My Two Cents on Cryptos

A friend of mine recently posed a question on her blog about Cryptocurrency.

You know-Bitcoin, Dogecoin, Ethereum-to name a few.

She was asking her followers what they knew about it, had they invested in it, and she made the statement that she thinks it may be here to stay.

I think she’s right, but whether I think the average person should be investing in it is another question.

Around the same time, I was talking with my oldest about needing to get his taxes filed so we could make a Roth contribution.  I was trying to educate him about why this was a great investment for his future. I liken what he was probably hearing was akin to the teacher’s voice from Charlie Brown.

His response, to my surprise, “I want to buy Dogecoin.”

My darling first born, you don’t even know what FICA taxes are or the difference between owning a stock vs a mutual fund, and you don’t necessarily need to understand all of this right now, but it’s also why you should not be buying Dogecoin with your very few hard earned dollars.

“Crypto” – it’s all the hype, I know. And don’t get me wrong, I’m not saying it’s a scam or investors haven’t or won’t in the future make money by investing in it. They have and they will. They’ve also lost a lot of money over the past month as well, at least on paper.

At this stage of the game, it is unregulated (which is kind of its modus operandi ), extremely volatile and very speculative. Its “buy in” has grown exponentially since its inception. I do think it has the POTENTIAL to EVENTUALLY be a small part of every investor’s diversified portfolio. Maybe. Time will tell.

It is my opinion, and only my opinion, that the AVERAGE investor, of which most of us are and why the term “average investor” was coined, should not be pouring our hard earned money into crypto, at least not for the hyped up reasons of turning a quick profit or easily becoming uber rich.

Unless you plan to “set it and forget it” like you would your 401(k) contributions and savings, and earmark it for the long term, then don’t do it.

Unless you are OK with potentially losing whatever you invest, don’t do it.

If you want to buy it to ride the wave and think it’s a get rich quick option,

DEFINITELY DON’T DO IT.

Because honestly, no one knows for sure what direction this is heading and I’m just not comfortable with the fact that a tweet from Elon Musk can singlehandedly make it soar or tank in a 24 hour period.  Are you???

For the majority of us, investing is meant for the long term, using investment strategies that are tried and true, and have proven to pay off for 100% of those of us who follow a disciplined and diversified approach to saving and investing.

A very small percentage of your portfolio…for the long term…with money you don’t need and are OK with losing?  OK, if you must, but do your research. Be aware, be informed and understand your decision.  

To be buying and selling crypto currencies on a regular basis is nothing short of day trading or trying to time the market. Most lose at that game in the long run.

That’s my two cents…I wonder what it’s worth in Crypto?

Financial Fitness

When you make an IRA contribution of any kind during the tax year, the institution where you made the contribution is required to file Form 5498 with the IRS. You will also receive a copy and it should be kept with your tax records. It is usually right around now.

For a deductible IRA contribution, this filing “proves” to the IRS that you did indeed make the contribution for which you are getting a tax break.

For non-deductible IRA contributions, keeping track of the contributions you make is important because you don’t want to pay taxes on that portion (known as your cost basis) of the IRA again in the future.

The usual deadline for these filings is May 31st and you would receive your copy in June. Since the tax filing deadline was extended this year, they have until June 30th, so don’t be concerned if you don’t see it until July.

There is no action on your part other than to make sure it is accurate and keep it for your records.

Favorite Quote

This month I’m taking a proud auntie moment to congratulate my nephew Jimmy, who is Valedictorian of his Class of 2021 and off to West Point in just a few weeks. He gave an awesome speech to his Senior class this past weekend and used this quote from Mark Twain that I really loved:

“The two most important days in your life are the day you are born and the day you find out why.”

Someone Had to Say It

Memorial Day Weekend- 2016: My Mom, Dad, sister, brother and me, celebrating my parents’ 50th Wedding Anniversary at The Hotel Manisses on Block Island.

You do know Sue, if something happens to Mom at this point, there’s no way Dad can stay in the house by himself”.

I still remember where I was parked when my sister spoke these words to me. Although our mom’s terminal cancer was “stable” at the time, our dad had entered into early stages of dementia and without her, would not be able to care for himself. Someone had to say it.

But we didn’t need to worry about that now, mom was finewe had time.  

