful lesson see episode 18 of this podcast entitled, when life gives you lemons, stay invested.

With a pessimistic mindset, you can make really poor decisions and miss incredibly once-in-a-generation type of opportunities, like I did, but with the right mindset you can see the economic rain storms and instead of running for cover you grab a bucket as Warrant Buffett said so well. And when you employ these better investment strategies it will make for an even better life.

Here are the strategies to consider based on how far down the market is. I’ll use each calendar year, January 1st, as the starting point.

Here is what one should do when the stock markets are down 5%.

If the stock markets are down 5% from where there were on January 1st, there really is nothing one should do other than stay the course. Drops in this magnitude are far more typical than one might imagine. In fact in the last 44 years, the stock market has been down on average 14.2% at some point during the calendar year. So at one point between January 1st and December 31st of every year since 1980, the stock market was down around 14% on average and yet, 33 of those 44 years, the markets ended up higher on December 31st than where it had started on New years day. 

Most times the best thing you can do is nothing at all. 

Here is what one should do when the stock markets are down 10% , the definition of a correction. 

Your first option is to do nothing and stay the course but there are also some ways to take advantage of these likely temporarily lower prices. 

The first consideration is to rebalance your accounts. For example, let’s say you have identified a portfolio of 80% stocks and 20% bonds to be your ideal portfolio to help achieve your goals.  Now let’s also say there is a drop in the stock market of ~10% and this causes the stock holdings to go down to 70% from 80%.  Alternatively the bonds portion of your portfolio rises by from 20% to 30% in this hypothetical example. Rebalancing merely, shifts your portfolio back to it’s initial distribution, so 10% of bonds or bond funds are sold and 10% stock funds are purchased to get back to your original ratio of 80% to stocks and 20% to bonds. This enables you to buy stocks while they are lower priced. This was a huge win for my clients during the Covid crash because I rebalance client accounts on a quarterly basis. We were fortunate in the market low just happened to occur on March 23rd. Stocks had crashed as much as 34% on that date and so when clients accounts were rebalanced on March 30, they were able to purchase stock at these very low prices. In fact stocks, represented by the S&P500 were up 50% at the end of 2020 from the low point on March 23rd, 2020. 

Other strategies you can consider when markets are down 10% that are specific to retirement accounts are as follows. You could accelerate retirement plan contributions. Instead of spreading contributions over the year, you could increase those contributions when markets are down 10%. Of course the stock market could go down further so you could also keep your recurring contributions as they are. However, one additional consideration is to initiate partial Roth conversions. 

Roth conversions work just as they sound, you convert portions of your not-yet-taxed retirement accounts to never again taxed accounts. There are no income limitations but since you will be paying income taxes in the year of the conversion it makes the most sense to complete Roth conversions in the years when your income is lower. For example if you work part time in the years prior to full retirement that would be a great time to consider Roth Conversions.There are many factors to consider so be sure to speak with the right CFP. 

For those with Non-Retirement Accounts  you can consider Tax Loss Harvesting. That’s where you sell investments with gains to offset those with losses. For example, let’s say you purchased stock ABC for $5000 and it’s now worth $10,000. Let’s say you also purchased stock DEF for $7500 and it’s now worth $5000. You could sell both stocks and the $5000 gain in ABC would be offset by the $2500 loss in DEF so you’d only be taxed on $2500. Please note, that you have to wait more than 30 calendar days before you purchase stock DEF otherwise it would negate the offset due to wash sale rules.  

I usually conduct tax loss harvesting in the fall each year and occasionally during the year if conditions allow for it. 

What strategies should one consider if stock markets are down 20% or more, which is the definition of a bear market. 

Generally they are the same strategies you would consider when the stock market was down 10%. If the stock market was down 20% from where it was on January 1st again you will want to definitely consider Rebalancing to increase your exposure to stocks. In retirement accounts it’s straight forward as there are no taxable implications but with non-retirement accounts those need to be considered. Also regarding retirement Accounts  you will want to further expedite Roth Conversions and/or accelerate retirement account contributions (Roth or Traditional). Again for those with Non-Retirement Accounts  you will want to consider tax Loss Harvesting.

And for those that are already retired, you will want to assess if you need to make adjustments to your income distributions and only take distributions from dedicated income sources (ie conservative investments). We implement income guardrails for our clients and adjust their income lower or higher based on market events. Clients are often surprised how much their investments drop before they would have a drop in their income. 

What if stock markets are down 30%, One of those rare moments when it can rain gold.

If markets are Down 30%, this may surprise you but it really is more of the same. Rebalance your stock and bond ratio to increase your exposure to stocks. With Retirement Accounts - Expedite Roth Conversions &/or Contributions and with Non-Retirement Accounts - Tax Loss Harvesting. For those that are Retired take distributions from dedicated income sources and Confirm one hasn’t hit your Income Guardrails.

All of this of course is easier said than done. When markets drop, especially when they do so steeply it can be a challenging time. For this reason one should always invest according to ones goals and in alignment with time-tested investment principles but that shouldn’t prevent you from taking advantage of when the market provides opportunities. As Warren Buffett also said, when people are greedy get fearful but when people are fearful get greedy or better yet, get planning for a better life. 

This is a way better option than the alternative, which is selling your stocks. 

The last few years have offered more than enough unprecedented events, the stock market included. Back in 2020, with the global pandemic shutting the world down we had the fastest bear market which is more than a 20%, it just took 16 days for that to happen and then dropped further still. But only a short time later the stock market rocketed higher with the fastest 50 day rally in history, and later still with one of the fastest 100 day rallies in history. 

But it was those that reacted to the losses that really were impacted financially. Fidelity manages over $4 trillion dollars and they found that close to one-third of their investors over the age of 65 sold all of their stocks during the Coronavirus meltdown*.  Unfortunately because they sold, their investments missed out on these significant rallies to the upside. Here’s a great quote from the WSJ article at that time “people tend to sell after an economic downturn is already priced into equity markets, By selling at this time, investors are locking in their losses”

Maybe these facts regarding stocks will be helpful to people to take advantage of stock market downturns:

Over the past nearly 100 years, the U.S. stock market 

is up nearly 75% of the time (3 out of every 4 years)

And 60% gains in excess of 10%. 

More than 33% of the time gains are 20% or more

25% of the time the market will be down

So you are more likely to gain 20% or more than experience a down year.

TIPS, TRICKS AND STRATEGIES

Welcome to tips, tricks and strategies portion of the podcast where I will share a few end of year financial planning tips so you make the most of your money before the end of the year. 

As i’ve heard it said, the days are long but the years are short and that phrase seems especially true in December when many wonder where did the year go. But there is still time to make some smart money decisions for the year is up. Often times this planning can’t wait until January since taxes are looked at on a calendar basis. So most things have to be completed on or before December 31st. 

Of course any of this planning needs to be viewed through the lens of your financial plan which in turn is aligned with your ideal life. 

This year end planning especially needs to be considered in years when there were significant life changes such as births, deaths, marriages or divorce or retirement as these can have a significant impact on your personal finances and your strategic financial plan.

The first planning tip is to confirm you are contributing as much as you can to your 401(k) or Simple IRA account contributions.  These contributions need to be made by the end of they year. If you aren’t able to max these out did you at least contribute as much as the company match? 

Another year end planning tip is to ensure you are contributing as much as you can to your health spending account (HSA), should you have one. You want to ensure you receive a tax break for any medical expenses you would need to pay for.

Another year end planning tip is to ensure you use up your FSA. HSAs don’t have to be used every year but FSAs have to spent by the end of each year. There are some qualified products you may not have thought of, from contact lens solution to bandages, that you can purchase with those funds.

One of the biggest end of the year planning strategies is directly related to taxes. For example based on your anticipated income for next year, would deferring or accelerating any bonuses, property sales, other taxable transactions, deductible expenses, charitable gifts, etc., benefit you from a tax perspective. 

Examples include paying your January mortgage early as you could deduct the interest on your 2024 tax return.

You will also want to look at your charitable contributions

For example, If you plan to donate the same amount of money each year, consider “bunching” the donations into a single year. This could increase your potential itemized deductions for that year. 

This is just one of many end of year considerations.

References

Retirement Income Worries Often Overblown, Survey Shows

Year-End Financial Checklist

18 To-Dos For Your Year-End Financial Planning Checklist

Welcome to episode 75 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. They say wisdom is learning from the mistakes of others and in that spirit, this episode will feature the mistakes a retirement expert made about her own retirement and I’ll share ways to avoid these same mistakes.

In the tips, tricks, and strategies portion, I will share a handy rule of thumb regarding knowing if you are on track for retirement.

In this episode...

• Who Is Alicia Munnell? [1:45]
• Mismanagement of Investments [2:47]
• Failure to Utilize Roth 401(k) [5:24]
• Premature Government Pension Withdrawal [8:14]
• Using Retirement Funds Early [10:07]

MAIN

Most people really only have one shot at retirement so you want to be sure you get it right and you will want to be sure to avoid any mistakes. They say wisdom is learning from the mistakes of others and in that spirit, there was a recent article in the WSJ on the ways a retirement authority got it wrong. This can serve as an example of what not to do. The Oct 12, 2024 article states in its opening line “Alicia Munnell spent decades trying to improve how Americans retire. Even she made mistakes in her retirement planning.”

First, let me share more about Alicia Munnell. She is an economist who served as an assistant secretary at the Treasury Department under President Bill Clinton. Her time in the Treasury Department was preceded by 20 years at the Federal Reserve Bank of Boston. After her time in the public sector, she established Boston College’s Center for Retirement Research, a think tank in 1998. 

Alicia, who is 82 years young, has been steeped in finance for many decades and her work covered everything from improving the 401(k) to whether the U.S. faces a retirement crisis.(Her Answer: Probably yes, since she and her colleagues calculate about 40% of the working population isn’t saving enough to maintain their lifestyle throughout retirement.) And yet despite the focus of her life’s work, she made some basic mistakes about her very own retirement. 

Here were some of her mistakes along with my thoughts on how she could have avoided them. 

One mistake she repeatedly made was not regularly monitoring her investments.  Like many people, she said that she lacked the time and interest to manage money. What she would do would rely on the occasional advice from her son, who works at a financial firm.

In her words “Every now and then, he tells me to send him my asset allocation and then he tells me how to adjust it. If I had to figure out what to invest in, I’d have no clue,” said Munnell. “People have busy lives. Retirement planning should not be something they have to put a lot of effort into.”

This boggles the mind. I am shocked a retirement authority, who highlights the importance of 401ks handles her retirement investments so carelessly. First, she doesn’t have a set schedule to review her investments on a regular basis, instead, she said that “every now and then” she reaches out to her son who works at a financial firm for changes she should make. And because she approached things so haphazardly, she or her son never consider her overall goals or taxable implications regarding her investments as demonstrated by the other mistakes that she had made.  

Here’s how Alicia could have avoided this investment management mistake. She should have spent the time with her husband outlining their specific goals for retirement. These goals would then be used to align her investments with those specific goals. She then should have had regularly scheduled meetings to confirm their goals and re-align their investments if necessary. She should have assumed this responsibility herself or delegated it to a financial planning professional who was aware of her goals and could meet with her regularly.

Alicia admitted she didn’t have the time and yet still was personally making the changes to her investments based on the occasional advice she solicited from her son. Since she lacked the time and desire to manage these investments she most likely would have benefited from the right CFP that would have taken the time to understand her and her husband’s goals and manage their investments accordingly. It’s a real shame that she didn’t engage in this type of guidance. What we have learned about our clients in our goal meetings is often surprising and is only a result of taking the time to have our clients go through the exercises to help them better articulate and prioritize the goals that are most important to the life they want to live. Using these goals, we then create and implement the best investment strategy to achieve them and we meet and speak with our clients regularly to re-confirm their goals and adjust their investments when needed.

Alicia said another mistake she made about retirement is that she didn’t move any of her money from a traditional 401(k) to a Roth 401 (k) and Neither did her husband. She said as a result that they are required to take more withdrawals (via Required minimum distributions) than they need right now and have to pay more taxes as a result. She said and I quote “someone should have said, “If you’re going to work until 82, you might not want to put all your savings into a traditional 401(k). Put some into a Roth.” 

Again, it’s really surprising that a “retirement expert” would say “Someone should have said….put some in a Roth”. My first question is who does she think this “someone” should be? Her co-worker, her husband,  or her son? Talk about taking zero personal responsibility. And if she is expecting “someone” to tell her this information, why didn’t she seek out professional advice? Again, it’s strange that someone so steeped in retirement readiness was so unready for retirement. 

Here’s how she could have avoided that mistake. She could have spent the time to project her income, retirement balances, RMD requirements, and the potential taxable implications. Years and even decades prior she then could have modeled different scenarios such as Roth conversions, Roth Contributions, or Back Door Roth strategies to determine what the most effective way she could have created tax-free forever funds. It’s unclear how “someone just saying something” would have put her in the best possible situation. It also seems as if she, her husband, or their son didn’t have the time or inclination to conduct such an analysis so she should have delegated this task to the right CFP because many CFP don’t go to these lengths of tax and income projections. 

At my firm, we really enjoy helping our clients navigate their approach to taxable, tax-deferred, and tax-free funds to ensure they will pay fewer taxes in retirement. Everyone has to pay taxes so it all comes down to having clients pay taxes when it is to their advantage. For our clients with lower income years that means Roth contributions or Roth conversions. For clients in higher earning years that means having them make the maximum pre-tax retirement contributions.  This type of planning is some of the greatest value we provide clients where we can help them save literally millions in taxes by implementing the right strategies at the right time and project the results and making adjustments in the subsequent years. She would have benefited tremendously from working with a CFP that models current and future tax rates, account balances, and required minimum distributions.

Another mistake she made that was noted in the article was regarding her government pension. She said, and I quote “When I left the Federal Reserve at age 50, I listened to someone who said I should take my monthly pension benefit early because I’d be so much better at investing the money than the Fed. So I took my monthly checks starting at 50 and didn’t invest a penny. Very quickly, my pension check became part of my spending. The monthly payment would have been meaningfully higher had I not taken it early.”

There are those words again, “I listened to someone”. What qualifications and analysis did this “someone” provide to determine that it was better to take the pension early and invest it than take a higher pension later?  This still may not have been a poor decision, but why did Alicia Munnell follow the first part of the “advice” and not follow through with arguably the most important piece of advice, investing the pension instead? Clearly she didn’t have the inclination, time, or knowledge of why it was so important to invest these proceeds instead. 

Here’s how she could have avoided that mistake. She could have spent the time to project what her pension benefit would be at 65 and compared that to what her benefit at 50 + investment returns would be and project these further throughout retirement.  It’s again mind-boggling that a “retirement expert” listens to the advice of a random coworker but doesn’t once advocate the need to sit down with a planner who could have modeled such a scenario for her to make the best decision.

I’ve modeled these scenarios for many of my clients and in almost every instance you want to delay your pension for as long as possible. The only time it makes sense to take a lump sum or take it early is if you have a shortened life expectancy. 

Alicia Munnell said another mistake was taking money out of a retirement account to help with a child’s wedding, which she said, and I quote “probably not a smart thing to do”. Again, I’m not sure if that was or was not the right decision. But what is clear, is that she never analyzed this financial decision in the context of her entire financial plan and how this related to her goals. 

Here’s how she could have avoided that mistake. She could...]]>TRAILER

Welcome to episode 75 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. They say wisdom is learning from the mistakes of others and in that spirit, this episode will feature the mistakes a retirement expert made about her own retirement and I’ll share ways to avoid these same mistakes.

In the tips, tricks, and strategies portion, I will share a handy rule of thumb regarding knowing if you are on track for retirement.

In this episode...

• Who Is Alicia Munnell? [1:45]
• Mismanagement of Investments [2:47]
• Failure to Utilize Roth 401(k) [5:24]
• Premature Government Pension Withdrawal [8:14]
• Using Retirement Funds Early [10:07]

MAIN

Most people really only have one shot at retirement so you want to be sure you get it right and you will want to be sure to avoid any mistakes. They say wisdom is learning from the mistakes of others and in that spirit, there was a recent article in the WSJ on the ways a retirement authority got it wrong. This can serve as an example of what not to do. The Oct 12, 2024 article states in its opening line “Alicia Munnell spent decades trying to improve how Americans retire. Even she made mistakes in her retirement planning.”

First, let me share more about Alicia Munnell. She is an economist who served as an assistant secretary at the Treasury Department under President Bill Clinton. Her time in the Treasury Department was preceded by 20 years at the Federal Reserve Bank of Boston. After her time in the public sector, she established Boston College’s Center for Retirement Research, a think tank in 1998. 

Alicia, who is 82 years young, has been steeped in finance for many decades and her work covered everything from improving the 401(k) to whether the U.S. faces a retirement crisis.(Her Answer: Probably yes, since she and her colleagues calculate about 40% of the working population isn’t saving enough to maintain their lifestyle throughout retirement.) And yet despite the focus of her life’s work, she made some basic mistakes about her very own retirement. 

Here were some of her mistakes along with my thoughts on how she could have avoided them. 

One mistake she repeatedly made was not regularly monitoring her investments.  Like many people, she said that she lacked the time and interest to manage money. What she would do would rely on the occasional advice from her son, who works at a financial firm.

In her words “Every now and then, he tells me to send him my asset allocation and then he tells me how to adjust it. If I had to figure out what to invest in, I’d have no clue,” said Munnell. “People have busy lives. Retirement planning should not be something they have to put a lot of effort into.”

This boggles the mind. I am shocked a retirement authority, who highlights the importance of 401ks handles her retirement investments so carelessly. First, she doesn’t have a set schedule to review her investments on a regular basis, instead, she said that “every now and then” she reaches out to her son who works at a financial firm for changes she should make. And because she approached things so haphazardly, she or her son never consider her overall goals or taxable implications regarding her investments as demonstrated by the other mistakes that she had made.  

Here’s how Alicia could have avoided this investment management mistake. She should have spent the time with her husband outlining their specific goals for retirement. These goals would then be used to align her investments with those specific goals. She then should have had regularly scheduled meetings to confirm their goals and re-align their investments if necessary. She should have assumed this responsibility herself or delegated it to a financial planning professional who was aware of her goals and could meet with her regularly.

Alicia admitted she didn’t have the time and yet still was personally making the changes to her investments based on the occasional advice she solicited from her son. Since she lacked the time and desire to manage these investments she most likely would have benefited from the right CFP that would have taken the time to understand her and her husband’s goals and manage their investments accordingly. It’s a real shame that she didn’t engage in this type of guidance. What we have learned about our clients in our goal meetings is often surprising and is only a result of taking the time to have our clients go through the exercises to help them better articulate and prioritize the goals that are most important to the life they want to live. Using these goals, we then create and implement the best investment strategy to achieve them and we meet and speak with our clients regularly to re-confirm their goals and adjust their investments when needed.

Alicia said another mistake she made about retirement is that she didn’t move any of her money from a traditional 401(k) to a Roth 401 (k) and Neither did her husband. She said as a result that they are required to take more withdrawals (via Required minimum distributions) than they need right now and have to pay more taxes as a result. She said and I quote “someone should have said, “If you’re going to work until 82, you might not want to put all your savings into a traditional 401(k). Put some into a Roth.” 

Again, it’s really surprising that a “retirement expert” would say “Someone should have said….put some in a Roth”. My first question is who does she think this “someone” should be? Her co-worker, her husband,  or her son? Talk about taking zero personal responsibility. And if she is expecting “someone” to tell her this information, why didn’t she seek out professional advice? Again, it’s strange that someone so steeped in retirement readiness was so unready for retirement. 

Here’s how she could have avoided that mistake. She could have spent the time to project her income, retirement balances, RMD requirements, and the potential taxable implications. Years and even decades prior she then could have modeled different scenarios such as Roth conversions, Roth Contributions, or Back Door Roth strategies to determine what the most effective way she could have created tax-free forever funds. It’s unclear how “someone just saying something” would have put her in the best possible situation. It also seems as if she, her husband, or their son didn’t have the time or inclination to conduct such an analysis so she should have delegated this task to the right CFP because many CFP don’t go to these lengths of tax and income projections. 

At my firm, we really enjoy helping our clients navigate their approach to taxable, tax-deferred, and tax-free funds to ensure they will pay fewer taxes in retirement. Everyone has to pay taxes so it all comes down to having clients pay taxes when it is to their advantage. For our clients with lower income years that means Roth contributions or Roth conversions. For clients in higher earning years that means having them make the maximum pre-tax retirement contributions.  This type of planning is some of the greatest value we provide clients where we can help them save literally millions in taxes by implementing the right strategies at the right time and project the results and making adjustments in the subsequent years. She would have benefited tremendously from working with a CFP that models current and future tax rates, account balances, and required minimum distributions.

Another mistake she made that was noted in the article was regarding her government pension. She said, and I quote “When I left the Federal Reserve at age 50, I listened to someone who said I should take my monthly pension benefit early because I’d be so much better at investing the money than the Fed. So I took my monthly checks starting at 50 and didn’t invest a penny. Very quickly, my pension check became part of my spending. The monthly payment would have been meaningfully higher had I not taken it early.”

There are those words again, “I listened to someone”. What qualifications and analysis did this “someone” provide to determine that it was better to take the pension early and invest it than take a higher pension later?  This still may not have been a poor decision, but why did Alicia Munnell follow the first part of the “advice” and not follow through with arguably the most important piece of advice, investing the pension instead? Clearly she didn’t have the inclination, time, or knowledge of why it was so important to invest these proceeds instead. 

Here’s how she could have avoided that mistake. She could have spent the time to project what her pension benefit would be at 65 and compared that to what her benefit at 50 + investment returns would be and project these further throughout retirement.  It’s again mind-boggling that a “retirement expert” listens to the advice of a random coworker but doesn’t once advocate the need to sit down with a planner who could have modeled such a scenario for her to make the best decision.

I’ve modeled these scenarios for many of my clients and in almost every instance you want to delay your pension for as long as possible. The only time it makes sense to take a lump sum or take it early is if you have a shortened life expectancy. 

Alicia Munnell said another mistake was taking money out of a retirement account to help with a child’s wedding, which she said, and I quote “probably not a smart thing to do”. Again, I’m not sure if that was or was not the right decision. But what is clear, is that she never analyzed this financial decision in the context of her entire financial plan and how this related to her goals. 

Here’s how she could have avoided that mistake. She could have spent the time to fully articulate her life goals and then analyze the various options she had in relation to all other goals to see if this was the best decision. 

I should note that this podcast episode wasn’t meant to bash Alicia Munnell at all. In fact it seems she did some great planning as they have more income than they need in retirement but I believe it is helpful to see how even an “expert” in retirement can make significant mistakes. I believe that Alicia had/has the intellect to make the right decisions but may not have had the time and consequently, followed the advice of others who did not know her full situation. This example emphatically demonstrates the need for people to take the necessary time to articulate their goals. They then should analyze their tax return, investments, and savings rates and project these into the future to ensure they are aligned with their current and future goals. This takes a lot of knowledge and technical know-how. If a person doesn’t have the time, knowledge, or inclination to conduct and continually adjust their planning then they should delegate it to the right Certified Financial planner to do this for them. The right type of CFP will take the time to understand you and your goals, they will analyze your tax return, analyze your income, saving rate,s and investment allocations to ensure they are aligned with your stated goals. 

After all you usually only have one chance at retirement and better to learn from the mistakes of a retirement expert to get it right. If you would like to review your retirement readiness with a Certified Financial Planner and discuss strategies to maximize your readiness, please schedule a free initial consultation by clicking the “Schedule a Meeting” button on my better planning better life .com website via the Contact page. 

TIPS, TRICKS AND STRATEGIES

Welcome to the tips, tricks, and strategies portion of the podcast where I will share a tip regarding retirement readiness. 

One of the questions I get asked most often is how much do I need to have saved to retire. Of course,e there is a lot of factors to consider regarding what you need to have saved. But here is a very general rule of thumb that you can use to determine based on what you should have saved at different ages**: 

By 30: Have one time your salary saved

By 35: Have two times your salary saved

By 40: Have three times your salary saved

By 45: Have four times your salary saved

By 50: Have six times your salary saved

By 55: Have seven times your salary saved

By 60: Have eight times your salary saved

By 67: Have ten times your salary saved.

So for example, if you earn $100,000/year by age 67 you should have ~$1 million saved. 

Of course, because this is a general rule, there are a number of factors that one needs to consider to determine what they need to have saved. Consider the following questions:

• Will you be receiving a pension
• What is your potential life expectancy
• Do you plan to relocate to another state, or even country during retirement? Which can greatly impact your expenses and consequently your income needs
• Will your current home suit your needs as you age?
• Will you be carrying a mortgage into retirement, or should you consider paying it off first?
• Will you be receiving an inheritance or would you like to leave one? I generally don’t like to plan for people receiving an inheritance as things can change (absent an irrevocable trust).

These are just a few of the factors that one needs to consider if you are on track for retirement. 

References

How Much Do I Need To Retire?

She’s a Retirement Authority and Still Made Mistakes. Here’s What She’d Do Differently.

In the tips, tricks, and strategies portion, I will share a retirement saving tip for those who don’t have access to a retirement plan through their job. 

In this episode...

• 1978 Revenue Act [1:05]
• When Not to Max Out Contributions [3:03]
• When You Should Max Out Contributions [6:46]

1978 was a watershed moment in the history of retirement for Americans. That was the year that a Revenue Act was enacted by congress and established 401k and 457b retirement plans. 401k retirement plans are for the private sector and 457b plans are for state and local government employees, as well employees of certain tax-exempt organizations. These plans now allowed employees to defer some of their income and avoid taxes on that income until they take it out later in retirement. This was huge. People could now save for retirement in tax advantaged ways.  

Prior to that, most American’s relied on pensions from their employers for income in retirement. With a pension, the employer is committed to providing a specific amount of money to the employee for life during retirement. And that was feasible when people worked for several decades for the same employer and didn’t live that long in retirement. But as individuals started changing jobs more frequently for better opportunities and peoples life expectancy increased significantly, the pension system became untenable for both the public and private sector. 401ks are for companies government employees use 457b plans and public school employees (teachers) and non profits use 403(b) plans. 

Specifically regarding 401ks, 68% of private sector American workers currently have access to an employer sponsored retirement plan.

For those Americans who have access to a retirement plan at work be it a 401k, 403b, 457b, SEP IRA or Simple IRA some wonder whether it makes sense to max it out every year. As with any financial planning, it depends upon your unique situation and circumstances.

When you should NOT max out your 401k/403b/457b/SEP or Simple IRA

There are times when you shouldn’t max out your retirement account. One of the most obvious reason is if you have high interest debt that needs to be paid off first. However, I would recommend in this scenario that you at least contribute to the company match as that is free money. No higher contributions should be made until after your high interest debt is paid off. You need to pay down high-interest debt, for example credit card debt. The average credit card currently has an APR of more than 20%, which is well above the amount you could reasonably expect to earn on a diversified portfolio in any given year. That’s why it is always better to funnel extra cash toward paying down high-interest debt instead of maxing out retirement plan contributions.

Another reason not to max out contributions to your work retirement plan is if you don’t have a sufficient emergency fund. As a reminder, you should have 3-6 months of your minimum expenses in savings to cover a potential financial emergency. We learned this first hand a few months ago when our eldest son nearly drowned while surfing. He was rushed to the hospital and was released the next day, but I was glad we had the savings to cover the incredibly high costs we have incurred as a result.

A third reason why you shouldn’t max out your company retirement plan is if you haven’t yet funded a Health Savings Account or HSA. As a reminder, HSAs are available to individuals with qualifying high deductible medical plans. HSAs are incredibly powerful as they are the only triple tax free retirement account and they have the added advantage of early accessibility. You should max out your HSA before maxing out a retirement account. Another huge advantage of HSAs is that they can be accessed at any time without penalty for qualified medical expenses, whereas 401ks it can be as early as 55 and IRAs its as early as 59.5. See episodes 2 and 49 for more on HSAs.  

A fourth reason why you may not want to max out your contributions to a retirement plan is if the plan has high costs and/or poor-quality investment options. Across the retirement industry, the majority of plan participants pay less than 80 basis points in combined costs (including administrative fees for the plan plus expense ratios for the underlying investment options). But costs span a wide range. If you work for a smaller employer, you’re more likely to be saddled with a higher-cost plan. In episode 73, I shared an example of a client that had hugely expensive investments. One had a management cost of nearly 2% and it had inferior performance. 

A final reason not to max out your work place retirement plan is if you plan to retire before 55 as you cannot access your money without a hefty penalty. If you roll your money to an IRA then you won’t be able to access your money without a hefty penalty until 59.5. Keeping your money in a 401k has that advantage over an IRA. When you invest in a 401(k)/403b/457b plan, your contributions are effectively off-limits until age 59½ (or 55 for retirement plan participants who have separated from service).

Here are reasons when you SHOULD max out your 401k/403b/457b/SEP or Simple IRA

If someone is behind on saving for retirement, it’s imperative to stuff as much money as you can into a 401(k)/403b/457b as these allow you to put away the most amount of money in tax beneficial vehicles. In 2024 people can contribute $23,000 and if you are 50 or older you can take advantage of catchup contributions and contribute an additional $7500 or $30,500 in total.

I recommend when you are young that you put in as much as you can in retirement vehicles because the longer your money is invested the greater the potential growth. I didn’t start saving in my 401k until I was nearly 30 and I didn’t make great money, but through budgeting, maximizing my 401k and selecting the right investments, and following a sound financial plan we are on track to have a great retirement. 

Another compelling reason to max out contributions to your pre-tax 401(k)/403b/457b is if you expect to be in a lower tax bracket after retirement. Most retirement savers have less taxable income after they stop working. Of course, tax rates can change in the future, but given American government’s reliance on income taxes and that lower incomes pay at lower tax rates you can benefit from contributing as much as you can to pre-tax 401(k)/403b/457b account. Contributing to a pre-tax retirement 401(k)/403b/457b account can also be used by early retirees to greatly lower their taxes in retirement by employing Roth conversions during their first few years of early retirement. There are a lot of factors to consider, but have employed these for my clients and it will save them hundreds of thousands of dollars in taxes. See episode 49 of this podcast for more details.

Another reason to max out your retirement plan contributions is if you think your tax rate will be higher in retirement. Of course this time the recommendation is to contribute to a Roth retirement plan account as it will allow you to put away way more money in a never-taxed-again retirement account, allowing it to compound and grow tax free for as long as possible. 

I hope I was able to provide better understanding of when and when not to max out your work retirement plan such as a 401k, 403b or 457b. There are many factors to consider when making these decisions and having a certified financial planner provide guidance can be a tremendous help. Feel free to schedule a no cost or obligation meeting with me on my website at betterplanningbetterlife.com 

Thank you again for listening and I hope you found this helpful, now on to the tips tricks and strategies portion of the podcast.

TIPS, TRICKS AND STRATEGIES

Welcome to the tips, tricks and strategies portion of the podcast where I will share a saving tip for those that don’t have access to a work retirement plan such as a 401k, 403b or 457b. 

There are a few reasons why you may not have a work retirement plan. If you are a small business owner, these can be expensive. In episode 35 of this podcast I highlight the different options available to you. The options mentioned in that episode include IRAs, Sep IRAs, Simple IRAs, Solo 401ks and defined benefit plans. 

A great option if you don’t have access to a retirement plan is to save in a non-retirement account. These accounts have a few advantages over retirement accounts. The first is that they can be accessed at anytime (no having to wait until age 55 or 59.5). The second advantage is that for investments held for longer than a year, the taxation will be at the generally lower long term capital gains rates than the generally higher income tax rates. Now you will be required to pay taxes annually on any dividends and interest received but this annual taxation has less of an impact than most people think. 

I will share an example where $10,000 contribution is made each year into a Roth 401(k) versus a $10,000 invested each year into a taxable account (i.e. brokerage) for over 30 years. This analysis is courtesy of Nick Maggiulli of Dollars and Data.

For this comparison, it assumed that both accounts grew at 5% a year and that the taxable account had to pay the long-term capital gains rate of 15% on a 2% annual dividend and when the portfolio was sold (in the last year). This means that no sales were made in the taxable account until...]]>Welcome to episode 74 of the One for the Money podcast. I am so very grateful you have taken the time to listen. In this episode, I will share when you should max out your retirement plan such as a 401k, and when you should not. 

In the tips, tricks, and strategies portion, I will share a retirement saving tip for those who don’t have access to a retirement plan through their job. 

In this episode...

• 1978 Revenue Act [1:05]
• When Not to Max Out Contributions [3:03]
• When You Should Max Out Contributions [6:46]

1978 was a watershed moment in the history of retirement for Americans. That was the year that a Revenue Act was enacted by congress and established 401k and 457b retirement plans. 401k retirement plans are for the private sector and 457b plans are for state and local government employees, as well employees of certain tax-exempt organizations. These plans now allowed employees to defer some of their income and avoid taxes on that income until they take it out later in retirement. This was huge. People could now save for retirement in tax advantaged ways.  

Prior to that, most American’s relied on pensions from their employers for income in retirement. With a pension, the employer is committed to providing a specific amount of money to the employee for life during retirement. And that was feasible when people worked for several decades for the same employer and didn’t live that long in retirement. But as individuals started changing jobs more frequently for better opportunities and peoples life expectancy increased significantly, the pension system became untenable for both the public and private sector. 401ks are for companies government employees use 457b plans and public school employees (teachers) and non profits use 403(b) plans. 

Specifically regarding 401ks, 68% of private sector American workers currently have access to an employer sponsored retirement plan.

For those Americans who have access to a retirement plan at work be it a 401k, 403b, 457b, SEP IRA or Simple IRA some wonder whether it makes sense to max it out every year. As with any financial planning, it depends upon your unique situation and circumstances.

When you should NOT max out your 401k/403b/457b/SEP or Simple IRA

There are times when you shouldn’t max out your retirement account. One of the most obvious reason is if you have high interest debt that needs to be paid off first. However, I would recommend in this scenario that you at least contribute to the company match as that is free money. No higher contributions should be made until after your high interest debt is paid off. You need to pay down high-interest debt, for example credit card debt. The average credit card currently has an APR of more than 20%, which is well above the amount you could reasonably expect to earn on a diversified portfolio in any given year. That’s why it is always better to funnel extra cash toward paying down high-interest debt instead of maxing out retirement plan contributions.

Another reason not to max out contributions to your work retirement plan is if you don’t have a sufficient emergency fund. As a reminder, you should have 3-6 months of your minimum expenses in savings to cover a potential financial emergency. We learned this first hand a few months ago when our eldest son nearly drowned while surfing. He was rushed to the hospital and was released the next day, but I was glad we had the savings to cover the incredibly high costs we have incurred as a result.

A third reason why you shouldn’t max out your company retirement plan is if you haven’t yet funded a Health Savings Account or HSA. As a reminder, HSAs are available to individuals with qualifying high deductible medical plans. HSAs are incredibly powerful as they are the only triple tax free retirement account and they have the added advantage of early accessibility. You should max out your HSA before maxing out a retirement account. Another huge advantage of HSAs is that they can be accessed at any time without penalty for qualified medical expenses, whereas 401ks it can be as early as 55 and IRAs its as early as 59.5. See episodes 2 and 49 for more on HSAs.  

A fourth reason why you may not want to max out your contributions to a retirement plan is if the plan has high costs and/or poor-quality investment options. Across the retirement industry, the majority of plan participants pay less than 80 basis points in combined costs (including administrative fees for the plan plus expense ratios for the underlying investment options). But costs span a wide range. If you work for a smaller employer, you’re more likely to be saddled with a higher-cost plan. In episode 73, I shared an example of a client that had hugely expensive investments. One had a management cost of nearly 2% and it had inferior performance. 

A final reason not to max out your work place retirement plan is if you plan to retire before 55 as you cannot access your money without a hefty penalty. If you roll your money to an IRA then you won’t be able to access your money without a hefty penalty until 59.5. Keeping your money in a 401k has that advantage over an IRA. When you invest in a 401(k)/403b/457b plan, your contributions are effectively off-limits until age 59½ (or 55 for retirement plan participants who have separated from service).

Here are reasons when you SHOULD max out your 401k/403b/457b/SEP or Simple IRA

If someone is behind on saving for retirement, it’s imperative to stuff as much money as you can into a 401(k)/403b/457b as these allow you to put away the most amount of money in tax beneficial vehicles. In 2024 people can contribute $23,000 and if you are 50 or older you can take advantage of catchup contributions and contribute an additional $7500 or $30,500 in total.

I recommend when you are young that you put in as much as you can in retirement vehicles because the longer your money is invested the greater the potential growth. I didn’t start saving in my 401k until I was nearly 30 and I didn’t make great money, but through budgeting, maximizing my 401k and selecting the right investments, and following a sound financial plan we are on track to have a great retirement. 

Another compelling reason to max out contributions to your pre-tax 401(k)/403b/457b is if you expect to be in a lower tax bracket after retirement. Most retirement savers have less taxable income after they stop working. Of course, tax rates can change in the future, but given American government’s reliance on income taxes and that lower incomes pay at lower tax rates you can benefit from contributing as much as you can to pre-tax 401(k)/403b/457b account. Contributing to a pre-tax retirement 401(k)/403b/457b account can also be used by early retirees to greatly lower their taxes in retirement by employing Roth conversions during their first few years of early retirement. There are a lot of factors to consider, but have employed these for my clients and it will save them hundreds of thousands of dollars in taxes. See episode 49 of this podcast for more details.

Another reason to max out your retirement plan contributions is if you think your tax rate will be higher in retirement. Of course this time the recommendation is to contribute to a Roth retirement plan account as it will allow you to put away way more money in a never-taxed-again retirement account, allowing it to compound and grow tax free for as long as possible. 

I hope I was able to provide better understanding of when and when not to max out your work retirement plan such as a 401k, 403b or 457b. There are many factors to consider when making these decisions and having a certified financial planner provide guidance can be a tremendous help. Feel free to schedule a no cost or obligation meeting with me on my website at betterplanningbetterlife.com 

Thank you again for listening and I hope you found this helpful, now on to the tips tricks and strategies portion of the podcast.

TIPS, TRICKS AND STRATEGIES

Welcome to the tips, tricks and strategies portion of the podcast where I will share a saving tip for those that don’t have access to a work retirement plan such as a 401k, 403b or 457b. 

There are a few reasons why you may not have a work retirement plan. If you are a small business owner, these can be expensive. In episode 35 of this podcast I highlight the different options available to you. The options mentioned in that episode include IRAs, Sep IRAs, Simple IRAs, Solo 401ks and defined benefit plans. 

A great option if you don’t have access to a retirement plan is to save in a non-retirement account. These accounts have a few advantages over retirement accounts. The first is that they can be accessed at anytime (no having to wait until age 55 or 59.5). The second advantage is that for investments held for longer than a year, the taxation will be at the generally lower long term capital gains rates than the generally higher income tax rates. Now you will be required to pay taxes annually on any dividends and interest received but this annual taxation has less of an impact than most people think. 

I will share an example where $10,000 contribution is made each year into a Roth 401(k) versus a $10,000 invested each year into a taxable account (i.e. brokerage) for over 30 years. This analysis is courtesy of Nick Maggiulli of Dollars and Data.

For this comparison, it assumed that both accounts grew at 5% a year and that the taxable account had to pay the long-term capital gains rate of 15% on a 2% annual dividend and when the portfolio was sold (in the last year). This means that no sales were made in the taxable account until retirement (when all long term capital gains taxes are paid). It’s buy and hold for three decades. After running this simulation for 30 years, it was found that the Roth 401(k) ended up with $114,000 more than the taxable account (after all capital gains taxes had been paid):

That $114,000 means that the Roth 401(k) ends up with 14% more than the taxable account after 30 years. That may seem like a lot but if you break it down by how much of a benefit it was per year it was only 0.73%. That’s it. You get a smaller return, just 0.73% in extra return each year to lock up your capital until you are 59½.

There are many factors to consider regarding when choosing the type of retirement or non-retirement account best aligned with your goals. I recommend that you speak with a Certified Financial planner that will listen to your goals, analyze your tax return and designs an investment and financial plan to help you achieve your goals. Listen to the end of this episode for how you can schedule a no cost or obligation with me. Again, I hope you found this helpful and Remember a better life is a result of better planning. Have a great one!

RESOURCES

401(k): What It Is, How It Works, Pros, and Cons

Should You Max Out Your 401(k)?

Should I Max Out My 401k? [The Surprising Truth]

Connect with Jonny West

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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In the tips, tricks, and strategies portion, I will share a tip regarding mutual fund and ETF management fees (also known as expense ratios). 

In this episode...

• Cost Considerations [2:39]
• Growth Limitations [4:55]
• Diversification and International Exposure [9:49]

Years ago, I spoke with a gentleman who had his own company. He learned I was a wealth manager and expressed his frustration that the advisor who was managing his company’s 401k plan had made some poor predictions about the economy and consequently grossly underperformed the stock market. He then asked me an interesting question: why not just invest everything in the S&P500 and be done with it?

This gentleman isn’t the only one with that same question and some, in fact, follow this philosophy by investing only in the S&P500 believing it is a wise investment strategy. Here are several significant reasons why investors should look beyond investing in just the S&P500.

But first, it must be noted that the possibility of this discussion is entirely thanks to the pioneering work of Jack Bogle of Vanguard. He deserves so much credit for what he accomplished in ensuring people could invest in passive index-based funds. Before him, you couldn’t inexpensively invest in the 500 stocks of the S&P500. There wasn’t an option, but because of the index funds he created, he made it possible to do so incredibly inexpensively. It will cost you just $3 a year for every $10,000 to invest in the 500 companies of the S&P500 index. That is remarkable. 

Now many think one can solely invest in the S&P500 and be done with it. But historical analysis has shown that there are compelling reasons to invest in more than just the stocks listed in the S&P500. 

Indexing vs Indexing plus

The first reason is that investing in an index can actually be more expensive. Many think it is a really inexpensive way to invest and from a cost of management perspective, it is. But you have to consider more factors than just the cost of management. I’ll explain. The S&P500 is an Index. An index is just a publicly available list of stocks. It’s sort of like an investment recipe. But unlike grandma’s tried and true chocolate chip cookie recipe, the “ingredients” of the S&P500 change from time to time. In a dynamic capitalist-based economy, companies grow bigger and others grow smaller. This requires changes to be made to the list of stocks, or in other words, changes to the investment recipe. And whenever changes are made to the index, it’s announced so everyone knows the stocks that will be added, the stocks that will be removed, and the date when it will happen. Consequently, everyone knows what all of the indexes are going to buy and sell. As one can imagine the costs can increase as a result. There are passive investment strategies, like factor investing which I featured in episode 68, where they employ more flexibility in what they buy and sell. Buying stocks whenever one else is, is a lot like buying roses on Valentine's Day. It’s a more expensive way to buy both roses as well as stocks. 

We have a very recent example. On September 6 of this year, 2024, it was announced that the company Palantir would be added to the S&P500 Index starting on Sept. 23, 2024, and you will never guess what happened, The stock rose 13% in the next trading session. By the time all of the indexes add this stock to their investment list, the price of the stock will likely be much higher. That’s an expensive way to buy stocks.

Another reason why the index can be more expensive is because they only buy and sell a few times a year when the changes are announced. The S&P 500 rebalances on the third Friday of March, June, September, and December. This process involves changing the weightings of companies in the index and sometimes adding or removing companies. That can lead to buying stocks at higher prices. But with other types of passive investing, it allows managers to buy and sell every day the market is open and take advantage of more favorable prices.

Large cap vs small cap

The second reason why the S&P500 index isn’t necessarily the best option is because it only represents the largest companies in the United States, namely those with a market capitalization of at least $10 billion. You might think that’s a good thing but it’s wise to remember that every company started out as a small one. Amazon and Apple and Microsoft are what’s called MegaCap companies because they have a valuation of over $200 billion. In fact, Apple and Microsoft have a larger value than the GDPs of Canada, Russia, or Spain. But at one time Amazon, Apple, and Microsoft were operated out of a garage or small office and would then grow to become small publicly traded companies and later mid-sized companies, then large companies, and now mega-sized companies. By investing only in the S&P500 you missed out on the most significant aspects of their growth. Take Shake Shack vs McDonalds. When it comes to investing, you want the company you are investing in to grow rapidly and smaller companies will grow faster. Shake Shack from a percentage perspective will be adding a lot more restaurants than McDonalds will. That doesn’t mean we don’t invest in McDonalds and larger companies. In fact a good amount of my and my clients’ investments are invested in large companies, however, we also have a good amount invested in smaller companies because that’s where the most explosive growth can occur. But if people only invest in the S&P500 you are only investing in the American companies after they got really large and you will miss out on buying the Apples, Teslas, Nvidia, and Microsofts when they were smaller. Again, using Palintar as an example. In the two years prior to joining the S&P500, the stock soared 350%. Those who invested in mid/small caps could have enjoyed that growth but those who solely invested in the S&P500 missed out on all of it.

To further my point as to why investing in small company stocks is important. For the period between 1926–2016, the compound annual growth rate of return was 11.4% for the Small Company Index and it was 10.0% for the Large Company Index. That may not seem like a significant difference but over that 90-year period, $1 invested in small caps would have grown to over $20,000 where as $1 invested in Large cap would be just over $6k.  And since 1927 through December 2023 small stocks outperformed large stocks and 68% of the time after 10 years. 

Another reason to invest beyond the S&P500 is because of valuations.

Some stocks are more expensive than others. Confusingly, this has nothing to do with the price of the stock but rather the price of the stock relative to the earnings of the company. This is known as the P/E ratio.  Companies for which you pay a higher price for earnings are called a growth stock whereas companies for which you pay a lower price for earnings are called a value stock. The difference can be significant.  Historically, value stocks have outperformed growth stocks in the US, often by a striking amount. Data covering nearly a century backs up the notion that value stocks—those with lower relative prices—have higher expected returns.

The S&P500 at times has become overvalued and some of that overvaluation can be concentrated on growth stocks. For example, in September 2024, the top 10 companies of the S&P 500 are 36% of the index. That’s right 2% of the companies make up 36% of the value. 

And as of July 31, 2024, the top 10 companies had a price-to-earnings ratio of 31.4 times earnings whereas the bottom 100 had a ratio half that, 15.3%. No one can predict where the market goes from here but historically growth stocks at these high valuations tend to come back to earth. In fact value stocks have outperformed growth stocks by 4.4% annually in the US since 1927. Since 1926 through December 2023 value stocks were higher than growth stocks 70% of the time after 5 years and 78% after 10 years. 

Another reason to look beyond the S&P500 is it doesn’t focus on a company’s profitability. That may seem like a captain obvious type comment but factoring in companies with higher profitability can make a significant difference for investors. Since 1963 through December 2023 high profitability companies were higher than lower profitability companies, 67% of the time after one year, 82% of the time after 5 years, and 92% of the time after 10 years. The S&P500 doesn’t always reflect the most profitable companies.

Domestic vs International

A final reason to invest beyond the S&P500 is because you miss out on investing in great international companies. The S&P500 is composed of solely large American Companies, but there are a lot of great companies beyond our nation’s borders. Some of those companies reside in more developed countries such as Great Britain, France, Taiwan, or Japan while other up-and-coming countries, defined as emerging market economies have great companies as well. 

An additional reason to consider international stocks is sometimes they zig while the S&P500 zags. In fact there was a period of time where an investment in the S&P500 was down 9% after ten years. so if you had invested $10,000 in the S&P500, ten years later your investment would have been worth just shy of $9100 dollars. That’s a poor return after 10 years time. That period of time was from January 2000 to December 2009. January 2000 was the height of the]]>Welcome to episode 73 of the One for the Money podcast. I am so very grateful you have taken the time to listen. In this episode, I will share why investors should look beyond investing in just the S&P500. 

In the tips, tricks, and strategies portion, I will share a tip regarding mutual fund and ETF management fees (also known as expense ratios). 

In this episode...

• Cost Considerations [2:39]
• Growth Limitations [4:55]
• Diversification and International Exposure [9:49]

Years ago, I spoke with a gentleman who had his own company. He learned I was a wealth manager and expressed his frustration that the advisor who was managing his company’s 401k plan had made some poor predictions about the economy and consequently grossly underperformed the stock market. He then asked me an interesting question: why not just invest everything in the S&P500 and be done with it?

This gentleman isn’t the only one with that same question and some, in fact, follow this philosophy by investing only in the S&P500 believing it is a wise investment strategy. Here are several significant reasons why investors should look beyond investing in just the S&P500.

But first, it must be noted that the possibility of this discussion is entirely thanks to the pioneering work of Jack Bogle of Vanguard. He deserves so much credit for what he accomplished in ensuring people could invest in passive index-based funds. Before him, you couldn’t inexpensively invest in the 500 stocks of the S&P500. There wasn’t an option, but because of the index funds he created, he made it possible to do so incredibly inexpensively. It will cost you just $3 a year for every $10,000 to invest in the 500 companies of the S&P500 index. That is remarkable. 

Now many think one can solely invest in the S&P500 and be done with it. But historical analysis has shown that there are compelling reasons to invest in more than just the stocks listed in the S&P500. 

Indexing vs Indexing plus

The first reason is that investing in an index can actually be more expensive. Many think it is a really inexpensive way to invest and from a cost of management perspective, it is. But you have to consider more factors than just the cost of management. I’ll explain. The S&P500 is an Index. An index is just a publicly available list of stocks. It’s sort of like an investment recipe. But unlike grandma’s tried and true chocolate chip cookie recipe, the “ingredients” of the S&P500 change from time to time. In a dynamic capitalist-based economy, companies grow bigger and others grow smaller. This requires changes to be made to the list of stocks, or in other words, changes to the investment recipe. And whenever changes are made to the index, it’s announced so everyone knows the stocks that will be added, the stocks that will be removed, and the date when it will happen. Consequently, everyone knows what all of the indexes are going to buy and sell. As one can imagine the costs can increase as a result. There are passive investment strategies, like factor investing which I featured in episode 68, where they employ more flexibility in what they buy and sell. Buying stocks whenever one else is, is a lot like buying roses on Valentine's Day. It’s a more expensive way to buy both roses as well as stocks. 

We have a very recent example. On September 6 of this year, 2024, it was announced that the company Palantir would be added to the S&P500 Index starting on Sept. 23, 2024, and you will never guess what happened, The stock rose 13% in the next trading session. By the time all of the indexes add this stock to their investment list, the price of the stock will likely be much higher. That’s an expensive way to buy stocks.

Another reason why the index can be more expensive is because they only buy and sell a few times a year when the changes are announced. The S&P 500 rebalances on the third Friday of March, June, September, and December. This process involves changing the weightings of companies in the index and sometimes adding or removing companies. That can lead to buying stocks at higher prices. But with other types of passive investing, it allows managers to buy and sell every day the market is open and take advantage of more favorable prices.

Large cap vs small cap

The second reason why the S&P500 index isn’t necessarily the best option is because it only represents the largest companies in the United States, namely those with a market capitalization of at least $10 billion. You might think that’s a good thing but it’s wise to remember that every company started out as a small one. Amazon and Apple and Microsoft are what’s called MegaCap companies because they have a valuation of over $200 billion. In fact, Apple and Microsoft have a larger value than the GDPs of Canada, Russia, or Spain. But at one time Amazon, Apple, and Microsoft were operated out of a garage or small office and would then grow to become small publicly traded companies and later mid-sized companies, then large companies, and now mega-sized companies. By investing only in the S&P500 you missed out on the most significant aspects of their growth. Take Shake Shack vs McDonalds. When it comes to investing, you want the company you are investing in to grow rapidly and smaller companies will grow faster. Shake Shack from a percentage perspective will be adding a lot more restaurants than McDonalds will. That doesn’t mean we don’t invest in McDonalds and larger companies. In fact a good amount of my and my clients’ investments are invested in large companies, however, we also have a good amount invested in smaller companies because that’s where the most explosive growth can occur. But if people only invest in the S&P500 you are only investing in the American companies after they got really large and you will miss out on buying the Apples, Teslas, Nvidia, and Microsofts when they were smaller. Again, using Palintar as an example. In the two years prior to joining the S&P500, the stock soared 350%. Those who invested in mid/small caps could have enjoyed that growth but those who solely invested in the S&P500 missed out on all of it.

To further my point as to why investing in small company stocks is important. For the period between 1926–2016, the compound annual growth rate of return was 11.4% for the Small Company Index and it was 10.0% for the Large Company Index. That may not seem like a significant difference but over that 90-year period, $1 invested in small caps would have grown to over $20,000 where as $1 invested in Large cap would be just over $6k.  And since 1927 through December 2023 small stocks outperformed large stocks and 68% of the time after 10 years. 

Another reason to invest beyond the S&P500 is because of valuations.

Some stocks are more expensive than others. Confusingly, this has nothing to do with the price of the stock but rather the price of the stock relative to the earnings of the company. This is known as the P/E ratio.  Companies for which you pay a higher price for earnings are called a growth stock whereas companies for which you pay a lower price for earnings are called a value stock. The difference can be significant.  Historically, value stocks have outperformed growth stocks in the US, often by a striking amount. Data covering nearly a century backs up the notion that value stocks—those with lower relative prices—have higher expected returns.

The S&P500 at times has become overvalued and some of that overvaluation can be concentrated on growth stocks. For example, in September 2024, the top 10 companies of the S&P 500 are 36% of the index. That’s right 2% of the companies make up 36% of the value. 

And as of July 31, 2024, the top 10 companies had a price-to-earnings ratio of 31.4 times earnings whereas the bottom 100 had a ratio half that, 15.3%. No one can predict where the market goes from here but historically growth stocks at these high valuations tend to come back to earth. In fact value stocks have outperformed growth stocks by 4.4% annually in the US since 1927. Since 1926 through December 2023 value stocks were higher than growth stocks 70% of the time after 5 years and 78% after 10 years. 

Another reason to look beyond the S&P500 is it doesn’t focus on a company’s profitability. That may seem like a captain obvious type comment but factoring in companies with higher profitability can make a significant difference for investors. Since 1963 through December 2023 high profitability companies were higher than lower profitability companies, 67% of the time after one year, 82% of the time after 5 years, and 92% of the time after 10 years. The S&P500 doesn’t always reflect the most profitable companies.

Domestic vs International

A final reason to invest beyond the S&P500 is because you miss out on investing in great international companies. The S&P500 is composed of solely large American Companies, but there are a lot of great companies beyond our nation’s borders. Some of those companies reside in more developed countries such as Great Britain, France, Taiwan, or Japan while other up-and-coming countries, defined as emerging market economies have great companies as well. 

An additional reason to consider international stocks is sometimes they zig while the S&P500 zags. In fact there was a period of time where an investment in the S&P500 was down 9% after ten years. so if you had invested $10,000 in the S&P500, ten years later your investment would have been worth just shy of $9100 dollars. That’s a poor return after 10 years time. That period of time was from January 2000 to December 2009. January 2000 was the height of the dot com/dot-bomb era and December 2009 was during the global financial crisis aka the Great Recession. How did international stocks during that time perform?

The MSCI International index that excludes the USA, returned over 17% during that time, the MSCI International value stocks index, returned over 48%, the MSCI International small cap index returned over 94% and the MSCI International emerging markets index and emerging markets value index returned over 154 and 212% during that same Jan 2000-December 2009 time period. As it’s often said, past performance cannot predict future performance but history has shown that it can help if you invest internationally. 

In summary, an S&P500 fund can end up being an expensive way to buy stocks because it’s like buying roses on Valentine’s Day. The S&P500 fund also misses out on the faster growth of small and mid-sized company stocks, an S&P500 fund can become over-concentrated on Growth stocks, doesn’t emphasize the most profitable companies and finally, an S&P500 fund excludes good international companies. For these reasons, investors should look beyond investing in just the stocks of the S&P500 which me and my clients do. 

Tips Tricks and Strategies 

Welcome to the tips, tricks, and strategies portion of the podcast where I will share a tip regarding investment fund management expenses. Nothing in life is too good to be free and the same goes for the management costs of mutual and exchange-traded funds. Now mutual and exchange-traded funds are a fantastic way for you to spread your money across as many investments as possible with the least expense incurred. It’s the most cost-effective way to obtain diversification of your investments which is one of the of the bedrock principles of sound investment strategy. It’s based on the modern portfolio theory which ensures that you achieve the maximum return for the least amount of risk.  Think of the unfortunate individuals who had all of their retirement or investment funds in a company that was found to be fraudulent. Enron being a prominent example. Those who failed to diversify outside of the company stock ended up losing everything. 

As I noted earlier in this episode Jack Bogle, the founder of Vanguard, has mutual funds with exceptionally low management costs. Now the term used to describe these management fees is “expense ratio”. And with some mutual funds, the expense ratio can be as low as 0.03%.  That’s just $3 a year for every $10,000 you invest. 

Some mutual and exchange-traded funds have much higher management costs or expense ratios as they reflect additional costs involved. For actively managed funds you are paying for the investment managers, research, and marketing teams. For other funds, you are paying for the type of investments within the fund which may have a higher cost associated with acquiring them. 

Most people aren’t aware of this internal expense but it is important to assess your investment portfolio management expenses to ensure you are getting value for them. The investment portfolios I build tend to have an average management cost of 0.2 to 0.3%. So $20-30/year for every $10,000 invested which allows for exposure to small and mid-sized companies, highly profitable companies, value companies, and international companies. However, I’ve seen some mutual funds for clients as high as 1.89%. That’s $189/year for every $10,000 invested. This fund was in a client's retirement plan at his former employer. What was worse was that this fund had massively underperformed similar passive mutual funds, which would have cost him just $3/year. Now what was really disappointing about this expensive active management fund is that it was from the very same provider as the company 401k retirement plan. Was there a conflict of interest? I can’t definitively say but it certainly doesn’t look favorable. 

When I help clients with rollovers I always assess their current investments to see if they are invested in accordance with sound investment principles and in alignment with their goals. I also assess a number of factors. Such as the region, are allocated to just the United States or are they also allocated to international and emerging markets, which have proven through evidence to provide higher risk-adjusted returns. I also look to see if they have too much allocated to one sector such as healthcare, energy, or technology), and what about the size of the companies. Do they have too much allocated to small companies or large companies?  I also look at their performance ranking against other similarly categorized funds. I’ll look at one large US company fund vs another large USA company fund. I also look at the fund expense ratios. As I mentioned I saw some of the fund expense ratios, for actively managed funds to be as high as 1.89%. What’s worse is that this fund had far inferior performance to the same category of passive investment funds that would have cost way less. Of course, past performance is no guarantee of future returns, and fund performances can come and go but fund expenses are forever.

All in all, it’s important that you are aware of many of the aspects of your investments including the associated expenses because they can have a significant impact over the course of years and decades on your ability to build wealth. 

EXTRA

If you are invested in mutual or exchange-traded funds, which you likely are in your 401k, you are paying these fees, you just may not it. that’s totally normal, as most people aren’t aware that there is an internal management expense called the expense ratio. This is the fund paid to the mutual or ETF fund provider to assemble, manage, and market the fund. This fee covers the costs associated with the administration, portfolio management, marketing, and more. These are usually percentage-based and represent the cost each year. So they can be as low as 0.03%. To give you an idea how much a fee that would be. On $10,000 invested, it would cost you $3/year. Pretty great deal. But I’ve seen some funds paying as much as 1.89%. That would be $189/year. Now these fees are deducted internally. Why are these funds even necessary? Mutual funds and ETFs provide the most cost-effective way to spread your money across investments. The technical term we use for this is diversification. It's one of the most critical aspects of investing. It helps ensure that all of your nest eggs are in more baskets. This isn’t just age-old wisdom but rather based on evidence-based research proving that diversification is better for investors. The theory is called the modern portfolio theory and it is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk. In layman’s terms, you get the highest potential return for the level of risk you are taking. That’s important because it doesn’t make sense to take more risk if you won’t be getting a higher potential reward. It would also be bad if you accepted a potential lower return but took on more risk.

This makes sense if you don’t have all of your accounts allocated to a single stock like they did with Enron when the stock cratered. 

Mutual funds and Exchange-traded funds allow you to spread your money out. You couldn’t do that on your own. One of the best-performing stocks is Berkshire Hathaway. A single A class share of stock is over $680,000 as of this recording. That’s right, it’s over $680,000 for a single share. There is a B share that trades for just over $45o but even at these prices, $1000, $5000, or $10,000 won’t buy you many shares in different companies. That’s where mutual funds and ETFs come in to make it way more affordable to spread across small amounts over hundreds and thousands of companies. 

The amount of the expense ratio is based on how much management you are going to have. Some are called Actively managed and what we mean by that is there are portfolio managers and research teams that are determining which company stocks are best to invest in. Some funds are passively invested and are invested based on a publicly available list. Like the S&P500 or DJIA. An actively managed fund may not select all 500 of the S&P500 but will select 258 that they think will outperform. Passive have very low expense ratios because little management is required than active. There is a lot of debate as to whether passive is better than active. You might think that active management with their research and expertise would have a clear advantage but long-term data shows otherwise. But long-term data shows otherwise that passive will outperform active over the longer term especially when you account for the fees.  While there is certainly a place for active management in certain situations, a diversified passive investment strategy used in conjunction with a financial plan can serve you well.

Connect with Jonny West

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

Subscribe to ONE FOR THE MONEY on

Apple Podcasts, Spotify, b5a499f8-06c9-4069-ad46-f2f8686f0acbFri, 01 Nov 2024 03:00:00 -070017:37falsefull7373Don't Die in Oregon - Ep #72Welcome to episode 72 of the One for the Money podcast. I am so very grateful you have taken the time to listen. Estate and tax planning are critical aspects of better financial planning so your beneficiaries can have a better life. In this episode, I’ll discuss the individual states with the highest estate and inheritance taxes. You’ll learn why you don’t want to die in Oregon or Maryland or a few other states. 

In this episode...

• Federal Estate Taxes [1:49]
• Estate Taxes vs. Inheritance Taxes [3:04]
• Considering Your State [3:38]

The two types of taxes are estate taxes and inheritance taxes. Estate taxes are paid by the estate of the person who died before assets are distributed to the heirs of the estate. Inheritance taxes are paid by heirs on the gifts they receive. There are twelve states and the District of Columbia that impose estate taxes and six states impose inheritance taxes. Maryland is the only state to impose both an estate tax and an inheritance tax (spouses are usually exempt from the inheritance tax).

Now most states have reduced or eliminated their estate and inheritance taxes over the past decade to dissuade well-off retirees from moving to more tax-friendly jurisdictions. But even if you don’t consider yourself particularly wealthy, the value of your home and funds in your retirement savings could exceed the estate tax threshold in some states. With that in mind, if you live in a state that imposes an estate or inheritance tax—and you don’t plan to move—you may want to talk to a certified financial planner or tax professional about steps you can take to reduce the size of your estate.

Just so you are aware here are the states that tax your estate and those that tax the heirs of your estate.

The Estate tax states are Washington, Oregon, Minnesota, Illinois, Vermont, NY, Maine, Mass, Connecticut, RI, Maryland, and DC.

The Inheritance tax states are Nebraska, Iowa, Kentucky, Pennsylvania, NJ, and Maryland.

As noted previously, the state of Maryland is on both lists as they tax both the estate and those who inherit it. 

While most individual states that tax Estates or Inheritance will have a high threshold, there are some that do not. 

In most states, estate taxes are progressive: the tax rate increases with the total value of the decedent’s assets. Two states, Connecticut and Vermont, have flat estate taxes with a single tax rate. Hawaii and Washington have the highest top rates in the nation at 20 percent. Eight states and the District of Columbia are next with a top rate of 16 percent. All states impose certain exemptions that prevent smaller estates from being subject to these taxes. Oregon has the lowest exemption at $1 million, and Connecticut has the highest exemption at $12.92 million.

Of the six states with inheritance taxes, Kentucky and New Jersey have the highest top rate of 16 percent. Iowa is phasing out its inheritance tax, with full repeal scheduled for 2025, with the tax’s top rate at 6 percent in 2023. All six states exempt spouses, and some fully or partially exempt immediate relatives. Compare state estate tax rates and state inheritance tax rates below.

Here are a few of the states with the highest estate taxes in the U.S. as of 2024:

1. Oregon: Oregon’s top estate tax rate is 16%, with a relatively low exemption amount of $1 million. The Beaver State is the worst place in the U.S. to die if you’re concerned about estate taxes. Oregon has resisted the trend to raise its estate tax exemption or even adjust it for inflation. In addition to taxing estates valued at as little as $1 million, Oregon imposes a relatively high minimum tax rate of 10% on even the smallest of qualifying estates. 
2. Massachusetts: The top rate in Massachusetts is 16%, with an exemption amount of $1 million. 
3. Washington: With a top estate tax rate of 20%, and threshold is $2.193 million.
4. Minnesota: Minnesota imposes a top estate tax rate of 16% with an exemption amount of $3 million.
5. Hawaii: Hawaii also has a top estate tax rate of 20%. The threshold is $5.49 million.
6. New York: New York has a top estate tax rate of 16%. The exemption amount is $6.58 million. 

How impactful inheritance taxes can be really depends on the heir’s relationship with the deceased. For example, Kentucky has no estate tax but it does have an inheritance tax with rates ranging from 4%–16% As with other states with an inheritance tax.  The tax isn’t an issue for spouses, parents, children, grandchildren, and siblings. They’re all exempt from Kentucky’s inheritance tax. However, the Kentucky tax can be a nightmare for other heirs. Nieces, nephews, daughters-in-law, sons-in-law, aunts, uncles, and great-grandchildren are taxed at rates ranging from 4% to 16%, depending on the value of the property inherited. 

Estate and inheritance taxes can be burdensome and should be considered if you live in the state mentioned. While Benjamin Franklin is right that there is nothing certain except death and taxes, with better planning, you can limit or even eliminate their effects. 

Tips Tricks and Strategies 

Welcome to the tips, tricks and strategies portion of the podcast where I will share a simple yet important estate planning tip when it comes to your beneficiaries. 

We often look at our estates being divided in terms of percentage but it may be more helpful to look at it from a dollar perspective. For example an estate divided equally amongst two children would yield 50% to each. But rather than look at it from a percentage perspective, it can be helpful to look at it from a dollar perspective. For example if a person had an estate of $5 million split between their two children it would give them each $2.5M. Looking at it this way can help you decide if you want your children to receive all $2.5m at your passing. Maybe it would be better for certain individuals to receive certain amounts distributed over time, especially if someone in their late teens or early 20s is to receive that kind of money. too many sad stories of young people blowing their inheritance. 

References

Estate and Inheritance Taxes by State, 2023

18 States with Scary Death Taxes

Connect with Jonny West

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on...]]>Welcome to episode 72 of the One for the Money podcast. I am so very grateful you have taken the time to listen. Estate and tax planning are critical aspects of better financial planning so your beneficiaries can have a better life. In this episode, I’ll discuss the individual states with the highest estate and inheritance taxes. You’ll learn why you don’t want to die in Oregon or Maryland or a few other states. 

  In this episode...

  • Federal Estate Taxes [1:49]
  • Estate Taxes vs. Inheritance Taxes [3:04]
  • Considering Your State [3:38]
  
  

  Benjamin Franklin famously said “In this world, nothing is certain except death and taxes” and in this episode, my focus is on a combination of the two, namely estate and inheritance taxes which are levied at one's passing. 

  A reminder, your estate is the sum total of all your assets at death. It would include retirement accounts, your home and other real estate, vehicles, jewelry, your classic 23-window van, and other valuable items. For a number of Americans, their estate will be worth millions of dollars. Many wonder if it would be taxed. As a reminder, there are often two categories of taxes you have to consider, namely Federal and State taxes. The good news is that most won’t have to worry about Federal estate taxes because the Tax Cuts and Jobs Act which was passed a few years ago, doubled the amount of an estate that won’t be taxed.  Now only those estates that have a value over $13.61 million for an individual or $27.22 million for a couple will be taxed. Those are 2024 numbers and each year it is adjusted for inflation. It should be noted that starting in 2026, if the TCJA does expire then those numbers will be halved. But even in half, those are pretty large values that an estate would have to exceed for that amount to be subject to tax. Consequently, only a tiny percentage have to factor federal estate taxes into their financial planning, and those that do can pay lawyers and accountants to minimize or eliminate most of the Federal estate taxes. 

  But just because we don’t have to worry about Federal taxes, doesn’t mean that our estate won’t be taxed because our state residence may apply a tax or even two. 

  The two types of taxes are estate taxes and inheritance taxes. Estate taxes are paid by the estate of the person who died before assets are distributed to the heirs of the estate. Inheritance taxes are paid by heirs on the gifts they receive. There are twelve states and the District of Columbia that impose estate taxes and six states impose inheritance taxes. Maryland is the only state to impose both an estate tax and an inheritance tax (spouses are usually exempt from the inheritance tax).

  Now most states have reduced or eliminated their estate and inheritance taxes over the past decade to dissuade well-off retirees from moving to more tax-friendly jurisdictions. But even if you don’t consider yourself particularly wealthy, the value of your home and funds in your retirement savings could exceed the estate tax threshold in some states. With that in mind, if you live in a state that imposes an estate or inheritance tax—and you don’t plan to move—you may want to talk to a certified financial planner or tax professional about steps you can take to reduce the size of your estate.

