A Wake-Up Call

A Wake-Up Call

It’s that time of year for many of us – kids back to school, a new routine established, and a list of to-do’s. I’m a big fan of the change of seasons (but a change in plans, now that’s another story!)

I love that there are biblical writings about different seasons of life, none better than Ecclesiastes 3. Listen to what Solomon wrote:

 For everything there is a season, and a time for every matter under heaven:

a time to be born, and a time to die;
a time to plant, and a time to pluck up what is planted;
a time to kill, and a time to heal;

a time to break down, and a time to build up;
a time to weep, and a time to laugh;
a time to mourn, and a time to dance;
a time to cast away stones, and a time to gather stones together;
a time to embrace, and a time to refrain from embracing;
a time to seek, and a time to lose;
a time to keep, and a time to cast away;
a time to tear, and a time to sew;
a time to keep silence, and a time to speak;
a time to love, and a time to hate;
a time for war, and a time for peace.

(Now some of you may have thought the Byrds would be credited for the above with their hit song, “Turn! Turn! Turn!”, but that’s certainly not the case.)

Some view the book of Ecclesiastes as a depressing read. I get that. But I’ve always read this book as a wake-up call. The writer is one of the wisest men to ever live, and he’s reflecting on life at the end of his own. What a gift for us!

“For everything there is a season, and a time for every matter under heaven.” That’s how this chapter begins – to let us know to expect different seasons of life. There will be seasons to rejoice, and seasons to mourn.

I’ve written in a previous newsletter about learning to live in the good and bad of life. This journey continues. I’ve not yet arrived…nor will I. But it’s worth honestly engaging in the journey rather than ignoring its existence.

What season of life are you in? Mixed emotions of kids going back to school? Rejoicing in an unexpected blessing? Mourning the loss of a loved one? Feeling ashamed for procrastinating in an important area of life, including money?

Know this – you are not alone. My encouragement to you is to bring others into whichever season you are in. We are not wired to go it alone. Connect with others, share with others, mourn with others, and rejoice with others. Our circumstances may not change, but, as we take these steps, our ability to cope does.

Know this also: There is a Savior who walked this earth and experienced different seasons of life: rejoicing at a wedding, mourning at a death, trusting while suffering. Be comforted in this truth.

Scott is the founder and a partner at Rivertree Financial Planning. Scott and his wife Helen currently reside in Jackson, MS with their three children Artur, Taylor, and Molly. They are members of Redeemer Church, PCA in Jackson.

Tax-Wise Giving and Ways to Lower your Taxes After Retirement

Tax-Wise Giving and Ways to Lower your Taxes After Retirement

What if I told you that there was a way to never pay taxes again when you retire? Well, I’m sorry – I can’t tell you that. But now that I have your attention, there are certainly some ways to lower your tax liability in retirement, particularly as it relates to charitable giving. Let’s look at a few of these strategies:

 

1)      Donating low tax-basis capital assets, such as stocks or mutual funds: How does this work? Generally, when you sell a capital asset, you have to pay taxes on any gains. For example, if you bought 400 shares of a stock (or a mutual fund) at $25, held them for at least one year, then sold them at $30 per share, you would owe taxes on the $5 gain per share (400 shares x $5 gain per share = $2,000 in taxable gain).

Using this example, let’s say you planned to give $12,000 to charitable organizations. Normally, you would just write a check from your checking or savings. However, by donating the stocks at fair market value of $12,000, you get the same tax deduction AND avoid paying capital gains tax. For the charity, it’s the same amount of money. But for you, it’s less taxes.

 

2)      Donating your Required Minimum Distribution (RMD): When you turn age 70 ½, the tax code requires that you begin taking minimum distributions from your pre-tax retirement accounts (Possible exception: 401k plan while still employed). Why can this be a problem? Well, one, you may not need or want the additional funds. And two, these distributions are direct increases to your taxable income.

Rather than receiving these distributions, the tax code allows us to donate up to $100,000 as a “qualified charitable distribution (QCD).” For the receiving charity, they receive the same amount. But for you the taxpayer, your taxable income is reduced by the amount donated.

 

3)      Reducing your living expenses: How does this help? Well, in two major ways. First of all, living on less means you’re taking out less from your retirement accounts. That strategy is a direct reduction of your taxable income and reduces the chance of paying taxes in a higher marginal bracket on a portion of your income.