I also remember the intense fight my sister and I had after our mother passed, while having a discussion about our father, moving him out, selling the house. My brother was in on this one too. It was not a discussion at all actually, it was a screaming match between me and my sister, wrought with grief. Two against one, and I was the odd man out. I knew intellectually what needed to be done, I just wasn’t ready emotionally for all that it meant. Someone had to say it.

I will add, my sister and I are extremely close, yet there we were.

It’s very difficult to have these conversations during a time of crises or grief.  

There are many articles written about how adult children should approach these tough topics with their parents because it is so hard for any of us to face getting older and what these changes mean for all family members. I think there should be more written for parents along the lines of, “Talk to Your Adult Children Before Things Get Ugly, Because It Can Get Ugly”.

Have these conversations with your adult children now. Let them know what you want, but keep in mind their lives as well if what you want has a heavy impact on them. Don’t be afraid of hurting anyone’s feelings. You know your kids better than anyone. There’s potential for worse fall out and hard feelings amongst your children after you are gone. When you have these hard conversations ahead of time when things are good, your kids are secure in knowing your wishes and that they are doing the right thing by you in the future, because “Mom and Dad said so”.

Some pointers for families:

1. Start Early
The sooner you begin to open up these conversations the better. No one is in crisis and it’s much less threatening for all involved.

2. Ensure your Estate Planning is in proper orderEstate Planning is one of the most important things a family can be sure is buttoned up tight. Work with a qualified estate planning attorney to be sure your wishes/concerns are addressed fully in a legal capacity. Documents such as health care proxies and durable powers of attorney are critical to have in place at all times, but especially as we age.

While these may be generic legal documents, their impact is anything but. There’s a heavy human component to those pieces of paper, and you must be sure to choose a person(s) you know you can trust explicitly to carry out things the way you would want. A conversation should be had with anyone involved in your wishes. These directives will potentially be a huge responsibility for this person at some point. Be sure the person(s) you are choosing are up for the task that may one day fall on them. Don’t be afraid of hurting anyone’s feelings when making your choices. It’s too important for that.

3. Organize Important Documents Personal, financial and legal documents should be organized and kept in one place. Tell a trusted family member or friend where they are should they need to be accessed.

4. Talk About the What IfsHave open conversations about what things might look like if things were to either suddenly, or over time, change. Discuss what options there are, what that might look like for all of you as a family, what would be the ideal solution if you could have it, what monies might be needed, who may need access to certain things like financial or legal documents. It’s a lot to think about, and not pleasant to talk about, but it’s harder when there’s been no discussion at all.

5. Enlist the Help of OthersIf you find starting these types of conversations too difficult on your own or fear emotions escalating, enlist the help of a trusted professional who is well versed in your wishes. It may be your estate attorney, financial advisor, doctor, or clergy member that could help facilitate a family discussion and help keep emotions in balance. We work with clients and families touching the most personal side of their lives every day. We can help here too.

There are no easy answers, I’m not going to pretend there are. Facing one’s mortality or that of someone we hold dear is as real as it gets when it comes to human emotion, but having these conversations in an open and honest manner may be one of the greatest gifts you can give to each other. 

Financial Fitness Tip

If your income was too high in 2019 or 2020 to receive the latest round of recovery stimulus, you will again have the opportunity to receive the recovery rebate (January 2021) as a tax credit when you file your 2021 return.  If you made too much prior to now but have since lost a job, or were close to the threshold and will be close to the threshold again in 2021, you can take steps now to reduce your taxable income.
 
The AGI income thresholds are more stringent for this latest round than they were for the previous two:
 
Single/MFS:        $75,000 – $80,000
HOH:                   $112,500 – $120,000
MFJ:                    $150,000 – $160,000

My Favorite Quotes

This one is for the Class of 2021 all over the world who had their moments big and small rocked by this pandemic for the past 14 months (or really, any of us):
 
“The Oak fought the wind and was broken, the Willow bent when it must and survived.”
                                                                       -Robert Jordan, The Fires of Heaven

Introducing the “Pink Tax”…and why it is worth being aware of.

Have you ever heard of the Pink Tax? This is not an actual tax levied by the state or federal government, but rather refers to what has been described as “ a discriminatory pricing practice” that lends itself to charging women more for “substantially similar” products and services. That part is real. 

If you have daughters, you’ve probably uttered the words, “geez, girls are expensive”, at least once. 

Health and beauty care products, kids’ toys, clothing, dry cleaning and car repair services are found to be the biggest offenders of the pink tax. 