  Just so you are aware here are the states that tax your estate and those that tax the heirs of your estate.

  The Estate tax states are Washington, Oregon, Minnesota, Illinois, Vermont, NY, Maine, Mass, Connecticut, RI, Maryland, and DC.

  The Inheritance tax states are Nebraska, Iowa, Kentucky, Pennsylvania, NJ, and Maryland.

  As noted previously, the state of Maryland is on both lists as they tax both the estate and those who inherit it. 

  While most individual states that tax Estates or Inheritance will have a high threshold, there are some that do not. 

  In most states, estate taxes are progressive: the tax rate increases with the total value of the decedent’s assets. Two states, Connecticut and Vermont, have flat estate taxes with a single tax rate. Hawaii and Washington have the highest top rates in the nation at 20 percent. Eight states and the District of Columbia are next with a top rate of 16 percent. All states impose certain exemptions that prevent smaller estates from being subject to these taxes. Oregon has the lowest exemption at $1 million, and Connecticut has the highest exemption at $12.92 million.

  Of the six states with inheritance taxes, Kentucky and New Jersey have the highest top rate of 16 percent. Iowa is phasing out its inheritance tax, with full repeal scheduled for 2025, with the tax’s top rate at 6 percent in 2023. All six states exempt spouses, and some fully or partially exempt immediate relatives. Compare state estate tax rates and state inheritance tax rates below.

  Here are a few of the states with the highest estate taxes in the U.S. as of 2024:

  1. Oregon: Oregon’s top estate tax rate is 16%, with a relatively low exemption amount of $1 million. The Beaver State is the worst place in the U.S. to die if you’re concerned about estate taxes. Oregon has resisted the trend to raise its estate tax exemption or even adjust it for inflation. In addition to taxing estates valued at as little as $1 million, Oregon imposes a relatively high minimum tax rate of 10% on even the smallest of qualifying estates. 
  2. Massachusetts: The top rate in Massachusetts is 16%, with an exemption amount of $1 million. 
  3. Washington: With a top estate tax rate of 20%, and threshold is $2.193 million.
  4. Minnesota: Minnesota imposes a top estate tax rate of 16% with an exemption amount of $3 million.
  5. Hawaii: Hawaii also has a top estate tax rate of 20%. The threshold is $5.49 million.
  6. New York: New York has a top estate tax rate of 16%. The exemption amount is $6.58 million. 
  
  

  How impactful inheritance taxes can be really depends on the heir’s relationship with the deceased. For example, Kentucky has no estate tax but it does have an inheritance tax with rates ranging from 4%–16% As with other states with an inheritance tax.  The tax isn’t an issue for spouses, parents, children, grandchildren, and siblings. They’re all exempt from Kentucky’s inheritance tax. However, the Kentucky tax can be a nightmare for other heirs. Nieces, nephews, daughters-in-law, sons-in-law, aunts, uncles, and great-grandchildren are taxed at rates ranging from 4% to 16%, depending on the value of the property inherited. 

  Estate and inheritance taxes can be burdensome and should be considered if you live in the state mentioned. While Benjamin Franklin is right that there is nothing certain except death and taxes, with better planning, you can limit or even eliminate their effects. 

  Tips Tricks and Strategies 

  Welcome to the tips, tricks and strategies portion of the podcast where I will share a simple yet important estate planning tip when it comes to your beneficiaries. 

  We often look at our estates being divided in terms of percentage but it may be more helpful to look at it from a dollar perspective. For example an estate divided equally amongst two children would yield 50% to each. But rather than look at it from a percentage perspective, it can be helpful to look at it from a dollar perspective. For example if a person had an estate of $5 million split between their two children it would give them each $2.5M. Looking at it this way can help you decide if you want your children to receive all $2.5m at your passing. Maybe it would be better for certain individuals to receive certain amounts distributed over time, especially if someone in their late teens or early 20s is to receive that kind of money. too many sad stories of young people blowing their inheritance. 

  References

  Estate and Inheritance Taxes by State, 2023

  18 States with Scary Death Taxes

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  ]]>b563130a-1329-4cb2-b817-9172b8a47235Tue, 15 Oct 2024 03:00:00 -070010:00falsefull7272Estate Plan Check Up - Ep #71Welcome to episode 71 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. In this episode, I’ll share about an estate plan checkup, for those that have one and for those that don’t. 

  In this episode...

  • Importance of Estate Planning [1:03]
  • Review and Update of Estate Plan [2:34]
  • Consequences of Not Having an Estate Plan [4:38]
  
  

  An estate plan is an absolutely crucial part of one’s financial plan. Over a lifetime you accumulate assets—real estate, investment accounts, a classic VW van, etc. When you pass away, there needs to be an orderly way for these assets to be distributed to those people you want to receive them. An estate plan is the way to carry out your wishes. Otherwise, the state of your residence, i.e. California, Hawaii, Texas, etc, will decide how it is divided up amongst your family. And if your estate is of significant value, you’ll have a lot of people claiming to be your family. 

  Because estate planning is a critical piece of better planning it is one of the five financial planning domains I focus on with my clients. These five domains are investments, income (aka cash flow), Insurance, taxes, and Estate planning. 

  Of those five domains, estate planning is the one most often ignored and that makes sense for a few reasons. We usually have a long time before we have to worry about it so it’s easy to put it off and the second reason is that no one wants to consider their own death. It’s rather depressing. But despite these facts, it’s incredibly important that any adult who owns real estate and or has children must have an estate plan. 

  For those who already have an estate plan in place, I say well done! You should commend yourself for doing what far too many do not. 

  But even if you already have one it’s important to complete a periodic check-up of your plan. Here is when to consider a checkup:

  First, When was the last time your estate plan was reviewed? If it has been ten years or more you will want to review it to ensure it reflects your current desires and circumstances and that the people who are assigned as the decision-makers are the people you still want.

  The second reason to consider a check-up is if there have been substantive changes in your life or the life of your beneficiaries. For example: marriages, divorce, births, adoptions, or even challenges faced by your beneficiaries (such as health events or substance abuse) all of which can change how you might wish to distribute your assets. Additionally, moving to a new state can affect your estate plan due to differing laws, so a review is advisable when relocating.

  Now if you have reviewed your estate plan and everything reflects your current desires and circumstances the next thing you need to do is ensure your loved ones know about it. Do they know where to locate the documents in the event they are needed? Do the people who will make the financial and medical decisions on your behalf, know they have that responsibility?

  It would be helpful to rehearse such a scenario to see how it plays out. The military practices scenarios to ensure they have made the necessary preparations as do firemen, policemen, lifeguards, and other professionals. It would be wise to consider what would happen if you and your spouse were incapacitated and couldn’t make a decision-what would happen then. Would the person named in your durable power of attorney documents know they are making the decisions and what you wanted them to decide? This is especially relevant for those of you in the later stages of life (70s and above). An older family member of ours recently had a health event, that put our preparations to the test. For a year before we had expressed the need to get the estate planning documents in the hands of the decision makers only until this recent scare had this been remedied. It’s wise to consider the what-ifs, as painful as such a thought may be. 

  Now for those who don’t have an estate plan, there is work to do. Yes, you do have a default plan. In fact, every state in the United States, from Alaska to Wyoming has a default plan in place. BUT YOU ABSOLUTELY DON’T WANT it. It will take way longer and is way more expensive. 

  Now you may be thinking, that sounds like something I’d want to avoid. And you would be right, but as I’ve shared in previous episodes you’d be surprised by the number of people that didn’t have an estate plan when they died. Here are just a few of the famous people you would know that sadly did just that: Pablo Picasso, Sonny Bono, Aretha Franklin, Prince (the artist formally known as), and the actor Chadwick Boseman (he played Black Panther in the Marvel Studios film). He did a phenomenal job in that role. Maybe you can’t entirely fault those who died suddenly, such as Sonny Bono and The Artist Formerly Known as Prince, but Aretha Franklin and Chadwick Boseman both had longer-term illnesses and still didn’t have an estate plan. Not a lot of R-E-S-P-E-C-T for one’s loved ones.

  Speaking of Aretha Franklin’s estate, her own sons had a five-year legal battle, before they were finally awarded real estate. A judge made the decision based on a handwritten will from 2014 that was found between couch cushions.

  It took 44 years to settle Jimmy Hendrix’s estate. Hendrix died in 1970 without a will. Without a will, Jimi Hendrix’s estate passed to his father. When his father died in 2002, he left behind his son’s estimated $80 million estate to Janie Hendrix, Jimi’s sister, cutting out Leon Hendrix, Jimi’s brother Leon Hendrix contested his father’s will in 2004, but it was upheld in 2007. Even when there isn’t lots of money there can still be a lot of drama.  

  There are so many advantages to an estate plan as it allows you to name who gets to receive what, and also when they receive it and on what conditions.  For example, you could say, I want money to go to my kids at 25, 35, and 45 years of age, rather than a lump sum of money at age 25. Most people in their early 20s wouldn’t make a great decision if hundreds of thousands were dropped into their lap.  But without an estate plan, the State of your residence will be making all of those decisions for you because that’s the default estate plan, which isn’t great, but at least it’s better than the State assuming ownership.

  You might reason - but I’m already dead, who gives a rip, let my family sort things out when I’m gone. That’s a great strategy if you want your family’s last memory of you to be one of stress, expense, and struggle and you want your legacy to include family members fighting over your fortune, however small. If this isn’t enough reasons here are three additional reasons why you need one:

  First, it will take a long time without one - Even if you don’t have a huge estate like Aretha or Jimmy. Because the courts are backlogged, it can take 9 months before you can schedule just an initial hearing and likely several more years to finalize it (depending on the size of the estate and number of people who want to benefit).

  Second, It’s dang expensive - Without a trust, your family would need to pay all of the legal fees, namely court filing fees and the billable hours of an estate planning attorney. It’s WAY less expensive to pay for one before.

  The third and final reason you need an estate plan is that without one it is open to the public. That’s why we know about Aretha and Jimmy Hendrix's estate. It’s all played out in public. With an estate plan, it can be handled privately. But without an estate plan, your beneficiaries' names will be listed for the public to see and for the scammers who specialize in taking money from them. 

  In conclusion, when it comes to estate planning it’s imperative that you complete a check-up. For those that have one, well done, but be sure it reflects your current circumstances and values and that all of the affected parties are notified and aware of the location and details. 

  For those who own real estate or have minor children and don’t have an estate plan, get on it. You can complete these quickly and easily and inexpensively online. As you get older you can meet with an estate planning attorney to complete a new estate plan as you will have a better idea about your and your beneficiaries' situations. 

  Tips Tricks and Strategies 

  Years ago, I spoke with another advisor and asked how everything was going. He said he was in the midst of a challenging time because one of his clients in his early 50s had died unexpectedly. The good news was that this client had life insurance. The bad news was that his ex-wife from over 10 years ago was still listed as the only beneficiary on the policy, and his current wife wasn’t too happy about things. The advisor told me that he didn’t facilitate the purchase of the original policy so hadn’t thought to review that policy to ensure the beneficiaries were up to date.

  Things will transfer first by title, then by beneficiary designation, and finally by probate. In this case, there was a legal battle because the beneficiary was the ex-wife and her being the beneficiary of the life insurance wasn’t a part of their divorce agreement. Needless to say, this caused a huge issue for the widow. 

  This is an example of exactly why we review clients' estate plans and regularly conduct beneficiary reviews. We always want to ensure everything is in alignment with your wishes, and we’ve made more than a few updates to beneficiary designations. None as drastic as the example just shared, but we’ve still made changes.

  References

  Welcome to episode 71 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. In this episode, I’ll share about an estate plan checkup, for those that have one and for those that don’t. 

  In this episode...

  • Importance of Estate Planning [1:03]
  • Review and Update of Estate Plan [2:34]
  • Consequences of Not Having an Estate Plan [4:38]
  
  

  An estate plan is an absolutely crucial part of one’s financial plan. Over a lifetime you accumulate assets—real estate, investment accounts, a classic VW van, etc. When you pass away, there needs to be an orderly way for these assets to be distributed to those people you want to receive them. An estate plan is the way to carry out your wishes. Otherwise, the state of your residence, i.e. California, Hawaii, Texas, etc, will decide how it is divided up amongst your family. And if your estate is of significant value, you’ll have a lot of people claiming to be your family. 

  Because estate planning is a critical piece of better planning it is one of the five financial planning domains I focus on with my clients. These five domains are investments, income (aka cash flow), Insurance, taxes, and Estate planning. 

  Of those five domains, estate planning is the one most often ignored and that makes sense for a few reasons. We usually have a long time before we have to worry about it so it’s easy to put it off and the second reason is that no one wants to consider their own death. It’s rather depressing. But despite these facts, it’s incredibly important that any adult who owns real estate and or has children must have an estate plan. 

  For those who already have an estate plan in place, I say well done! You should commend yourself for doing what far too many do not. 

  But even if you already have one it’s important to complete a periodic check-up of your plan. Here is when to consider a checkup:

  First, When was the last time your estate plan was reviewed? If it has been ten years or more you will want to review it to ensure it reflects your current desires and circumstances and that the people who are assigned as the decision-makers are the people you still want.

  The second reason to consider a check-up is if there have been substantive changes in your life or the life of your beneficiaries. For example: marriages, divorce, births, adoptions, or even challenges faced by your beneficiaries (such as health events or substance abuse) all of which can change how you might wish to distribute your assets. Additionally, moving to a new state can affect your estate plan due to differing laws, so a review is advisable when relocating.

  Now if you have reviewed your estate plan and everything reflects your current desires and circumstances the next thing you need to do is ensure your loved ones know about it. Do they know where to locate the documents in the event they are needed? Do the people who will make the financial and medical decisions on your behalf, know they have that responsibility?

  It would be helpful to rehearse such a scenario to see how it plays out. The military practices scenarios to ensure they have made the necessary preparations as do firemen, policemen, lifeguards, and other professionals. It would be wise to consider what would happen if you and your spouse were incapacitated and couldn’t make a decision-what would happen then. Would the person named in your durable power of attorney documents know they are making the decisions and what you wanted them to decide? This is especially relevant for those of you in the later stages of life (70s and above). An older family member of ours recently had a health event, that put our preparations to the test. For a year before we had expressed the need to get the estate planning documents in the hands of the decision makers only until this recent scare had this been remedied. It’s wise to consider the what-ifs, as painful as such a thought may be. 

  Now for those who don’t have an estate plan, there is work to do. Yes, you do have a default plan. In fact, every state in the United States, from Alaska to Wyoming has a default plan in place. BUT YOU ABSOLUTELY DON’T WANT it. It will take way longer and is way more expensive. 

  Now you may be thinking, that sounds like something I’d want to avoid. And you would be right, but as I’ve shared in previous episodes you’d be surprised by the number of people that didn’t have an estate plan when they died. Here are just a few of the famous people you would know that sadly did just that: Pablo Picasso, Sonny Bono, Aretha Franklin, Prince (the artist formally known as), and the actor Chadwick Boseman (he played Black Panther in the Marvel Studios film). He did a phenomenal job in that role. Maybe you can’t entirely fault those who died suddenly, such as Sonny Bono and The Artist Formerly Known as Prince, but Aretha Franklin and Chadwick Boseman both had longer-term illnesses and still didn’t have an estate plan. Not a lot of R-E-S-P-E-C-T for one’s loved ones.

  Speaking of Aretha Franklin’s estate, her own sons had a five-year legal battle, before they were finally awarded real estate. A judge made the decision based on a handwritten will from 2014 that was found between couch cushions.

  It took 44 years to settle Jimmy Hendrix’s estate. Hendrix died in 1970 without a will. Without a will, Jimi Hendrix’s estate passed to his father. When his father died in 2002, he left behind his son’s estimated $80 million estate to Janie Hendrix, Jimi’s sister, cutting out Leon Hendrix, Jimi’s brother Leon Hendrix contested his father’s will in 2004, but it was upheld in 2007. Even when there isn’t lots of money there can still be a lot of drama.  

  There are so many advantages to an estate plan as it allows you to name who gets to receive what, and also when they receive it and on what conditions.  For example, you could say, I want money to go to my kids at 25, 35, and 45 years of age, rather than a lump sum of money at age 25. Most people in their early 20s wouldn’t make a great decision if hundreds of thousands were dropped into their lap.  But without an estate plan, the State of your residence will be making all of those decisions for you because that’s the default estate plan, which isn’t great, but at least it’s better than the State assuming ownership.

  You might reason - but I’m already dead, who gives a rip, let my family sort things out when I’m gone. That’s a great strategy if you want your family’s last memory of you to be one of stress, expense, and struggle and you want your legacy to include family members fighting over your fortune, however small. If this isn’t enough reasons here are three additional reasons why you need one:

  First, it will take a long time without one - Even if you don’t have a huge estate like Aretha or Jimmy. Because the courts are backlogged, it can take 9 months before you can schedule just an initial hearing and likely several more years to finalize it (depending on the size of the estate and number of people who want to benefit).

  Second, It’s dang expensive - Without a trust, your family would need to pay all of the legal fees, namely court filing fees and the billable hours of an estate planning attorney. It’s WAY less expensive to pay for one before.

  The third and final reason you need an estate plan is that without one it is open to the public. That’s why we know about Aretha and Jimmy Hendrix's estate. It’s all played out in public. With an estate plan, it can be handled privately. But without an estate plan, your beneficiaries' names will be listed for the public to see and for the scammers who specialize in taking money from them. 

  In conclusion, when it comes to estate planning it’s imperative that you complete a check-up. For those that have one, well done, but be sure it reflects your current circumstances and values and that all of the affected parties are notified and aware of the location and details. 

  For those who own real estate or have minor children and don’t have an estate plan, get on it. You can complete these quickly and easily and inexpensively online. As you get older you can meet with an estate planning attorney to complete a new estate plan as you will have a better idea about your and your beneficiaries' situations. 

  Tips Tricks and Strategies 

  Years ago, I spoke with another advisor and asked how everything was going. He said he was in the midst of a challenging time because one of his clients in his early 50s had died unexpectedly. The good news was that this client had life insurance. The bad news was that his ex-wife from over 10 years ago was still listed as the only beneficiary on the policy, and his current wife wasn’t too happy about things. The advisor told me that he didn’t facilitate the purchase of the original policy so hadn’t thought to review that policy to ensure the beneficiaries were up to date.

  Things will transfer first by title, then by beneficiary designation, and finally by probate. In this case, there was a legal battle because the beneficiary was the ex-wife and her being the beneficiary of the life insurance wasn’t a part of their divorce agreement. Needless to say, this caused a huge issue for the widow. 

  This is an example of exactly why we review clients' estate plans and regularly conduct beneficiary reviews. We always want to ensure everything is in alignment with your wishes, and we’ve made more than a few updates to beneficiary designations. None as drastic as the example just shared, but we’ve still made changes.

  References

  Estate Planning Basics

  9 Famous People Who Died Without a Will

  Connect with Jonny West

  
  

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  ]]>f057db8a-ab5d-4aaf-906a-97b3dc2fa89aTue, 01 Oct 2024 03:00:00 -070011:53falsefull7171How Much to Spend on Vacation - Ep #70Welcome to episode 70 of the One for the Money podcast. I am so very grateful you have taken the time to listen. In this episode, I answer the question “How much should one spend on vacation?”

  In the tips, tricks, and strategies portion, I will share some cost-saving travel tips. 

  In this episode...

  • How Much Should You Spend [3:15]
  • Why You Should Travel [6:21]
  • Travel Saving Tips [8:56]
  
  

  MAIN

  When it comes to travel, St Augustine and Mark Twain said it best in my opinion. 

  St Augustine said that -The world is a book and those who do not travel only read one page. 

  And Mark Twain said - Travel is fatal to prejudice, bigotry, and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome, charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime.

  My family and I are enamored with travel because of what we learn about the world, other cultures, and about ourselves. There are few things that create better memories than a vacation. Some have argued that life is really about collecting wonderful memories and research has shown that people tend to be happier when they have purchased experiences rather than things. 

  That certainly is the case with our family. When both my children and my business were young, we traveled by car around the Western United States and Western Canada. We love the outdoors and visited over 25 national parks in both the US and Canada with Banff, Jasper, Waterton, Glacier, Yosemite, and Crater Lake being some of our favorites but there were so many others that were really great as well. 

  As my business and kids grew we have been fortunate to be able to take a few international trips with Moorea and Cinque Terre being some of our favorites. 

  When our family talks about our favorite memories it almost always involves experiences we’ve had together on our trips and our favorite family photos have come from our trips as well.

  This is why I am a strong advocate of traveling. It doesn’t have to require an airplane, because seeing a local museum or park can also provide a memorable time. 

  In fact, when I was a kid our family never took an airplane on our trips. Instead, we all piled in our wood-paneled station wagon with the rear-facing seats in the back and went to the national park near our home, and a couple of times we visited family that lived in the Western States of Utah, California, and Texas. It was an incredibly long drive from Alberta, Canada but I have some cherished memories from those trips. 

  One question that many ask is how much should one spend on travel.  Some financial experts recommend that you spend 5-10% of your net income per year on vacations.

  For example, if your net income is $100k a year, and as a reminder that is your income after taxes and retirement contributions. then you could reasonably spend $5-10k a year on vacations.

  My family and I tend to spend more than 10% but we restrict our expenses in other areas of spending to compensate. We only eat out rarely and if we do it’s usually inn-n-out. Our kids don’t participate in club sports and just play AYSO soccer instead. With savings in those areas, we are able to do more on our vacations. 

  When it comes to money for vacation it should be saved in advance of the year of travel and would be in addition to what you have in your emergency savings.

  I recommend you tentatively plan your upcoming trips for the coming years so you can anticipate the expenses. We have already planned our travel destinations for the next 2-3 years. I’ll do research on the expected expenses and create a Google spreadsheet that forecasts potential transportation, accommodations, food, activity, and other related expenses.  As the trip gets closer, I even break it down by a daily expense. We usually save money on our trips by only eating out one meal a day and it’s usually a one to two-dollar sign place we find on Tripadvisor or like website. We also frequent the grocery stores of the country which is an enriching cultural experience to shop with and amongst the locals. 

  For those who like to eat out more or at nicer restaurants, you can forecast those anticipated expenses beforehand. I always add a few extra thousand dollars to our overall travel budget just in case we have some unexpected trip expenses. 

  Regarding travel, you will also want to consider the season of life you’re in. If you’ve got little kids, you will likely want to spend less of your income on vacations and do lower-key, closer-to-home trips. That’s what we did with our road trips to National parks. So many great memories from these. However, my wife and I have many more memories than our kids because they were so young they don’t remember them as well, but they do look at the photos as they play on our TV. Now that our two oldest kids are older we have justified spending more than the 10% of our net income on vacations. That was the rationale used for our recent trip to Europe. When my wife would ask about planning the trip, I’d tell her that we have 2 reasons why we should go on it, and that number represented the number of summers we have left with our oldest son Lucas before he leaves the nest. 

  Now as wonderfully amazing as trips are one should never, ever,  go into debt to go on a vacation. Instead, visit a local national or state park instead. Often the memories are just as good. 

  I was reading an article on travel spending and they had a very appropriate warning which was beware of luxury creep. They said “Remember that it’s much easier to go up in the luxury level of a vacation than it is to come back down. That is, right now, you feel a 2-star hotel is perfectly amenable. However, once you stay at a 4-star property, a 2-star hotel will seem like an unacceptable comedown. 

  One book that accelerated my travel was the book Die with Zero written by Bill Perkins. 

  One of the most significant learnings from the book was his explanation regarding the intersection of time, money, and health and how too many worked too long to the point where they had plenty of time and money but didn’t have the health to truly enjoy it. He argued that people should be spending more money when their health is better. He argues that more money on travel should be spent in their 40s then their 50s, and more in their 50s then their 60s, and more money in their 60s than their 70s because you have the health to do it.  Too many wait until after they have retired to travel and they just don’t have the stamina needed. For some, due to work obligations and other factors, they cannot travel until they have retired. And for those people, I strongly recommend that you pack a lot of travel in those first few years of retirement. In fact this is exactly what I encourage and help my clients to do. 

  Whether it’s a trip in your car across a county or state line or a flight across the international date line, travel can create unique conditions for you and your loved ones to make incredible memories. The key is to be away from the daily requirements and to be fully present with your loved ones while you collectively experience with your 5 senses new places and things. You’ll have some incredibly memorable times as you meet with locals and read additional pages about the world, in the words of St. Augustine. You’ll also develop a broader more wholesome view of men and things as Mark Twain advised.  

  All of these experiences will be incredibly enriching. As Bill Perkins notes in Die with Zero, one's life is a sum of your experiences and so to maximize your life you need to maximize your experiences. He notes that memories are an investment in our future selves. Buying an experience just doesn’t buy you the experience itself–it also buys you the sum of all the dividends that experience will bring for the rest of your life. Consequently, we need to make the most of whatever health we have at every point in our lifetime and see the world around us. It could be as simple as exploring a nearby museum or park and interacting with the people in that area. All told, you should be investing and spending according to a plan so you can have even more experiences.

  If you want to learn more about working with me to plan your ideal life, go to my website, betterplanningbetterlife.com. On the “getting acquainted page you can schedule a free introductory meeting that should be worth your time.

  Thank you again for listening and I hope you found this helpful, now on to the tips tricks, and strategies portion of the podcast.

  TIPS, TRICKS AND STRATEGIES

  Welcome to the tips, tricks, and strategies portion of the podcast where I will share a few tips on how to spend less on vacation.

  As I mentioned earlier in this podcast, when both my children and my business were young, we traveled by car around the Western United States and Western Canada visiting various National parks. I have always loved the outdoors and wanted to instill that same love in our 3 sons. One of the impetuses for visiting National Parks was that every 4 grader and their family gets into National Parks for free because of the wonderful Every Kid in the Outdoors program. This was Federal legislation that was passed that allowed 4 graders and their families to have free access to hundreds of parks, lands, and waters for an entire year. You just need to register online at everykidoutdoors.gov and print out your pass as electronic copies aren't accepted. We would present our paper and]]>Welcome to episode 70 of the One for the Money podcast. I am so very grateful you have taken the time to listen. In this episode, I answer the question “How much should one spend on vacation?”

  In the tips, tricks, and strategies portion, I will share some cost-saving travel tips. 

  In this episode...

  • How Much Should You Spend [3:15]
  • Why You Should Travel [6:21]
  • Travel Saving Tips [8:56]
  
  

  MAIN

  When it comes to travel, St Augustine and Mark Twain said it best in my opinion. 

  St Augustine said that -The world is a book and those who do not travel only read one page. 

  And Mark Twain said - Travel is fatal to prejudice, bigotry, and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome, charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime.

  My family and I are enamored with travel because of what we learn about the world, other cultures, and about ourselves. There are few things that create better memories than a vacation. Some have argued that life is really about collecting wonderful memories and research has shown that people tend to be happier when they have purchased experiences rather than things. 

  That certainly is the case with our family. When both my children and my business were young, we traveled by car around the Western United States and Western Canada. We love the outdoors and visited over 25 national parks in both the US and Canada with Banff, Jasper, Waterton, Glacier, Yosemite, and Crater Lake being some of our favorites but there were so many others that were really great as well. 

  As my business and kids grew we have been fortunate to be able to take a few international trips with Moorea and Cinque Terre being some of our favorites. 

  When our family talks about our favorite memories it almost always involves experiences we’ve had together on our trips and our favorite family photos have come from our trips as well.

  This is why I am a strong advocate of traveling. It doesn’t have to require an airplane, because seeing a local museum or park can also provide a memorable time. 

  In fact, when I was a kid our family never took an airplane on our trips. Instead, we all piled in our wood-paneled station wagon with the rear-facing seats in the back and went to the national park near our home, and a couple of times we visited family that lived in the Western States of Utah, California, and Texas. It was an incredibly long drive from Alberta, Canada but I have some cherished memories from those trips. 

  One question that many ask is how much should one spend on travel.  Some financial experts recommend that you spend 5-10% of your net income per year on vacations.

  For example, if your net income is $100k a year, and as a reminder that is your income after taxes and retirement contributions. then you could reasonably spend $5-10k a year on vacations.

  My family and I tend to spend more than 10% but we restrict our expenses in other areas of spending to compensate. We only eat out rarely and if we do it’s usually inn-n-out. Our kids don’t participate in club sports and just play AYSO soccer instead. With savings in those areas, we are able to do more on our vacations. 

  When it comes to money for vacation it should be saved in advance of the year of travel and would be in addition to what you have in your emergency savings.

  I recommend you tentatively plan your upcoming trips for the coming years so you can anticipate the expenses. We have already planned our travel destinations for the next 2-3 years. I’ll do research on the expected expenses and create a Google spreadsheet that forecasts potential transportation, accommodations, food, activity, and other related expenses.  As the trip gets closer, I even break it down by a daily expense. We usually save money on our trips by only eating out one meal a day and it’s usually a one to two-dollar sign place we find on Tripadvisor or like website. We also frequent the grocery stores of the country which is an enriching cultural experience to shop with and amongst the locals. 

  For those who like to eat out more or at nicer restaurants, you can forecast those anticipated expenses beforehand. I always add a few extra thousand dollars to our overall travel budget just in case we have some unexpected trip expenses. 

  Regarding travel, you will also want to consider the season of life you’re in. If you’ve got little kids, you will likely want to spend less of your income on vacations and do lower-key, closer-to-home trips. That’s what we did with our road trips to National parks. So many great memories from these. However, my wife and I have many more memories than our kids because they were so young they don’t remember them as well, but they do look at the photos as they play on our TV. Now that our two oldest kids are older we have justified spending more than the 10% of our net income on vacations. That was the rationale used for our recent trip to Europe. When my wife would ask about planning the trip, I’d tell her that we have 2 reasons why we should go on it, and that number represented the number of summers we have left with our oldest son Lucas before he leaves the nest. 

  Now as wonderfully amazing as trips are one should never, ever,  go into debt to go on a vacation. Instead, visit a local national or state park instead. Often the memories are just as good. 

  I was reading an article on travel spending and they had a very appropriate warning which was beware of luxury creep. They said “Remember that it’s much easier to go up in the luxury level of a vacation than it is to come back down. That is, right now, you feel a 2-star hotel is perfectly amenable. However, once you stay at a 4-star property, a 2-star hotel will seem like an unacceptable comedown. 

  One book that accelerated my travel was the book Die with Zero written by Bill Perkins. 

  One of the most significant learnings from the book was his explanation regarding the intersection of time, money, and health and how too many worked too long to the point where they had plenty of time and money but didn’t have the health to truly enjoy it. He argued that people should be spending more money when their health is better. He argues that more money on travel should be spent in their 40s then their 50s, and more in their 50s then their 60s, and more money in their 60s than their 70s because you have the health to do it.  Too many wait until after they have retired to travel and they just don’t have the stamina needed. For some, due to work obligations and other factors, they cannot travel until they have retired. And for those people, I strongly recommend that you pack a lot of travel in those first few years of retirement. In fact this is exactly what I encourage and help my clients to do. 

  Whether it’s a trip in your car across a county or state line or a flight across the international date line, travel can create unique conditions for you and your loved ones to make incredible memories. The key is to be away from the daily requirements and to be fully present with your loved ones while you collectively experience with your 5 senses new places and things. You’ll have some incredibly memorable times as you meet with locals and read additional pages about the world, in the words of St. Augustine. You’ll also develop a broader more wholesome view of men and things as Mark Twain advised.  

  All of these experiences will be incredibly enriching. As Bill Perkins notes in Die with Zero, one's life is a sum of your experiences and so to maximize your life you need to maximize your experiences. He notes that memories are an investment in our future selves. Buying an experience just doesn’t buy you the experience itself–it also buys you the sum of all the dividends that experience will bring for the rest of your life. Consequently, we need to make the most of whatever health we have at every point in our lifetime and see the world around us. It could be as simple as exploring a nearby museum or park and interacting with the people in that area. All told, you should be investing and spending according to a plan so you can have even more experiences.

  If you want to learn more about working with me to plan your ideal life, go to my website, betterplanningbetterlife.com. On the “getting acquainted page you can schedule a free introductory meeting that should be worth your time.

  Thank you again for listening and I hope you found this helpful, now on to the tips tricks, and strategies portion of the podcast.

  TIPS, TRICKS AND STRATEGIES

  Welcome to the tips, tricks, and strategies portion of the podcast where I will share a few tips on how to spend less on vacation.

  As I mentioned earlier in this podcast, when both my children and my business were young, we traveled by car around the Western United States and Western Canada visiting various National parks. I have always loved the outdoors and wanted to instill that same love in our 3 sons. One of the impetuses for visiting National Parks was that every 4 grader and their family gets into National Parks for free because of the wonderful Every Kid in the Outdoors program. This was Federal legislation that was passed that allowed 4 graders and their families to have free access to hundreds of parks, lands, and waters for an entire year. You just need to register online at everykidoutdoors.gov and print out your pass as electronic copies aren't accepted. We would present our paper and they gave us a plastic pass to our 4th grader. When we did this for our two oldest boys, they felt pretty special that they were able to get the whole family into the parks for free. When Lucas was in the 4th grade we visited Death Valley, Zion, Bryce, Canyonlands, Arches, Capitol Reef, Grand Canyon, and Joshua Tree National Parks. When Conway was in the 4th grade, we visited Redwoods, Crater Lake, Olympic, Mt Rainier, North Cascades, Yellow Stone, Grand Tetons, Sequoia, and Kings Canyon national parks. Our youngest son Quinton just entered the 4th grade this year so we look forward to planning our national park trips for this year. 

  Another travel tip for having less expensive vacations is to utilize Google Flights to scan for less expensive airline tickets. It’s important that you start watching for flights at least 6 months in advance of your trip. What that allowed me to do was determine what the usual price would be for a flight. I would monitor it regularly and when I would see the prices drop, I’d purchase the tickets. Sometimes those tickets were purchased 8 months in advance and other times they’d be purchased just 2-3 months in advance.

  My final travel tip is I would recommend going for longer international trips if possible. The reason is that transportation costs, often airline tickets, can be the most expensive part of a trip. For shorter trips, travel expenses were 60-70% of the total trip cost but with longer trips, they would be 40% of the costs. Yes, your accommodation expenses would increase but there is a benefit if you’ve already spent the money to get to a location to stay longer. 

  Well, I hope you found these travel tips helpful. As a great friend and mentor of mine said, happiness is being on vacation or planning your next one. And with Better travel planning you can have a better life. Have a great one!

  References

  Every kid in the outdoors

  How much you should spend on vacation

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  
  
  
  
  ]]>2e639763-b0aa-47d4-8ec1-3fa3155cfa0bSun, 15 Sep 2024 03:00:00 -070012:55falsefull7070Neither a Borrower Nor a Lender Be - Ep #69Neither a Borrower Nor a Lender Be- Ep#69

  Welcome to episode 69 of the One for the Money podcast. I am so very grateful you have taken the time to listen.  In this episode, I shared whether it is wise to lend money to family or friends. 

  In the tips, tricks, and strategies portion, I share a tip regarding loans from a 401k. 

  In this episode...

  • Just Say No [1:24]
  • If You Can’t Say No [6:06]
  • 401k Emergency Loan [9:20]
  
  

  MAIN

  Recently I re-read The Tragedy of Hamlet by William Shakespeare. There are so many great quotes from this play. Just a few of these include:

  • Brevity is the soul of wit
  • there is nothing good or bad but thinking makes it so
  • and one of the more famous lines - to be or not to be, that is the question.
  
  

  But the quote most relevant to the subject of this podcast episode comes from Polonius’ counsel to his son Laertes. 

  Amongst other sage advice he provides his son, he tells him t0 “Neither a borrower nor a lender be; for loan oft loses both itself and friend.”

  Over the course of life, we will invariably all experience times where friends and family will ask us for money. It’s important to prepare prior to such a request as the wrong approach could ruin some of our closest relationships.  

  Charles Barkley shared his thoughts on giving money to family.

  Barkley and the rest of the Team USA basketball players were in Atlanta preparing for the 1996 Olympic Games when he heard a conversation between his teammate Grant Hill and Hill’s mother. Janet Hill told her son that she was only staying in town for a few days, because she had to return to work. Barkley wondered why she was still working, considering that her son was making tens of millions of dollars playing in the NBA. 

  And Grant Hill’s mom said the following:

  “Do not start taking care of your family and friends. They never gonna stop, and it’s gonna ruin all your relationships,” She also said. “When you start giving people money, they never gonna ask for money [just] one time. No matter what you do for them, the first time you tell them no, they hate you.”

  Barkley took the advice to heart and started to tell people no when they asked for money, which temporarily led to some ruined friendships.

  “It was a tough and painful lesson for me,” Barkley said.

  Some would think that professional athletes should share.  Here is why most shouldn’t:

  Nearly 80% of NFL players go bankrupt or are under financial stress within two years of retirement and 60% of NBA players go broke or are bankrupt within five years of retirement. Just look at the sad cases of Antoine Walker, Bernie Kosar and others.

  When a family or friend asks for money, there could be a variety of reasons. Investing in their startup or helping them during a financially hard time. 

  -The first thing I recommend is to thank them for coming to you and before you can consider helping them you will need to ask them for more details.

  • For those wanting you to invest in their startup or small business, you have every right to ask for their business plan. How will they generate profits, what sort of experience do they have in that line of business, how many others have invested, what is their path to profitability, etc. 
  • If they can’t answer those basic business questions, they are likely doomed to failure as most businesses fail. Better planning isn’t just for a better life but for better businesses as well and you want to ensure they have robust and well thought out plans.
  • For those wanting to borrow money to get through a hard time, that one is more challenging. But you should ask them what the money is needed for. Was it because they lost their job, had an unexpected medical expense, or did they get in a financial bind? You have a right to ask what they have done already to make ends meet. There are things they may not have considered.. There may be a way for them to cut expenses, sell some assets, etc. It can make for a very challenging conversation but if you approach it with sincere concern and a willingness to help them they will hopefully understand. 
  • In addition, to show your concern you can buy their groceries and/or make them meals and help with work around their house. 
  • For those thinking of giving much larger sums of money or providing assistance over any period of time, its often better to not provide them with assistance. People are tremendously capable but sometimes it’s only through adversity where the conditions exist to discover them.  I worked with a remarkable gentleman a few years ago. He overcame stints in prison to eventually get his phd.  A motto of his was “rock bottom will teach you things mountain tops never will”. It can be heartbreaking to see your loved ones struggle, but sometimes the nicest thing you can do is withholding financial help 
  • Lastly, for my clients I tell them to refer their friends and family to me and I can have an introductory conversation with them about their financial situation and provide recommendations. Any information shared with me, is confidential and cannot be shared with the referring family member, but it’s a way for them to provide their family member or friend with objective advice in private. 
  
  

  TIPS, TRICKS AND STRATEGIES

  The Internal Revenue Service has now made it easier to take a limited amount of money out of a traditional retirement account penalty-free. While previously you could tap your savings without penalty in more limited ways and often with more paperwork, (adoption, first time home buyer, etc), you can now take out up to $1,000 of your funds for any self-defined emergency.

  The $1,000 provision is different from other retirement-account withdrawal options because you can just say that you have an emergency, without specifying what it is. So you can get the money faster. It is one of several ways Congress keeps making it easier for people to use their retirement savings as emergency funds.

  You’ll still owe income tax on the $1,000 you take out if you don’t pay it back.

  References

  Charles Barkely - Don’t Give Money to Friends

  Jr Bridgemen - $600 million Dollar NBA Man

  WSJ - 401k Loan

  Connect with Jonny West

  
  

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  
  ]]>Neither a Borrower Nor a Lender Be- Ep#69

  Welcome to episode 69 of the One for the Money podcast. I am so very grateful you have taken the time to listen.  In this episode, I shared whether it is wise to lend money to family or friends. 

  In the tips, tricks, and strategies portion, I share a tip regarding loans from a 401k. 

  In this episode...

  • Just Say No [1:24]
  • If You Can’t Say No [6:06]
  • 401k Emergency Loan [9:20]
  
  

  MAIN

  Recently I re-read The Tragedy of Hamlet by William Shakespeare. There are so many great quotes from this play. Just a few of these include:

  • Brevity is the soul of wit
  • there is nothing good or bad but thinking makes it so
  • and one of the more famous lines - to be or not to be, that is the question.
  
  

  But the quote most relevant to the subject of this podcast episode comes from Polonius’ counsel to his son Laertes. 

  Amongst other sage advice he provides his son, he tells him t0 “Neither a borrower nor a lender be; for loan oft loses both itself and friend.”

  Over the course of life, we will invariably all experience times where friends and family will ask us for money. It’s important to prepare prior to such a request as the wrong approach could ruin some of our closest relationships.  

  Charles Barkley shared his thoughts on giving money to family.

  Barkley and the rest of the Team USA basketball players were in Atlanta preparing for the 1996 Olympic Games when he heard a conversation between his teammate Grant Hill and Hill’s mother. Janet Hill told her son that she was only staying in town for a few days, because she had to return to work. Barkley wondered why she was still working, considering that her son was making tens of millions of dollars playing in the NBA. 

  And Grant Hill’s mom said the following:

  “Do not start taking care of your family and friends. They never gonna stop, and it’s gonna ruin all your relationships,” She also said. “When you start giving people money, they never gonna ask for money [just] one time. No matter what you do for them, the first time you tell them no, they hate you.”

  Barkley took the advice to heart and started to tell people no when they asked for money, which temporarily led to some ruined friendships.

  “It was a tough and painful lesson for me,” Barkley said.

  Some would think that professional athletes should share.  Here is why most shouldn’t:

  Nearly 80% of NFL players go bankrupt or are under financial stress within two years of retirement and 60% of NBA players go broke or are bankrupt within five years of retirement. Just look at the sad cases of Antoine Walker, Bernie Kosar and others.

  When a family or friend asks for money, there could be a variety of reasons. Investing in their startup or helping them during a financially hard time. 

  -The first thing I recommend is to thank them for coming to you and before you can consider helping them you will need to ask them for more details.

  • For those wanting you to invest in their startup or small business, you have every right to ask for their business plan. How will they generate profits, what sort of experience do they have in that line of business, how many others have invested, what is their path to profitability, etc. 
  • If they can’t answer those basic business questions, they are likely doomed to failure as most businesses fail. Better planning isn’t just for a better life but for better businesses as well and you want to ensure they have robust and well thought out plans.
  • For those wanting to borrow money to get through a hard time, that one is more challenging. But you should ask them what the money is needed for. Was it because they lost their job, had an unexpected medical expense, or did they get in a financial bind? You have a right to ask what they have done already to make ends meet. There are things they may not have considered.. There may be a way for them to cut expenses, sell some assets, etc. It can make for a very challenging conversation but if you approach it with sincere concern and a willingness to help them they will hopefully understand. 
  • In addition, to show your concern you can buy their groceries and/or make them meals and help with work around their house. 
  • For those thinking of giving much larger sums of money or providing assistance over any period of time, its often better to not provide them with assistance. People are tremendously capable but sometimes it’s only through adversity where the conditions exist to discover them.  I worked with a remarkable gentleman a few years ago. He overcame stints in prison to eventually get his phd.  A motto of his was “rock bottom will teach you things mountain tops never will”. It can be heartbreaking to see your loved ones struggle, but sometimes the nicest thing you can do is withholding financial help 
  • Lastly, for my clients I tell them to refer their friends and family to me and I can have an introductory conversation with them about their financial situation and provide recommendations. Any information shared with me, is confidential and cannot be shared with the referring family member, but it’s a way for them to provide their family member or friend with objective advice in private. 
  
  

  TIPS, TRICKS AND STRATEGIES

  The Internal Revenue Service has now made it easier to take a limited amount of money out of a traditional retirement account penalty-free. While previously you could tap your savings without penalty in more limited ways and often with more paperwork, (adoption, first time home buyer, etc), you can now take out up to $1,000 of your funds for any self-defined emergency.

  The $1,000 provision is different from other retirement-account withdrawal options because you can just say that you have an emergency, without specifying what it is. So you can get the money faster. It is one of several ways Congress keeps making it easier for people to use their retirement savings as emergency funds.

  You’ll still owe income tax on the $1,000 you take out if you don’t pay it back.

  References

  Charles Barkely - Don’t Give Money to Friends

  Jr Bridgemen - $600 million Dollar NBA Man

  WSJ - 401k Loan

  Connect with Jonny West

  
  

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  
  ]]>8b7821ff-8149-4196-8af5-d88cc577288eSun, 01 Sep 2024 03:00:00 -070012:43falsefull6969Novel Investment Strategies - Part 2 - Ep #68Welcome to episode 68 of the One for the Money podcast. This is part 2 of a 2-part series on novel investment strategies. In this episode, I’ll review a novel investment strategy called factor investing.

  In the tips, tricks, and strategies portion, I will share a second tip regarding stock options this time regarding incentive stock options also known as ISOs. 

  In this episode...

  • Investment Factors & Potential Higher Returns [1:15]
  • Factor Investing - Passive vs Active [6:32]
  • Incentive Stock Options [9:12]
  
  

  Factor investing is a strategy that chooses investments based on certain attributes or factors that historically have had higher rates of return. The assumption is that these same attributes will continue in the future. 

  The First one is that historically, stocks have outperformed bonds. Since 1926 stocks returned between 8% – 10% whereas the bonds returned between 4% – 6%. If you invested $1 in 1926 and earned the bond average of 5% it would be $113 by 2023, but if that dollar earned the stock average of 9% return it would be $4269. That’s why for longer-term goals we invest in stocks because historically they give you more to spend in the future when things will cost more.

  The second investment factor is that smaller companies tend to grow faster than larger companies. Amazon and Apple all started in a garage and look at them now. But if people only invest in the S&P500 which all of the large American companies then they will miss out on buying the Apples, Teslas, Nvidia, Microsofts when they were smaller. From 1927 through December 2023 small stocks outperformed large stocks, 55% of the time after one year, 59% of the time after 5 years, and 68% of the time after 10 years.

  The third factor to consider while investing is the price of the stocks you are buying. Some stocks are more expensive than others. Confusingly, this has nothing to do with the price of the stock but rather the price of the stock relative to the earnings of the company. This is known as the P/E ratio.  On average, value stocks have outperformed growth stocks by 4.4% annually in the US since 1927. From 1926 through December 2023 value stocks were higher than growth stocks, 59% of the time after one year, 70% of the time after 5 years, and 78% of the time after 10 years. 

  The final factor to consider is profitability. That may seem like a captain obvious type comment but factoring in companies with higher probability can make a significant difference for investors. From 1963 through December 2023 high profitability companies were higher than lower profitability companies, 67% of the time after one year, 82% of the time after 5 years, and 92% of the time after 10 years. 

  Successful investing really should target factors that generate higher expected returns. Looking at average annualized returns going back decades, small-cap stocks have beaten large caps, value has outperformed growth, and high-profitability stocks have outgained low-profitability stocks. 

  Unlike active investing or trend models, factor investing doesn’t use a crystal ball but instead is grounded in economic theory and backed by decades of empirical data. Of course, past performance is no guarantee of future results but investing based on science is way better than investing based on an active manager's hunch or predictions about the future.

  Tips & Tricks

  ISOs are usually issued by publicly traded companies or private companies planning to go public. My tip regarding ISOs is whether you should take a higher salary and fewer ISOs or a lower salary and more ISOs and it really comes down to how much risk can you afford. If you are in your 20s or early 30s it can make sense to take a lower salary so you can receive more ISOs because you can live with roommates and because you have time to invest later, if this company isn’t as successful as one had hoped it would be. This approach can also make sense if you are much older and are on track for retirement. But if you are older and not on track for retirement then you will really want to consider taking a higher salary and fewer ISOs or a different job altogether. There are too many people risking their retirement on the hope that their one company rockets higher. 

  References

  Factor investing

  Incentive Stock Options 

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  ]]>Welcome to episode 68 of the One for the Money podcast. This is part 2 of a 2-part series on novel investment strategies. In this episode, I’ll review a novel investment strategy called factor investing.

  In the tips, tricks, and strategies portion, I will share a second tip regarding stock options this time regarding incentive stock options also known as ISOs. 

  In this episode...

  • Investment Factors & Potential Higher Returns [1:15]
  • Factor Investing - Passive vs Active [6:32]
  • Incentive Stock Options [9:12]
  
  

  Factor investing is a strategy that chooses investments based on certain attributes or factors that historically have had higher rates of return. The assumption is that these same attributes will continue in the future. 

  The First one is that historically, stocks have outperformed bonds. Since 1926 stocks returned between 8% – 10% whereas the bonds returned between 4% – 6%. If you invested $1 in 1926 and earned the bond average of 5% it would be $113 by 2023, but if that dollar earned the stock average of 9% return it would be $4269. That’s why for longer-term goals we invest in stocks because historically they give you more to spend in the future when things will cost more.

  The second investment factor is that smaller companies tend to grow faster than larger companies. Amazon and Apple all started in a garage and look at them now. But if people only invest in the S&P500 which all of the large American companies then they will miss out on buying the Apples, Teslas, Nvidia, Microsofts when they were smaller. From 1927 through December 2023 small stocks outperformed large stocks, 55% of the time after one year, 59% of the time after 5 years, and 68% of the time after 10 years.

  The third factor to consider while investing is the price of the stocks you are buying. Some stocks are more expensive than others. Confusingly, this has nothing to do with the price of the stock but rather the price of the stock relative to the earnings of the company. This is known as the P/E ratio.  On average, value stocks have outperformed growth stocks by 4.4% annually in the US since 1927. From 1926 through December 2023 value stocks were higher than growth stocks, 59% of the time after one year, 70% of the time after 5 years, and 78% of the time after 10 years. 

  The final factor to consider is profitability. That may seem like a captain obvious type comment but factoring in companies with higher probability can make a significant difference for investors. From 1963 through December 2023 high profitability companies were higher than lower profitability companies, 67% of the time after one year, 82% of the time after 5 years, and 92% of the time after 10 years. 

  Successful investing really should target factors that generate higher expected returns. Looking at average annualized returns going back decades, small-cap stocks have beaten large caps, value has outperformed growth, and high-profitability stocks have outgained low-profitability stocks. 

  Unlike active investing or trend models, factor investing doesn’t use a crystal ball but instead is grounded in economic theory and backed by decades of empirical data. Of course, past performance is no guarantee of future results but investing based on science is way better than investing based on an active manager's hunch or predictions about the future.

  Tips & Tricks

  ISOs are usually issued by publicly traded companies or private companies planning to go public. My tip regarding ISOs is whether you should take a higher salary and fewer ISOs or a lower salary and more ISOs and it really comes down to how much risk can you afford. If you are in your 20s or early 30s it can make sense to take a lower salary so you can receive more ISOs because you can live with roommates and because you have time to invest later, if this company isn’t as successful as one had hoped it would be. This approach can also make sense if you are much older and are on track for retirement. But if you are older and not on track for retirement then you will really want to consider taking a higher salary and fewer ISOs or a different job altogether. There are too many people risking their retirement on the hope that their one company rockets higher. 

  References

  Factor investing

  Incentive Stock Options 

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  ]]>894b29ff-5b03-437b-945c-bfc0668071eaThu, 15 Aug 2024 03:00:00 -070012:20falsefull6868Novel Investment Strategies - Part 1 - Ep #67Welcome to episode 67 of the One for the Money podcast. I am so very grateful you have taken the time to listen. This is part 1 of a 2-part series on novel investment strategies. In this episode, I’ll go over what is sometimes referred to as the borrow, spend, die strategy.

  In this episode...

  • SBLOC Defined -[1:45]
  • SBLOC in Practice -[4:58]
  • Stock Options - Restricted Stock Units (RSUs) -[6:30]
  
  

  Most people are familiar with the notion of buying and selling investments. The goal when buying an investment is that it increases in value and then you sell the investment to enjoy the proceeds. But there is a strategy where you can spend without ever having to sell. This is much less complicated than it may sound when one realizes it’s not all that different from a home equity line of credit, or HELOC, for short. With a HELOC the homeowner will borrow money against their appreciated property and aren’t required to sell their home to do so.  There is a similar option with stock market investments and it is called a security-based line of credit, or SBLOC for short. Here is how they work.

  An SBLOC (Securities-Based Line of Credit) is a special type of loan where you use your non-retirement investments as collateral. Just how can you use some of this newfound wealth without triggering a huge tax bill and not missing out on potential future gains? Why an SBLOC of course. These allow you to borrow against these shares using your stock  as collateral.

  In fact this is the exact same strategy that many uber wealthy utilize to access the wealth formed in the publicly traded companies that they founded. 

  The strategy is sometimes called the borrow, spend, die strategy. They borrow from their massive wealth, spend the proceeds and when they die some of their shares are sold to pay off the loans. Often this can lead to massive tax savings as when they die, there could be a step up in the basis at death and the taxes could be severely limited.

  Tips Tricks and Strategies 

  RSUs (short for Restricted Stock Units) are a type of compensation given to employees by a company. They represent company shares that an employee will receive in the future. However, there are certain conditions, such as working for the company for a certain period of time or achieving specific performance goals, which must be met before the employee actually receives the shares

  Once your shares are granted and taxes paid, there is no taxable benefit to staying invested in those shares. For many investors, it may make more sense to sell all of the shares and diversify their investments or use the proceeds to pay of higher interest debt.

  References

  Security Based Line of Credit

  Borrow, Spend and Die Strategy

  Restricted Stock Units

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  ]]>Welcome to episode 67 of the One for the Money podcast. I am so very grateful you have taken the time to listen. This is part 1 of a 2-part series on novel investment strategies. In this episode, I’ll go over what is sometimes referred to as the borrow, spend, die strategy.

  In this episode...

  • SBLOC Defined -[1:45]
  • SBLOC in Practice -[4:58]
  • Stock Options - Restricted Stock Units (RSUs) -[6:30]
  
  

  Most people are familiar with the notion of buying and selling investments. The goal when buying an investment is that it increases in value and then you sell the investment to enjoy the proceeds. But there is a strategy where you can spend without ever having to sell. This is much less complicated than it may sound when one realizes it’s not all that different from a home equity line of credit, or HELOC, for short. With a HELOC the homeowner will borrow money against their appreciated property and aren’t required to sell their home to do so.  There is a similar option with stock market investments and it is called a security-based line of credit, or SBLOC for short. Here is how they work.

  An SBLOC (Securities-Based Line of Credit) is a special type of loan where you use your non-retirement investments as collateral. Just how can you use some of this newfound wealth without triggering a huge tax bill and not missing out on potential future gains? Why an SBLOC of course. These allow you to borrow against these shares using your stock  as collateral.

  In fact this is the exact same strategy that many uber wealthy utilize to access the wealth formed in the publicly traded companies that they founded. 

  The strategy is sometimes called the borrow, spend, die strategy. They borrow from their massive wealth, spend the proceeds and when they die some of their shares are sold to pay off the loans. Often this can lead to massive tax savings as when they die, there could be a step up in the basis at death and the taxes could be severely limited.

  Tips Tricks and Strategies 

  RSUs (short for Restricted Stock Units) are a type of compensation given to employees by a company. They represent company shares that an employee will receive in the future. However, there are certain conditions, such as working for the company for a certain period of time or achieving specific performance goals, which must be met before the employee actually receives the shares

  Once your shares are granted and taxes paid, there is no taxable benefit to staying invested in those shares. For many investors, it may make more sense to sell all of the shares and diversify their investments or use the proceeds to pay of higher interest debt.

  References

  Security Based Line of Credit

  Borrow, Spend and Die Strategy

  Restricted Stock Units

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  ]]>956c609d-acf9-4636-8420-ce59733abb43Thu, 01 Aug 2024 03:00:00 -070009:45falsefull6767Financial Language of Love - Ep #66What is one of the best ways a husband, wife, father, and mother can show their love financially? Hint it’s not diamond rings, cars, fancy trips, or a big house. It’s WAY cheaper than that.

  In this episode...

  • Financially caring for family in case of an accident [1:15]
  • 5 factors that impact the price of life insurance  [4:43]
  • The right type of Life Insurance [7:08]
  
  

  If you died yesterday, how financially secure would your family be today, tomorrow, and for the years to come?

  This is an incredibly depressing thought no doubt, but that’s exactly why we should address this just-in-case scenario. Because if you love your family, you will want to make certain that they are taken care of financially if you are not here today. Term life insurance is the only instrument that can provide sudden wealth for your loved ones in their greatest time of need all for just a fraction of the cost of the wealth obtained.  

  Term life insurance can be incredibly inexpensive far too many Americans lack life insurance. Too often you see, what I refer to as the worst type of life insurance, the GoFundMe page. But with term insurance being priced like a commodity, it really shouldn’t be this way for millions of families.

  Some people don’t bother with Life Insurance because they don’t want to “waste” money on term life insurance premiums. I can certainly relate because that’s the reason I never purchased term life insurance for many years.

  For those who worry about the cost of life insurance here are the five factors that impact the price

  #1 - A person’s Age - all things being equal, a 35-year-olds policy will be less expensive than a 40-year-olds

  #2 - A person's Gender - Men are more expensive than women. Men do stupid things and have a higher probability of death at all ages.

  #3 A person’s health rating - Think, BMI, smoker/non-smoker, etc ones driving record is also included. 

  #4 The amount of the benefit - $2m of coverage will cost you more than $1m

  #5 How many years you have coverage - Getting coverage for 10 years will be less than 20 years of coverage. 

   I must note that life insurance shouldn’t just be for the working spouse. If there is a stay at home parent they need life insurance as well. We cannot underestimate their contribution to the family. If they were to pass it would be devastating for the family and sure money would never replace their absence, it would help ease the tremendous burden so the working spouse can take the requisite time and have the means to help their family heal.  

  Tips Tricks and Strategies

  I absolutely love what I do but it wasn’t until after a lot of research that I finally found my dream career.  This career has married things that I love, namely personal finance, education, and being able to have a positive impact on others and for that reason, I became a Certified Financial Planner in order to have the greatest impact on my clients.  But that’s not actually, how it started out for me.  Due to my naiveté, I joined a “financial services" firm that claimed to put financial planning at the forefront of what they did but in truth, they primarily pushed expensive insurance that the overwhelming majority of people don’t need.  But, in my defense, it wasn’t anything like what I was promised during the interviews with the firm. I had interviewed a few actual CFP®s from the firm who spoke of the merits of being fiduciaries, a fiduciary is a professional that puts the interests of clients above their own, (apparently, this was in name only) and they in fact did not do comprehensive planning nor were they fiduciaries but the main efforts was to sell really expensive life insurance.

  What sort of expensive Life Insurance am I talking about; namely Index Universal Life (IUL), Whole life, and similar permanent life policies? Life insurance legally cannot be sold as an investment, but there are far too many instances where an IUL is sold as such. More importantly, they don’t even determine if these policies are in the best interest of the individual as permanent insurance is almost always sold and rarely bought.

  You might be wondering, are permanent life insurance like IUL or whole life so bad? The answer is yes because with very rare exceptions term insurance is all you need and permanent policies are WAY MORE EXPENSIVE and leave a person with way less wealth than other solutions. Jeremy Schneider compares investing in an IUL policy vs an index fund and the results are remarkable. He showed how an IUL policy could erode over 80% of your wealth compared to investing directly in an index fund.

  Some say I want whole life insurance because I don’t want to waste the money. You hope it’s a waste because it’s insurance. 

  References

  Is Whole Life Insurance a Good Investment? - NerdWallet

  The Statistic Whole Life Salesmen Don’t Want You To Know

  Is IUL a Scam? Yes.

  Jeremy Schneider - Founder - Personal Finance Club

  ]]>What is one of the best ways a husband, wife, father, and mother can show their love financially? Hint it’s not diamond rings, cars, fancy trips, or a big house. It’s WAY cheaper than that.

  In this episode...

  • Financially caring for family in case of an accident [1:15]
  • 5 factors that impact the price of life insurance  [4:43]
  • The right type of Life Insurance [7:08]
  
  

  If you died yesterday, how financially secure would your family be today, tomorrow, and for the years to come?

  This is an incredibly depressing thought no doubt, but that’s exactly why we should address this just-in-case scenario. Because if you love your family, you will want to make certain that they are taken care of financially if you are not here today. Term life insurance is the only instrument that can provide sudden wealth for your loved ones in their greatest time of need all for just a fraction of the cost of the wealth obtained.  

  Term life insurance can be incredibly inexpensive far too many Americans lack life insurance. Too often you see, what I refer to as the worst type of life insurance, the GoFundMe page. But with term insurance being priced like a commodity, it really shouldn’t be this way for millions of families.

  Some people don’t bother with Life Insurance because they don’t want to “waste” money on term life insurance premiums. I can certainly relate because that’s the reason I never purchased term life insurance for many years.

  For those who worry about the cost of life insurance here are the five factors that impact the price

  #1 - A person’s Age - all things being equal, a 35-year-olds policy will be less expensive than a 40-year-olds

  #2 - A person's Gender - Men are more expensive than women. Men do stupid things and have a higher probability of death at all ages.

  #3 A person’s health rating - Think, BMI, smoker/non-smoker, etc ones driving record is also included. 

  #4 The amount of the benefit - $2m of coverage will cost you more than $1m

  #5 How many years you have coverage - Getting coverage for 10 years will be less than 20 years of coverage. 

   I must note that life insurance shouldn’t just be for the working spouse. If there is a stay at home parent they need life insurance as well. We cannot underestimate their contribution to the family. If they were to pass it would be devastating for the family and sure money would never replace their absence, it would help ease the tremendous burden so the working spouse can take the requisite time and have the means to help their family heal.  

  Tips Tricks and Strategies

  I absolutely love what I do but it wasn’t until after a lot of research that I finally found my dream career.  This career has married things that I love, namely personal finance, education, and being able to have a positive impact on others and for that reason, I became a Certified Financial Planner in order to have the greatest impact on my clients.  But that’s not actually, how it started out for me.  Due to my naiveté, I joined a “financial services" firm that claimed to put financial planning at the forefront of what they did but in truth, they primarily pushed expensive insurance that the overwhelming majority of people don’t need.  But, in my defense, it wasn’t anything like what I was promised during the interviews with the firm. I had interviewed a few actual CFP®s from the firm who spoke of the merits of being fiduciaries, a fiduciary is a professional that puts the interests of clients above their own, (apparently, this was in name only) and they in fact did not do comprehensive planning nor were they fiduciaries but the main efforts was to sell really expensive life insurance.

  What sort of expensive Life Insurance am I talking about; namely Index Universal Life (IUL), Whole life, and similar permanent life policies? Life insurance legally cannot be sold as an investment, but there are far too many instances where an IUL is sold as such. More importantly, they don’t even determine if these policies are in the best interest of the individual as permanent insurance is almost always sold and rarely bought.

  You might be wondering, are permanent life insurance like IUL or whole life so bad? The answer is yes because with very rare exceptions term insurance is all you need and permanent policies are WAY MORE EXPENSIVE and leave a person with way less wealth than other solutions. Jeremy Schneider compares investing in an IUL policy vs an index fund and the results are remarkable. He showed how an IUL policy could erode over 80% of your wealth compared to investing directly in an index fund.

  Some say I want whole life insurance because I don’t want to waste the money. You hope it’s a waste because it’s insurance. 

  References

  Is Whole Life Insurance a Good Investment? - NerdWallet

  The Statistic Whole Life Salesmen Don’t Want You To Know

  Is IUL a Scam? Yes.

  Jeremy Schneider - Founder - Personal Finance Club

  ]]>0f9bc1aa-10fd-4c66-ae8d-61deaa6e0185Mon, 15 Jul 2024 03:00:00 -070016:35falsefull6666The Two Biggest Risks in Retirement - Ep#65Welcome to episode 65 of the One for the Money podcast. There are two huge risks when it comes to retirement, and they are contradictory to one another. In this episode, I’ll share those risks as well as a strategy to address them. 

  In this episode...

  • Retirement is a Miracle [1:13]
  • The first biggest risk in retirement  [2:25]
  • The second biggest risk in retirement [2:44]
  • Enjoying more in retirement through planning [11:29]
  
  

  Before we talk about these risks, it’s helpful to first appreciate the absolute miracle that is retirement.  A hundred years ago, three-quarters of the world’s population lived in extreme poverty. Today, it’s less than 10%. 

  Interestingly, the two biggest risks retirees will face are contradictory to one another. The first is the most obvious one, running out of money. That’s really everyone’s biggest fear. But since people are so focused on the fear of running out of money they ignore the second biggest risk in retirement which is dying with WAY too much money. But, with the right retirement income strategy, you can spend WAY more money WITH your loved ones all while having a much more fulfilling retirement, and still leave your loved ones with a generous inheritance. 

  Sadly way too many people go into retirement without a plan and just wing it instead. In episode 62 of this podcast, I shared the regrets of retired Americans and how more than 6 in 10 retirees say they change their retirement if they had the opportunity. 

  I believe it is helpful to think of your approaching retirement as summiting your financial Mount Everest. Taking withdraws from your investments in retirement is like climbing down which requires even more guidance because the financial mistakes in retirement are WAY more costly, because when you are still working, you have the time and income to overcome most financial mistakes, but not in retirement. 

  For these reasons, you need a plan that is designed to address your specific retirement needs. But not any plan will do because having the RIGHT plan is JUST as important as having a plan at all. Way too many people think they have a retirement plan when all they have is an expensive product sold to them by some salesman. Others may have a very “light” plan by following a certain rule of thumb believing that a one-size-fits-all all plan will fit their specific situation. Examples would include the  60/40 rule (having 60% invested in stocks 40% invested in bonds, and selling which is up for the year to provide the income. Or there is the 4% distribution rule. Neither of which accounts for how your account is invested or when is the best time to take social security or how to mitigate taxes.

  What people need instead is a tailor-made income model to provide an inflation-adjusted income throughout their retirement.

  For this reason, I create and implement a retirement income distribution plan for clients that accounts for all their income sources, pensions, social security, and rental income, and consequently we are able to maximize their income spending so that they can achieve wonderful goals throughout their retirement. With the properly structured retirement income models, we are able to help clients spend (i.e. enjoy) more in retirement.

  Having a dynamic retirement Income model puts clients at ease and helps them enjoy retirement. They don’t have to fear running out of money or dying with too much. aspects of the strategy include investing money differently based on when you plan to spend this money.

  I hope I’ve been able to convey that life in retirement turns out WAY better when you have a plan and that is especially the case when it comes to retirement income planning. Because with a plan that is designed and aligned with your specific goals, you won’t run out of money and just as tragic won’t die with too much. 

  Tips Tricks and Strategies

  Earlier in the podcast, I mentioned how one should review retirement as summiting a financial Mount Everest and that taking withdraws from investments in retirement is like climbing down which requires even more guidance because the financial mistakes in retirement are WAY more costly which is why you want a Sherpa to Help Guide You To and Through Retirement.

  Certified Financial Planners are the Sherpas that guide people through the storms and beautiful weather up and down the mountain. Adjustments will need to be made as you make your way up and down the retirement mountain. 

  With the right financial planner, you can feel confident and excited about the years and decades ahead in retirement. 

  References

  World Population Living in extreme poverty

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  ]]>Welcome to episode 65 of the One for the Money podcast. There are two huge risks when it comes to retirement, and they are contradictory to one another. In this episode, I’ll share those risks as well as a strategy to address them. 

  In this episode...

  • Retirement is a Miracle [1:13]
  • The first biggest risk in retirement  [2:25]
  • The second biggest risk in retirement [2:44]
  • Enjoying more in retirement through planning [11:29]
  
  

  Before we talk about these risks, it’s helpful to first appreciate the absolute miracle that is retirement.  A hundred years ago, three-quarters of the world’s population lived in extreme poverty. Today, it’s less than 10%. 

  Interestingly, the two biggest risks retirees will face are contradictory to one another. The first is the most obvious one, running out of money. That’s really everyone’s biggest fear. But since people are so focused on the fear of running out of money they ignore the second biggest risk in retirement which is dying with WAY too much money. But, with the right retirement income strategy, you can spend WAY more money WITH your loved ones all while having a much more fulfilling retirement, and still leave your loved ones with a generous inheritance. 

  Sadly way too many people go into retirement without a plan and just wing it instead. In episode 62 of this podcast, I shared the regrets of retired Americans and how more than 6 in 10 retirees say they change their retirement if they had the opportunity. 

  I believe it is helpful to think of your approaching retirement as summiting your financial Mount Everest. Taking withdraws from your investments in retirement is like climbing down which requires even more guidance because the financial mistakes in retirement are WAY more costly, because when you are still working, you have the time and income to overcome most financial mistakes, but not in retirement. 

  For these reasons, you need a plan that is designed to address your specific retirement needs. But not any plan will do because having the RIGHT plan is JUST as important as having a plan at all. Way too many people think they have a retirement plan when all they have is an expensive product sold to them by some salesman. Others may have a very “light” plan by following a certain rule of thumb believing that a one-size-fits-all all plan will fit their specific situation. Examples would include the  60/40 rule (having 60% invested in stocks 40% invested in bonds, and selling which is up for the year to provide the income. Or there is the 4% distribution rule. Neither of which accounts for how your account is invested or when is the best time to take social security or how to mitigate taxes.

  What people need instead is a tailor-made income model to provide an inflation-adjusted income throughout their retirement.

