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?
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...
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...
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.
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.
A big part of retirement plan design has to do with...
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.
With young professionals, we start the financial planning conversation with:
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....
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.
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.
Spend extra time with the people you care for most in life. This is easier said than done...
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.
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...
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 1/2. They make an exception on distributions up to $10,000 for 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...
With this blog post I’m beginning a two-part series about retirement savings plans available to the small business owner. Earlier Jonathan wrote about the Traditional IRA and the Roth IRA. In this piece I’m going to explain the Simplified Employee Pension, or SEP IRA. It is best used in a small shop, with few (or no) employees. It can be established by an individual proprietor, filing a Schedule C, or by a corporation, LLC, or partnership.
The SEP is designed for the business owner with few employees. Money goes into the SEP from employer contributions only. All contributions are tax-deductible to the employer. There is no opportunity for employee deferrals. A SEP IRA account is opened for each participant, and all funds contributed are immediately vested. (There is an older version, called a SARSEP, or salary reduction SEP. Although many are still out there, they cannot be opened after...
Usually when we think of estate planning we have in mind the orderly transition of assets at death. Death is something that you have a 100% chance of experiencing – we just don’t know when. Tomorrow isn’t promised to us – and neither is this afternoon, for that matter. Consequently it is prudent to plan for this eventuality.
A valid will
A basic will is the foundational document of estate planning. You need that once you own real property or begin to accumulate assets. Typically, at the earlier stages of life, most of what you have is going to pass by operation of a beneficiary arrangement – by contract, in other words. Think life insurance or IRA and 401(K) beneficiaries. What won’t pass by operation of contract? everything else that you own. This would be real property, or your car, for example – assets that cannot have a beneficiary attached to them.
Guardianship for your...
529 College Savings accounts just got better!
A 529 college savings account is one in which money is invested for a beneficiary’s future college expenses. The account grows without taxation, and funds are eventually distributed with no federal taxation for the beneficiary’s qualified education expenses. The growth never gets taxed!* This is a huge benefit.
The states each sponsor a 529 plan. Florida’s is the Florida Pre-Paid. A parent goes online during open enrollment in the autumn and chooses an option: tuition only, or tuition and housing. Once enrolled, the parent pays a monthly fee. The benefit is that the child goes off to college with all tuition paid for! Fees and expenses are not covered, and those can be considerable. The prepaid plan is best suited for a conservative investor.
Most states 529 plans are of the mutual fund...