Not for nothing, but in my house, regardless of gender, we don’t know what is legit for car repairs. But I suppose, “generally speaking”, men have (or are perceived to have) more general car knowledge and may be less likely to be quoted an unreasonable price. 

Toy pricing came as a surprise to me. One example cited in the piece I read was a blue bike helmet costing less than the same helmet in pink. Same manufacturer, same product, different color. Maybe pink decals cost more? 

Probably not. 

The State of New York actually passed a “Pink Tax Ban” in 2020, prohibiting this practice and requiring certain service providers to present price lists for standard services upon request. 

“Upon request” being the key words there. I’m not sure how the state will effectively police this. Time will tell, but it’s a start. 

The point I want to make on this topic is this:
I believe the best defense for stuff like this is a good offense. 

How do you create a good offense? 

AWARENESS. Through awareness you create knowledge and power, and that goes for anything. 

As women, are we always unaware we are paying more? Of course not. Sometimes we make the choice to. I am fully aware I am paying more for my “spa” shampoo, which is why I treasure every drop and don’t share it with the men in my house, but I do have the choice to buy a lower cost product and still get my hair clean. 

If you’ve never heard of the pink tax before this, now you are aware that it is actually a thing and you can be an informed consumer. Granted, you probably don’t want to smell like Axe body spray or Old Spice just to pay a lower price, but you can still make choices of one product over another or ask informed questions of a service provider. 

Be AWARE. Stay INFORMED. The best defense is a good OFFENSE. 

Financial Fitness Tip

I have been involved with a wonderful organization for a number of years called The Fresh Air Fund. April is financial literacy month and they asked me to sit on a panel with some teens to talk about what I do for a living as they learned about financial topics. 

Kudos to The Fresh Air Fund for putting this program together for their teens!

They shared a short You Tube video offering some basic, and some not so basic, financial education in an easy to understand format, which I am always a big fan of. 

Take some time to view the video and share it with others you think might benefit!

My Favorite Quotes

Since it’s financial literacy month, I am sharing a quote that promotes one of the single most important tenets of growing your wealth over time:

“Do not save what is left after spending. Spend what is left after saving”

– Warren Buffet (and me)

Alleviate This Planning Headache Now, Before it Becomes a Bigger One

I’ve noticed that the older my kids get, the further away my marker gets for true adulthood.

When I was the mother of toddlers, older kids in high school and college seemed so grown up to me, ready to support themselves and make smart decisions. I’d see them driving around town, getting their first jobs, heading off to college, starting a career. Adults, right?

But then your own kids start to get to that age and you learn that despite this outward appearance of “young adulthood”, they are still just KIDS. Sure, they are getting there, but they won’t truly arrive for years to come.

In most states, they legally become adults at 18. As any parent of a 17 year old knows, that’s crazy talk.

The idea of not being “here” to get them all the way “there” is not a thought we like to ponder.

One of the things you can do as a parent is put an effective estate plan in place in the event something should happen.

This is even more critical if you are a single parent, as you are the last line of defense. Even if there is an ex-spouse involved in their lives, once the horse has left the gate (i.e. they inherit all of your assets outright), that parent has no legal say about how those assets are spent.  

I shared last month that my husband and I were in the process of updating our estate documents. When we last updated them, age 25 seemed fairly adult to me, an appropriate time for our children to receive our assets should something happen to us.

Wait, what??? No way. I’ve changed my mind. At least not all of it, at once, for any old thing they wanted.

Pay off college loans? Sure. Buy a (reasonable) car? That makes sense. Maybe take a chance of a lifetime trip around the world before they start their career? Well, maybe.

Depending on what is going on in my kids’ lives at that time, I’ve legally entrusted their Auntie Beth to guide them in making good decisions around money while they continue to learn to make those sound decisions on their own.
When I meet with prospects and clients, I tell them that a financial plan is a living, breathing thing. It’s not just one and done. Life is always changing.

Estate planning, as part of your overall financial plan, is very much the same. You first create an estate plan when you are newly married or have young children. You can’t possibly create a single document that addresses all situations forever. You have no idea what life will look like in 5 years, never mind 25.

In addition, estate tax laws are ALWAYS changing and with that, estate planning techniques are adjusted to meet your needs within the context of these changes.