  For this reason, I create and implement a retirement income distribution plan for clients that accounts for all their income sources, pensions, social security, and rental income, and consequently we are able to maximize their income spending so that they can achieve wonderful goals throughout their retirement. With the properly structured retirement income models, we are able to help clients spend (i.e. enjoy) more in retirement.

  Having a dynamic retirement Income model puts clients at ease and helps them enjoy retirement. They don’t have to fear running out of money or dying with too much. aspects of the strategy include investing money differently based on when you plan to spend this money.

  I hope I’ve been able to convey that life in retirement turns out WAY better when you have a plan and that is especially the case when it comes to retirement income planning. Because with a plan that is designed and aligned with your specific goals, you won’t run out of money and just as tragic won’t die with too much. 

  Tips Tricks and Strategies

  Earlier in the podcast, I mentioned how one should review retirement as summiting a financial Mount Everest and that taking withdraws from investments in retirement is like climbing down which requires even more guidance because the financial mistakes in retirement are WAY more costly which is why you want a Sherpa to Help Guide You To and Through Retirement.

  Certified Financial Planners are the Sherpas that guide people through the storms and beautiful weather up and down the mountain. Adjustments will need to be made as you make your way up and down the retirement mountain. 

  With the right financial planner, you can feel confident and excited about the years and decades ahead in retirement. 

  References

  World Population Living in extreme poverty

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  ]]>c2c491b1-00a7-48c8-ba75-135a03f93c1eMon, 01 Jul 2024 03:00:00 -070014:07falsefull6565Aligning Your Financial Plan with Happiness - Ep #64Welcome to episode 64 of the One for the Money podcast. I am so very grateful you have taken the time to listen.While investments, taxes, estate plans, risk management and cash flow are critical aspects of a financial plan, they won’t mean anything if they aren’t aligned with what matters most. In this episode I’ll share how one can align their financial plan with exactly that.

  In this episode...

  • Where does Happiness come from [1:13]
  • Financial success and relationships [5:41]
  • Experiences or things, what will you remember most? [12:15]
  
  

  A better life is a result of actions you have taken via better planning and when it comes to financial planning it’s imperative that the focus is on what is absolutely essential for happiness. The pursuit of happiness has been a recurring theme on this podcast and I have encouraged clients and listeners to pursue the things that ultimately lead to happiness. The Harvard Study of Adult Development started in 1938 has been investigating what makes people flourish. The study was launched as a result of the generosity of WT Grant and as a result is sometimes called the Grant study. and his goal for the study, using his words, was to “help people live more contentedly and peacefully and well in body and mind through a better knowledge of how to use and enjoy all the good things that the world has to offer them.”  

  It’s the longest in-depth longitudinal study on human life ever done, and it’s brought the researchers to a simple and profound conclusion: Good relationships lead to both health and happiness. it’s not career achievement, money, exercise, or even a healthy diet that brings happiness. Rather the most consistent finding they found through 85 years of study is that Positive relationships keep a person happier, healthier, and help a person live longer. Those who scored highest on measurements of "warm relationships" earned an average of $141,000 a year more at their peak salaries.

  If relationships are the most important criteria for a long and happy life, than surely the most meaningful relationships have the most importance, for example, one’s marriage or one’s relationship with their children.  Whether it’s right or wrong, good or bad, money has a significant impact on these relationships.

  I talk with many clients and most say that they would rather spend more time with their family then have a bigger inheritance. For this reason, I encourage my clients to spend their money having family get togethers, because this is what will help them the most. But it’s more than just having good memories, people that have better relationships do better in many facets of life, including money. 

  The Harvard Study of Adult Development noted that the warmth of childhood relationship with mothers matters long into adulthood: Men who had "warm" childhood relationships with their mothers earned an average of $87,000 more a year than men whose mothers were uncaring.

  Interestingly, while the poorer participants had shorter lifespans than the Harvard men (attributed to more dangerous work conditions, and poorer access to health care) when it came to happiness, the inner-city men were just as happy as the Harvard men, and their families were just as happy and in some cases, happier.

  Tips Tricks and Strategies

  I will answer the question on whether one should spend money on experiences or should they spend it on things, and provide a strategy to help you decide. Most of the research shows that experiences can provide more joy and actual things. For instance, while a vacation might only last a week, a new car can be driven for many years. However, a 'thing' might last longer physically, the enjoyment of it and the memories it creates can wane over time. On the other hand, experiences act more like appreciating assets, in that the initial experience might be short, but the value of it tends to increase over time. From my own experience that has been the case. Throughout the years, I’ve asked my kids what they remember most and invariably it’s the trips we took.

  References

  Good Genes are nice, but joy is better

  What Makes People Happy? Decoupling the Experiential-Material Continuum

  The Grant Study

  Lessons from the world’s longest happiness study

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  ]]>Welcome to episode 64 of the One for the Money podcast. I am so very grateful you have taken the time to listen.While investments, taxes, estate plans, risk management and cash flow are critical aspects of a financial plan, they won’t mean anything if they aren’t aligned with what matters most. In this episode I’ll share how one can align their financial plan with exactly that.

  In this episode...

  • Where does Happiness come from [1:13]
  • Financial success and relationships [5:41]
  • Experiences or things, what will you remember most? [12:15]
  
  

  A better life is a result of actions you have taken via better planning and when it comes to financial planning it’s imperative that the focus is on what is absolutely essential for happiness. The pursuit of happiness has been a recurring theme on this podcast and I have encouraged clients and listeners to pursue the things that ultimately lead to happiness. The Harvard Study of Adult Development started in 1938 has been investigating what makes people flourish. The study was launched as a result of the generosity of WT Grant and as a result is sometimes called the Grant study. and his goal for the study, using his words, was to “help people live more contentedly and peacefully and well in body and mind through a better knowledge of how to use and enjoy all the good things that the world has to offer them.”  

  It’s the longest in-depth longitudinal study on human life ever done, and it’s brought the researchers to a simple and profound conclusion: Good relationships lead to both health and happiness. it’s not career achievement, money, exercise, or even a healthy diet that brings happiness. Rather the most consistent finding they found through 85 years of study is that Positive relationships keep a person happier, healthier, and help a person live longer. Those who scored highest on measurements of "warm relationships" earned an average of $141,000 a year more at their peak salaries.

  If relationships are the most important criteria for a long and happy life, than surely the most meaningful relationships have the most importance, for example, one’s marriage or one’s relationship with their children.  Whether it’s right or wrong, good or bad, money has a significant impact on these relationships.

  I talk with many clients and most say that they would rather spend more time with their family then have a bigger inheritance. For this reason, I encourage my clients to spend their money having family get togethers, because this is what will help them the most. But it’s more than just having good memories, people that have better relationships do better in many facets of life, including money. 

  The Harvard Study of Adult Development noted that the warmth of childhood relationship with mothers matters long into adulthood: Men who had "warm" childhood relationships with their mothers earned an average of $87,000 more a year than men whose mothers were uncaring.

  Interestingly, while the poorer participants had shorter lifespans than the Harvard men (attributed to more dangerous work conditions, and poorer access to health care) when it came to happiness, the inner-city men were just as happy as the Harvard men, and their families were just as happy and in some cases, happier.

  Tips Tricks and Strategies

  I will answer the question on whether one should spend money on experiences or should they spend it on things, and provide a strategy to help you decide. Most of the research shows that experiences can provide more joy and actual things. For instance, while a vacation might only last a week, a new car can be driven for many years. However, a 'thing' might last longer physically, the enjoyment of it and the memories it creates can wane over time. On the other hand, experiences act more like appreciating assets, in that the initial experience might be short, but the value of it tends to increase over time. From my own experience that has been the case. Throughout the years, I’ve asked my kids what they remember most and invariably it’s the trips we took.

  References

  Good Genes are nice, but joy is better

  What Makes People Happy? Decoupling the Experiential-Material Continuum

  The Grant Study

  Lessons from the world’s longest happiness study

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  ]]>11e40695-f8e5-4062-95e3-535c0a10ea7fSat, 15 Jun 2024 03:00:00 -070017:39falsefull6464The Case for Optimism - Part 3 - Ep #63The Case of Optimism - Part 3

  Each year I record one episode of this podcast that makes the case for why we should be optimistic. This is part 3. (Click here for part 1 and here for part 2) There are a lot of disturbing events and trends that are happening in the world at present and yet despite all of these concerns I’ll argue the case for why we should remain optimistic about our future.

  In this episode...

  • The climate is actually great [6:18]
  • How Happy Are Americans? [14:17]
  • How Americans are missing out on billions [16:23]
  
  

  This episode is airing in June of 2024 and we are starting to see some market volatility of late. That can create a lot of fear in the hearts of investors. Add to that a war that continues to rage in Europe, Add to that a war that continues to rage in Europe, and finally add to that a presidential election this November where a solid majority of people overwhelmingly don’t want either candidate to be president. There is a lot we can worry about but yet despite all of these concerns we really should remain optimistic. Let’s look at some of the evidence as to what’s so great:

  The first is to consider the state of democracy. We are in an election year where we are told that our democracy is at stake, and you get that from leaders and followers of both political parties. For this reason the upcoming presidential election is one of investors chief concerns. there certainly has been more challenges to the pillars of democracy in the USA and also in other countries around the world but it’s much wiser to step back and take a longer view of the state of democracy. In 1976 just 23% of countries were legitimate electoral democracies but it’s 51% now. That is remarkable progress. 

  The brutal terrorist attacks perpetuated by Hamas on October 7th, were absolutely sickening. Iran fired 170 drones, more than 30 cruise missiles and more than 120 ballistic missiles but due to the marvels of technology and the help of allies 99% of them were intercepted or eliminated.

  I recently read the book “Unsettled” by Steven E Kooning, The subtitle of the books is this “What climate science tells us, what it doesn’t, and why it matters”. Dr. Kooning notes that heat waves in the US are now no more common than they were in 1900 and that the warmest temperatures in the US have not risen in the past 50 years. Weather-fixated television news would make us all think that disasters are getting worse. They’re not. Around 1900, 4.5 percent of the land area of the world would burn every year. Over the last century, this declined to 3.2 percent. In the previous two decades, satellites have shown further decline — in 2021, just 2.5 percent burned.

  Here’s additional details on how far we have come: 

  • Global poverty rates have been reduced by 50% in the past 20 years.  A hundred years ago, three-quarters of the world’s population lived in extreme poverty. Today, it’s less than 10%.
  •  Human life expectancy has doubled over the past century, from 36 years in 1920 to more than 72 years today. 
  
  

  Americans fell to 23rd place in happiness, down from 15th a year ago, according to data collected in the Gallup World Poll for the World Happiness Report 2024. In the U.S., self-reported happiness has fallen in all age groups, but especially among young adults. Americans 30 and younger ranked 62nd globally in well-being. If you want to know how great you have it, you should really travel more to third world countries. What we have here in America, especially the freedoms provided by the inspired constitution are the envy of the world. There are 7.9 Billion people on planet 🌎 yet only 4.2% of us live in the USA  331,449,281. It’s a remarkable privilege but it’s only appreciated if you travel.

  Tips Tricks and Strategies

  I will share a tip on how to earn more interest on your savings but oddly many Americans curiously are not doing so. This information is courtesy of a recent article in the WSJ entitled  The $42 Billion Question: Why Aren’t AmericansDitching Big Banks? Americans are missing out on billions of dollars in interest by keeping their savings at the biggest U.S. banks.

  I’ve helped at least a dozen clients and even more non-clients transfer some of their deposits to online banks accounts earning as much as 5% which are also FDIC insured. These accounts were setup in as little as 20 minutes and they easily transferred funds between their traditional account and their new online bank account. 

  References

  Good News, the World Is Getting Better

  U.S. Carbon (CO2) Emissions 1960-2024

  Climate Change Indicators: U.S. Greenhouse Gas Emissions

  American Airlines Announces Agreement to Purchase Boom Supersonic Aircraft

  Ridley: Good News Is Gradual, Bad News Is Sudden

  Is humanity doomed? Five ways the world is actually doing better - in data

  The World has made spectacular progress

  2022 Was One of the Worst Years Ever For Markets

  The World Really Is Getting Better

  The $42 Billion Question: Why Aren’t Americans Ditching Big Banks?

  Why Climate Alarmism Hurts us All

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  
  
  
  
  
  
  ]]>The Case of Optimism - Part 3

  Each year I record one episode of this podcast that makes the case for why we should be optimistic. This is part 3. (Click here for part 1 and here for part 2) There are a lot of disturbing events and trends that are happening in the world at present and yet despite all of these concerns I’ll argue the case for why we should remain optimistic about our future.

  In this episode...

  • The climate is actually great [6:18]
  • How Happy Are Americans? [14:17]
  • How Americans are missing out on billions [16:23]
  
  

  This episode is airing in June of 2024 and we are starting to see some market volatility of late. That can create a lot of fear in the hearts of investors. Add to that a war that continues to rage in Europe, Add to that a war that continues to rage in Europe, and finally add to that a presidential election this November where a solid majority of people overwhelmingly don’t want either candidate to be president. There is a lot we can worry about but yet despite all of these concerns we really should remain optimistic. Let’s look at some of the evidence as to what’s so great:

  The first is to consider the state of democracy. We are in an election year where we are told that our democracy is at stake, and you get that from leaders and followers of both political parties. For this reason the upcoming presidential election is one of investors chief concerns. there certainly has been more challenges to the pillars of democracy in the USA and also in other countries around the world but it’s much wiser to step back and take a longer view of the state of democracy. In 1976 just 23% of countries were legitimate electoral democracies but it’s 51% now. That is remarkable progress. 

  The brutal terrorist attacks perpetuated by Hamas on October 7th, were absolutely sickening. Iran fired 170 drones, more than 30 cruise missiles and more than 120 ballistic missiles but due to the marvels of technology and the help of allies 99% of them were intercepted or eliminated.

  I recently read the book “Unsettled” by Steven E Kooning, The subtitle of the books is this “What climate science tells us, what it doesn’t, and why it matters”. Dr. Kooning notes that heat waves in the US are now no more common than they were in 1900 and that the warmest temperatures in the US have not risen in the past 50 years. Weather-fixated television news would make us all think that disasters are getting worse. They’re not. Around 1900, 4.5 percent of the land area of the world would burn every year. Over the last century, this declined to 3.2 percent. In the previous two decades, satellites have shown further decline — in 2021, just 2.5 percent burned.

  Here’s additional details on how far we have come: 

  • Global poverty rates have been reduced by 50% in the past 20 years.  A hundred years ago, three-quarters of the world’s population lived in extreme poverty. Today, it’s less than 10%.
  •  Human life expectancy has doubled over the past century, from 36 years in 1920 to more than 72 years today. 
  
  

  Americans fell to 23rd place in happiness, down from 15th a year ago, according to data collected in the Gallup World Poll for the World Happiness Report 2024. In the U.S., self-reported happiness has fallen in all age groups, but especially among young adults. Americans 30 and younger ranked 62nd globally in well-being. If you want to know how great you have it, you should really travel more to third world countries. What we have here in America, especially the freedoms provided by the inspired constitution are the envy of the world. There are 7.9 Billion people on planet 🌎 yet only 4.2% of us live in the USA  331,449,281. It’s a remarkable privilege but it’s only appreciated if you travel.

  Tips Tricks and Strategies

  I will share a tip on how to earn more interest on your savings but oddly many Americans curiously are not doing so. This information is courtesy of a recent article in the WSJ entitled  The $42 Billion Question: Why Aren’t AmericansDitching Big Banks? Americans are missing out on billions of dollars in interest by keeping their savings at the biggest U.S. banks.

  I’ve helped at least a dozen clients and even more non-clients transfer some of their deposits to online banks accounts earning as much as 5% which are also FDIC insured. These accounts were setup in as little as 20 minutes and they easily transferred funds between their traditional account and their new online bank account. 

  References

  Good News, the World Is Getting Better

  U.S. Carbon (CO2) Emissions 1960-2024

  Climate Change Indicators: U.S. Greenhouse Gas Emissions

  American Airlines Announces Agreement to Purchase Boom Supersonic Aircraft

  Ridley: Good News Is Gradual, Bad News Is Sudden

  Is humanity doomed? Five ways the world is actually doing better - in data

  The World has made spectacular progress

  2022 Was One of the Worst Years Ever For Markets

  The World Really Is Getting Better

  The $42 Billion Question: Why Aren’t Americans Ditching Big Banks?

  Why Climate Alarmism Hurts us All

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  
  
  
  
  
  
  ]]>eaecf0d3-3bd5-4dcf-95ed-d4798a66edf4Sat, 01 Jun 2024 03:00:00 -070019:50falsefull6363The Top Financial Regrets of Retired Americans and How to Avoid Them - Ep #62The Top Regrets of Retired Americans and How to Avoid Them - Ep #62

  In episode 61, I  shared the top financial regrets of Americans and how to avoid them but in this episode, I’ll share the top regrets of Retired Americans and how to avoid them. The future is unknown so no one can plan their retirement perfectly we will all have some regrets, but it’s important to be aware of what the most common regrets are for retirees so we can take action now to avoid them in the future. In the tips, tricks, and strategies portion, I will share a tip regarding how to spend more in retirement. 

  In this episode...

  • 78% of retirees wish they would have saved more [2:10]
  • Retire Earlier [13:44]
  • Dynamic Retirement Spending Strategies [15:59]
  
  

  More than 6 in 10 retirees say they would go back and change their retirement planning if they had the opportunity. This comes courtesy of a survey conducted by the Lincoln Financial Group and their results reveal many of the top regrets of retirees. businesswire.com referenced this survey and also shared  10 ways today’s retirees say they would have planned differently.

  Save More

  According to an annual study by the Transamerica Center for Retirement Studies, a full 78% of retirees wish they would have saved more. The majority (70 percent) would advise changing savings habits by saving or investing more or earlier. Other savings regrets included not making the most of their 401(k) plan, not enrolling in the plan early enough, and not saving the maximum amount allowed by their plan. What if I told you that if you invested $5000 per year for 40 years from age 25 to age 65 ($200,000 total) you could then withdraw ~$140,000 each year for the following 30 years? 

  Not having a plan for retirement

  According to a Transamerica study it found that only 18% of retirees have a written plan. This is one of my favorite things to do with clients when we plan financially. As we enter the data in their financial plan, and add their goals and wishes, it shows them everything that is possible. It’s especially great when I am able to surprise clients by telling them they can retire much sooner than they thought they could.

  Plan more carefully for the fun they want to have in Retirement

  Two-thirds of pre-retirees (68%) have not completed a budget of anticipated income and expenses, according to Fidelity Investments. With the proper financial plan, I can show how they can spend much more in the earlier years, while they have the best health to do so. It’s highly unlikely you will run out of money.In fact, overall, the retiree finishes with more than double their starting wealth in a whopping 2/3rds of the scenarios, and is more likely to finish with quintuple, or 5 times,  their starting wealth than to finish with less than their starting principal.

  Plan For Health Care

  Many people are surprised when they hear that Medicare does not cover everything. The annual expenses for a couple in retirement are around $12,000. One of the best things a person can do to prepare for healthcare costs in retirement is to exercise regularly. In episode 29 of this podcast I shared how many retirees can have a healthy wealthy and wise retirement.

  Learn more about Personal Finance

  A full 66% of retirees wish they were and had been more knowledgeable about financial planning.

  Plan and make moves to protect money from taxes

  Ed Slott the tax guru calls pre-tax retirement accounts a ticking tax time bomb. Every spring I hold strategy meetings with my clients that focus on strategies that ensure they don’t pay more taxes than they are required. In episode 15 I share about the ticking tax time bomb in retirement.

  Anticipate the unexpected

  we don’t have to look back too far to think of an example of the unexpected, namely Covid. Many retirees had planned to travel during 2020 and 2021 only to see those plans scuttled by the reactions to the pandemic.

  Plan for Income

  It can be challenging on how to turn your savings into income but once you do it can provide peace of mind. 

  Have less Debt

  One-third of retirees regret not paying off debts sooner. In episode X I explained whether you can retire with debt.

  Retire Earlier

  In episode 26 I shared about mini-retirement and how these can be a great way to enjoy moments of retirement sooner. Also, I shared in episodes 50 and 52 about the book Die with Zero whose title belies the true message of the book. I will always remember when a dear friend let me know after her husband had passed away in his 50s, that she was so relieved that they hadn’t waited to go on adventures and had went on many when they were younger.

  Tips Tricks and Strategies

  When it comes to retirement spending there really are two huge risks which are: running out of money and dying with too much money. To combat these conflicting risks I use a dynamic distribution strategy that allows clients to maximize their level of spending but, also ensures they won't run out of money.

  References

  Retirement Regrets: Top 10 Things Retirees Wish They Would Have Done Differently

  7 Retirement Mistakes You Will Regret

  10 Retirees Share Their Biggest Regrets

  Over 60% of retirees wish they could get a “do-over”

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  ]]>The Top Regrets of Retired Americans and How to Avoid Them - Ep #62

  In episode 61, I  shared the top financial regrets of Americans and how to avoid them but in this episode, I’ll share the top regrets of Retired Americans and how to avoid them. The future is unknown so no one can plan their retirement perfectly we will all have some regrets, but it’s important to be aware of what the most common regrets are for retirees so we can take action now to avoid them in the future. In the tips, tricks, and strategies portion, I will share a tip regarding how to spend more in retirement. 

  In this episode...

  • 78% of retirees wish they would have saved more [2:10]
  • Retire Earlier [13:44]
  • Dynamic Retirement Spending Strategies [15:59]
  
  

  More than 6 in 10 retirees say they would go back and change their retirement planning if they had the opportunity. This comes courtesy of a survey conducted by the Lincoln Financial Group and their results reveal many of the top regrets of retirees. businesswire.com referenced this survey and also shared  10 ways today’s retirees say they would have planned differently.

  Save More

  According to an annual study by the Transamerica Center for Retirement Studies, a full 78% of retirees wish they would have saved more. The majority (70 percent) would advise changing savings habits by saving or investing more or earlier. Other savings regrets included not making the most of their 401(k) plan, not enrolling in the plan early enough, and not saving the maximum amount allowed by their plan. What if I told you that if you invested $5000 per year for 40 years from age 25 to age 65 ($200,000 total) you could then withdraw ~$140,000 each year for the following 30 years? 

  Not having a plan for retirement

  According to a Transamerica study it found that only 18% of retirees have a written plan. This is one of my favorite things to do with clients when we plan financially. As we enter the data in their financial plan, and add their goals and wishes, it shows them everything that is possible. It’s especially great when I am able to surprise clients by telling them they can retire much sooner than they thought they could.

  Plan more carefully for the fun they want to have in Retirement

  Two-thirds of pre-retirees (68%) have not completed a budget of anticipated income and expenses, according to Fidelity Investments. With the proper financial plan, I can show how they can spend much more in the earlier years, while they have the best health to do so. It’s highly unlikely you will run out of money.In fact, overall, the retiree finishes with more than double their starting wealth in a whopping 2/3rds of the scenarios, and is more likely to finish with quintuple, or 5 times,  their starting wealth than to finish with less than their starting principal.

  Plan For Health Care

  Many people are surprised when they hear that Medicare does not cover everything. The annual expenses for a couple in retirement are around $12,000. One of the best things a person can do to prepare for healthcare costs in retirement is to exercise regularly. In episode 29 of this podcast I shared how many retirees can have a healthy wealthy and wise retirement.

  Learn more about Personal Finance

  A full 66% of retirees wish they were and had been more knowledgeable about financial planning.

  Plan and make moves to protect money from taxes

  Ed Slott the tax guru calls pre-tax retirement accounts a ticking tax time bomb. Every spring I hold strategy meetings with my clients that focus on strategies that ensure they don’t pay more taxes than they are required. In episode 15 I share about the ticking tax time bomb in retirement.

  Anticipate the unexpected

  we don’t have to look back too far to think of an example of the unexpected, namely Covid. Many retirees had planned to travel during 2020 and 2021 only to see those plans scuttled by the reactions to the pandemic.

  Plan for Income

  It can be challenging on how to turn your savings into income but once you do it can provide peace of mind. 

  Have less Debt

  One-third of retirees regret not paying off debts sooner. In episode X I explained whether you can retire with debt.

  Retire Earlier

  In episode 26 I shared about mini-retirement and how these can be a great way to enjoy moments of retirement sooner. Also, I shared in episodes 50 and 52 about the book Die with Zero whose title belies the true message of the book. I will always remember when a dear friend let me know after her husband had passed away in his 50s, that she was so relieved that they hadn’t waited to go on adventures and had went on many when they were younger.

  Tips Tricks and Strategies

  When it comes to retirement spending there really are two huge risks which are: running out of money and dying with too much money. To combat these conflicting risks I use a dynamic distribution strategy that allows clients to maximize their level of spending but, also ensures they won't run out of money.

  References

  Retirement Regrets: Top 10 Things Retirees Wish They Would Have Done Differently

  7 Retirement Mistakes You Will Regret

  10 Retirees Share Their Biggest Regrets

  Over 60% of retirees wish they could get a “do-over”

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  ]]>d0d3feef-8384-45f0-8474-3fae23111f5dWed, 15 May 2024 03:00:00 -070019:06falsefull6262The Top Financial Regrets of Americans and How to Avoid Them - Ep #61In this episode, I’ll share the top 3 financial regrets of Americans and how to counteract them. No one manages their finances perfectly so we all have regrets, but it’s important to be aware of what the most common ones are so we can take actions to avoid them.

  In this episode...

  • Emergency Funds [03:15]
  • Investing for Growth [08:02]
  • Buying a Home [9:57]
  • Unconventional emergency fund options [14:25]
  
  

  Now no one is perfect when it comes to financial decisions. Like everyone else, I’ve certainly made my fair share of financial mistakes which I chronicled in a few different episodes of this podcast. In episode 18 I shared about a time when I sold a stock for a 50% loss because I succumbed to fear during the Great Recession only to see that stock since that time, rocket over 11,000% higher. You heard that right, I missed out on an 11,000% return. In episode 43, I shared the financial mistakes I made as a young adult and what I wished I had known about money sooner. Having financial regrets is a normal part of learning and growing, but it’s important to be aware of the biggest regrets so we can take actions preemptively to avoid them.

  So just what are the most common regrets of Americans so we can avoid them. These insights are courtesy of the personal finance software company Quicken, which surveyed about 1,000 Americans and found that a whopping 80% said they have financial regrets. 

  The top three regrets were not having a big enough emergency fund (mentioned by 28% of respondents), not investing aggressively enough (25%) and not buying a house when they were younger (22%). A few of the other regrets mentioned were lending money to a friend and family member and not investing in stocks. 

  Emergency Fund

  As a Certified Financial Planner™, financially speaking I know that few things can provide the peace and security that an emergency fund can provide. An emergency fund is way more than for just emergencies, instead it’s financial insurance allowing you to have way more freedom in how you choose to live your life. For example, having an emergency fund allows you to quit a toxic workplace. I recommend having three months’ worth of expenses in savings if both spouses work and if you are single or only one spouse works, then you will need 4-6 months worth of expenses saved. Sadly, far too many Americans don’t have emergency savings as nearly 6 in 10 Americans could not come up with $1000 in the event of an emergency. Far too many think their credit card is their emergency fund.

  How do we prevent this regret and ensure we have an emergency fund. The first step is to have a budget and ensure that you have extra money left over each month. The next step is to set aside these extra funds into an account that you don’t regularly access.

  Not Investing For Growth

  This had to be tied to the fact to some painful emotional memories. Maybe they succumbed to fear in the moment and sold stocks only to see the stock market soar higher. Here is why it’s so important to invest with a higher allocation to stocks. For nearly a century, stocks have provided returns of nearly three times that of inflation. As an asset class, they have been the greatest generator of effortless wealth in history. Since 1926 stocks returned between 8% – 10%  where as the bonds returned between 4% – 6%. The best way to counteract this fear of not investing aggressively enough, is to ignore the noise and stay invested. 

  Buying A Home 

  The third biggest regret for American’s was not buying a home when they were younger. This one seems a bit unfair as there can be a lot outside of ones control when it comes to purchasing a home. Prices shot up by 40% in the two years of Covid and inventory is at historic lows leaving too many buyers and too few sellers so these higher prices aren’t decreasing. My recommendations to these clients have been as follows. First of all, be sure your house savings is in a high-yield savings account. There are online accounts paying over 4.5 and in some cases over 5%. You don’t want to lose out to the silent thief of inflation. The next recommendation is to confirm that they plan to live in their home for at least the next 10 years. Given the closing costs, realtor fees, and other expenses associated with the purchase of a home a general rule of thumb is that you should own the home for 10 years. My final recommendation is that they should feel proud that they have worked so hard to have so much saved and that as they exercise patience they will be rewarded when they find the right home for the right price. 

  TIPS, TRICKS AND STRATEGIES

  Welcome to the tips, tricks, and strategies portion of the podcast where I will share a tip regarding unconventional emergency fund options, these unconventional emergency fund options can help in a pinch.

  401k loan - Many 401k plans have a loan provision that allows participants to take out 50% of their account balance or $50,000 - whichever is less. You will need to pay back the loan over time with interest

  IRA - Indirect Rollover 60-day rule - Most rollovers happen as direct transfers that go from one retirement account directly to the other. There are also indirect transfers where the individual owner of the retirement account takes the money out of an IRA that they can personally reinvest into another IRA, or they can reinvest back into the same IRA without any taxes or penalties if done within 60 days.

  Roth 401k/IRA Contributions - A Roth is a retirement account to which you contribute after-tax funds. What many people don’t realize is that because you have already paid taxes on these contributions, the IRS allows you to withdraw the contributed sums (not the gains) at any time without taxes or penalties.

  References

  80% of Americans Say They Have Financial Regrets - Here are the Most Common Ones

  How to Use Your Roth IRA as an Emergency Fund

  A $1,000 Emergency would push many Americans into debt

  About Half of Lower-Income Americans Report Household Job or Wage Loss Due to COVID-19

  UPS to Offer Employees a Way to Save for Emergencies

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  ]]>In this episode, I’ll share the top 3 financial regrets of Americans and how to counteract them. No one manages their finances perfectly so we all have regrets, but it’s important to be aware of what the most common ones are so we can take actions to avoid them.

  In this episode...

  • Emergency Funds [03:15]
  • Investing for Growth [08:02]
  • Buying a Home [9:57]
  • Unconventional emergency fund options [14:25]
  
  

  Now no one is perfect when it comes to financial decisions. Like everyone else, I’ve certainly made my fair share of financial mistakes which I chronicled in a few different episodes of this podcast. In episode 18 I shared about a time when I sold a stock for a 50% loss because I succumbed to fear during the Great Recession only to see that stock since that time, rocket over 11,000% higher. You heard that right, I missed out on an 11,000% return. In episode 43, I shared the financial mistakes I made as a young adult and what I wished I had known about money sooner. Having financial regrets is a normal part of learning and growing, but it’s important to be aware of the biggest regrets so we can take actions preemptively to avoid them.

  So just what are the most common regrets of Americans so we can avoid them. These insights are courtesy of the personal finance software company Quicken, which surveyed about 1,000 Americans and found that a whopping 80% said they have financial regrets. 

  The top three regrets were not having a big enough emergency fund (mentioned by 28% of respondents), not investing aggressively enough (25%) and not buying a house when they were younger (22%). A few of the other regrets mentioned were lending money to a friend and family member and not investing in stocks. 

  Emergency Fund

  As a Certified Financial Planner™, financially speaking I know that few things can provide the peace and security that an emergency fund can provide. An emergency fund is way more than for just emergencies, instead it’s financial insurance allowing you to have way more freedom in how you choose to live your life. For example, having an emergency fund allows you to quit a toxic workplace. I recommend having three months’ worth of expenses in savings if both spouses work and if you are single or only one spouse works, then you will need 4-6 months worth of expenses saved. Sadly, far too many Americans don’t have emergency savings as nearly 6 in 10 Americans could not come up with $1000 in the event of an emergency. Far too many think their credit card is their emergency fund.

  How do we prevent this regret and ensure we have an emergency fund. The first step is to have a budget and ensure that you have extra money left over each month. The next step is to set aside these extra funds into an account that you don’t regularly access.

  Not Investing For Growth

  This had to be tied to the fact to some painful emotional memories. Maybe they succumbed to fear in the moment and sold stocks only to see the stock market soar higher. Here is why it’s so important to invest with a higher allocation to stocks. For nearly a century, stocks have provided returns of nearly three times that of inflation. As an asset class, they have been the greatest generator of effortless wealth in history. Since 1926 stocks returned between 8% – 10%  where as the bonds returned between 4% – 6%. The best way to counteract this fear of not investing aggressively enough, is to ignore the noise and stay invested. 

  Buying A Home 

  The third biggest regret for American’s was not buying a home when they were younger. This one seems a bit unfair as there can be a lot outside of ones control when it comes to purchasing a home. Prices shot up by 40% in the two years of Covid and inventory is at historic lows leaving too many buyers and too few sellers so these higher prices aren’t decreasing. My recommendations to these clients have been as follows. First of all, be sure your house savings is in a high-yield savings account. There are online accounts paying over 4.5 and in some cases over 5%. You don’t want to lose out to the silent thief of inflation. The next recommendation is to confirm that they plan to live in their home for at least the next 10 years. Given the closing costs, realtor fees, and other expenses associated with the purchase of a home a general rule of thumb is that you should own the home for 10 years. My final recommendation is that they should feel proud that they have worked so hard to have so much saved and that as they exercise patience they will be rewarded when they find the right home for the right price. 

  TIPS, TRICKS AND STRATEGIES

  Welcome to the tips, tricks, and strategies portion of the podcast where I will share a tip regarding unconventional emergency fund options, these unconventional emergency fund options can help in a pinch.

  401k loan - Many 401k plans have a loan provision that allows participants to take out 50% of their account balance or $50,000 - whichever is less. You will need to pay back the loan over time with interest

  IRA - Indirect Rollover 60-day rule - Most rollovers happen as direct transfers that go from one retirement account directly to the other. There are also indirect transfers where the individual owner of the retirement account takes the money out of an IRA that they can personally reinvest into another IRA, or they can reinvest back into the same IRA without any taxes or penalties if done within 60 days.

  Roth 401k/IRA Contributions - A Roth is a retirement account to which you contribute after-tax funds. What many people don’t realize is that because you have already paid taxes on these contributions, the IRS allows you to withdraw the contributed sums (not the gains) at any time without taxes or penalties.

  References

  80% of Americans Say They Have Financial Regrets - Here are the Most Common Ones

  How to Use Your Roth IRA as an Emergency Fund

  A $1,000 Emergency would push many Americans into debt

  About Half of Lower-Income Americans Report Household Job or Wage Loss Due to COVID-19

  UPS to Offer Employees a Way to Save for Emergencies

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  ]]>633965e8-32ff-4b56-af14-bec3805156abWed, 01 May 2024 03:00:00 -070019:35falsefull6161Taxes Are Going Higher for Everyone - Ep #60WARNING - Why Taxes Are Going Higher for Everyone

  This episode is airing on April 15th, our tax filing deadline and a key aspect of my financial planning practice is to identify and implement tax-saving strategies for my clients. In this episode, I’ll share why it’s almost certain that everyone’s taxes will be going higher in the future because of our annual federal deficit and our cumulative national debt.

  In this episode...

  • The Government Spends Worse than a Drunken Sailor [3:10]
  • Tax Burdens by Income Level [07:12]
  • Possible revenue streams for the US Government [11:02]
  • Tax Saving Strategies [15:24]
  
  

  The National Debt 

  The federal government of the United States has an annual budget. It’s the set amount that the Federal government spends throughout the year. The amount they are currently spending is much more than the “income” they receive from individual and corporate taxes. In the Calendar Year of 2023, the federal government spent $6.3 trillion but only collected $4.5 trillion in taxes. Just what happens when you add up all of this overspending year after year? That’s called our national debt. Right now that total is over $34Trillion dollars. I shared more in episode 33 of this podcast entitled Time to Pay the Piper. Our debt is steadily climbing at over $34T as of this recording and is expected to be over $5oT by 2032. you can see more at the website usdebtclock.org. 

  We must get our deficits lowered because the interest costs are set to become enormous. In 2028, Federal tax revenue is expected to be $6.1T, actual spending is expected to be $11.7T and just the interest payments on the debt will be nearly $2.7T a year. In order to reduce our debt and the interest we pay on it,  we will need to stop adding to it each and every year with the government's extra spending.   As John Mauldin says: “Yet people continue to say we could balance the budget and pay down the debt by“making the rich pay their fair share.” I wish it were that easy. I really do. But sadly, as I’ll show you, it’s not.”

  Tax Load

  Here’s how it looked in 2020 (the latest available data from the IRS courtesy of the Heritage Foundation).

  The top 1% earners in America, those that earn over $548k/year earn 22% of the income and pay 42% of the income taxes received by the Federal government.

  The top 5% earn more than $220K 38% and pay 62% of the taxes paid to the government. The top 10% earn more than $152K earn 49% of the income and pay 73% of the taxes paid to the government.

  The bottom 90% (those that make less than $152K) earned 50% of the income and paid 26% of the taxes.

  The US deficit will rise by an average of about $2 trillion/ year for the next decade.

  As John points out, to account for the extra $2 trillion of spending we will need $2T more of tax revenue. If we raised taxes by about 50% on everybody, from the bottom 1% to the top 1%, it would only get us $850 billion which is a little less than half the way there. Clearly, we don’t have enough money just to match the current projected spending of the government. Instead, they have to reduce spending and raise taxes on individuals and corporations and likely also look for additional sources of tax revenue because income tax by itself won’t cut it. The most likely option in my opinion is a national sales tax or value-added tax.

  Suffice it to say, we and really our children are in a heap of trouble given our debt obligations. We’ll eventually have to pay the piper for our overspending. What exactly happens is uncertain but I believe what is almost certain, is that our taxes will be going higher to pay for it in the future.

  Tips Tricks and Strategies

  In past episodes, I’ve outlined numerous ways to save money on taxes. The Augusta rule, where you can rent your primary residence for 14 or fewer days each year and all of the money earned is tax-free. For business owners, it’s even better as they can rent their house to their business and get a deduction on the expense from their business and transfer-tax-free income to themselves. See episodes 8 and 9 for the details. I’ve also discussed Roth contributions and when they make the most sense (see episodes 1 ), Roth conversions (see episodes 12, 26, 49), and Roth IRAs for your kids (episode 6). I also discussed Traditional and 401k contributions (Ep 1). Defined benefit plans where I’ve helped several clients reduce over $250k in a single year from the highest tax rates (were highlighted in episode 7) and  Health Savings Accounts have figured prominently as well (see episodes 2, 8, 9, 26, 29, and 59). I also discussed tax loss harvesting and its incredibly powerful and less well-known sibling, tax gain harvesting (see ep 26).  In episode 34 I shared about Net Unrealized Appreciations or  NUAs which is a significant tax savings that could be hiding in your 401k if you own company stock.  In episode 51 I shared tax-advantaged ways to give to charity through Donor-advised funds, Qualified Charitable distributions as well as donating appreciated stock and a tax saving strategy to stack contributions.

  References

  US Budget Gap widened During Year on Rate Rise, Revenue drop

  Responding To Critics of Rolling Back the Retirement Tax Break

  Do the Rich Pay Their Fair Share

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  ]]>WARNING - Why Taxes Are Going Higher for Everyone

  This episode is airing on April 15th, our tax filing deadline and a key aspect of my financial planning practice is to identify and implement tax-saving strategies for my clients. In this episode, I’ll share why it’s almost certain that everyone’s taxes will be going higher in the future because of our annual federal deficit and our cumulative national debt.

  In this episode...

  • The Government Spends Worse than a Drunken Sailor [3:10]
  • Tax Burdens by Income Level [07:12]
  • Possible revenue streams for the US Government [11:02]
  • Tax Saving Strategies [15:24]
  
  

  The National Debt 

  The federal government of the United States has an annual budget. It’s the set amount that the Federal government spends throughout the year. The amount they are currently spending is much more than the “income” they receive from individual and corporate taxes. In the Calendar Year of 2023, the federal government spent $6.3 trillion but only collected $4.5 trillion in taxes. Just what happens when you add up all of this overspending year after year? That’s called our national debt. Right now that total is over $34Trillion dollars. I shared more in episode 33 of this podcast entitled Time to Pay the Piper. Our debt is steadily climbing at over $34T as of this recording and is expected to be over $5oT by 2032. you can see more at the website usdebtclock.org. 

  We must get our deficits lowered because the interest costs are set to become enormous. In 2028, Federal tax revenue is expected to be $6.1T, actual spending is expected to be $11.7T and just the interest payments on the debt will be nearly $2.7T a year. In order to reduce our debt and the interest we pay on it,  we will need to stop adding to it each and every year with the government's extra spending.   As John Mauldin says: “Yet people continue to say we could balance the budget and pay down the debt by“making the rich pay their fair share.” I wish it were that easy. I really do. But sadly, as I’ll show you, it’s not.”

  Tax Load

  Here’s how it looked in 2020 (the latest available data from the IRS courtesy of the Heritage Foundation).

  The top 1% earners in America, those that earn over $548k/year earn 22% of the income and pay 42% of the income taxes received by the Federal government.

  The top 5% earn more than $220K 38% and pay 62% of the taxes paid to the government. The top 10% earn more than $152K earn 49% of the income and pay 73% of the taxes paid to the government.

  The bottom 90% (those that make less than $152K) earned 50% of the income and paid 26% of the taxes.

  The US deficit will rise by an average of about $2 trillion/ year for the next decade.

  As John points out, to account for the extra $2 trillion of spending we will need $2T more of tax revenue. If we raised taxes by about 50% on everybody, from the bottom 1% to the top 1%, it would only get us $850 billion which is a little less than half the way there. Clearly, we don’t have enough money just to match the current projected spending of the government. Instead, they have to reduce spending and raise taxes on individuals and corporations and likely also look for additional sources of tax revenue because income tax by itself won’t cut it. The most likely option in my opinion is a national sales tax or value-added tax.

  Suffice it to say, we and really our children are in a heap of trouble given our debt obligations. We’ll eventually have to pay the piper for our overspending. What exactly happens is uncertain but I believe what is almost certain, is that our taxes will be going higher to pay for it in the future.

  Tips Tricks and Strategies

  In past episodes, I’ve outlined numerous ways to save money on taxes. The Augusta rule, where you can rent your primary residence for 14 or fewer days each year and all of the money earned is tax-free. For business owners, it’s even better as they can rent their house to their business and get a deduction on the expense from their business and transfer-tax-free income to themselves. See episodes 8 and 9 for the details. I’ve also discussed Roth contributions and when they make the most sense (see episodes 1 ), Roth conversions (see episodes 12, 26, 49), and Roth IRAs for your kids (episode 6). I also discussed Traditional and 401k contributions (Ep 1). Defined benefit plans where I’ve helped several clients reduce over $250k in a single year from the highest tax rates (were highlighted in episode 7) and  Health Savings Accounts have figured prominently as well (see episodes 2, 8, 9, 26, 29, and 59). I also discussed tax loss harvesting and its incredibly powerful and less well-known sibling, tax gain harvesting (see ep 26).  In episode 34 I shared about Net Unrealized Appreciations or  NUAs which is a significant tax savings that could be hiding in your 401k if you own company stock.  In episode 51 I shared tax-advantaged ways to give to charity through Donor-advised funds, Qualified Charitable distributions as well as donating appreciated stock and a tax saving strategy to stack contributions.

  References

  US Budget Gap widened During Year on Rate Rise, Revenue drop

  Responding To Critics of Rolling Back the Retirement Tax Break

  Do the Rich Pay Their Fair Share

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  ]]>d1a9afd4-dbe1-41b1-a939-9fa362489e2bMon, 15 Apr 2024 03:00:00 -070019:22falsefull6060Tax Advantaged Investment Accounts - Ep #59Tax Advantaged Investment Accounts, Ep #59

  It’s April and taxes are on the forefront of everyone’s mind. An essential part of building wealth is to not pay more taxes than you have to. In this episode, I will be getting back to the basics and provide and overview of tax-advantaged investment accounts.  

  In this episode...

  • Pre-tax account strategies  [4:03]
  • After-tax account strategies  [6:11]
  • How young adults can benefit from HSA accounts   [12:26]
  
  

  Taxes can be incredibly confusing regarding how they work and the terminology does not help. Terms such as Gross Income, Adjusted Gross Income, Modified Adjusted Gross Income, above-the-line deductions, below-the-line deductions, tax credits, tax deductions, and Marginal tax rate vs effective tax rate are all important to understand how taxes work and how to implement tax saving strategies. If you want to learn more about these terms consider listening to Episode 8 and Episode 9 of this podcast. 

  In this episode, I’ll provide a more basic understanding of tax-advantaged investment accounts and how these accounts can help you save on taxes. More specifically, how different investment accounts are taxed because knowing the differences can help a person decide when it is to their advantage to pay taxes.  This is an important topic because I often see individuals and families paying way more taxes than they need to because they don’t understand the differences between tax-advantaged investment accounts and how they allow tax optimization.

  There are 3 different types of tax-advantaged accounts we will discuss each one below.

  Pre-tax Accounts - Also known as traditional retirement accounts. Most know these as their 401(k) or IRA. In these accounts, you contribute a portion of your salary before you pay taxes. You will still have to pay taxes on this money but you will pay it later, when you take the money out of the account. These types of accounts make the most sense when you are in your highest earning income years. Deciding to pay taxes on the money put into these accounts during retirement when your income is lower can save you a significant amount of money in taxes. 

  After-tax Accounts -After-tax accounts are when you pay taxes on the money before you make contributions to the account. These are commonly recognized as Roth 401k or Roth IRA retirement accounts. 529 accounts are also after-tax accounts. The advantage to these accounts is you never have to pay taxes again on the money contributed if you follow the distribution rules. This type of tax-advantaged account makes a lot of sense in your lowest and lower earning income years. By deciding to pay taxes when your income is lower you can save a significant amount in taxes. 

  HSA Accounts -HSA accounts are the only accounts that are considered triple tax-free. With these types of accounts, you don’t pay taxes on the contributions or distributions or anytime in between. The contributions are tax-deductible, and both the growth, and distributions (if used for a qualifying medical expense) are tax-free.  As long as you follow the rules with HSAs you will pay ZERO taxes on them. Only people with a qualifying high-deductible medical plan are eligible to invest in HSAs. Contributions to HSAs are limited to an annual amount. For 2024 the limits are as follows: Individual $4,150, and Family $8,300. For those 55 and older you can contribute an additional $1,000. 

  You may use funds in an HSA at any time for medical expenses. If you do not use all of the money inside of an HSA it will essentially become a traditional IRA and be taxed at ordinary income rates. HSAs can be so beneficial because the average retired couple will spend, on average, over $315,000 on medical expenses during retirement. 

  Tips, Tricks, and Strategies - Young adults between the ages of 18-26 can benefit strongly from HSAs. Young adults can remain on their parents' health plan until age 26 and if their parents have a high deductible health plan they can contribute to their own HSA account. 

  References

  How to plan for rising health care costs

  Maximizing HSA Tax Benefits With Adult Children

  401(k)s Will Be Gone Within a Decade

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  **************************************************************************************************

  ]]>Tax Advantaged Investment Accounts, Ep #59

  It’s April and taxes are on the forefront of everyone’s mind. An essential part of building wealth is to not pay more taxes than you have to. In this episode, I will be getting back to the basics and provide and overview of tax-advantaged investment accounts.  

  In this episode...

  • Pre-tax account strategies  [4:03]
  • After-tax account strategies  [6:11]
  • How young adults can benefit from HSA accounts   [12:26]
  
  

  Taxes can be incredibly confusing regarding how they work and the terminology does not help. Terms such as Gross Income, Adjusted Gross Income, Modified Adjusted Gross Income, above-the-line deductions, below-the-line deductions, tax credits, tax deductions, and Marginal tax rate vs effective tax rate are all important to understand how taxes work and how to implement tax saving strategies. If you want to learn more about these terms consider listening to Episode 8 and Episode 9 of this podcast. 

  In this episode, I’ll provide a more basic understanding of tax-advantaged investment accounts and how these accounts can help you save on taxes. More specifically, how different investment accounts are taxed because knowing the differences can help a person decide when it is to their advantage to pay taxes.  This is an important topic because I often see individuals and families paying way more taxes than they need to because they don’t understand the differences between tax-advantaged investment accounts and how they allow tax optimization.

  There are 3 different types of tax-advantaged accounts we will discuss each one below.

  Pre-tax Accounts - Also known as traditional retirement accounts. Most know these as their 401(k) or IRA. In these accounts, you contribute a portion of your salary before you pay taxes. You will still have to pay taxes on this money but you will pay it later, when you take the money out of the account. These types of accounts make the most sense when you are in your highest earning income years. Deciding to pay taxes on the money put into these accounts during retirement when your income is lower can save you a significant amount of money in taxes. 

  After-tax Accounts -After-tax accounts are when you pay taxes on the money before you make contributions to the account. These are commonly recognized as Roth 401k or Roth IRA retirement accounts. 529 accounts are also after-tax accounts. The advantage to these accounts is you never have to pay taxes again on the money contributed if you follow the distribution rules. This type of tax-advantaged account makes a lot of sense in your lowest and lower earning income years. By deciding to pay taxes when your income is lower you can save a significant amount in taxes. 

  HSA Accounts -HSA accounts are the only accounts that are considered triple tax-free. With these types of accounts, you don’t pay taxes on the contributions or distributions or anytime in between. The contributions are tax-deductible, and both the growth, and distributions (if used for a qualifying medical expense) are tax-free.  As long as you follow the rules with HSAs you will pay ZERO taxes on them. Only people with a qualifying high-deductible medical plan are eligible to invest in HSAs. Contributions to HSAs are limited to an annual amount. For 2024 the limits are as follows: Individual $4,150, and Family $8,300. For those 55 and older you can contribute an additional $1,000. 

  You may use funds in an HSA at any time for medical expenses. If you do not use all of the money inside of an HSA it will essentially become a traditional IRA and be taxed at ordinary income rates. HSAs can be so beneficial because the average retired couple will spend, on average, over $315,000 on medical expenses during retirement. 

  Tips, Tricks, and Strategies - Young adults between the ages of 18-26 can benefit strongly from HSAs. Young adults can remain on their parents' health plan until age 26 and if their parents have a high deductible health plan they can contribute to their own HSA account. 

  References

  How to plan for rising health care costs

  Maximizing HSA Tax Benefits With Adult Children

  401(k)s Will Be Gone Within a Decade

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  **************************************************************************************************

  ]]>a93e1732-fcfd-4ff1-986d-4c9dbb56ce22Mon, 01 Apr 2024 03:00:00 -070015:34falsefull5959Retiring Outside of the United States? Factors to Consider - Ep #58Retiring Out of the States - What to Consider, Ep #58

  Last episode we discussed the implications of where you choose to retire in the United States. In this episode, we will dive into what to consider when retiring internationally. Retiring outside of the United States is not a simple decision but one we hope to offer guidance on today.

  In this episode...

  • Top countries for Americans to retire to [03:12]
  • Factors to Consider when retiring out of the states  [8:47]
  • How to “test drive” international retirement   [10:45]
  
  

  For those that want to retire internationally, you are not alone.  Global Citizens Solutions is a firm that helps Americans retire abroad. They have listed the top 10 countries to retire by considering criteria such as housing, benefits and low-cost perks, Visas and residency ease, cost of living, cultural assimilation, quality and accessibility of healthcare, development, climate, government stability, and the opportunity to semi-retire.

  The number one country to retire to as ranked by the Global Citizens Solutions is Portugal followed by Mexico and Panama. You may be considering retiring out of the States to pursue a happier life and an adventure, you will also be able to take advantage of stretching your funds through a lower cost of living and meeting financial goals that wouldn’t be possible to achieve by staying in the United States.

  My practice helps take clients to and through early retirement and retiring in a country with a lower cost of living makes early retirement much more feasible. Take Portugal for example, the number one country for Americans to retire to offering beautiful beaches, a warm climate, and a rich culture. Portugal offers programs to help Americans retire to Portugal.

  Most obvious factors to consider when moving to another country in retirement:

  Cost of Living - This is a significant factor to consider when choosing to retire abroad. Retiring to a country with a significantly lower cost of living can change lifestyle during retirement.

  Climate —It is important to consider what climate you want to retire to. Why make such a massive move to only have to endure winter? 

  Healthcare Access and Expenses— This is one of the top considerations with international retirees. The average married couple in America spends over $250k during retirement on healthcare alone. There are countries where your health care dollars can go further and you will be surprised how good the healthcare you receive will be.

  Housing— will be a significant factor to consider, for example, some of the houses in Costa Rica are gorgeous but they come at a steep price. You may want to consider the cost of buying a home outside of the States.

  Culture— There may be significant cultural differences as well as language barriers to consider.

  In short, if you are looking to retire outside of the States some of the factors you will want to consider are Cost of living, Climate, Healthcare Access, Housing, and Culture. There are a host of other factors as well such as tax and legal factors and proximity to family. 

  My practice helps take clients to and through early retirement, one strategy to consider is to spend the first few years of retirement in an international location with a lower cost of living.

  The idea of living internationally might sound exciting but, you might still have some hesitation. A great way to temporarily test drive a retirement out of the country is doing a home swap. There are websites that provide a platform where you can exchange homes with other international travelers. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Retiring Overseas: Here's What You Need to Know
  • Top 10 Countries for Americans to retire
  • Home Exchange
  • Robert August
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  **************************************************************************************************

  ]]>Retiring Out of the States - What to Consider, Ep #58

  Last episode we discussed the implications of where you choose to retire in the United States. In this episode, we will dive into what to consider when retiring internationally. Retiring outside of the United States is not a simple decision but one we hope to offer guidance on today.

  In this episode...

  • Top countries for Americans to retire to [03:12]
  • Factors to Consider when retiring out of the states  [8:47]
  • How to “test drive” international retirement   [10:45]
  
  

  For those that want to retire internationally, you are not alone.  Global Citizens Solutions is a firm that helps Americans retire abroad. They have listed the top 10 countries to retire by considering criteria such as housing, benefits and low-cost perks, Visas and residency ease, cost of living, cultural assimilation, quality and accessibility of healthcare, development, climate, government stability, and the opportunity to semi-retire.

  The number one country to retire to as ranked by the Global Citizens Solutions is Portugal followed by Mexico and Panama. You may be considering retiring out of the States to pursue a happier life and an adventure, you will also be able to take advantage of stretching your funds through a lower cost of living and meeting financial goals that wouldn’t be possible to achieve by staying in the United States.

  My practice helps take clients to and through early retirement and retiring in a country with a lower cost of living makes early retirement much more feasible. Take Portugal for example, the number one country for Americans to retire to offering beautiful beaches, a warm climate, and a rich culture. Portugal offers programs to help Americans retire to Portugal.

  Most obvious factors to consider when moving to another country in retirement:

  Cost of Living - This is a significant factor to consider when choosing to retire abroad. Retiring to a country with a significantly lower cost of living can change lifestyle during retirement.

  Climate —It is important to consider what climate you want to retire to. Why make such a massive move to only have to endure winter? 

  Healthcare Access and Expenses— This is one of the top considerations with international retirees. The average married couple in America spends over $250k during retirement on healthcare alone. There are countries where your health care dollars can go further and you will be surprised how good the healthcare you receive will be.

  Housing— will be a significant factor to consider, for example, some of the houses in Costa Rica are gorgeous but they come at a steep price. You may want to consider the cost of buying a home outside of the States.

  Culture— There may be significant cultural differences as well as language barriers to consider.

  In short, if you are looking to retire outside of the States some of the factors you will want to consider are Cost of living, Climate, Healthcare Access, Housing, and Culture. There are a host of other factors as well such as tax and legal factors and proximity to family. 

  My practice helps take clients to and through early retirement, one strategy to consider is to spend the first few years of retirement in an international location with a lower cost of living.

  The idea of living internationally might sound exciting but, you might still have some hesitation. A great way to temporarily test drive a retirement out of the country is doing a home swap. There are websites that provide a platform where you can exchange homes with other international travelers. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Retiring Overseas: Here's What You Need to Know
  • Top 10 Countries for Americans to retire
  • Home Exchange
  • Robert August
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  **************************************************************************************************

  ]]>ba7f0b95-8646-468c-a9ca-e7ab8ab38323Fri, 15 Mar 2024 03:00:00 -070013:06falsefull5858Retiring Out of State? Factors to Consider - Ep #57Retiring Out of State - What to Consider, Ep #57

  When it comes to retirement for citizens in the U-S-of-A, you have 50 different states to choose where you would like to spend your retirement. It’s not a decision to take lightly as there are advantages and disadvantages that every state offers. There are a host of factors to consider when retiring to another state and I’ll go over a few of them here.

  In this episode...

  • United States Retirement Migration trends [03:35]
  • Factors to Consider when retiring out of State  [05:47]
  • How to save on taxes for those with residences in two states   [12:57]
  
  

  More than a few Americans decide to relocate to another state. Smart Asset examined U.S. Census Bureau migration data to uncover where retirees are moving. They noted, unsurprisingly, that a lot of seniors are moving out of expensive northeastern cities and into other parts of the country. Here are some of the key findings of their analysis of the census data:

  The most popular city for retirees to move to was Mesa, Arizona which topped the list for the nation’s highest net gain of seniors for the third consecutive year. In fact, the influx of retirees more than doubled that of the second place city.

  The most popular state is Florida which sees a massive influx of seniors. Florida netted more than 78,000 senior residents from other states in 2021 – three times as many as the second-ranked state. Miami, Jacksonville, St. Petersburg, and Tampa all placed among the top 20 cities gaining the most seniors.

  Smart Asset noted that Taxes and climate appear to influence retirees.

  The most obvious factors to consider when moving to another state in retirement. 

  Proximity to Family - As you get older, you want to cherish your time with family. Obviously, you’ll get more of that when you live closer to one another. Additionally, you may need some assistance as you get older so you will want to have family close to help you. Clearly, being geographically close to family is a compelling reason to retire to another state but maybe not too close to your family, as the comedian George Burns put it “Happiness is having a large, loving, caring, close-knit family in another city”. But it should be noted that he didn’t say in another state.

  Cost of Living —The next most important factor when considering retiring in another state is the cost of living. This has more to do with just taxes as things can be significantly more or less expensive. 

  Climate — There’s a reason why more retirees are moving to sunnier climes such as Florida, Arizona, Texas and the like. 

  Taxes — Are a huge consideration when deciding to retire in another state. Some states tax income at higher rates, some don’t tax income at all. Some tax social security benefits and some don’t at all. Others have no to low income rates but have higher property tax rates to make up for it. Some have high sales tax and a few have none.

  In short, if you are looking to retire to another state some of the factors you will want to consider is proximity to family, the climate, the cost of living and of course taxes. Because if you live close to family near the border of two different states, it might make a big difference in which of the fifty nifty United states you decide to retire to. 

  There is a tax saving strategy for those who have residences in two different states. We’ll call it the 183 rule. Why that number, because there are 365 days in a year and 183 days is just over half. If a person has residences in two different states, say California and Nevada, they would want to become a resident in Nevada and spend 183 days or more in their Nevada residence. This would ensure that their income would be taxed at Nevada rates and not Californias, because they spent the majority of the time in Nevada.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • https://www.investopedia.com/articles/personal-finance/110614/overall-tax-burden-state.asp
  • https://www.nerdwallet.com/cost-of-living-calculator
  • https://www.kitces.com/blog/state-income-tax-retirees-top-marginal-rates-social-security-pension-income-age-exemptions/
  • https://smartasset.com/data-studies/where-retirees-are-moving-2023
  • https://www.investopedia.com/tax-residency-rules-by-state-5114689
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  
  
  

  ******************************************************************

  
  ]]>Retiring Out of State - What to Consider, Ep #57

  When it comes to retirement for citizens in the U-S-of-A, you have 50 different states to choose where you would like to spend your retirement. It’s not a decision to take lightly as there are advantages and disadvantages that every state offers. There are a host of factors to consider when retiring to another state and I’ll go over a few of them here.

  In this episode...

  • United States Retirement Migration trends [03:35]
  • Factors to Consider when retiring out of State  [05:47]
  • How to save on taxes for those with residences in two states   [12:57]
  
  

  More than a few Americans decide to relocate to another state. Smart Asset examined U.S. Census Bureau migration data to uncover where retirees are moving. They noted, unsurprisingly, that a lot of seniors are moving out of expensive northeastern cities and into other parts of the country. Here are some of the key findings of their analysis of the census data:

  The most popular city for retirees to move to was Mesa, Arizona which topped the list for the nation’s highest net gain of seniors for the third consecutive year. In fact, the influx of retirees more than doubled that of the second place city.

  The most popular state is Florida which sees a massive influx of seniors. Florida netted more than 78,000 senior residents from other states in 2021 – three times as many as the second-ranked state. Miami, Jacksonville, St. Petersburg, and Tampa all placed among the top 20 cities gaining the most seniors.

  Smart Asset noted that Taxes and climate appear to influence retirees.

  The most obvious factors to consider when moving to another state in retirement. 

  Proximity to Family - As you get older, you want to cherish your time with family. Obviously, you’ll get more of that when you live closer to one another. Additionally, you may need some assistance as you get older so you will want to have family close to help you. Clearly, being geographically close to family is a compelling reason to retire to another state but maybe not too close to your family, as the comedian George Burns put it “Happiness is having a large, loving, caring, close-knit family in another city”. But it should be noted that he didn’t say in another state.

  Cost of Living —The next most important factor when considering retiring in another state is the cost of living. This has more to do with just taxes as things can be significantly more or less expensive. 

  Climate — There’s a reason why more retirees are moving to sunnier climes such as Florida, Arizona, Texas and the like. 

  Taxes — Are a huge consideration when deciding to retire in another state. Some states tax income at higher rates, some don’t tax income at all. Some tax social security benefits and some don’t at all. Others have no to low income rates but have higher property tax rates to make up for it. Some have high sales tax and a few have none.

  In short, if you are looking to retire to another state some of the factors you will want to consider is proximity to family, the climate, the cost of living and of course taxes. Because if you live close to family near the border of two different states, it might make a big difference in which of the fifty nifty United states you decide to retire to. 

  There is a tax saving strategy for those who have residences in two different states. We’ll call it the 183 rule. Why that number, because there are 365 days in a year and 183 days is just over half. If a person has residences in two different states, say California and Nevada, they would want to become a resident in Nevada and spend 183 days or more in their Nevada residence. This would ensure that their income would be taxed at Nevada rates and not Californias, because they spent the majority of the time in Nevada.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • https://www.investopedia.com/articles/personal-finance/110614/overall-tax-burden-state.asp
  • https://www.nerdwallet.com/cost-of-living-calculator
  • https://www.kitces.com/blog/state-income-tax-retirees-top-marginal-rates-social-security-pension-income-age-exemptions/
  • https://smartasset.com/data-studies/where-retirees-are-moving-2023
  • https://www.investopedia.com/tax-residency-rules-by-state-5114689
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  
  
  

  ******************************************************************

  
  ]]>cf41d90c-df56-4274-87b1-639ab9be351dFri, 01 Mar 2024 03:00:00 -070016:03falsefull5757The Two Comma Club & How to Become a Member - Ep #56How to Become a Member of the Two Comma Club, Ep #56

  This episode focuses on the behaviors needed to become a member of the two-comma club. What exactly is the two-comma club? Well, it’s just a different way of saying how to become a millionaire, since one million dollars is represented by 7 numbers, the number 1 followed by 6 zeros, consequently there are two commas required to break those numbers up.

  In this episode...

  • Who Wants to be a Millionaire [01:26]
  • USA has a lot of millionaires [03:23]
  • The Abundance Mentality [05:49]
  • Prerequisites to becoming a Millionaire: The Success Sequence [07:28]
  • What you should do [09:20]
  • What happens to those that didn’t model the behaviors [14:13]
  
  

  Years ago there was a hugely popular game show entitled Who Wants to Be a Millionaire. It captivated the American public. The television network ABC first launched the American version of the game show in 1999 and it became the highest-rated television show later that year, and has since had 21 seasons with several different celebrities serving as the game show host.

  In 2023 here in the US of A, we have never had more millionaires than we do right now. 

  Based on the latest estimates from the Federal Reserve there are around 16 million American households with a net worth of $1 million or more. That’s up from fewer than 10 million millionaire families in 2019.

  While saving and investing are important behaviors to cultivate on the path to becoming financially independent (or a millionaire) there are prerequisites behaviors that must be mentioned. In an opinion piece in the WSJ by the wonderful Jason Riley, he emphasized the success sequence. That sequence is often credited to research done by Brookings Institution scholars Isabel Sawhill and Ron Haskins, though others have made similar observations. The success sequence is simply this:

  If you finish high school, get a job, and get married before having children, you have a 98% chance of not being in poverty.

  Recently Dr. Melissa Kearny, MIT-trained economist wrote a book entitled The Two-Parent Privilege.  In it she shared the story of how declining marriage rates are driving many of the country’s biggest economic problems and how the greatest impacts of marriage are, in fact, economic: when two adults marry, their economic and household lives improve, offering a host of benefits not only for the married adults but for their children. A summary of the book notes that For many, the two-parent home may be an old-fashioned symbol of the idyllic American dream. But The Two-Parent Privilege makes it clear that marriage, for all its challenges and faults, maybe our best path to a more equitable future.

  Here are a few additional behaviors I would add:

  Not borrowing money when you don’t have to. Just because you are approved for a loan doesn’t mean you can afford the thing you are trying to purchase. Don’t confuse approval with proof that you can afford the car or whatever it is you are trying to buy with borrowed money. If a person has a new luxury car they are wasting money and most who have them don’t have the money to waste. You should only borrow money to buy an house and pay for some college. And even with college there are many reasons not to borrow money to pay for college. See episodes 15 and 16 of this podcast for more information.

  Another thing to note, just because a person has a high FICO score it doesn’t necessarily mean they have made smart money choices but simply the fact that they have shown the ability to borrow money and pay it back consistently. One’s personally accrued net worth and the savings rate is a far better determiners of smart money choices.

  In the end, it all comes down to discipline. Everything changes financially when you are living on a paycheck from 3 months ago. If a person needs their upcoming paycheck to pay their expenses they don’t have the mindset to be financially free or a millionaire. Instead, they have the mindset to struggle financially. 

  That may sound like a harsh thing to say to those who are suffering to make ends meet. But the principles required to lift their self out of their current circumstances can be found in their daily choices.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • https://awealthofcommonsense.com/2023/11/how-to-become-a-millionaire/
  • https://www.wsj.com/us-news/never-mind-the-1-mini-millionaires-are-where-wealth-is-growing-fastest-b1dd2ee7
  • https://press.uchicago.edu/ucp/books/book/chicago/T/bo205550079.html
  • https://www.wsj.com/articles/the-biggest-root-cause-of-crime-is-fatherlessness-single-motherhood-5cdfe763
  • https://ourworldindata.org/millennium-development-goals
  
  

  Connect with Jonny West

  
  

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  
  
  

  ******************************************************************

  
  ]]>How to Become a Member of the Two Comma Club, Ep #56

  This episode focuses on the behaviors needed to become a member of the two-comma club. What exactly is the two-comma club? Well, it’s just a different way of saying how to become a millionaire, since one million dollars is represented by 7 numbers, the number 1 followed by 6 zeros, consequently there are two commas required to break those numbers up.

  In this episode...

  • Who Wants to be a Millionaire [01:26]
  • USA has a lot of millionaires [03:23]
  • The Abundance Mentality [05:49]
  • Prerequisites to becoming a Millionaire: The Success Sequence [07:28]
  • What you should do [09:20]
  • What happens to those that didn’t model the behaviors [14:13]
  
  

  Years ago there was a hugely popular game show entitled Who Wants to Be a Millionaire. It captivated the American public. The television network ABC first launched the American version of the game show in 1999 and it became the highest-rated television show later that year, and has since had 21 seasons with several different celebrities serving as the game show host.

  In 2023 here in the US of A, we have never had more millionaires than we do right now. 

  Based on the latest estimates from the Federal Reserve there are around 16 million American households with a net worth of $1 million or more. That’s up from fewer than 10 million millionaire families in 2019.

  While saving and investing are important behaviors to cultivate on the path to becoming financially independent (or a millionaire) there are prerequisites behaviors that must be mentioned. In an opinion piece in the WSJ by the wonderful Jason Riley, he emphasized the success sequence. That sequence is often credited to research done by Brookings Institution scholars Isabel Sawhill and Ron Haskins, though others have made similar observations. The success sequence is simply this:

  If you finish high school, get a job, and get married before having children, you have a 98% chance of not being in poverty.

  Recently Dr. Melissa Kearny, MIT-trained economist wrote a book entitled The Two-Parent Privilege.  In it she shared the story of how declining marriage rates are driving many of the country’s biggest economic problems and how the greatest impacts of marriage are, in fact, economic: when two adults marry, their economic and household lives improve, offering a host of benefits not only for the married adults but for their children. A summary of the book notes that For many, the two-parent home may be an old-fashioned symbol of the idyllic American dream. But The Two-Parent Privilege makes it clear that marriage, for all its challenges and faults, maybe our best path to a more equitable future.

