The decumulation stage of retirement is different from all those years you spent accumulating your retirement savings. Video Recap: https://youtu.be/UyvHGltT1Z0 This is why you need to have a retirement plan in place to help guide you through this transition. Unfortunately, the same plan won’t work for everyone which is why it is important to understand what type of strategy would work best for you.  On this episode of Financial Symmetry, Allison Berger and I will check out the risks and opportunities to consider as you approach the decumulation stage of your life. Listen in to hear what you need to consider to make the most of your personal retirement plan.  What to consider if you are retiring before age 59.5  If you are planning to retire before the age of 59.5 you first need to make sure that you have all your ducks in a row. Before age 59.5 you won’t be able to access your various retirement accounts without a penalty, so you’ll want to make sure that you have access to money for this time period outside of a traditional retirement account. You could obtain funds from a brokerage account, home equity, rental properties, or an inheritance. Before you retire early, think about which funds you could source without having to take a penalty by dipping into your tax-deferred accounts.  You’ll not only need to know where your money is coming from when retiring early, but you’ll also have to think about health insurance. Obtaining health insurance before you are eligible for Medicare can be quite costly. Many people choose to go with COBRA or the ACA. Make sure you consider the costs of health insurance when creating your retirement plan.  The younger you retire the more susceptible you are to sequence of return risk. Sequence of return risk can lead many people to become conservative with their investments, however, this leads to increased inflation risk. To consider these two types of risk it is important to have a balanced portfolio Retirement between the ages of 59.5 and 65 If you are planning to wait until full retirement age at 67 or beyond then you may be funding the early years of retirement all on your own without the help of Social Security. Once you reach the age of 59.5 you can access your retirement accounts without penalty. However, it is important to remember that income from your IRAs, 401Ks, and 403Bs will be taxed when you access them.  Sequence of returns is still a factor this early on in retirement so make sure that your portfolio can weather the storms that the market could bring. Listen in to discover what you should be thinking about 2 years before you apply for Medicare.  Retirement considerations after age 65 Once you reach 65 you can enroll in Medicare and will no longer have to worry about paying for costly medical insurance. This is a good time to start thinking about when you will take Social Security and the tax ramifications. If you are unfamiliar with the Social Security tax bubble check out episode 101 to learn more.  During retirement, your annual tax plan should always be taken into consideration with your overall retirement tax plan to ensure that you save as much as you can over the course of your lifetime. Retirement strategies don’t always go according to plan You’ve probably heard of popular retirement strategies like the 4% rule, the guardrails, the bucket strategy, or a systematic withdrawal approach. These strategies are all great on paper but they can often fall apart when life gets in the way. We like to take a flexible approach to retirement planning that is based on your life and your financial plan. We look at the big picture to think about how you can reduce your lifetime tax rate and create a plan that works with your financial goals.  Examine where you are on your retirement journey. Think about your risks and opportunities when creating your retirement plan. Listen to this episode to hear what you need to think about during the different phases of your retirement.  Outline of This Episode [2:40] What to consider if you are retiring before age 59.5  [7:30] Considerations for those between the ages of 59.5 and 65 [9:49] Retirement strategies don’t always go according to plan [12:10] Retirement between ages 65 and 72 [16:39] Retirement in the post-RMD age [22:28] Progress principles Resources & People Mentioned Starting Over in Your 50s How an IRMAA Appeal Can Save You Thousands of Dollars Solving the Social Security Tax Bubble Mystery Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

Financial Symmetry: Balancing Today with Retirement

Developing a Retirement Withdrawal Strategy, Ep #148

The American Families Plan hasn’t yet become law, but that doesn’t mean that you can’t prepare for the changes that may be coming. Video recap: https://youtu.be/DFVgJZPwEIc In this episode we consider the planning opportunities that could arise with the changes in tax legislation. Our goal is to ensure that you have all the tools in your toolbox so that you can minimize your tax burden.  Who will most be affected by the tax law changes?  The current tax law comes from the Trump administration and dates back to 2017. Prior to the current tax cuts, the marginal tax rate for those making over $400,000 was 39%. The present marginal tax rate is 35% for married couples who earn $650,000 or more. The American Families Plan essentially reverts the tax cuts back to the pre-2017 rates. Those most affected by the proposed tax plan are higher-income earners. The current administration sees the tax changes as a way for high-income earners to pay their fair share of taxes rather than burdening those at lower income rates. How will capital gains taxes change? If the American Families Plan passes and becomes law then the new income tax structure would go into effect in January of 2022 which doesn’t leave much time for tax planning.  In addition to the changes in marginal income tax rates and compressing the income brackets, there are proposed changes to the capital gains tax. The original capital gains tax plan had been to keep the capital gains tax at the income tax rate, but new changes to the legislation have dropped that rate to 25% for those who earn $400,000 or more. Unlike the income tax plan, the capital gains tax proposal would take effect the day it was written which was in September of 2021. This leaves no time for advanced tax planning, however, Grayson Blazek offers plenty of ideas in this episode on how you can best prepare for any upcoming changes in the tax code. Are we saying goodbye to the backdoor Roth IRA? The backdoor Roth has been a strategy that high-income earners have been able to utilize for years to continue to fund Roth IRAs. Under the new proposal, the backdoor Roth would disappear. Rather than lamenting the loss of this useful tax tool, a better outlook is to be thankful that you were able to implement it when you could. To ensure that you take full advantage of what could be the last year of the backdoor Roth, make sure to get all of your backdoor Roth contributions in by January 31, 2021. How will the American Families Plan affect families? The main way that this proposed legislation will affect families is by the extension of the expanded child tax credit. The American Rescue Plan increased the child tax credit up to $3000 per child and the American Families Plan would ensure the continuation of this credit. In addition, American families would continue to receive the benefit monthly as they have in the latter part of 2021.  Make sure to listen to the entire episode to hear the rest of the highlights of the proposed legislation. We want to keep you informed of all the potential effects of the changes in the tax code so that you can make careful decisions in your tax planning. If you have any questions regarding these changes or are looking for an advisor that stays on top of the latest in tax planning legislation, please reach out to us at FinancialSymmetry.com. Outline of This Episode [2:40] Who will be most affected by the tax law changes? [6:15] How will capital gains change? [10:50] The death of the backdoor Roth IRA and mega backdoor Roth IRA [12:44] Who would be affected by a surtax on ultra-high income earners? [15:33] Changes to RMDs [20:26] Estate tax changes [22:55] The child tax credit [25:52] Today’s progress principle Connect With Allison and Grayson https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