Life happens. If you haven’t updated your estate documents in the last 3-5 years, take time to review them now and answer these questions: 

  • If the proverbial “hit by a bus tomorrow” happens to you, is your estate in proper order for the person you trust with your life to step in, literally that day, and take over with as little roadblock as possible?
  • Does this plan still reflect your wishes and the wishes you have for your beneficiaries?
  • Are the people you’ve named as health care proxy, power of attorney and/or trustee still the ones you trust the most to handle these responsibilities? Are they getting older and maybe no longer the best choice? Are their values similar to yours? Remember, they may be making major decisions in your place.
  • If you’ve created trusts, are your assets titled appropriately to “fund” the trust?
  • IRA, 401(k) and life insurance assets pass by way of beneficiary designation and NOT by will or trust. Do you have beneficiaries named appropriately? Again, it does not matter who or what you have in a will or trust. It won’t apply to these types of assets. 

Honestly, there are many other pieces of the estate planning puzzle to consider. A qualified estate planning attorney will walk you through it all.

You can’t take away the heartache, but you can alleviate some of the headache.

Financial Fitness Tip

Last March, I reminded you that you have until the current tax filing deadline to make IRA contributions for LAST YEAR.
 
But my tip this month is to point out that your child who works a part-time job can also still make a 2020 contribution – and it should be to a Roth IRA.
 
If they had earned income in 2020, consider opening a Roth IRA and having them fund it with their earnings or, if you are in a financial position to do so, fund it for them, or a combination of both.
 
They can contribute up to the lesser of $6,000 or their earned income for 2020.
 
They are most likely earning too little to owe any federal or state income taxes, which means this “income tax free” money is being invested into an account that will grow tax free forever. NO TAXES EVER, even when they take it out.
 
Of course, as with all qualified accounts, there are rules as to when distributions can be taken tax and penalty free, but as long as they follow the rules, this savings vehicle is a slam dunk.

My Favorite Quotes

I’m sure many of the women being honored this March for Women’s History Month followed this type of mindset:
 
“You can never leave footprints that last if you are always walking on tiptoe” – Leymah Gbowee

Calling All Young Females: I Have a Career for You!

Following a recent client meeting, I finished the Zoom call on a natural high, with the feeling of “this is why I LOVE what I do”.
 
This high did not come from landing a big sale (I don’t sell anything) or growing a portfolio by a certain percent. It came from knowing I had helped them and from their recognition that our work together is having a positive impact on their financial security.
 
It did not require me to be great with numbers or love statistics, or economics, or analyze the stock market, or any of those other topics one might associate with this profession.
 
It required my passion to help others by sharing my expertise. To listen, to truly hear them, to understand their concerns, fears and hopes for their financial future and to offer my guidance and expertise on that path.
 
LISTENING. UNDERSTANDING. GUIDANCE. 
I’ll add EMPATHY, TRUST and COMPASSIONATE COMMUNICATION skills. Personal finances are extremely PERSONAL. 
 
Attention to detail is also very important. There are a lot of details to someone’s personal finances.
 
Women, in general, have a natural proclivity to this skill set and it can really help set them apart in this profession. Unfortunately, female advisors only represent about 15%-20% of all advisors.
 
Being a woman in this profession, and also being a small business owner, I want to help educate young women about the opportunities and rewards of what I do. 
 
If you have a young woman in your life who ever wants to learn more, you know how to reach me. I am always happy to have a conversation!

Financial Fitness Tip

For the second month in a row, I’m hitting on a teen related tip.

If you have a child who has turned or will be turning 18, you should have them sign three important documents: 

  1. Healthcare proxy
  2. HIPPA authorization
  3. Durable Power of Attorney 

My oldest turns 18 this year and my estate attorney is in the process of drafting his forms following our estate update meeting last week, just so they are ready and we don’t forget.

You can read more about the importance of it here.

My Favorite Quotes

When my mom was diagnosed with breast cancer, a friend who’s like family gave her a plaque with this quote:
 
“A woman is like a teabag. You never know how strong she is until you put her in a little hot water.”
 
I couldn’t agree more – here’s to all the strong women out there!

Flexing Your Financial Muscle

It seems every year between Thanksgiving and New Year’s Day I can’t seem to find the time to fit in my workouts.  Now it’s mid-January, and I still haven’t gotten back at it, despite knowing I feel 150% better when I do.

So now, I will pay the price.

I have not performed any studies, but I would venture to guess that exercise/diet and getting a handle on one’s finances are two of the most common resolutions people make each January.