  Here are a few additional behaviors I would add:

  Not borrowing money when you don’t have to. Just because you are approved for a loan doesn’t mean you can afford the thing you are trying to purchase. Don’t confuse approval with proof that you can afford the car or whatever it is you are trying to buy with borrowed money. If a person has a new luxury car they are wasting money and most who have them don’t have the money to waste. You should only borrow money to buy an house and pay for some college. And even with college there are many reasons not to borrow money to pay for college. See episodes 15 and 16 of this podcast for more information.

  Another thing to note, just because a person has a high FICO score it doesn’t necessarily mean they have made smart money choices but simply the fact that they have shown the ability to borrow money and pay it back consistently. One’s personally accrued net worth and the savings rate is a far better determiners of smart money choices.

  In the end, it all comes down to discipline. Everything changes financially when you are living on a paycheck from 3 months ago. If a person needs their upcoming paycheck to pay their expenses they don’t have the mindset to be financially free or a millionaire. Instead, they have the mindset to struggle financially. 

  That may sound like a harsh thing to say to those who are suffering to make ends meet. But the principles required to lift their self out of their current circumstances can be found in their daily choices.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • https://awealthofcommonsense.com/2023/11/how-to-become-a-millionaire/
  • https://www.wsj.com/us-news/never-mind-the-1-mini-millionaires-are-where-wealth-is-growing-fastest-b1dd2ee7
  • https://press.uchicago.edu/ucp/books/book/chicago/T/bo205550079.html
  • https://www.wsj.com/articles/the-biggest-root-cause-of-crime-is-fatherlessness-single-motherhood-5cdfe763
  • https://ourworldindata.org/millennium-development-goals
  
  

  Connect with Jonny West

  
  

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production by

  PODCAST FAST TRACK

  
  
  

  ******************************************************************

  
  ]]>9ec632c0-23d2-4faa-9452-e9321a599278Thu, 15 Feb 2024 03:00:00 -070017:32falsefull5656All that Glitters Isn't Gold -Ep #55All That Glitters Isn’t Gold, Ep #55

  On my drive to work, I mostly like to listen to podcasts but on occasion, I will listen to the radio. And frequently, I hear advertisements that claim that the economic sky may be falling and that one needs to invest in gold to protect themselves from the oncoming economic apocalypse. Well, the truth regarding investing in gold is a very different story and those that invest in gold may not have fools gold but I’ll share why it could be very foolish to do so.

  In this episode...

  • Using Fear to Sell [2:54]
  • The lies salesmen tell you about Gold [4:10]
  • Gold has grossly underperformed for over 40 years [6:26]
  • Three Additional Reasons to NOT invest in Gold [10:25]
  • Beware When Salesmen Use Fear to Sell [13:13]
  
  

  This communication regarding a precious metal is limited to a general and educational discussion as an asset class such as an economic or market commentary. This is not a promotion or solicitation for the direct purchase of a hard asset. 

  Gold has enamored the mind of mankind for millennia. There are tales of Eldorado, the lost city of gold, or King Midas who had the golden touch, or even a leprechaun that hides a pot of gold at the end of a rainbow. In fact, the very state I reside in, California, owes much of its initial rise to the tens of thousands of people that came out west in hopes of also striking it rich in the gold deposits after gold was first discovered in 1848 at Sutter’s mill. 

  Gold holds a certain allure to people and the commercials advertising investing in gold use this perception to peddle an investment theory regarding how gold supposedly has these incredible wealth-preserving capabilities. Now the advertisements I have heard always focus on fear and emotions with references to a teetering economy or references to the stability of the dollar owing to our massive national debt. That they use fear is no surprise as few things motivate people like fear. Greed is a close second, but fear is certainly the most powerful.

  Since 1980, Which Investment Has Generated the Best Returns? Stocks bonds or gold?

  From January 1980 through January 2023, the S&P 500, with dividends reinvested, returned an annualized 11.4% before inflation. Adjusted for inflation, it was 8.0%. 

  As for bonds, the benchmark 10-year Treasury note delivered an annualized total return of 5.6% over the same period. Adjusted for inflation, it was 2.4%.

  What were Gold's returns since 1980? Gold had an annualized return of just 3.1% before inflation. After adjusting for inflation, the average annualized return was negative. 0.01%. Meaning you had less money than you started with 44 years later.

  Let me repeat that, since 1980, over 44 years, gold has had a negative return when adjusted for inflation. Again, how these people can get away with these lies on the radio and TV is beyond me. 

  Now if that’s not enough reason to convince you why you shouldn’t invest in gold let me share 3 additional reasons why all that glitters isn’t gold.

  First - Gold pays ZERO income

  Gold doesn’t produce income. It’s only worth what someone will buy it from you in the future, whereas stocks pay income via dividends and bonds pay income via interest payments. 

  I like Apple products. I own a Macbook Air, a watch, an iPhone, iPad and Airpods, and Apple TV. These are all products Apple makes. They sell these products to consumers for a profit. Some of those profits are shared with stockholders/part owners in the form of dividends. 

  Bonds are when you lend money to either the government or a corporation. You lend them money and they pay you interest for the privilege of borrowing your money. That’s income for you.

  But what does Gold pay you, absolutely nothing. Nada, Zilch. 

  The second reason why solid gold sucks as an “investment” is that it’s not very liquid. If I had a gold bar, how do I sell it? If you are wondering who would buy a gold bar, Costco just sold $100 million in gold bars in the fall of 2023. How do you exchange that for money? 

  With stocks and bonds, there are markets where you can sell the shares or bonds easily and get your funds in a matter of a few days all from the convenience of your couch. 

  The third reason why gold sucks as an “investment” is taxation. This refers to when people buy physical gold. When you sell that for a gain, you will pay higher taxes because the IRS considers it a collectible and it is taxed at a 28% rate. If you purchased stocks and bonds in a non-retirement account and sold them for a long-term gain, then the rates are dependent upon your income and could be 0, 15, 20%, or 23.5% for really high-income owners. All of which are much lower than what the tax rate would be on solid gold. 

  Hopefully, I’ve been able to demonstrate why you shouldn’t listen to some washed-up former politician or washed-up B-list celebrity when they tell you to invest in gold. 

  Because when it comes to gold, the best “investment” you can make is the purchase of jewelry for your spouse. My wife’s wedding ring was the best “investment” in gold I ever made.

  Securities and Advisory services are offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Kiplinger - 10 Facts about Gold
  • Costco selling gold bars
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  ******************************************************************

  ]]>All That Glitters Isn’t Gold, Ep #55

  On my drive to work, I mostly like to listen to podcasts but on occasion, I will listen to the radio. And frequently, I hear advertisements that claim that the economic sky may be falling and that one needs to invest in gold to protect themselves from the oncoming economic apocalypse. Well, the truth regarding investing in gold is a very different story and those that invest in gold may not have fools gold but I’ll share why it could be very foolish to do so.

  In this episode...

  • Using Fear to Sell [2:54]
  • The lies salesmen tell you about Gold [4:10]
  • Gold has grossly underperformed for over 40 years [6:26]
  • Three Additional Reasons to NOT invest in Gold [10:25]
  • Beware When Salesmen Use Fear to Sell [13:13]
  
  

  This communication regarding a precious metal is limited to a general and educational discussion as an asset class such as an economic or market commentary. This is not a promotion or solicitation for the direct purchase of a hard asset. 

  Gold has enamored the mind of mankind for millennia. There are tales of Eldorado, the lost city of gold, or King Midas who had the golden touch, or even a leprechaun that hides a pot of gold at the end of a rainbow. In fact, the very state I reside in, California, owes much of its initial rise to the tens of thousands of people that came out west in hopes of also striking it rich in the gold deposits after gold was first discovered in 1848 at Sutter’s mill. 

  Gold holds a certain allure to people and the commercials advertising investing in gold use this perception to peddle an investment theory regarding how gold supposedly has these incredible wealth-preserving capabilities. Now the advertisements I have heard always focus on fear and emotions with references to a teetering economy or references to the stability of the dollar owing to our massive national debt. That they use fear is no surprise as few things motivate people like fear. Greed is a close second, but fear is certainly the most powerful.

  Since 1980, Which Investment Has Generated the Best Returns? Stocks bonds or gold?

  From January 1980 through January 2023, the S&P 500, with dividends reinvested, returned an annualized 11.4% before inflation. Adjusted for inflation, it was 8.0%. 

  As for bonds, the benchmark 10-year Treasury note delivered an annualized total return of 5.6% over the same period. Adjusted for inflation, it was 2.4%.

  What were Gold's returns since 1980? Gold had an annualized return of just 3.1% before inflation. After adjusting for inflation, the average annualized return was negative. 0.01%. Meaning you had less money than you started with 44 years later.

  Let me repeat that, since 1980, over 44 years, gold has had a negative return when adjusted for inflation. Again, how these people can get away with these lies on the radio and TV is beyond me. 

  Now if that’s not enough reason to convince you why you shouldn’t invest in gold let me share 3 additional reasons why all that glitters isn’t gold.

  First - Gold pays ZERO income

  Gold doesn’t produce income. It’s only worth what someone will buy it from you in the future, whereas stocks pay income via dividends and bonds pay income via interest payments. 

  I like Apple products. I own a Macbook Air, a watch, an iPhone, iPad and Airpods, and Apple TV. These are all products Apple makes. They sell these products to consumers for a profit. Some of those profits are shared with stockholders/part owners in the form of dividends. 

  Bonds are when you lend money to either the government or a corporation. You lend them money and they pay you interest for the privilege of borrowing your money. That’s income for you.

  But what does Gold pay you, absolutely nothing. Nada, Zilch. 

  The second reason why solid gold sucks as an “investment” is that it’s not very liquid. If I had a gold bar, how do I sell it? If you are wondering who would buy a gold bar, Costco just sold $100 million in gold bars in the fall of 2023. How do you exchange that for money? 

  With stocks and bonds, there are markets where you can sell the shares or bonds easily and get your funds in a matter of a few days all from the convenience of your couch. 

  The third reason why gold sucks as an “investment” is taxation. This refers to when people buy physical gold. When you sell that for a gain, you will pay higher taxes because the IRS considers it a collectible and it is taxed at a 28% rate. If you purchased stocks and bonds in a non-retirement account and sold them for a long-term gain, then the rates are dependent upon your income and could be 0, 15, 20%, or 23.5% for really high-income owners. All of which are much lower than what the tax rate would be on solid gold. 

  Hopefully, I’ve been able to demonstrate why you shouldn’t listen to some washed-up former politician or washed-up B-list celebrity when they tell you to invest in gold. 

  Because when it comes to gold, the best “investment” you can make is the purchase of jewelry for your spouse. My wife’s wedding ring was the best “investment” in gold I ever made.

  Securities and Advisory services are offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Kiplinger - 10 Facts about Gold
  • Costco selling gold bars
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production by

  PODCAST FAST TRACK

  ******************************************************************

  ]]>12a6025b-5b19-445e-bb2d-eb25e6e2f29eThu, 01 Feb 2024 03:00:00 -070016:39falsefull5555For Investors, Elections Do Not Matter, Ep #54For Investors, Elections Do Not Matter - Ep #54

  Recently, I read that one of investors' chief concerns is the upcoming presidential election that occurs in November of this year. It seems every year we are told that this is the most important election of our lifetimes only for the next election to be even more important than that. In this episode, I will share why elections do, and do not matter for investors.

  In this episode...

  • America is the Best Country in the world [02:05]
  • Americans have more freedoms [04:04]
  • It’s All About the Constitution [6:48]
  • Election Outcomes Don’t Matter for Investors [10:14]
  • We need to vote [16:51]
  • How to have more influence via voting [19:22]
  
  

  The Inspired Constitution

  Our founding fathers understood that power corrupts and absolute power corrupts absolutely and for these reasons, they put tremendous checks on the powers of government to limit their influence on the freedoms of American citizens. In doing so they provided many more freedoms for the citizens of the United States than any other nation where they could go on and pursue their happiness. Allowing us, individually to determine our ultimate destiny.

  The freedoms enshrined in the Constitution has enabled America to drive the progress of humanity further than any other nation in history. 

  Stock Market Ignores Election Outcomes

  U.S. stocks have trended up regardless of whether a Republican or Democrat won the White House.  A $1,000 investment in the S&P 500 Index when FDR became president in 1933 would have been worth over $19 million in 2023. During that time there have been seven Republican and eight Democratic presidents. 

  But We Must Vote

  Many could complain about the government, media, and academia but if one fails to take action to make the changes by voting not just in the general elections but the primary elections as well. 

  How to Have More Influence via Voting

   If you take the initiative to understand the elections and especially the ballot propositions, you can guide multiple other voters on how to vote, magnifying the result. That can have a huge effect. Your endorsement holds WAY more weight than some politician, businessman, or celebrity.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The US Constitution
  • Guidetoelections.com
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production and Show notes by

  PODCAST FAST TRACK

  
  
  

  **************************************************************************************************

  
  ]]>For Investors, Elections Do Not Matter - Ep #54

  Recently, I read that one of investors' chief concerns is the upcoming presidential election that occurs in November of this year. It seems every year we are told that this is the most important election of our lifetimes only for the next election to be even more important than that. In this episode, I will share why elections do, and do not matter for investors.

  In this episode...

  • America is the Best Country in the world [02:05]
  • Americans have more freedoms [04:04]
  • It’s All About the Constitution [6:48]
  • Election Outcomes Don’t Matter for Investors [10:14]
  • We need to vote [16:51]
  • How to have more influence via voting [19:22]
  
  

  The Inspired Constitution

  Our founding fathers understood that power corrupts and absolute power corrupts absolutely and for these reasons, they put tremendous checks on the powers of government to limit their influence on the freedoms of American citizens. In doing so they provided many more freedoms for the citizens of the United States than any other nation where they could go on and pursue their happiness. Allowing us, individually to determine our ultimate destiny.

  The freedoms enshrined in the Constitution has enabled America to drive the progress of humanity further than any other nation in history. 

  Stock Market Ignores Election Outcomes

  U.S. stocks have trended up regardless of whether a Republican or Democrat won the White House.  A $1,000 investment in the S&P 500 Index when FDR became president in 1933 would have been worth over $19 million in 2023. During that time there have been seven Republican and eight Democratic presidents. 

  But We Must Vote

  Many could complain about the government, media, and academia but if one fails to take action to make the changes by voting not just in the general elections but the primary elections as well. 

  How to Have More Influence via Voting

   If you take the initiative to understand the elections and especially the ballot propositions, you can guide multiple other voters on how to vote, magnifying the result. That can have a huge effect. Your endorsement holds WAY more weight than some politician, businessman, or celebrity.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The US Constitution
  • Guidetoelections.com
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production and Show notes by

  PODCAST FAST TRACK

  
  
  

  **************************************************************************************************

  
  ]]>42d83080-c98e-48d1-82dd-ddcadf81a75fMon, 15 Jan 2024 03:00:00 -070021:06falsefull5454Ten Things to Consider Ten or So Years from RetirementAnother year has passed, which means that many are a year closer to retirement. The most successful retirements are planned many decades in advance. This episode of the One for the Money podcast focuses on what one should do in the last decade of work before retiring. A mistake in these years can ruin the prior decades of work and jeopardize retirement dreams. 

  In this episode...

  • Better planning [01:22]
  • Assessing financial readiness [03:09]
  • Health and financial planning [07:36]
  • Tax diversification [10:25]
  • Estate considerations [13:31]
  
  

  Planning before retirement

  Few things are looked to with more anticipation than retirement, and sufficient savings to provide the income to fund retirement is at the top of the list of retirement readiness. Fidelity, an investment company, suggests that by age 55, individuals should have approximately seven times their current income saved. However, this is just a general rule and doesn't account for factors such as pensions, life expectancy, and other sources of income. 

  Seeking advice from a Certified Financial Planner is crucial to ensure a more thorough assessment of your preparedness for retirement. Certified Financial Planners can also determine if enough or too much is being saved. Considering an individual's unique circumstances, they will also determine whether money should be saved in pre-tax or after-tax accounts. 

  A healthy retirement

  People can be set financially for a wonderful and early retirement, but that won't matter if they have poor health. Now is the time to start or increase healthy habits, enabling you to thrive both now and during retirement. Those 50 and older should "invest" an hour a day into their health. Longevity is most impacted by major, modifiable behaviors such as exercise, sleep, nutrition, and emotional health. 

  Exercise itself is in a league of its own because of its ability to extend one's life and reduce all-cause mortality. It is the most challenging aspect of people's behavior because of the significant time commitment, but having healthy habits entering retirement will make retirement significantly better. 

  Estate plans

  An estate plan is a critical part of financial planning and cannot be missed. This estate plan must be communicated to the beneficiaries. The primary reason for an estate plan isn't to avoid probate. Rather, estate planning preserves family unity. When the last parent or grandparent dies, money goes into motion, and some people's love for money can destroy lifelong family relationships. This tragic circumstance happened to my father's family. That's why, every fall, I focus on my clients' estate planning preparedness. I also continue to spend time and money on my own understanding of estate planning.

  The last decade before retirement has critical planning considerations to help ensure a better retirement through better planning. It's imperative to take advantage of the next ten years and utilize these points. Tremendous progress towards the best retirement possible because the best retirements don't happen by accident but are planned for years in advance.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • How much do I need to retire? | Fidelity
  • Congratulations, You Already Have an Estate Plan - BUT YOU DON'T WANT IT!, Ep #21
  • Will I Be Able to Retire?, Ep #23
  • Can You Retire with Debt?, Ep #27
  • One of the Biggest Risks in Retirement, Ep #28
  • Healthy, Wealthy, & Wise, Ep #29
  • When to Take Social Security - Avoiding a Potential $200,000 Mistake, Ep #41
  • The Only Legacy that Matters - Ensuring Family Unity via Estate Planning , Ep #45
  • Why a Will Is Not Enough - Estate Planning, Ep #46
  • Ensuring You Get to Spend More of Your Hard Earned Money & the Government Gets to Spend Less, Ep #49
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Another year has passed, which means that many are a year closer to retirement. The most successful retirements are planned many decades in advance. This episode of the One for the Money podcast focuses on what one should do in the last decade of work before retiring. A mistake in these years can ruin the prior decades of work and jeopardize retirement dreams. 

  In this episode...

  • Better planning [01:22]
  • Assessing financial readiness [03:09]
  • Health and financial planning [07:36]
  • Tax diversification [10:25]
  • Estate considerations [13:31]
  
  

  Planning before retirement

  Few things are looked to with more anticipation than retirement, and sufficient savings to provide the income to fund retirement is at the top of the list of retirement readiness. Fidelity, an investment company, suggests that by age 55, individuals should have approximately seven times their current income saved. However, this is just a general rule and doesn't account for factors such as pensions, life expectancy, and other sources of income. 

  Seeking advice from a Certified Financial Planner is crucial to ensure a more thorough assessment of your preparedness for retirement. Certified Financial Planners can also determine if enough or too much is being saved. Considering an individual's unique circumstances, they will also determine whether money should be saved in pre-tax or after-tax accounts. 

  A healthy retirement

  People can be set financially for a wonderful and early retirement, but that won't matter if they have poor health. Now is the time to start or increase healthy habits, enabling you to thrive both now and during retirement. Those 50 and older should "invest" an hour a day into their health. Longevity is most impacted by major, modifiable behaviors such as exercise, sleep, nutrition, and emotional health. 

  Exercise itself is in a league of its own because of its ability to extend one's life and reduce all-cause mortality. It is the most challenging aspect of people's behavior because of the significant time commitment, but having healthy habits entering retirement will make retirement significantly better. 

  Estate plans

  An estate plan is a critical part of financial planning and cannot be missed. This estate plan must be communicated to the beneficiaries. The primary reason for an estate plan isn't to avoid probate. Rather, estate planning preserves family unity. When the last parent or grandparent dies, money goes into motion, and some people's love for money can destroy lifelong family relationships. This tragic circumstance happened to my father's family. That's why, every fall, I focus on my clients' estate planning preparedness. I also continue to spend time and money on my own understanding of estate planning.

  The last decade before retirement has critical planning considerations to help ensure a better retirement through better planning. It's imperative to take advantage of the next ten years and utilize these points. Tremendous progress towards the best retirement possible because the best retirements don't happen by accident but are planned for years in advance.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • How much do I need to retire? | Fidelity
  • Congratulations, You Already Have an Estate Plan - BUT YOU DON'T WANT IT!, Ep #21
  • Will I Be Able to Retire?, Ep #23
  • Can You Retire with Debt?, Ep #27
  • One of the Biggest Risks in Retirement, Ep #28
  • Healthy, Wealthy, & Wise, Ep #29
  • When to Take Social Security - Avoiding a Potential $200,000 Mistake, Ep #41
  • The Only Legacy that Matters - Ensuring Family Unity via Estate Planning , Ep #45
  • Why a Will Is Not Enough - Estate Planning, Ep #46
  • Ensuring You Get to Spend More of Your Hard Earned Money & the Government Gets to Spend Less, Ep #49
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>3fc03526-1e8d-4166-9ab3-7fc51035337eMon, 01 Jan 2024 03:00:00 -070017:36falsefull5353Investing - The Only Thing to Fear is Fear ItselfMany feel that the country and the world are on the brink of challenging times, and many investors wonder if they should get out of the market and wait to invest because a better time may come along in the future. In this episode of the One for the Money podcast, I share why this is always the wrong strategy.

  In this episode...

  • Fear of investing in uncertain times [01:19]
  • The relationship between difficult times and stocks [04:30]
  • Investment mistakes and the importance of discipline [10:37]
  • Don’t let emotions get the best of you [13:18]
  • Planning and spending for more experiences [17:16]
  
  

  Investments in uncertain times

  When someone is about to make a significant investment, they often wonder if there might be a better time to invest later. This same fear is gripping the hearts of people invested in the stock market, with many wondering if they should be more conservative.

  With ongoing conflicts in Europe and the Middle East, there is a growing concern that we are heading towards a period of instability. Despite predictions of an economic downturn, it has yet to materialize. The upcoming presidential election is causing anxiety as both major party candidates have historically low approval ratings. As a result, many individuals are hesitant to invest or stay invested.

  Losses are twice as impactful for investors than equivalent gains. Studies have shown that a 10% loss hurts twice as much as a 10% gain. However, being afraid of the future market is a dangerous mindset that will not lead to successful investing. For this reason, one should always invest according to one’s goals and in alignment with time-tested investment principles. 

  Data perspective

  Since 1926, bonds were negative just 15 times, with an average loss of just 2.4%. Over that same period, stocks were negative just 25 times, with a significantly higher average loss at 13.2%. That’s why bonds are beneficial for short-term goals: fewer years with negative returns, and those negative returns were considerably less than what they were for stocks.

  For longer-term goals, we invest in stocks. Since 1926, stocks returned between 8-10%, whereas bonds only returned between 4-6%. Over the past century, the U.S. stock market has been up nearly 75% of the time, and for 60% of the time, those increases were more than 10%. More than 33% of the time, those increases are more than 20%. Historically, you are more likely to have a gain of 20% in your investments than to experience a down year.

  Investment behavior

  Some don’t succumb to the fear of a down market but rather the belief that they can correctly time the markets and know when to sell or buy. But the two most successful investors in history, Jack Bogle and Warren Buffett, said they had never met anyone who could correctly time the markets. The famous investor Peter Lynch explained the fool’s errand of market timing best when he said, “More people lost money waiting for corrections and anticipating corrections than the actual corrections themselves.”

  JP Morgan’s Guide to Retirement highlights the perils of trying to time the market and why it doesn’t work. Using data from the S&P 500, the guide shows the performance of $10,000 invested between January 1, 2002 and December 31, 2021. The initial investment would have grown to over $61,000 during that period. But if the best ten days were missed, then the initial investment would have grown to only just over $28,000. That’s missing only ten days out of 5,000 or just 2% of the time invested. If you have long-term investment goals, investing and staying invested is essential. Every investor should have an investment plan that aligns with their goals and can help them navigate challenging market conditions.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The Role of Bonds in your Portfolio – Diversification and Risk Management - Wedbush Securities
  • Historical Returns Of Different Stock And Bond Portfolio Weightings
  • Keith Fitz-Gerald
  • Guide to the Markets | J.P. Morgan Asset Management
  • Guide to Retirement | J.P. Morgan Asset Management
  • Close to One-Third of Investors Over 65 Moved to Cash
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Many feel that the country and the world are on the brink of challenging times, and many investors wonder if they should get out of the market and wait to invest because a better time may come along in the future. In this episode of the One for the Money podcast, I share why this is always the wrong strategy.

  In this episode...

  • Fear of investing in uncertain times [01:19]
  • The relationship between difficult times and stocks [04:30]
  • Investment mistakes and the importance of discipline [10:37]
  • Don’t let emotions get the best of you [13:18]
  • Planning and spending for more experiences [17:16]
  
  

  Investments in uncertain times

  When someone is about to make a significant investment, they often wonder if there might be a better time to invest later. This same fear is gripping the hearts of people invested in the stock market, with many wondering if they should be more conservative.

  With ongoing conflicts in Europe and the Middle East, there is a growing concern that we are heading towards a period of instability. Despite predictions of an economic downturn, it has yet to materialize. The upcoming presidential election is causing anxiety as both major party candidates have historically low approval ratings. As a result, many individuals are hesitant to invest or stay invested.

  Losses are twice as impactful for investors than equivalent gains. Studies have shown that a 10% loss hurts twice as much as a 10% gain. However, being afraid of the future market is a dangerous mindset that will not lead to successful investing. For this reason, one should always invest according to one’s goals and in alignment with time-tested investment principles. 

  Data perspective

  Since 1926, bonds were negative just 15 times, with an average loss of just 2.4%. Over that same period, stocks were negative just 25 times, with a significantly higher average loss at 13.2%. That’s why bonds are beneficial for short-term goals: fewer years with negative returns, and those negative returns were considerably less than what they were for stocks.

  For longer-term goals, we invest in stocks. Since 1926, stocks returned between 8-10%, whereas bonds only returned between 4-6%. Over the past century, the U.S. stock market has been up nearly 75% of the time, and for 60% of the time, those increases were more than 10%. More than 33% of the time, those increases are more than 20%. Historically, you are more likely to have a gain of 20% in your investments than to experience a down year.

  Investment behavior

  Some don’t succumb to the fear of a down market but rather the belief that they can correctly time the markets and know when to sell or buy. But the two most successful investors in history, Jack Bogle and Warren Buffett, said they had never met anyone who could correctly time the markets. The famous investor Peter Lynch explained the fool’s errand of market timing best when he said, “More people lost money waiting for corrections and anticipating corrections than the actual corrections themselves.”

  JP Morgan’s Guide to Retirement highlights the perils of trying to time the market and why it doesn’t work. Using data from the S&P 500, the guide shows the performance of $10,000 invested between January 1, 2002 and December 31, 2021. The initial investment would have grown to over $61,000 during that period. But if the best ten days were missed, then the initial investment would have grown to only just over $28,000. That’s missing only ten days out of 5,000 or just 2% of the time invested. If you have long-term investment goals, investing and staying invested is essential. Every investor should have an investment plan that aligns with their goals and can help them navigate challenging market conditions.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The Role of Bonds in your Portfolio – Diversification and Risk Management - Wedbush Securities
  • Historical Returns Of Different Stock And Bond Portfolio Weightings
  • Keith Fitz-Gerald
  • Guide to the Markets | J.P. Morgan Asset Management
  • Guide to Retirement | J.P. Morgan Asset Management
  • Close to One-Third of Investors Over 65 Moved to Cash
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>2900afe8-a652-47f1-a6c9-5dad71d4011aFri, 15 Dec 2023 03:00:00 -070019:29falsefull5252How to Give BetterGiving to others can be an incredibly rewarding experience. Have you ever wondered how you can give better? In this One for the Money podcast episode, I discuss ways to improve our giving and make it more impactful for both others and ourselves. 

  In this episode...

  • The season of charitable donations [01:12]
  • Donor-advised funds [03:39]
  • Donating appreciated assets [05:26]
  • Giving retirement money [06:33]
  • Planning charitable giving [09:32]
  
  

  The month of giving

  For many people, December is the season of giving. While many may think of presents around a Christmas tree, December is also when the most money is given to charitable organizations. According to the Blackbaud Institute, in 2021, over 20% of all donations for the year were received in December. 

  Americans gave an astounding $471 billion to charity in 2020, nearly 70% of that coming from individuals. What’s fascinating is that philanthropic giving is highly correlated to the stock market’s strength. The better the stock market performs, the more charitable contributions are made. 

  Investing to give

  A donor-advised fund is an investment account you set up to hold your donations, allowing you to receive a tax deduction. The great thing is that you don’t have to decide where to donate these funds until later. The money can grow until you find the charity best aligned with your values. Donor-advised funds can accept non-cash assets, as well as stock, mutual funds, bonds, and even S and C corp stock.

  While a donor-advised fund can be a potent vehicle for charitable contributions, the fact that they can receive stock provides an introduction to another powerful way to give to either a donor-advised fund directly or to a charity itself. Some may think it’s best to sell appreciated assets and give the money to charity. A better way is not to sell the asset at all and give it directly to the charity. Donating appreciated stock to a charity can be more beneficial than selling it. The charity can receive more without paying taxes, and you can qualify for a larger tax deduction.

  Qualified charitable distributions

  What if you want to give some of your retirement money to charity? A qualified charitable distribution(QCD) is a tax-free donation from an IRA to a qualified charity. While a QCD can’t be deducted from your taxes, the savings on your income may make this type of donation beneficial to your taxes. A QCD counts toward satisfying the required minimum distributions. 

  QCDs must go directly from the IRA to the charity. Clients can be provided with a checkbook just for their QCDs so they can make direct contributions. While there isn’t a deduction for these contributions, they’re a great way to give unwanted retirement funds to charity.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Overall Giving Trends - Blackbaud Institute
  • Trends that Will Shape Philanthropy in 2022 | Giving USA
  • 2021 Donor-Advised Fund Report | National Philanthropic Trust
  • Who Itemizes Deductions?
  
  ]]>Giving to others can be an incredibly rewarding experience. Have you ever wondered how you can give better? In this One for the Money podcast episode, I discuss ways to improve our giving and make it more impactful for both others and ourselves. 

  In this episode...

  • The season of charitable donations [01:12]
  • Donor-advised funds [03:39]
  • Donating appreciated assets [05:26]
  • Giving retirement money [06:33]
  • Planning charitable giving [09:32]
  
  

  The month of giving

  For many people, December is the season of giving. While many may think of presents around a Christmas tree, December is also when the most money is given to charitable organizations. According to the Blackbaud Institute, in 2021, over 20% of all donations for the year were received in December. 

  Americans gave an astounding $471 billion to charity in 2020, nearly 70% of that coming from individuals. What’s fascinating is that philanthropic giving is highly correlated to the stock market’s strength. The better the stock market performs, the more charitable contributions are made. 

  Investing to give

  A donor-advised fund is an investment account you set up to hold your donations, allowing you to receive a tax deduction. The great thing is that you don’t have to decide where to donate these funds until later. The money can grow until you find the charity best aligned with your values. Donor-advised funds can accept non-cash assets, as well as stock, mutual funds, bonds, and even S and C corp stock.

  While a donor-advised fund can be a potent vehicle for charitable contributions, the fact that they can receive stock provides an introduction to another powerful way to give to either a donor-advised fund directly or to a charity itself. Some may think it’s best to sell appreciated assets and give the money to charity. A better way is not to sell the asset at all and give it directly to the charity. Donating appreciated stock to a charity can be more beneficial than selling it. The charity can receive more without paying taxes, and you can qualify for a larger tax deduction.

  Qualified charitable distributions

  What if you want to give some of your retirement money to charity? A qualified charitable distribution(QCD) is a tax-free donation from an IRA to a qualified charity. While a QCD can’t be deducted from your taxes, the savings on your income may make this type of donation beneficial to your taxes. A QCD counts toward satisfying the required minimum distributions. 

  QCDs must go directly from the IRA to the charity. Clients can be provided with a checkbook just for their QCDs so they can make direct contributions. While there isn’t a deduction for these contributions, they’re a great way to give unwanted retirement funds to charity.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Overall Giving Trends - Blackbaud Institute
  • Trends that Will Shape Philanthropy in 2022 | Giving USA
  • 2021 Donor-Advised Fund Report | National Philanthropic Trust
  • Who Itemizes Deductions?
  
  ]]>cacbf509-b1e9-46dd-a1a5-1162b3cf840bFri, 01 Dec 2023 03:00:00 -070014:39falsefull5151How to Plan For Your Ideal LifeIn February, I visited the beautiful island of Maui, Hawaii, and trained in helping clients plan for their ideal life. It’s not just the right way to plan but the only way to conduct financial planning for clients. In this episode of the One for the Money podcast, I share details of this type of planning. At the end of the episode, I share a thought-provoking strategy from a book I recently read called Die with Zero.

  In this episode...

  • Focus on the essentials [01:20]
  • The godfather of life planning [02:22]
  • Life choices with limited time [06:14]
  • Untapped potential [08:32]
  • Dying with zero [11:24]
  
  

  Listening first, then planning

  When financial planning, focusing on what is essential for you to have the life you desire is imperative. The worst thing I could do for a client is to immediately start solving their financial problems without an understanding of what they truly want. Financial solutions without the proper context have the potential of putting a ladder on the wrong wall and having clients start climbing. 

  The key to discovering what is essential for clients to have an ideal life requires something you may not experience in many investment firms: an investment of time and a lot of listening. After going through this planning myself and taking a number of my clients through the same process, I’ve concluded that it’s not only the best way to plan financially for clients; it’s the only way. 

  Prioritizing people in their financial plans

  George Kinder, the godfather of the life planning movement, has been at the forefront of the financial services industry for more than 35 years. He spearheaded the movement to put the lives that clients desire to live at the center of their financial plans. George Kinder has distilled this planning via five unique steps he has termed the EVOKE process: Exploration, Vision, Obstacles, Knowledge, and Execution. As George Kinder describes, “Life planning focuses on the human side of financial planning and puts people, not products, at the center of analysis and advice and helps clients meet unique goals and unlock the greatest meaning in their lives.”

  EVOKE life planning

  During the exploration phase, clients share everything that would encompass an ideal life for them without any emphasis on prioritization. It’s imperative to understand what is essential for each individual, even with couples. The vision stage prioritizes the elements of one’s ideal life through inspirational writing exercises. This process helps to shape financial plans that aim toward what matters most to the clients. The Obstacles stage involves identifying barriers hindering the realization of clients’ goals and finding solutions to overcome them. 

  EVOKE planning’s collaborative process empowers clients to make their dreams feel attainable. The subsequent stages, Knowledge and Execution, involve conducting comprehensive financial analyses and implementing tailored strategies that align with clients’ aspirations, making every financial decision resonate with their passions and purposes.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Kinder Institute of Life Planning
  • Die With Zero: Getting All You Can from Your Money and Your Life
  • Too Much Money & Too Few Memories, Ep #24
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>In February, I visited the beautiful island of Maui, Hawaii, and trained in helping clients plan for their ideal life. It’s not just the right way to plan but the only way to conduct financial planning for clients. In this episode of the One for the Money podcast, I share details of this type of planning. At the end of the episode, I share a thought-provoking strategy from a book I recently read called Die with Zero.

  In this episode...

  • Focus on the essentials [01:20]
  • The godfather of life planning [02:22]
  • Life choices with limited time [06:14]
  • Untapped potential [08:32]
  • Dying with zero [11:24]
  
  

  Listening first, then planning

  When financial planning, focusing on what is essential for you to have the life you desire is imperative. The worst thing I could do for a client is to immediately start solving their financial problems without an understanding of what they truly want. Financial solutions without the proper context have the potential of putting a ladder on the wrong wall and having clients start climbing. 

  The key to discovering what is essential for clients to have an ideal life requires something you may not experience in many investment firms: an investment of time and a lot of listening. After going through this planning myself and taking a number of my clients through the same process, I’ve concluded that it’s not only the best way to plan financially for clients; it’s the only way. 

  Prioritizing people in their financial plans

  George Kinder, the godfather of the life planning movement, has been at the forefront of the financial services industry for more than 35 years. He spearheaded the movement to put the lives that clients desire to live at the center of their financial plans. George Kinder has distilled this planning via five unique steps he has termed the EVOKE process: Exploration, Vision, Obstacles, Knowledge, and Execution. As George Kinder describes, “Life planning focuses on the human side of financial planning and puts people, not products, at the center of analysis and advice and helps clients meet unique goals and unlock the greatest meaning in their lives.”

  EVOKE life planning

  During the exploration phase, clients share everything that would encompass an ideal life for them without any emphasis on prioritization. It’s imperative to understand what is essential for each individual, even with couples. The vision stage prioritizes the elements of one’s ideal life through inspirational writing exercises. This process helps to shape financial plans that aim toward what matters most to the clients. The Obstacles stage involves identifying barriers hindering the realization of clients’ goals and finding solutions to overcome them. 

  EVOKE planning’s collaborative process empowers clients to make their dreams feel attainable. The subsequent stages, Knowledge and Execution, involve conducting comprehensive financial analyses and implementing tailored strategies that align with clients’ aspirations, making every financial decision resonate with their passions and purposes.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Kinder Institute of Life Planning
  • Die With Zero: Getting All You Can from Your Money and Your Life
  • Too Much Money & Too Few Memories, Ep #24
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>b939c719-7ac3-4713-a3e3-324c7cf8cf55Wed, 15 Nov 2023 03:00:00 -070015:29falsefull5050Ensuring You Get to Spend More of Your Hard Earned Money & the Government Gets to Spend LessEnsuring You Get to Spend More of Your Hard Earned Money & the Government Gets to Spend Less, Ep #49

  For many of my clients during the fall, I implement a powerful strategy called a Roth conversion, which can significantly lower the taxes paid during retirement. In this episode of the One for the Money podcast, I review this strategy that can help retirees spend more of their own money rather than the government. Listen to the end, where I share additional powerful tax-saving strategies you may want to consider during your employer’s open enrollment.

   

  In this episode...

  
  

  • Retirement tax planning [01:20]
  • Timing Roth IRA conversions [05:38]
  • The importance of tax diversification [12:16]
  • When Roth conversions aren’t the best idea [13:20]
  • HSAs and healthcare expenses [15:19]
  
  

  
  

  Planning for retirement taxes

  
  

  We’ve all made poor decisions when it comes to spending. However, our spending is still way better than the government’s bridges to nowhere, costly, incomplete high-speed trains, or countless other examples of wasteful government spending. This reason is why I love helping clients keep more of their money to spend by utilizing tax-saving strategies.

  
  

  These strategies are necessary because people don’t pay less in taxes accidentally. Instead, lower taxes result from executing strategies over many years and being proactive with tax planning. Most Americans have two options. They can hope taxes will be lower in the future, or they can take action to retire as diversified as possible. 

  
  

  Benefits of Roth conversions

  
  

  Roth conversions are a great way to become tax-diversified and reduce taxes when conditions are right. Roth conversions work just as they sound, converting portions of not-yet-taxed retirement accounts to never-again-taxed accounts. There are no income limitations, but since income taxes will be paid in the year of the conversion, it makes the most sense to complete Roth conversions in the years when your income is lower. 

  
  

  When the math works, a Roth conversion is one of the best strategies to mitigate taxes. Most Americans save for retirement in traditional or pre-tax retirement accounts. This money will be taxed upon withdrawal during retirement. Consequently, retirement accounts are essentially co-owned with Uncle Sam. How much is owned by Uncle Same will depend on whatever the tax rates are in the future.

  
  

  Reasons not to do a Roth conversion

  
  

  Although Roth conversions can be a great option, there are some reasons why you may not want to consider them. Since the converted amount cannot be used for tax payment, you would have to make sure you have the tax money saved up. Also, if you expect to be in a lower tax bracket in retirement, then a Roth conversion may not be the best decision for you. If you have a child who is applying to college and seeking financial aid, a Roth conversion would show you as having a higher income, which may affect your child’s eligibility for financial aid. It’s crucial to weigh the benefits against these factors and consider speaking with a certified financial planner and a tax professional to help you make an informed decision.

  
  

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

   

  
  

  Resources & People Mentioned

  
  

  • National Debt Clock
  • History of the US Federal Budget Deficit
  • Historical U.S. Federal Individual Income Tax Rates & Brackets, 1862-2021
  • The Fiscal & Economic Challenge
  
  

  
  

  Connect with Jonny West

  
  

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Ensuring You Get to Spend More of Your Hard Earned Money & the Government Gets to Spend Less, Ep #49

  For many of my clients during the fall, I implement a powerful strategy called a Roth conversion, which can significantly lower the taxes paid during retirement. In this episode of the One for the Money podcast, I review this strategy that can help retirees spend more of their own money rather than the government. Listen to the end, where I share additional powerful tax-saving strategies you may want to consider during your employer’s open enrollment.

   

  In this episode...

  
  

  • Retirement tax planning [01:20]
  • Timing Roth IRA conversions [05:38]
  • The importance of tax diversification [12:16]
  • When Roth conversions aren’t the best idea [13:20]
  • HSAs and healthcare expenses [15:19]
  
  

  
  

  Planning for retirement taxes

  
  

  We’ve all made poor decisions when it comes to spending. However, our spending is still way better than the government’s bridges to nowhere, costly, incomplete high-speed trains, or countless other examples of wasteful government spending. This reason is why I love helping clients keep more of their money to spend by utilizing tax-saving strategies.

  
  

  These strategies are necessary because people don’t pay less in taxes accidentally. Instead, lower taxes result from executing strategies over many years and being proactive with tax planning. Most Americans have two options. They can hope taxes will be lower in the future, or they can take action to retire as diversified as possible. 

  
  

  Benefits of Roth conversions

  
  

  Roth conversions are a great way to become tax-diversified and reduce taxes when conditions are right. Roth conversions work just as they sound, converting portions of not-yet-taxed retirement accounts to never-again-taxed accounts. There are no income limitations, but since income taxes will be paid in the year of the conversion, it makes the most sense to complete Roth conversions in the years when your income is lower. 

  
  

  When the math works, a Roth conversion is one of the best strategies to mitigate taxes. Most Americans save for retirement in traditional or pre-tax retirement accounts. This money will be taxed upon withdrawal during retirement. Consequently, retirement accounts are essentially co-owned with Uncle Sam. How much is owned by Uncle Same will depend on whatever the tax rates are in the future.

  
  

  Reasons not to do a Roth conversion

  
  

  Although Roth conversions can be a great option, there are some reasons why you may not want to consider them. Since the converted amount cannot be used for tax payment, you would have to make sure you have the tax money saved up. Also, if you expect to be in a lower tax bracket in retirement, then a Roth conversion may not be the best decision for you. If you have a child who is applying to college and seeking financial aid, a Roth conversion would show you as having a higher income, which may affect your child’s eligibility for financial aid. It’s crucial to weigh the benefits against these factors and consider speaking with a certified financial planner and a tax professional to help you make an informed decision.

  
  

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

   

  
  

  Resources & People Mentioned

  
  

  • National Debt Clock
  • History of the US Federal Budget Deficit
  • Historical U.S. Federal Individual Income Tax Rates & Brackets, 1862-2021
  • The Fiscal & Economic Challenge
  
  

  
  

  Connect with Jonny West

  
  

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>ec4d1857-2e35-4cb9-9779-bebb2ad67867Wed, 01 Nov 2023 03:00:00 -070020:27falsefull4949How to Spend BetterFor some people, spending money can be a hard thing to do. As a financial planner, one of the things that has surprised me the most is the difficulty some clients have in spending their money. In this episode of the One for the Money podcast, I share ways to help make spending easier. Listen to the end, where I share a spending tip for the rest of your life.

  In this episode...

  • Learning to spend in retirement [02:22]
  • Why do some people save and some spend? [06:00]
  • Being prepared “just in case” [10:02]
  • The rest of your life analysis [13:11]
  
  

  The decumulation paradox

  According to a 2018 Investments & Wealth Institute study, nearly six in seven retirees only spend down the earnings in their portfolios and spend none of the principle itself. This phenomenon is called the decumulation paradox.

  People who have always been in a saving mode find flipping the switch to spending difficult. Spending can be particularly challenging when someone has retired or is on a mini-retirement because they no longer have a salary every month because everything can depend on their nest egg. This is why people with guaranteed sources of income, such as pensions and annuities, tend to spend more money during retirement.

  Spending more in retirement 

  Psychological barriers can prevent us from spending what would bring more enjoyment and happiness intellectually. Clients may understand that dying the wealthiest person in the graveyard isn’t a good goal, but they may still struggle emotionally with spending money.

  I realize that some may see spending more as a “first-world problem,” but I will say that having worked with hundreds of individuals, I’ve seen people with limited income build significant wealth. One of my goals is to encourage people to spend more of what they worked and sacrificed so hard to make possible. It’s important for those who have made wise decisions to save and accumulate funds to spend what they’ve earned. Money is a resource, not an end in itself. 

  Just in case

  Some individuals avoid spending money due to what I call the “just in case” factor. They don’t spend money in case their children require financial assistance, in case they incur medical expenses, or in case they experience an extended long-term care situation. We are all aware of relatives with dementia for years, which appears to factor into our planning for the worst-case scenarios.

  There are ways to plan for these scenarios without sacrificing our ability to make memories both now and in retirement. Some of the help I give clients is giving them the peace of mind to spend on what they want. Then, they can make the memories that last lifetimes. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The Decumulation Paradox: Why retirees are not spending more?
  • Regrets of the Dying
  • Why Most Retirees Never Spend Their Retirement Assets
  • How to Get Clients to Spend More Money - Articles - Advisor Perspectives
  • Die With Zero: Getting All You Can from Your Money and Your Life - Bill Perkins
  • When Money Can Buy Happiness, Ep #47
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>For some people, spending money can be a hard thing to do. As a financial planner, one of the things that has surprised me the most is the difficulty some clients have in spending their money. In this episode of the One for the Money podcast, I share ways to help make spending easier. Listen to the end, where I share a spending tip for the rest of your life.

  In this episode...

  • Learning to spend in retirement [02:22]
  • Why do some people save and some spend? [06:00]
  • Being prepared “just in case” [10:02]
  • The rest of your life analysis [13:11]
  
  

  The decumulation paradox

  According to a 2018 Investments & Wealth Institute study, nearly six in seven retirees only spend down the earnings in their portfolios and spend none of the principle itself. This phenomenon is called the decumulation paradox.

  People who have always been in a saving mode find flipping the switch to spending difficult. Spending can be particularly challenging when someone has retired or is on a mini-retirement because they no longer have a salary every month because everything can depend on their nest egg. This is why people with guaranteed sources of income, such as pensions and annuities, tend to spend more money during retirement.

  Spending more in retirement 

  Psychological barriers can prevent us from spending what would bring more enjoyment and happiness intellectually. Clients may understand that dying the wealthiest person in the graveyard isn’t a good goal, but they may still struggle emotionally with spending money.

  I realize that some may see spending more as a “first-world problem,” but I will say that having worked with hundreds of individuals, I’ve seen people with limited income build significant wealth. One of my goals is to encourage people to spend more of what they worked and sacrificed so hard to make possible. It’s important for those who have made wise decisions to save and accumulate funds to spend what they’ve earned. Money is a resource, not an end in itself. 

  Just in case

  Some individuals avoid spending money due to what I call the “just in case” factor. They don’t spend money in case their children require financial assistance, in case they incur medical expenses, or in case they experience an extended long-term care situation. We are all aware of relatives with dementia for years, which appears to factor into our planning for the worst-case scenarios.

  There are ways to plan for these scenarios without sacrificing our ability to make memories both now and in retirement. Some of the help I give clients is giving them the peace of mind to spend on what they want. Then, they can make the memories that last lifetimes. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The Decumulation Paradox: Why retirees are not spending more?
  • Regrets of the Dying
  • Why Most Retirees Never Spend Their Retirement Assets
  • How to Get Clients to Spend More Money - Articles - Advisor Perspectives
  • Die With Zero: Getting All You Can from Your Money and Your Life - Bill Perkins
  • When Money Can Buy Happiness, Ep #47
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>b298def9-5dd1-49b0-bee1-69e658757343Sun, 15 Oct 2023 03:00:00 -070016:39falsefull4848When Money Can Buy Happiness, Ep #47Surveys have shown that money cannot buy happiness; however, certain types of spending can increase happiness. In this episode of the One for the Money podcast, I talk about ways to increase happiness, not through increased spending, but by improving the way money is spent.

  In this episode...

  • Life, liberty, and the pursuit of happiness [01:05]
  • Money does not guarantee happiness [02:06]
  • Spending money on others [04:03]
  • Opportunities to anticipate [07:47]
  
  

  Pursuing happiness

  America’s purpose aligns perfectly with human purpose: life, liberty, and the pursuit of happiness. Pursuing happiness has been a recurring theme in this podcast, and I regularly encourage clients and listeners to seek the things that ultimately lead to happiness. Those things are only sometimes directly influenced by money. Happiness is derived through positive emotion, engagement, relationships, meaning, and accomplishment. 

  Money neither buys nor guarantees happiness. I have met both wealthy and poor people who are equally unhappy. When I visited India years ago, I walked past a squatters’ camp on my way to see a temple. The makeshift shelters were built of worn blue tarps and cardboard boxes. Despite their difficult living conditions, these people had joyful countenances that still impact me today.

  Using money for what matters

  While money can’t buy or guarantee one’s happiness, there are instances where money via spending CAN make you happier. Spending money on others rather than ourselves has proven to lead to more happiness for the spender. Spending money to buy ourselves more time might seem simple, but it goes a long way. Sometimes, I spend a little money to have more time with my family. That extra time is priceless. 

  With more time, you can do other things like exercise, volunteer work, or other activities linked to increased happiness. Connecting with friends, attending an event, and learning new things are all great ways to spend your time positively. Important to note is the critical issue of how people consume this extra time. Spending all your free time binge-watching shows, playing games, or scrolling through social media is quite different from doing something meaningful, engaging, or growth-promoting. 

  Experiences

  Research suggests that happiness is more often derived from experiences rather than material possessions. However, it’s important to remember that material things can also bring us joy if we use them to create experiences like going on a picnic or visiting a national park or museum. Simple, low-cost activities can provide small but meaningful boosts to happiness in the short term that accumulate one step at a time to significantly impact happiness in the long term.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • When it Comes to Early Retirement - Start with Why, Ep #1
  • Too Much Money & Too Few Memories, Ep #24
  • Michael Kitces
  • 6 Ways Money Really Can Buy Happiness For Your Financial Planning Clients
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Surveys have shown that money cannot buy happiness; however, certain types of spending can increase happiness. In this episode of the One for the Money podcast, I talk about ways to increase happiness, not through increased spending, but by improving the way money is spent.

  In this episode...

  • Life, liberty, and the pursuit of happiness [01:05]
  • Money does not guarantee happiness [02:06]
  • Spending money on others [04:03]
  • Opportunities to anticipate [07:47]
  
  

  Pursuing happiness

  America’s purpose aligns perfectly with human purpose: life, liberty, and the pursuit of happiness. Pursuing happiness has been a recurring theme in this podcast, and I regularly encourage clients and listeners to seek the things that ultimately lead to happiness. Those things are only sometimes directly influenced by money. Happiness is derived through positive emotion, engagement, relationships, meaning, and accomplishment. 

  Money neither buys nor guarantees happiness. I have met both wealthy and poor people who are equally unhappy. When I visited India years ago, I walked past a squatters’ camp on my way to see a temple. The makeshift shelters were built of worn blue tarps and cardboard boxes. Despite their difficult living conditions, these people had joyful countenances that still impact me today.

  Using money for what matters

  While money can’t buy or guarantee one’s happiness, there are instances where money via spending CAN make you happier. Spending money on others rather than ourselves has proven to lead to more happiness for the spender. Spending money to buy ourselves more time might seem simple, but it goes a long way. Sometimes, I spend a little money to have more time with my family. That extra time is priceless. 

  With more time, you can do other things like exercise, volunteer work, or other activities linked to increased happiness. Connecting with friends, attending an event, and learning new things are all great ways to spend your time positively. Important to note is the critical issue of how people consume this extra time. Spending all your free time binge-watching shows, playing games, or scrolling through social media is quite different from doing something meaningful, engaging, or growth-promoting. 

  Experiences

  Research suggests that happiness is more often derived from experiences rather than material possessions. However, it’s important to remember that material things can also bring us joy if we use them to create experiences like going on a picnic or visiting a national park or museum. Simple, low-cost activities can provide small but meaningful boosts to happiness in the short term that accumulate one step at a time to significantly impact happiness in the long term.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • When it Comes to Early Retirement - Start with Why, Ep #1
  • Too Much Money & Too Few Memories, Ep #24
  • Michael Kitces
  • 6 Ways Money Really Can Buy Happiness For Your Financial Planning Clients
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>924d08d3-2d3b-43a0-a062-ba6c251bb397Sun, 01 Oct 2023 03:00:00 -070012:29falsefull4747Why a Will Is Not Enough - Estate PlanningA will is a crucial component of a financial plan, but it may not be sufficient on its own. In this episode of the One for the Money podcast, I share why many people would benefit from a trust. In the tips, tricks, and strategies portion, I share a tip regarding locating unclaimed money.

  In this episode...

  • More than a will [01:13]
  • Trusts vs. wills [04:06]
  • Inadvertent disinheritance [06:52]
  • Finding unclaimed assets [10:40]
  
  

  More than money

  Without an estate plan, transferring an estate costs much more because a lawyer is necessary. Also, the process takes much longer because of the backlog in the courts. The records are 100% public, so there’s no privacy whatsoever. If you don't want scammers to harass your children by knowing how much they received, make sure you have an estate plan.

  While avoiding expensive lawyers and keeping your final financial information private and away from the eyes of scammers are great reasons to have an estate plan, the primary reason is to preserve family unity. As I mentioned in the previous episode, family unity is the most important legacy you leave behind. Without an estate plan, your heirs may have some strong disagreements. Relationships could be ruined over a simple thing like money.

  Will vs. trust

  Some law firms prefer wills over trusts because the result is more lucrative. That’s why some law firms charge so little for wills; they want the probate business. Changing a will requires certain steps; the same witness must sign the updated will. Trusts are easier to change than wills, and assets will be distributed based on an attached document. That document can be periodically updated, and distributions are based on the latest version. 

  A trust is much more flexible than a will to make those changes. Trusts are great when you have several beneficiaries on accounts. You won't need to update your accounts if you’ve named the trust as the beneficiary. With a will, you can’t control the distributions. With a trust, you can for some beneficiaries. 

  Smoothly transferring assets

  Certain situations almost require a trust, as inadvertently disinheriting children is too easy, as with blended families. For example, if a husband and wife each have kids from a previous marriage, and the husband were to pass away, the wife may inherit everything. Then, when she passes, only her children may inherit all of the money. Inadvertently, this would disinherit the husband’s children from the previous marriage. Because of gift taxes and other complications, the solution isn’t as simple as inheriting children giving a portion to the others.

  One important thing to note about the transferring of assets is that property transfers first by title, then by beneficiary designation, and finally by probate or will through the courts. Some assets can’t have a beneficiary named, like a house. So if your will states that your 401k will be split between your kids but names only one of your kids as the beneficiary, that beneficiary will supersede the will. In that scenario, the title beneficiaries would need to match the will. By establishing trust, you can easily address this concern. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • MissingMoney.com
  • National Association of Unclaimed Property Administrators
  • The Only Legacy that Matters - Ensuring Family Unity via Estate Planning , Ep #45
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>A will is a crucial component of a financial plan, but it may not be sufficient on its own. In this episode of the One for the Money podcast, I share why many people would benefit from a trust. In the tips, tricks, and strategies portion, I share a tip regarding locating unclaimed money.

  In this episode...

  • More than a will [01:13]
  • Trusts vs. wills [04:06]
  • Inadvertent disinheritance [06:52]
  • Finding unclaimed assets [10:40]
  
  

  More than money

  Without an estate plan, transferring an estate costs much more because a lawyer is necessary. Also, the process takes much longer because of the backlog in the courts. The records are 100% public, so there’s no privacy whatsoever. If you don't want scammers to harass your children by knowing how much they received, make sure you have an estate plan.

  While avoiding expensive lawyers and keeping your final financial information private and away from the eyes of scammers are great reasons to have an estate plan, the primary reason is to preserve family unity. As I mentioned in the previous episode, family unity is the most important legacy you leave behind. Without an estate plan, your heirs may have some strong disagreements. Relationships could be ruined over a simple thing like money.

  Will vs. trust

  Some law firms prefer wills over trusts because the result is more lucrative. That’s why some law firms charge so little for wills; they want the probate business. Changing a will requires certain steps; the same witness must sign the updated will. Trusts are easier to change than wills, and assets will be distributed based on an attached document. That document can be periodically updated, and distributions are based on the latest version. 

  A trust is much more flexible than a will to make those changes. Trusts are great when you have several beneficiaries on accounts. You won't need to update your accounts if you’ve named the trust as the beneficiary. With a will, you can’t control the distributions. With a trust, you can for some beneficiaries. 

  Smoothly transferring assets

  Certain situations almost require a trust, as inadvertently disinheriting children is too easy, as with blended families. For example, if a husband and wife each have kids from a previous marriage, and the husband were to pass away, the wife may inherit everything. Then, when she passes, only her children may inherit all of the money. Inadvertently, this would disinherit the husband’s children from the previous marriage. Because of gift taxes and other complications, the solution isn’t as simple as inheriting children giving a portion to the others.

  One important thing to note about the transferring of assets is that property transfers first by title, then by beneficiary designation, and finally by probate or will through the courts. Some assets can’t have a beneficiary named, like a house. So if your will states that your 401k will be split between your kids but names only one of your kids as the beneficiary, that beneficiary will supersede the will. In that scenario, the title beneficiaries would need to match the will. By establishing trust, you can easily address this concern. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • MissingMoney.com
  • National Association of Unclaimed Property Administrators
  • The Only Legacy that Matters - Ensuring Family Unity via Estate Planning , Ep #45
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>408f14c0-69d1-4702-ac61-9c698b700517Fri, 15 Sep 2023 03:00:00 -070013:39falsefull4646Preserving Family Unity - Estate PlanningAn estate plan is a crucial part of one’s financial plan, but most people don’t have one. Those who do have a plan likely need to make updates or changes. This episode of the One for the Money podcast discusses the impact of an estate plan on the family. In the tips, tricks, and strategies portion, I share a tip regarding legacy contacts for your smart devices.

  In this episode...

  • The crucial estate plan [01:08]
  • Planning for the details [04:04]
  • Family matters [06:32]
  • Legacy contacts for smartphones [08:33]
  
  

  Proactive unity

  What happens when someone dies without an estate plan? The reality is that everyone does have an estate plan. Every state in the United States has a default plan, but it takes much longer and is much more expensive than necessary. There is one primary goal with estate planning: to preserve family unity.

  When the last surviving parent or grandparent dies, money often creates tension among family members. Unfortunately, some prioritize their love for money over maintaining lifelong family relationships. My father and his family experienced this firsthand. We learned an important lesson from this experience - to prioritize our family’s well-being, having a comprehensive estate plan and regularly reviewing it is essential.

  Review your plan with the right people

  When it comes to estate planning, a general attorney may not be the best fit for expressing your exact wishes. While they can assist with avoiding probate, they may not take into account the preservation of your family’s relationships. Estate planning often involves filling out forms that may not fully capture your desires if the right questions aren’t asked. 

  For instance, let’s say that Mom promised her classic Volkswagen van to one son, while Dad promised it to their daughter. If the estate plan documents don’t clearly state who inherits the van, it can create family tension. Families often have disagreements over sentimental heirlooms, such as a piano or jewelry. It’s essential to consider how crucial family unity is to you after your passing. If it’s important, then you should take the time to discuss how to pass down heirlooms with your loved ones.

  Communication

  Communication can be an issue with the most basic estate plan. What if special needs children are involved or children who suffer from substance abuse? These complicated issues deserve attention. You need to communicate your wishes should you become incapacitated. What if you told your oldest child that you don’t want to be on life support, but your youngest isn’t aware of that fact and wants to believe that you might still recover? That’s why it’s not only critical to have a durable power of attorney but to communicate your wishes as well. You don’t want this to come up for the first time around your hospital bed. It’s not fair for the person left responsible to have to guess.

  A financial planner is an excellent option to review your documents because the lawyer who drew up the plan will unlikely look at it again. Regularly review the decision makers regarding your healthcare directive and the trustee. Things change, and you may not want the person in charge now that you named previously. Family unity has a better chance with a well-written, executed, and communicated estate plan. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Click here for the funny estate planning commercial 
  • What Makes Life Meaningful? Views From 17 Advanced Economies | Pew Research Center
  • How to add a Legacy Contact for your Apple ID
  • Congratulations, You Already Have an Estate Plan - BUT YOU DON'T WANT IT!, Ep #21
  • Estate Planning Simplified, Ep #22
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>An estate plan is a crucial part of one’s financial plan, but most people don’t have one. Those who do have a plan likely need to make updates or changes. This episode of the One for the Money podcast discusses the impact of an estate plan on the family. In the tips, tricks, and strategies portion, I share a tip regarding legacy contacts for your smart devices.

  In this episode...

  • The crucial estate plan [01:08]
  • Planning for the details [04:04]
  • Family matters [06:32]
  • Legacy contacts for smartphones [08:33]
  
  

  Proactive unity

  What happens when someone dies without an estate plan? The reality is that everyone does have an estate plan. Every state in the United States has a default plan, but it takes much longer and is much more expensive than necessary. There is one primary goal with estate planning: to preserve family unity.

  When the last surviving parent or grandparent dies, money often creates tension among family members. Unfortunately, some prioritize their love for money over maintaining lifelong family relationships. My father and his family experienced this firsthand. We learned an important lesson from this experience - to prioritize our family’s well-being, having a comprehensive estate plan and regularly reviewing it is essential.

  Review your plan with the right people

  When it comes to estate planning, a general attorney may not be the best fit for expressing your exact wishes. While they can assist with avoiding probate, they may not take into account the preservation of your family’s relationships. Estate planning often involves filling out forms that may not fully capture your desires if the right questions aren’t asked. 

  For instance, let’s say that Mom promised her classic Volkswagen van to one son, while Dad promised it to their daughter. If the estate plan documents don’t clearly state who inherits the van, it can create family tension. Families often have disagreements over sentimental heirlooms, such as a piano or jewelry. It’s essential to consider how crucial family unity is to you after your passing. If it’s important, then you should take the time to discuss how to pass down heirlooms with your loved ones.

  Communication

  Communication can be an issue with the most basic estate plan. What if special needs children are involved or children who suffer from substance abuse? These complicated issues deserve attention. You need to communicate your wishes should you become incapacitated. What if you told your oldest child that you don’t want to be on life support, but your youngest isn’t aware of that fact and wants to believe that you might still recover? That’s why it’s not only critical to have a durable power of attorney but to communicate your wishes as well. You don’t want this to come up for the first time around your hospital bed. It’s not fair for the person left responsible to have to guess.

  A financial planner is an excellent option to review your documents because the lawyer who drew up the plan will unlikely look at it again. Regularly review the decision makers regarding your healthcare directive and the trustee. Things change, and you may not want the person in charge now that you named previously. Family unity has a better chance with a well-written, executed, and communicated estate plan. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Click here for the funny estate planning commercial 
  • What Makes Life Meaningful? Views From 17 Advanced Economies | Pew Research Center
  • How to add a Legacy Contact for your Apple ID
  • Congratulations, You Already Have an Estate Plan - BUT YOU DON'T WANT IT!, Ep #21
  • Estate Planning Simplified, Ep #22
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>a8879657-67f9-4ddf-abd7-307a78aabc69Fri, 01 Sep 2023 03:00:00 -070011:20falsefull4545Are Financial Planners Worth the Fees They Charge?Many people wonder if financial planners are worth the fees they charge. In this One for the Money podcast episode, I’ll help you learn the value a financial planner can provide. In the tips, tricks, and strategies portion, you’ll learn how to identify competent financial planners and avoid hucksters and salesmen.

  In this episode...

  • Money is a sensitive topic [01:07]
  • How financial planners add value [03:46]
  • Providing peace of mind [09:34]
  • Planner? Advisor? Agent? [13:47]
  • Identifying competent financial planners [15:46]
  
  

  The cost of not having a financial planner

  Discussing finances can be a delicate and personal matter for many individuals. Unfortunately, some people equate their financial prosperity with their overall success in life, causing anxiety and fear over their perceived lack of progress. As a financial planner, I’ve had the opportunity to meet with countless clients to review their financial situations. I’m pleased to say that individuals are often pleasantly surprised by how well they’re on track for their financial goals.

  Many people avoid seeking the help of a financial planner due to the complexity and emotional nature of finances. Instead, they attempt to manage their finances on their own or rely on advice from colleagues, friends, or family. However, in my experience of reviewing numerous financial plans, I have encountered many instances where mistakes or missed opportunities. These mistakes can include problems with company 401k plans, cash management, debt repayment, or tax planning, each of which can result in significant financial losses.

  A financial planner often means greater results

  According to Vanguard’s research paper from July 2022, financial advisors have the potential to increase their clients’ net returns by up to 3% or more. However, the value added may vary depending on the client’s situation. To demonstrate the impact of a 3% increase in returns, consider this example: 

  If $10,000 is invested at a 4% rate for 30 years, it will grow to just over $32,000. But if the same amount is invested at a 7% rate, 3% higher, it will grow to over $76,000. 

  This example shows how a financial planner can significantly impact someone’s financial future. While these results are not guaranteed, they highlight the value that professional investment advice can bring. Most mutual fund assets are advised, which further supports the importance of seeking the help of a knowledgeable advisor who can provide tailored guidance.

  How to choose the right professional

  It is crucial to choose a financial planner who is certified, meaning they have completed at least seven college-level courses covering a wide range of financial topics such as investments, retirement plans, taxes, insurance, and estate planning. They also have bachelor’s degrees. I wouldn’t let my friends or family work with anyone who wasn’t a CFP. Sadly, a CFP isn’t a guarantee they will have your best interests in mind, as I’ve seen too many CFPs sell only insurance products and not provide comprehensive planning.

  A financial planner should thoroughly analyze your tax return every year and identify all the ways to help you avoid paying extra taxes. Without studying your tax return, how can any financial planner provide guidance regarding contributions, distributions, or other tax mitigation strategies? To create a comprehensive financial plan that aligns with your ideal life, a financial planner should consider all aspects of your financial situation, including investments, taxes, savings, pensions, income, goals, and real estate, and analyze the impact of adjustments on your ideal life. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Putting a value on your value: Quantifying Vanguard Advisor® Alpha
  • BrokerCheck
  • Series 65 Exam Content Outline - NASAA
  • Beware of Wolves in Insurance Salesmen's Clothing, Ep #19
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Many people wonder if financial planners are worth the fees they charge. In this One for the Money podcast episode, I’ll help you learn the value a financial planner can provide. In the tips, tricks, and strategies portion, you’ll learn how to identify competent financial planners and avoid hucksters and salesmen.

  In this episode...

  • Money is a sensitive topic [01:07]
  • How financial planners add value [03:46]
  • Providing peace of mind [09:34]
  • Planner? Advisor? Agent? [13:47]
  • Identifying competent financial planners [15:46]
  
  

  The cost of not having a financial planner

  Discussing finances can be a delicate and personal matter for many individuals. Unfortunately, some people equate their financial prosperity with their overall success in life, causing anxiety and fear over their perceived lack of progress. As a financial planner, I’ve had the opportunity to meet with countless clients to review their financial situations. I’m pleased to say that individuals are often pleasantly surprised by how well they’re on track for their financial goals.

  Many people avoid seeking the help of a financial planner due to the complexity and emotional nature of finances. Instead, they attempt to manage their finances on their own or rely on advice from colleagues, friends, or family. However, in my experience of reviewing numerous financial plans, I have encountered many instances where mistakes or missed opportunities. These mistakes can include problems with company 401k plans, cash management, debt repayment, or tax planning, each of which can result in significant financial losses.

  A financial planner often means greater results

  According to Vanguard’s research paper from July 2022, financial advisors have the potential to increase their clients’ net returns by up to 3% or more. However, the value added may vary depending on the client’s situation. To demonstrate the impact of a 3% increase in returns, consider this example: 

  If $10,000 is invested at a 4% rate for 30 years, it will grow to just over $32,000. But if the same amount is invested at a 7% rate, 3% higher, it will grow to over $76,000. 

  This example shows how a financial planner can significantly impact someone’s financial future. While these results are not guaranteed, they highlight the value that professional investment advice can bring. Most mutual fund assets are advised, which further supports the importance of seeking the help of a knowledgeable advisor who can provide tailored guidance.

  How to choose the right professional

  It is crucial to choose a financial planner who is certified, meaning they have completed at least seven college-level courses covering a wide range of financial topics such as investments, retirement plans, taxes, insurance, and estate planning. They also have bachelor’s degrees. I wouldn’t let my friends or family work with anyone who wasn’t a CFP. Sadly, a CFP isn’t a guarantee they will have your best interests in mind, as I’ve seen too many CFPs sell only insurance products and not provide comprehensive planning.

