Don’t Make These 2 Mistakes with Your 457 Plan!

By Glenn J. Downing, MBA, CFP®

457 plans are a type of retirement account offered largely to certain governmental employees.  We see them available typically to police officers and fire fighters as an avenue for supplemental retirement savings.  The 457 is a place to accumulate retirement savings over and above your pension.  As such, the 457 is a type of non-qualified deferred compensation, rather than a qualified plan that comes under ERISA (Employee Retirement Income Security Act) legislation.  Please see my  previous post about 457 plans here

There were a lot of terms there, but they’re important, so let me break it down a bit.  ERISA legislation determines whether an employer’s retirement plan is qualified or not.  Qualified, meaning that the employee can defer income to the retirement account on a pre-tax basis.  The most popular of these is the 401(K) plan.  Others are profit sharing plans and money...

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My Top Ten List of Things to Waste Money On

 

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...

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6 Options for a Life Policy I No Longer Need

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...

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Long Term Care Insurance Coverage

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...

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Health Savings Accounts

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. ...

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Annuities Part II:  The Distribution Phase

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...
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Annuities Part I:  The Accumulation Phase

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...

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165 Eaton Place

By Glenn J. Downing, MBA, CFP®

Last year (2019) I watched the entire Upstairs Downstairs series on Britbox. Easily sixty episodes in all. My viewing interests are usually limited to either WWII or British crime stories, so this was a bit of a departure for me, and one I thoroughly enjoyed. As the name suggests, it is sort of a Downtown Abbey Lite. The time spanned goes from before WWI to the New York Stock exchange crash. It is the story of all the residents of 165 Eaton Place in London – the home of a member of Parliament who married a titled lady (the upstairs folks) and their household staff (the downstairs folks).

Richard Bellamy, MP, had two children – a married daughter in New York, and a son at home – James Bellamy. James was up at Cambridge, though no mention of a degree. He worked at a job he hated because it was, well, work, and then joined his regiment as an officer during the Great War. This is a fellow whose newspapers and shoelaces were ironed for...

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Hurricane Financial Preparedness: Top 6 Priorities Before A Storm Hits

by Jonathan G. Cameron, CFP®

When I originally wrote this, the Carolinas were experiencing the worst of Hurricane Florence.  As a native Floridian I've ridden out half a dozen hurricanes myself . The aftermath of a hurricane is not only about the damage to life and property, but for many it can take a serious personal financial toll. As you stock up on canned food, batteries, and bottled water, don’t neglect to address these top 6 financial priorities before a storm makes landfall.

1. Review Your Homeowners Insurance Policy for Windstorm Coverage

Odds are your home is your most valuable asset. Why roll the dice on this? Not having homeowners insurance coverage is a mistake. Having a homeowners policy with little hurricane windstorm coverage could become a catastrophe. Typically, your policy will have a windstorm deductible for hurricane damage claims in addition to your All Other Perils deductible for everything else. The deductible for hurricane damage can...

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Financial Windfalls: Money Changes, Life Changes

by Jonathan G. Cameron, CFP®

A few months ago I heard Susan Bradley from the Sudden Money® Institute say something quite profound regarding our relationship with money and financial windfalls:

When life changes, money changes.
When money changes, life changes.

The order in which change happens makes a big difference. The latter statement, referring specifically to financial windfalls, turns out to be much harder to handle for most people than the former statement. Let me explain.

Life Changes

Life changes are a constant: marriage, babies, a new home, family milestones, divorce, promotions, demotions, getting fired, moving to a new city, kids going to college, changes in health status (ourselves or in a loved one), growing old, and death.  As with any change, anticipated or otherwise, we regroup; we make budget adjustments; and move forward.  Whatever the life change, you hopefully take wise counsel and update your financial plan accordingly.

Money Changes

By ...

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