By Glenn J. Downing, MBA, CFP®

This is a really personal list.  It is complied from years of observing the human condition and reading good novels.  It is intended to be humorous, yet I’m fully aware that it might hit some raw nerves.  So for the intrepid souls out there, read on . . .

Counting down to number one, we have:

#10.  Beer

Now I enjoy a brew as much as the next guy, but why spend a lot of money on something you’re going to literally piss away?  Why not get a whisky instead?  You’ll get the same buzz and not have to keep running to the gents.

#9.  Cine Bistro

Go once if you don’t believe me, but you’re going to drop $100 on a movie and a meal for two.  How much nicer to dine at a proper restaurant and then go see a show afterwards for the same money. 

#8.  True Religion jeans

One of my daughters used to work at True Religion in Dadeland Mall.  Spending $300 for denim that is faded and...

By Glenn J. Downing, MBA, CFP®

As many of my readers know, I have been teaching the CFP® curriculum to those preparing for the exam for several years now.  Most are experienced professionals; all must have at least a bachelor’s degree; many have advanced degrees or are practicing attorneys or CPAs.  In other words, it is my privilege to teach la crème de la crème.  Still, it surprises me sometimes that even amongst this group, there is so little understanding of the financial benefits of legal marriage.  So I thought I’d blog about it.

My My My how things have changed!

Lucy and Ricky Ricardo slept in twin beds.  So did Rob and Laura Petrie.  (I Love Lucy and the Dick VanDyke Show references, for my young readers).  My my my how times have changed!  Now people hook up on television.  Who even needs a bed?  Maybe there’s a vacant stairwell, or there’s always the back seat. ...

By Glenn J. Downing, MBA, CFP®

This blog post builds upon a previous one:  No, Darling, because we can’t afford that.  I’m sharing some thoughts about teaching children to be financially responsible. 

What Was the First Trip?

My second trip?  What was the first?  My first trip to Europe I was 13, and my grandparents took me on vacation with them.  My maternal grandmother had come over from Italy at about age 5, and was raised in Connecticut, where I was born.  Her husband, my maternal grandfather, one of 16 children, was born in Connecticut, but some of the siblings were, I believe, born in Italy.  Grandpa was a successful business owner in New Haven, and they went to Europe on vacation most years.  In turn, they took each of their four grandchildren with them once – a gift I’d like to return some day.

The Deal with Dad

The second trip is the one I want to write about.  My Uncle Joe, my Dad’s...

By Glenn J. Downing, MBA, CFP®

As a financial planner, I work with a lot of couples planning for retirement.  Retirement brings on a sea-change in thinking.  Up until then most people have been in an accumulative stage of money management – saving up against the day they stop working.  Come retirement, what is saved is spent down over many years.  The fundamental question:  Will I outlive my money?

Will I Outlive My Money?

With software, we can answer the question, and with some specificity.  To model the answer, though, requires good data inputs.  Those inputs include spending requirements, inflation and earnings assumptions, future medical expenses, and a host of other things, both quantitative and qualitative.  But we always begin at the beginning, which is the spending plan, aka the budget. 

We recently worked with a couple on retirement planning.  We found them to be in enviable financial shape.  But one spouse...

By Glenn J. Downing, MBA, CFP®

A friend recently suggested that I write a piece about children and money.  At first I thought myself unqualified, as I have no formal education in this area.  But then I got to thinking that, as a father and now grandfather, and since I’ve been graduated from life’s School of Hard Knocks, that I might have something useful to contribute.  Hence this effort.  This is actually Part I of a two-part series.  Part II is all about my Second Trip to Europe.  

I love children.  Always have.  I don’t like unrestrained screaming, but I do enjoy hearing children happily play.  My wife and I have two married daughters and two grandchildren, all of whom we love dearly.  But children, as they are delivered to us, are loud, messy, demanding, have appalling table manners, and think the world revolves around them.  Furthermore, they don't come with manuals.  Yet it is our job as...

by Glenn J. Downing, MBA, CFP®

A lot of thought goes into planning for the retirement years.  Typically, people like to have the mortgages on their primary residences paid off, to go into retirement clean and with no debt.  This often begs the question; Do I have to keep paying on this life policy? 