How the American Families Plan Could Impact You and Your Taxes, Ep #147

We all have those milestones in life that we enjoy looking back on or forward to. Graduations, weddings, and births of children are a few that jump to mind. However, there are financial milestones that are also important to remember. These may not seem as exciting, but financially speaking, they are just as valuable.  Mike Eklund joins me once again to discuss these critical financial moments in our lives. Press play to make sure that you aren’t missing out on these key times in your financial life.  The most important times (financially) in a child’s life Birth - As soon as your child is born you can start contributing to their financial future. Once that child has a Social Security number you can open a 529 account in their name. This is a popular way to save for that little bundle of joy’s education. Another account that you can open for your child at birth is a Uniform Trust for Minors account (UTMA).  Age 13 - This is the age when your child is no longer eligible for the dependent care tax credit. The dependent care credit covers after-school care and summer camp. Age 18 - Your baby is no longer a child at this point, so that means you must say goodbye to the child tax credit. Also at age 18 (or 21 in some states), a child’s UTMA will automatically be transferred to their name. This is also an opportune time for you and your child to think about creating a healthcare power of attorney.  Age 26 - Yes, technically they are not children at this age, but this is the age when children lose eligibility for their parents’ health insurance.  The years before retirement have plenty of financial milestones There is a lot to remember to stay on track in the years leading up to retirement. By this time in life, you are probably beginning to dream about that upcoming milestone. To make sure that you stay on track for retirement, pay attention to these ages.  Age 50 - You can now contribute $6,500 more per year to your 401K and $1000 more per year to your IRA accounts.  Age 55 - You can now make HSA catch-up contributions of an extra $1000 per year. You should also note that some 401k plans allow for penalty-free withdrawal at age 55. Age 59.5 - This is when you can finally access your retirement accounts without a 10% penalty. You’ll also have the ability to roll over a portion of 401K to your IRA even if you are still working. Age 60 - You are now eligible for Social Security survivor benefits. Age 62 - You now can qualify for Social Security benefits. But should you? Listen in to hear why this may not be the best idea.  What’s in store for you once you reach retirement age? Congratulations, you’ve made it to retirement age! Let’s find out what milestones are in store for you next.  Age 65 - You probably won’t miss this one due to the amount of mail that you’ll be getting. You’ll want to review the literature so that you know what kind of Medicare to sign up for. You can also now withdraw HSA funds for non-medical purposes without a penalty. Age 66-67 - Full retirement age for Social Security used to be age 65 but now, depending on your birth year, it is between 66 and 67.  Age 70.5 - This used to be the time of life when you had to take RMDs. Now the only notable aspect of this age is that you can make qualified charitable distributions (QCD). This is a fantastic way to donate money to your favorite charities if you are so inclined.  Age 72 - The required minimum distribution age has recently increased from 70.5 to 72.  Who is holding you accountable? You may know about many of these milestones, but it is helpful to have a reminder to take action once you reach these ages. One way to ensure that you are making the most of your financial life is to have someone help hold you accountable. A fee-only financial advisor with Financial Symmetry can do exactly that. Give us a call if you would like to ensure that you are doing everything you can to stay on top of your financial life.  Outline of This Episode [2:19] What to think about when children are born [5:52] Why age 26 is important [12:55] You can take Social Security at 62, but should you? [16:35] The RMD age has changed [18:13] Today’s progress principle Resources & People Mentioned Table Topics Game Episode 59 - Tax Solutions for Charitable Giving Episode 46 - What Tax Strategies Am I Missing? Episode 72 - 7 Tax Reform Strategies and How to Spot Them Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

Financial Milestones to Remember, Ep #146

With Grandparents day around the corner, we're breaking down helpful financial planning strategies for grandparents.  Many grandparents have dreams of sharing the fruits of their labor with their families. However, sharing your wealth effectively takes careful planning. Listen to this episode to hear the best ways to plan effectively for your kids and grandkids. Vacationing Confidently Grandparents love spoiling the grandkids. One of the more memorable ways to do this, is by taking care of planning and paying for the whole family to take a bucket list vacation. After working and saving for years, retirement brings an excellent opportunity for grandparents to take everyone on this epic family trip. Before taking your trip, understanding how much you have to spend and whether it will be a one-time event or an annual tradition. This is where financial planning can provide priceless perspective to help you understand how much you have to spend and at what level. Share the wealth Another common planning strategy many grandparents begin to consider is direct gifting to their children and grandchildren. In 2021, the gift tax exemption is $15,000 per person, which means $30,000 per couple. This provides a more meaningful way for grandparents to enjoy seeing their children and grandchildren benefit from their hard work vs. waiting to inherit monies after they were to pass. If you want to do even more to provide for the grandkids’ education you could contribute to their 529 plan or even start one of your own with the grandchild as the beneficiary. Many grandparents choose to pay the fees directly to the school. Have you thought about ways to contribute to your grandkids' education? Leave your affairs in order Too many people put off their basic estate planning documents in place. Before planning anything else, make sure that you have a will, power of attorney, and healthcare power of attorney. Once you have the basics in place then you can think more strategically about specific ways you can plan your estate. One way to directly leave your wealth to those you love is by naming them as beneficiaries on your accounts. It’s important to remember that named beneficiaries supersede your will, so check your beneficiaries periodically to assure they still align with your wishes. Listen in to hear about trusts, per stirpes, and whether it’s better to give cash or appreciated stocks. Common misconceptions to avoid There is a common misconception that you can plan for a long-term care event by giving away your assets and waiting 5 years to be eligible for Medicaid. What many people don’t realize is that your household income could disqualify you from Medicaid. To qualify for Medicaid care, your household income must be less than $17,000 per year in NC and most people’s Social Security benefits would be higher than that. Listen in to hear how important it is to create a plan to put in place and communicate your wishes to your family. Outline of This Episode [2:09] Family travel is one way to show your love [3:39] How to share your wealth with your family [6:30] Get your affairs in order [10:35] Common misconceptions to avoid [14:44] The progress principles Resources & People Mentioned StoryWorth Connect With Chad and Allison https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