Secondly, lowering your monthly expenses can reduce the amount of taxes you pay on social security income. (Yes, I know…taxes on social security income after paying into the system all these years? Sadly, yes.) For single tax filers, social security income starts being taxable when “modified adjusted gross income” exceeds $25,000. For married couples, taxes on social security income begins at $32,000. (Be sure to discuss this strategy with your tax preparer as the calculations can be complex.)

 *What’s a sure-fire way to reduce your living expenses in retirement? Being debt-free!

 

4)      Fund Roth 401k’s and Roth IRAs: This strategy particularly applies to our “Accumulator” folks. Why? You have more time to fund retirement accounts that do not require minimum distributions beginning at age 70 ½. Often, we have clients who do not want to take their required minimum distribution but are forced to, increasing their taxable income.

 

These are just a few ways to lower your tax liability in retirement and give in a more tax-wise manner. If we can be of assistance in any way, please don’t hesitate to contact us. We’d love to help.

 

Disclosure: Be sure to discuss these strategies with your CPA or tax preparer as each individual’s tax circumstances are unique. These planning strategies are not considered “tax advice” but merely strategies to consider.

Scott is the founder and a partner at Rivertree Financial Planning. Scott and his wife Helen currently reside in Jackson, MS with their three children Artur, Taylor, and Molly. They are members of Redeemer Church, PCA in Jackson.

Why Everyone Needs a Financial Quarterback

Why Everyone Needs a Financial Quarterback

I’ve always loved sports – playing, watching, and understanding sports has always been a hobby. From my earliest memories, our family journeyed to various sporting events. One of my treasured memories was going to Atlanta to see Dale Murphy play for the Braves. He was my favorite player, and he did not disappoint in live view as he hit two home runs.

I’d argue that few things teach more about life than sports. You learn submission to authority, how to play as a team and work with people you like (and don’t like) to accomplish a greater goal. One of my greatest joys has been transitioning from being a player to being a coach. It’s a total gamechanger: who plays where, who bats when, and who attempts to explain the win or loss. It’s a blast, but being a coach comes with an enormous burden.

Think of your finances: Who is the overseer? Is it you? If so, that’s okay for now, but what about when (not if) you’re gone? How can you best care for those you love most with your finances? By having a financial quarterback.

Learning to Delegate

I distinctly remember a watershed moment early in my career. As my client base grew, I found it harder and harder to proactively manage 1) their investments and 2) their overall financial plan. I needed to choose: Do I want to manage investments, or do I want to do financial planning? I chose the latter and have not looked back.

Part of my growth was learning to let go and delegate, not just within my business but with my own personal finances. For example, I used to prepare my own tax return. And, it used to be fun. But was that the best use of my time and resources? No. I freed myself by handing that task over to a CPA.

Think of head coaches. They love to coach players and positions. But as a head coach, you’re now in charge of the overall game plan. You must delegate tasks to your coaches. It’s not easy, but the great coaches learn to let go and chime in during the game only when needed (insert: Nick Saban).

What gives me great peace of mind is knowing my wife and family will be cared for when I’m gone. They’ll have a team of experts surrounding them to hold their hands throughout the process. What a blessing!

So, reader, do you have a financial quarterback to care for those you love most when you’re gone? I know… It’s hard to let go. But you must for the sake of a greater goal.

We’d love to talk with you about being that quarterback for you and your family. Schedule a meeting today.

Scott is the founder and a partner at Rivertree Financial Planning. Scott and his wife Helen currently reside in Jackson, MS with their three children Artur, Taylor, and Molly. They are members of Redeemer Church, PCA in Jackson.

Three Things You Can Do to Start Planning for Retirement

Three Things You Can Do to Start Planning for Retirement

To prepare for this writing, I just spent about 30 minutes updating my personal retirement and education savings plan. All the basic facts were there — it just needed some minor tweaking. As a nerd, it’s fun to track progress towards meeting our goals. But, being married to a sweet lady who defines “fun” differently from me, I understand we are all wired differently.

Maybe you or someone you know would like to start planning for retirement, but they don’t know where to start. Whether you’re a nerd or a free spirit, here are three things you can do to start planning for retirement.

1. Take Inventory

There’s no way around organizing what you have. For many, this step is the greatest fear. Why? It’s a reality check. Start with your most recent bank statements and other account statements. Soon to follow would be your tax return and other financial records. We have a one-page checklist that’s extremely helpful. Let us know if you would like to receive it.