To answer the question, I’ll ask you to think back on why you bought the policy in the first place.  Is someone still depending upon you for a living?  If so, and you dropped dead today, would there be sufficient financial resources without the policy?  If not, then you still need it.  If so, then here are six good options. 

You Can Cash the Policy In

In this case you simply turn it back to the insurance company, which cuts you a check for the policy’s cash value.  If the cash value exceeds your basis in the policy, then you have a taxable gain.  Your basis is the sum of all the premiums you’ve paid in.  The...

By Glenn J. Downing, MBA, CFP®

This is a big topic and a big part of financial planning for retirement.  The statistic is that by age 75, 75% of us will have needed some long-term care.  So the question is, how can I prepare for this risk financially? 

A principle of risk management is to insure risks of low frequency and high severity.  We insure our homes against hurricanes, and our cars against collisions.  We insure our lives against premature death, and our incomes against disability.  So it makes sense to insure our retirement assets against a financially devastating long term illness.  The point is not to spend all the accumulated assets on the first spouse to become sick, leaving the surviving spouse impoverished. 

Long Term Care Policies

The insurance industry introduced long-term care policies roughly a generation ago.  Policy benefits were triggered by needing substantial help and assistance in performing 2 of 6 ADLs...

By Glenn J. Downing, MBA, CFP®

What is the best tax bargain out there? 

Is it the 529 college savings plan?  Let’s see.  That is funding with after tax dollars, but the funds grow without taxation and come out without taxation when used for qualified higher education expenses.  That’s a double tax advantage.

How about the Roth IRA?  Same thing as the 529.  A double tax advantage. 

How about a Traditional IRA?  Here I deduct on the way in and have growth without taxation.  The tax bill comes when I distribute.  So this is another double tax advantage. 

Is there a triple tax advantage out there?

Yes!  There is one to my knowledge, and that is the Health Savings Account. 

The HSA is used in conjunction with a high deductible health insurance plan (HDHP).  This is one which, per IRS regulations, has a deductible of at least $1400 for an individual or twice that for family coverage. ...

by Glenn J. Downing, MBA, CFP®

As I noted in Part I, an annuity is a complex financial animal.  It can be used as a tool to accumulate funds on a tax-advantaged basis.  It can also be used efficiently to distribute funds in later years, which is my focus here in Part II.   

A Stream of Payments I Cannot Outlive

This is the very definition of the word annuity.  If I want that stream of payments, I can either purchase it from the annuity company, or I can annuitize an annuity contract I already have.  In either case I make an irrevocable choice to turn over control of my principal to the annuity company in exchange for this stream of payments. 

Annuitize the Contract

What’s the Risk? 

That I annuitize a lot of money, get hit by a bus, and the annuity company keeps the remainder.  That is called the single life option, which yields the highest payout.  To mitigate against this risk, I chose a payout option:

• Joint and...

Glenn J. Downing, MBA, CFP®

An annuity is a complex financial animal.  It can be used as a tool to accumulate funds on a tax-advantaged basis.  It can also be used efficiently to distribute funds in later years.  Here in Part I I’m focusing on the accumulation phase.  In Part II I’ll cover distribution and tax issues.

An annuity, in its strictest sense, is a stream of payments that one cannot outlive.  The term annuity is often used synonymously with the word pension.  A stream of payments describes a distribution of principal, however.  How do I get the annuity in the first place?

Purchase it

You can purchase this stream of income just as you’d purchase a new suit or a car.  It pays to shop around, because different annuity companies (i.e. life insurance companies; they are one and the same) use different mortality tables and interest rate assumptions which affect the payments they offer to you.  

Accumulate...