Financial Planning Insights
Per following the 4% rule, you've dutifully saved over your working years and are now ready to retire. You plan to withdraw 4% annually in retirement.
But the 4% rule alone will not guide you to retirement success. In this article I outline a few shortfalls with this famous rule-of-thumb, and why you need to be weary of them well before your actual retirement.
Roth accounts are the holy grail of retirement savings. While taxed in the year of contribution, once in a Roth, funds are tax free forever. No tax on investment, or withdrawals, or even distributions to your kids when you’re gone and they’re fighting over your estate.
But high earners face an uphill battle in funding Roth accounts. Direct contributions to a Roth IRA aren’t allowed for households earning more than $203,000. Here are few workarounds.....
Arbitrage is a fancy word used in finance conversations by people that really want to seem smart.
Today, I’m excited to be one of those people.
Roth conversions during low-income years can be a great way to set money free forever at a reduced tax rate. This strategy works well for those that have accumulated a high balance in traditional IRA or 401(k) through pre-tax contributions, and will have a low-income year because of a decision to retire, start a business, or become an instagram life coach.
Why high-earners should own a "personalized ETF" and consistently sell loss positions to boost after tax returns.
At the end of every year, take a look at your portfolio and sell whatever is "down" to capture a tax loss. If you still like the investment, buy it back after thirty days. If not, buy something else.
This annual exercise can create huge value over several years of investing.
After an IPO, employees that hold equity should sell their shares and avoid the urge to "let it ride"...
Early stage employees have a unique opportunity to place their future economic gains into preferential tax classifications. It just takes a little effort and some cash.
Equity compensation is a broad category of various ownership grants given to employees, founders and investors throughout a company’s lifecycle. If managed properly, equity compensation can provide an economic windfall that turbo charges a wealth plan.
A little discussed provision of the Tax Cuts and Jobs Act of 2017 allows for investors to invest taxable capital gains directly into an “Opportunity Fund” and defer paying taxes. There is a 10% and 15% basis increase after holding the Opportunity Fund for five and seven years, respectively. Any gains on Opportunity Fund investments are tax free if there is a holding period of ten years or longer.
Using good judgment to make smart decisions is paramount to successful results, and financial decisions are no exception. It is well documented that investor behavior, defined as the mental processes and emotions that cause investors to buy or sell, is the decisive factor in long term results, rather than knowledge, skill or luck. We might classify these behavioral missteps as the lack of good judgment in financial decision making.
While folks may not have a full grasp on their employment picture over the short term, as consolidation means many things to many different people, one area of worthwhile focus is the effect of ownership change on personal finance and retirement planning.
How does this acquisition affect your current retirement plan? Major transitions are a great time to take another look at everything and see how you can solidify your finances, despite short-term uncertainty.
Each year, seemingly thousands of financial institutions, professional investors and everyday financial advisors provide a forward-looking outlook for the coming year. These outlook papers serve as forward-looking predictions for the market and economy. Ostensibly, investors leverage these insights to position their portfolios for success.
There is no shortage of intellectual geniuses in the investment community. For decades, the brightest, most ambitious go-getters from all over the globe have flooded into asset management firms in search of their investment fortune. I won’t pretend to be half as smart as these folks. I’m not a CFA, nor do I play one on TV.
There are two stages of retirement planning - accumulation and distribution. Accumulators are those still working (and who we’ll discuss here). Distributors are those that are no longer working and live off their assets and passive income streams (to be discussed later).
Here’s a graphic showing the lifecycle of a good financial plan from working years (accumulation phase) to retirement years (distribution phase).
Now, let’s talk about how to optimize HSA funding with an IRA rollover to provide a “cushion”, some resources for where to spend your HSA funds on everyday “health expenses”, and how to be a smarter healthcare consumer.
Married couples can contribute up to $6,900 annually to HSAs. Generally, open enrollment season is in October or November, but benefit changes technically don’t go into place until January first of the following calendar year. You have to wait until your HDHP plan goes into effect to contribute to your HSA.
For the past decade, institutional and retail investors alike have chosen low-cost passive index funds over higher cost actively managed strategies because active managers can’t consistently beat the index, but still, charge high fees for trying. Here are the numbers for active managers vs. the index from a Wall Street Journal article:
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