My father was recently diagnosed with a serious progressive illness. After the initial shock, my siblings and I feel this is a good time to make sure his finances are in order, particularly with regards to estate planning. What do you recommend?
Read MoreMoney-Saving Apps Part 2. I am back with another 3 great "money-saving" apps to share.
Read MoreGrowing up, I would always watch him diligently shop for fresh produce, and over the years, I have learned many tips and tricks. Here are some of my favorites, since summer is right around the corner.
Read MoreCheck out these money-saving apps that will save you time and money, with little effort.
Read MoreI had an encounter recently with an annuity salesperson - we'll call him John. John introduced himself as a financial advisor. I said I was a fee-only financial planner, and I don't charge commissions. He said he didn't either. The following is a paraphrase of our conversation. I share it with you because it is a good example of questions you should be asking investment professionals before you consider working with them. In particular, question those who sell products. This is not the first time it has been clear to me that people selling products do not know the details of what they are selling or the other options available to their clients. Me: You don't charge commissions? How do you get paid?
John: I sell annuity products and the annuity companies pay us a certain amount, depending on the product.
Me: If you receive a fee for a particular product, it sounds like a commission to me.
John: Yes, but the clients don't pay anything. It is a great option for them and the money is very good. My goal is to achieve passive income.
Me: The clients don't pay any fees? John: They pay .08%, but that is very low.
Me: What about the underlying investments? What are the expense ratios on those?
John: It is an equity-indexed annuity. It is just invested in the market. It is not like those variable annuities that burned a lot of people.
Me: Yes, but the underlying investments have fees. Do you know those?
John: (The question was not answered.) We only get paid if the market goes up. We don't charge the .08% fee if the client doesn't make any money.
Me: So if the market goes up, they get the full gain in the market?
John: No, 50% of the gain.
Me: Do you ever recommend indexed mutual funds to your clients? They also track the market, but they are much lower cost when you add up all the additional fees that get tacked on with annuities. There is also much more transparency and liquidity.
John: There are no other investments out there that just track the market. This is the only way to do it.
Me: Of course there are. You haven't heard of index mutual funds? They've been around for decades. That's what they do by definition - track a given index.
John: (Blank stare, awkward moment) You should meet my associate, Bill. (another made up name)
Me: Well, if you wouldn't mind I would love to see a contract for one of your products that spells out all the details and fees.
John: Of course, nice talking to you.
Annuities are incredibly complicated and most people don't know what to ask or look for. I didn't get to the harder questions, like how the gain of the index is calculated (it is not as straightforward as seeing how the index performs) or the surrender period & fees. I have seen a 14 year surrender period with a 15% surrender charge in the first year. There are dozens of fees for optional benefits like inflation adjustments, death benefits and early withdrawal benefits that would tack onto the .08% fee John quoted. I am assuming this .08% is the administrative fee, but I cannot verify that because I never received the contract.
We all respond to incentives. The incentive for an annuity salesperson is huge. They make a lot of money upfront when they sell the product in addition to a trailing fee. Hence, there is a passive income for the seller. For that reason alone, it makes sense to seek out the opinion of someone who does not stand to gain financially. Examples include this Investor Alert from FINRA or a second opinion from a fee-only advisor.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.
Feeling uneasy with the global economy right now? Remember: Portfolios that include international exposure have historically performed better (and with less risk) than those that don't. The goal of diversification is to have broad exposure to different areas that are not perfectly correlated (such as the US and international markets). When one part of the portfolio goes down, it is offset by another part that behaves differently.
Trying to time movement in the market is not a viable strategy. We know the markets will react to political & economic events - we just don't know when or by how much. Successful market timing requires getting two things correct - when to get out of the market and when to get back in. When investors react emotionally, they tend to buy high and sell low.
During the planning process, I help you determine a balance you are comfortable with, and can stick with, always at a time when things are not emotional.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.
Many believe the "gig economy" is here to stay and will continue to get bigger. I heard a futurist speak at a conference a couple years ago, and he predicted there will be a "match.com" for employers and workers. Work will become more project-based with workers not necessarily being employees of a company but functioning as independent contractors. With Microsoft's recent purchase of LinkedIn, Microsoft may see LinkedIn as that matchmaking site. I will be asking our educational speaker next month for her thoughts, but I recommend professionals do the following: 1) Update your LinkedIn profile and clearly define your skills. Create a recurring task to review and update your profile quarterly.