Financial Planning Strategies for Grandparents, Ep #145

The Mega Backdoor Roth IRA could be the secret weapon you have yet to use in your retirement saving strategy. If you consider yourself a super saver, looking for alternative ways to save tax efficiently, this could be a great option. This strategy is of most interest to those maxing out all other tax-efficient savings accounts. Including standard employee 401k contributions, Roth IRA, 529, and HSA. In this episode, you'll see why we call this the secret weapon for super savers, as we breakdown who the Mega Backdoor Roth is for, why you might be interested in it, and how it compares to other IRAs. Who should take advantage of the Mega Backdoor Roth IRA? In order to take advantage of the Mega Backdoor Roth IRA, you first have to have access to a 401k that allows after-tax contributions. These are contributions on top of your regular $19k allowable contributions to a 401k in 2019. Hence the "Mega" moniker. So if you are already maxing out your 401K, Roth IRA, 529, and HSA contributions then the Mega Backdoor Roth IRA could be a great extra additional savings opportunity. Many get confused as to why it's called a Mega Backdoor Roth IRA when we are talking about your 401k. Good question. The name derives from where the money will be after you complete the consolidation process. You're now seeing more larger companies and solo 401ks allow for "in-service" distributions. Meaning, you could withdraw portions of your 401k savings, while still employed. The real benefit with this savings strategy, is when you can save the extra after-tax contributions and then roll them to a Roth IRA in the same year. Meaning, you could get a larger amount in to a tax-free savings account to grow for years to come. What’s so great about the Mega Backdoor Roth? If done correctly, the Mega Backdoor Roth can allow you to contribute up to 6X what you can contribute to a regular Roth IRA. With a regular Roth IRA, you can contribute only $6,000 per year in 2019. The Mega Backdoor Roth allows you to contribute up to $37,000 extra each year on top of your normal employee 401k contributions. Many people don’t know this, but the limit for 401K contributions is $56,000 or $62,000 and for those over 50. Many people assume that the limit is only $19,000. But this $19,000 limit is for pretax contributions. You can actually contribute up to $37,000 more after taxes are withheld (depending on your employer match amount). You can ask your employer if they contribute to after-tax contributions. If you aren’t sure then you should contact your HR department. They may not even know about the Mega Backdoor Roth, but if you communicate with them you could get it started in your company. What is the difference between the Mega Backdoor Roth and the regular backdoor Roth? If your income for a married couple is over $203,000 then you are ineligible to contribute to a typical Roth IRA. Instead, you can implement the Backdoor Roth IRA strategy. But this strategy has multiple steps to assure it's done correctly which we wrote about in a previous post. To be a good candidate for this strategy, you need to first move existing pretax accounts to an existing 401K, if you have one. The next step is to contribute $6000 to a regular non-deductible IRA. After completing this, you can convert the non-deductible IRA to a Roth IRA. The issue with the Backdoor Roth is that you can only contribute $6,000 per year. The Mega Backdoor Roth allows you to contribute much more and would be a provision of your 401k account. Essentially, it's the amount above your normal employee contributions ($19k in 2019; or $25k if over age 50) plus your employer match contributions. It’s important to consider all of your options to see if the Mega Backdoor Roth is right for your circumstances. Download the Pre-Retirement Checklist Download the Pre-Retirement Checklist here to assure you are taking the steps you can now, to retire with confidence. Outline of This Episode [2:27] Who is the Mega Backdoor Roth for? [4:31] What is the difference between the Mega Backdoor Roth and the regular backdoor Roth? [12:33] How do you know if you can take advantage of the Mega Backdoor Roth? [17:59] What are the risks? Resources and Links Mentioned In Show Thecollegeinvestor.com Article - Understanding the Mega-Backdoor Roth IRA Morningstar.com Article - Heavy Savers, Meet the Mega-Backdoor Roth Article - High Earners Can Still Get into a Roth IRA Article - How to Start a Retirement Plan for Your Small Business Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/ Connect on Twitter @csmithraleigh@TeamFSINC Follow Financial Symmetry on Facebook Follow Our Podcast on Your Favorite Podcast Platform Apple Podcasts Spotify Google Podcasts 