2. Know Your Number

No, it’s not the balance of your overall retirement nest egg. I’m talking about the number it takes you to live each month. We have to use certain assumptions when developing retirement plans, such as inflation, rates of return, monthly savings, etc. But we would argue no assumption impacts the success of your plan more than minimizing this number. How do you reduce it? Have a plan to be totally debt-free when you reach your retirement age. We can help.

3. Work with a Professional

I know…but what about online retirement estimators? Sure. You can try it. But know that all aspects needed to develop a sufficient retirement plan are rarely included in these tools. For example, does the online calculator factor in social security maximization strategies, tax-efficient withdrawals strategies, realistic growth rates, etc. You may enjoy managing your own investments and do well with it. So maybe you need a fee-based financial plan to make sure you’re not missing any critical pieces to your plan.

I often say that there is only one guarantee when presenting a retirement plan: It won’t look exactly this way. Life happens, and goals can change. So then why plan? Managed money goes farther….period. As the late Zig Ziglar said, “If you aim at nothing, you’ll hit it every time!” Let’s aim at something. You might be surprised. Schedule a call today so we can help you plan for tomorrow.

Scott is the founder and a partner at Rivertree Financial Planning. Scott and his wife Helen currently reside in Jackson, MS with their three children Artur, Taylor, and Molly. They are members of Redeemer Church, PCA in Jackson.

Say “No” to Instant Gratification

Say “No” to Instant Gratification

I remember it like it was yesterday. When I was in high school, I worked all summer to save up enough money to purchase a brand-new Sharp VCR from Wal-Mart. I remember how I felt when I finally walked into the store and laid down my hard-earned cash to make the purchase. I can still smell the fresh Styrofoam as I opened the box. I had zero regrets because it was worth the wait.

I also remember the times I’ve made impulsive purchases. Something would catch my eye that I wasn’t looking for (perhaps an infomercial??). After making the impulsive purchase, the product or service didn’t satisfy the same and guilt would eventually follow.

The Missing Word

There’s a word that’s missing from many of our vocabularies in America. That word is “No.” Saying “No” has become increasingly more difficult as we are now the most marketed to culture in the history of the world. That’s a fact. What’s more amazing is how much more effective (and less expensive) advertising is. The ads are more targeted now. They know what you want, or might want, based on your web and social media activity.

And what if you don’t have the money to make the purchase? No problem! It’s just 49 easy monthly payments of $1.99. Wait…what the heck did I purchase? A pair of running shoes?? And how much interest will I pay over these four years? Who cares…it’s just $1.99 a month. I can do it (although often the interest on an annual basis is anywhere from 39% – 400%). And no, that’s not a typo.

My old boss Dave Ramsey is often pleaded to by his listeners to run for public office. He responds with his classic shotgun laugh. But for fun, they came up with some slogans. One was, “Change…You’re Not Going to Like.” Another was simply, “No.” These were in reference to our government’s out of control spending habits.

Insert “No” Moving Forward

I read a time.com article just this morning regarding debt levels in America at every age group. The article opens with “Americans have fallen back in love with debt.” The statistics are staggering. We’ve exceeded debt levels prior to the Great Recession…just by a little. Below is from newyorkfed.org:

Aggregate household debt balances increased in the fourth quarter of 2017, for the 14th consecutive quarter, and are now $473 billion higher than the previous (2008: Q3) peak of $12.68 trillion. As of December 31, 2017, total household indebtedness was $13.15 trillion, a $193 billion (1.5 percent) increase from the third quarter of 2017. Overall household debt is now 17.9 percent above the 2013Q2 trough.

So how can we appropriately respond to this? Take a look at your budget and spending habits. Where do you see “No” inserted? Perhaps ridding yourself of credit cards would be a tremendous step. And what about that tax refund being applied to debt payoff or savings rather than a car down payment? Small steps like this go a long way.

Think about people from just a few generations ago. Could they finance a couch? Of course not. If they wanted a sofa, they were forced to save for it and delay pleasure. Today, we can stretch payments over five years. And no, I’m not buying the “Same as Cash” deals. It’s not the same as cash. Over 80% of these arrangements result in interest payments of up to 39% going back to day one. They win. You’re not beating the system. That’s why they keep on doing it and stretching out payments for even more years.

Saying “No” is healthy vocabulary. We need it in all areas of life. Prayerfully consider where you need to say “No.” Your freedom awaits.

Scott is the founder and a partner at Rivertree Financial Planning. Scott and his wife Helen currently reside in Jackson, MS with their three children Artur, Taylor, and Molly. They are members of Redeemer Church, PCA in Jackson.