2) Always be networking. Even if you love your job and have job security now, the future is unknown. I see many people who feel secure with their positions only to be let go due to a company sale, re-location, or structural change within their industry.
3) Reflect on what you are good at and enjoy doing. I just read the book, Spark Joy. The author is a decluttering guru from Japan, Marie Kondo. Her childhood stories are just as entertaining as the organization methods she developed and illustrated in the book. As a child, she would wake up early to organize her family's kitchen, and she practiced until she perfected a system for organizing every cabinet and drawer in her house. While she drove her family crazy at times, I am sure they couldn't deny she had a skill that she was very passionate about.
4) Create a vision of what you want to be doing in the next 5 years. Document everything you need to do to reach that goal. Break the action items into achievable goals for each of the next 5 years.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.
A health savings account (HSA) allows you to use tax-free money to pay for qualified medical expenses. The money you use to fund the account is not subject to federal income tax or state income tax in most states (California being one exception), and employer contributions are not taxable to the employee. Unlike a flex savings account (FSA), the money contributed to an HSA can be rolled over from year to year. There is no "use it or lose it" feature. In order to contribute to an HSA, you are required to be enrolled in a high deductible health plan (HDHP). You cannot contribute to an HSA if you are on Medicare Part A, but if you had an existing HSA account, you can use the funds to pay for qualified medical expenses while you are on Medicare. Considering Medicare doesn't pay for all medical expenses in retirement, and that this money is tax-free, there is a planning opportunity to over-fund an HSA with the understanding that you are letting the funds grow to be used tax-free in retirement.
For 2018, the max that can be contributed to an HSA is $3,450 for one person or $6,900 for a family.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.
The New York Times Your Money column had a timely article on renting versus buying by Tara Siegel Bernard. She interviewed a couple who are renting, by choice, in southern California due to high home prices in the area. She also interviewed a few financial professionals in the article. In summary, they agreed on the following: 1) In the short-term, no one can predict what the real estate market will do on a consistent basis. Therefore, if you are planning to live somewhere for just a few years and have no interest in being a landlord, it is better to rent.
2) If you plan to live in a place for 5+ years, buying may be the better investment, but it depends on the assumptions (time horizon, tax bracket, risk tolerance, etc).
3) While the research supports that buying a home isn't necessarily always a good investment, it disregards the non-financial benefits of owning (such as stability) and it assumes that you are disciplined with your money in terms of saving and investing.
4) When left to our own devices, many of us don't save as much as we can afford. If you are one of those people, a forced savings plan, like a mortgage payment, can be a good thing.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.
Every year, I compile a list of the FAQ's I get during tax season to share in the hopes it answers somebody else's question. This is not a substitute for tax advice. Please check with your tax professional for questions specific to your situation.
I have a taxable account, but I did not receive a 1099-INT form for it. I looked online and I earned $7 of interest in 2015. Do I need to claim this interest income on my tax return?
Yes - claim the interest income. Banks are only required to issue 1099-INT forms on accounts with income greater than $10 for the year. Regardless, all income is taxable (even if it is below the reporting requirements).
What is the 1095 form I received this year?
This form proves that you had health insurance for the entire year in 2015. The majority will only need to check a box on their tax return attesting to coverage. Those who purchased insurance on the Marketplace will get a 1095-A form and will need to fill out more information to see if their advance premium credit was accurate. The 1095-B and 1095-C are purely informational, but still need to be kept with your other tax documents in case you get audited.
I am considering installing solar panels this year. What tax benefit do I receive from this, if any?
You can claim 30% of the cost to install qualified solar systems as a federal tax credit.
Is unemployment income taxable?
Yes.
I started a business. Can I deduct expenses related to my home office?
Yes, but only if the area for your home office is exclusively and regularly used for your business. It cannot be used for personal as well as business reasons. See the other requirements and details here.
Can I deduct the cost of my child's summer camp?
You may be eligible for the dependent care tax credit if the child is your dependent, under age 13, and sending him or her to camp allows you to work. Check out IRS Publication 503 for more information.
How do I value my non-cash charitable contributions?
Use TurboTax's Its Deductible tool.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.
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