  A financial planner should thoroughly analyze your tax return every year and identify all the ways to help you avoid paying extra taxes. Without studying your tax return, how can any financial planner provide guidance regarding contributions, distributions, or other tax mitigation strategies? To create a comprehensive financial plan that aligns with your ideal life, a financial planner should consider all aspects of your financial situation, including investments, taxes, savings, pensions, income, goals, and real estate, and analyze the impact of adjustments on your ideal life. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Putting a value on your value: Quantifying Vanguard Advisor® Alpha
  • BrokerCheck
  • Series 65 Exam Content Outline - NASAA
  • Beware of Wolves in Insurance Salesmen's Clothing, Ep #19
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>723018f1-775d-46dd-b430-b5e24d1e25b6Tue, 15 Aug 2023 03:00:00 -070019:27falsefull4444What I Wished I Knew Sooner About MoneyThis One for the Money podcast episode is for young adults and those younger. This information is what I wish someone had shared with me at that stage of life. Would I have heeded the advice? I can’t definitively say, but what is definite is that knowledge proceeds wisdom. With the knowledge provided in this episode, hopefully some listeners can make wiser decisions to create a better life.

  In this episode...

  • Reasons understanding money is so important [03:34]
  • When not to borrow money [10:11]
  • Avoid credit cards at all costs [12:29]
  • Building wealth is about discipline [15:55]
  • Lessons from Everyday Millionaires [17:50]
  • How to keep your spending simple [21:10]
  
  

  When to borrow money

  Only borrow money when investing in appreciating assets. Borrowing money to buy real estate is a positive example. A car, however, is a depreciating asset. For example, if you purchased a car for $25,000 and were paying 6% interest on the loan, your car would be worth $22,000 the day after its purchase. If the car is paid off in five years, the total payments would have been $31,000, but the car’s worth would be around $7,500. 

  Sadly, this was a lesson I learned the hard way. My twin brother and I borrowed money to purchase a used Jeep Wrangler. We fell in love with the vehicle at the auto dealership and even paid extra for drive-train insurance. Two days later, the clutch went out, and the dealership said it wasn’t included in part of the drive-train. That wasn’t the only issue we had with the Jeep. It was constantly in the shop, and we had expensive mechanical problem after problem that the dealership said our drive-train insurance didn’t cover. 

  Avoid credit card debt at all costs. Literally. 

  Credit card debt leads to long-term borrowing habits that are tough to overcome. Instead, it’s best to avoid developing these negative habits altogether and save yourself the trouble.

  If you had $10,000 in credit card debt with 17% interest and paid the minimum payment of around $142/month, your balance would have decreased by only a dollar by the time interest is applied. I learned this lesson the hard way by borrowing money on a credit card because I had no other options. Because of that, I missed a few credit card and student loan payments. Later, a company ran my credit, and I wasn’t approved to buy anything. In my mid to late 20s, when I learned the power of money, I mended my ways, paid off all my debts, and maxed out my savings.

  Make budgeting simple

  Budgeting is key to succeeding with money, but many make it harder and more tedious than it has to be. Keep it simple by maxing out your retirement and other savings, then spend the rest. This strategy has made one of the biggest differences for me. Because I was maxing out my 401k and my wife’s Roth IRA, I didn’t have to worry about budget categories since we didn’t go into debt for our regular spending.

  Sometimes the easiest way to control your spending is to set bigger goals. It’s way easier to limit what you spend at restaurants and Amazon when saving for a trip to Tahiti, a newer car, or a down payment for a home. It has been way easier for me to skip restaurants and eat at home when I know that my family can enjoy new cuisines in another part of the world because of it.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Letter to a High School Graduate
  • Everyday Millionaires: Chris Hogan, Dave Ramsey
  • Average consumer spending $273 per month on subscription services
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>This One for the Money podcast episode is for young adults and those younger. This information is what I wish someone had shared with me at that stage of life. Would I have heeded the advice? I can’t definitively say, but what is definite is that knowledge proceeds wisdom. With the knowledge provided in this episode, hopefully some listeners can make wiser decisions to create a better life.

  In this episode...

  • Reasons understanding money is so important [03:34]
  • When not to borrow money [10:11]
  • Avoid credit cards at all costs [12:29]
  • Building wealth is about discipline [15:55]
  • Lessons from Everyday Millionaires [17:50]
  • How to keep your spending simple [21:10]
  
  

  When to borrow money

  Only borrow money when investing in appreciating assets. Borrowing money to buy real estate is a positive example. A car, however, is a depreciating asset. For example, if you purchased a car for $25,000 and were paying 6% interest on the loan, your car would be worth $22,000 the day after its purchase. If the car is paid off in five years, the total payments would have been $31,000, but the car’s worth would be around $7,500. 

  Sadly, this was a lesson I learned the hard way. My twin brother and I borrowed money to purchase a used Jeep Wrangler. We fell in love with the vehicle at the auto dealership and even paid extra for drive-train insurance. Two days later, the clutch went out, and the dealership said it wasn’t included in part of the drive-train. That wasn’t the only issue we had with the Jeep. It was constantly in the shop, and we had expensive mechanical problem after problem that the dealership said our drive-train insurance didn’t cover. 

  Avoid credit card debt at all costs. Literally. 

  Credit card debt leads to long-term borrowing habits that are tough to overcome. Instead, it’s best to avoid developing these negative habits altogether and save yourself the trouble.

  If you had $10,000 in credit card debt with 17% interest and paid the minimum payment of around $142/month, your balance would have decreased by only a dollar by the time interest is applied. I learned this lesson the hard way by borrowing money on a credit card because I had no other options. Because of that, I missed a few credit card and student loan payments. Later, a company ran my credit, and I wasn’t approved to buy anything. In my mid to late 20s, when I learned the power of money, I mended my ways, paid off all my debts, and maxed out my savings.

  Make budgeting simple

  Budgeting is key to succeeding with money, but many make it harder and more tedious than it has to be. Keep it simple by maxing out your retirement and other savings, then spend the rest. This strategy has made one of the biggest differences for me. Because I was maxing out my 401k and my wife’s Roth IRA, I didn’t have to worry about budget categories since we didn’t go into debt for our regular spending.

  Sometimes the easiest way to control your spending is to set bigger goals. It’s way easier to limit what you spend at restaurants and Amazon when saving for a trip to Tahiti, a newer car, or a down payment for a home. It has been way easier for me to skip restaurants and eat at home when I know that my family can enjoy new cuisines in another part of the world because of it.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Letter to a High School Graduate
  • Everyday Millionaires: Chris Hogan, Dave Ramsey
  • Average consumer spending $273 per month on subscription services
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>67691658-19b8-424c-a2ce-6a4664370c03Tue, 01 Aug 2023 03:00:00 -070024:28falsefull4343What Every American Should Know About Social SecurityThe timing of when you start receiving Social Security benefits can greatly affect your retirement experience. In this episode of the One for the Money podcast, I share a few things every American should know about Social Security. At the end of the episode, I share a tip on where you can find out the details regarding your Social Security benefit.

  In this episode...

  • Eligibility for Social Security [02:19]
  • Is Social Security enough? [03:16]
  • Retirement doesn’t mean lower living expenses [06:32]
  • Will Social Security run out? [08:46]
  • Estimating your benefits [15:03]
  
  

  What is Social Security?

  Social Security is an essential aspect of retirement planning, providing a source of income not affected by market fluctuations. Given its significance, Americans need to have a thorough understanding of Social Security. To receive Social Security benefits, individuals must contribute by paying FICA taxes. Employees and employers each pay 6.2% up to a certain level of income. A self-employed individual is responsible for paying the employer and employee portions of Social Security.

  Relying on Social Security

  Unfortunately, living on Social Security alone leaves people on the brink of poverty. According to the Social Security Administration, 21% of married couples and about 44% of unmarried people rely on Social Security for 90% or more of their retirement income. Social Security was never meant to provide for a comfortable retirement. Rather, it is intended to help ensure lower-paid workers do not have to retire in relative poverty. 

  Social Security retirement benefits will replace only about 40% of your pre-retirement income if you have average earnings. Your Social Security benefit is determined by calculating your average monthly income over your lifetime. This figure is then divided into three portions using a formula, with the lowest portion being given the most weight. The result is that the less a person earns while working, the more income Social Security replaces.

  Living expenses in retirement

  Many assume that Social Security will be enough because their living expenses will reduce in retirement. Unfortunately, expenses don’t go down as much as one might expect. More and more people are taking mortgages into retirement. Homes require regular repairs and maintenance, and some of those repairs can be very expensive. Transportation costs will remain about the same, as well as everyday household expenses. 

  In retirement, expenses for healthcare and leisure activities increase significantly, with healthcare being particularly costly. A couple, on average, spends over $250,000 on health care in retirement. Consequently, people are expected to need 70-80% of their pre-retirement income to live comfortably in retirement. Social Security doesn’t provide enough to meet that need, which is why people need to supplement Social Security with 401k or IRA savings.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Fear Over Social Security’s Future Leads Some to Claim Retirement Benefits Early - WSJ
  • SSA
  • What Is Social Security Tax? Definition, Exemptions, and Example
  • Social Security Benefit Amounts
  • How much of my income will Social Security replace?
  • When to Take Social Security - Avoiding a Potential $200,000 Mistake, Ep #41
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>The timing of when you start receiving Social Security benefits can greatly affect your retirement experience. In this episode of the One for the Money podcast, I share a few things every American should know about Social Security. At the end of the episode, I share a tip on where you can find out the details regarding your Social Security benefit.

  In this episode...

  • Eligibility for Social Security [02:19]
  • Is Social Security enough? [03:16]
  • Retirement doesn’t mean lower living expenses [06:32]
  • Will Social Security run out? [08:46]
  • Estimating your benefits [15:03]
  
  

  What is Social Security?

  Social Security is an essential aspect of retirement planning, providing a source of income not affected by market fluctuations. Given its significance, Americans need to have a thorough understanding of Social Security. To receive Social Security benefits, individuals must contribute by paying FICA taxes. Employees and employers each pay 6.2% up to a certain level of income. A self-employed individual is responsible for paying the employer and employee portions of Social Security.

  Relying on Social Security

  Unfortunately, living on Social Security alone leaves people on the brink of poverty. According to the Social Security Administration, 21% of married couples and about 44% of unmarried people rely on Social Security for 90% or more of their retirement income. Social Security was never meant to provide for a comfortable retirement. Rather, it is intended to help ensure lower-paid workers do not have to retire in relative poverty. 

  Social Security retirement benefits will replace only about 40% of your pre-retirement income if you have average earnings. Your Social Security benefit is determined by calculating your average monthly income over your lifetime. This figure is then divided into three portions using a formula, with the lowest portion being given the most weight. The result is that the less a person earns while working, the more income Social Security replaces.

  Living expenses in retirement

  Many assume that Social Security will be enough because their living expenses will reduce in retirement. Unfortunately, expenses don’t go down as much as one might expect. More and more people are taking mortgages into retirement. Homes require regular repairs and maintenance, and some of those repairs can be very expensive. Transportation costs will remain about the same, as well as everyday household expenses. 

  In retirement, expenses for healthcare and leisure activities increase significantly, with healthcare being particularly costly. A couple, on average, spends over $250,000 on health care in retirement. Consequently, people are expected to need 70-80% of their pre-retirement income to live comfortably in retirement. Social Security doesn’t provide enough to meet that need, which is why people need to supplement Social Security with 401k or IRA savings.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Fear Over Social Security’s Future Leads Some to Claim Retirement Benefits Early - WSJ
  • SSA
  • What Is Social Security Tax? Definition, Exemptions, and Example
  • Social Security Benefit Amounts
  • How much of my income will Social Security replace?
  • When to Take Social Security - Avoiding a Potential $200,000 Mistake, Ep #41
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>a4a17781-c545-4213-b22a-382479f64921Sat, 15 Jul 2023 03:00:00 -070018:26falsefull4242When to Take Social Security - Avoiding a Potential $200,000 MistakeThe critical piece of many Americans’ retirement is their Social Security benefit. Without a strategy for claiming Social Security, many Americans make a decision that can cause them to lose out on hundreds of thousands of dollars. In this episode of the One for the Money podcast, I review the factors you should consider when deciding when to take Social Security.

  In this episode...

  • Assessing your options [01:16]
  • Later filing eventually passes earlier filing [04:25]
  • When should you consider taking Social Security early? [05:56]
  • Social Security when you have other income [09:26]
  • Many people take Social Security too early [10:59]
  • Strategies for married couples [12:29]
  
  

  Timing depends on the individual

  I’m often asked when a person should take Social Security. The answer to this question requires discussing goals, assessing additional sources of income in retirement, and running projections in my financial planning software. Far too many Americans don’t consider these factors when making this critical decision. Instead, they take Social Security based on what their friends decided to do - friends who likely have very different financial situations and goals. 

  
  

  Benefits of delaying

  
  

  If you take Social Security at age 62, your benefit will be up to 30% less than at age 67. That reduction is for the rest of your life and is a 6% yearly decrease when taking benefits early. If you wait until age 70, your benefit will be 32% more each month than it would be at age 67 for the rest of your life. That’s an 8% increase each year you wait.

  
  

  While taking early Social Security would mean collecting for more years, eventually the benefits of filing later catch up with earlier filing. How long would you need to live to have gained more with later filing? According to JP Morgan, a median Social Security earner taking benefits at age 67 will have received more at just over age 76 than if starting at age 62. If you take benefits at age 70, you’ll have received more by age 80 and five months than if you had started at age 62. By age 90, you will have accumulated $125,000 more if you waited until age 67 versus 62.

  
  

  Life expectancy and income

  
  

  Deciding when to take Social Security depends on two main factors: life expectancy and sources of income. If you have a shorter life expectancy based on family history and health and don’t think you’ll live into your late 70s or early 80s, delaying Social Security doesn’t make sense. However, if you have a long life expectancy, it can be in your best interest to delay taking benefits as long as possible. 

  
  

  Taking early Social Security may also make sense if it’s your primary source of income in retirement. You may not have the option to delay. Other than that reason and a shorter life expectancy, I firmly believe it makes more sense to delay Social Security provided a comprehensive analysis was completed. Social Security is critical to retirement, so choosing wisely and assessing goals is imperative. This decision is far too important to leave to chance or go along with the crowds.

  
  

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  
  

  Resources & People Mentioned

  • Which Social Security Claiming Strategy Generates the Highest Legacy Value? | Financial Planning Association
  • Guide to Retirement | J.P. Morgan Asset Management
  • The Most Popular Ages to Collect Social Security
  • Research Summary: Early Claiming of Social Security Retirement Benefits Increased During the Recession
  • U.S. Retirees Aren't Waiting Till Age 70 to Collect Social Security - TheStreet
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>The critical piece of many Americans’ retirement is their Social Security benefit. Without a strategy for claiming Social Security, many Americans make a decision that can cause them to lose out on hundreds of thousands of dollars. In this episode of the One for the Money podcast, I review the factors you should consider when deciding when to take Social Security.

  In this episode...

  • Assessing your options [01:16]
  • Later filing eventually passes earlier filing [04:25]
  • When should you consider taking Social Security early? [05:56]
  • Social Security when you have other income [09:26]
  • Many people take Social Security too early [10:59]
  • Strategies for married couples [12:29]
  
  

  Timing depends on the individual

  I’m often asked when a person should take Social Security. The answer to this question requires discussing goals, assessing additional sources of income in retirement, and running projections in my financial planning software. Far too many Americans don’t consider these factors when making this critical decision. Instead, they take Social Security based on what their friends decided to do - friends who likely have very different financial situations and goals. 

  
  

  Benefits of delaying

  
  

  If you take Social Security at age 62, your benefit will be up to 30% less than at age 67. That reduction is for the rest of your life and is a 6% yearly decrease when taking benefits early. If you wait until age 70, your benefit will be 32% more each month than it would be at age 67 for the rest of your life. That’s an 8% increase each year you wait.

  
  

  While taking early Social Security would mean collecting for more years, eventually the benefits of filing later catch up with earlier filing. How long would you need to live to have gained more with later filing? According to JP Morgan, a median Social Security earner taking benefits at age 67 will have received more at just over age 76 than if starting at age 62. If you take benefits at age 70, you’ll have received more by age 80 and five months than if you had started at age 62. By age 90, you will have accumulated $125,000 more if you waited until age 67 versus 62.

  
  

  Life expectancy and income

  
  

  Deciding when to take Social Security depends on two main factors: life expectancy and sources of income. If you have a shorter life expectancy based on family history and health and don’t think you’ll live into your late 70s or early 80s, delaying Social Security doesn’t make sense. However, if you have a long life expectancy, it can be in your best interest to delay taking benefits as long as possible. 

  
  

  Taking early Social Security may also make sense if it’s your primary source of income in retirement. You may not have the option to delay. Other than that reason and a shorter life expectancy, I firmly believe it makes more sense to delay Social Security provided a comprehensive analysis was completed. Social Security is critical to retirement, so choosing wisely and assessing goals is imperative. This decision is far too important to leave to chance or go along with the crowds.

  
  

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  
  

  Resources & People Mentioned

  • Which Social Security Claiming Strategy Generates the Highest Legacy Value? | Financial Planning Association
  • Guide to Retirement | J.P. Morgan Asset Management
  • The Most Popular Ages to Collect Social Security
  • Research Summary: Early Claiming of Social Security Retirement Benefits Increased During the Recession
  • U.S. Retirees Aren't Waiting Till Age 70 to Collect Social Security - TheStreet
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>7f28cdd7-0be9-4f88-9719-28b37c1e912cSat, 01 Jul 2023 03:00:00 -070015:58falsefull4141Investing for Your Kids - Giving the Power of TimeIn the One for the Money podcast, we’ve been discussing finances and children in our recent episodes. In the previous episode, we covered lessons for kids a few years away from adulthood. In this episode, we will focus on investing for kids only a few years old. Don’t miss out on the end of the episode, where we’ll discuss how a new law has made 529s even more valuable.

  In this episode...

  • Improving investment returns with time [01:56]
  • UTMAs and UGMAs [03:43]
  • Setting up a kid Roth [08:10]
  • The power of 529s [11:54]
  • Turning a 539 into a Roth IRA for your kids [15:35]
  
  

  Time is crucial

  Money invested in the stock market should always be for the long term. The short term poses a high level of risk, while the long term yields significant rewards. The amount of time invested in the market profoundly affects returns, as it is the exponent in the compound interest formula. Compared to other factors, time has the most significant impact on investment returns.

  Maintaining a healthy lifestyle through diet and exercise can add time to our lives, but we cannot go back in time and invest earlier. However, we can encourage our children to invest as soon as possible to increase their investment time horizons.

  Investments for children

  The Uniform Transfers to Minors Act (UTMA) is a law that permits minors to receive gifts without the assistance of a guardian or trustee. The gifts may include money, patents, royalties, real estate, and fine art. Children can receive these gifts directly without an additional step involving parents, guardians, or trustees. While most of these gifts are arranged by parents to provide assets for their children, some minors have a guardian or trustee instead. 

  An extension to UTMA is UGMA (Uniform Gifts to Minors Act), which expands the types of assets you can give. While UGMA only allows financial products like stocks, bonds, and mutual funds, UTMA includes both financial and physical assets. Once the child reaches legal age, they no longer require a custodian and can spend the money as they please. The age they become legally independent is determined by their state of residence, usually 18 or 21 years old, but each state has the option to adopt and amend the UTMA.

  College savings and 529s

  A college savings account, also known as a 529, is a great investment option for our children’s future. Currently, the total student loan debt in the US is a staggering $1.7 trillion, making it the second-highest consumer debt category after mortgage debt. Surprisingly, due to government regulations and unintended consequences, Americans owe more money on school loans than credit cards and auto loans combined.

  529s may seem simple at first glance, but they offer a range of benefits beyond their basic strategy. You can designate any person as a beneficiary and even save for future college expenses or for children who have not yet been born. Additionally, changing the beneficiary is allowed at any time. Parents and grandparents can start saving now to ensure a brighter financial future for their heirs, taking advantage of the power of compounding interest.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The Psychology of Money: Timeless lessons on wealth, greed, and happiness
  • Uniform Transfers to Minors Act (UTMA): What It Is, How It Works
  • UGMA-UTMA Account: The Benefits of One | Vanguard
  • Meaning & Purpose in Retirement, Ep #6
  • The Psychology of Money, Ep #13
  • The Cost of College and How to Pay for It - Part 1, Ep #15
  • The Cost of College and How to Pay for It - Part 2, Ep #16
  • Congress Just Made Changes to Your Retirement… Again, Ep #31
  • The Brass Tacks on Small Business Taxes - Part 2, Ep #36
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>In the One for the Money podcast, we’ve been discussing finances and children in our recent episodes. In the previous episode, we covered lessons for kids a few years away from adulthood. In this episode, we will focus on investing for kids only a few years old. Don’t miss out on the end of the episode, where we’ll discuss how a new law has made 529s even more valuable.

  In this episode...

  • Improving investment returns with time [01:56]
  • UTMAs and UGMAs [03:43]
  • Setting up a kid Roth [08:10]
  • The power of 529s [11:54]
  • Turning a 539 into a Roth IRA for your kids [15:35]
  
  

  Time is crucial

  Money invested in the stock market should always be for the long term. The short term poses a high level of risk, while the long term yields significant rewards. The amount of time invested in the market profoundly affects returns, as it is the exponent in the compound interest formula. Compared to other factors, time has the most significant impact on investment returns.

  Maintaining a healthy lifestyle through diet and exercise can add time to our lives, but we cannot go back in time and invest earlier. However, we can encourage our children to invest as soon as possible to increase their investment time horizons.

  Investments for children

  The Uniform Transfers to Minors Act (UTMA) is a law that permits minors to receive gifts without the assistance of a guardian or trustee. The gifts may include money, patents, royalties, real estate, and fine art. Children can receive these gifts directly without an additional step involving parents, guardians, or trustees. While most of these gifts are arranged by parents to provide assets for their children, some minors have a guardian or trustee instead. 

  An extension to UTMA is UGMA (Uniform Gifts to Minors Act), which expands the types of assets you can give. While UGMA only allows financial products like stocks, bonds, and mutual funds, UTMA includes both financial and physical assets. Once the child reaches legal age, they no longer require a custodian and can spend the money as they please. The age they become legally independent is determined by their state of residence, usually 18 or 21 years old, but each state has the option to adopt and amend the UTMA.

  College savings and 529s

  A college savings account, also known as a 529, is a great investment option for our children’s future. Currently, the total student loan debt in the US is a staggering $1.7 trillion, making it the second-highest consumer debt category after mortgage debt. Surprisingly, due to government regulations and unintended consequences, Americans owe more money on school loans than credit cards and auto loans combined.

  529s may seem simple at first glance, but they offer a range of benefits beyond their basic strategy. You can designate any person as a beneficiary and even save for future college expenses or for children who have not yet been born. Additionally, changing the beneficiary is allowed at any time. Parents and grandparents can start saving now to ensure a brighter financial future for their heirs, taking advantage of the power of compounding interest.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The Psychology of Money: Timeless lessons on wealth, greed, and happiness
  • Uniform Transfers to Minors Act (UTMA): What It Is, How It Works
  • UGMA-UTMA Account: The Benefits of One | Vanguard
  • Meaning & Purpose in Retirement, Ep #6
  • The Psychology of Money, Ep #13
  • The Cost of College and How to Pay for It - Part 1, Ep #15
  • The Cost of College and How to Pay for It - Part 2, Ep #16
  • Congress Just Made Changes to Your Retirement… Again, Ep #31
  • The Brass Tacks on Small Business Taxes - Part 2, Ep #36
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>37c77f40-eafe-4d87-b7f8-8a57be5a3d1eThu, 15 Jun 2023 03:00:00 -070019:55falsefull4040What Have We Taught Our Kids about Money?We spend ample time, effort, and resources to ensure our children have a good education when they leave school. However, far too many young adults enter the world without understanding personal finances. In this episode of the One for the Money podcast, I provide information that will likely help your kids more than Pythagoras’ theorem or algebra. In the tips, tricks, and strategies portion, I share a tip to help understand interest rates and rates of return.

  In this episode...

  • We want the best for our children [01:52]
  • Money communication [02:59]
  • The power of interest [06:07]
  • Teaching our mistakes [09:38]
  • The Rule of 72 [12:16]
  • Interest of stocks and bonds [16:49]
  
  

  Teaching money communication

  Wanting what’s best for our children is the remarkable selflessness of parenting. We want them to have a better life than we have. What our children know and believe about money will profoundly shape their lives and empower them to do greater things. However, the lack of knowledge can create conditions of predictable misery.

  How can we expect our kids to speak to their spouses about money if we haven’t had these conversations with them first? Money issues are the leading cause of divorce. My mother and late father are an example of this. They were married for twenty-five years and were both loving and kind. However, they were raised with different philosophies regarding money that they didn’t discuss. While a lot of stress and heartache preceded my parents’ divorce, I believe that if they had talked about money with their own parents, they would have more easily been able to talk about money with each other.

  Values and money

  Values determine how we manage our time and money. Jim Grubman, a family wealth psychologist, said, “Without an understanding of values, you can’t really make great choices.” Teaching children the value of a dollar or the satisfaction of earning and saving money requires conscious effort. 

  The goal isn’t for everyone to have the same values. Rather, families can use these values to find common ground and create ground rules for decisions. A family may talk about the principles of lifelong learning or hard work, but how individuals apply these principles can differ based on personal values. 

  Helping make sense of finances

  Are we teaching our kids about budgeting, taxes, investing, Social Security, Medicare, and saving for retirement? If we haven’t taught them, who will? What mistakes and pains could we help them avoid? While most parents want their kids to have a better life than they had, we don’t often don’t teach them the principles required to achieve it. I offer a service to my clients to teach their children about the financial fundamentals of building wealth. Many have taken me up on the offer to discuss the principles of budgeting, discipline, saving, investing, taxes, and compound wealth with their children. While I am certainly no substitute for what parents can teach their children, I’m happy to augment these efforts. 

  As a Certified Financial Planner, one of my main goals is to help clients and their children make sense of the financial world. When people understand finances, they make the best decisions wherever life and money intersect. With this greater understanding, we can create a plan so their life unfolds how they want it. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • 78% Of Workers Live Paycheck To Paycheck
  • Most Americans don't have savings to cover a $1,000 emergency
  • 55% of Americans with credit cards have debt—here's how much it could cost you
  • Putting Values at the Center of Wealth Planning
  • Credit card interest rates hit record highs - CBS News
  • How do bond returns compare with stock returns? - Ultimate Guide to Retirement
  • It's all about the Benjamins, Ep #3
  • The Case for Optimism - Part 2, Ep #32
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>We spend ample time, effort, and resources to ensure our children have a good education when they leave school. However, far too many young adults enter the world without understanding personal finances. In this episode of the One for the Money podcast, I provide information that will likely help your kids more than Pythagoras’ theorem or algebra. In the tips, tricks, and strategies portion, I share a tip to help understand interest rates and rates of return.

  In this episode...

  • We want the best for our children [01:52]
  • Money communication [02:59]
  • The power of interest [06:07]
  • Teaching our mistakes [09:38]
  • The Rule of 72 [12:16]
  • Interest of stocks and bonds [16:49]
  
  

  Teaching money communication

  Wanting what’s best for our children is the remarkable selflessness of parenting. We want them to have a better life than we have. What our children know and believe about money will profoundly shape their lives and empower them to do greater things. However, the lack of knowledge can create conditions of predictable misery.

  How can we expect our kids to speak to their spouses about money if we haven’t had these conversations with them first? Money issues are the leading cause of divorce. My mother and late father are an example of this. They were married for twenty-five years and were both loving and kind. However, they were raised with different philosophies regarding money that they didn’t discuss. While a lot of stress and heartache preceded my parents’ divorce, I believe that if they had talked about money with their own parents, they would have more easily been able to talk about money with each other.

  Values and money

  Values determine how we manage our time and money. Jim Grubman, a family wealth psychologist, said, “Without an understanding of values, you can’t really make great choices.” Teaching children the value of a dollar or the satisfaction of earning and saving money requires conscious effort. 

  The goal isn’t for everyone to have the same values. Rather, families can use these values to find common ground and create ground rules for decisions. A family may talk about the principles of lifelong learning or hard work, but how individuals apply these principles can differ based on personal values. 

  Helping make sense of finances

  Are we teaching our kids about budgeting, taxes, investing, Social Security, Medicare, and saving for retirement? If we haven’t taught them, who will? What mistakes and pains could we help them avoid? While most parents want their kids to have a better life than they had, we don’t often don’t teach them the principles required to achieve it. I offer a service to my clients to teach their children about the financial fundamentals of building wealth. Many have taken me up on the offer to discuss the principles of budgeting, discipline, saving, investing, taxes, and compound wealth with their children. While I am certainly no substitute for what parents can teach their children, I’m happy to augment these efforts. 

  As a Certified Financial Planner, one of my main goals is to help clients and their children make sense of the financial world. When people understand finances, they make the best decisions wherever life and money intersect. With this greater understanding, we can create a plan so their life unfolds how they want it. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • 78% Of Workers Live Paycheck To Paycheck
  • Most Americans don't have savings to cover a $1,000 emergency
  • 55% of Americans with credit cards have debt—here's how much it could cost you
  • Putting Values at the Center of Wealth Planning
  • Credit card interest rates hit record highs - CBS News
  • How do bond returns compare with stock returns? - Ultimate Guide to Retirement
  • It's all about the Benjamins, Ep #3
  • The Case for Optimism - Part 2, Ep #32
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>45d759ef-f0b3-46ad-b71d-908e9f6086c8Thu, 01 Jun 2023 03:00:00 -070019:08falsefull3939Are we teaching our kids about budgeting, taxes, investing, Social Security, Medicare, and saving for retirement? If we haven’t taught them, who will?Which is the Better Investment: Stocks or RE?Many Americans dream about owning property they can rent for passive income. In this episode of the One for the Money podcast, I examine whether investing in real estate or the stock market is better. Listen to the end when I share tax-saving strategies associated with selling real estate.

  In this episode...

  • All investments carry risks [02:22]
  • Advantages of investment properties [06:24]
  • Capital expenditures [11:04]
  • So which is better? [15:41]
  • The primary home exemption [17:14]
  
  

  The dream of owning rental property

  Owning a home is one of the more common American dreams. Many Americans also dream about owning an additional rental property to generate passive income. Many wonder which is the better investment: the stock market or real estate. Both stocks and real estate can be worthwhile investments, but all investments carry risk. 

  Investing in real estate is hugely appealing. Real estate is tangible and practical. You can use the property yourself if you need shelter again. A stock or a bond can’t do that for you. Even if you own 10% of a publicly traded company, they aren’t going to allow you to move into their headquarters! Another reason people like the idea of investing in real estate is that it’s simpler to understand than stocks and bonds.

  Challenges in real estate investments

  However, just because an investment on the surface seems easy to understand, that doesn’t make the investment any less risky. Income isn’t necessarily guaranteed. Additionally, squatters seem to have an insane amount of rights when they occupy a property, and evictions can be lengthy and costly. Even with a great tenant, there are still challenges. If you don’t have a big enough down payment, generating positive cash flow may take a long time. That means you will be funding losses each year.

  Too many people oversimplify the math. They assume they’ll pocket the difference between the rent and the mortgage, failing to account for various fees, taxes, maintenance, and vacancies. You must have experience and intimate knowledge of home values to do well with real estate. Without the time to gain that knowledge, purchasing properties at a discount can be difficult when up against a large corporation with cash offers. Of course, the same could be said of individual investors competing against large investment firms. 

  Tax breaks on real estate

  Homeowners can save money on taxes and make money from property by taking advantage of the primary home exemption. The principal residence exclusion is an IRS rule that allows people who meet specific criteria to exclude up to $250,000 for single filers or up to $500,000 for married filing jointly in capital gains tax from profit when they sell their primary residence. To qualify for this exclusion, you must have owned and lived in the property as your primary residence for two of the five years immediately preceding the sale. That means you could move out of your primary residence for a few years and then rent it for income while still enjoying the tax savings when you sell it.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Rich Dad Poor Dad
  • Why Rental Properties Aren't Good Investments | Wealthfront
  • 35 Insightful Landlord Statistics – 2023 - Flex | Pay Rent On Your Own Schedule
  • Determining How Much You Should Charge for Rent - SmartAsset
  • Top Reasons to Invest in Real Estate vs. Stocks
  • Is Investing in Real Estate Better Than Stocks?
  • How Much Does the S&P 500 Return Annually? - TheStreet
  • S&P 500 Average Return
  • Historical Average Stock Market Returns for S&P 500 (5-year to 150-year averages) - Trade That Swing
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Many Americans dream about owning property they can rent for passive income. In this episode of the One for the Money podcast, I examine whether investing in real estate or the stock market is better. Listen to the end when I share tax-saving strategies associated with selling real estate.

  In this episode...

  • All investments carry risks [02:22]
  • Advantages of investment properties [06:24]
  • Capital expenditures [11:04]
  • So which is better? [15:41]
  • The primary home exemption [17:14]
  
  

  The dream of owning rental property

  Owning a home is one of the more common American dreams. Many Americans also dream about owning an additional rental property to generate passive income. Many wonder which is the better investment: the stock market or real estate. Both stocks and real estate can be worthwhile investments, but all investments carry risk. 

  Investing in real estate is hugely appealing. Real estate is tangible and practical. You can use the property yourself if you need shelter again. A stock or a bond can’t do that for you. Even if you own 10% of a publicly traded company, they aren’t going to allow you to move into their headquarters! Another reason people like the idea of investing in real estate is that it’s simpler to understand than stocks and bonds.

  Challenges in real estate investments

  However, just because an investment on the surface seems easy to understand, that doesn’t make the investment any less risky. Income isn’t necessarily guaranteed. Additionally, squatters seem to have an insane amount of rights when they occupy a property, and evictions can be lengthy and costly. Even with a great tenant, there are still challenges. If you don’t have a big enough down payment, generating positive cash flow may take a long time. That means you will be funding losses each year.

  Too many people oversimplify the math. They assume they’ll pocket the difference between the rent and the mortgage, failing to account for various fees, taxes, maintenance, and vacancies. You must have experience and intimate knowledge of home values to do well with real estate. Without the time to gain that knowledge, purchasing properties at a discount can be difficult when up against a large corporation with cash offers. Of course, the same could be said of individual investors competing against large investment firms. 

  Tax breaks on real estate

  Homeowners can save money on taxes and make money from property by taking advantage of the primary home exemption. The principal residence exclusion is an IRS rule that allows people who meet specific criteria to exclude up to $250,000 for single filers or up to $500,000 for married filing jointly in capital gains tax from profit when they sell their primary residence. To qualify for this exclusion, you must have owned and lived in the property as your primary residence for two of the five years immediately preceding the sale. That means you could move out of your primary residence for a few years and then rent it for income while still enjoying the tax savings when you sell it.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Rich Dad Poor Dad
  • Why Rental Properties Aren't Good Investments | Wealthfront
  • 35 Insightful Landlord Statistics – 2023 - Flex | Pay Rent On Your Own Schedule
  • Determining How Much You Should Charge for Rent - SmartAsset
  • Top Reasons to Invest in Real Estate vs. Stocks
  • Is Investing in Real Estate Better Than Stocks?
  • How Much Does the S&P 500 Return Annually? - TheStreet
  • S&P 500 Average Return
  • Historical Average Stock Market Returns for S&P 500 (5-year to 150-year averages) - Trade That Swing
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>46d9b4bb-d135-47de-b748-1c6f60485f81Mon, 15 May 2023 03:00:00 -070019:37falsefull3838Both stocks and real estate can be a worthwhile investment, but all investments carry risk.Investing & RecessionsEconomists are debating whether or not we will have a recession this year. The Wall Street Journal recently noted that this has become the most anticipated recession in recent U.S. history. In this episode of the One for the Money podcast, I share about recessions and my five rules of investing. Listen to the end when I share a tip about the amazing power of dividends.

  In this episode...

  • How to prepare for a recession [01:56]
  • Five investing rules during volatile times [05:44]
  • Avoid the negative hype [08:43]
  • There’s no one right answer [12:25]
  • The power of dividends in retirement [13:40]
  
  

  Recession anticipation

  Recessions receive a lot of attention, and rightly so. Few things strike more fear in the hearts of Americans than the job losses, bankruptcies, and plummeting stock markets associated with recessions. On March 6th, the Wall Street Journal published “Why the Recession Is Always Six Months Away.” The article noted that the next economic downturn has become the most anticipated recession in recent U.S. history. 

  In episode 18, I shared a painful story of when I became spooked during a recession and made an unfortunate decision not to stay invested. As a result, I missed out on tremendous gains. What should we do about investments when we’re on the supposed precipice of a recession? The stock market can feel too much like a roller coaster, even investing with goals and a plan.

  Finding the good in recessions

  Believe it or not, a recession can be a good thing. While a recession has plenty of negative consequences, recessions are an inevitable and necessary part of the economic cycle. Recessions are a way for the economy to bring things back into balance after straying too far from reality. Many of us might remember the dot-com era when companies with nothing but a website domain name and no viable plan to make profits became valued at hundreds of millions of dollars. More recently, the stocks from companies that facilitated working from home soared only to come back down to earth when their profit potentials also came back down to earth.

  How does this happen? The stock market is essentially a popularity contest where the stocks of popular companies are voted higher. Over the long term, the stock market will weigh a business precisely as businesses should be weighed: the ability to generate consistent profits. During recessions, companies are weighed the most regarding their profitability.

  Recessions return money to businesses that generate reliable profits, enabling future growth. We have to cut back the overgrowth with pruning to have new growth. Pruning done via recession creates these growth conditions. For these reasons, my and my clients’ money is invested according to personal goals and financial plans, emphasizing value investing and corporate profitability. 

  Investing during volatile times

  The ups and downs of the market can be scary. A good investment rule is to invest according to your goals and have a plan that isn’t dependent on the stock market’s status. Your time horizon is a necessary consideration. If you’re within five years from retirement, you must begin adjusting your portfolio. Otherwise, there is a significant risk that you could have a lot less to spend during retirement. If you are further than five years from retirement and can adopt a long-term perspective, a recession can be a great time to hunt for bargains and purchase undervalued assets.

  Sometimes the best strategy is simply to ignore the markets and keep making periodic contributions via your retirement accounts. Dollar-cost averaging is a great strategy to invest at regular intervals, removing the emotion from investing. Over the past 100 years, the U.S. stock market has been up roughly three out of every four years. 

  The progress we have seen in the past 50 years has been remarkable, and the pace of positive change will only increase and continue. Investing in the stock of companies is investing where innovation happens. Life has improved for everyone in this beautiful world over the years. For example, in the 1980s, 50% of the world lived in poverty. Now it’s less than 10%. If we focus on the negative, we miss seeing how bright the future can be and the opportunities around us. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Economists in WSJ Survey Still See Recession This Year Despite Easing Inflation
  • The Recession Is Always Six Months Away, Complicating Fed Chair Powell’s Inflation Fight - WSJ
  • Ben's 4 Common Sense Rules of Investing
  • How Dividends Juice Your Returns in the Stock Market - A Wealth of Common Sense
  • The Best Time to Invest, Ep #10
  • When Life Gives You Lemons, STAY INVESTED!, Ep #18 
  • The Case for Optimism, Ep #17
  • Ways to Avoid Running out of Money in Retirement - Most Accidents Happen on the Way Down, Ep #20
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Economists are debating whether or not we will have a recession this year. The Wall Street Journal recently noted that this has become the most anticipated recession in recent U.S. history. In this episode of the One for the Money podcast, I share about recessions and my five rules of investing. Listen to the end when I share a tip about the amazing power of dividends.

  In this episode...

  • How to prepare for a recession [01:56]
  • Five investing rules during volatile times [05:44]
  • Avoid the negative hype [08:43]
  • There’s no one right answer [12:25]
  • The power of dividends in retirement [13:40]
  
  

  Recession anticipation

  Recessions receive a lot of attention, and rightly so. Few things strike more fear in the hearts of Americans than the job losses, bankruptcies, and plummeting stock markets associated with recessions. On March 6th, the Wall Street Journal published “Why the Recession Is Always Six Months Away.” The article noted that the next economic downturn has become the most anticipated recession in recent U.S. history. 

  In episode 18, I shared a painful story of when I became spooked during a recession and made an unfortunate decision not to stay invested. As a result, I missed out on tremendous gains. What should we do about investments when we’re on the supposed precipice of a recession? The stock market can feel too much like a roller coaster, even investing with goals and a plan.

  Finding the good in recessions

  Believe it or not, a recession can be a good thing. While a recession has plenty of negative consequences, recessions are an inevitable and necessary part of the economic cycle. Recessions are a way for the economy to bring things back into balance after straying too far from reality. Many of us might remember the dot-com era when companies with nothing but a website domain name and no viable plan to make profits became valued at hundreds of millions of dollars. More recently, the stocks from companies that facilitated working from home soared only to come back down to earth when their profit potentials also came back down to earth.

  How does this happen? The stock market is essentially a popularity contest where the stocks of popular companies are voted higher. Over the long term, the stock market will weigh a business precisely as businesses should be weighed: the ability to generate consistent profits. During recessions, companies are weighed the most regarding their profitability.

  Recessions return money to businesses that generate reliable profits, enabling future growth. We have to cut back the overgrowth with pruning to have new growth. Pruning done via recession creates these growth conditions. For these reasons, my and my clients’ money is invested according to personal goals and financial plans, emphasizing value investing and corporate profitability. 

  Investing during volatile times

  The ups and downs of the market can be scary. A good investment rule is to invest according to your goals and have a plan that isn’t dependent on the stock market’s status. Your time horizon is a necessary consideration. If you’re within five years from retirement, you must begin adjusting your portfolio. Otherwise, there is a significant risk that you could have a lot less to spend during retirement. If you are further than five years from retirement and can adopt a long-term perspective, a recession can be a great time to hunt for bargains and purchase undervalued assets.

  Sometimes the best strategy is simply to ignore the markets and keep making periodic contributions via your retirement accounts. Dollar-cost averaging is a great strategy to invest at regular intervals, removing the emotion from investing. Over the past 100 years, the U.S. stock market has been up roughly three out of every four years. 

  The progress we have seen in the past 50 years has been remarkable, and the pace of positive change will only increase and continue. Investing in the stock of companies is investing where innovation happens. Life has improved for everyone in this beautiful world over the years. For example, in the 1980s, 50% of the world lived in poverty. Now it’s less than 10%. If we focus on the negative, we miss seeing how bright the future can be and the opportunities around us. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Economists in WSJ Survey Still See Recession This Year Despite Easing Inflation
  • The Recession Is Always Six Months Away, Complicating Fed Chair Powell’s Inflation Fight - WSJ
  • Ben's 4 Common Sense Rules of Investing
  • How Dividends Juice Your Returns in the Stock Market - A Wealth of Common Sense
  • The Best Time to Invest, Ep #10
  • When Life Gives You Lemons, STAY INVESTED!, Ep #18 
  • The Case for Optimism, Ep #17
  • Ways to Avoid Running out of Money in Retirement - Most Accidents Happen on the Way Down, Ep #20
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>1aa4a374-67da-462d-9fc8-af3f0f95807aMon, 01 May 2023 03:00:00 -070018:42falsefull3737Recessions can be scary, but all successful investing is goal-focused and planning-driven.The Brass Tacks on Small Business Taxes - Part 299.9% of businesses across the U.S. are small businesses, with eight out of ten being owner-only businesses. In this episode of the One for the Money podcast, I share strategies that small business owners can consider to save on taxes. This episode is the second of two on the subject. I recommend you listen to episode 35 to hear other strategies. Listen to the end when I share an approach to tax deductions for vehicles used in your business.

  In this episode...

  • Kids earning income [01:41]
  • The power of a Roth IRA [04:18]
  • The Augusta Rule [07:36]
  • Tax deductions on vehicles in your business [11:08]
  
  

  Small businesses and paying family

  Business owners can save on taxes by paying their children for work they do at the company in a family-run business. Sometimes the entire family is needed to keep a business viable. The whole family commonly runs family restaurants and family farms. In these instances, the children can be paid for the work they do for the business. Because the children will be earning an income, they must pay taxes at a certain level. As a reminder, that level is anything above the standard deduction of $13,850.

  If your children each earned $13,850, they would pay $0 in federal income taxes. That money could be used to help them pay for their own expenses, such as cars and clothes, all while your business gets a deduction for their salary. That’s a much better thought than having the business owners receive their taxed income and pay for the same expenses.

  Child Roth IRAs

  One of the best things you could have your kids do with this earned income is to fund a Roth IRA. With retirement accounts, you always have to pay income taxes. Of course, you’d want to pay taxes when it’s to your advantage and when rates are lowest. The tax rate for children can be as low as $0. If your kid earns $6,500, they could contribute that to an IRA and pay nothing in federal income taxes. Because it’s a Roth IRA, taxes on that money won’t have to be paid again.

  The best thing you can do as an investor is to increase your time horizon. Having your kids set up a Roth IRA gives them decades more time for their investments to benefit from compound interest. While hiring a child may not be top of mind for many business owners, there can be a surprisingly broad array of tax and other benefits. The caveat is that the child must be doing age-appropriate work for a reasonable wage.

  Vehicle tax savings for small businesses

  If you use a vehicle for your small business, how and when you deduct the business use for the vehicle can have significant tax savings. The cost of operating vehicles used for business activities is typically deductible, along with the cost of the vehicles as equipment. You can calculate expenses using the IRS’ standard mileage rate for most vehicles. For 2022, that average is between 58.5 cents per mile and 62.5 cents per mile. The other option is to add up actual expenses, including gas and oil changes, tires, repairs, etc. The vehicle doesn’t have to be owned by the company itself but can also be owned by the employee.

  If your business leases a vehicle, you can calculate the deduction using either the standard mileage or the actual expenses method. For new and pre-owned vehicles put to use in the tax year of 2022, the maximum first-year depreciation write-off is $11,200, plus an additional $8,000 bonus depreciation. If you use the vehicle for personal and business use, you can split the percentage between the two. Be sure to keep excellent records and speak with an accounting professional. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Small Business Statistics Of 2023 – Forbes Advisor
  • Business Use of Vehicles - TurboTax Tax Tips & Videos
  • The Augusta Rule - Tax Free Rental Income | HLB Gross Collins
  • Hiring Children In The Family Business For Tax (And Other) Benefits
  • Saving Strategies for the Self-Employed, Ep #7
  • It's All Very Taxing - Part 1, Ep #8
  • Time to Pay the Piper, Ep #33
  • The Brass Tacks on Small Business Taxes - Part 1, Ep #35
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>99.9% of businesses across the U.S. are small businesses, with eight out of ten being owner-only businesses. In this episode of the One for the Money podcast, I share strategies that small business owners can consider to save on taxes. This episode is the second of two on the subject. I recommend you listen to episode 35 to hear other strategies. Listen to the end when I share an approach to tax deductions for vehicles used in your business.

  In this episode...

  • Kids earning income [01:41]
  • The power of a Roth IRA [04:18]
  • The Augusta Rule [07:36]
  • Tax deductions on vehicles in your business [11:08]
  
  

  Small businesses and paying family

  Business owners can save on taxes by paying their children for work they do at the company in a family-run business. Sometimes the entire family is needed to keep a business viable. The whole family commonly runs family restaurants and family farms. In these instances, the children can be paid for the work they do for the business. Because the children will be earning an income, they must pay taxes at a certain level. As a reminder, that level is anything above the standard deduction of $13,850.

  If your children each earned $13,850, they would pay $0 in federal income taxes. That money could be used to help them pay for their own expenses, such as cars and clothes, all while your business gets a deduction for their salary. That’s a much better thought than having the business owners receive their taxed income and pay for the same expenses.

  Child Roth IRAs

  One of the best things you could have your kids do with this earned income is to fund a Roth IRA. With retirement accounts, you always have to pay income taxes. Of course, you’d want to pay taxes when it’s to your advantage and when rates are lowest. The tax rate for children can be as low as $0. If your kid earns $6,500, they could contribute that to an IRA and pay nothing in federal income taxes. Because it’s a Roth IRA, taxes on that money won’t have to be paid again.

  The best thing you can do as an investor is to increase your time horizon. Having your kids set up a Roth IRA gives them decades more time for their investments to benefit from compound interest. While hiring a child may not be top of mind for many business owners, there can be a surprisingly broad array of tax and other benefits. The caveat is that the child must be doing age-appropriate work for a reasonable wage.

  Vehicle tax savings for small businesses

  If you use a vehicle for your small business, how and when you deduct the business use for the vehicle can have significant tax savings. The cost of operating vehicles used for business activities is typically deductible, along with the cost of the vehicles as equipment. You can calculate expenses using the IRS’ standard mileage rate for most vehicles. For 2022, that average is between 58.5 cents per mile and 62.5 cents per mile. The other option is to add up actual expenses, including gas and oil changes, tires, repairs, etc. The vehicle doesn’t have to be owned by the company itself but can also be owned by the employee.

  If your business leases a vehicle, you can calculate the deduction using either the standard mileage or the actual expenses method. For new and pre-owned vehicles put to use in the tax year of 2022, the maximum first-year depreciation write-off is $11,200, plus an additional $8,000 bonus depreciation. If you use the vehicle for personal and business use, you can split the percentage between the two. Be sure to keep excellent records and speak with an accounting professional. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Small Business Statistics Of 2023 – Forbes Advisor
  • Business Use of Vehicles - TurboTax Tax Tips & Videos
  • The Augusta Rule - Tax Free Rental Income | HLB Gross Collins
  • Hiring Children In The Family Business For Tax (And Other) Benefits
  • Saving Strategies for the Self-Employed, Ep #7
  • It's All Very Taxing - Part 1, Ep #8
  • Time to Pay the Piper, Ep #33
  • The Brass Tacks on Small Business Taxes - Part 1, Ep #35
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>a6927804-9154-46d9-89b0-2d09ac669acfSat, 15 Apr 2023 03:00:00 -070015:47falsefull3636Business owners can save on taxes with a variety of strategiesThe Brass Tacks on Small Business Taxes - Part 1Small business owners have much to consider to maximize their tax savings. In this episode of the One for the Money podcast, I share strategies that small business owners can consider to save on taxes. As there are many strategies to consider, this will be the first of two episodes on the subject. In the tips, tricks, and strategies portion, I share an additional business tax strategy utilizing the home office deduction.

  In this episode...

  • Small businesses and the economy [01:10]
  • What are payroll taxes? [03:20]
  • Saving for retirement as a business owner [04:58]
  • Personal Defined Benefit Plans[10:29]
  • The home office tax deduction [13:37]
  
  

  The importance of small businesses

  Most of us are familiar with prominent companies here in the United States, but the majority of companies in the U.S. are much smaller. In fact, 99.9% of businesses across the country are small businesses. Despite their minimal size, their importance cannot be understated. Over the past 25 years, small businesses have added nearly two out of every three jobs to the economy. Because of the incredible importance of such businesses, I want to share some provisions the tax code has that small businesses should know. 

  Taxes for the self-employed

  Nearly eight in ten businesses have no employees besides the owner. Often individuals are paid as independent contractors or 1099s. However, these individuals may want to add themselves to the ranks of business owners and incorporate instead of being paid as a 1099 employee. Being a corporation can save money on payroll taxes. Social Security and Medicare are the two most common examples of these taxes paid to the government for social programs. Collectively, they are called your FICA taxes. Employees contribute 6.2% to Social Security, and employers make a matching contribution. Employees also make a 1.45% contribution towards Medicare, which employers also match. Altogether that’s 15.3% of a person’s income being contributed before any state and federal income taxes.

  Taxes are even more expensive for the self-employed because they must pay both the employee and the employer contributions. Individuals who receive a W2 pay a total of only 7.65%, while sole proprietors pay double that. But, self-employed individuals can form a corporation, and the IRS allows corporations to pay employees a reasonable wage. The rest of the funds can be transferred as a quarterly distribution instead. There are expenses to consider and rules on reasonable wages and distributions, so you would want to enlist the work of accounting professionals with this area of expertise.

  Retirement plans for business owners

  As the business owner, you are solely responsible for saving for your retirement as there isn’t a company making a matching contribution from your employer. Many business owners reinvest much of their money into their businesses but miss out on years of investments compounding in the stock market. Diversifying investments outside of your business is critical, and doing so early, even in small amounts. The best thing you can do to increase your investment returns is to increase your time horizon. Small amounts can grow to enormous sums given a lot of time. 

  A self-employed individual has several options for saving for retirement, and choosing the right one ultimately depends on income. The simplest option is an Individual Retirement Account, either Traditional or Roth. These types of accounts are only taxed once with ordinary income taxes. You decide when. With a traditional IRA, taxes are applied in retirement. With a Roth, taxes are applied now. There are many factors to consider, so it’s recommended that you check with a certified financial planner.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Small Business Statistics Of 2023 – Forbes Advisor
  • 25 Home Business Tax Deductions | LendingTree
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Small business owners have much to consider to maximize their tax savings. In this episode of the One for the Money podcast, I share strategies that small business owners can consider to save on taxes. As there are many strategies to consider, this will be the first of two episodes on the subject. In the tips, tricks, and strategies portion, I share an additional business tax strategy utilizing the home office deduction.

  In this episode...

  • Small businesses and the economy [01:10]
  • What are payroll taxes? [03:20]
  • Saving for retirement as a business owner [04:58]
  • Personal Defined Benefit Plans[10:29]
  • The home office tax deduction [13:37]
  
  

  The importance of small businesses

  Most of us are familiar with prominent companies here in the United States, but the majority of companies in the U.S. are much smaller. In fact, 99.9% of businesses across the country are small businesses. Despite their minimal size, their importance cannot be understated. Over the past 25 years, small businesses have added nearly two out of every three jobs to the economy. Because of the incredible importance of such businesses, I want to share some provisions the tax code has that small businesses should know. 

  Taxes for the self-employed

  Nearly eight in ten businesses have no employees besides the owner. Often individuals are paid as independent contractors or 1099s. However, these individuals may want to add themselves to the ranks of business owners and incorporate instead of being paid as a 1099 employee. Being a corporation can save money on payroll taxes. Social Security and Medicare are the two most common examples of these taxes paid to the government for social programs. Collectively, they are called your FICA taxes. Employees contribute 6.2% to Social Security, and employers make a matching contribution. Employees also make a 1.45% contribution towards Medicare, which employers also match. Altogether that’s 15.3% of a person’s income being contributed before any state and federal income taxes.

  Taxes are even more expensive for the self-employed because they must pay both the employee and the employer contributions. Individuals who receive a W2 pay a total of only 7.65%, while sole proprietors pay double that. But, self-employed individuals can form a corporation, and the IRS allows corporations to pay employees a reasonable wage. The rest of the funds can be transferred as a quarterly distribution instead. There are expenses to consider and rules on reasonable wages and distributions, so you would want to enlist the work of accounting professionals with this area of expertise.

  Retirement plans for business owners

  As the business owner, you are solely responsible for saving for your retirement as there isn’t a company making a matching contribution from your employer. Many business owners reinvest much of their money into their businesses but miss out on years of investments compounding in the stock market. Diversifying investments outside of your business is critical, and doing so early, even in small amounts. The best thing you can do to increase your investment returns is to increase your time horizon. Small amounts can grow to enormous sums given a lot of time. 

  A self-employed individual has several options for saving for retirement, and choosing the right one ultimately depends on income. The simplest option is an Individual Retirement Account, either Traditional or Roth. These types of accounts are only taxed once with ordinary income taxes. You decide when. With a traditional IRA, taxes are applied in retirement. With a Roth, taxes are applied now. There are many factors to consider, so it’s recommended that you check with a certified financial planner.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Small Business Statistics Of 2023 – Forbes Advisor
  • 25 Home Business Tax Deductions | LendingTree
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>76658585-b944-4463-a3be-661f5ea65c23Sat, 01 Apr 2023 03:00:00 -070016:00falsefull3535Small business owners have much to consider to maximize their tax savings.Is the Tax Code Fair?Springtime symbolizes renewal and new beginnings. How ironic that this season is when we’re required to file our taxes and look back at the previous year’s finances. In this episode of the One for the Money podcast, I share why not only is assessing our tax strategies essential but also assessing the tax code in general. Listen to the end when I share a strategy regarding significant tax savings that could be hiding in your 401k.

  In this episode...

  • The electric vehicle tax credit [02:07]
  • Standard vs. itemized deduction [04:01]
  • The deductibility of state and local taxes [06:01]
  • The progressive nature of the tax code [09:24]
  • Fairness and unfairness in the tax code [10:48]
  • Tax advantages hiding in a 401(k) [12:20]
  
  

  Who fairs fairer?

  Many question the fairness of the tax code. While it’s anything but fair, you may be surprised by who does and does not benefit. The common argument is that people should pay their fair share. But change is constant in the tax code, as is the refrain about making the tax code fair. Here are a few examples that show who benefits and who does not. 

  First, let’s consider the electric vehicle tax credit. The federal government provides a $7,500 tax credit to people who buy an electric or hybrid vehicle. A tax credit is way better than a tax deduction because a credit is dollar-for-dollar elimination of taxes that would otherwise be paid. So if someone purchased a $200,000 electric vehicle that qualifies, they would pay $7,500 less in income taxes. While this is a significant tax break to the purchasers of these vehicles, is it fair that people who purchase gas-powered vehicles pay more taxes?

  Taxes for homeowners vs. renters

  When filing taxes, we can choose the standard deduction or the itemized deduction, which is the base amount of income on which you pay $0 in taxes. If you have items that add up to more than the standard deduction, you would take that amount in 2023. The standard deduction for an individual is $13,850; for a married couple, the deduction is double that amount. 

  The itemized deduction is where the questions of tax fairness come into play. One major contributing factor to one’s itemized deductions is the ability to deduct the interest paid on one’s mortgage. Are homeowners more virtuous than renters? If mortgage interest is deductible, but rent isn’t, then renters are required to pay more taxes and subsidize property owners. Is that fair? On average, homeowners are from the middle and upper-income tax brackets. Is it fair that poor renters provide a benefit for richer owners? The mortgage interest may incentivize some to purchase a home, though that’s debatable. Is it fair for the government to tip the scales in a homeowner’s favor versus a renter’s?

  Plan to make the best of it

  As you can see, there isn’t anything simple about tax matters. What about the progressive nature of our tax code? Those with higher incomes have to pay a higher dollar amount in taxes and a higher percentage. On average, higher earners pay a higher percentage than those who earn less. According to data from 2018 on the top 1% of US taxpayers, those who earned more than $540,000 per year made 21% of all the US income but paid 40% of all the individual federal income taxes. The top 10%, those who earned $152,000 or more, made 48% of the income but paid 71% of federal income taxes. The bottom 50% of earners, earning $43,600 or less, made 12% of the income and paid 3% of all the income taxes.

  There are many other examples of fairness or unfairness in the tax code. Most would agree that the tax system in the United States is complex, confusing, and inefficient. The point of this podcast is to show that the critical thing is to focus on your tax planning rather than trying to determine whether the tax code is fair or not. Understanding the tax code and implementing better tax planning strategies will lead you to pay taxes better. Strategies to consider could take many forms, such as Roth contributions or conversions in low or lower-income periods. It could mean deductible retirement contributions during higher income periods, HSA contributions, or other strategies I highlighted in previous episodes.

  This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Small Business Statistics Of 2023 – Forbes Advisor
  • 25 Home Business Tax Deductions | LendingTree
  • It's All Very Taxing - Part 1, Ep #8
  • It's All Very Taxing - Part 2, Ep #9
  • Time to Pay the Piper, Ep #33
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Springtime symbolizes renewal and new beginnings. How ironic that this season is when we’re required to file our taxes and look back at the previous year’s finances. In this episode of the One for the Money podcast, I share why not only is assessing our tax strategies essential but also assessing the tax code in general. Listen to the end when I share a strategy regarding significant tax savings that could be hiding in your 401k.

  In this episode...

  • The electric vehicle tax credit [02:07]
  • Standard vs. itemized deduction [04:01]
  • The deductibility of state and local taxes [06:01]
  • The progressive nature of the tax code [09:24]
  • Fairness and unfairness in the tax code [10:48]
  • Tax advantages hiding in a 401(k) [12:20]
  
  

  Who fairs fairer?

  Many question the fairness of the tax code. While it’s anything but fair, you may be surprised by who does and does not benefit. The common argument is that people should pay their fair share. But change is constant in the tax code, as is the refrain about making the tax code fair. Here are a few examples that show who benefits and who does not. 

  First, let’s consider the electric vehicle tax credit. The federal government provides a $7,500 tax credit to people who buy an electric or hybrid vehicle. A tax credit is way better than a tax deduction because a credit is dollar-for-dollar elimination of taxes that would otherwise be paid. So if someone purchased a $200,000 electric vehicle that qualifies, they would pay $7,500 less in income taxes. While this is a significant tax break to the purchasers of these vehicles, is it fair that people who purchase gas-powered vehicles pay more taxes?

  Taxes for homeowners vs. renters

  When filing taxes, we can choose the standard deduction or the itemized deduction, which is the base amount of income on which you pay $0 in taxes. If you have items that add up to more than the standard deduction, you would take that amount in 2023. The standard deduction for an individual is $13,850; for a married couple, the deduction is double that amount. 

  The itemized deduction is where the questions of tax fairness come into play. One major contributing factor to one’s itemized deductions is the ability to deduct the interest paid on one’s mortgage. Are homeowners more virtuous than renters? If mortgage interest is deductible, but rent isn’t, then renters are required to pay more taxes and subsidize property owners. Is that fair? On average, homeowners are from the middle and upper-income tax brackets. Is it fair that poor renters provide a benefit for richer owners? The mortgage interest may incentivize some to purchase a home, though that’s debatable. Is it fair for the government to tip the scales in a homeowner’s favor versus a renter’s?

  Plan to make the best of it

  As you can see, there isn’t anything simple about tax matters. What about the progressive nature of our tax code? Those with higher incomes have to pay a higher dollar amount in taxes and a higher percentage. On average, higher earners pay a higher percentage than those who earn less. According to data from 2018 on the top 1% of US taxpayers, those who earned more than $540,000 per year made 21% of all the US income but paid 40% of all the individual federal income taxes. The top 10%, those who earned $152,000 or more, made 48% of the income but paid 71% of federal income taxes. The bottom 50% of earners, earning $43,600 or less, made 12% of the income and paid 3% of all the income taxes.

  There are many other examples of fairness or unfairness in the tax code. Most would agree that the tax system in the United States is complex, confusing, and inefficient. The point of this podcast is to show that the critical thing is to focus on your tax planning rather than trying to determine whether the tax code is fair or not. Understanding the tax code and implementing better tax planning strategies will lead you to pay taxes better. Strategies to consider could take many forms, such as Roth contributions or conversions in low or lower-income periods. It could mean deductible retirement contributions during higher income periods, HSA contributions, or other strategies I highlighted in previous episodes.

  This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. 

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • Small Business Statistics Of 2023 – Forbes Advisor
  • 25 Home Business Tax Deductions | LendingTree
  • It's All Very Taxing - Part 1, Ep #8
  • It's All Very Taxing - Part 2, Ep #9
  • Time to Pay the Piper, Ep #33
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>1d0c4817-36fe-46dd-b113-3c429126d941Wed, 15 Mar 2023 03:00:00 -070017:07falsefull3434Many question the fairness of the tax code. While it’s anything but fair, you may be surprised by who does and does not benefit.Time to Pay the PiperWe all make choices. But in the end, our choices make us. While a better life results from actions you have taken via better planning, outside factors need to be considered to implement better planning strategies. One of those forces is the reality of our national debt and its impact on our taxes. Mitigating these effects is the subject of this episode of the One for the Money podcast.

  In this episode...

  • The Pied Piper of Hamelin [01:29] 
  • The US national deficit [02:59]
  • Interest on the debt will only increase [05:31] 
  • What can we do about the deficit? [07:46] 
  • Prepare for potential increasing taxes [09:40]
  • Tax mitigation strategies [12:23]
  
  

  The national deficit

  The story of the Pied Piper of Hamelin takes place in the 13th century. The town of Hamelin had a rat infestation, and a man in colorful clothes offered to get rid of the rats for a fee. The town agreed, and the man played a pipe to get all the rats to drown themselves in a nearby river. When the Piper came to collect his payment, the townspeople told him they would not pay because they now had no reason to make good on their debt. As revenge, the Pied Piper played his pipe to get all the town’s children to follow him away. 

  This analogy is most appropriate given our national deficit. Like the people of Hamelin, America has run up a bill. But like the Pied Piper story, our children will likely ultimately pay the price. As I’m recording this episode, Congress is in a standoff debate about raising the debt ceiling. However, there’s no discussion about the debt itself. 

  What can we do?

  Many people blame the deficit and spending on their opposite political party. But the truth is that despite the political divide in the country, we’ve had broad bipartisanship support for spending. We’ve had multiple administrations from both parties over the past several decades, and we’ve only had five instances where America spent less than it took in. Clearly, overspending is not a partisan issue but a bipartisan one. 

  So what can we do about the deficit? We have two choices as I see it. The first is considering voting for new candidates who will take the national debt seriously. That means more people would need to be active in the election primaries to get the candidates they want in November. The second choice would be deciding to be proactive in tax planning. Too many Americans don’t have a plan in which they implement strategies to reduce their lifetime tax liability. We’re fast approaching the 2022 tax season, which provides an excellent assessment of strategies you have utilized or need to consider.

  Rising taxes

  Congress and state governments have looked for ways to increase taxes significantly. Some factors they have considered are increasing the top ordinary income tax rate, raising the top long-term capital gains tax rate, and creating new minimum distribution requirements for taxpayers with high-income and mega-sized retirement accounts. While the federal government wasn’t successful in implementing these, several states are considering similar measures. According to the Washington Post, legislators in California, Connecticut, Hawaii, Illinois, Maryland, New York, and Washington state plan to release a series of bills this week that will target high-income and ultra-high-net-worth residents for tax increases. 

  While the specific proposed measures vary by state and include taxing unrealized capital gains, raising state income tax rates, and reducing the state tax exemption limits, certain proposals would also create a first of their kind of wealth tax. For those who think that high-income and ultra-high-net-worth individuals should be taxed the most, we need to remember that they always are, but also that they are the first subject of these taxes who will hire lawyers and accountants to avoid them. Also worth noting is that several European countries that initiated wealth tax have since abandoned it due to problems.

  Resources & People Mentioned

  • National Debt Clock
  • Pied Piper of Hamelin - Wikipedia
  • History of the US Federal Budget Deficit
  • Historical US Federal Individual Income Tax Rates & Brackets, 1862-2021
  • Billionaires in blue states face coordinated wealth-tax bills
  • The State Wealth-Tax Alliance - WSJ
  • The Fiscal & Economic Challenge
  • When it Comes to Early Retirement - Start with Why, Ep #1
  • Are you on FIRE financially?, Ep #2
  • Meaning & Purpose in Retirement, Ep #6
  • Saving Strategies for the Self-Employed, Ep #7
  • It's All Very Taxing - Part 1, Ep #8
  • It's All Very Taxing - Part 2, Ep #9
  • The Ticking Tax Time Bomb in Your Retirement Account, Ep #12
  • Maxing Out Your Life with a Mini-Retirement, Ep #26
  • Healthy, Wealthy, & Wise, Ep #29
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>We all make choices. But in the end, our choices make us. While a better life results from actions you have taken via better planning, outside factors need to be considered to implement better planning strategies. One of those forces is the reality of our national debt and its impact on our taxes. Mitigating these effects is the subject of this episode of the One for the Money podcast.

  In this episode...

  • The Pied Piper of Hamelin [01:29] 
  • The US national deficit [02:59]
  • Interest on the debt will only increase [05:31] 
  • What can we do about the deficit? [07:46] 
  • Prepare for potential increasing taxes [09:40]
  • Tax mitigation strategies [12:23]
  
  

  The national deficit

  The story of the Pied Piper of Hamelin takes place in the 13th century. The town of Hamelin had a rat infestation, and a man in colorful clothes offered to get rid of the rats for a fee. The town agreed, and the man played a pipe to get all the rats to drown themselves in a nearby river. When the Piper came to collect his payment, the townspeople told him they would not pay because they now had no reason to make good on their debt. As revenge, the Pied Piper played his pipe to get all the town’s children to follow him away. 

  This analogy is most appropriate given our national deficit. Like the people of Hamelin, America has run up a bill. But like the Pied Piper story, our children will likely ultimately pay the price. As I’m recording this episode, Congress is in a standoff debate about raising the debt ceiling. However, there’s no discussion about the debt itself. 

  What can we do?

  Many people blame the deficit and spending on their opposite political party. But the truth is that despite the political divide in the country, we’ve had broad bipartisanship support for spending. We’ve had multiple administrations from both parties over the past several decades, and we’ve only had five instances where America spent less than it took in. Clearly, overspending is not a partisan issue but a bipartisan one. 

  So what can we do about the deficit? We have two choices as I see it. The first is considering voting for new candidates who will take the national debt seriously. That means more people would need to be active in the election primaries to get the candidates they want in November. The second choice would be deciding to be proactive in tax planning. Too many Americans don’t have a plan in which they implement strategies to reduce their lifetime tax liability. We’re fast approaching the 2022 tax season, which provides an excellent assessment of strategies you have utilized or need to consider.