The Retirement Secret Weapon: Mega Backdoor Roth 401k, Ep 144

Stock options can be one of the most lucrative benefits of your job, but they can also be a tax land mine. Our resident tax professional, Will Holt, joins us today to help you build a framework to consider your company’s stock options. You’ll learn strategies that you can use to make better decisions for managing your stock option holdings. If stock options are one of the perks of your jobs you don’t want to get bit by the tax dog, so don’t miss this episode.  What are the risks and benefits of the two primary stock options? It is important to understand the type of stock options that you have. There are two primary types of company stock options: incentive and non-qualified. The difference between the two is how they are taxed. Non-qualified stock options have no real risks until they are exercised since they aren’t worth anything until they are above the strike price, or “in the money.” You can exercise your right to purchase these stock options at the strike price, but they first have to vest over a period of time, typically 4 years. If choosing to exercise and not immediately sell, and the stock price is above the strike price, your shares are in the money. If choosing to sell while in the money, any gain would be taxed at ordinary income rates and come through your paystub in most cases. Incentive stock options alternatively, offer the opportunity for preferential tax treatment compared to non-qualified stock options.  To get preferential long-term capital gains tax treatment, you must be 2 years from the grant date and 1 year after you've exercised. The big risk if choosing this avenue is the potential for phantom income to be taxed at AMT rates. This can be created in the year after the stock is exercised. During that 12 month period, the stock price could fall dramatically. If this occurs, you are still responsible for alternative minimum tax due on the 'bargain element," the difference between the strike price and fair market value of the stock when exercised. It's called phantom income, because the income effectively disappears, but the tax remains on income that is no longer there due to a sinking stock price. Working with a professional can help you make better decisions Understanding stock options can be complicated which is why it is helpful to work with a professional. A financial professional can help guide you through the challenging decisions that stock options present. Stock options can be a very valuable part of your net worth and you don’t want to make the wrong moves. Taxes and holding periods aren’t the only challenges that you face by owning stock options; the concentration that you might have can pose further risk.  Are your benefits putting you at risk? The advantage of having stock options in your benefits package could end up being a risk. You may end up holding a supersized concentration of one stock. Having your net worth tied up in one stock can lead to unnecessary risk. On the other hand, you may end up with a negative tax impact by selling.  There are ways you can manage these risks. One way is to set target prices to time your exit. You won’t always make the right call, but if you set up a framework to help manage your decisions it can help take the emotions out of the sale. You’ll also want to consider the impact of your stock options on other areas of your financial plan.  What do you do with the proceeds when you have been forced to sell There may be times when you are forced to sell before you are ready. This could be a large, infrequent income event that could change your tax situation. To manage that it will be important to run a tax projection for the year.  You may be able to take advantage of tax-loss harvesting to offset some of your tax burden. If you are charitably minded, then another way to reduce your tax liability is to set up a donor-advised fund.  It is to remember that your stock options are a reward for your hard work. You don’t want to ignore them or get caught up in analysis paralysis. You can avoid this by building your decision-making framework or working with a financial professional that can help walk you through your choices.  Outline of This Episode [2:14] The difference between incentive and non-qualified stock options  [7:40] Your concentration can be another risk [11:35] What do you do with the proceeds when you have been forced to sell [16:36] How are you handling your strategies? Resources & People Mentioned Tech Worker Stock Options Turn Into Tax Nightmares Episode 97 - How to Make Decisions About Your Equity Compensation Plans Episode 59 - Tax Solutions for Charitable Giving Connect With Chad and Will https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

3 Key Areas to Analyze for your Stock Options, Ep #143

Compared to 2020, the summer of 2021 has been exciting for most people. Many parts of the country are getting back to normal and there is plenty of fun to be had. Video recap: https://youtu.be/aCuc4zsi3SE But with that fun can come extra spending. Now that we are halfway through the year, this is a fantastic time to check in with your finances.  This week, we let Chad and Mike have time off to enjoy their summer fun, so Grayson Blazek joins me to discuss 10 financial tasks for you to complete before summer comes to an end. Don’t get caught unprepared, listen to this episode to hear which key financial areas you should focus your attention on before the end of the year.  10 Key financial areas to evaluate mid-year How is your spending changing now that we are (somewhat) post-Covid? Now that life is getting back to normal, how have your spending habits changed? It’s important to be aware of where your money is going. Start tracking what you have been spending on eating out, entertainment, and travel. Becoming aware of these expenditures will help you create a post-Covid spending plan. How has travel impacted your spending plan? Was your travel money previously going towards something else? Can you ease back spending in other areas to increase your travel budget? Make sure to shop around to get an understanding of prices before you rush into a big purchase. Post-Covid, many people are going on ‘one-time’ trips. But ask yourself, is this really a one-time thing?  How do your childcare spending habits change in the summer? For many families, summer is more expensive since there are summer camps and extra daycare costs. But for private school families, costs may decrease during the summer. If you have a child that is aging out of daycare to start school, don’t let that money simply enter back into your monthly cash flow. Think about how the money could be better spent. Are you maxing out your 401K or Roth contributions? Consider how you could distribute that money to savings.  Check your recurring services. Many of us increased our subscription services during the pandemic. Now is a good time to reevaluate whether you still need them. Do you still need grocery delivery or Doordash? Consider what you could cancel now that other spending areas are starting to creep back into your budget. Revisit your retirement savings. It’s much easier to adjust your savings levels now than to try and play catchup in November or December. Make sure that you utilize your full employer match and consider what to do if you have already hit your yearly max in your Roth or 401K. Are you missing a savings opportunity? Your retirement savings may come directly out of your paycheck, but are you automatically diverting other savings? Think about other areas where you could be saving money: an HSA, college savings fund, or even a brokerage account. Listen in to hear about the changes in the FSA limits. Consider the child tax credit. Many Americans saw the child tax credit hit their bank accounts in July. Before another one hits, reevaluate where you fall on the tax credit spectrum. Consider how your income will change in 2021 and think about if you should opt out or if you may need to pay that tax credit back come tax time.  Start constructing your tax plan. Think about how your tax situation may have changed this year. Do you have enough taxes withheld?  Have your circumstances changed? Did your goals change from 2020? Have you landed a new job? Have you seen a reduction in income or an increase in income? How may this affect your goals? Review your estate plan. Do you have all of your documents in place? Reevaluate your documents to ensure that they are current and still make sense.  Focusing on these ten areas now can set you off on the right foot for the fall. Listen in to learn how you can enhance today and enrich tomorrow. Outline of This Episode How is your spending changing? [2:12] How does travel impact your plan? [3:15] How does summer impact your childcare spending [4:24] Take a look at recurring services [5:45] Revisit retirement savings [7:28] Are you missing a savings opportunity? [8:40] Child tax credit [11:06]  Start constructing your tax plan [13:38] Have your circumstances changed? [14:40] Review your estate plan [16:33] Resources & People Mentioned Tips for Avoiding a Post-Covid Spending Boom Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