I can’t give much advice on the former – I welcome it if you have any – but here are a few suggestions on the latter:

1. Get Organized:

Know what you have and where you have it. Create a spreadsheet or use a tracking software to note the type of account, where it is held and username/passwords. I mentioned Last Pass in a previous newsletter and now can’t imagine a day without it. It’s technically a password management software, which in itself is awesome, but you can also organize everything into folders and keep notes for each one.

2. Automate bill payments

There’s nothing worse than having to pay late fees and interest charges because you missed a payment. Anything that can be automated should be automated.

3. Pay yourself first: 

This is one of the most significant things you can do for yourself to reach your saving’s goal. Most employer plans are automated, but you can also set up autopayments to build an emergency fund, a vacation spending account or any type of investment account. You never tend to miss the money you never see. But the beauty of it is…it’s still your money.

4. Track your spending (everyone hates this one, even me)

Why do we hate it? Because it’s SO eye-opening and we sometimes do not like what we see. There is software out there to help. Quicken, Mint or Tiller seem to be the most popular. But even an old fashioned spreadsheet will work.

5. Review and update estate planning documents:

Life insurance and retirement account assets do not pass by way of will. You must have named beneficiaries on these assets if you want your wishes to be carried out. Review your beneficiary designations, powers of attorney, health care proxies and any other estate documents to be sure they still reflect your wishes.

Commit to even just one of these now and email me here to let me know which one you choose. Sometimes “saying it out loud” is the only force we need to take action.

Financial Fitness Tip

For those of you who have teens or young adults with part-time jobs, they will have a W2 detailing their wages and any taxes withheld. They will have had to pay FICA taxes (Social Security and Medicare). This is mandatory.

If their W2 indicates they have also had Federal and State taxes withheld, then they may want to file for a possible refund. Chances are, they did not earn enough throughout the year to owe any federal or state income taxes, so whatever was withheld from their paycheck is theirs.

However, they will have to file a tax return to get it back.

Things I Love: A Great Quote

Don’t you just love a great quote? I’m changing things up for 2021 and moving from “Things I Love” to “My Favorite Quotes”. 
 
Since I’m writing this newsletter on MLK Jr. Day, I thought I would kick off with one from him:
 
“We must learn to live together as brothers or perish together as fools.”
 
Thanks to the progress we’ve made, he would most definitely include “and sisters” if he were giving his inspiring speeches today.
 
Feel free to share a favorite quote of yours here and I will feature it in a future newsletter!

Highest Score Wins: How to Improve Your Credit Score in 2021

Everyone thinks that being a financial advisor means I am great with numbers, but there are lots of numbers that confuse the heck out of me. 

Blood pressure, tire pressure and my son’s PSAT scores come to mind. 

A number that is a mystery to many is their credit score. 

Sure, you know the higher the better, but how do you get there? And how do you stay there? 

This time of the year has me scrambling about at a variety of stores for holiday shopping.

Something I hear over and over again, from one cashier to the next:
“Would you like to save 10% by opening a Fill In The Blank credit card today?”  NOOOOO, I would not, but thank you for asking.

I’m a financial advisor – why wouldn’t I want to save 10%?

Here’s the thing. Having multiple credit cards won’t necessarily harm your credit score, it may even help it, when managed properly. It’s the “when managed properly” part that gets many into trouble and can inadvertently affect your credit score.

What Factors Affect Your Credit Score?

  1. Payment History

    Creditors want to see a trend of you making payments on time, every time, even if it’s just the minimum payment due.

    Carrying a balance on a high interest credit card is a financial planning 101 topic separate and apart from this (don’t do it), but paying the minimum amount due ON TIME is imperative to maintaining good credit. This is the factor most heavily weighted. 
     
  2. Credit Utilization Ratio (you want this number low)

    Simply stated, if your credit cards are “maxed out”, your ratio is not good. Lenders want to see that you have the option to use the credit, but don’t.

    For example, if you have three credit cards each with a $10,000 limit ($30,000 total limit), lenders don’t want to see you carrying a $25,000 balance. You are using almost 85% of your available credit (25/30). Conversely, if you are carrying a $5,000 balance you are only using about 15% (5/30) of your available credit. Lenders like this.
     