  Rising taxes

  Congress and state governments have looked for ways to increase taxes significantly. Some factors they have considered are increasing the top ordinary income tax rate, raising the top long-term capital gains tax rate, and creating new minimum distribution requirements for taxpayers with high-income and mega-sized retirement accounts. While the federal government wasn’t successful in implementing these, several states are considering similar measures. According to the Washington Post, legislators in California, Connecticut, Hawaii, Illinois, Maryland, New York, and Washington state plan to release a series of bills this week that will target high-income and ultra-high-net-worth residents for tax increases. 

  While the specific proposed measures vary by state and include taxing unrealized capital gains, raising state income tax rates, and reducing the state tax exemption limits, certain proposals would also create a first of their kind of wealth tax. For those who think that high-income and ultra-high-net-worth individuals should be taxed the most, we need to remember that they always are, but also that they are the first subject of these taxes who will hire lawyers and accountants to avoid them. Also worth noting is that several European countries that initiated wealth tax have since abandoned it due to problems.

  Resources & People Mentioned

  • National Debt Clock
  • Pied Piper of Hamelin - Wikipedia
  • History of the US Federal Budget Deficit
  • Historical US Federal Individual Income Tax Rates & Brackets, 1862-2021
  • Billionaires in blue states face coordinated wealth-tax bills
  • The State Wealth-Tax Alliance - WSJ
  • The Fiscal & Economic Challenge
  • When it Comes to Early Retirement - Start with Why, Ep #1
  • Are you on FIRE financially?, Ep #2
  • Meaning & Purpose in Retirement, Ep #6
  • Saving Strategies for the Self-Employed, Ep #7
  • It's All Very Taxing - Part 1, Ep #8
  • It's All Very Taxing - Part 2, Ep #9
  • The Ticking Tax Time Bomb in Your Retirement Account, Ep #12
  • Maxing Out Your Life with a Mini-Retirement, Ep #26
  • Healthy, Wealthy, & Wise, Ep #29
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>b477f52c-9377-4359-9a7b-073182cd34e1Wed, 01 Mar 2023 03:00:00 -070016:29falsefull3333The Pied Piper analogy is most appropriate given our national deficit.The Case for Optimism - Part 2I’ve heard it said that pessimists sound smart, but optimists make money. In episode 17 released this last July, I shared the case for why we should be optimistic about the future. In this episode of the One for the Money Podcast, at the beginning of a year when many believe we will see a recession, I make an additional case for why we should remain optimistic. In the tips, tricks, and strategies portion, I share a tip on how to ensure you can earn the most interest on your savings and how most Americans are not. 

  In this episode...

  • Acknowledging 2022 [01:21]
  • Advancements in the last century [03:52]
  • The progress of human well-being [12:05]
  • Earning more interest on savings [14:40]
  
  

  Don’t be stuck in 2022

  If you read or watch the news, you would be forgiven for thinking that much is not right in the world. 2022 provided quite a bit of negative material. Investment returns were historically bad. Stocks faced the 7th worst loss since the 1920s, and particularly shocking was that the bond markets suffered too. Bonds historically have been a safe haven, with only four previous down years in the last forty-six that were down less than 3%. But in 2022, the bond market was down 13%. 2022 was the third worst year ever for a stock/bond portfolio.

  2022’s stock and bond performance, coupled with the forecast for the year ahead, can make us feel less optimistic about the future. However, the narrow focus on the last and current year can cause us to forget about the unmistakable and remarkable progress humanity has made and will continue to make. 

  Progress in the last century

  In the past 20 years, global poverty rates have been reduced by 50%. A hundred years ago, three-quarters of the world’s population lived in extreme poverty; today, that number is less than 10%. Just 24% of people had modern sanitation, but now 70% of the world does. Murders are down roughly 17% over the last 25 years or so. The number of deaths due to wars and genocide is also down dramatically. Today, child mortality is at the lowest it has ever been. Human life expectancy has doubled over the past century from 36 years in 1920 to more than 72 years today. 

  Even the environment has had many improvements in the last century. In 1920, the deadliest environmental problem, pollution, was four times more likely to kill you in 1920 than today. In the 1920s, half a million people were killed by weather disasters, whereas the death toll in the last decade averaged 18,000. A decade ago, environmentalists declared that Australia’s Great Barrier Reef was nearly dead, killed by bleaching caused by warming ocean temperatures. This year, scientists revealed that two-thirds of the Great Barrier Reef shows the highest coral cover since records began in 1985.

  Big banks vs. savings accounts

  Big banks still pay nearly nothing on savings, but their customers aren’t moving much of that money to higher-yielding alternatives. As a result, Americans are missing out on billions of dollars in interest. The Federal Reserve has raised interest rates to their highest level since early 2008, yet the most prominent commercial banks still pay peanuts to savers. In theory, savers could have earned $42 billion more in interest in the third quarter of 2022 had they moved their money out of the five largest U.S. banks and deposited it into the five highest-yielding savings accounts.

  Those five big banks, Bank of America, Citigroup, JP Morgan, US Bank, and Wells Fargo, paid an average of 0.4% interest on consumer deposits in savings and money market accounts during this most recent quarter. The five highest-yielding savings accounts paid an average of 2.14% during the same period, according to data from bankrate.com. The five banks collectively hold about half the money kept at U.S. commercial banks.

  Why haven’t savers moved their money? Some customers aren’t aware of how much money could be made by switching. That’s been the case for several clients to whom I’ve made this recommendation. Others think the switch is difficult, though it can be done in less than thirty minutes. Others don’t want to be bothered. You can’t blame the banks if they can maintain customers without paying for them. I recommend you look at what you’re earning at your current bank, find out what the online banks are offering, and consider transferring some to an online account.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The Case for Optimism, Ep #17
  • Good News, the World Is Getting Better | AIER
  • U.S. Carbon (CO2) Emissions 1990-2023 | MacroTrends
  • Climate Change Indicators: U.S. Greenhouse Gas Emissions | US EPA
  • American Airlines Announces Agreement to Purchase Boom Supersonic Overture Aircraft, Places Deposit on 20 Overtures
  • Ridley: Good News Is Gradual, Bad News Is Sudden
  • Is humanity doomed? Five ways the world is actually doing better – in data | Euronews
  • The world has made spectacular progress in every measure of well-being. So why does almost no one know about it?
  • 2022 Was One of the Worst Years Ever For Markets
  • The World Really Is Getting Better - The Atlantic
  • The $42 Billion Question: Why Aren’t Americans Ditching Big Banks? - WSJ
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>I’ve heard it said that pessimists sound smart, but optimists make money. In episode 17 released this last July, I shared the case for why we should be optimistic about the future. In this episode of the One for the Money Podcast, at the beginning of a year when many believe we will see a recession, I make an additional case for why we should remain optimistic. In the tips, tricks, and strategies portion, I share a tip on how to ensure you can earn the most interest on your savings and how most Americans are not. 

  In this episode...

  • Acknowledging 2022 [01:21]
  • Advancements in the last century [03:52]
  • The progress of human well-being [12:05]
  • Earning more interest on savings [14:40]
  
  

  Don’t be stuck in 2022

  If you read or watch the news, you would be forgiven for thinking that much is not right in the world. 2022 provided quite a bit of negative material. Investment returns were historically bad. Stocks faced the 7th worst loss since the 1920s, and particularly shocking was that the bond markets suffered too. Bonds historically have been a safe haven, with only four previous down years in the last forty-six that were down less than 3%. But in 2022, the bond market was down 13%. 2022 was the third worst year ever for a stock/bond portfolio.

  2022’s stock and bond performance, coupled with the forecast for the year ahead, can make us feel less optimistic about the future. However, the narrow focus on the last and current year can cause us to forget about the unmistakable and remarkable progress humanity has made and will continue to make. 

  Progress in the last century

  In the past 20 years, global poverty rates have been reduced by 50%. A hundred years ago, three-quarters of the world’s population lived in extreme poverty; today, that number is less than 10%. Just 24% of people had modern sanitation, but now 70% of the world does. Murders are down roughly 17% over the last 25 years or so. The number of deaths due to wars and genocide is also down dramatically. Today, child mortality is at the lowest it has ever been. Human life expectancy has doubled over the past century from 36 years in 1920 to more than 72 years today. 

  Even the environment has had many improvements in the last century. In 1920, the deadliest environmental problem, pollution, was four times more likely to kill you in 1920 than today. In the 1920s, half a million people were killed by weather disasters, whereas the death toll in the last decade averaged 18,000. A decade ago, environmentalists declared that Australia’s Great Barrier Reef was nearly dead, killed by bleaching caused by warming ocean temperatures. This year, scientists revealed that two-thirds of the Great Barrier Reef shows the highest coral cover since records began in 1985.

  Big banks vs. savings accounts

  Big banks still pay nearly nothing on savings, but their customers aren’t moving much of that money to higher-yielding alternatives. As a result, Americans are missing out on billions of dollars in interest. The Federal Reserve has raised interest rates to their highest level since early 2008, yet the most prominent commercial banks still pay peanuts to savers. In theory, savers could have earned $42 billion more in interest in the third quarter of 2022 had they moved their money out of the five largest U.S. banks and deposited it into the five highest-yielding savings accounts.

  Those five big banks, Bank of America, Citigroup, JP Morgan, US Bank, and Wells Fargo, paid an average of 0.4% interest on consumer deposits in savings and money market accounts during this most recent quarter. The five highest-yielding savings accounts paid an average of 2.14% during the same period, according to data from bankrate.com. The five banks collectively hold about half the money kept at U.S. commercial banks.

  Why haven’t savers moved their money? Some customers aren’t aware of how much money could be made by switching. That’s been the case for several clients to whom I’ve made this recommendation. Others think the switch is difficult, though it can be done in less than thirty minutes. Others don’t want to be bothered. You can’t blame the banks if they can maintain customers without paying for them. I recommend you look at what you’re earning at your current bank, find out what the online banks are offering, and consider transferring some to an online account.

  Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

  Resources & People Mentioned

  • The Case for Optimism, Ep #17
  • Good News, the World Is Getting Better | AIER
  • U.S. Carbon (CO2) Emissions 1990-2023 | MacroTrends
  • Climate Change Indicators: U.S. Greenhouse Gas Emissions | US EPA
  • American Airlines Announces Agreement to Purchase Boom Supersonic Overture Aircraft, Places Deposit on 20 Overtures
  • Ridley: Good News Is Gradual, Bad News Is Sudden
  • Is humanity doomed? Five ways the world is actually doing better – in data | Euronews
  • The world has made spectacular progress in every measure of well-being. So why does almost no one know about it?
  • 2022 Was One of the Worst Years Ever For Markets
  • The World Really Is Getting Better - The Atlantic
  • The $42 Billion Question: Why Aren’t Americans Ditching Big Banks? - WSJ
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>0f109a71-6563-4ca0-a173-fb5356f96912Wed, 15 Feb 2023 03:00:00 -070018:50falsefull3232Pessimists sound smart, but optimists make money.Congress Just Made Changes to Your Retirement… AgainEvery once in a while, Congress makes changes to your retirement. In this episode of the One for the Money podcast, I talk about recent, significant changes. Your financial plan must take advantage of these changes because there are always winners and losers when Congress makes changes. In the tips, tricks, and strategies portion, I share tips on reducing your taxes in retirement.

  In this episode...

  • The SECURE Act [01:05]
  • Required Minimum Distributions(RMD) [03:31]
  • Transferring funds from a 529 to a Roth IRA [06:24]
  • Lowering your RDMs [10:01]
  
  

  The SECURE Act of 2019

  In December 2019, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act. And in December 2022, they passed the SECURE Act 2.0. Before looking into the follow-up version, it’s essential to understand the original. The 2019 law brought massive changes to retirement planning. The most notable was the death of the Stretch IRA. 

  The stretch IRA was an estate planning strategy where your child would inherit your not-yet-taxed retirement account and distribute it over their entire lifetime, giving them significant tax savings. So a daughter who inherited a million-dollar IRA could spread out the distributions over a few decades, significantly reducing the taxes she would need to pay. As of 2019, a non-spouse must take those distributions in just ten years. This results in their paying significantly more in taxes because they would have to distribute much larger amounts over a shorter period. Beneficiaries will be paying way more taxes than before the 2019 SECURE Act.

  What is a Required Minimum Distribution?

  When you contribute money to a pre-tax retirement account, you have elected to pay taxes when you take the money out in your retirement, hoping your income and tax rate will be lower. Since you haven’t paid taxes on this money, Congress forces you to take money out each year starting at a certain age. In 2019, Congress raised the age from 70.5 to 72. One of the reasons is that people are working longer because they didn’t save up enough for retirement. 

  In the new SECURE 2.0 Act, Congress pushed out the RMD required dates even further. Those born between 1951 and 1959 are required to start taking money out at age 73. People born in 1960 or later can wait until age 75. That’s a great thing because it allows their money to grow longer without being taxed. Some people might consider not taking their RMDs, but the IRS would penalize them for that. The penalty for a missed RMD used to be 50%. So if the requirement were $10,000, the IRS would charge $5,000. Now that amount is 25%, and if corrected promptly, the penalty is reduced to just 10%. 

  SECURE Act 2.0

  One of the best changes made by SECURE 2.0 is that it made it possible to transfer funds from a college savings account, also known as a 529, to a Roth IRA for the beneficiary. This process can start in 2024, but several conditions must be satisfied before a transfer can be valid. The Roth IRA receiving the funds must be in the name of the beneficiary of the 529 plan. The 529 plan must have been maintained for 15 years or longer, and any earnings and contributions to the 529 plan within the last five years are ineligible to be moved to a Roth IRA. 

  The annual limit for these transfers is whatever the individual’s limit is for a Roth IRA that year. The maximum amount that can be moved from a 529 plan to a Roth IRA in an individual’s lifetime is $35,000. This new strategy could be used for higher net-worth families to prime the retirement pump for children, grandchildren, and other loved ones. A meaningful contribution could be made to a 529 plan when the child is born. Then, after the account has existed for over 15 years, the account’s funds could be moved to a Roth IRA for the child’s benefit. The transfer rules require that the child have compensation, such as from a summer or part-time job, to make the transfers. The child’s Roth IRA balance by age 65 could potentially approach or even exceed a million dollars, all tax-free

  Resources & People Mentioned

  • Secure Act 2.0 Detailed Breakdown
  • Maxing Out Your Life with a Mini-Retirement
  • Too Much Money & Too Few Memories
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Every once in a while, Congress makes changes to your retirement. In this episode of the One for the Money podcast, I talk about recent, significant changes. Your financial plan must take advantage of these changes because there are always winners and losers when Congress makes changes. In the tips, tricks, and strategies portion, I share tips on reducing your taxes in retirement.

  In this episode...

  • The SECURE Act [01:05]
  • Required Minimum Distributions(RMD) [03:31]
  • Transferring funds from a 529 to a Roth IRA [06:24]
  • Lowering your RDMs [10:01]
  
  

  The SECURE Act of 2019

  In December 2019, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act. And in December 2022, they passed the SECURE Act 2.0. Before looking into the follow-up version, it’s essential to understand the original. The 2019 law brought massive changes to retirement planning. The most notable was the death of the Stretch IRA. 

  The stretch IRA was an estate planning strategy where your child would inherit your not-yet-taxed retirement account and distribute it over their entire lifetime, giving them significant tax savings. So a daughter who inherited a million-dollar IRA could spread out the distributions over a few decades, significantly reducing the taxes she would need to pay. As of 2019, a non-spouse must take those distributions in just ten years. This results in their paying significantly more in taxes because they would have to distribute much larger amounts over a shorter period. Beneficiaries will be paying way more taxes than before the 2019 SECURE Act.

  What is a Required Minimum Distribution?

  When you contribute money to a pre-tax retirement account, you have elected to pay taxes when you take the money out in your retirement, hoping your income and tax rate will be lower. Since you haven’t paid taxes on this money, Congress forces you to take money out each year starting at a certain age. In 2019, Congress raised the age from 70.5 to 72. One of the reasons is that people are working longer because they didn’t save up enough for retirement. 

  In the new SECURE 2.0 Act, Congress pushed out the RMD required dates even further. Those born between 1951 and 1959 are required to start taking money out at age 73. People born in 1960 or later can wait until age 75. That’s a great thing because it allows their money to grow longer without being taxed. Some people might consider not taking their RMDs, but the IRS would penalize them for that. The penalty for a missed RMD used to be 50%. So if the requirement were $10,000, the IRS would charge $5,000. Now that amount is 25%, and if corrected promptly, the penalty is reduced to just 10%. 

  SECURE Act 2.0

  One of the best changes made by SECURE 2.0 is that it made it possible to transfer funds from a college savings account, also known as a 529, to a Roth IRA for the beneficiary. This process can start in 2024, but several conditions must be satisfied before a transfer can be valid. The Roth IRA receiving the funds must be in the name of the beneficiary of the 529 plan. The 529 plan must have been maintained for 15 years or longer, and any earnings and contributions to the 529 plan within the last five years are ineligible to be moved to a Roth IRA. 

  The annual limit for these transfers is whatever the individual’s limit is for a Roth IRA that year. The maximum amount that can be moved from a 529 plan to a Roth IRA in an individual’s lifetime is $35,000. This new strategy could be used for higher net-worth families to prime the retirement pump for children, grandchildren, and other loved ones. A meaningful contribution could be made to a 529 plan when the child is born. Then, after the account has existed for over 15 years, the account’s funds could be moved to a Roth IRA for the child’s benefit. The transfer rules require that the child have compensation, such as from a summer or part-time job, to make the transfers. The child’s Roth IRA balance by age 65 could potentially approach or even exceed a million dollars, all tax-free

  Resources & People Mentioned

  • Secure Act 2.0 Detailed Breakdown
  • Maxing Out Your Life with a Mini-Retirement
  • Too Much Money & Too Few Memories
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>0400e8fc-e345-40a1-93d7-99ae2129b8eeWed, 01 Feb 2023 03:00:00 -070015:21falsefull3131Every once in a while, Congress makes changes to your retirement. our financial plan must take advantage of these changes because there are always winners and losers when Congress makes changes.The "B" WordLet’s talk about the B-word: budget. In this episode of the One for the Money podcast, I share information about budgeting, why it is essential, and how to use it to invest in your future self. In the tips, tricks, and strategies portion, I share a powerful tip on why you want to avoid credit card debt. Listen in to learn how having a spending plan can help you aim to reach your goals.

  In this episode...

  • Using a budget to steer [01:00]
  • The purpose of a spending plan [02:45]
  • How to make a budget [04:58]
  • Is your budget working? [06:52]
  • More than minimum [08:59]
  
  

  The perspective on budgets

  Not long ago, I read my boys the classic Treasure Island by Robert Louis Stevenson. The book tells the story of a few men and their mutinous crew sailing from England to Treasure Island on a ship called the Hispaniola. This large ship could not have made such an impressive journey without the aid of a small rudder to steer. As a certified financial planner, I see a parallel between a rudder steering a ship and a budget steering someone into a better financial future. Without a rudder or a budget, we would never reach where we want to go.

  Many people view budgets as a financial straightjacket, sucking the joy out of life. Some view it as a diet for money or a middle seat on a long flight, unpleasant but necessary. Regardless of your view, budgets are essential, and we must see budgeting in a better light. One way to do that is to use a different term: spending plan. 

  Planning for your lifestyle

  Spending plans, or budgets, aren’t designed to deny you lattes or your Amazon Prime subscription. Instead, they are a way to plan a satisfying lifestyle for both now and in the future. When I work with clients, I advocate for two people: the client’s present self and the client’s future self. I want both people to have wonderful and fulfilling lives, and a spending plan can make that possible.

  Spending plans also ensure you’re making the most of your financial opportunities, maxing out retirement contributions, getting the highest rate on savings accounts, or reducing your insurance premiums. The plan also ensures you’re not wasting money on old gym memberships or streaming services that you no longer use or have forgotten. One study found that the average American spends $237/month for subscription services and that 84% of consumers underestimate how much they spend on these services each month.

  How do you know your budget is working?

  One way to tell if your budget is working is if you have revolving credit card debt that’s non-medically related. Reviewing your budget is imperative if you don’t have an emergency fund of at least three months worth of expenses and aren’t saving at least 10-15% for retirement. The necessity of addressing spending priorities applies especially to those who have credit card debt rolling over each month.

  People with credit card debt are sadly living in a fantasy, without incomes to support their lifestyles. Plenty of credit card companies and auto dealerships are more than happy to charge Americans thousands of dollars in interest each year to help them believe in the fantasy of their unsustainable lifestyle. If your financial ship is sailing with a compromised rudder, you can end up in dangerous waters. Like a ship off course, you must make the corrections to get yourself back on the path. With an honest assessment of your spending and regular reviews of your spending plan, you can help ensure a bountiful future.

  Resources & People Mentioned

  • Treasure Island by Robert Louis Stevenson
  • Quote by Charles Dickens
  • Average consumer spending $273 per month on subscription services
  • Credit Card Debt Explained With a Glass of Water
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Let’s talk about the B-word: budget. In this episode of the One for the Money podcast, I share information about budgeting, why it is essential, and how to use it to invest in your future self. In the tips, tricks, and strategies portion, I share a powerful tip on why you want to avoid credit card debt. Listen in to learn how having a spending plan can help you aim to reach your goals.

  In this episode...

  • Using a budget to steer [01:00]
  • The purpose of a spending plan [02:45]
  • How to make a budget [04:58]
  • Is your budget working? [06:52]
  • More than minimum [08:59]
  
  

  The perspective on budgets

  Not long ago, I read my boys the classic Treasure Island by Robert Louis Stevenson. The book tells the story of a few men and their mutinous crew sailing from England to Treasure Island on a ship called the Hispaniola. This large ship could not have made such an impressive journey without the aid of a small rudder to steer. As a certified financial planner, I see a parallel between a rudder steering a ship and a budget steering someone into a better financial future. Without a rudder or a budget, we would never reach where we want to go.

  Many people view budgets as a financial straightjacket, sucking the joy out of life. Some view it as a diet for money or a middle seat on a long flight, unpleasant but necessary. Regardless of your view, budgets are essential, and we must see budgeting in a better light. One way to do that is to use a different term: spending plan. 

  Planning for your lifestyle

  Spending plans, or budgets, aren’t designed to deny you lattes or your Amazon Prime subscription. Instead, they are a way to plan a satisfying lifestyle for both now and in the future. When I work with clients, I advocate for two people: the client’s present self and the client’s future self. I want both people to have wonderful and fulfilling lives, and a spending plan can make that possible.

  Spending plans also ensure you’re making the most of your financial opportunities, maxing out retirement contributions, getting the highest rate on savings accounts, or reducing your insurance premiums. The plan also ensures you’re not wasting money on old gym memberships or streaming services that you no longer use or have forgotten. One study found that the average American spends $237/month for subscription services and that 84% of consumers underestimate how much they spend on these services each month.

  How do you know your budget is working?

  One way to tell if your budget is working is if you have revolving credit card debt that’s non-medically related. Reviewing your budget is imperative if you don’t have an emergency fund of at least three months worth of expenses and aren’t saving at least 10-15% for retirement. The necessity of addressing spending priorities applies especially to those who have credit card debt rolling over each month.

  People with credit card debt are sadly living in a fantasy, without incomes to support their lifestyles. Plenty of credit card companies and auto dealerships are more than happy to charge Americans thousands of dollars in interest each year to help them believe in the fantasy of their unsustainable lifestyle. If your financial ship is sailing with a compromised rudder, you can end up in dangerous waters. Like a ship off course, you must make the corrections to get yourself back on the path. With an honest assessment of your spending and regular reviews of your spending plan, you can help ensure a bountiful future.

  Resources & People Mentioned

  • Treasure Island by Robert Louis Stevenson
  • Quote by Charles Dickens
  • Average consumer spending $273 per month on subscription services
  • Credit Card Debt Explained With a Glass of Water
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>0b10122b-60cc-401a-a7b2-f45f8c503768Sun, 15 Jan 2023 03:00:00 -070012:28falsefull3030Many people view budgets as a financial straightjacket, but it can provide you the freedom to live your best lifestyle.Healthy, Wealthy & WiseThis episode of the One for the Money podcast airs on January 1st when many Americans make resolutions to improve their lives. These resolutions often focus on eating better and getting more exercise, perhaps because of everything eaten during the holidays. In this episode, I share why, financially, it’s better not just to be wealthy and wise but healthy too. Listen to the tips, tricks, and strategies portion, where I share a few ideas that have helped make exercise easier for me.

  In this episode...

  • Exercising and long-term financial goals [01:33]
  • Greater quality of life [04:17]
  • Benefits of HSAs [08:28]
  • Tips to help you exercise more [11:22]
  
  

  Returns in exercise

  January is a time of resolutions that often focus on physical health. Unfortunately, most of these resolutions have faded away by mid-February. Investing in your health is in your long-term financial interest, and health brings a freedom that few realize until it’s gone. Not only does exercise extend our lives, but it extends the years we have good health. Good health allows us to spend less on healthcare and more on things we want. 

  Longevity is most impacted by major modifiable behaviors such as exercise, sleep, nutrition, and emotional health. Exercise itself is in a league of its own because of its ability to extend one’s life and reduce all-cause mortality. This observation was made by the famous Dr. Attia, whose practice consequently focuses on exercise. Dr. Attia also noted that this is the most challenging aspect of behavior for people to change because of the significant time commitment. 

  Greater quality of life

  Exercise doesn’t just buy you more time; it buys you more quality time. Quality of life isn’t the only benefit. Good health is essential because healthy people can have lower healthcare expenses. Healthcare is expensive now, but even more so in retirement. The average retired couple will spend $285,000 in today’s dollars just for medical expenses, not including long-term care expenses. 

  Early retirees will especially want to consider exercise, as they must pay most of their healthcare expenses before Medicare does. Just because someone turns 65 does not mean Medicare covers everything. Deductibles, premiums, and prescription costs add up quickly, and all must be considered. Stay healthy, and you may be able to avoid many of these costs.

  Health Savings Accounts

  One of my favorite planning tools is a Health Savings Account. HSAs are the only investment vehicles that are triple tax-free. If used for qualifying medical expenses, growth and distributions are tax-free. The money in an HSA is not susceptible to taxes and isn’t impacted by the amount of the individual’s income. While anyone can get this deduction, not everyone is eligible to invest in an HSA. You must have a qualifying, high-deductible medical plan. Additionally, the contributions are limited per individual and family. 

  What if you don’t need all the money in an HSA for health care expenses? Essentially the account becomes like a traditional IRA, and distributions are taxed at ordinary income tax rates. Remember, the earlier you invest your money, the longer it grows. That growth can be significant. With just $2,000 invested annually for thirty years, earning a 7% rate of return could grow that account to over $200,000. That money would go a long way to help offset healthcare expenses in early retirement. 

  Resources & People Mentioned

  • Exercise, VO2 max, and longevity | Mike Joyner, M.D
  • Jerry Morris: Pathfinder for Health Through an Active and Fit Way of Life
  • How to plan for rising health care costs | Fidelity
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>This episode of the One for the Money podcast airs on January 1st when many Americans make resolutions to improve their lives. These resolutions often focus on eating better and getting more exercise, perhaps because of everything eaten during the holidays. In this episode, I share why, financially, it’s better not just to be wealthy and wise but healthy too. Listen to the tips, tricks, and strategies portion, where I share a few ideas that have helped make exercise easier for me.

  In this episode...

  • Exercising and long-term financial goals [01:33]
  • Greater quality of life [04:17]
  • Benefits of HSAs [08:28]
  • Tips to help you exercise more [11:22]
  
  

  Returns in exercise

  January is a time of resolutions that often focus on physical health. Unfortunately, most of these resolutions have faded away by mid-February. Investing in your health is in your long-term financial interest, and health brings a freedom that few realize until it’s gone. Not only does exercise extend our lives, but it extends the years we have good health. Good health allows us to spend less on healthcare and more on things we want. 

  Longevity is most impacted by major modifiable behaviors such as exercise, sleep, nutrition, and emotional health. Exercise itself is in a league of its own because of its ability to extend one’s life and reduce all-cause mortality. This observation was made by the famous Dr. Attia, whose practice consequently focuses on exercise. Dr. Attia also noted that this is the most challenging aspect of behavior for people to change because of the significant time commitment. 

  Greater quality of life

  Exercise doesn’t just buy you more time; it buys you more quality time. Quality of life isn’t the only benefit. Good health is essential because healthy people can have lower healthcare expenses. Healthcare is expensive now, but even more so in retirement. The average retired couple will spend $285,000 in today’s dollars just for medical expenses, not including long-term care expenses. 

  Early retirees will especially want to consider exercise, as they must pay most of their healthcare expenses before Medicare does. Just because someone turns 65 does not mean Medicare covers everything. Deductibles, premiums, and prescription costs add up quickly, and all must be considered. Stay healthy, and you may be able to avoid many of these costs.

  Health Savings Accounts

  One of my favorite planning tools is a Health Savings Account. HSAs are the only investment vehicles that are triple tax-free. If used for qualifying medical expenses, growth and distributions are tax-free. The money in an HSA is not susceptible to taxes and isn’t impacted by the amount of the individual’s income. While anyone can get this deduction, not everyone is eligible to invest in an HSA. You must have a qualifying, high-deductible medical plan. Additionally, the contributions are limited per individual and family. 

  What if you don’t need all the money in an HSA for health care expenses? Essentially the account becomes like a traditional IRA, and distributions are taxed at ordinary income tax rates. Remember, the earlier you invest your money, the longer it grows. That growth can be significant. With just $2,000 invested annually for thirty years, earning a 7% rate of return could grow that account to over $200,000. That money would go a long way to help offset healthcare expenses in early retirement. 

  Resources & People Mentioned

  • Exercise, VO2 max, and longevity | Mike Joyner, M.D
  • Jerry Morris: Pathfinder for Health Through an Active and Fit Way of Life
  • How to plan for rising health care costs | Fidelity
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>8bb9b3be-dcc0-48d5-90c0-7c509a20d1ecSun, 01 Jan 2023 03:00:00 -070014:39falsefull2929In this episode I share why, financially, it’s better to not just be wealthy and wise, but healthy too.One of the Biggest Risks in RetirementIn this episode of the One for the Money podcast, I explain one of the greatest financial risks you could face in retirement, which has nothing to do with the stock market! I’ll also share the planning strategies you can use to address this risk. In the tips, tricks, and strategies portion, I share a strategy to reduce the financial risk associated with lawsuits. Listen to learn more!

  In this episode...

  • Top three risks in retirement [01:09]
  • Long-term care planning [03:41]
  • Options for long-term care [06:40]
  • What is umbrella insurance [09:46]
  
  

  Three of the greatest risks in retirement

  While there are risks in retirement, I view three as more serious. The first is running out of money via significant negative returns in the years just before and after retirement. That scenario is also known as the sequence of returns risk, which I outlined in episode 20. Significant negative returns in the few years just before or after retirement can significantly impact how long your money lasts. One way to counteract this risk is the bucket strategy. That strategy allocates a portion of funds to a conservative bucket of investments, a portion to a moderate bucket, and a final portion to a growth bucket.

  The second primary risk I see in retirement is inflation, which is the persistent rise in the prices of goods and services. For example, if someone had $100,000 in a safety deposit box, and inflation averaged 5% per year, that money could buy only half as much in just thirteen and a half years. As I explained, the growth portion of the bucket strategy works to address the risk of inflation.

  The third major risk in retirement is fundamentally different from the others. It’s the tremendous expense associated with a long-term medical event such as an extended bout with Alzheimer’s. The long-term care needed for such an event can top $100,000 annually.

  Long-term care planning

  Long-term care describes the medical and non-medical services older adults generally need when they can no longer care for themselves. These are called activities of daily living, and there are six of them. Activities of daily living include bathing, dressing, getting in and out of a bed or chair, walking to use the restroom, and eating. If you cannot complete at least two of those in your own power, you are considered in need of long-term care, and you can access the benefits of a long-term care policy if you have one. 

  While most of us hope to live a full life with little to no illness before leaving for the next life, seven out of every ten people over 65 will need long-term care support. The national average for in-home health care is $59,000 per year, and a nursing home can be as high as $108,000 per year. Those are 2022 numbers, but because healthcare expenses increase quickly, those long-term care costs could double every fourteen years! Unfortunately, Medicare doesn’t cover long-term care. Medicaid can cover long-term care, but only for those poor enough to qualify.

  Since Medicaid is not a desirable option, two options remain. The first is self-insure, assuming the risk and hoping a need doesn’t occur. That’s a huge risk for you and your loved ones to carry. With expenses potentially being $100,000 per year, your retirement nest egg would quickly be impacted. The second option is to share your risk with others by pooling your resources via an insurance-based solution. 

  Insurance options

  There are a few types of insurance options. The traditional standalone policies were a popular option quite a few years ago, but the insurance carriers underestimated the need and vastly underestimated the cost. This situation resulted in holders of these policies having their monthly premiums increased significantly and their benefits reduced. A huge drawback to these policies is you can’t use any of the money you’ve put into it unless you have a long-term care event. 

  A newer solution is a hybrid policy. These policies use an insurance vehicle, such as life insurance or an annuity, to offset expenses. The money can go to beneficiaries if the policy isn’t used. These insurance products can offer a lot more coverage for a long-term care event utilizing the leverage of pooled insurance dollars. Some products can provide two or three times the premium paid for the coverage. That means you could have more coverage if you need it, and if you don’t, your beneficiaries will get the original amount plus a fixed rate of return. 

  Resources & People Mentioned

  • Ways to Avoid Running out of Money in Retirement - Most Accidents Happen on the Way Down, Ep #20
  • Cost of Long Term Care by State
  • How Much Care You Will Need
  • California Long-Term Care Income Tax
  • Umbrella Insurance
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>In this episode of the One for the Money podcast, I explain one of the greatest financial risks you could face in retirement, which has nothing to do with the stock market! I’ll also share the planning strategies you can use to address this risk. In the tips, tricks, and strategies portion, I share a strategy to reduce the financial risk associated with lawsuits. Listen to learn more!

  In this episode...

  • Top three risks in retirement [01:09]
  • Long-term care planning [03:41]
  • Options for long-term care [06:40]
  • What is umbrella insurance [09:46]
  
  

  Three of the greatest risks in retirement

  While there are risks in retirement, I view three as more serious. The first is running out of money via significant negative returns in the years just before and after retirement. That scenario is also known as the sequence of returns risk, which I outlined in episode 20. Significant negative returns in the few years just before or after retirement can significantly impact how long your money lasts. One way to counteract this risk is the bucket strategy. That strategy allocates a portion of funds to a conservative bucket of investments, a portion to a moderate bucket, and a final portion to a growth bucket.

  The second primary risk I see in retirement is inflation, which is the persistent rise in the prices of goods and services. For example, if someone had $100,000 in a safety deposit box, and inflation averaged 5% per year, that money could buy only half as much in just thirteen and a half years. As I explained, the growth portion of the bucket strategy works to address the risk of inflation.

  The third major risk in retirement is fundamentally different from the others. It’s the tremendous expense associated with a long-term medical event such as an extended bout with Alzheimer’s. The long-term care needed for such an event can top $100,000 annually.

  Long-term care planning

  Long-term care describes the medical and non-medical services older adults generally need when they can no longer care for themselves. These are called activities of daily living, and there are six of them. Activities of daily living include bathing, dressing, getting in and out of a bed or chair, walking to use the restroom, and eating. If you cannot complete at least two of those in your own power, you are considered in need of long-term care, and you can access the benefits of a long-term care policy if you have one. 

  While most of us hope to live a full life with little to no illness before leaving for the next life, seven out of every ten people over 65 will need long-term care support. The national average for in-home health care is $59,000 per year, and a nursing home can be as high as $108,000 per year. Those are 2022 numbers, but because healthcare expenses increase quickly, those long-term care costs could double every fourteen years! Unfortunately, Medicare doesn’t cover long-term care. Medicaid can cover long-term care, but only for those poor enough to qualify.

  Since Medicaid is not a desirable option, two options remain. The first is self-insure, assuming the risk and hoping a need doesn’t occur. That’s a huge risk for you and your loved ones to carry. With expenses potentially being $100,000 per year, your retirement nest egg would quickly be impacted. The second option is to share your risk with others by pooling your resources via an insurance-based solution. 

  Insurance options

  There are a few types of insurance options. The traditional standalone policies were a popular option quite a few years ago, but the insurance carriers underestimated the need and vastly underestimated the cost. This situation resulted in holders of these policies having their monthly premiums increased significantly and their benefits reduced. A huge drawback to these policies is you can’t use any of the money you’ve put into it unless you have a long-term care event. 

  A newer solution is a hybrid policy. These policies use an insurance vehicle, such as life insurance or an annuity, to offset expenses. The money can go to beneficiaries if the policy isn’t used. These insurance products can offer a lot more coverage for a long-term care event utilizing the leverage of pooled insurance dollars. Some products can provide two or three times the premium paid for the coverage. That means you could have more coverage if you need it, and if you don’t, your beneficiaries will get the original amount plus a fixed rate of return. 

  Resources & People Mentioned

  • Ways to Avoid Running out of Money in Retirement - Most Accidents Happen on the Way Down, Ep #20
  • Cost of Long Term Care by State
  • How Much Care You Will Need
  • California Long-Term Care Income Tax
  • Umbrella Insurance
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>5f92b447-db96-4302-b425-fa1f639a00f2Thu, 15 Dec 2022 03:00:00 -070013:11falsefull2828One of the greatest financial risks you could face in retirement, has nothing to do with the stock market!Can You Retire with Debt?Can you retire when you have debt? This episode of the One for the Money podcast focuses on answering that question. More and more Americans are retiring with a mortgage, but is it right for you? Doing so depends on many factors that can’t be assessed in isolation. Listen to the end when I share a simple strategy to pay off your mortgage early.

  In this episode...

  • Keeping mortgages past age 65 [01:44]
  • Why are more people retiring with a mortgage? [02:57]
  • Retiring with a mortgage [06:58]
  • Debt and relationships [08:16]
  
  

  Advantages of paying off the mortgage

  Whether you can retire or retire early with debt depends on the type of debt you have. If you don’t have a three- to six-month emergency fund, have multiple sources of debt, have multiple credit cards to pay off, have an auto loan, and have a mortgage, then the answer is almost certainly no. If you only have a mortgage, retiring may be possible depending on several factors, such as retirement income, mortgage payment, mortgage interest rate, and years remaining on the mortgage. 

  Having no debt, including a mortgage, makes retirement so much easier. I wouldn’t recommend an early retirement before paying off your home. Paying off your mortgage early essentially provides a risk-free rate of return. For example, if your mortgage rate is at 5%, paying it off early saves 5%. While that savings isn’t an incredible rate of return, it’s pretty fantastic, considering you don’t have to pay that on the loan. However, more and more Americans are entering retirement with a mortgage. A 2016 report by Harvard’s Joint Center for Housing Studies showed that in 1996, 25% of homeowners in their late 60s to 70s still had a mortgage, but in 2016 that number had jumped to nearly 50%.

  Why are more people retiring with mortgages?

  Several developments over the last three decades may explain the dramatic increase in the share of retirees with mortgages. Americans today seem to have less aversion to debt than the generation that grew up after the Great Depression. Although consumer debt levels always ebb and flow with economic cycles, total debt as a percentage of disposable income is significantly higher today than in the late 90s. The Tax Reform Act of 1986 made mortgages a more attractive form of debt. The reform eliminated the income tax deductions for interest on credit cards and other types of consumer debt with one exception: mortgage interest.

  For the majority of the last decade, mortgage rates were extremely low. While the rates have climbed rapidly this year, 85% of homeowners in the United States have a rate lower than 5%. That makes taking a mortgage into retirement a little more manageable. People have also been purchasing homes later in life because homes have become expensive. In the late 80s and early 90s, housing prices were about three times the typical household earnings, while prices today are more than four times.

  Paying off your mortgage early

  A simple tip to paying off a mortgage early is making one extra payment each year, applied to the principal. What kind of difference can that make? Let’s say you secured a 30-year fixed-rate mortgage for $400,000 with a 5% interest rate. Your regular monthly payment would be $2147 per month. If you make an extra monthly payment of $2147/per year, you’d pay off your 30-year mortgage four years and five months early and save over $62,000 in interest in the process. 

  That’s a huge savings of time and money, which would set you up very well for early retirement. Ultimately, a paid-for home gives you something a mortgage cannot: peace of mind. Removing that worry significantly impacts psychology and happiness, which is why I believe a paid-for home is a critical piece of early retirement planning.

  Resources & People Mentioned

  • More Retirees Today Have a Mortgage 
  • Housing America's Older Adults 2019
  • Nearly 10 Million Homeowners 65 And Older Are Still Saddled With Mortgage Debt
  • How Many Taxpayers Itemize Under Current Law?
  • 85% of Homeowners with Mortgages Have a Rate Far Below Today's Level, a Factor Prompting Many to Stay Put
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Schedule a meeting with Jonny
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Can you retire when you have debt? This episode of the One for the Money podcast focuses on answering that question. More and more Americans are retiring with a mortgage, but is it right for you? Doing so depends on many factors that can’t be assessed in isolation. Listen to the end when I share a simple strategy to pay off your mortgage early.

  In this episode...

  • Keeping mortgages past age 65 [01:44]
  • Why are more people retiring with a mortgage? [02:57]
  • Retiring with a mortgage [06:58]
  • Debt and relationships [08:16]
  
  

  Advantages of paying off the mortgage

  Whether you can retire or retire early with debt depends on the type of debt you have. If you don’t have a three- to six-month emergency fund, have multiple sources of debt, have multiple credit cards to pay off, have an auto loan, and have a mortgage, then the answer is almost certainly no. If you only have a mortgage, retiring may be possible depending on several factors, such as retirement income, mortgage payment, mortgage interest rate, and years remaining on the mortgage. 

  Having no debt, including a mortgage, makes retirement so much easier. I wouldn’t recommend an early retirement before paying off your home. Paying off your mortgage early essentially provides a risk-free rate of return. For example, if your mortgage rate is at 5%, paying it off early saves 5%. While that savings isn’t an incredible rate of return, it’s pretty fantastic, considering you don’t have to pay that on the loan. However, more and more Americans are entering retirement with a mortgage. A 2016 report by Harvard’s Joint Center for Housing Studies showed that in 1996, 25% of homeowners in their late 60s to 70s still had a mortgage, but in 2016 that number had jumped to nearly 50%.

  Why are more people retiring with mortgages?

  Several developments over the last three decades may explain the dramatic increase in the share of retirees with mortgages. Americans today seem to have less aversion to debt than the generation that grew up after the Great Depression. Although consumer debt levels always ebb and flow with economic cycles, total debt as a percentage of disposable income is significantly higher today than in the late 90s. The Tax Reform Act of 1986 made mortgages a more attractive form of debt. The reform eliminated the income tax deductions for interest on credit cards and other types of consumer debt with one exception: mortgage interest.

  For the majority of the last decade, mortgage rates were extremely low. While the rates have climbed rapidly this year, 85% of homeowners in the United States have a rate lower than 5%. That makes taking a mortgage into retirement a little more manageable. People have also been purchasing homes later in life because homes have become expensive. In the late 80s and early 90s, housing prices were about three times the typical household earnings, while prices today are more than four times.

  Paying off your mortgage early

  A simple tip to paying off a mortgage early is making one extra payment each year, applied to the principal. What kind of difference can that make? Let’s say you secured a 30-year fixed-rate mortgage for $400,000 with a 5% interest rate. Your regular monthly payment would be $2147 per month. If you make an extra monthly payment of $2147/per year, you’d pay off your 30-year mortgage four years and five months early and save over $62,000 in interest in the process. 

  That’s a huge savings of time and money, which would set you up very well for early retirement. Ultimately, a paid-for home gives you something a mortgage cannot: peace of mind. Removing that worry significantly impacts psychology and happiness, which is why I believe a paid-for home is a critical piece of early retirement planning.

  Resources & People Mentioned

  • More Retirees Today Have a Mortgage 
  • Housing America's Older Adults 2019
  • Nearly 10 Million Homeowners 65 And Older Are Still Saddled With Mortgage Debt
  • How Many Taxpayers Itemize Under Current Law?
  • 85% of Homeowners with Mortgages Have a Rate Far Below Today's Level, a Factor Prompting Many to Stay Put
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Schedule a meeting with Jonny
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>bf1884e7-18c5-4b01-b8c2-a94b11a20684Thu, 01 Dec 2022 03:00:00 -070011:19falsefull2727Can you retire when you have debt? Doing so depends on many factors that can’t be assessed in isolation.Maxing Out Your Life with a Mini-RetirementWhile the One for the Money podcast focuses primarily on retiring early on a permanent basis, this episode explains the planning needs to retire even earlier via a mini-retirement. A mini-retirement provides the opportunity to test-drive a full retirement, allowing the individual to travel, volunteer, and pursue new hobbies or other interests. In the tips, tricks, and strategies portion, I share some strategies that could mean massive tax savings during a mini-retirement.

  In this episode...

  • Taking a temporary break [01:11]
  • Self-funding mini-retirement [03:53]
  • Health insurance [06:29]
  • Tax savings in mini-retirement [10:44]
  • Tax gain harvesting [13:15]
  
  

  Sabbaticals aren’t just for professors

  The idea of a mini-retirement isn’t new but is often associated with professors. Nowadays, a sabbatical is a periodic break from work. This tradition started at Harvard around 1880, but other professions, such as scientists, physicians, and lawyers, also take sabbaticals. According to a survey by the Society for Human Resource Management, only 17% of companies offered a sabbatical policy to their employees in 2017. That means most people won’t work for a company that provides a sabbatical. However, with some planning, people can create their own sabbatical via mini-retirement and enjoy the benefits themselves.

  This episode is just an introduction to the planning considerations of a mini-retirement. Sadly, far too many people have consigned themselves to a life of working from 9-5 until age 65, not realizing that many retirements are even possible. But, with the right kind of planning, they certainly are. Often such mini-retirements will have only a little or limited effect on one’s goals for retirement, even an early one, and a delay of a year or so is more than worth it. 

  Taking care of your health

  Health insurance needs in mini-retirement can be met in the same way as in early retirement, which I discussed in episode 5. For a U.S.-based mini-retirement, employer retirement healthcare benefits can be utilized for an additional 18 months of coverage. This coverage was made possible via the Consolidated Omnibus Budget Reconciliation Act of 1985, also known as COBRA. However, most times, the full cost of the health care plan will need to be paid, plus an additional 2%. The extra cost is worth it for a domestic-based mini-retirement. Another option is the public market established under the Affordable Care Act. This legislation enables people to obtain coverage, even with a pre-existing medical condition. 

  While the cost of these plans can vary widely, the recently enacted American Rescue Plan provides even more generous subsidies based on income. These are solutions for U.S.-based mini-retirements. International mini-retirements require other planning. However, travel supplemental insurance is often an option. Travel health insurance is also an option for those traveling abroad for a short time. For extended periods, many countries allow foreign nationals to purchase health insurance from the government or private firms within that country.

  Factors to consider when planning

  One of the most significant factors to consider is the length of the mini-retirement, which will determine the level of planning required. If the plan is for one to three months, the amount needed for expenses can be saved up in advance. The plan must include home and location expenses if time is spent in another location. Taking a mini-vacation for six months to a year would require considerably more planning. Homeowners need to consider if they plan to keep or sell their homes. Selling would simplify the math, but keeping could mean potential rental income.

  Once the duration of the mini-vacation has been determined, monthly expenses are the next thing to consider. While income may stop during mini-retirement, expenses certainly will not. Covering those expenses requires some supercharged savings in the prior months and years. The money saved for this purpose should not be subject to market risk and should be protected in a bank account. Saving this money requires significant sacrifices, but the motivation for doing so is based on the glorious experience on the other side. 

  Resources & People Mentioned

  • Sabbatical - Wikipedia
  • Health Insurance When Traveling Abroad
  • Bronnie Ware – Regrets of the Dying
  • Let’s Have a Heart to Heart: Early Retirement Healthcare Planning, Ep #5
  • Meaning & Purpose in Retirement, Ep #6
  • Too Much Money & Too Few Memories, Ep #24
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Schedule a meeting with Jonny
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>While the One for the Money podcast focuses primarily on retiring early on a permanent basis, this episode explains the planning needs to retire even earlier via a mini-retirement. A mini-retirement provides the opportunity to test-drive a full retirement, allowing the individual to travel, volunteer, and pursue new hobbies or other interests. In the tips, tricks, and strategies portion, I share some strategies that could mean massive tax savings during a mini-retirement.

  In this episode...

  • Taking a temporary break [01:11]
  • Self-funding mini-retirement [03:53]
  • Health insurance [06:29]
  • Tax savings in mini-retirement [10:44]
  • Tax gain harvesting [13:15]
  
  

  Sabbaticals aren’t just for professors

  The idea of a mini-retirement isn’t new but is often associated with professors. Nowadays, a sabbatical is a periodic break from work. This tradition started at Harvard around 1880, but other professions, such as scientists, physicians, and lawyers, also take sabbaticals. According to a survey by the Society for Human Resource Management, only 17% of companies offered a sabbatical policy to their employees in 2017. That means most people won’t work for a company that provides a sabbatical. However, with some planning, people can create their own sabbatical via mini-retirement and enjoy the benefits themselves.

  This episode is just an introduction to the planning considerations of a mini-retirement. Sadly, far too many people have consigned themselves to a life of working from 9-5 until age 65, not realizing that many retirements are even possible. But, with the right kind of planning, they certainly are. Often such mini-retirements will have only a little or limited effect on one’s goals for retirement, even an early one, and a delay of a year or so is more than worth it. 

  Taking care of your health

  Health insurance needs in mini-retirement can be met in the same way as in early retirement, which I discussed in episode 5. For a U.S.-based mini-retirement, employer retirement healthcare benefits can be utilized for an additional 18 months of coverage. This coverage was made possible via the Consolidated Omnibus Budget Reconciliation Act of 1985, also known as COBRA. However, most times, the full cost of the health care plan will need to be paid, plus an additional 2%. The extra cost is worth it for a domestic-based mini-retirement. Another option is the public market established under the Affordable Care Act. This legislation enables people to obtain coverage, even with a pre-existing medical condition. 

  While the cost of these plans can vary widely, the recently enacted American Rescue Plan provides even more generous subsidies based on income. These are solutions for U.S.-based mini-retirements. International mini-retirements require other planning. However, travel supplemental insurance is often an option. Travel health insurance is also an option for those traveling abroad for a short time. For extended periods, many countries allow foreign nationals to purchase health insurance from the government or private firms within that country.

  Factors to consider when planning

  One of the most significant factors to consider is the length of the mini-retirement, which will determine the level of planning required. If the plan is for one to three months, the amount needed for expenses can be saved up in advance. The plan must include home and location expenses if time is spent in another location. Taking a mini-vacation for six months to a year would require considerably more planning. Homeowners need to consider if they plan to keep or sell their homes. Selling would simplify the math, but keeping could mean potential rental income.

  Once the duration of the mini-vacation has been determined, monthly expenses are the next thing to consider. While income may stop during mini-retirement, expenses certainly will not. Covering those expenses requires some supercharged savings in the prior months and years. The money saved for this purpose should not be subject to market risk and should be protected in a bank account. Saving this money requires significant sacrifices, but the motivation for doing so is based on the glorious experience on the other side. 

  Resources & People Mentioned

  • Sabbatical - Wikipedia
  • Health Insurance When Traveling Abroad
  • Bronnie Ware – Regrets of the Dying
  • Let’s Have a Heart to Heart: Early Retirement Healthcare Planning, Ep #5
  • Meaning & Purpose in Retirement, Ep #6
  • Too Much Money & Too Few Memories, Ep #24
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Schedule a meeting with Jonny
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>b0d55562-8bf0-4fce-b384-19e19f200454Tue, 15 Nov 2022 03:00:00 -070019:31falsefull2626Taking a mini-retirement may cause some to redefine their values and priorities altogether, which could drastically impact their life in even more positive ways.The Fed is Not Your Friend, Unless You Are a BankWhile an early retirement can be a result of actions you have taken via better planning, there are outside forces that need to be considered as well. One of those forces is the Federal Reserve. In this episode of the One for the Money podcast, I share why the Fed is not necessarily your friend unless you are a bank. Listen until the end to hear more strategies to consider, given the actions of the Fed.

  In this episode...

  • Why are stocks and bonds struggling? [01:46]
  • Mortgage on a house of cards [04:38]
  • Fixing inflation [06:41]
  • No one knows the future [09:33]
  
  

  A happy medium

  At the halfway point of this year, the markets had the worst six-month performance in over 50 years. Stocks and bonds were down for only the fourth time since 1926. Now, nine months into the year, bonds and stocks are still down, and the primary reason they're still struggling is higher-than-expected inflation. If the prices of things that both businesses and individuals buy increase too quickly for too long, future prices can go out of control and cause significant economic problems. A small amount of inflation is good, lots of inflation is bad, and negative inflation on a broad scale is even worse, like what is seen in a depression.

  Because inflation is a natural result of the economy, we want a happy medium for inflation. The Federal Reserve is responsible for keeping inflation in that comfortable, medium zone. Right now, they're taking actions that are causing both bonds and stock prices to reduce. However, it's unknown whether these actions will have their intended effect. 

  Understanding how we got here

  To understand where the economy is going, we must first understand the journey to where it is today. What may surprise many is that the challenges we face today result from actions taken during the Great Recession between 2008 and 2012. In the early 2000s, the housing market was ascendant, and there was a surge in home purchases and prices. Sadly, the housing market crashed, and the economy was pushed to the brink of collapse, as many banks were at risk of failing. As a result, the nation became dangerously close to another depression. 

  During this crisis, an untested solution was implemented to save the banks and economy that sowed the seeds of what we are reaping today. Many believe this crisis was solely a result of greedy banks, but that's not entirely true. Banks were indeed guilty, but they had a tremendous amount of help from homebuyers and a well-intentioned government program. That government program reduced the financial requirements to borrow money to purchase a home. Requirements for proof of income, credit scores, and down payments were significantly reduced or eliminated so that more people could buy homes. 

  Correcting inflation

  During normal times, the Federal Reserve raises interest rates and reduces the amount of money in the banks. The reduced bank reserves and higher interest rates make borrowing money more expensive for consumers, lowering demand and ultimately slowing inflation. Unfortunately, the usual levers aren't an option as the banks have already lent out much of this extra money. The Fed can now only increase interest rates and not substantially reduce the money supply in the economy. 

  Some may use this situation as an argument for the government to take over the banks. This solution could cause even more problems, however. Concentrating control in the hands of fewer individuals will only create more problems. The best societies and economies have power distributed more broadly. So what can we do? One solution is to significantly reduce the Fed's ability to create more money and create conditions in the economy that will allow businesses and the private sector to grow and make the extra revenue needed to retire the debt used to justify the printing of the extra money.

  Resources & People Mentioned

  • NINJA Loan
  • Will Higher Interest Rates Tame Inflation?
  • Refocusing the Fed
  • When Life Gives You Lemons, STAY INVESTED!, Ep #18
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>While an early retirement can be a result of actions you have taken via better planning, there are outside forces that need to be considered as well. One of those forces is the Federal Reserve. In this episode of the One for the Money podcast, I share why the Fed is not necessarily your friend unless you are a bank. Listen until the end to hear more strategies to consider, given the actions of the Fed.

  In this episode...

  • Why are stocks and bonds struggling? [01:46]
  • Mortgage on a house of cards [04:38]
  • Fixing inflation [06:41]
  • No one knows the future [09:33]
  
  

  A happy medium

  At the halfway point of this year, the markets had the worst six-month performance in over 50 years. Stocks and bonds were down for only the fourth time since 1926. Now, nine months into the year, bonds and stocks are still down, and the primary reason they're still struggling is higher-than-expected inflation. If the prices of things that both businesses and individuals buy increase too quickly for too long, future prices can go out of control and cause significant economic problems. A small amount of inflation is good, lots of inflation is bad, and negative inflation on a broad scale is even worse, like what is seen in a depression.

  Because inflation is a natural result of the economy, we want a happy medium for inflation. The Federal Reserve is responsible for keeping inflation in that comfortable, medium zone. Right now, they're taking actions that are causing both bonds and stock prices to reduce. However, it's unknown whether these actions will have their intended effect. 

  Understanding how we got here

  To understand where the economy is going, we must first understand the journey to where it is today. What may surprise many is that the challenges we face today result from actions taken during the Great Recession between 2008 and 2012. In the early 2000s, the housing market was ascendant, and there was a surge in home purchases and prices. Sadly, the housing market crashed, and the economy was pushed to the brink of collapse, as many banks were at risk of failing. As a result, the nation became dangerously close to another depression. 

  During this crisis, an untested solution was implemented to save the banks and economy that sowed the seeds of what we are reaping today. Many believe this crisis was solely a result of greedy banks, but that's not entirely true. Banks were indeed guilty, but they had a tremendous amount of help from homebuyers and a well-intentioned government program. That government program reduced the financial requirements to borrow money to purchase a home. Requirements for proof of income, credit scores, and down payments were significantly reduced or eliminated so that more people could buy homes. 

  Correcting inflation

  During normal times, the Federal Reserve raises interest rates and reduces the amount of money in the banks. The reduced bank reserves and higher interest rates make borrowing money more expensive for consumers, lowering demand and ultimately slowing inflation. Unfortunately, the usual levers aren't an option as the banks have already lent out much of this extra money. The Fed can now only increase interest rates and not substantially reduce the money supply in the economy. 

  Some may use this situation as an argument for the government to take over the banks. This solution could cause even more problems, however. Concentrating control in the hands of fewer individuals will only create more problems. The best societies and economies have power distributed more broadly. So what can we do? One solution is to significantly reduce the Fed's ability to create more money and create conditions in the economy that will allow businesses and the private sector to grow and make the extra revenue needed to retire the debt used to justify the printing of the extra money.

  Resources & People Mentioned

  • NINJA Loan
  • Will Higher Interest Rates Tame Inflation?
  • Refocusing the Fed
  • When Life Gives You Lemons, STAY INVESTED!, Ep #18
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>8620073a-597d-42f6-8fcb-fbfa28651463Tue, 01 Nov 2022 03:00:00 -070013:38falsefull2525While an early retirement can be a result of actions you have taken via better planning, there are outside forces that need to be considered as well.Too Much Money & Too Few MemoriesWe often focus on the amount we need to retire comfortably. In this episode of the One for the Money podcast, you might be surprised to learn that most retirees die with too much money and too few memories. I’m not advocating that we reduce our savings for retirement. Instead, we should enjoy the fruits of our labor both before and during retirement.

  In this episode...

  • The strongest force in the universe [01:29]
  • Spending just the earnings [02:37]
  • Why do people die with so much money? [04:51]
  • Making lasting memories [06:42]
  • How to spend more, wisely [10:54]
  
  

  Compound memories

  Albert Einstein famously called compound interest the strongest force in the universe. I love showing people the remarkable growth that can come from small contributions given significant time. It’s astounding that if you invested $5,000 a year for 40 years, and your investments earned an average rate of return of 10% each year, the $200,000 contributions would grow to $2.2 million. That’s eleven times the original investment!

  As remarkable as that is, I’ve found that there’s something that compounds even better than money: memories. Many retirees don’t spend down their money in retirement. According to a 2018 Investments and Wealth Institute study, nearly six in seven retirees spend down only the earrings in their portfolios. That means they spent only the money generated by their investment portfolios. These people use guaranteed income sources such as Social Security, dividends, and interest and don’t touch the principal.

  Spending decisions in retirement

  Many retirees are unnecessarily constraining spending and living well below their means. Behavioral biases and predispositions may prevent individuals from making optimal spending decisions in retirement. Most people match their spending with their income, and when their expenses increase, they decrease their spending accordingly. In fact, many retirees save money in retirement rather than spending. According to the research, retirees with more than $100,000 of assets save 38% of their income. 

  According to a survey conducted by the Insured Retirement Institute, 48% of people prioritize a comfortable standard of living, while only 3% view leaving a legacy as their primary goal. The only other double-digit financial goal in this survey was protecting one’s current level of wealth. Most people’s goals in retirement are a comfortable standard of living and protecting the current level of wealth. The remaining common financial goals are minimizing taxes, better managing risk, funding college, improving cash flow, aggressively growing wealth, or some charitable giving. However, all of those were between 1% and 6%. 

  Confidence in spending

  Based on my research and experience in my practice, I believe there are two primary reasons people don’t spend as much as they could. The first is that they’ve always been in a saving mode. Switching to a spending mode is difficult, especially when there is no longer a salary. Everything depends on the next egg. It’s why people with guaranteed sources of income, pensions, and annuities spend more in retirement. I believe there are better ways to spend more than using annuity, but it shows what an impact this can have. The second reason is what I would call the “just in case” expense. We financially plan for worst-case scenarios. However, there are ways to prepare without sacrificing the ability to make memories both now and in retirement.

  Sometimes, some of the best help I can give clients is when I give them the confidence to spend on what they want to achieve. Then they can make memories that can last lifetimes. And when we make memories with our kids and grandkids, those memories will last lifetimes. Of course, we need to plan so that the fear of running out of money doesn’t leave us with a worse feeling of regret. Most retirees die with too much money and too many regrets. Some are nervous about spending, but with proper planning that accounts for multiple scenarios, you can have the confidence to spend both now and in retirement to make memories, achieve your dreams, and have a life with less regret.

  Resources & People Mentioned

  • The Decumulation Paradox: Why retirees are not spending more?
  • Regrets of the dying
  • Why Most Retirees Never Spend Their Retirement Assets
  • Insured Retirement Institute
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>We often focus on the amount we need to retire comfortably. In this episode of the One for the Money podcast, you might be surprised to learn that most retirees die with too much money and too few memories. I’m not advocating that we reduce our savings for retirement. Instead, we should enjoy the fruits of our labor both before and during retirement.

  In this episode...

  • The strongest force in the universe [01:29]
  • Spending just the earnings [02:37]
  • Why do people die with so much money? [04:51]
  • Making lasting memories [06:42]
  • How to spend more, wisely [10:54]
  
  

  Compound memories

  Albert Einstein famously called compound interest the strongest force in the universe. I love showing people the remarkable growth that can come from small contributions given significant time. It’s astounding that if you invested $5,000 a year for 40 years, and your investments earned an average rate of return of 10% each year, the $200,000 contributions would grow to $2.2 million. That’s eleven times the original investment!

  As remarkable as that is, I’ve found that there’s something that compounds even better than money: memories. Many retirees don’t spend down their money in retirement. According to a 2018 Investments and Wealth Institute study, nearly six in seven retirees spend down only the earrings in their portfolios. That means they spent only the money generated by their investment portfolios. These people use guaranteed income sources such as Social Security, dividends, and interest and don’t touch the principal.

  Spending decisions in retirement

  Many retirees are unnecessarily constraining spending and living well below their means. Behavioral biases and predispositions may prevent individuals from making optimal spending decisions in retirement. Most people match their spending with their income, and when their expenses increase, they decrease their spending accordingly. In fact, many retirees save money in retirement rather than spending. According to the research, retirees with more than $100,000 of assets save 38% of their income. 

  According to a survey conducted by the Insured Retirement Institute, 48% of people prioritize a comfortable standard of living, while only 3% view leaving a legacy as their primary goal. The only other double-digit financial goal in this survey was protecting one’s current level of wealth. Most people’s goals in retirement are a comfortable standard of living and protecting the current level of wealth. The remaining common financial goals are minimizing taxes, better managing risk, funding college, improving cash flow, aggressively growing wealth, or some charitable giving. However, all of those were between 1% and 6%. 

  Confidence in spending

  Based on my research and experience in my practice, I believe there are two primary reasons people don’t spend as much as they could. The first is that they’ve always been in a saving mode. Switching to a spending mode is difficult, especially when there is no longer a salary. Everything depends on the next egg. It’s why people with guaranteed sources of income, pensions, and annuities spend more in retirement. I believe there are better ways to spend more than using annuity, but it shows what an impact this can have. The second reason is what I would call the “just in case” expense. We financially plan for worst-case scenarios. However, there are ways to prepare without sacrificing the ability to make memories both now and in retirement.

  Sometimes, some of the best help I can give clients is when I give them the confidence to spend on what they want to achieve. Then they can make memories that can last lifetimes. And when we make memories with our kids and grandkids, those memories will last lifetimes. Of course, we need to plan so that the fear of running out of money doesn’t leave us with a worse feeling of regret. Most retirees die with too much money and too many regrets. Some are nervous about spending, but with proper planning that accounts for multiple scenarios, you can have the confidence to spend both now and in retirement to make memories, achieve your dreams, and have a life with less regret.

  Resources & People Mentioned

  • The Decumulation Paradox: Why retirees are not spending more?
  • Regrets of the dying
  • Why Most Retirees Never Spend Their Retirement Assets
  • Insured Retirement Institute
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>f11377a3-f0a6-4284-b8c5-a7f3922ed975Sat, 15 Oct 2022 03:00:00 -070014:29falsefull2424Many retirees die with too much money and too few memories. Learn how to enjoy the fruits of your labor both before and after retirement.Will I Be Able to Retire?The question I’m most often asked is, “Will I be able to retire?” In this episode of the One for the Money podcast, I answer that question and share ways to know you’re on the right track. In the tips, tricks, and strategies portion, I explain how a simple rule can help you track your progress towards retirement. Listen to learn more!

  In this episode...

  • Well, it depends… [01:06]
  • Determining yearly expenses [03:37]
  • Income sources [04:56]
  • The 4% rule [05:44]
  • How much will you need to save? [07:28]
  • High impact factors [09:19]
  • The rule of 72 [11:50]
  
  

  Where to start

  As a Certified Financial Planner, people often ask me if they’ll be able to retire. That question is imperative to ask now, because now is the time to make adjustments in saving and spending. The few years prior to retirement are generally too late. We need to consider many factors to determine readiness for retirement. Of course, these factors are based on assumptions, as we’re making forecasts about the future regarding rates of return, inflation, healthcare expenses, and life expectancy. 

  There are some standard benchmarks we can use such as starting retirement at age 65 and living to age 90. That would mean 25 years of retirement. My financial planning practice focuses on early retirement, but we can make modifications from that initial baseline. Determining how much you need to retire starts with considering how much will be spent each year. That number is generally higher than one might think.

  Expenses in retirement

  More people are taking mortgages into retirement. For those who don’t take a mortgage into retirement, their houses tend to be older and require more repairs and maintenance. Transportation costs will remain the same if the person leases vehicles. Insurance and other costs will be factors if the car is leased or owned. Any additional expenses such as heat and air, electricity, subscriptions, personal care, food, and internet will be similar to now and will increase with inflation. 

  Healthcare and leisure expenses increase significantly in retirement, especially healthcare. A couple, on average, spends over $250,000 a year on healthcare in retirement. A Fidelity study found that people should expect to spend between 55% and 80% of their pre-retirement income each year through retirement. Interestingly, the higher a person’s pre-retirement salary, the smaller the percentage of working income would need to be replaced when they stop working. 

  Sources of income

  After calculating approximate expenses for a typical retirement, the next step is determining the sources that produce that income. First, we would add up what is sometimes called “mailbox income.” This income comes in regularly, including a pension, social security, and rental income. We would then subtract the annual amounts of this steady income from the total amount needed for spending each year. The difference between those is the income investments would need to produce. 

  How do we determine how large an investment nest egg needs to be? The 4% rule is a distribution rule derived by financial planner Bill Bengen. This rule has been adopted by many in the industry because of its simplicity. It was created to meet the financial needs of a retiree, even during a worst-case economic scenario such as a prolonged market downturn. The rule was developed using historical data on stock and bond returns over the 50 years from 1926-1976, focusing heavily on the severe market downturns of the 30s and early 70s. 

  Bill Bengen concluded that even during untenable markets, no historical case existed in which a 4% annual withdrawal exhausted a retirement portfolio in fewer than 33 years, which bodes well for early retirement. The 4% rule was tested during some challenging decades, notably the Great Depression, World War Two, and the challenging economic times during the 70s. By withdrawing just 4% each year from retirement, that retirement account should last 33 years.

  Resources & People Mentioned

  • How much will you spend in retirement? | Fidelity
  • How much do I need to retire? | Fidelity
  • 4% Rule Definition
  • FPA Journal - Decision Rules and Maximum Initial Withdrawal Rates
  • Ways to Avoid Running out of Money in Retirement - Most Accidents Happen on the Way Down
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>The question I’m most often asked is, “Will I be able to retire?” In this episode of the One for the Money podcast, I answer that question and share ways to know you’re on the right track. In the tips, tricks, and strategies portion, I explain how a simple rule can help you track your progress towards retirement. Listen to learn more!

  In this episode...

  • Well, it depends… [01:06]
  • Determining yearly expenses [03:37]
  • Income sources [04:56]
  • The 4% rule [05:44]
  • How much will you need to save? [07:28]
  • High impact factors [09:19]
  • The rule of 72 [11:50]
  
  

  Where to start

  As a Certified Financial Planner, people often ask me if they’ll be able to retire. That question is imperative to ask now, because now is the time to make adjustments in saving and spending. The few years prior to retirement are generally too late. We need to consider many factors to determine readiness for retirement. Of course, these factors are based on assumptions, as we’re making forecasts about the future regarding rates of return, inflation, healthcare expenses, and life expectancy. 