The Summer Sprint - Financial Tasks to Complete Before Fall, Ep # 142

With the turbocharged real estate market, buying a house is not as easy as it once was. We’ve all heard stories of houses getting multiple offers even before they are listed or homes selling well over the asking price. Stories like these have many people thinking about moving.  Short Video recap: https://www.youtube.com/channel/UCw9vXJ3JyO-pHEcQ1p9O-Lw?view_as=subscriber On this episode of Financial Symmetry, we explore whether or not it is worth the effort to buy a home in a seller’s housing market. You’ll learn the reasons why the housing market is so hot, questions to ask yourself, and alternatives to buying a home.  Why is the housing market so hot? If you have talked to your neighbors or seen the news lately, you know how hot the housing market is. Everyone has heard stories about bidding wars and people receiving multiple offers on homes. It is definitely a seller's market, but why?  There are several reasons that home sales are through the roof. As with any economic force, when demand outstrips supply, then the market becomes one-sided. Since people have been spending more time at home and even working from home, they have had an opportunity to evaluate the pros and cons of their place of residence. Couple this with an influx of cash from higher incomes and injections of cash into the economy, and many people are ready for a change of scenery.  Steps you should take before you consider a move But just because the Jones’s are packing up and moving, does that mean that you should too? Before you think of selling your home you should stop and consider a few questions. Since this is such a big financial decision you can take advantage of financial planning to help you analyze this choice.  After you figure out why you want to move, you need to consider what steps you need to take to prepare. Buying a home is not as easy as it once was, so you’ll need to make sure that you have a preapproval letter in hand before looking at any houses. It’s also important to realize that in a hot housing market, contingency offers are off the table. You won’t be able to compete with cash offers if you are trying to buy a home based on the sale of your own home. So if you must sell your current house to come up with a down payment, then you may need to rent for a while after the sale of your home.  Know how much you can afford Your housing costs should be between 28%-36% of your monthly income. Many people know this but they only figure in the mortgage without figuring in the other expenses that come with moving to a new home. It is important to watch out for the lifestyle creep that often comes with moving. You don’t want to end up being house rich and cash poor. One way to ensure that you don’t get roped into spending too much is by coming up with a maximum number that you can afford and telling the realtor a number that is 20%-30% less. Don’t rely on the bank to decide how much you can afford since they will be happy to lend you more. Where will your down payment come from? The next consideration is where will you get your down payment? There are 4 primary ways to come up with a down payment. Many people rely on the sale of their home for a down payment. Others have cash set aside in savings. Another consideration is to use a 60 day IRA rollover. This will allow you to avoid the taxes that come from withdrawing from your IRA if you repay the money in 60 days. Oftentimes, this allows you to close on the home you are selling and replace the money in the account. However, this could backfire if the sale of your home falls through or gets delayed. The last way to fund a down payment is to take out a HELOC on your existing home. It is important to do this before you put your home on the market. Listen in to hear some alternatives to buying a new home that you should consider before taking the leap and moving.  Outline of This Episode [1:07] Reasons why the housing market is so hot [3:10] What considerations should you be thinking about? [11:34] Where will your down payment come from? [15:33] What are some alternatives to moving [17:10] Today’s progress principle Resources & People Mentioned Rocket Mortgage Modern Family WSJ article on down payments HGTV Episode 116 on buying a second home Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

To Buy or Not to Buy in a Hot Housing Market, Ep #141

Are you a super saver? If so, you may feel like you are doing a lot of the right things to save for retirement, but you are not sure where to go next. Check out our Youtube channel for a short video recap: https://www.youtube.com/channel/UCw9vXJ3JyO-pHEcQ1p9O-Lw In this episode of Financial Symmetry, we explore the different ways to save for retirement outside of your 401K. You’ll learn what each type of account is used for, how you should save in each one, when is the best time to save, and how to withdraw. Let’s explore the various ways that you can save for retirement.  Retirement investment vehicles If you have been maxing out your 401K, you are ready to move onto the next step in retirement savings, but with so many different types of accounts to choose from, it can be hard to know which one to choose. All you have to do is learn about them to choose from the different investment vehicles. To make the various types of accounts more memorable, we are equating these investment vehicles to actual vehicles. Listen in to hear how to use the right set of wheels to drive you to retirement.  The health savings account  The health savings account can be compared to a Jeep Wrangler. Like the Jeep Wrangler, the health savings account has a specific purpose, but it also has added benefits. The purpose of a health savings account is to be used for medical expenses, however, it also has a triple tax advantage. You must be enrolled in a high deductible health insurance plan to qualify for a health savings account, but if you can use one, this is a fantastic way to save and invest for future healthcare expenses.  The backdoor Roth  The backdoor Roth is the Rolls Royce of retirement savings. Like the Rolls Royce, the backdoor Roth is unique and specifically designed for high-income earners. A regular Roth IRA maxes out at $6000 per year. With the Roth and the backdoor Roth, you will save so much in taxes that it will offset any fees that you incur.  The mega backdoor Roth The mega backdoor Roth can be compared to the Koenigsegg Gemera. Similar to the Koenigsegg Gemera, you may not have heard of the mega backdoor Roth. You’ll need to buckle up to drive both of these vehicles because the mega backdoor Roth will turbocharge your retirement savings. The mega backdoor Roth allows you to contribute an extra $35,000 in a Roth. You won’t see any tax savings upfront, but you will see it in retirement since this is a tax-deferred account. This account will provide a huge impact on your long-term saving for retirement. If you want to take your savings to the next level, check out the mega backdoor Roth. The brokerage account Many people don’t even consider this account a retirement savings account, but like the trusty Honda Accord, a common brokerage account can be just as dependable. You can use a brokerage account like a super-charged savings account. Yes, there are more tax-efficient accounts, but the benefit of a brokerage account is that there are no restrictions which gives you more flexibility. If you feel restricted by the other retirement accounts, you may want to consider saving for retirement in a brokerage account.  You won’t want to miss our last comparison, the DeLorean. Listen in to hear which type of account we compared to this unique car. Which investment vehicle sounds right for you?  Outline of This Episode [2:13] The health savings account [5:22] Backdoor Roth [9:05] Mega backdoor Roth [13:45] Brokerage account [17:27] The 529 account [20:08] The progress principle Resources & People Mentioned Episode 47 - Why Do I Need an HSA? Episode 91 - The Mega Backdoor Roth Tax Loss Harvesting in Bear Markets Cars with suicide doors The DeLorean Koenigsegg Gemera Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