  3. Length of Credit History

    Different from payment history (and not as heavily weighted in your score), creditors look at the average length of all your credit accounts. This is why it often makes sense to keep an old credit card open, even if you’ve moved on to a new shiny one.

    This is why it’s also good to get teenagers/young adults started with some form of credit in their early years, and teaching them how to use it responsibly. This will put them on a solid foundation for a good credit score, which they will need for their first car loan or apartment.
     
  4. Types of Credit

    Having a diverse mix of credit and being able to manage all of them effectively at the same time helps boost your credit score.

    This doesn’t mean various credit cards from Macy’s, Amazon and Homegoods. This means entirely different types of loans, such as a mortgage, car and student loans, along with your credit cards.
     
  5. New Credit Inquiries

    How many new accounts you’ve opened and how many “hard inquiries” that come in from lenders have an effect on your credit score. Hard inquiries happen any time you are opening a new card or applying for a loan.

    Too many in a short period of time makes a lender nervous.

Financial Fitness Tip

Separate from your actual credit score is the report that makes up your score.

You can and should be checking your free credit report at least annually. The report will provide a comprehensive overview of your credit history and allow you to flag any activity that does not look right.

There are three major credit reporting agencies: Transunion, Equifax and Experian. They have come together  to make requesting your credit report more seamless and to help you avoid scammer websites offering “free” credit reports.

Follow this link to bring you to the ONLY official website you should be using. In “normal” times, you can request a report from each of the three agencies once per year, but due to COVID-19, they are offering free weekly online reports through April 2021.

Things I Love

These beautiful faces are now 17, 15 and 13, and ornaments like these become my favorites more and more every year. I am so blessed. Time is going too fast.

God Bless you and your families this holiday season, as we eagerly wave goodbye to 2020!

Mega Back Door Roth: This Supersized Option is Good for your Health

This topic has come up for me twice in the last week, so as is often the case, I’ve made it the topic for my newsletter this month.

I often get asked about the best strategies for saving outside of one’s 401(k).

My first caveat is that one size does not fit all, so what is a great solution for your neighbor may not be the best strategy for your situation.

I’ve highlighted in past newsletters the benefits of saving into an HSA, if you have one.

There’s also the option to contribute to an IRA, but regardless of which type of IRA you are to contributing to (deductible, non-deductible, ROTH, backdoor Roth), you are limited to how much you can contribute each year ($6,000 for 2020, $7,000 if you are over 50).

But what if you are in the fortunate position to be able to save more than this?

Introducing the Mega Backdoor Roth

There’s a little known strategy that I’m seeing as an option with more employers as of late. It’s the option to make after-tax contributions to your 401(k).

This strategy can offer tax diversification in retirement, but there are certain criteria that make it most effective.

It’s known in my industry as a  “Mega Backdoor Roth”, but you will not see it described that way in your benefits guide. It allows you to sock away more into retirement than the annual limits on a 401(k) or IRA.

Here’s how it works:

  1. Your 401(k) plan (your employer) allows after-tax contributions. If they don’t, game over.
     
  2. Your employer offers in-service distributions of these after-tax contributions to a Roth IRA while you are still employed or allows you to move the after-tax potion of your 401(k) to the Roth 401(k) part of the employer plan (if they offer one).

    If not allowed, game might be over, but not necessarily. It depends.

    I know, you hate when I say that. 
     
  3. You convert the after-tax contributions to one of the above as soon as allowed in order that the growth on your contributions is tax-free. You will now have a Roth IRA in retirement where there are no RMD requirements and distributions are tax free. Game changer.

When MIGHT this strategy be an effective strategy for you?

  • You already max out on your 401(k) contributions.
  • You max out on your HSA, if your employer offers one.
  • You make too much money for traditional IRA contributions to be deductible.
  • You max out a Roth IRA or backdoor Roth ($6,000 for 2020, $7,000 if you are over 50).

As with most financial planning and tax strategies, there are a lot of ins and outs and I try to stick to top level highlights to educate and make you aware of possible options available to you.  Consulting with your financial advisor or CPA is always prudent to determine which strategies are your best fit.

Financial Fitness Tip

Speaking of 401(k)’s, we are quickly approaching the end of 2020 (thank goodness). It’s a good time to check where you are with your 401(k) contributions for the year. You may have dialed back the % you contribute when things got a little coo coo in the markets or you had a temporary need for increased cash flow.