  There are some standard benchmarks we can use such as starting retirement at age 65 and living to age 90. That would mean 25 years of retirement. My financial planning practice focuses on early retirement, but we can make modifications from that initial baseline. Determining how much you need to retire starts with considering how much will be spent each year. That number is generally higher than one might think.

  Expenses in retirement

  More people are taking mortgages into retirement. For those who don’t take a mortgage into retirement, their houses tend to be older and require more repairs and maintenance. Transportation costs will remain the same if the person leases vehicles. Insurance and other costs will be factors if the car is leased or owned. Any additional expenses such as heat and air, electricity, subscriptions, personal care, food, and internet will be similar to now and will increase with inflation. 

  Healthcare and leisure expenses increase significantly in retirement, especially healthcare. A couple, on average, spends over $250,000 a year on healthcare in retirement. A Fidelity study found that people should expect to spend between 55% and 80% of their pre-retirement income each year through retirement. Interestingly, the higher a person’s pre-retirement salary, the smaller the percentage of working income would need to be replaced when they stop working. 

  Sources of income

  After calculating approximate expenses for a typical retirement, the next step is determining the sources that produce that income. First, we would add up what is sometimes called “mailbox income.” This income comes in regularly, including a pension, social security, and rental income. We would then subtract the annual amounts of this steady income from the total amount needed for spending each year. The difference between those is the income investments would need to produce. 

  How do we determine how large an investment nest egg needs to be? The 4% rule is a distribution rule derived by financial planner Bill Bengen. This rule has been adopted by many in the industry because of its simplicity. It was created to meet the financial needs of a retiree, even during a worst-case economic scenario such as a prolonged market downturn. The rule was developed using historical data on stock and bond returns over the 50 years from 1926-1976, focusing heavily on the severe market downturns of the 30s and early 70s. 

  Bill Bengen concluded that even during untenable markets, no historical case existed in which a 4% annual withdrawal exhausted a retirement portfolio in fewer than 33 years, which bodes well for early retirement. The 4% rule was tested during some challenging decades, notably the Great Depression, World War Two, and the challenging economic times during the 70s. By withdrawing just 4% each year from retirement, that retirement account should last 33 years.

  Resources & People Mentioned

  • How much will you spend in retirement? | Fidelity
  • How much do I need to retire? | Fidelity
  • 4% Rule Definition
  • FPA Journal - Decision Rules and Maximum Initial Withdrawal Rates
  • Ways to Avoid Running out of Money in Retirement - Most Accidents Happen on the Way Down
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>d9931566-0b6e-4802-863a-5ccd63925068Sat, 01 Oct 2022 03:00:00 -070015:18falsefull2323The question I’m most often asked is, “Will I be able to retire?” In this episode of the One for the Money podcast, I answer that question and share ways to know you’re on the right track.Estate Planning SimplifiedIf you are confused about what estate planning is and its importance, this episode of the One for the Money podcast will resonate with you. I break down the critical elements of an estate plan and their respective purposes, which should help you understand why you need one. In the tips, tricks, and strategies portion, I share tips on ensuring your estate plan is executed as you had planned.

  In this episode...

  • What is an estate plan? [01:01]
  • Creating an effective plan [03:19]
  • The purpose of a trust [05:05]
  • Power of attorney [07:12]
  • The 30-year estate battle [09:04]
  
  

  What is an estate plan?

  Many people don’t understand estate plans or why they would want one. As a culture, we don’t talk about these things a lot. And fortunately, many of us haven’t encountered situations where one was necessary or wasn’t already in place. Those who have experienced what it is like when someone passes without an estate plan know how vital a plan truly is. An estate plan is the sum of everything someone owns that has value. That would include land, real estate, stocks, bonds, annuities, cash, jewelry, vehicles, and any other asset someone owns or has a controlling interest in, less liabilities such as mortgage and consumer debts.

  An estate plan is simply a plan for how to distribute someone’s net worth after death. In the last episode, I explained how expensive and time-consuming the process is without a plan. Some may wonder why they can’t just distribute assets to the spouse and next of kin, but life and families aren’t that simple. Family members have had far too many disputes about who would receive what. A trust or estate plan may seem complicated, but it is way better than the alternative.

  Critical components

  Most people are familiar with a will. A will provides the details on how assets are to be distributed at death, names the estate executor and beneficiaries, how and when said beneficiaries will receive assets, and who would be guardians for any minor children. A will is vitally important because it is where a beneficiary is named for certain assets that don’t allow a beneficiary to be named directly. A retirement account, for example, requires at least one beneficiary to be named. Certain assets don’t allow listing a beneficiary, such as a house or real estate. 

  Wills can be as simple as a handwritten note. However, wills alone are not legally binding and can therefore be contested in court. While the will can guide the court in how assets should be distributed, beneficiaries will still have to go to court. As I mentioned in the previous episode, this legal process is called probate, which is expensive and open to the public. 

  Beyond a will

  If a will doesn’t avoid probate, what does? That’s where a trust comes into play. A trust is an arrangement that allows a third party or trustee to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets will be passed to the beneficiaries. Trusts usually avoid probate, so beneficiaries can gain access to these assets much more quickly than if there were only a will. There are many types of trusts, but a significant distinction is whether they are revocable or irrevocable. My wife and I have a revocable, living trust we established in 2016. The trust allows us to proceed with our lives as usual, and we can change it anytime. It essentially serves as a safety net for our family if something happens to my wife and me. 

  Revocable estates are subject to estate taxes, but only if the value is greater than $23.4 million, according to 2022 tax law. An irrevocable trust would help mitigate taxes. However, all assets transferred to the trust would be beyond further control, the terms could not be changed, and the trust could not be dissolved. These types of trusts work if the primary aim is to reduce the amount subject to estate taxes by effectively removing certain assets from the taxable estate. 

  Too many people make the mistake of not making an estate plan, thinking they’ll set one up later. I understand why many want to avoid the thought of their passing, but these things need to be addressed to ensure the best possible impact on the family. If you have any questions about estate planning, it’s best to discuss them with a legal professional.

  Capital Investment Advisers and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.

  Resources & People Mentioned

  • Congratulations, You Already Have an Estate Plan - BUT YOU DON'T WANT IT!, Ep #21
  • 10 Famous People Who Died Without a Will | LegalZoom
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>If you are confused about what estate planning is and its importance, this episode of the One for the Money podcast will resonate with you. I break down the critical elements of an estate plan and their respective purposes, which should help you understand why you need one. In the tips, tricks, and strategies portion, I share tips on ensuring your estate plan is executed as you had planned.

  In this episode...

  • What is an estate plan? [01:01]
  • Creating an effective plan [03:19]
  • The purpose of a trust [05:05]
  • Power of attorney [07:12]
  • The 30-year estate battle [09:04]
  
  

  What is an estate plan?

  Many people don’t understand estate plans or why they would want one. As a culture, we don’t talk about these things a lot. And fortunately, many of us haven’t encountered situations where one was necessary or wasn’t already in place. Those who have experienced what it is like when someone passes without an estate plan know how vital a plan truly is. An estate plan is the sum of everything someone owns that has value. That would include land, real estate, stocks, bonds, annuities, cash, jewelry, vehicles, and any other asset someone owns or has a controlling interest in, less liabilities such as mortgage and consumer debts.

  An estate plan is simply a plan for how to distribute someone’s net worth after death. In the last episode, I explained how expensive and time-consuming the process is without a plan. Some may wonder why they can’t just distribute assets to the spouse and next of kin, but life and families aren’t that simple. Family members have had far too many disputes about who would receive what. A trust or estate plan may seem complicated, but it is way better than the alternative.

  Critical components

  Most people are familiar with a will. A will provides the details on how assets are to be distributed at death, names the estate executor and beneficiaries, how and when said beneficiaries will receive assets, and who would be guardians for any minor children. A will is vitally important because it is where a beneficiary is named for certain assets that don’t allow a beneficiary to be named directly. A retirement account, for example, requires at least one beneficiary to be named. Certain assets don’t allow listing a beneficiary, such as a house or real estate. 

  Wills can be as simple as a handwritten note. However, wills alone are not legally binding and can therefore be contested in court. While the will can guide the court in how assets should be distributed, beneficiaries will still have to go to court. As I mentioned in the previous episode, this legal process is called probate, which is expensive and open to the public. 

  Beyond a will

  If a will doesn’t avoid probate, what does? That’s where a trust comes into play. A trust is an arrangement that allows a third party or trustee to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets will be passed to the beneficiaries. Trusts usually avoid probate, so beneficiaries can gain access to these assets much more quickly than if there were only a will. There are many types of trusts, but a significant distinction is whether they are revocable or irrevocable. My wife and I have a revocable, living trust we established in 2016. The trust allows us to proceed with our lives as usual, and we can change it anytime. It essentially serves as a safety net for our family if something happens to my wife and me. 

  Revocable estates are subject to estate taxes, but only if the value is greater than $23.4 million, according to 2022 tax law. An irrevocable trust would help mitigate taxes. However, all assets transferred to the trust would be beyond further control, the terms could not be changed, and the trust could not be dissolved. These types of trusts work if the primary aim is to reduce the amount subject to estate taxes by effectively removing certain assets from the taxable estate. 

  Too many people make the mistake of not making an estate plan, thinking they’ll set one up later. I understand why many want to avoid the thought of their passing, but these things need to be addressed to ensure the best possible impact on the family. If you have any questions about estate planning, it’s best to discuss them with a legal professional.

  Capital Investment Advisers and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.

  Resources & People Mentioned

  • Congratulations, You Already Have an Estate Plan - BUT YOU DON'T WANT IT!, Ep #21
  • 10 Famous People Who Died Without a Will | LegalZoom
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>c0412890-6a02-4208-ade7-baac36caf206Thu, 15 Sep 2022 03:00:00 -070012:32falsefull2222In this episode, I break down the critical elements of an estate plan and their respective purposes. I understand why many want to avoid the thought of their passing, but these things need to be addressed to ensure the best possible impact on the family.Congratulations, You Already Have an Estate Plan - BUT YOU DON'T WANT IT!In this episode of the One for the Money podcast, I explain how everyone has an estate plan. I also provide reasons why you want better than the default. In the tips, tricks, and strategies portion, I share a tip in the form of a sad story that shows why you want to review and communicate details of your estate plan to the responsible party. Listen to learn the importance of estate planning and the difference good planning can make.

  In this episode...

  • What happens without an estate plan? [01:38]
  • The memory you leave [03:53]
  • Keeping the plans updated [06:35]
  • The importance of communication [07:53]
  
  

  Without a plan

  Estate plans are a critical component of better financial planning and, ultimately, a better life. We accumulate assets, real estate, investment accounts, vehicles, and more throughout our lives. When we pass away, there needs to be an orderly way for these assets to be distributed to the people we choose. Without an estate plan, the state of residence makes those decisions in public and after many extra expenses. 

  While it may seem obvious that you would want to avoid having the state in charge of your assets, a surprising number of people don’t have an estate plan when they die. Perhaps we wouldn’t entirely fault those who died suddenly, but even many with longer-term illnesses don’t plan for their estate. 

  Establishing your wishes

  When I open a retirement account for clients, naming a beneficiary is required. Bank accounts can also have beneficiaries. However, certain assets such as houses, cars, and jewelry do not have a way to assign a beneficiary. That’s where an estate plan comes in. It allows us to name who receives what, when they receive it, and under what conditions. For example, we might want our children to receive their inheritances in portions throughout their lives rather than a lump sum when they’re younger and possibly less disciplined. Without a plan, the state will be making all of these decisions.

  I recently heard an estate planning attorney describe the challenges of not having an estate plan in California. Without an estate plan, the process takes a long time. Currently, the courts are backlogged, causing people to wait for an initial appointment for up to nine months. Then the family would need to pay a filing fee to open the proceedings, run a notice in the local newspaper, wait another several months for a final hearing, and pay another court fee to close the case. In addition to those expenses, the hourly fees charged by the lawyer can cost thousands of dollars. 

  Communication is key to a successful plan

  I was at a webinar where the presenter shared the story of how an elderly couple had moved to Florida. Years later, the wife passed away, and their grown children decided they would move their father back north to be closer to his family. His children made all the necessary changes to facilitate the move, changing bank accounts and mailing addresses for investment accounts. After he passed away, the family went through their father’s things and were elated to find a $500,000 life insurance policy. When they contacted the insurance company, they were informed that, sadly, the insurance policy had lapsed and was worthless. Despite their father paying for the policy for several decades, payments were missed because of the closed bank account. Sharing details of an estate with the responsible party is essential to one’s wishes being carried out.

  Years ago, I spoke with another advisor going through a difficult time because one of his clients had died unexpectedly. Thankfully, the client had a life insurance policy. Unfortunately, his ex-wife from over ten years ago was still listed as the beneficiary, and his current wife wasn’t happy about it. Since the advisor didn’t facilitate the purchase of the original policy, he hadn’t thought to review it to ensure the beneficiaries were up to date, and no one knew about the policy to have it updated. This example illustrates why we review clients’ estate plans and regularly conduct beneficiary reviews for accounts and life insurance policies. We always want to ensure everything is in alignment with current wishes.

  Resources & People Mentioned

  • Estate Planning Basics - Fidelity
  • 10 Famous People Who Died Without a Will | LegalZoom
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>In this episode of the One for the Money podcast, I explain how everyone has an estate plan. I also provide reasons why you want better than the default. In the tips, tricks, and strategies portion, I share a tip in the form of a sad story that shows why you want to review and communicate details of your estate plan to the responsible party. Listen to learn the importance of estate planning and the difference good planning can make.

  In this episode...

  • What happens without an estate plan? [01:38]
  • The memory you leave [03:53]
  • Keeping the plans updated [06:35]
  • The importance of communication [07:53]
  
  

  Without a plan

  Estate plans are a critical component of better financial planning and, ultimately, a better life. We accumulate assets, real estate, investment accounts, vehicles, and more throughout our lives. When we pass away, there needs to be an orderly way for these assets to be distributed to the people we choose. Without an estate plan, the state of residence makes those decisions in public and after many extra expenses. 

  While it may seem obvious that you would want to avoid having the state in charge of your assets, a surprising number of people don’t have an estate plan when they die. Perhaps we wouldn’t entirely fault those who died suddenly, but even many with longer-term illnesses don’t plan for their estate. 

  Establishing your wishes

  When I open a retirement account for clients, naming a beneficiary is required. Bank accounts can also have beneficiaries. However, certain assets such as houses, cars, and jewelry do not have a way to assign a beneficiary. That’s where an estate plan comes in. It allows us to name who receives what, when they receive it, and under what conditions. For example, we might want our children to receive their inheritances in portions throughout their lives rather than a lump sum when they’re younger and possibly less disciplined. Without a plan, the state will be making all of these decisions.

  I recently heard an estate planning attorney describe the challenges of not having an estate plan in California. Without an estate plan, the process takes a long time. Currently, the courts are backlogged, causing people to wait for an initial appointment for up to nine months. Then the family would need to pay a filing fee to open the proceedings, run a notice in the local newspaper, wait another several months for a final hearing, and pay another court fee to close the case. In addition to those expenses, the hourly fees charged by the lawyer can cost thousands of dollars. 

  Communication is key to a successful plan

  I was at a webinar where the presenter shared the story of how an elderly couple had moved to Florida. Years later, the wife passed away, and their grown children decided they would move their father back north to be closer to his family. His children made all the necessary changes to facilitate the move, changing bank accounts and mailing addresses for investment accounts. After he passed away, the family went through their father’s things and were elated to find a $500,000 life insurance policy. When they contacted the insurance company, they were informed that, sadly, the insurance policy had lapsed and was worthless. Despite their father paying for the policy for several decades, payments were missed because of the closed bank account. Sharing details of an estate with the responsible party is essential to one’s wishes being carried out.

  Years ago, I spoke with another advisor going through a difficult time because one of his clients had died unexpectedly. Thankfully, the client had a life insurance policy. Unfortunately, his ex-wife from over ten years ago was still listed as the beneficiary, and his current wife wasn’t happy about it. Since the advisor didn’t facilitate the purchase of the original policy, he hadn’t thought to review it to ensure the beneficiaries were up to date, and no one knew about the policy to have it updated. This example illustrates why we review clients’ estate plans and regularly conduct beneficiary reviews for accounts and life insurance policies. We always want to ensure everything is in alignment with current wishes.

  Resources & People Mentioned

  • Estate Planning Basics - Fidelity
  • 10 Famous People Who Died Without a Will | LegalZoom
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>1c0e7fe9-2a45-4a61-910f-91dfffd3c546Thu, 01 Sep 2022 03:00:00 -070010:56falsefull2121Everyone, by default, has an estate plan. In this episode I explain why you really don't want it!Ways to Avoid Running out of Money in Retirement - Most Accidents Happen on the Way DownEven the best savers can run out of money in retirement. In this episode of the One for the Money podcast, I share how making the appropriate adjustments in the few years before and after retirement can help prevent that. In the tips, tricks, and strategy portion, I’ll share information for those who started saving later for early retirement. Listen to learn more!

  In this episode...

  • Into thin air [01:51]
  • Sequence of returns risk [03:30]
  • The years before retirement [11:32]
  • The bucket strategy [13:09]
  • Saving late for early retirement [16:43]
  
  

  Climbing down carefully

  While the most common accident in mountain climbing is falling, the majority of those incidents occur on the way down from the peak. People put so much physical and mental energy into making it to the pinnacle that they don’t take the necessary precautions on the way down. Think of your approaching retirement as submitting your financial Mount Everest. Taking withdrawals from your retirement investments is like climbing down, which requires even more precautions.

  The mistakes made after retirement can be costly, and unlike when someone is younger, they don’t have the time or salary to overcome these mistakes. One of retirees’ biggest fears is running out of money. This shortage can happen for many reasons, including negative returns in the first few years before and just after retirement. Another significant risk is inflation. Strategies need to be deployed to address both of these risks.

  Before and after retirement

  The rate of return in the first few years of retirement significantly impacts how money lasts throughout retirement. Similarly, the rate of returns in the years before retirement makes a huge difference. So what can you do to retire on time without running out of money? We can’t predict the future rates of return, and we can’t know if the stock market will be up or down.

  Some might think a good strategy is to be conservative in investments. However, that would also mean slowing growth and not keeping up with inflation. For my clients nearing or in retirement, I employ a bucket strategy. The monies to be withdrawn in the near term are invested more conservatively. Monies to be withdrawn in the next 6-15 years are invested more moderately. Finally, monies that will be withdrawn beyond that timeframe are invested more towards growth or a higher percent allocated to stocks.

  Strategies around retirement

  In the bucket strategy, the ultimate determining factor for each bucket is the action of the market, the individual client’s spending goals, and their tolerance for risk. The logic behind the strategy is that money spent in the near term shouldn’t be impacted by large swings in the market. Monies spent further in the future have the potential for increased growth to provide future income and offset the effects of inflation. 

  While the bucket strategy works well for those who completely stop working, another approach would be retiring slowly by reducing work hours before leaving the workforce. This situation would result in less reliance on income generated from an investment portfolio and create a smoother transition from a full-time job to a life without work responsibilities. A flexible or dynamic budget can be helpful to make withdrawals less in down years. Delaying Social Security to increase monthly benefits can also reduce reliance on income generated from a portfolio. These and similar approaches aim to match assets, liabilities, and time horizons as best as possible.

  Resources & People Mentioned

  • Into Thin Air: A Personal Account of the Mt. Everest Disaster
  • A Wealth of Common Sense
  • When Life Gives You Lemons, STAY INVESTED!, Ep #18
  • Most Accidents Happen On The Way Down — betterplanning.betterlife.
  • Sequence of returns | BlackRock
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Even the best savers can run out of money in retirement. In this episode of the One for the Money podcast, I share how making the appropriate adjustments in the few years before and after retirement can help prevent that. In the tips, tricks, and strategy portion, I’ll share information for those who started saving later for early retirement. Listen to learn more!

  In this episode...

  • Into thin air [01:51]
  • Sequence of returns risk [03:30]
  • The years before retirement [11:32]
  • The bucket strategy [13:09]
  • Saving late for early retirement [16:43]
  
  

  Climbing down carefully

  While the most common accident in mountain climbing is falling, the majority of those incidents occur on the way down from the peak. People put so much physical and mental energy into making it to the pinnacle that they don’t take the necessary precautions on the way down. Think of your approaching retirement as submitting your financial Mount Everest. Taking withdrawals from your retirement investments is like climbing down, which requires even more precautions.

  The mistakes made after retirement can be costly, and unlike when someone is younger, they don’t have the time or salary to overcome these mistakes. One of retirees’ biggest fears is running out of money. This shortage can happen for many reasons, including negative returns in the first few years before and just after retirement. Another significant risk is inflation. Strategies need to be deployed to address both of these risks.

  Before and after retirement

  The rate of return in the first few years of retirement significantly impacts how money lasts throughout retirement. Similarly, the rate of returns in the years before retirement makes a huge difference. So what can you do to retire on time without running out of money? We can’t predict the future rates of return, and we can’t know if the stock market will be up or down.

  Some might think a good strategy is to be conservative in investments. However, that would also mean slowing growth and not keeping up with inflation. For my clients nearing or in retirement, I employ a bucket strategy. The monies to be withdrawn in the near term are invested more conservatively. Monies to be withdrawn in the next 6-15 years are invested more moderately. Finally, monies that will be withdrawn beyond that timeframe are invested more towards growth or a higher percent allocated to stocks.

  Strategies around retirement

  In the bucket strategy, the ultimate determining factor for each bucket is the action of the market, the individual client’s spending goals, and their tolerance for risk. The logic behind the strategy is that money spent in the near term shouldn’t be impacted by large swings in the market. Monies spent further in the future have the potential for increased growth to provide future income and offset the effects of inflation. 

  While the bucket strategy works well for those who completely stop working, another approach would be retiring slowly by reducing work hours before leaving the workforce. This situation would result in less reliance on income generated from an investment portfolio and create a smoother transition from a full-time job to a life without work responsibilities. A flexible or dynamic budget can be helpful to make withdrawals less in down years. Delaying Social Security to increase monthly benefits can also reduce reliance on income generated from a portfolio. These and similar approaches aim to match assets, liabilities, and time horizons as best as possible.

  Resources & People Mentioned

  • Into Thin Air: A Personal Account of the Mt. Everest Disaster
  • A Wealth of Common Sense
  • When Life Gives You Lemons, STAY INVESTED!, Ep #18
  • Most Accidents Happen On The Way Down — betterplanning.betterlife.
  • Sequence of returns | BlackRock
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>96431026-b6ac-45b8-afcd-5b023161437eMon, 15 Aug 2022 03:00:00 -070020:27falsefull2020One of retirees’ biggest fears is running out of money. In this episode of the One for the Money podcast, I share how making the appropriate adjustments can help prevent that.Beware of Wolves in Insurance Salesmen's ClothingThis episode of the One for the Money podcast is a little different than previous episodes, as it’s more of a “buyer beware” when buying life insurance. Life insurance is a valuable part of any financial plan, but I’ve seen too many individuals fall for the tricks of some insurance salesmen. Listen to the end when I share strategies on some of the best ways to buy life insurance, which some agents may not want you to know.

  >>>>>player code here<<<<<<<

  In this episode...

  • My journey to becoming a CFP [01:19]
  • The wrong life insurance [02:53]
  • Permanent life insurance [05:55]
  • The fastest way for agents to make money [08:35]
  • Factors in life insurance [11:30]
  • Avoiding expensive life insurance [16:02]
  • One of the best ways to purchase life insurance [18:01]
  
  

  The dangers in life insurance

  I became a certified financial planner to have the greatest impact for my clients. This career has married personal finance and education, two things I love. Sadly, my career didn’t start that way. Due to my naivety, I joined a financial services firm that claimed to put financial planning at the forefront of what they did. However, the reality was that they primarily pushed expensive insurance that the overwhelming majority of people don’t need. 

  In my defense, the job wasn’t anything like what I was promised in the interviews with the firm. I had interviewed with a few certified financial planners who spoke of the merits of being fiduciaries, but apparently, this was in name only. In fact, they did not do comprehensive financial planning, nor were they fiduciaries. Their primary efforts were to sell expensive insurance. I share this so you know I have first-hand knowledge of how some financial services industries operate.

  Why is permanent life insurance so bad?

  Many people don’t have life insurance at all, and those who do often have policies that are way too expensive because they fell for the tricks of insurance salespeople. This insurance is called Index Universal Life(IUL), whole life and similar permanent life insurance policies. Legally, life insurance cannot be sold as an investment, but there are far too many instances where an IUL is portrayed as an investment. Often IULs are sold as a way to avoid stock market losses and receive stock market-like returns. 

  The illustrations used to demonstrate the policy often don’t share the majority of expenses associated with these policies, some of which include significant commissions. More importantly, these representatives don’t determine if these policies are in the individual’s best interest. Permanent insurance is introduced as the only solution. I know this because of my training at the original firm on how to schedule appointments and use emotionally manipulative sales techniques. But that firm didn’t train on how to determine if the clients had sufficient retirement savings or whether they had an adequate emergency fund. The focus was to sell the most expensive insurance.

  Needless to say, the agency and I parted ways. I’ve since learned that, with rare exception, term life insurance is usually all that is needed. It typically costs less than indexed universal life, variable universal, or whole life policies that are incredibly expensive and may not meet clients' goals. An IUL policy could potentially erode over 80% of your wealth compared to investing directly in an index fund. 

  How to choose life insurance

  Various insurance companies offer better-priced policies for specific individuals. Some offer better terms for people with diabetes, while others are only better for younger people. A person could apply for one company and receive the highest health rating but receive a lower rating at another company. These variables result in a significant difference in monthly premiums for the same benefits. Consequently, obtaining quotes from multiple companies is beneficial. 

  Choosing an independent licensed agent who can provide quotes from multiple companies would help find the best option as opposed to a captive agent who would only offer a quote from the company they represent. If you’re still interested in buying whole life insurance, there are a few things to consider. You need to have no consumer debt besides a mortgage, be on track for retirement, and have an adequate emergency fund in place. After all those things, if you still have extra money, there is a more cost-effective way to buy whole life insurance. That’s to purchase a convertible term policy with the same company. These types of term policies allow you to convert to a whole life policy later, and the commission paid to the agents is much lower. Therefore more of your money would build up in the policy.

  Resources & People Mentioned

  • Is Whole Life Insurance a Good Investment? - NerdWallet
  • The Statistic Whole Life Salesmen Don’t Want You To Know
  • Is IUL a Scam? Yes.
  • Jeremy Schneider - Founder - Personal Finance Club
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>This episode of the One for the Money podcast is a little different than previous episodes, as it’s more of a “buyer beware” when buying life insurance. Life insurance is a valuable part of any financial plan, but I’ve seen too many individuals fall for the tricks of some insurance salesmen. Listen to the end when I share strategies on some of the best ways to buy life insurance, which some agents may not want you to know.

  >>>>>player code here<<<<<<<

  In this episode...

  • My journey to becoming a CFP [01:19]
  • The wrong life insurance [02:53]
  • Permanent life insurance [05:55]
  • The fastest way for agents to make money [08:35]
  • Factors in life insurance [11:30]
  • Avoiding expensive life insurance [16:02]
  • One of the best ways to purchase life insurance [18:01]
  
  

  The dangers in life insurance

  I became a certified financial planner to have the greatest impact for my clients. This career has married personal finance and education, two things I love. Sadly, my career didn’t start that way. Due to my naivety, I joined a financial services firm that claimed to put financial planning at the forefront of what they did. However, the reality was that they primarily pushed expensive insurance that the overwhelming majority of people don’t need. 

  In my defense, the job wasn’t anything like what I was promised in the interviews with the firm. I had interviewed with a few certified financial planners who spoke of the merits of being fiduciaries, but apparently, this was in name only. In fact, they did not do comprehensive financial planning, nor were they fiduciaries. Their primary efforts were to sell expensive insurance. I share this so you know I have first-hand knowledge of how some financial services industries operate.

  Why is permanent life insurance so bad?

  Many people don’t have life insurance at all, and those who do often have policies that are way too expensive because they fell for the tricks of insurance salespeople. This insurance is called Index Universal Life(IUL), whole life and similar permanent life insurance policies. Legally, life insurance cannot be sold as an investment, but there are far too many instances where an IUL is portrayed as an investment. Often IULs are sold as a way to avoid stock market losses and receive stock market-like returns. 

  The illustrations used to demonstrate the policy often don’t share the majority of expenses associated with these policies, some of which include significant commissions. More importantly, these representatives don’t determine if these policies are in the individual’s best interest. Permanent insurance is introduced as the only solution. I know this because of my training at the original firm on how to schedule appointments and use emotionally manipulative sales techniques. But that firm didn’t train on how to determine if the clients had sufficient retirement savings or whether they had an adequate emergency fund. The focus was to sell the most expensive insurance.

  Needless to say, the agency and I parted ways. I’ve since learned that, with rare exception, term life insurance is usually all that is needed. It typically costs less than indexed universal life, variable universal, or whole life policies that are incredibly expensive and may not meet clients' goals. An IUL policy could potentially erode over 80% of your wealth compared to investing directly in an index fund. 

  How to choose life insurance

  Various insurance companies offer better-priced policies for specific individuals. Some offer better terms for people with diabetes, while others are only better for younger people. A person could apply for one company and receive the highest health rating but receive a lower rating at another company. These variables result in a significant difference in monthly premiums for the same benefits. Consequently, obtaining quotes from multiple companies is beneficial. 

  Choosing an independent licensed agent who can provide quotes from multiple companies would help find the best option as opposed to a captive agent who would only offer a quote from the company they represent. If you’re still interested in buying whole life insurance, there are a few things to consider. You need to have no consumer debt besides a mortgage, be on track for retirement, and have an adequate emergency fund in place. After all those things, if you still have extra money, there is a more cost-effective way to buy whole life insurance. That’s to purchase a convertible term policy with the same company. These types of term policies allow you to convert to a whole life policy later, and the commission paid to the agents is much lower. Therefore more of your money would build up in the policy.

  Resources & People Mentioned

  • Is Whole Life Insurance a Good Investment? - NerdWallet
  • The Statistic Whole Life Salesmen Don’t Want You To Know
  • Is IUL a Scam? Yes.
  • Jeremy Schneider - Founder - Personal Finance Club
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>0bdc0191-6302-4738-b881-2b4d5147bfd5Mon, 01 Aug 2022 03:00:00 -070021:13falsefull1919Life insurance is a valuable part of any financial plan, but I’ve seen too many individuals fall for the tricks of some insurance salesmen. Listen to the end when I share strategies on some of the best ways to buy life insurance.When Life Gives You Lemons, STAY INVESTED!In this episode of the One for the Money podcast, I share a personal, financially painful experience that can serve as an example of why you should stay invested. Considering the stock market of late, this is quite a timely topic. Listen to the end when I share a strategy you can use some stock market losses in a non-retirement account to ultimately reduce your taxes.

  In this episode...

  • Unprecedented events [01:13]
  • Locking in losses [03:42]
  • Delusions in timing the markets [08:25]
  • Aligning investment plans with goals [12:10]
  • Tax-loss harvesting [13:35]
  
  

  Don’t lock in losses

  The last few years have offered more than enough unprecedented events, the stock market included. With the pandemic shutting the world down, we had the fastest bear market in history. In 2020 that took only sixteen days to happen, and then the market dropped further. A short time later, the stock market rocketed higher with the fastest fifty-day rally in history. In 2021 the stock market had more remarkable growth. However, the stock market in 2022 began the year with the worst start in half a century.

  Seeing the value of your nest egg decrease can be incredibly disheartening. Sadly, far too many people succumb to these emotions and sell their investments. In fact, a study found that close to a third of investors over the age of 65 sold all of their stocks during the Coronavirus meltdown. Because they sold their investments, they missed out on these significant rallies to the upside, locking in their losses.

  A cautionary tale of emotional selling

  Many believe we are due for a recession, and they’ll be right eventually. There’s no way to know when it will occur or to what magnitude, let alone its impact on the stock market. What we do know is that succumbing to these fears is detrimental to building wealth and early retirement. For those nearing retirement, we will conservatively invest in the next few years. For those seven or more years from retirement, now is the time to keep buying periodically and not sell stocks. Selling leads to realized losses and missed out gains.

  I know from personal experience the pain of selling an investment when I shouldn’t have. Years ago, I purchased stock in a company that was exploding in popularity. However, during the 2008 financial crisis, these stocks dropped 50%. I was scared to lose more, so I foolishly sold, guaranteeing my losses. The painful part of this story is that these stocks have since increased by over 7,500%. While I did use the proceeds of my sale to invest in some companies that worked out well for me, emotional selling was a huge mistake. I’ve learned a lot since then and invest much differently now, but my sad story illustrates the mistake of selling that many investors have made.

  What is Tax-loss harvesting?

  Tax-loss harvesting is a strategy that involves selling an asset or security at a net loss. The investor uses the proceeds to purchase a similar investment, maintaining the portfolio’s overall balance. The investor can continue to gain while paying fewer taxes. Essential to keep in mind is that the IRS has a rule that says you can’t just buy a substantially identical investment within thirty days, so you’ll have to wait.

  What do you do if you have more than the maximum of $3,000 in losses? The good news is that you can use these losses to offset the ordinary income tax. The losses can carry over for the next two years to offset income taxes. Tax-loss harvesting can only be used in non-retirement accounts, and you can see the power of that strategy to offset taxes.

  This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

  Resources & People Mentioned

  • Close to One-Third of Investors Over 65 Moved to Cash
  • Three Money Mistakes to Avoid in a Bear Market - WSJ
  • J. P Morgan - Guide to Retirement
  • J. P Morgan - Guide to the Markets
  • Tax-Loss Harvesting Definition
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>In this episode of the One for the Money podcast, I share a personal, financially painful experience that can serve as an example of why you should stay invested. Considering the stock market of late, this is quite a timely topic. Listen to the end when I share a strategy you can use some stock market losses in a non-retirement account to ultimately reduce your taxes.

  In this episode...

  • Unprecedented events [01:13]
  • Locking in losses [03:42]
  • Delusions in timing the markets [08:25]
  • Aligning investment plans with goals [12:10]
  • Tax-loss harvesting [13:35]
  
  

  Don’t lock in losses

  The last few years have offered more than enough unprecedented events, the stock market included. With the pandemic shutting the world down, we had the fastest bear market in history. In 2020 that took only sixteen days to happen, and then the market dropped further. A short time later, the stock market rocketed higher with the fastest fifty-day rally in history. In 2021 the stock market had more remarkable growth. However, the stock market in 2022 began the year with the worst start in half a century.

  Seeing the value of your nest egg decrease can be incredibly disheartening. Sadly, far too many people succumb to these emotions and sell their investments. In fact, a study found that close to a third of investors over the age of 65 sold all of their stocks during the Coronavirus meltdown. Because they sold their investments, they missed out on these significant rallies to the upside, locking in their losses.

  A cautionary tale of emotional selling

  Many believe we are due for a recession, and they’ll be right eventually. There’s no way to know when it will occur or to what magnitude, let alone its impact on the stock market. What we do know is that succumbing to these fears is detrimental to building wealth and early retirement. For those nearing retirement, we will conservatively invest in the next few years. For those seven or more years from retirement, now is the time to keep buying periodically and not sell stocks. Selling leads to realized losses and missed out gains.

  I know from personal experience the pain of selling an investment when I shouldn’t have. Years ago, I purchased stock in a company that was exploding in popularity. However, during the 2008 financial crisis, these stocks dropped 50%. I was scared to lose more, so I foolishly sold, guaranteeing my losses. The painful part of this story is that these stocks have since increased by over 7,500%. While I did use the proceeds of my sale to invest in some companies that worked out well for me, emotional selling was a huge mistake. I’ve learned a lot since then and invest much differently now, but my sad story illustrates the mistake of selling that many investors have made.

  What is Tax-loss harvesting?

  Tax-loss harvesting is a strategy that involves selling an asset or security at a net loss. The investor uses the proceeds to purchase a similar investment, maintaining the portfolio’s overall balance. The investor can continue to gain while paying fewer taxes. Essential to keep in mind is that the IRS has a rule that says you can’t just buy a substantially identical investment within thirty days, so you’ll have to wait.

  What do you do if you have more than the maximum of $3,000 in losses? The good news is that you can use these losses to offset the ordinary income tax. The losses can carry over for the next two years to offset income taxes. Tax-loss harvesting can only be used in non-retirement accounts, and you can see the power of that strategy to offset taxes.

  This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

  Resources & People Mentioned

  • Close to One-Third of Investors Over 65 Moved to Cash
  • Three Money Mistakes to Avoid in a Bear Market - WSJ
  • J. P Morgan - Guide to Retirement
  • J. P Morgan - Guide to the Markets
  • Tax-Loss Harvesting Definition
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>4cbe5851-1975-44a7-a68f-652d4f8581e5Fri, 15 Jul 2022 03:00:00 -070019:23falsefull1818The last few years have offered more than enough unprecedented events, the stock market included. In this episode of the One for the Money podcast, I share a personal, financially painful experience that can serve as an example of why you should stay invested.The Case for OptimismHow much does the news influence your financial decisions? This episode of the One for the Money podcast focuses on the optimism we can have in the market, even through disheartening times. The world has changed dramatically over the years, yet time and time again, investments have proven themselves. Listen through the end when I share tips regarding credit scores.

  >>>>>player code here<<<<<<<

  In this episode...

  • Negativity sells the news [01:20]
  • Progress over the years [02:41]
  • Investing proves itself again and again [06:40]
  • Credit score and financial plans [10:40]
  
  

  The news and investments

  This year has brought a lot of market volatility, creating fear in investors’ hearts. With a war in Europe, inflation at levels we haven’t seen in over 40 years, a pandemic still lingering in parts of the world, and political and civil strife, there’s an overall theme of negativity in the news. It’s essential to remember that media companies are businesses, and negative news attracts more attention, creating more revenue. While the media may have a financially compelling reason to focus on negative things or things that generate fear, it’s important not to let that shape our perspective of the general trajectory of humanity, which is undoubtedly positive. 

  The pace of progress

  The photo on my website shows my great-grandparents, both clad in fur coats. My great-grandpa John was born in the United States and emigrated to Canada in 1894. My great-grandma Margaret was born in Germany, immigrating first to Wisconsin. She later emigrated to Canada, having answered my great grandpa John’s advertisement in a newspaper for a wife. Great Grandpa John was a rancher and settled near the town of Mountain View, where he built his home. While that was a stunning place to live, cattle ranching is a hard way to make a living, especially through the brutal Canadian winters. 

  My great-grandparents didn’t have indoor plumbing for most of their lives, let alone toilet paper or a way to order it to be delivered just hours later. What would they say about self-driving cars or about the feats of architecture, medicine, agricultural productivity, airplanes, and space travel that could all be enjoyed by their great-grandson? All of this progress occurred in the last 100 years, and the pace of that progress and positive change is only moving faster. If this is the progress of the previous 100 years, what do the next 100 years hold?

  A review of history shows that there have always been reasons why investing is scary, but that investing has repeatedly proved itself. Some may argue that this time is different, but they are joining a long line of people who said the same thing and were proved wrong. Regardless of what happens, people will still work, earn a living, and spend their money on goods and services. Investing in well-run companies that provide those goods and services is one of the best ways to grow your wealth. 

  Credit history and score

  Credit scores can be a critical part of a financial plan, especially when purchasing a home. However, most people don’t know how their credit score is determined. Thirty-five percent of a credit score is derived from payment history, and thirty percent is derived from the amount owed. The next fifteen percent is derived from the length of credit history, ten percent is new credit, and the final ten percent is the type of credit owed. A credit score over 800 is deemed exceptional, and the higher a credit score is, the lower interest rates are in the terms offered.

  Three companies provide credit scores to lenders: TransUnion, Equifax, and Experian. The first tip I recommend is freezing credit with all three companies, which will prevent someone from opening new credit in your name. The second tip is regarding credit history. Fifty percent of credit score is based on credit history. Before canceling a credit card, consider how it can shorten credit history, negatively affecting a credit score. Before dropping off an old credit card, it’s also important to ensure that annual fees aren’t being paid on that card. 

  Resources & People Mentioned

  • Moore's Law and Intel Innovation
  • Major Wars and Conflicts of the 20th Century
  • PolitiFact | Did we really reduce extreme poverty by half in 30 years?
  • How are FICO Scores Calculated? | myFICO
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>How much does the news influence your financial decisions? This episode of the One for the Money podcast focuses on the optimism we can have in the market, even through disheartening times. The world has changed dramatically over the years, yet time and time again, investments have proven themselves. Listen through the end when I share tips regarding credit scores.

  >>>>>player code here<<<<<<<

  In this episode...

  • Negativity sells the news [01:20]
  • Progress over the years [02:41]
  • Investing proves itself again and again [06:40]
  • Credit score and financial plans [10:40]
  
  

  The news and investments

  This year has brought a lot of market volatility, creating fear in investors’ hearts. With a war in Europe, inflation at levels we haven’t seen in over 40 years, a pandemic still lingering in parts of the world, and political and civil strife, there’s an overall theme of negativity in the news. It’s essential to remember that media companies are businesses, and negative news attracts more attention, creating more revenue. While the media may have a financially compelling reason to focus on negative things or things that generate fear, it’s important not to let that shape our perspective of the general trajectory of humanity, which is undoubtedly positive. 

  The pace of progress

  The photo on my website shows my great-grandparents, both clad in fur coats. My great-grandpa John was born in the United States and emigrated to Canada in 1894. My great-grandma Margaret was born in Germany, immigrating first to Wisconsin. She later emigrated to Canada, having answered my great grandpa John’s advertisement in a newspaper for a wife. Great Grandpa John was a rancher and settled near the town of Mountain View, where he built his home. While that was a stunning place to live, cattle ranching is a hard way to make a living, especially through the brutal Canadian winters. 

  My great-grandparents didn’t have indoor plumbing for most of their lives, let alone toilet paper or a way to order it to be delivered just hours later. What would they say about self-driving cars or about the feats of architecture, medicine, agricultural productivity, airplanes, and space travel that could all be enjoyed by their great-grandson? All of this progress occurred in the last 100 years, and the pace of that progress and positive change is only moving faster. If this is the progress of the previous 100 years, what do the next 100 years hold?

  A review of history shows that there have always been reasons why investing is scary, but that investing has repeatedly proved itself. Some may argue that this time is different, but they are joining a long line of people who said the same thing and were proved wrong. Regardless of what happens, people will still work, earn a living, and spend their money on goods and services. Investing in well-run companies that provide those goods and services is one of the best ways to grow your wealth. 

  Credit history and score

  Credit scores can be a critical part of a financial plan, especially when purchasing a home. However, most people don’t know how their credit score is determined. Thirty-five percent of a credit score is derived from payment history, and thirty percent is derived from the amount owed. The next fifteen percent is derived from the length of credit history, ten percent is new credit, and the final ten percent is the type of credit owed. A credit score over 800 is deemed exceptional, and the higher a credit score is, the lower interest rates are in the terms offered.

  Three companies provide credit scores to lenders: TransUnion, Equifax, and Experian. The first tip I recommend is freezing credit with all three companies, which will prevent someone from opening new credit in your name. The second tip is regarding credit history. Fifty percent of credit score is based on credit history. Before canceling a credit card, consider how it can shorten credit history, negatively affecting a credit score. Before dropping off an old credit card, it’s also important to ensure that annual fees aren’t being paid on that card. 

  Resources & People Mentioned

  • Moore's Law and Intel Innovation
  • Major Wars and Conflicts of the 20th Century
  • PolitiFact | Did we really reduce extreme poverty by half in 30 years?
  • How are FICO Scores Calculated? | myFICO
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>2317350c-1cda-48cd-97a2-bed376c5b7e6Fri, 01 Jul 2022 03:00:00 -070015:04falsefull1717The world has changed greatly over the years, yet time and time again, investments have proven themselves. This episode of the One for the Money podcast focuses on the optimism we can have in the market, even through disheartening times.The Cost of College and How to Pay for It - Part 2This episode of the One for the Money podcast is part two of this month’s series on the cost of college and how to pay for it. In the last episode, I talked about the rising cost of college and student loans. This time, I will share information about the 529 college savings account. Listen to learn some strategies to make the most of your money investing in your loved one’s college expenses.

  In this episode...

  • What is a 529 account? [03:13]
  • Creating a legacy of education [05:20]
  • Navigating college funding [10:00]
  • Determining what your family can afford [12:18]
  • Prioritizing retirement [16:21]
  
  

  More than meets the eye

  A 529 account is a phenomenal investment vehicle to help pay for college. These investments are made with after-tax money, so taxes don’t have to be paid again when the money is used for qualifying college expenses. These qualifying expenses include tuition, fees, books, computers, and even room and board. While the general strategy of a 529 seems straightforward, there’s much more than meets the eye regarding what you can do with them. 

  One of the most powerful wealth transfer vehicles available to the American public is the 529. Any relative, friend, stranger, or even yourself can be named on the account as a beneficiary. While most people invest in a 529 for children, you can also use these for yourself. If one of your goals in retirement is to go back to school, you can start saving now to have tax-free funds to help offset that cost.

  When to save for college 

  We all want our kids to graduate from college so that they have a better chance of higher-paying jobs and are less likely to be unemployed. So we must be careful how we go about paying for college. Please know that as a parent, you should only contribute to your kid’s college savings after you have an established emergency fund, no high-interest debt, and you are on track for retirement. Of course, your kids would love for you to pay for their college. Still, they’re less enthusiastic about parents moving in who weren’t retirement ready! Additionally, it seems kids study a bit harder when they know they’re paying for a portion of their education. 

  The college funding maze

  There are many factors to consider when it comes to navigating college funding. While a 529 is a tremendous help, it’s only part of the financial strategy. One of the first things to consider is which college is affordable. As I mentioned in the last episode, colleges will charge you based on what they believe you can afford. Colleges look at parents’ and students’ assets and income to determine what you will be able to pay for college. So it’s essential to understand what colleges think you can afford. 

  Similarly, families need to determine how much they can realistically afford. Far too many people don’t look at the calculations available to them. The college application process itself can take the majority of a family’s attention, and understandably so. Unfortunately, too many achieve their college dream by graduating from a particular university, only to end up having a student loan nightmare as a result. They’re saddled with student loan debt and can’t begin saving for retirement, so they miss out on years of compound growth. This conversation needs to happen long before your children receive an acceptance letter. It’s much more challenging to have this conversation after they’ve been accepted, particularly if the school is one they want to attend.

  Resources & People Mentioned

  • The Cost of College and How to Pay for It - Part 1, Ep #15
  • FAFSA® Application | Federal Student Aid
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>This episode of the One for the Money podcast is part two of this month’s series on the cost of college and how to pay for it. In the last episode, I talked about the rising cost of college and student loans. This time, I will share information about the 529 college savings account. Listen to learn some strategies to make the most of your money investing in your loved one’s college expenses.

  In this episode...

  • What is a 529 account? [03:13]
  • Creating a legacy of education [05:20]
  • Navigating college funding [10:00]
  • Determining what your family can afford [12:18]
  • Prioritizing retirement [16:21]
  
  

  More than meets the eye

  A 529 account is a phenomenal investment vehicle to help pay for college. These investments are made with after-tax money, so taxes don’t have to be paid again when the money is used for qualifying college expenses. These qualifying expenses include tuition, fees, books, computers, and even room and board. While the general strategy of a 529 seems straightforward, there’s much more than meets the eye regarding what you can do with them. 

  One of the most powerful wealth transfer vehicles available to the American public is the 529. Any relative, friend, stranger, or even yourself can be named on the account as a beneficiary. While most people invest in a 529 for children, you can also use these for yourself. If one of your goals in retirement is to go back to school, you can start saving now to have tax-free funds to help offset that cost.

  When to save for college 

  We all want our kids to graduate from college so that they have a better chance of higher-paying jobs and are less likely to be unemployed. So we must be careful how we go about paying for college. Please know that as a parent, you should only contribute to your kid’s college savings after you have an established emergency fund, no high-interest debt, and you are on track for retirement. Of course, your kids would love for you to pay for their college. Still, they’re less enthusiastic about parents moving in who weren’t retirement ready! Additionally, it seems kids study a bit harder when they know they’re paying for a portion of their education. 

  The college funding maze

  There are many factors to consider when it comes to navigating college funding. While a 529 is a tremendous help, it’s only part of the financial strategy. One of the first things to consider is which college is affordable. As I mentioned in the last episode, colleges will charge you based on what they believe you can afford. Colleges look at parents’ and students’ assets and income to determine what you will be able to pay for college. So it’s essential to understand what colleges think you can afford. 

  Similarly, families need to determine how much they can realistically afford. Far too many people don’t look at the calculations available to them. The college application process itself can take the majority of a family’s attention, and understandably so. Unfortunately, too many achieve their college dream by graduating from a particular university, only to end up having a student loan nightmare as a result. They’re saddled with student loan debt and can’t begin saving for retirement, so they miss out on years of compound growth. This conversation needs to happen long before your children receive an acceptance letter. It’s much more challenging to have this conversation after they’ve been accepted, particularly if the school is one they want to attend.

  Resources & People Mentioned

  • The Cost of College and How to Pay for It - Part 1, Ep #15
  • FAFSA® Application | Federal Student Aid
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>d0551fc5-9542-47ea-a8aa-5be4d43f34d9Wed, 15 Jun 2022 03:00:00 -070017:04falsefull1616This episode of the One for the Money podcast is part two of this month’s series on the cost of college and how to pay for it. Listen to learn some strategies to make the most of your money investing in your loved one’s college expenses.The Cost of College and How to Pay for It - Part 1June is the graduation season, so the episodes airing this month will focus on the cost of college and how best to pay for it. This episode of the One for the Money podcast focuses on your ability to pay for the college education of your loved ones effectively. Listen until the end when I share a great resource to help you further understand the expense of college and additional options on how to pay for it.

  In this episode...

  • The magnitude of student loans [02:14]
  • College costs more now than ever [05:22]
  • Be careful with your choice of college [08:25]
  • Understanding the cost of college [12:52]
  
  

  Preparing for college financially

  My wife and I can’t believe how quickly time has passed. Our oldest son is going into high school this fall, our middle son is going into middle school, and our youngest is starting the second grade. Sooner than we realize, my wife and I will begin working on their applications to college, which is a daunting project. If the college application process isn’t complicated enough, paying for college is an equally important and complex matter. 

  Our focus on the costs of college has increased for a good reason. The current level of student loan debt in the United States is $1.7 trillion. In fact, student loan debt is the second-highest consumer debt category behind only mortgage debt and is higher than both credit card debt and auto loans. These debts have a chance of leading to a future of financial crisis. The forgiveness of student loan debt may feature in the midterm elections. The government has already deferred interest, which has cost America over $100 billion.

  The increasing costs of college

  The cost of student loans has increased at twice the rate of inflation since 1983. The usual suspect is good government intentions to make schools more affordable. Despite the good intentions, these student loan programs caused a significant rise in tuition because the supply and demand mechanism became broken. Typically, prices are relatively held in check because consumers can’t afford steep increases. However, when people can borrow more and more money, tuition increases, and the federal government guarantees these loans.

  College Planning Essentials

  There’s a fabulous resource to help you further understand the cost of college and how to pay for it. College Planning Essentials is a resource provided by JP Morgan with a tremendous amount of relevant data. This tool provides the starting salaries achieved from certain degrees, with computer science having the highest starting salary, followed by engineers. It would seem that the STEM programs are great for future earning potential. This resource also provides intriguing facts about athletic scholarships and what they cover, which isn’t as much as you might think.

  College Planning Essentials also provides a breakdown of expected family contribution. That’s a formula that colleges use to determine how much they will charge you. Unfortunately, the sticker price at a college isn’t the same for all families and instead is based on expected contributions. The resource compares various college saving vehicles, the benefit of 529s, and a host of other information. Check it out to learn more about the expense of college and how you can make well-informed decisions about those costs.

  Prior to investing in a 529 Plan, investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

  Resources & People Mentioned

  • Student Loan Debt Statistics In 2020: A Record $1.6 Trillion
  • Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs
  • Bureaucrats And Buildings: The Case For Why College Is So Expensive
  • Student Loan Truth Telling - WSJ
  • Everyday Millionaires
  • College Planning Essentials | JP Morgan
  • Holding Colleges Accountable
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  
  

  ]]>June is the graduation season, so the episodes airing this month will focus on the cost of college and how best to pay for it. This episode of the One for the Money podcast focuses on your ability to pay for the college education of your loved ones effectively. Listen until the end when I share a great resource to help you further understand the expense of college and additional options on how to pay for it.

  In this episode...

  • The magnitude of student loans [02:14]
  • College costs more now than ever [05:22]
  • Be careful with your choice of college [08:25]
  • Understanding the cost of college [12:52]
  
  

  Preparing for college financially

  My wife and I can’t believe how quickly time has passed. Our oldest son is going into high school this fall, our middle son is going into middle school, and our youngest is starting the second grade. Sooner than we realize, my wife and I will begin working on their applications to college, which is a daunting project. If the college application process isn’t complicated enough, paying for college is an equally important and complex matter. 

  Our focus on the costs of college has increased for a good reason. The current level of student loan debt in the United States is $1.7 trillion. In fact, student loan debt is the second-highest consumer debt category behind only mortgage debt and is higher than both credit card debt and auto loans. These debts have a chance of leading to a future of financial crisis. The forgiveness of student loan debt may feature in the midterm elections. The government has already deferred interest, which has cost America over $100 billion.

  The increasing costs of college

  The cost of student loans has increased at twice the rate of inflation since 1983. The usual suspect is good government intentions to make schools more affordable. Despite the good intentions, these student loan programs caused a significant rise in tuition because the supply and demand mechanism became broken. Typically, prices are relatively held in check because consumers can’t afford steep increases. However, when people can borrow more and more money, tuition increases, and the federal government guarantees these loans.

  College Planning Essentials

  There’s a fabulous resource to help you further understand the cost of college and how to pay for it. College Planning Essentials is a resource provided by JP Morgan with a tremendous amount of relevant data. This tool provides the starting salaries achieved from certain degrees, with computer science having the highest starting salary, followed by engineers. It would seem that the STEM programs are great for future earning potential. This resource also provides intriguing facts about athletic scholarships and what they cover, which isn’t as much as you might think.

  College Planning Essentials also provides a breakdown of expected family contribution. That’s a formula that colleges use to determine how much they will charge you. Unfortunately, the sticker price at a college isn’t the same for all families and instead is based on expected contributions. The resource compares various college saving vehicles, the benefit of 529s, and a host of other information. Check it out to learn more about the expense of college and how you can make well-informed decisions about those costs.

  Prior to investing in a 529 Plan, investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

  Resources & People Mentioned

  • Student Loan Debt Statistics In 2020: A Record $1.6 Trillion
  • Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs
  • Bureaucrats And Buildings: The Case For Why College Is So Expensive
  • Student Loan Truth Telling - WSJ
  • Everyday Millionaires
  • College Planning Essentials | JP Morgan
  • Holding Colleges Accountable
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  
  

  ]]>f7fa14c5-38e7-4ff8-a851-313cbea55345Wed, 01 Jun 2022 03:00:00 -070016:24falsefull1515This episode of the One for the Money podcast focuses on your ability to pay for the college education of your loved ones effectively.Financial Planning is PersonalMany people struggle with finances, and it’s heartbreaking to see. In this episode of the One for the Money podcast, I share my personal experience with what happens when there is no financial plan. Financial literacy and education are critical life skills that can benefit us all. Listen in, and at the end, I’ll share a tip regarding calculating your net worth and why you’d want to do that.

  In this episode...

  • The power of financial planning [01:07]
  • Financial family dirt [02:44]
  • Good things through good planning [04:01]
  • The effect of not having a plan [07:15]
  • Better life through better planning [08:01]
  • Determining your net worth [09:45]
  
  

  More choices, less stress

  Financial planning is powerful. However, when it is absent, huge problems occur. I’ve experienced this reality in some unfortunate events in my own family. Many of my own family needlessly struggle because they failed to plan financially. My family and others didn’t plan financially because they didn’t know what to do or where to start. Because of that, I’m a huge advocate for financial literacy and education. I started a blog and podcast to provide this information from my perspective.

  How much wealth a person accumulates is not an index by which we measure success. However, planning done right can provide a life of less stress, more choices, and better experiences, regardless of income. Marriages are stronger, retirement is better, and you can visit more of this beautiful world. Life turns out way better when you have a plan.

  Spreading financial literacy

  My mission is for people to have a better life through better planning. Through my podcast and blog, you’ll learn how to plan better so you can live better. The financial world can be confusing, but I hope to make it much more understandable. That’s a significant reason many people don’t plan financially very well. Fortunately, there are many ways today to learn what one can do to prepare better. 

  Many financial planning professionals can provide excellent guidance. As I mentioned, I’m a huge advocate of financial literacy education. Each summer, I conduct a webinar on the financial fundamentals of building wealth, which I teach to high school graduates and college students. I also teach a financial literacy class in the community for those who need it most. Charles Schwab conducted a survey that proved that those who plan have better outcomes. The survey also showed that having a written financial plan leads to better money behaviors.

  Know where you are

  Part of putting together a financial plan is calculating net worth. My clients are often surprised regarding their net worth. That surprise is primarily positive because people had no idea they had that much net worth. This knowledge changes my conversation with clients because we can discuss things like early retirement or other goals they want to achieve. 

  It’s necessary to have a gauge and understand where you currently stand financially. With a net worth worksheet, you can figure this out. After calculating your total assets, you’ll assemble all of your debts. It’s important to look at the interest rates on debts to ensure that you’re trending more positively and that your net worth grows with time. Calculating your net worth helps you know what actions you need to take to reach your goals.

  Resources & People Mentioned

  • Investopedia
  • Financial Planning is Personal — BetterPlanning.BetterLife.
  • 5 Ways Financial Planning Can Help | Charles Schwab
  • Net Worth Worksheet - Morningstar
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Many people struggle with finances, and it’s heartbreaking to see. In this episode of the One for the Money podcast, I share my personal experience with what happens when there is no financial plan. Financial literacy and education are critical life skills that can benefit us all. Listen in, and at the end, I’ll share a tip regarding calculating your net worth and why you’d want to do that.

  In this episode...

  • The power of financial planning [01:07]
  • Financial family dirt [02:44]
  • Good things through good planning [04:01]
  • The effect of not having a plan [07:15]
  • Better life through better planning [08:01]
  • Determining your net worth [09:45]
  
  

  More choices, less stress

  Financial planning is powerful. However, when it is absent, huge problems occur. I’ve experienced this reality in some unfortunate events in my own family. Many of my own family needlessly struggle because they failed to plan financially. My family and others didn’t plan financially because they didn’t know what to do or where to start. Because of that, I’m a huge advocate for financial literacy and education. I started a blog and podcast to provide this information from my perspective.

  How much wealth a person accumulates is not an index by which we measure success. However, planning done right can provide a life of less stress, more choices, and better experiences, regardless of income. Marriages are stronger, retirement is better, and you can visit more of this beautiful world. Life turns out way better when you have a plan.

  Spreading financial literacy

  My mission is for people to have a better life through better planning. Through my podcast and blog, you’ll learn how to plan better so you can live better. The financial world can be confusing, but I hope to make it much more understandable. That’s a significant reason many people don’t plan financially very well. Fortunately, there are many ways today to learn what one can do to prepare better. 

  Many financial planning professionals can provide excellent guidance. As I mentioned, I’m a huge advocate of financial literacy education. Each summer, I conduct a webinar on the financial fundamentals of building wealth, which I teach to high school graduates and college students. I also teach a financial literacy class in the community for those who need it most. Charles Schwab conducted a survey that proved that those who plan have better outcomes. The survey also showed that having a written financial plan leads to better money behaviors.

  Know where you are

  Part of putting together a financial plan is calculating net worth. My clients are often surprised regarding their net worth. That surprise is primarily positive because people had no idea they had that much net worth. This knowledge changes my conversation with clients because we can discuss things like early retirement or other goals they want to achieve. 

  It’s necessary to have a gauge and understand where you currently stand financially. With a net worth worksheet, you can figure this out. After calculating your total assets, you’ll assemble all of your debts. It’s important to look at the interest rates on debts to ensure that you’re trending more positively and that your net worth grows with time. Calculating your net worth helps you know what actions you need to take to reach your goals.

  Resources & People Mentioned

  • Investopedia
  • Financial Planning is Personal — BetterPlanning.BetterLife.
  • 5 Ways Financial Planning Can Help | Charles Schwab
  • Net Worth Worksheet - Morningstar
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>381bb0b1-d5d6-40a6-9e0b-abb96743149dSun, 15 May 2022 03:00:00 -070013:34falsefull1414In this episode of the One for the Money podcast, I share my personal experience with what happens when there is no financial plan.The Psychology of MoneyIn today’s episode, I’ll be sharing thoughts from a personal finance book that I read last summer. Morgan Housel, a former columnist at The Motley Fool in the Wall Street Journal, wrote the book entitled The Psychology of Money. In it, he shares the idea that intelligence isn’t what makes someone good with money; behaviors are what play the most significant role. Listen to learn what these behaviors are and how you can benefit from them.

  In this episode...

  • Intelligence vs. behavior [01:13]
  • Investment bias [05:41]
  • What is happiness? [08:26]
  • Lessons from a gerontologist [09:39]
  • Lifestyle and budgeting [12:01]
  
  

  Behaviors make the difference

  In 2020 Morgan Housel wrote a book called The Psychology of Money. The book’s premise is that doing well with money has little to do with how smart you are and a lot to do with how you behave. If a genius loses control of his emotions, that can create a financial disaster. The opposite is also true. Ordinary people without financial education can become wealthy if they have a handful of behavioral skills. Someone who makes a lot of money can be poorer than the man sweeping floors. The difference comes down to lifestyles and how they utilize what they have.

  Emotional finances

  Health and money are two things that impact everyone. Despite this similarity, we’ve seen a divergence in the outcomes. While health has improved for centuries and made remarkable advancements in improving people’s lives, financial advances haven’t. The extensive research hasn’t made us better investors or savers because money is far too emotional. A consumer finance survey found out that people’s lifetime investment decisions are heavily anchored to their experiences in their generation, especially experiences in early adulthood. 

  If inflation was high, people invested less in bonds throughout their lifetime. If the stock market was strong, they invested more in stocks. That was true for me because I started investing in the late 90s at the start of the dot-com era. I still invest heavily in stocks, albeit differently than I did then. Before, I purchased single stocks hoping they’d outperform. Now I use evidence-based research and invest in broadly diversified portfolios. 

  Prioritizing expenses and reducing waste

  People strive to get a couple of percent higher returns. Meanwhile, what they could benefit from is reducing lifestyle bloat. The tip here is to review expenses regularly to see if they make sense. According to a recent study, adults in the US spend nearly $1,500 a month on non-essential items. That’s roughly $18,000 a year on things we probably don’t need. That’s a lot of money, considering how much Americans are letting their savings and other crucial goals fall by the wayside.

  The same study found that 58% of people believed that there were important things they were unable to afford, including retirement savings and life insurance. There’s nothing wrong with enjoying a few luxuries here and there to make life enjoyable. But unfortunately, Americans are spending a small fortune on things that take away their opportunity to save for the future or protect their families with life insurance. The good news is that examining our budgets and reducing waste will help us prioritize those important things for our families and us.

  Resources & People Mentioned

  • The Psychology of Money: Timeless lessons on wealth, greed, and happiness
  • When it Comes to Early Retirement - Start with Why, Ep #1
  • Meaning & Purpose in Retirement, Ep #6
  • The Average American Spends Almost $18,000 a Year on Nonessentials | The Motley Fool
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>In today’s episode, I’ll be sharing thoughts from a personal finance book that I read last summer. Morgan Housel, a former columnist at The Motley Fool in the Wall Street Journal, wrote the book entitled The Psychology of Money. In it, he shares the idea that intelligence isn’t what makes someone good with money; behaviors are what play the most significant role. Listen to learn what these behaviors are and how you can benefit from them.

  In this episode...

  • Intelligence vs. behavior [01:13]
  • Investment bias [05:41]
  • What is happiness? [08:26]
  • Lessons from a gerontologist [09:39]
  • Lifestyle and budgeting [12:01]
  
  

  Behaviors make the difference

  In 2020 Morgan Housel wrote a book called The Psychology of Money. The book’s premise is that doing well with money has little to do with how smart you are and a lot to do with how you behave. If a genius loses control of his emotions, that can create a financial disaster. The opposite is also true. Ordinary people without financial education can become wealthy if they have a handful of behavioral skills. Someone who makes a lot of money can be poorer than the man sweeping floors. The difference comes down to lifestyles and how they utilize what they have.

  Emotional finances

  Health and money are two things that impact everyone. Despite this similarity, we’ve seen a divergence in the outcomes. While health has improved for centuries and made remarkable advancements in improving people’s lives, financial advances haven’t. The extensive research hasn’t made us better investors or savers because money is far too emotional. A consumer finance survey found out that people’s lifetime investment decisions are heavily anchored to their experiences in their generation, especially experiences in early adulthood. 

  If inflation was high, people invested less in bonds throughout their lifetime. If the stock market was strong, they invested more in stocks. That was true for me because I started investing in the late 90s at the start of the dot-com era. I still invest heavily in stocks, albeit differently than I did then. Before, I purchased single stocks hoping they’d outperform. Now I use evidence-based research and invest in broadly diversified portfolios. 

  Prioritizing expenses and reducing waste

  People strive to get a couple of percent higher returns. Meanwhile, what they could benefit from is reducing lifestyle bloat. The tip here is to review expenses regularly to see if they make sense. According to a recent study, adults in the US spend nearly $1,500 a month on non-essential items. That’s roughly $18,000 a year on things we probably don’t need. That’s a lot of money, considering how much Americans are letting their savings and other crucial goals fall by the wayside.

  The same study found that 58% of people believed that there were important things they were unable to afford, including retirement savings and life insurance. There’s nothing wrong with enjoying a few luxuries here and there to make life enjoyable. But unfortunately, Americans are spending a small fortune on things that take away their opportunity to save for the future or protect their families with life insurance. The good news is that examining our budgets and reducing waste will help us prioritize those important things for our families and us.

  Resources & People Mentioned

  • The Psychology of Money: Timeless lessons on wealth, greed, and happiness
  • When it Comes to Early Retirement - Start with Why, Ep #1
  • Meaning & Purpose in Retirement, Ep #6
  • The Average American Spends Almost $18,000 a Year on Nonessentials | The Motley Fool
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>e41a9e32-bcc8-4528-8943-23382da886f6Sun, 01 May 2022 03:00:00 -070016:47falsefull1313Behavior, rather than intelligence, is what makes someone good with money.The Ticking Tax Time Bomb in Your Retirement Account, Ep #12How much of your retirement will be available to spend? Most Americans aren’t aware of the ticking tax time bomb in their retirement accounts. In this episode of the One for the Money podcast, I share ways you can get the most out of your retirement investments. Listen to learn strategies to overcome the uncertainty of future taxes.

  In this episode...

  • The ticking time bomb [01:04]
  • Roth conversions [05:48]
  • The benefits of being tax diversified [09:09]
  • Reasons not to consider Roth conversions [10:38]
  • The importance of rebalancing [11:54]
  
  

  Future taxes and retirement accounts

  The vast majority of retirement accounts held by Americans are in the form of traditional IRAs and 401. Contributions to these accounts are pre-tax, meaning that future politicians will determine the amount left to spend in retirement. So, in a sense, these retirement accounts are co-owned with Uncle Sam. 

  While we can’t predict what taxes will be, I can think of 30 trillion reasons why taxes could be raised. The U.S. Debt Clock online has interesting information highlighting U.S. debt ratios, the largest budget items, and other fascinating census type data. These references to the deficit and taxes aren’t an endorsement or criticism of any political party. The reality is that these factors affect everyone, and we need to prepare as best we can.

  Taxes can go in one of three directions: lower, higher, or stay the same. In 2022, taxes are at historic lows, so many don’t believe there’s a risk of lowering taxes. Meanwhile, deficit spending has never been higher. Therefore, you will want to be proactive in your approach to when you pay income taxes.

  Becoming tax diversified

  We can approach the unknown of future tax rates by becoming as tax diversified as possible. Otherwise, tax rates may determine your lifestyle in retirement because of the amount you’ll have remaining to spend. Americans have two options. They can either hope that taxes will be lower in the future, or they can implement strategies via a plan to become tax diversified. 

  Roth conversions can be the most powerful way to reduce future taxes when the conditions are right. They work just as they sound by converting portions of not yet taxed accounts to an already taxed account, also known as a Roth. There are no income limitations on these conversions. Remember that income taxes will be paid in the year of conversion, so Roth conversions make the most sense in years where your income is lower. Because of the many factors involved, I recommend you speak with a certified financial planner and a CPA about this before trying it out on your own.

  Rebalancing investments

  Rebalancing is when adjustments are made to investments to bring them back to specific ratios. This adjustment is made when part of your investments do better than others, causing the ratio of your portfolio to change. Rebalancing would sell a percentage of an investment and reinvest that to achieve the intended ratios. 