Choosing the Right Investment Vehicle to Save for Retirement, Ep #140

Recent headlines have people thinking more about investing for inflation. It's the most recent economic worry, but there's always something to scare or concern investors. Think about the last 16 months. We've had: COVID Crash 2020 Election Reddit/Robinhood/Gamestop Crypto Volatility Now it's inflation. But it's a good reminder that listening to the media can be expensive. In this week's episode, we are breaking down how to think about and prepare for inflation as it relates to your investment strategy. How to Think about Inflationary Scenarios What is inflation? Increases in prices over time. For example, a gallon of milk cost ~$0.26 in 1926 and has increased to ~$3.00 today. Since 1926, inflation has averaged ~3% per year. On the other hand, deflation is when prices decline over time. These periods are generally driven by economic downturns such as the depression in the late 1920’s/early 1930’s or a brief period during the financial crisis. While the media can make the threat of inflation sound scary, it is a normal part of time passing. Hyperinflation, however, can be very damaging. While regular inflation has averaged ~3%/yr, hyperinflation is when prices spike very quickly and at much higher rates. For example, Germany in the early 1920’s and more recently, cases in Venezuela and Zimbabwe. Hyperinflation it typically driven by two primary causes: Government debt in another currency (Germany after WW1) and supply chain shocks (no access to necessary products). We are not concerned about hyperinflation today. Current Situation The last twelve months ending April 30th, 2021 saw an annualized inflation rate of 4.2% after averaging 1-2% over the last 10 years. This is the largest jump in inflation since September 2008. It is important to keep in mind, however, that these numbers were coming off March/April 2020 lows where inflation declined due to lack of demand for products and services – driven by the COVID crisis. The big question most are asking: Are these permanent or transitory increases? Transitory increases are those that are shorter-term or temporary. These have been driven by stimulus checks and government support from the $1.9 trillion American Rescue Plan passed in March 2021. Permanent increases on the other hand are those in which prices are expected to increase materially year over year. Today, this can be seen somewhat in the Real estate markets. It is too early to tell which route it will take, but keep in mind that the Federal Reserve wants some inflation as that is their mandate and is healthy for the market. If inflation begins to rise too quickly, they can always raise interest rates to slow down the economy. What should you do about it? Inflation is good for stocks and real estate over the long-term. Companies can raise prices leading to higher gross sales and companies have claims on their real assets (buildings, plant, land, equipment, etc.). Since 1926, US Large/Small cap stock returns have outpaced inflation by ~7% and 9%, respectively. During that same time period, cash and bonds have barely exceeded inflation. While cash can feel like a safer option in the short-term, over long periods of time, you can lose purchasing power. For example, if inflation averages 3%/yr while your cash holdings earn 1% or bonds earn 2%, you are losing purchasing power. Although we can speculate, we don’t know whether we’ll have material or stable inflation over the next decade. Rather than being driven to change strategies based on short term media noise, we recommend sticking to your investment plan and maintain a diversified portfolio constructed based on your capacity and tolerance for risk. Additional Resources Article by Ben Carlson - The Simplest Asset To Hedge Against Inflation 

Investing for Inflation, ep #139

You may have heard a lot on the news about President Biden’s tax plan. Are you worried about how it will affect you and your tax situation? In this episode of Financial Symmetry, Grayson Blazek helps to demystify Biden’s tax proposal. You’ll learn how you may be affected and whether or not you should be worried. Don’t wait until April 15 to start your tax planning! Press play to learn what you can expect next year.  When does the new tax law take effect? Even though you may have heard plenty about Biden’s tax plan, it still isn’t the law--yet. As of May 2021, there has been no bill signed. This much-discussed tax plan still needs to make its way through Congress. There may be changes that take place in the way the plan is structured as part of the negotiation process. Although it hasn’t passed yet, it is still a good idea to learn as much as you can about the proposed tax law so that you can get a jump start on your future tax planning.  Who benefits from the proposed tax law? If your annual income level is at or below $400,000 there are many tax planning opportunities that come with the proposed tax law. The most notable change to the current tax plan is in the child tax credit. This tax credit will rise from $2000 per child to $3000. Additionally, for children under the age of 5, the child tax credit will be even higher--$3600. You may even see your tax credit hit your account early starting in July of 2021. Learn what you should be watching out for as Grayson Blazek explains how the new child tax credit will work.  How will this tax plan affect your retirement accounts? The proposed tax law could turn retirement planning on its head. Many people use a 401K as their preferred retirement savings vehicle, but with the new proposal, the tax benefits of the 401K may no longer be as attractive for high-income earners. The Roth IRA could become the preferred avenue. When the new tax plan takes effect you may want to change your retirement contribution strategy. Press play to learn why. Don’t let the tax tail wag the dog! Even though it is important to plan ahead when it comes to taxes, you don’t want the tax tail to wag the dog. This means that you don’t want your tax planning to decide everything about your financial planning. Taxes are a big part of financial planning, but it is also important to note that they are simply an inevitable side effect of making money. Now that you know a bit more about the future of tax laws you can begin to think forward to next year and beyond to structure any big liquidation events and consider where you stand financially. Download the Biden Tax Plan Decision Tree at FinancialSymmetry.com. Outline of This Episode [2:33] Don’t be in a rush to make any changes to your tax planning--yet [7:34] Some benefits of the new tax laws [12:35] What to look out for if you make between $400,000-$1M [17:45] Retirement account tax planning could change completely [23:48] Estate planning considerations [28:08] Today’s progress principle Resources & People Mentioned Schitt’s Creek Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