If things are looking brighter in your financial world, increase your % for these last few paychecks of the year and into 2021. And if there was never a hardship yet you are not maxing out, consider increasing it a percent or two now.

Little steps carry us a long way over time.

Things I Love

I will be pulling out my mom’s tattered and stained copy of her mom’s recipe to try to match what my grandmother used to create – a true masterpiece! I can never quite match it (my mother always said the same thing when she made it), but I can try.

And besides, it’s simply the tradition of making it and remembering them both that is my true Favorite Thing!

Happy Thanksgiving!

Sea of Letters

You are likely in the middle of open enrollment, or will be soon, so I thought this month would be a great time to review some of the crazy acronyms you see as your eyes glaze over the 100+ page benefits guide from your employer.

I can’t say here which benefits are the “best fit” for you. Reviewing benefit options is part of what I do with my clients each year. Lives change. Families change. Benefit packages change. For many, the confusion stays the same. 

The Biggest Offenders

FSA – Flexible Spending Account
HSA – Health Savings Account
HRA –  Health Reimbursement Account

These are NOT the same thing.

I’ll get the HRA out of the way, as it is not as common as the other two. This is an EMPLOYER owned and funded account an employee can use for medical expenses. It generally stays with your employer if you leave, unless they offer a retirement continuation. 

FSAs are offered with a standard HMO or PPO (I’m going to assume you know these two old friends).

I wrote a newsletter on HSAs a few months ago and the triple tax benefit they offer. They are only offered in conjunction with a HDHP. 

HDHP – High Deductible Health Plan

Similarities

  • Both are employee funded, although some employers will make contributions as an added benefit.
  • Both are funded with pre-tax dollars. Always a PLUS.
  • Both are used to pay for qualified medical expenses. 

Differences

  • Pre-tax contribution limits are higher for the HSA than the FSA. The HSA also offers a catch up contribution for those over age 55.
  • The up front, out of pocket medical payments are higher for Team HSA/HDHP.
  • FSA contributions are forfeited if not used in the same calendar year. There is some flexibility for carry over and grace periods, but forfeiture is the general rule. 
  • HSA contributions are yours forever. AND they can be invested. AND they can grow tax deferred. 
  • Your FSA is not portable. If you leave your company, the funds in the account do not go with you. An HSA is yours forever. 

While the HSA offers more flexibility than the FLEXIBLE Spending Account (oh the irony), it does not mean it is the right choice for you, even if both are offered by your employer. Every situation is unique.

Almost done, but a distinction I explain in this next section is REALLY important.

STD  – Short Term Disability
LTD – Long Term Disability

Granted, you probably know these two acronyms, but are you aware of the distinction when it comes to whether this benefit it taxable or not? 

It all comes down to how the premium is paid. I’ve worked with many clients who were not aware of the key difference because most benefit guides don’t do a great job of explaining it. 

It makes a big difference in how much money you actually take home, should you become disabled. 

  • If premiums are paid by you with after-tax dollars, then the disability benefit will not be taxable.
  • If premiums are paid by your employer, then the disability benefit will be taxable. 

Most LTD benefits offer coverage for “60% of salary”. If that 60% is not taxed, you are in OK shape.

If that 60% is taxed, your monthly benefit will be significantly less than your regular pay. 

One final scenario offering a TAX FREE disability benefit: 

  • Your employer pays the premium BUT adds the amount paid on your behalf to your gross earnings. By you paying taxes on the premium, any disability benefit you receive will be tax free

If your employer offers a tax free disability benefit option, this is the option you want. Otherwise, you may want to consider a private policy to supplement your employer plan.

Financial Fitness Tip

I often tie in both personal and professional experience to my newsletter and this time is no different. I was in a minor fender bender this morning (thankfully, everyone is OK), so I thought this was a good time to touch on auto insurance. Ironically, I also worked on a client plan this week where I recommended they increase their coverage. 

Most states require a minimum level of insurance, and if you are using a lender, they require proof of this coverage as well. Many folks go with the minimum requirements for Uninsured/Underinsured coverage and Property Damage. I don’t recommend this. Increase your coverage limits where you can. Back in my 20’s, I worked for an auto insurer as a claims adjuster, and believe me, these coverages come into play more often than we would like. 

Things I Love

I could probably do an entire newsletter devoted to binge worthy shows. My current fave is “Heartland” on Netflix. It’s a modern day Little House on the Prairie, which of course was the favorite of my 7 to 11 year old self. As I said in my January newsletter about The Marvelous Mrs. Maisel, it allows me to fall asleep with a happy heart. 

