My Second Trip to Europe

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...

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No, Darling, Because We Can't Afford It

By Glenn J. Downing, MBA, CFP®

A friend recently suggest 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...

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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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Need Some Fast Cash? Part II: Look at a 401(K) Withdrawal. 

By Glenn J. Downing, MBA, CFP®

Q:  I’m in financial trouble.  Should I take out a 401k withdrawal?

This is a tough question, and the answer is generally, Not unless you truly need it.  A direct withdrawal from a 401(K) before age 59 ½ is a last-resort option, with a big taxable event. 

I want to distinguish clearly between 401K loans and 401K withdrawals.  In this piece I’m discussing withdrawals. You can read about loans here. 

Tax Advantaged Savings

Think about what happens in the 401(K).  The IRS “lets” you defer salary into your account without taxation. Your employer may make matching or discretionary contributions to the account on your behalf, which he deducts from his income.  Lots of tax advantages here, and the IRS wants you to keep the funds invested for their purpose:  funding your retirement.  Consequently, if you need to put your hands on some fast cash, the IRS doesn’t...

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Need Some Fast Cash? Part I: Look at a 401(K) Loan. 

By Glenn J. Downing, MBA, CFP®

Q:  I have a lot of high interest credit card debt.  Should I take out a 401k loan?

This is a question we come across not uncommonly.  There is a lot to like about doing this, but a big potential tax trap as well. 

I want to distinguish clearly between 401K loans and 401K withdrawals.  In this piece I’m discussion the loans; you can read about withdrawals here.

What are the Rules?

First of all, your 401k plan has to have loan provisions in place.  No loan provisions, no loan.  An employer can always go to his third-party administrator to have the plan documents amended if he would like to make loans available to the employees. 

The loaned amount can be 50% of the vested account balance up to $50,000.  A special rule allows participants with smaller balances to borrow up to $10,000 without the percentage restriction.  Under the CARES Act (2020), this amount is temporarily increased to...

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SIMPLE IRA

By Glenn J. Downing, MBA, CFP®

The SIMPLE IRA is the Savings Incentive Match Plan for Employees. The SIMPLE allows for both employer contributions and employee deferrals. The plan is deal for employers who want to contribute something – but not a lot – to employee retirement accounts.

The is the second in a two-part series about retirement plans for the small business.  The first was about the SEP IRA.  

Who Is Covered Under the SIMPLE?

The SIMPLE is for an employer with fewer than 100 employees who earned less than $5000 in the previous year. The employer cannot have any other retirement plan – only the SIMPLE. Any employee who earned $5000 in any of the previous two years and expects to do so in the current year is eligible to participate. The plan must be established before October 1st for the current year. After Oct. 1st it will become effective for the following year.

Employer Contributions

A big part of retirement plan design has to do with...

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The Top 4 Financial Priorities for Young Professionals

by Jonathan G. Cameron, CFP®

Young professionals are expected to accomplish a lot early in life. You’re beginning to make real money. Time to get sound financial advice to establish a good foundation from someone you trust. The problem is most financial advisors focus primarily on retirement planning. When working with young professionals, I believe this is a mistake. 

Where do I start? 

With young professionals, we start the financial planning conversation with:

  • Debt payoff
  • Saving for a home down payment
  • Building an emergency fund
  • Wealth building (including retirement)

In addition, actively maintaining a budget is essential to establishing a strong financial foundation.

Most financial advisors do not spend time working with clients on the first three financial points. Why? It is likely because there isn’t a product associated with these financial needs. In other words, there is no incentive to talk about debt, home purchase, or emergency fund.

...
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7 Financial Life Hacks While Living in Miami

by Jonathan G. Cameron, CFP®

1. Create a budget.

If this sounds too obvious, I’ll say it again for reinforcement – are you maintaining a budget? Seriously. Miami is one of the flashiest cities in the world. If you don’t have a budget I’ll put it another way — Estas loco? It has been proven that our propensity to spend money in Miami is directly proportional to our physical proximity to Brickell/Downtown Miami and South Beach. A budget is by far the best way to keep track of your money. If you have a budget, you’re already way ahead.

2. Want to build up your credit score fast?

Pay your bills on time. In other words, “Do what you say you’re going to do, Miami.” Your payment history comprises 35% of your credit score. By contrast, your length of credit history accounts for only 15% of your overall score.

3. Time is your biggest asset.

Spend extra time with the people you care for most in life. This is easier said than done...

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Homestead Exemption for First Time Home Buyers

by Jonathan G. Cameron, CFP®

Congratulations! You've read Your First Home Purchase Part I and Part II and taken the advice to heart.  Now you’re a first-time home owner in Miami, FL and you’re settling into your new place. The first year of home ownership brings many changes – new commute to work, new paint on the walls, and perhaps some remodeling.  It’s an exciting season as you make your house a home, and start a new chapter in life while building personal equity.

But one thing that can get lost in the excitement is remembering to file for your Florida Homestead Exemption! Not filing for a the exemption will likely cost you money.

What is a Homestead Exemption?

A Homestead Exemption accomplishes three main things — it reduces your property tax bill, protects you from creditors, and protects a surviving spouse when the other home owner dies.

Reduce your taxes with a Homestead Exemption

Florida allows up to $50,000 in Homestead...

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Using an IRA for a First Home Purchase

by Jonathan G. Cameron, CFP®

A first home purchase is a big financial commitment. Not only are you taking on a mortgage, but you often need to deplete cash reserves to come up with the down payment. But what if you don’t have enough socked away for a down payment? or what if you prefer not to use all your cash reserves, leaving some cushion in your savings account? Normally the Internal Revenue Service levies a 10% penalty on distributions from a Traditional Individual Retirement Account (IRA) before age 59 12.  They make an exception on distributions up to $10,000 for a first home purchase.

How Does the IRS Define a First Home Purchase?

To qualify, it’s important to know how the IRS defines a first time homebuyer. According to IRS Publication 590-B, a first time homebuyer is defined in the following way:

Generally, you are a first time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the...

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