Demystifying What the Biden Tax Plan Could Mean for You, Ep #138

A recent survey discovered that millions of Americans are contemplating retiring years earlier than they had imagined. The pandemic motivated many of us to adopt a "life is short" mentality. Video recap: https://youtu.be/q5r5ZiVw7d4 But before you rush into a decision to retire early you’ll want to consider it carefully. We've listed 6 steps below to analyze if you are ready to retire. Why retire early? Since the pandemic has made us all consider how we are spending our time, people have become more and more frustrated with their daily grind. Many people would like to spend more time with their families or pursuing hobbies that they enjoy.  However, if you are in a position to retire early it is important to think about why you really want to retire beyond the initial urge to leave the work world behind. It is important to consider how you will spend your days. Think about your purpose so that you are retiring to something, rather than simply running away from the 9-5. Have a plan, not just a portfolio. Use the acronym RETIRE to consider early retirement Grayson Blazek and I have come up with 6 strategies to consider when thinking about early retirement. We’re using the word RETIRE as an acronym to help keep it easy to remember. Risk - Have you considered the sequence of return risks? You may have good returns now but a bear market could ruin that. You don’t want to have to sell low, so make sure your portfolio is allocated with risk in mind. If you want to retire early, you’ll need to have the upcoming 5-7 years of spending available to avoid the risk of having to sell a position when you aren’t ready to. Everyone has their own risk tolerance, so carefully consider yours. In addition to the sequence of return risk, you’ll also need to think about inflation risk.  Early retirement account withdrawals - If you are retiring early you won’t want to pull from accounts where there might be a penalty. This means that you’ll have to consider which accounts your income will come from. Be sure to have a diversified mix of accounts to pull from. Give yourself flexibility and make sure you have access to your wealth outside of retirement plans. Have different buckets ready and understand all the tools that you have available. Taxes - Take advantage of strategic tax moves. Use Roth conversions to take money from pre-tax accounts and convert it to a Roth IRA. You can take advantage of lower tax rates to fill your buckets with tax-deferred funds. In retirement, you'll want to think about your lifetime tax rate rather than your yearly tax bill. Insurance game plan - One of the biggest issues for early retirees is where to get insurance. You’ll need to carefully plan how you will source insurance and how much it will cost. Most early retirees consider 3 choices: COBRA, a spousal healthcare plan, or the Affordable Care Act. You’ll want to ensure that you understand the expenses involved with each of these choices. Regular reviews - How will you know if you are on the right track? Have a plan to monitor your situation periodically. Ask yourself these questions: Have your goals changed? Do you want to pivot? Has your financial situation changed?  Estate loose ends - Nobody likes thinking about end-of-life decisions, but having your estate documents in place will give you peace of mind. Consider the 3 most important ones: a will, a healthcare power of attorney, and financial power of attorney.  Download the Pre-Retirement Checklist The question of whether to retire early is one that should not be taken lightly. You can use these 6 considerations to help you contemplate your retirement readiness, in addition, you can also download our Pre-Retirement Checklist to ensure that you are making the right decision for you and your family. Outline of This Episode [1:46] Questions people have about retiring early [3:48] R is for risk [8:42] E is for early retirement account withdrawals [13:06] T is for taxes [17:52] I is for insurance [20:56] R is for regular reviews [23:02] E is for estate loose ends [25:42] The progress principle Resources & People Mentioned Download the Pre-Retirement Checklist Episode 136 - 3 Not-So-Obvious Retirement Roadblocks Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook  

The Rush to Retire Blueprint, Ep #137

Have you ever been on your way to an epic summer road trip and then all of a sudden you come upon a roadblock? That can ruin the excitement you feel for the upcoming trip. This can happen in retirement as well. In retirement, you may confront roadblocks on your journey and if you don’t know how to maneuver around them it can leave you feeling stuck.  On this episode of Financial Symmetry, Allison Berger joins me to discuss 3 not so obvious retirement roadblocks that you may encounter along your retirement journey. We want to be your GPS so that if you experience them you can find your way around them without too much hassle.  Sequence of return risk  Your first years of retirement are so important when it comes to investment returns. Sequence of return risk is when you have several years of bad returns at the beginning of retirement when you are starting to withdraw your money. There is no way to control your market returns, but there are ways to mitigate this risk.  To combat sequence of return risk, you’ll need to maintain a balanced portfolio the way you maintain a balanced diet. Use the financial food groups! In retirement, you can no longer subsist solely on financial junk food (stocks). You’ll want to make sure that you have a healthy serving of vegetables (bonds and cash) thrown into the mix.  After maintaining a growth mindset in the accumulation stage of life by using mainly stocks, you may be hesitant to reduce your risk load in retirement. However, having a balanced portfolio can ensure that you won’t be forced to sell when prices are down.  Inflation You want to ensure that your money will be worth something in retirement, but inflation reduces purchasing power over time. We can visualize how inflation works by thinking about what the price of milk was 20 years ago. Inflation not only impacts the prices of goods but also impacts your retirement income. Even with the cost of living adjustments, your Social Security may not have the same buying power in 20 years.  Inflation is also known as the silent assassin. It is most dangerous for those who are overly cautious. To fight inflation you’ll need to make sure that there is some growth in your portfolio. You’ll need to take on some risk.  Unforeseen tax bombs  It is important to understand how different events can impact your taxes. The best way to combat unforeseen tax bombs is through multi-year tax planning. Most people are used to tax planning one year at a time, but retirement offers an opportunity to plan ahead. You can reduce your lifetime tax burden by thoughtful planning. Create your retirement road map If you put together a financial plan for retirement you’ll have a road map for the years ahead. In retirement, you’ll want to become flexible and look for opportunities. This is part of what we do with our clients. If you are interested in using us as your GPS to help you through those retirement roadblocks then check out our website and click Learn More. Outline of This Episode [3:07] Sequence of return risk can ruin your retirement [9:45] Inflation is the silent killer of retirements [14:14] Unforeseen tax bombs can derail your tax strategy [20:47] Today’s progress principle Resources & People Mentioned Episode 89 - Sequence of Return Risk Kitces article Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