From a Google review:
“This sprawling family saga takes place where an unfortunate tragedy has glued a family together to pull them through life’s thick and thin moments. Follow young Amy Fleming as she slowly discovers she possesses her now-deceased mother’s ability to aid injured horses as well as maintaining good relationships with those who are trying to get by one day at a time.” 

Netflix has all 13 seasons and Heartland has been renewed for its 14th. When I saw that, I knew it must be a hit! 

One Woman Really CAN Reshape the World

In honor of the late Supreme Court Justice Ruth Bader Ginsburg, I’ve decided to share my newsletter from back in January where I made “art imitating life” observations of how far we’ve come, and still have to go, in moving the educational, professional and financial plight of all women forward.

RBG fought tirelessly for her own rights as a young woman to attend law school and, despite finishing top in her class at Columbia Law, still encountered gender discrimination while seeking employment. Of course she did, it was 1959! If not for her and many other female pioneers like her, I would not be sitting here today as owner of my own financial advisory firm.

Thank you RBG, for your tireless fight.

RBG and Mrs. Maisel would probably have been great friends!

Please continue reading for the post I shared in January:

Have you been watching Amazon’s hit comedy “The Marvelous Mrs. Maisel”? Do you love it? I have-and I DO! It’s simple. It’s funny. I can fall asleep after it is over with a light heart. I binge watched Season 3 over the holidays.

The story line focuses on Miriam “Midge” Maisel, a NYC housewife in the late 1950s/early 1960s who discovers she has a knack for stand-up comedy and begins actively pursuing a career. To keep it simple without need of spoiler alerts, her husband can’t handle her success, has an affair with his secretary and they separate.

I love that it brings current day recognition to the female pioneers that paved the way for the careers we women pursue today (although still today, this is not without challenges and/or risks to our financial well-being, but that’s a topic for another newsletter).

“Mrs. Maisel” depicts, in a “making fun of what used to be” sort of way, the early phases of breaking the mold during a time that was probably anything but fun for women choosing this path. I love that it makes me recognize and appreciate how much things have changed for women.   

Yet after watching an episode of Season 3, I began to wonder if in some ways, despite the 1960’s setting, “Mrs. Maisel” is also current day art imitating life when it comes to many women and their finances. As Midge gains earning power, she washes her hands of money management and leaves it in the trusted hands of her talent manager Susie, who fails miserably. And then, of all people, Susie goes to Midge’s EX-HUSBAND, begging him to take over Midge’s finances. So Midge has a successful career and is taking on the world…but will still be relying on her ex-husband to handle her money.

Unusual for the times? No, not at all. Women weren’t even allowed to apply for their own credit cards until 1974! But how much has truly changed in regards to women being fully engaged in their finances?

Certainly, there have been HUGE strides over the decades in so many areas for women, but there are still inroads that we need to make for our financial security and that of our families.

I leave you with this question:

On a scale of 1-10, how “in the loop” are you in the understanding of your personal or family finances?

If you are not an 8 or above, I encourage you to become more engaged, ask questions if you don’t understand, and make 2020 the year that you become your own pioneer in financial empowerment.


Financial Fitness Tip

This month I helped a client in understanding her right to appeal the IRMAA surcharge she was paying for her Medicare.

The Income Related Monthly Adjustment Amount (IRMAA) is an amount that is added on top of the base premiums for Medicare. Those that earn over a certain amount are subject to this surcharge.  More and more folks are affected by this as more and more folks work past age 65, but there are certain times that this surcharge can be successfully repealed.

Much to her delight, she easily won her appeal and now pays significantly less per month for her Medicare premiums!


My Favorite Things: Block Island

I have three passionate football players in my house, and a youth football coach, so when it was announced that football would not be allowed this Fall, it was time to make lemonade out of lemons.

We took a “glass half full” September trip to Block Island. We all have that place we hold near and dear to our hearts, our “happy place” that holds so many memories. In our hearts, it feels like it’s a living, breathing object. This is what Block Island is for me. I have been visiting since I was 6 -years old, and now my children have been there since as early as 1-month old!

Little known fact: Block Island’s official town name is “New Shoreham” and it’s where I derived the name of my firm, New Shore Financial. I had to be sure to incorporate my happy place into my passion!