  Many of my clients rebalance investments quarterly. This strategy was beneficial during the so-called COVID correction. The stock market had hit a low in March, just before rebalancing. This dip meant we sold investments and reinvested them into the stock market at much lower prices. While we were fortunate in the timing, it doesn’t lessen the positive impact rebalancing had on the rest of the year.

  This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

  Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

  Resources & People Mentioned

  • US Debt Clock
  • Ed Slott, CPA - Professor of Practice - The American College of Financial Services | LinkedIn
  • Increase Individual Income Tax Rates | Congressional Budget Office
  • The Ticking Tax Time Bomb in Your Retirement Account — Better Planning. Better Life.
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  
  ]]>How much of your retirement will be available to spend? Most Americans aren’t aware of the ticking tax time bomb in their retirement accounts. In this episode of the One for the Money podcast, I share ways you can get the most out of your retirement investments. Listen to learn strategies to overcome the uncertainty of future taxes.

  In this episode...

  • The ticking time bomb [01:04]
  • Roth conversions [05:48]
  • The benefits of being tax diversified [09:09]
  • Reasons not to consider Roth conversions [10:38]
  • The importance of rebalancing [11:54]
  
  

  Future taxes and retirement accounts

  The vast majority of retirement accounts held by Americans are in the form of traditional IRAs and 401. Contributions to these accounts are pre-tax, meaning that future politicians will determine the amount left to spend in retirement. So, in a sense, these retirement accounts are co-owned with Uncle Sam. 

  While we can’t predict what taxes will be, I can think of 30 trillion reasons why taxes could be raised. The U.S. Debt Clock online has interesting information highlighting U.S. debt ratios, the largest budget items, and other fascinating census type data. These references to the deficit and taxes aren’t an endorsement or criticism of any political party. The reality is that these factors affect everyone, and we need to prepare as best we can.

  Taxes can go in one of three directions: lower, higher, or stay the same. In 2022, taxes are at historic lows, so many don’t believe there’s a risk of lowering taxes. Meanwhile, deficit spending has never been higher. Therefore, you will want to be proactive in your approach to when you pay income taxes.

  Becoming tax diversified

  We can approach the unknown of future tax rates by becoming as tax diversified as possible. Otherwise, tax rates may determine your lifestyle in retirement because of the amount you’ll have remaining to spend. Americans have two options. They can either hope that taxes will be lower in the future, or they can implement strategies via a plan to become tax diversified. 

  Roth conversions can be the most powerful way to reduce future taxes when the conditions are right. They work just as they sound by converting portions of not yet taxed accounts to an already taxed account, also known as a Roth. There are no income limitations on these conversions. Remember that income taxes will be paid in the year of conversion, so Roth conversions make the most sense in years where your income is lower. Because of the many factors involved, I recommend you speak with a certified financial planner and a CPA about this before trying it out on your own.

  Rebalancing investments

  Rebalancing is when adjustments are made to investments to bring them back to specific ratios. This adjustment is made when part of your investments do better than others, causing the ratio of your portfolio to change. Rebalancing would sell a percentage of an investment and reinvest that to achieve the intended ratios. 

  Many of my clients rebalance investments quarterly. This strategy was beneficial during the so-called COVID correction. The stock market had hit a low in March, just before rebalancing. This dip meant we sold investments and reinvested them into the stock market at much lower prices. While we were fortunate in the timing, it doesn’t lessen the positive impact rebalancing had on the rest of the year.

  This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

  Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

  Resources & People Mentioned

  • US Debt Clock
  • Ed Slott, CPA - Professor of Practice - The American College of Financial Services | LinkedIn
  • Increase Individual Income Tax Rates | Congressional Budget Office
  • The Ticking Tax Time Bomb in Your Retirement Account — Better Planning. Better Life.
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  
  ]]>cde83f24-0b9b-40dd-81e3-d3d396831fccFri, 15 Apr 2022 03:00:00 -070015:22falsefull1212How much of your retirement will be available to spend? Listen to learn strategies to overcome the uncertainty of future taxes.The Case of the 7 Million Missing American Children - How to tax plan and how not toThe case of the seven million missing American children is a story of how tax planning shouldn’t be done. In this episode, I cover that story and share ways we should be tax planning. You may be surprised at the order in which this planning should be done. Listen to learn more about that, and at the end of the episode, I’ll share a general tip about tax planning.

  In this episode...

  • A sad story of “missing” children [01:10]
  • Legal strategies to reduce tax liability [03:03]
  • Why HSAs are important in retirement [05:51]
  • IRA contributions [07:43]
  • A proactive tax approach [09:45]
  
  

  Imaginary children

  One spring day in the late 1980s, over seven million American children went “missing.” The day was April 15th, the deadline for Americans to file taxes. The year was 1987, and it was the first year the IRS required tax filers to include the Social Security number (SSN) for any claimed dependents. In 1986, when taxpayers only had to provide the children’s names, 77 million dependents were listed on tax returns. But, in 1987, when SSNs were required, only 70 million dependents were listed.

  Taxpayers in 1986 received an exemption of $1,900 per claimed dependent. That’s $1,900 for each child that would be subtracted from any taxes owed. However, when the new requirements were implemented, 7 million children “disappeared,” resulting in an extra $2.8 billion in additional taxes paid to the treasury.

  Looking at the past, present, and future

  Claiming imaginary children isn’t the best idea for saving on taxes and is unwise. However, there are legal strategies to reduce lifetime tax liability in 2022 and beyond. One of the aspects I focus on with clients is tax mitigation. Paying less in taxes requires a proactive approach. All tax mitigation strategies should be verified with a tax professional and a certified financial planner. Why both? Because tax professionals often only look at the past, financial planners will also look at the present and future. 

  These strategies assume that there isn’t high-interest consumer debt, like credit cards, that needs to be paid off first, and an emergency fund has been established. The first priority to mitigate taxes is participating in a company 401k type retirement account. Company matches are always pre-tax, but they are low risk, and double your money to a certain percentage (subject to individual plan vesting and matching percentage guidelines). Another step to consider is contributing to a health-saving account. These accounts are the only ones that are triple tax-free.

  Taxes in traditional retirement accounts

  We have to have a plan when it comes to taxes. Most Americans save for retirement in what are called traditional retirement accounts. We choose to be taxed during retirement when the funds are withdrawn from these accounts. Many people look at their 401k or IRA balances and believe that money is all theirs to spend. However, that money is partly the government’s. Since taxes are owed on these funds, how much is taken by the government will ultimately depend on planning. In the next episode, I’ll be going over what is often called the ticking tax time bomb and a strategy, called a Roth conversion, that could reduce your taxes.

  This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

  Resources & People Mentioned

  • 7 Million Missing Children
  • The IRS' Case of Missing Children - Los Angeles Times
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>The case of the seven million missing American children is a story of how tax planning shouldn’t be done. In this episode, I cover that story and share ways we should be tax planning. You may be surprised at the order in which this planning should be done. Listen to learn more about that, and at the end of the episode, I’ll share a general tip about tax planning.

  In this episode...

  • A sad story of “missing” children [01:10]
  • Legal strategies to reduce tax liability [03:03]
  • Why HSAs are important in retirement [05:51]
  • IRA contributions [07:43]
  • A proactive tax approach [09:45]
  
  

  Imaginary children

  One spring day in the late 1980s, over seven million American children went “missing.” The day was April 15th, the deadline for Americans to file taxes. The year was 1987, and it was the first year the IRS required tax filers to include the Social Security number (SSN) for any claimed dependents. In 1986, when taxpayers only had to provide the children’s names, 77 million dependents were listed on tax returns. But, in 1987, when SSNs were required, only 70 million dependents were listed.

  Taxpayers in 1986 received an exemption of $1,900 per claimed dependent. That’s $1,900 for each child that would be subtracted from any taxes owed. However, when the new requirements were implemented, 7 million children “disappeared,” resulting in an extra $2.8 billion in additional taxes paid to the treasury.

  Looking at the past, present, and future

  Claiming imaginary children isn’t the best idea for saving on taxes and is unwise. However, there are legal strategies to reduce lifetime tax liability in 2022 and beyond. One of the aspects I focus on with clients is tax mitigation. Paying less in taxes requires a proactive approach. All tax mitigation strategies should be verified with a tax professional and a certified financial planner. Why both? Because tax professionals often only look at the past, financial planners will also look at the present and future. 

  These strategies assume that there isn’t high-interest consumer debt, like credit cards, that needs to be paid off first, and an emergency fund has been established. The first priority to mitigate taxes is participating in a company 401k type retirement account. Company matches are always pre-tax, but they are low risk, and double your money to a certain percentage (subject to individual plan vesting and matching percentage guidelines). Another step to consider is contributing to a health-saving account. These accounts are the only ones that are triple tax-free.

  Taxes in traditional retirement accounts

  We have to have a plan when it comes to taxes. Most Americans save for retirement in what are called traditional retirement accounts. We choose to be taxed during retirement when the funds are withdrawn from these accounts. Many people look at their 401k or IRA balances and believe that money is all theirs to spend. However, that money is partly the government’s. Since taxes are owed on these funds, how much is taken by the government will ultimately depend on planning. In the next episode, I’ll be going over what is often called the ticking tax time bomb and a strategy, called a Roth conversion, that could reduce your taxes.

  This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

  Resources & People Mentioned

  • 7 Million Missing Children
  • The IRS' Case of Missing Children - Los Angeles Times
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>df0dd73b-ce0f-451d-8a76-291311d67897Fri, 01 Apr 2022 03:00:00 -070012:17falsefull1111The case of the seven million missing American children is a story of how tax planning shouldn’t be done. In this episode, I cover that story and share ways we should be tax planning.The Best Time to InvestOne of the most frequent questions I receive is asking when the best time to invest is. In this episode, I answer that question by reviewing a strategy that may help ease your entry into the market. In the Tips, Tricks, and Strategies section, I go over mutual fund expense ratios and explain why you might be paying a lot more than you realize. Listen to learn how to reduce those expenses.

  In this episode...

  • When to invest [01:17]
  • S&P 500 [02:28]
  • Dollar-cost averaging [04:03]
  • Investing a larger sum [07:04]
  • Mutual fund expense ratios [12:16]
  • Active vs. passive management [15:19]
  
  

  Is now a good time to invest?

  The stock market can seem like a roller coaster. People often ask me, “Is now a good time to invest?” The simple answer is that it’s always a good time to invest long-term. With stock market history as a guide, more than likely, you’ll be glad to have invested today. You may even wish you’d invested more. Despite this, many are still hesitant to invest because they fear the market will drop as soon as they invest. No one wants to buy high, only to see investments go down. 

  The trouble is that it’s impossible to predict what the market will do. While a look at stock market history can serve as a potential guide, a qualifier should always be added that past performance is no guarantee of future returns.

  Long-term investments

  The S&P 500 is the average return of 500 of the largest publicly-traded companies in the United States. It’s not an exact investment proxy since good investment practice has one invested portion internationally. However, the U.S. economy is the largest in the world, so it should be a decent proxy. Looking at the data since 1937 can show the probability of positive returns after specific periods of time. That data shows that an investment has a 63% probability of being higher than it began after one month. After one year, the probability of investments being higher is 77%. After ten years, that probability increases to 97.3%.

  It’s no surprise that longer-term investments have a greater probability of being more. Despite this historical data, some are still nervous about investing. But, there is a strategy that can help those who might still be hesitant. Dollar-cost averaging is a strategy in which investments are made in the stock market at regular intervals. With dollar-cost averaging, investments are made regardless of whether the stock market is high or low. The benefit of this strategy is that it helps remove the emotion from investing. 

  Investing large sums

  According to research, around 66% of the time, investments will earn a higher return by investing a large amount of money in a lump sum than if the dollar-cost averaging approach was used. The reason for that is relatively simple. The market generally moves higher, and by investing a lump sum, more of your money would increase when the market moves higher.

  When should dollar-cost averaging be utilized for large sums? Some worry about the 34% of the time when they would have less, which makes sense considering the principle of loss aversion. People prefer avoiding losses to acquiring equivalent gains. So what’s a person to do? Since the most crucial aspect of building wealth is investments, dollar-cost averaging can provide many the confidence to invest. For many clients with this strategy, I recommend investing half as a lump sum and dollar-cost averaging the remainder over the subsequent six to twelve months.

  Resources & People Mentioned

  • S&P 500 Historical Data - See page 6 for 1937 data
  • Black Monday
  • Lump sum pays more than gradual investment - Deseret News
  • How to invest a lump sum of money | Vanguard
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>One of the most frequent questions I receive is asking when the best time to invest is. In this episode, I answer that question by reviewing a strategy that may help ease your entry into the market. In the Tips, Tricks, and Strategies section, I go over mutual fund expense ratios and explain why you might be paying a lot more than you realize. Listen to learn how to reduce those expenses.

  In this episode...

  • When to invest [01:17]
  • S&P 500 [02:28]
  • Dollar-cost averaging [04:03]
  • Investing a larger sum [07:04]
  • Mutual fund expense ratios [12:16]
  • Active vs. passive management [15:19]
  
  

  Is now a good time to invest?

  The stock market can seem like a roller coaster. People often ask me, “Is now a good time to invest?” The simple answer is that it’s always a good time to invest long-term. With stock market history as a guide, more than likely, you’ll be glad to have invested today. You may even wish you’d invested more. Despite this, many are still hesitant to invest because they fear the market will drop as soon as they invest. No one wants to buy high, only to see investments go down. 

  The trouble is that it’s impossible to predict what the market will do. While a look at stock market history can serve as a potential guide, a qualifier should always be added that past performance is no guarantee of future returns.

  Long-term investments

  The S&P 500 is the average return of 500 of the largest publicly-traded companies in the United States. It’s not an exact investment proxy since good investment practice has one invested portion internationally. However, the U.S. economy is the largest in the world, so it should be a decent proxy. Looking at the data since 1937 can show the probability of positive returns after specific periods of time. That data shows that an investment has a 63% probability of being higher than it began after one month. After one year, the probability of investments being higher is 77%. After ten years, that probability increases to 97.3%.

  It’s no surprise that longer-term investments have a greater probability of being more. Despite this historical data, some are still nervous about investing. But, there is a strategy that can help those who might still be hesitant. Dollar-cost averaging is a strategy in which investments are made in the stock market at regular intervals. With dollar-cost averaging, investments are made regardless of whether the stock market is high or low. The benefit of this strategy is that it helps remove the emotion from investing. 

  Investing large sums

  According to research, around 66% of the time, investments will earn a higher return by investing a large amount of money in a lump sum than if the dollar-cost averaging approach was used. The reason for that is relatively simple. The market generally moves higher, and by investing a lump sum, more of your money would increase when the market moves higher.

  When should dollar-cost averaging be utilized for large sums? Some worry about the 34% of the time when they would have less, which makes sense considering the principle of loss aversion. People prefer avoiding losses to acquiring equivalent gains. So what’s a person to do? Since the most crucial aspect of building wealth is investments, dollar-cost averaging can provide many the confidence to invest. For many clients with this strategy, I recommend investing half as a lump sum and dollar-cost averaging the remainder over the subsequent six to twelve months.

  Resources & People Mentioned

  • S&P 500 Historical Data - See page 6 for 1937 data
  • Black Monday
  • Lump sum pays more than gradual investment - Deseret News
  • How to invest a lump sum of money | Vanguard
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>5e79c297-f8d1-488f-b010-f913c8ec6c13Tue, 15 Mar 2022 03:00:00 -070020:09falsefull1010Is now a good time to invest? In this episode, I answer that question by reviewing a strategy that may help ease your entry into the market.It's All Very Taxing - Part 2This episode is part two of my series summarizing how income taxes work. I know taxes may not be the most exciting topic, but I share this with you because you don’t pay less accidentally. Instead, paying less in taxes results from being proactive in your approach and executing strategies over many years. You’ll want to listen so you can take advantage of these tax-saving strategies.

  In this episode...

  • A review of incomes [01:38]
  • A progressive tax code [02:58]
  • Paying taxes to your advantage [05:16]
  • Roth Conversions for early retirement [06:50]
  • The Augusta Rule for business owners [09:53]
  
  

  An intro to tax brackets

  In episode eight, I went over the stages income goes through before taxes are applied. All income received in total is called gross income, and, provided certain adjustments are made, taxes aren’t owed on that entire amount. These adjustments would include IRA, retirement plan, and HSA contributions. After these adjustments are made, the income is called adjusted gross income, and taxes aren’t applied to that amount either. There’s one more phase called the deduction stage, for which there is either the standard deduction or itemized deduction. 

  Once income has gone through these adjustments and deductions, the remaining income will be taxed. Here in America, those who earn more income pay a higher tax percentage. This system is what’s called a progressive tax code. Under current tax law, portions of a person’s income are taxed at different rates. Each level is called a tax bracket or marginal tax rate, which aren’t necessarily the most self-explanatory terms. Averaging an individual’s tax rates will result in what’s known as the effective tax rate.

  Timing retirement taxes

  Choosing the best time to pay taxes is especially important with retirement accounts because those amounts are only taxed once. People in a lower income tax bracket will want to pay taxes now if they expect to be in a higher tax bracket in retirement. This situation could occur for people who are early in their careers or semi-retired with a reduced income. For those in a higher income bracket now than retirement, it would be more advantageous to make contributions that will be taxed later.

  A great example of this is setting up accounts for clients’ children. I have helped them start Roth IRAs because the children are very early in their careers and would pay less in taxes now. Clients who are retiring in their mid-fifties who have a pension plan that starts at age 65 will have a higher income in retirement. Over the years before their pension began, we do Roth conversions where we convert a portion of their traditional IRA from a pre-tax basis to a Roth. I’ll explain more on Roth conversions in a future episode.

  Business-owners and the Augusta Rule

  This strategy is commonly referred to as the Augusta Rule, as it was created to protect the residents of Augusta, Georgia. The good news is that all of us can benefit from this provision of the tax code. Section 280a of the IRS tax code allows all homeowners to rent out their primary residence for up to 14 days per year without reporting the rental income on tax returns. The residence could be rented to individuals looking to stay on vacation, or you could rent to a business owner who intends to use it for business purposes such as a retreat or meeting. 

  Even business owners can rent their homes to their businesses. Employing the Augusta Rule can be an effective strategy for moving income away from your business and shifting it to personal income where there would be no tax consequences. The corporation can deduct the rent on the business tax return if the total rental does not exceed 14 days and the rent is reasonable. The business owner wouldn’t have to report this income on personal taxes. 

  Resources & People Mentioned

  • 2021 and 2022 Tax Brackets and Other Tax Changes
  • Masters Tournament
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>This episode is part two of my series summarizing how income taxes work. I know taxes may not be the most exciting topic, but I share this with you because you don’t pay less accidentally. Instead, paying less in taxes results from being proactive in your approach and executing strategies over many years. You’ll want to listen so you can take advantage of these tax-saving strategies.

  In this episode...

  • A review of incomes [01:38]
  • A progressive tax code [02:58]
  • Paying taxes to your advantage [05:16]
  • Roth Conversions for early retirement [06:50]
  • The Augusta Rule for business owners [09:53]
  
  

  An intro to tax brackets

  In episode eight, I went over the stages income goes through before taxes are applied. All income received in total is called gross income, and, provided certain adjustments are made, taxes aren’t owed on that entire amount. These adjustments would include IRA, retirement plan, and HSA contributions. After these adjustments are made, the income is called adjusted gross income, and taxes aren’t applied to that amount either. There’s one more phase called the deduction stage, for which there is either the standard deduction or itemized deduction. 

  Once income has gone through these adjustments and deductions, the remaining income will be taxed. Here in America, those who earn more income pay a higher tax percentage. This system is what’s called a progressive tax code. Under current tax law, portions of a person’s income are taxed at different rates. Each level is called a tax bracket or marginal tax rate, which aren’t necessarily the most self-explanatory terms. Averaging an individual’s tax rates will result in what’s known as the effective tax rate.

  Timing retirement taxes

  Choosing the best time to pay taxes is especially important with retirement accounts because those amounts are only taxed once. People in a lower income tax bracket will want to pay taxes now if they expect to be in a higher tax bracket in retirement. This situation could occur for people who are early in their careers or semi-retired with a reduced income. For those in a higher income bracket now than retirement, it would be more advantageous to make contributions that will be taxed later.

  A great example of this is setting up accounts for clients’ children. I have helped them start Roth IRAs because the children are very early in their careers and would pay less in taxes now. Clients who are retiring in their mid-fifties who have a pension plan that starts at age 65 will have a higher income in retirement. Over the years before their pension began, we do Roth conversions where we convert a portion of their traditional IRA from a pre-tax basis to a Roth. I’ll explain more on Roth conversions in a future episode.

  Business-owners and the Augusta Rule

  This strategy is commonly referred to as the Augusta Rule, as it was created to protect the residents of Augusta, Georgia. The good news is that all of us can benefit from this provision of the tax code. Section 280a of the IRS tax code allows all homeowners to rent out their primary residence for up to 14 days per year without reporting the rental income on tax returns. The residence could be rented to individuals looking to stay on vacation, or you could rent to a business owner who intends to use it for business purposes such as a retreat or meeting. 

  Even business owners can rent their homes to their businesses. Employing the Augusta Rule can be an effective strategy for moving income away from your business and shifting it to personal income where there would be no tax consequences. The corporation can deduct the rent on the business tax return if the total rental does not exceed 14 days and the rent is reasonable. The business owner wouldn’t have to report this income on personal taxes. 

  Resources & People Mentioned

  • 2021 and 2022 Tax Brackets and Other Tax Changes
  • Masters Tournament
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>c764941c-4bae-46c2-a0ac-1393a10f4c6eTue, 01 Mar 2022 03:00:00 -070014:12falsefull99Paying less in taxes is a result of being proactive in your approach to and executing strategies over the course of many years. Listen to take advantage of these money saving strategies.It's All Very Taxing - Part 1In this eighth episode of the One for the Money podcast, we cover a critical component of building wealth and early retirement: not paying more for taxes than necessary. While everyone has to pay taxes, no one says you have to leave a tip. Listen to learn more about reducing what you pay in taxes to have more of your money to spend in early retirement.

  In this episode...

  • Gaining a general knowledge of taxes [00:39]
  • Income taxes and how they’re calculated [02:56]
  • Adjusted gross income [04:50]
  • Modified adjusted gross income [06:19]
  • Types of deductions [07:49]
  • Major expenses in itemized deductions [09:44]
  • The Augusta Rule [15:31]
  
  

  Understanding taxes

  Pursuing strategies to reduce what you pay in taxes will help ensure you have more of your money to spend in early retirement. Implementing these tax mitigation strategies requires a general understanding of taxes. While taxes may not be the most exciting topic, it’s essential, and I’ll try to make it as interesting as possible. 

  Taxes can be incredibly confusing, and the terminology certainly doesn’t help. Terms like gross income and adjusted gross income are confusing enough, and now they’ve added modified adjusted gross income. There are also above-the-line deductions versus below-the-line deductions. The list goes on and on. This confusing terminology makes many people want to ignore taxes altogether. However, if taxes are ignored, more will likely be paid in taxes than necessary. Reducing taxes is about implementing specific strategies based on general knowledge and understanding of taxes over many years. 

  Standard vs. itemized deductions

  There are two ways to determine deductions. One is called the standard deduction, which everyone can take. The other is the itemized deduction which includes additional adjustments for qualifying expenses. If these deductions total higher than the standard, the itemized deduction would be used.

  The standard deduction for 2021 is different for single, married, and head of household. The deduction for single is $12,550, married filing jointly is $25,100, and head of household or people caring for a qualifying dependent is $18,800. This option, of course, is if you choose not to itemize your deductions. However, if you’ve had certain expenses in total that were higher than the standard deduction, then you would want to itemize. Four major expenses included in the itemized deduction are medical expenses, state and local taxes paid, interest paid on a mortgage, and charitable contributions. These are considered below-the-line deductions because they may not lower your taxable income if the standard deduction is higher.

  The Augusta Rule

  This episode’s tips, tricks, and strategies portion is a tip that may sound too good to be true, but true it is. This tax mitigation strategy is commonly referred to as the Augusta rule, named after the famous golf course on which the Masters Tournament is played every year. Section 288 of the IRS tax code allows homeowners to rent out their primary residence for up to 14 days per year without needing to report the rental income on their individual tax return. That’s a lot of tax-free income potential that can be earned every year. This rule was created to protect the residents of Augusta, Georgia who had rented out their homes to attendees of the golf championship.

  The rent charged must be reasonable and in line with what the rental market supports. Charging $1000 per night when comparable houses rent for $200 per night is not considered reasonable. Homeowners can rent their homes to individuals looking for vacation opportunities or rent to business owners who intend to use the property for business purposes. Whatever you choose, this could be a great way to generate income tax-free.

  Resources & People Mentioned

  • Credits & Deductions for Individuals | Internal Revenue Service
  • Masters Tournament
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>In this eighth episode of the One for the Money podcast, we cover a critical component of building wealth and early retirement: not paying more for taxes than necessary. While everyone has to pay taxes, no one says you have to leave a tip. Listen to learn more about reducing what you pay in taxes to have more of your money to spend in early retirement.

  In this episode...

  • Gaining a general knowledge of taxes [00:39]
  • Income taxes and how they’re calculated [02:56]
  • Adjusted gross income [04:50]
  • Modified adjusted gross income [06:19]
  • Types of deductions [07:49]
  • Major expenses in itemized deductions [09:44]
  • The Augusta Rule [15:31]
  
  

  Understanding taxes

  Pursuing strategies to reduce what you pay in taxes will help ensure you have more of your money to spend in early retirement. Implementing these tax mitigation strategies requires a general understanding of taxes. While taxes may not be the most exciting topic, it’s essential, and I’ll try to make it as interesting as possible. 

  Taxes can be incredibly confusing, and the terminology certainly doesn’t help. Terms like gross income and adjusted gross income are confusing enough, and now they’ve added modified adjusted gross income. There are also above-the-line deductions versus below-the-line deductions. The list goes on and on. This confusing terminology makes many people want to ignore taxes altogether. However, if taxes are ignored, more will likely be paid in taxes than necessary. Reducing taxes is about implementing specific strategies based on general knowledge and understanding of taxes over many years. 

  Standard vs. itemized deductions

  There are two ways to determine deductions. One is called the standard deduction, which everyone can take. The other is the itemized deduction which includes additional adjustments for qualifying expenses. If these deductions total higher than the standard, the itemized deduction would be used.

  The standard deduction for 2021 is different for single, married, and head of household. The deduction for single is $12,550, married filing jointly is $25,100, and head of household or people caring for a qualifying dependent is $18,800. This option, of course, is if you choose not to itemize your deductions. However, if you’ve had certain expenses in total that were higher than the standard deduction, then you would want to itemize. Four major expenses included in the itemized deduction are medical expenses, state and local taxes paid, interest paid on a mortgage, and charitable contributions. These are considered below-the-line deductions because they may not lower your taxable income if the standard deduction is higher.

  The Augusta Rule

  This episode’s tips, tricks, and strategies portion is a tip that may sound too good to be true, but true it is. This tax mitigation strategy is commonly referred to as the Augusta rule, named after the famous golf course on which the Masters Tournament is played every year. Section 288 of the IRS tax code allows homeowners to rent out their primary residence for up to 14 days per year without needing to report the rental income on their individual tax return. That’s a lot of tax-free income potential that can be earned every year. This rule was created to protect the residents of Augusta, Georgia who had rented out their homes to attendees of the golf championship.

  The rent charged must be reasonable and in line with what the rental market supports. Charging $1000 per night when comparable houses rent for $200 per night is not considered reasonable. Homeowners can rent their homes to individuals looking for vacation opportunities or rent to business owners who intend to use the property for business purposes. Whatever you choose, this could be a great way to generate income tax-free.

  Resources & People Mentioned

  • Credits & Deductions for Individuals | Internal Revenue Service
  • Masters Tournament
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>6848d06e-f635-4511-a513-3e5dd84a7d4dTue, 15 Feb 2022 03:00:00 -070019:04falsefull88A critical component of building wealth and early retirement is not paying more for taxes than necessary. Listen in to learn more about how to reduce what you pay in taxes so you have more of your money to spend in early retirement.Savings Strategies for the Self-EmployedWhat are the best retirement saving strategies for the self-employed? We’ll be talking about that answer in this episode of the One for the Money podcast. I go over the relatively unknown Personal Pension Plan strategy that has allowed some of my clients to put away over $300,000 in a single tax year. In the end, I’ll talk about some strategies for employees who don’t have access to a 401k type plan. Listen to learn more about the options available to you.

  In this episode...

  • Retirement considerations in self-employment [01:19]
  • Deciding when to be taxed on retirement savings [02:45]
  • Advantages of Roth vs. traditional IRAs [04:51]
  • SEP IRA and solo 401k [05:35]
  • The Personal Pension Plan [10:35]
  • W2 employees without access to 401k [14:50]
  
  

  Timing retirement taxes

  Many Americans dream of being their own boss. Self-employed professionals such as sole proprietors and independent contractors are living out that dream. While they have the opportunity to reap the rewards of being their own boss, they also assume all of the risks. One of those risks is saving for retirement, which is entirely up to the individual since there isn’t a company to provide a matching contribution.

  A self-employed individual has several options available, and choosing the right one will depend on income. The simplest option is to have an individual retirement account. These come in two varieties, Traditional and Roth. These types of accounts are only taxed once with ordinary income taxes. With a traditional IRA, taxes are applied in retirement, and with a Roth, taxes are applied now. 

  Deciding when to be taxed is based on income level. If your income is on the lower side, I typically recommend you pay the income tax now and contribute to a Roth. If you’re in a higher income bracket and expect to have a lower income in retirement, you’ll want to wait to pay your income taxes then. There are a lot of factors to consider, so it’s recommended that you check with a certified financial planner.

  Solo 401k advantages and disadvantages

  A solo 401k has the advantage of allowing higher contributions with smaller incomes. Also, more can be contributed to a solo 401k via profit-sharing contributions from your business. Another advantage is having the option of traditional or Roth. Something to keep in mind is that while a solo 401k can have a loan taken out on it, I’d only recommend borrowing from it to avoid bankruptcy. 

  All these features come with an additional administration cost. A solo 401k is subject to IRS ERISA rules, so a third-party administrator is required to help manage the plan paperwork and annual filing requirements. The contributions for a solo 401k have to be established within the same tax year they’re made. The employee contributions need to be made within the year or the first few weeks of the following year.

  Options for W2 employees

  Those who are W2 employees without access to 401k plans may be wondering what their options are. Unfortunately, retirement plans are similar to healthcare; employers usually provide the best options. Your next best options are either a traditional IRA or a Roth IRA. After maxing out contributions for the year, a further option would be to save in a non-retirement account. However, with a non-retirement account, you’re taxed multiple times. Taxes are paid on the money invested, which was already subject to income tax. Then, if you’re receiving dividends and interest, taxes will be paid on them as well. Finally, when an investment is sold for a gain, taxes will be paid then as well. 

  Non-retirement accounts have the advantage of paying long-term capital gains if the investment is held for more than a year. Another advantage is that the funds are accessible any time instead of waiting until age 59 and a half. Also, if there are losses in a non-retirement account, they can be offset against gains to mitigate taxes that would have to be paid. Overall, there are a lot of factors to consider, which is why I recommend speaking with a certified financial planner who will evaluate your entire financial picture when making a recommendation.

  Resources & People Mentioned

  • Employee Retirement Income Security Act (ERISA) | US Department of Labor
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>What are the best retirement saving strategies for the self-employed? We’ll be talking about that answer in this episode of the One for the Money podcast. I go over the relatively unknown Personal Pension Plan strategy that has allowed some of my clients to put away over $300,000 in a single tax year. In the end, I’ll talk about some strategies for employees who don’t have access to a 401k type plan. Listen to learn more about the options available to you.

  In this episode...

  • Retirement considerations in self-employment [01:19]
  • Deciding when to be taxed on retirement savings [02:45]
  • Advantages of Roth vs. traditional IRAs [04:51]
  • SEP IRA and solo 401k [05:35]
  • The Personal Pension Plan [10:35]
  • W2 employees without access to 401k [14:50]
  
  

  Timing retirement taxes

  Many Americans dream of being their own boss. Self-employed professionals such as sole proprietors and independent contractors are living out that dream. While they have the opportunity to reap the rewards of being their own boss, they also assume all of the risks. One of those risks is saving for retirement, which is entirely up to the individual since there isn’t a company to provide a matching contribution.

  A self-employed individual has several options available, and choosing the right one will depend on income. The simplest option is to have an individual retirement account. These come in two varieties, Traditional and Roth. These types of accounts are only taxed once with ordinary income taxes. With a traditional IRA, taxes are applied in retirement, and with a Roth, taxes are applied now. 

  Deciding when to be taxed is based on income level. If your income is on the lower side, I typically recommend you pay the income tax now and contribute to a Roth. If you’re in a higher income bracket and expect to have a lower income in retirement, you’ll want to wait to pay your income taxes then. There are a lot of factors to consider, so it’s recommended that you check with a certified financial planner.

  Solo 401k advantages and disadvantages

  A solo 401k has the advantage of allowing higher contributions with smaller incomes. Also, more can be contributed to a solo 401k via profit-sharing contributions from your business. Another advantage is having the option of traditional or Roth. Something to keep in mind is that while a solo 401k can have a loan taken out on it, I’d only recommend borrowing from it to avoid bankruptcy. 

  All these features come with an additional administration cost. A solo 401k is subject to IRS ERISA rules, so a third-party administrator is required to help manage the plan paperwork and annual filing requirements. The contributions for a solo 401k have to be established within the same tax year they’re made. The employee contributions need to be made within the year or the first few weeks of the following year.

  Options for W2 employees

  Those who are W2 employees without access to 401k plans may be wondering what their options are. Unfortunately, retirement plans are similar to healthcare; employers usually provide the best options. Your next best options are either a traditional IRA or a Roth IRA. After maxing out contributions for the year, a further option would be to save in a non-retirement account. However, with a non-retirement account, you’re taxed multiple times. Taxes are paid on the money invested, which was already subject to income tax. Then, if you’re receiving dividends and interest, taxes will be paid on them as well. Finally, when an investment is sold for a gain, taxes will be paid then as well. 

  Non-retirement accounts have the advantage of paying long-term capital gains if the investment is held for more than a year. Another advantage is that the funds are accessible any time instead of waiting until age 59 and a half. Also, if there are losses in a non-retirement account, they can be offset against gains to mitigate taxes that would have to be paid. Overall, there are a lot of factors to consider, which is why I recommend speaking with a certified financial planner who will evaluate your entire financial picture when making a recommendation.

  Resources & People Mentioned

  • Employee Retirement Income Security Act (ERISA) | US Department of Labor
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>6dfecacb-a0c3-4a7d-85c3-8bc009d45001Tue, 01 Feb 2022 03:00:00 -070020:17falsefull77Learn about the best retirement savings options for the self-employed and for employees who don't have access to a 401k type plan.Meaning & Purpose in RetirementMeaning & Purpose in Retirement, Ep #6

  In this episode of the One for the Money podcast, I share what you can do to ensure you have a fulfilling retirement. The process has less to do with money than you might think. In the tips, tricks, and strategies portion, I’ll share the first of many tax strategies as we approach the individual tax filing deadline of Monday, April 18th, 2022. You’ll learn the multitude of reasons you should seriously consider Roth IRAs for your children. Listen in to learn this and more!

  In this episode...

  • Looking back to look forward [01:15]
  • Replacing your work identity [04:48]
  • Preventing loneliness [07:55]
  • Preparing your kids for retirement [11:38]
  
  

  Meaning and purpose

  A successful early retirement is way more than pursuing the correct financial strategies. It’s having a plan that enables you to do the things that matter most. In the inaugural episode of this podcast, I went over where happiness is ultimately derived. In this episode, I dive deeper into two of those areas: meaning and purpose. 

  You may be baffled by the idea that retirement can feel a bit depressing for some people. For early retirees, it can feel more so. We forget that we get a lot of meaning and purpose from our careers. Finding that same level of meaning and purpose in retirement doesn’t happen accidentally. It requires significant planning.

  When you look up the word retirement, you’ll see images of people relaxing on a tropical beach or traveling the world. These images convey feelings of liberation, relaxation, happiness, and joy. But reality can be very different from what you see online. However, your retirement can be even more meaningful with the right type of planning.

  Finding deep meaning 

  As I shared in the first episode, much of what makes us happy has nothing to do with money. True meaning doesn’t have to be something grand like solving world hunger. It can be as simple as spending more meaningful time with your family or volunteering for your community. Ideally, we can find an activity that provides meaning, purpose, and true fulfillment. 

  Another way retirees plan for success is by staying relevant and connected. As an early retiree, many of your friends and family will still work. Losing connections at the workplace can lead to increased feelings of loneliness. Because of that, it’s crucial to become involved with organizations before you retire so you can look forward to spending time with people you already know.

  The exponent of time

  In the episodes leading up to the 2022 personal tax filing deadline, April 18th, I’m going to be going over strategies to not only prepare you for early retirement but to do so in ways that may reduce the taxes you pay in the process. While our focus is on early retirement planning, you may also want to consider helping your children get started on their early retirement planning as well.

  We always want to pay taxes when it’s to our advantage. Obviously, that would mean paying when income tax rates are the lowest. As a child, that rate could be as low as zero. Therefore, contributing to a Roth IRA as a child can mean never having to pay taxes on the amount contributed during this period. As an investor, the single most powerful thing you can do is increase your time horizon. By having your kids set up a Roth IRA, you give them the gift of decades more time for their investments to benefit from compound interest. 

  Resources & People Mentioned

  • Maslow's Hierarchy of Needs | Simply Psychology
  • Robert Laura
  • The Psychology of Money: Timeless lessons on wealth, greed, and happiness
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Meaning & Purpose in Retirement, Ep #6

  In this episode of the One for the Money podcast, I share what you can do to ensure you have a fulfilling retirement. The process has less to do with money than you might think. In the tips, tricks, and strategies portion, I’ll share the first of many tax strategies as we approach the individual tax filing deadline of Monday, April 18th, 2022. You’ll learn the multitude of reasons you should seriously consider Roth IRAs for your children. Listen in to learn this and more!

  In this episode...

  • Looking back to look forward [01:15]
  • Replacing your work identity [04:48]
  • Preventing loneliness [07:55]
  • Preparing your kids for retirement [11:38]
  
  

  Meaning and purpose

  A successful early retirement is way more than pursuing the correct financial strategies. It’s having a plan that enables you to do the things that matter most. In the inaugural episode of this podcast, I went over where happiness is ultimately derived. In this episode, I dive deeper into two of those areas: meaning and purpose. 

  You may be baffled by the idea that retirement can feel a bit depressing for some people. For early retirees, it can feel more so. We forget that we get a lot of meaning and purpose from our careers. Finding that same level of meaning and purpose in retirement doesn’t happen accidentally. It requires significant planning.

  When you look up the word retirement, you’ll see images of people relaxing on a tropical beach or traveling the world. These images convey feelings of liberation, relaxation, happiness, and joy. But reality can be very different from what you see online. However, your retirement can be even more meaningful with the right type of planning.

  Finding deep meaning 

  As I shared in the first episode, much of what makes us happy has nothing to do with money. True meaning doesn’t have to be something grand like solving world hunger. It can be as simple as spending more meaningful time with your family or volunteering for your community. Ideally, we can find an activity that provides meaning, purpose, and true fulfillment. 

  Another way retirees plan for success is by staying relevant and connected. As an early retiree, many of your friends and family will still work. Losing connections at the workplace can lead to increased feelings of loneliness. Because of that, it’s crucial to become involved with organizations before you retire so you can look forward to spending time with people you already know.

  The exponent of time

  In the episodes leading up to the 2022 personal tax filing deadline, April 18th, I’m going to be going over strategies to not only prepare you for early retirement but to do so in ways that may reduce the taxes you pay in the process. While our focus is on early retirement planning, you may also want to consider helping your children get started on their early retirement planning as well.

  We always want to pay taxes when it’s to our advantage. Obviously, that would mean paying when income tax rates are the lowest. As a child, that rate could be as low as zero. Therefore, contributing to a Roth IRA as a child can mean never having to pay taxes on the amount contributed during this period. As an investor, the single most powerful thing you can do is increase your time horizon. By having your kids set up a Roth IRA, you give them the gift of decades more time for their investments to benefit from compound interest. 

  Resources & People Mentioned

  • Maslow's Hierarchy of Needs | Simply Psychology
  • Robert Laura
  • The Psychology of Money: Timeless lessons on wealth, greed, and happiness
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>c395ccff-d33e-4465-86a1-1914f9fedd9fSat, 15 Jan 2022 03:00:00 -070019:20falsefull66What can you do to ensure you have a fulfilling retirement? It has less to do with money than you might think. Listen to learn more!Let’s Have a Heart to Heart: Early Retirement Healthcare PlanningOne of the more challenging aspects of early retirement is the topic of this episode of the One for the Money podcast: Obtaining and paying for health care. Medicare isn’t an option until age sixty-five. Stick around for the tips, tricks, and strategies portion where I’ll be discussing when it makes sense to get life insurance through your employer and when it’s better to get your own!

  In this episode...

  • Planning for healthcare after retirement [01:08]
  • Options for healthcare [03:37]
  • Healthcare sharing plans [06:09]
  • Life insurance is critical for financial planning [08:57]
  
  

  Why do I need to plan for healthcare?

  After housing and transportation, healthcare is the third-largest expense people will have when they retire at age 65, and that’s with Medicare! Early retirees don’t have this option. Even if you elect to accept Social Security at age 62, you still won’t be eligible for Medicare until age 65. Early retirees also need to consider the health status of those relying on them for their healthcare. 

  Healthcare options in early retirement

  The most generous healthcare plan is the employer’s retirement healthcare benefits. A fortunate few have employers who provide paid-for health care in early retirement. This perk is so tremendous that it’s no longer offered to government and private employees. However, some people have been grandfathered into this position. If you’ve worked for several decades, you should review your retirement healthcare options with your HR department.

  Even if you retire early and leave your employer, you can still receive your healthcare through them for a certain amount of time. This option was made possible via the Consolidated Omnibus Budget Reconciliation Act of 1985, known as COBRA. However, you typically will have to pay the total cost of your healthcare coverage plus an additional 2% because your employer subsidizes a significant portion of these costs while you’re working for them. This practice is a perk to attract employees and provides the employer with a tax deduction.

  Life insurance is critical

  Term life insurance is all you need. If someone tells you that you need permanent life insurance, they are likely an agent trying to earn a much higher commission by selling it. You should only consider permanent insurance if you are on track for retirement, have a fully-funded emergency fund, and have no consumer debt. Even then, it’s hugely debatable. Life insurance cannot legally be sold as an investment because it isn’t. Another thing you need to know about life insurance is that the price you pay is based on the probability of your passing away.

  Life insurance from your employer isn’t based on your health but solely on your age. Consequently, if you are in poor health, it may be in your best interest to get life insurance through your employer. If you are in good health, that will likely be more cost-effective. A benefit of getting your own policy is that you still have it if you leave your job. In the end, it’s imperative that you have life insurance if there are people that depend on you, such as children, a spouse, or loved ones.

  Resources & People Mentioned

  • elaws - Health Benefits Advisor
  • Love Insurance
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>One of the more challenging aspects of early retirement is the topic of this episode of the One for the Money podcast: Obtaining and paying for health care. Medicare isn’t an option until age sixty-five. Stick around for the tips, tricks, and strategies portion where I’ll be discussing when it makes sense to get life insurance through your employer and when it’s better to get your own!

  In this episode...

  • Planning for healthcare after retirement [01:08]
  • Options for healthcare [03:37]
  • Healthcare sharing plans [06:09]
  • Life insurance is critical for financial planning [08:57]
  
  

  Why do I need to plan for healthcare?

  After housing and transportation, healthcare is the third-largest expense people will have when they retire at age 65, and that’s with Medicare! Early retirees don’t have this option. Even if you elect to accept Social Security at age 62, you still won’t be eligible for Medicare until age 65. Early retirees also need to consider the health status of those relying on them for their healthcare. 

  Healthcare options in early retirement

  The most generous healthcare plan is the employer’s retirement healthcare benefits. A fortunate few have employers who provide paid-for health care in early retirement. This perk is so tremendous that it’s no longer offered to government and private employees. However, some people have been grandfathered into this position. If you’ve worked for several decades, you should review your retirement healthcare options with your HR department.

  Even if you retire early and leave your employer, you can still receive your healthcare through them for a certain amount of time. This option was made possible via the Consolidated Omnibus Budget Reconciliation Act of 1985, known as COBRA. However, you typically will have to pay the total cost of your healthcare coverage plus an additional 2% because your employer subsidizes a significant portion of these costs while you’re working for them. This practice is a perk to attract employees and provides the employer with a tax deduction.

  Life insurance is critical

  Term life insurance is all you need. If someone tells you that you need permanent life insurance, they are likely an agent trying to earn a much higher commission by selling it. You should only consider permanent insurance if you are on track for retirement, have a fully-funded emergency fund, and have no consumer debt. Even then, it’s hugely debatable. Life insurance cannot legally be sold as an investment because it isn’t. Another thing you need to know about life insurance is that the price you pay is based on the probability of your passing away.

  Life insurance from your employer isn’t based on your health but solely on your age. Consequently, if you are in poor health, it may be in your best interest to get life insurance through your employer. If you are in good health, that will likely be more cost-effective. A benefit of getting your own policy is that you still have it if you leave your job. In the end, it’s imperative that you have life insurance if there are people that depend on you, such as children, a spouse, or loved ones.

  Resources & People Mentioned

  • elaws - Health Benefits Advisor
  • Love Insurance
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>cac695e1-5eeb-4262-99c2-6995bce7d2acSat, 01 Jan 2022 03:00:00 -070014:08falsefull55Obtaining and paying for healthcare is one of the more challenging aspects of early retirement. This episode covers healthcare options available to help you make the best financial decision for your health in retirement.Social Security & Early Retirement - Avoiding a Very Expensive MistakeThe previous episode of the One for the Money podcast was all about strategies to generate income in retirement. Many might consider Social Security as part of an early retirement income strategy since you can begin receiving payments as early as age 62. In this episode, I’ll share with you why you most likely don’t want to try that approach. Listen to learn about how your Social Security benefit is calculated and how you can get a peek into what your projected benefit will be.

  In this episode...

  • How is Social Security calculated? [01:15]
  • Reasons to wait to take Social Security [04:02]
  • When should you start SS benefits? [09:44]
  • Is investing early SS benefits a reliable strategy? [10:59]
  • Social Security strategies for married couples [13:05]
  • What could happen to Social Security? [14:43]
  
  

  The role of Social Security

  President Franklin Delano Roosevelt signed Social Security into law in 1935. Americans who paid into Social Security will receive a check each month from Uncle Sam to help pay for retirement expenses. Many might consider Social Security an integral part of an early retirement income strategy. However, there are thousands of reasons why you want to consider waiting to take this benefit. 

  It’s essential to make the best decision regarding your Social Security benefit because you only have one chance to make the right decision. Once you’ve made that decision, you’re stuck with it for life.

  Determining when to start Social Security benefits

  Social Security benefits are based on lifetime earnings. Your past income used by the Social Security Administration to determine benefits is adjusted to account for inflation. This process ensures you have a much higher benefit. Any dollar you earned in the 1990s is equivalent to the dollar you earned in the 2020s. While your benefit is based on the highest 35 years of earnings, you’re eligible for Social Security after working for just ten years. But of course, your benefit will be much smaller. The longer you wait, the higher your benefit will be.

  The question is when you should take social security. The answer to that can be challenging to predict because it depends on one factor: life expectancy. If your family medical history and genetics are good, and you’re in relatively good health, it’s likely in your best interest to delay taking the benefit for as long as possible. When you take Social Security, Delaying maximizes your benefits and can significantly mitigate the effects of market fluctuations and general price increases. In other words, by delaying your benefit for later, you’re going to have a more guaranteed income.

  What if the Social Security trust fund is exhausted?

  As with all types of planning, it’s easier to make adjustments sooner rather than later. Unfortunately, the U.S. Congress doesn’t have an excellent track record of making timely adjustments. There are some options available, though, and it’s unlikely that benefits will be reduced. Older people vote, and politicians want to take care of active voters. Another option is to increase the amount of taxable income. That’s highly likely as taxing the “rich” isn’t as unpopular as the other options. Or, increasing taxes higher than the current 6.2% is possible. Raising the full retirement age would be fairly likely. With life expectancy increasing, it will mainly be the younger generations who that change would impact.

  While a lot has changed since Social Security was introduced, it’s important to understand what your benefit is and how you can optimize it. No one builds wealth by accident.

  Resources & People Mentioned

  • Learn About Retirement Benefits | SSA
  • The Silent Thief
  • Investopedia: Sharper insight, better investing.
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>The previous episode of the One for the Money podcast was all about strategies to generate income in retirement. Many might consider Social Security as part of an early retirement income strategy since you can begin receiving payments as early as age 62. In this episode, I’ll share with you why you most likely don’t want to try that approach. Listen to learn about how your Social Security benefit is calculated and how you can get a peek into what your projected benefit will be.

  In this episode...

  • How is Social Security calculated? [01:15]
  • Reasons to wait to take Social Security [04:02]
  • When should you start SS benefits? [09:44]
  • Is investing early SS benefits a reliable strategy? [10:59]
  • Social Security strategies for married couples [13:05]
  • What could happen to Social Security? [14:43]
  
  

  The role of Social Security

  President Franklin Delano Roosevelt signed Social Security into law in 1935. Americans who paid into Social Security will receive a check each month from Uncle Sam to help pay for retirement expenses. Many might consider Social Security an integral part of an early retirement income strategy. However, there are thousands of reasons why you want to consider waiting to take this benefit. 

  It’s essential to make the best decision regarding your Social Security benefit because you only have one chance to make the right decision. Once you’ve made that decision, you’re stuck with it for life.

  Determining when to start Social Security benefits

  Social Security benefits are based on lifetime earnings. Your past income used by the Social Security Administration to determine benefits is adjusted to account for inflation. This process ensures you have a much higher benefit. Any dollar you earned in the 1990s is equivalent to the dollar you earned in the 2020s. While your benefit is based on the highest 35 years of earnings, you’re eligible for Social Security after working for just ten years. But of course, your benefit will be much smaller. The longer you wait, the higher your benefit will be.

  The question is when you should take social security. The answer to that can be challenging to predict because it depends on one factor: life expectancy. If your family medical history and genetics are good, and you’re in relatively good health, it’s likely in your best interest to delay taking the benefit for as long as possible. When you take Social Security, Delaying maximizes your benefits and can significantly mitigate the effects of market fluctuations and general price increases. In other words, by delaying your benefit for later, you’re going to have a more guaranteed income.

  What if the Social Security trust fund is exhausted?

  As with all types of planning, it’s easier to make adjustments sooner rather than later. Unfortunately, the U.S. Congress doesn’t have an excellent track record of making timely adjustments. There are some options available, though, and it’s unlikely that benefits will be reduced. Older people vote, and politicians want to take care of active voters. Another option is to increase the amount of taxable income. That’s highly likely as taxing the “rich” isn’t as unpopular as the other options. Or, increasing taxes higher than the current 6.2% is possible. Raising the full retirement age would be fairly likely. With life expectancy increasing, it will mainly be the younger generations who that change would impact.

  While a lot has changed since Social Security was introduced, it’s important to understand what your benefit is and how you can optimize it. No one builds wealth by accident.

  Resources & People Mentioned

  • Learn About Retirement Benefits | SSA
  • The Silent Thief
  • Investopedia: Sharper insight, better investing.
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  
  

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>6a5aa86e-5cb5-46e2-be80-915fea15de8dWed, 15 Dec 2021 03:00:00 -070025:35falsefull44Many might consider Social Security as part of an early retirement income strategy. In this episode, I'll share why you mostly likely don't want to try that approach.It's all about the BenjaminsAre you financially prepared for life after retirement? This episode of the One for the Money podcast is all about generating income in early retirement. Congress has put a 10% penalty for those who access IRAs before age 59 and a half, but I’ll be going over ways you can generate income. Listen through to the end, and I’ll share some early retirement tips, tricks, and strategies, including an easy math trick that allows you quickly to understand interest, rates of return, and how they impact both your investments and debts.

  In this episode...

  • The tricky first years of retirement [01:33]
  • Retirement income sources [02:30]
  • Workarounds to access retirement funds [04:41]
  • The Rule of 72 [08:53]
  
  

  Accessing retirement funds

  The first few years of retirement can be the trickiest to generate income because Congress has applied a 10% penalty for Americans who access their retirement funds before age 59 and a half. The purpose of the penalty was to encourage Americans to keep their monies invested for longer to benefit from compounded interest. Consequently, it requires some deft planning to generate income during the first years of early retirement.

  Income sources in early retirement

  The simplest income source is savings, the money you have in the bank. Savings is money in addition to an emergency fund and should be the first money spent in early retirement because it just sits in the bank. I recommend that early retirees begin saving extra money in the bank in the few years just before early retirement. These savings will be the money you want to spend first, so it won’t be subject to risk in the stock market, where a downturn can reduce what you already have. Another income option is a non-retirement account, which is a great way to save more if you’ve already maxed out your retirement accounts. 

  Roth IRA contributions are made with after-tax money. Because you have already paid taxes on this money, the IRS allows you to withdraw the contributed amounts, not the gains, at any time without taxes or penalties. For example, let’s say you contribute $5,000 to a Roth IRA in 2015, and it grows to $10,000. In 2020, you can take the $5,000 contribution out with no taxable consequences. However, the disadvantage is that less of your money will be compounding. So I wouldn’t recommend that you utilize the Roth IRA for funds in early retirement because you want this tax-free money to continue to grow as long as possible.

  Understanding interest

  One of the most important things people can understand about finances is interest. Fortunately, a simple math trick called the Rule of 72 can help us understand how interest can impact our finances from both an investment and debt perspective. The Rule of 72 is a simple way to determine how long an investment will take to double, given a fixed annual rate of interest. All you need to do is divide the number 72 by the annual rate of return, and you will obtain a rough estimate of how many years it will take for your initial investment to double. The Rule of 72 is a powerful means for anyone to understand interest, which is integral to understanding finances.

  Resources & People Mentioned

  • Amazon - 24 Year Stock Price History
  • 72(t) Distributions
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>Are you financially prepared for life after retirement? This episode of the One for the Money podcast is all about generating income in early retirement. Congress has put a 10% penalty for those who access IRAs before age 59 and a half, but I’ll be going over ways you can generate income. Listen through to the end, and I’ll share some early retirement tips, tricks, and strategies, including an easy math trick that allows you quickly to understand interest, rates of return, and how they impact both your investments and debts.

  In this episode...

  • The tricky first years of retirement [01:33]
  • Retirement income sources [02:30]
  • Workarounds to access retirement funds [04:41]
  • The Rule of 72 [08:53]
  
  

  Accessing retirement funds

  The first few years of retirement can be the trickiest to generate income because Congress has applied a 10% penalty for Americans who access their retirement funds before age 59 and a half. The purpose of the penalty was to encourage Americans to keep their monies invested for longer to benefit from compounded interest. Consequently, it requires some deft planning to generate income during the first years of early retirement.

  Income sources in early retirement

  The simplest income source is savings, the money you have in the bank. Savings is money in addition to an emergency fund and should be the first money spent in early retirement because it just sits in the bank. I recommend that early retirees begin saving extra money in the bank in the few years just before early retirement. These savings will be the money you want to spend first, so it won’t be subject to risk in the stock market, where a downturn can reduce what you already have. Another income option is a non-retirement account, which is a great way to save more if you’ve already maxed out your retirement accounts. 

  Roth IRA contributions are made with after-tax money. Because you have already paid taxes on this money, the IRS allows you to withdraw the contributed amounts, not the gains, at any time without taxes or penalties. For example, let’s say you contribute $5,000 to a Roth IRA in 2015, and it grows to $10,000. In 2020, you can take the $5,000 contribution out with no taxable consequences. However, the disadvantage is that less of your money will be compounding. So I wouldn’t recommend that you utilize the Roth IRA for funds in early retirement because you want this tax-free money to continue to grow as long as possible.

  Understanding interest

  One of the most important things people can understand about finances is interest. Fortunately, a simple math trick called the Rule of 72 can help us understand how interest can impact our finances from both an investment and debt perspective. The Rule of 72 is a simple way to determine how long an investment will take to double, given a fixed annual rate of interest. All you need to do is divide the number 72 by the annual rate of return, and you will obtain a rough estimate of how many years it will take for your initial investment to double. The Rule of 72 is a powerful means for anyone to understand interest, which is integral to understanding finances.

  Resources & People Mentioned

  • Amazon - 24 Year Stock Price History
  • 72(t) Distributions
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>68d94c97-faf3-4311-ac5b-91f71ae4c3e2Wed, 01 Dec 2021 03:00:00 -070015:50falsefull33Are you financially prepared for life after retirement? This episode of the One for the Money podcast is all about generating income in early retirement.Are you on FIRE financially?This One for the Money podcast episode is all about the Financial Independence, Retire Early movement known as FIRE. I’m your host, Jonny West, and I’m going to be teaching you tips, tricks, and strategies you can use to retire early. We’ll also discuss Health Savings Accounts, which are a great way to save for healthcare expenses now and in retirement. I hope you’ll find this episode helpful for your retirement goals!

  In this episode...

  • Financial Independence, Retire Early [00:31]
  • What to consider before early retirement [04:11]
  • Health Savings Accounts [06:37]
  
  

  Thank goodness it’s Monday!

  Most of the people I know would never utter that phrase. Generally, the goal to work toward is the weekend, not going back to work. That’s why the notion of early retirement is appealing to so many. People want more time to do what they want to do. That’s why the Financial Independence, Retire Early (FIRE) movement is so popular.

  The principal strategy behind this movement is being a super-saver. That typically means saving between 50% and 70% of income each year by having higher incomes and living frugally. To give some perspective, when planning to retire at age 65, I recommend clients save between 10% and 15% of their income each year into retirement accounts. FIRE adherents often save in non-retirement accounts because distributions occur before age 59½. 

  Life after retirement

  After saving sufficient income, FIRE adherents retire from work and use their savings to generate income while continuing to live frugally. They can live off their income from portfolio gains, dividends, and interest without touching the original investment. After retirement, some people even move to less expensive locales so their retirement incomes can go further. 

  Early retirement requires a lot of planning. My financial planning clientele consists of several early retirees and clients who are on track to do so. You may be surprised to hear that these people didn’t have significant incomes. Instead, they lived well within their means and invested the difference. My financial planning practice specializes in taking clients like these through early retirement and helping ensure that the next stage of life is just as meaningful.

  HSAs

  Health Savings Accounts are the only investment that is triple tax-free. The contributions are tax-deductible. Both the growth and distributions are tax-free when used for qualifying medical expenses. To be eligible for an HSA, you must have a qualifying high deductible medical plan. The money in an HSA can be used at any time to cover health care expenses. But to see the full benefit, you’ll want to let the money grow and pay for current healthcare expenses from other sources of personal savings when possible. My younger listeners may think that they can wait until later. Remember, the sooner you invest your money, the longer it has time to grow. The average couple will need about $285,000 in retirement for medical expenses, not including long-term care. That’s a ton of money and is why you want to consider HSAs as a great way to save for future medical expenses.

  Resources & People Mentioned

  • Mr. Money Mustache: Blog
  • More Americans Want to Retire by 55. How Can FAs Help?
  • Fidelity - 20th Annual Retiree Health Care Cost Estimate
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>This One for the Money podcast episode is all about the Financial Independence, Retire Early movement known as FIRE. I’m your host, Jonny West, and I’m going to be teaching you tips, tricks, and strategies you can use to retire early. We’ll also discuss Health Savings Accounts, which are a great way to save for healthcare expenses now and in retirement. I hope you’ll find this episode helpful for your retirement goals!

  In this episode...

  • Financial Independence, Retire Early [00:31]
  • What to consider before early retirement [04:11]
  • Health Savings Accounts [06:37]
  
  

  Thank goodness it’s Monday!

  Most of the people I know would never utter that phrase. Generally, the goal to work toward is the weekend, not going back to work. That’s why the notion of early retirement is appealing to so many. People want more time to do what they want to do. That’s why the Financial Independence, Retire Early (FIRE) movement is so popular.

  The principal strategy behind this movement is being a super-saver. That typically means saving between 50% and 70% of income each year by having higher incomes and living frugally. To give some perspective, when planning to retire at age 65, I recommend clients save between 10% and 15% of their income each year into retirement accounts. FIRE adherents often save in non-retirement accounts because distributions occur before age 59½. 

  Life after retirement

  After saving sufficient income, FIRE adherents retire from work and use their savings to generate income while continuing to live frugally. They can live off their income from portfolio gains, dividends, and interest without touching the original investment. After retirement, some people even move to less expensive locales so their retirement incomes can go further. 

  Early retirement requires a lot of planning. My financial planning clientele consists of several early retirees and clients who are on track to do so. You may be surprised to hear that these people didn’t have significant incomes. Instead, they lived well within their means and invested the difference. My financial planning practice specializes in taking clients like these through early retirement and helping ensure that the next stage of life is just as meaningful.

  HSAs

  Health Savings Accounts are the only investment that is triple tax-free. The contributions are tax-deductible. Both the growth and distributions are tax-free when used for qualifying medical expenses. To be eligible for an HSA, you must have a qualifying high deductible medical plan. The money in an HSA can be used at any time to cover health care expenses. But to see the full benefit, you’ll want to let the money grow and pay for current healthcare expenses from other sources of personal savings when possible. My younger listeners may think that they can wait until later. Remember, the sooner you invest your money, the longer it has time to grow. The average couple will need about $285,000 in retirement for medical expenses, not including long-term care. That’s a ton of money and is why you want to consider HSAs as a great way to save for future medical expenses.

  Resources & People Mentioned

  • Mr. Money Mustache: Blog
  • More Americans Want to Retire by 55. How Can FAs Help?
  • Fidelity - 20th Annual Retiree Health Care Cost Estimate
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>71564cca-4aef-4e98-a9aa-aae675dd56a3Mon, 15 Nov 2021 03:00:00 -070010:15falsefull22Early retirement is appealing to many, but are YOU ready?When it Comes to Early Retirement - Start with WhyThis is the inaugural episode of the One for the Money podcast! While most episodes will be about the details and implementation of early retirement, I want to take this opportunity to focus on the motivations and reasons. Many of you may be thinking that the “why” of early retirement seems straightforward. You’d love to stop working sooner! However, your retirement is far more successful when you retire TO something rather than FROM something. I look forward to sharing with you what that means, and at the end, I’ll share some early retirement tips, tricks, and strategies.

  In this episode...

  • The pursuit of happiness [01:59]
  • Money management happiness [06:51]
  • Which type of 401k is for you? [09:29]
  • Having options in retirement [11:59]
  
  

  Where do we find happiness?

  You may be surprised to hear what research has shown about where people ultimately derive happiness. Studying happiness and the pursuit thereof has long been a hobby of mine. Much of what I read was research from Dr. Martin Seligman, an American psychologist who focuses on happiness rather than psychological disorders. He analyzed people who were thriving and derived five key elements of psychological well-being and happiness. These five core elements are positive emotion, engagement, relationships, meaning, and accomplishment: PERMA. Financial planning can help in each of these core elements. 

  Financial planning to reach your goals

  Financial planning is much more than managing money or helping you reduce your tax liability. It’s also about accountability to the values and goals that are most important to achieving happiness. Goals are the destinations, a financial plan is the vehicle to get us there, and investments are the engine that drives the plan forward. True financial planning will intensify these goals, designing and implementing strategies to help you on your way to PERMA and in your pursuit of happiness.

  As you put together your financial plans, I challenge you to focus on the factors that impact happiness: positive emotion, engagement, relationships, meaning, and accomplishment. Those should be the central focus of any financial planning that you do.

  Traditional 401(k) vs. Roth 401(k)

  There are essentially two types of retirement accounts. The difference between them is when you decide to be taxed. The first is known as the traditional retirement account. These are the original retirement accounts in which you elect to be taxed later when you retire. Traditional retirement accounts include an IRA version, 401(k), 403(b), and 457. The second type of account is a Roth retirement account, named after the senator who sponsored the legislation to create them. You elect to be taxed now in a Roth retirement account, so you never have to be taxed again. Roths are relatively new. They became an option as an IRA in 1998 and a 401(k) option in 2001.

  The big question is: which should you choose? Your decision depends on what your taxes are now and what you think they will be in retirement. Tax rates may seem high right now, but they’re near historic lows. Starting in 2026, all the tax brackets, except the lowest, will be reset higher. As a general rule of thumb, it’s best to fund traditional IRAs and 401(k)s during your highest income years when your taxes are generally higher. It’s best to fund your Roth IRAs and 401(k)s during lower income years when your taxes are lower. Investing in both gives you a tax-diversified retirement with control over your tax rate. This strategy provides you with important options during your retirement.

  Resources & People Mentioned

  • Start With 'Why' - TED Talk from Simon Sinek
  • The PERMA Model: Your Scientific Theory of Happiness
  • Flow: The Psychology of Optimal Experience (Harper Perennial Modern Classics)
  • Mihaly Csikszentmihalyi
  • Bank of America Study Finds Nearly Half of Affluent Americans Getting Their Financial Lives in Order During the Pandemic
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>This is the inaugural episode of the One for the Money podcast! While most episodes will be about the details and implementation of early retirement, I want to take this opportunity to focus on the motivations and reasons. Many of you may be thinking that the “why” of early retirement seems straightforward. You’d love to stop working sooner! However, your retirement is far more successful when you retire TO something rather than FROM something. I look forward to sharing with you what that means, and at the end, I’ll share some early retirement tips, tricks, and strategies.

  In this episode...

  • The pursuit of happiness [01:59]
  • Money management happiness [06:51]
  • Which type of 401k is for you? [09:29]
  • Having options in retirement [11:59]
  
  

  Where do we find happiness?

  You may be surprised to hear what research has shown about where people ultimately derive happiness. Studying happiness and the pursuit thereof has long been a hobby of mine. Much of what I read was research from Dr. Martin Seligman, an American psychologist who focuses on happiness rather than psychological disorders. He analyzed people who were thriving and derived five key elements of psychological well-being and happiness. These five core elements are positive emotion, engagement, relationships, meaning, and accomplishment: PERMA. Financial planning can help in each of these core elements. 

  Financial planning to reach your goals

  Financial planning is much more than managing money or helping you reduce your tax liability. It’s also about accountability to the values and goals that are most important to achieving happiness. Goals are the destinations, a financial plan is the vehicle to get us there, and investments are the engine that drives the plan forward. True financial planning will intensify these goals, designing and implementing strategies to help you on your way to PERMA and in your pursuit of happiness.

  As you put together your financial plans, I challenge you to focus on the factors that impact happiness: positive emotion, engagement, relationships, meaning, and accomplishment. Those should be the central focus of any financial planning that you do.

  Traditional 401(k) vs. Roth 401(k)

  There are essentially two types of retirement accounts. The difference between them is when you decide to be taxed. The first is known as the traditional retirement account. These are the original retirement accounts in which you elect to be taxed later when you retire. Traditional retirement accounts include an IRA version, 401(k), 403(b), and 457. The second type of account is a Roth retirement account, named after the senator who sponsored the legislation to create them. You elect to be taxed now in a Roth retirement account, so you never have to be taxed again. Roths are relatively new. They became an option as an IRA in 1998 and a 401(k) option in 2001.

  The big question is: which should you choose? Your decision depends on what your taxes are now and what you think they will be in retirement. Tax rates may seem high right now, but they’re near historic lows. Starting in 2026, all the tax brackets, except the lowest, will be reset higher. As a general rule of thumb, it’s best to fund traditional IRAs and 401(k)s during your highest income years when your taxes are generally higher. It’s best to fund your Roth IRAs and 401(k)s during lower income years when your taxes are lower. Investing in both gives you a tax-diversified retirement with control over your tax rate. This strategy provides you with important options during your retirement.

  Resources & People Mentioned

  • Start With 'Why' - TED Talk from Simon Sinek
  • The PERMA Model: Your Scientific Theory of Happiness
  • Flow: The Psychology of Optimal Experience (Harper Perennial Modern Classics)
  • Mihaly Csikszentmihalyi
  • Bank of America Study Finds Nearly Half of Affluent Americans Getting Their Financial Lives in Order During the Pandemic
  
  

  Connect with Jonny West

  • https://BetterPlanningBetterLife.com 
  • Connect with Jonny on LinkedIn
  
  

  Subscribe to ONE FOR THE MONEY on

  Apple Podcasts, Spotify, Google Podcasts

  Audio Production and Show notes by

  PODCAST FAST TRACK

  ]]>8c9769d6-5b2c-43e1-bc97-4870599488a2Mon, 01 Nov 2021 03:00:00 -070014:24falsefull11Retirement is far more successful when you retire TO something rather than FROM something. Let's start with your "WHY"A podcast about how to practically plan for early retirement!https://www.betterplanningbetterlife.com/
  ]]>https://www.betterplanningbetterlife.com/
  ]]>1f1e3653-8645-47eb-a590-cc85e2af0f65Mon, 01 Nov 2021 03:00:00 -070001:33falsetrailer