3 Not-So-Obvious Retirement Roadblocks, Ep #136

What are you investing for? Many say higher or better returns--but higher or better than what? What do those higher returns make possible for you?  To have a successful investment experience you need to have a plan in place. Mike Eklund joins me once again on this episode of Financial Symmetry to discuss our 3 step investing process. This process creates the guideposts for all Financial Symmetry clients. Listen in to learn why failing to plan means you are planning to fail.  Why do you need a plan? Have you ever thought about why you are investing in the first place? Before creating your investment plan you’ll want to set your goals. This way you can understand what kind of returns you need in order to achieve your goals.  We are all often guilty of the lottery mindset--that mindset that thinks if we could choose that one next big thing then we would be set. All we needed to do was buy Apple in 2000, or Tesla in 2012, or Bitcoin at $1000. But the reality is, successful investing requires a plan. Your investment plan can help you understand when to buy and sell or increase or reduce risk in your portfolio.  Our 3 step process At Financial Symmetry, we use a 3 step process to help our clients achieve their financial goals. Determine when you need the money. Will you need it sooner or later? When you need the money determines the amount of risk you can take. The longer you own stock the more the risk diminishes, so as investors, we are short-term pessimists and long-term optimists.  Have a plan in place. Having a plan means that you won’t have to react to market events. This is why the rules-based process is so important. Think about what you can control and implement the plan by using low-cost, high-quality investments. Whether you use index funds or active funds doesn't matter as much as how you plan.  Monitor your investment plan so that you can stay invested. Take advantage of opportunistic rebalancing and buy and sell based on your target percentage. Many people leave out this step but it is just as important as the other two steps.  5 things you can expect as a Financial Symmetry client You may be wondering what we at Financial Symmetry offer to our clients. Our clients can expect these 5 things from us. Our focus is to help you achieve your goals. We focus on long-term success over short-term results.  Clients can review their investments on a daily basis in the Client Center.  We know that communication is important, so we make sure to answer your questions. We understand that it's your money we are working with. We provide years of experience and do extensive research on all our investments.  We all invest in the same way as our clients. We can help you reach your goals What is your investment plan? Do you have a rules-based process? Investing is a lot like fitness. Everyone wants to start, but it can be hard to keep up. We can be your financial personal trainer and help you stay on track to reach your goals. We can make investing easier for you. If you don’t have the knowledge, experience, and interest to do this all on your own we can help. Outline of This Episode Why are you investing in the first place? [3:40] We follow a rules-based process [6:02] Monitor your investment plan [15:32] 5 things to expect as a Financial Symmetry client [18:21] The progress principle [23:25] Resources & People Mentioned Episode 118  Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

Our 3 Step Investing Process, Ep #135

Have you been on the fence about hiring a financial advisor? This indecisiveness can cost you. This episode will help you decide whether hiring a financial advisor is right for you. You’ll learn the 5 C’s that you can expect when hiring a financial advisor. Press play to find out what you should expect from your financial advisor. 4 reasons you may be looking for a financial advisor Have you been considering hiring a financial advisor? If so, then you may be seeking assistance in one of several areas.  Competence - You are looking for someone who knows more than you and is an expert in their field. Coaching - You may know quite a bit, but knowing and doing are 2 different things. A financial advisor can be like a personal trainer and give you the push you need to get things done.  Convenience -A financial advisor can do what you don’t have time for.  Continuity - You may want someone to help you coordinate with others for family or legacy planning.  Do any of these reasons seem familiar to you? Keep listening to hear what a financial planner can do to help you. What to expect from a financial advisor Collaboration - Your financial advisor will co-create a plan that serves you and helps you reach your financial goals. This should be a collaborative process between the two of you. In your first meeting, you can expect to be asked a lot of questions so that they can learn about you and your goals. You want your financial advisor to lead with a planning focused approach. If you receive a sales pitch instead, this should raise a red flag. Credentials - Many people are surprised to learn that you don’t have to have any qualifications to be a financial advisor. However, you may see a bit of an alphabet soup after a financial advisor’s name. It is important to understand what these letters mean. Are they real credentials or simply sales designations? Look for the gold standard CFP certification. CFA and CPA are two other certifications that may be relevant to your situation. Communication - You can expect regular communication from your financial advisor. They may set up a communication calendar with you to help you set expectations in communication. This regular communication will help you stay updated. Your advisor may also reach out to discuss tax opportunities, set goals, and to review progress. Listen in to hear what red flags you should look out for in your advisor communications. Compounding value - Are you better off after you pay your advisor than you would have been otherwise? This can be hard to quantify and may take a bit of introspection. Look at your return on life as well as the quantitative parts. Consider your investment returns, rebalancing, and tax deferral. If you think that your advisor is providing a free service then make sure to look for the hidden costs in your portfolio. A fee-only financial advisor discloses their costs upfront so that there are no surprises. If you are looking for a fee-only financial advisor you can find out more about our services at FinancialSymmetry.com. Outline of This Episode The 4 reasons you may be looking for a financial advisor [2:57] What to expect from a financial advisor [4:19] Your financial advisor should communicate with you regularly [14:51]  Is your financial advisor adding value to your life? [18:51] The progress principle [24:01] Resources & People Mentioned Episode 63 - Financial Acronymology, Decoded Episode 108 - What the CARES Act Means for You Episode 133 - Tax Planning with the New American Rescue Plan Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/  Connect on Twitter @csmithraleigh @TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast Apple Podcasts  Stitcher  Google Play

What to Expect from a Financial Advisor - The 5 C’s, Ep #134

When considering retirement, do you wonder what financial opportunities you may be missing? Busy lives take over and years pass without taking advantage. In this retirement podcast, Chad Smith and Mike Eklund unveil financial opportunities, to help you balance enjoying today so you are ready to retire later. By day, they are fiduciary fee-only financial advisors who answer questions about tax savings, investment decisions, and how to save more. If you’ve been putting off your financial to-do list or are just not sure what you’ve been missing, subscribe to the show and learn more at www.financialsymmetry.com. This podcast is published by Financial Symmetry, located in Raleigh, NC.

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Financial Symmetry: Balancing Today with Retirement

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