Financial Blog For Busy Families & Impact Investors

Linda Rogers 11/19/24 Linda Rogers 11/19/24

In-Kind RMD Strategy [video]

For people who don’t need the money yet, such as those who inherited an IRA subject to RMDs but are still working, you can transfer shares equivalent to the RMD amount to a Brokerage account. That allows you to satisfy the RMD but keep the money invested. Let's go through this strategy.

transcript

I'm working through RMDs for clients to make sure that they're done by the end of the year. These are required minimum distributions from tax-deferred accounts.

What many people don’t realize is that we can actually do in-kind distributions to satisfy that RMD.

For example, taking it from the IRA and moving it to your brokerage account.

The more traditional way of doing it is if you need to take a $10,000 distribution from your IRA, just sell $10,000 worth of a mutual fund or ETF, transfer the proceeds to your checking account - and you're good. That makes sense for people who are retired and already living off of their portfolio.

But for people that are still working and are not using that money to live on, what you can do instead are these in-kind distributions.

Instead of selling that $10,000 of a mutual fund, we can move $10,000 worth of those shares and transfer them to the brokerage account.

It is still a distribution, you'll still be taxed on it, you're still satisfying your RMD, but it's more efficient. We're not making those two trades, so if there are any fees associated with selling / buying, you're avoiding that. You're also not exposing yourself to any market fluctuation if there's a lag between those two trade days. It's just another option to consider that I will do for my clients that don't need to live off their RMDs but have to take their distribution by the end of the year.

Help me with my RMDs

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.

Linda Rogers 11/12/24 Linda Rogers 11/12/24

6 Estate Planning Mistakes to Fix Now

Estate Planning is something we all need to do regardless of net worth or personal situation. Your loved ones bear the burden of your mistakes - whether that is high probate fees, delays in receiving their inheritance, or hurt feelings that can destroy relationships. Here are the most common mistakes and how to avoid them.

Common Estate Planning Mistakes

1. Not having a plan in place.

Many people assume their situation is not complicated enough to warrant a plan. If you have a house, a child, money in a brokerage account, or want personal items to go to specific people, you need a plan. Every adult should have these basics:

A Will,
an Advanced Health Care Directive, and
a Durable Power of Attorney.

2. Not thinking through the Guardian for your minors.

Besides the obvious requirements of loving your child and being someone you want to raise them, the potential Guardian should have the necessary financial means, a stable life, and a relatively high probability that they will be around to raise your child. Nominate a Primary and Contingent Guardian in the event your first choice is not up to the task due to personal or health reasons.

3. Not explaining your plan to those involved.

Notify the people named in your estate planning documents of their roles. Provide them with a copy of your documents if you feel that is appropriate. Have the discussion now so they can ask questions and confirm they are comfortable with what may be asked of them. While some will be flattered to be named a Successor Trustee, others may see it as a burden. It is best to be clear on that now so you can make alternate arrangements if necessary.

4. Not titling assets in the name of your Trust.

Your Trust is powerless if you don’t “fund the Trust”. Your estate planning attorney will tell you exactly how to title each account and how to update each beneficiary designation. You just need to implement their recommendations. This is where people fail - they are thrilled they finally completed their documents but they don’t take this final, necessary step.

5. Not keeping your beneficiaries up to date.

You are often not required to name a beneficiary when you open an account, so many people leave this blank and assume they will get back to it. At least a few times a year I have a new client who has no beneficiaries or still has their ex-spouse listed. Sometimes the listed beneficiary has even died. We are all busy - it is understandable. That is why it is best practice to make a note for yourself to review beneficiaries periodically, such as once a year.

6. Not updating your plan with law changes.

Laws change. Unless you are an estate planning attorney, it is unlikely that you will be able to keep up with the new information (or that you will fully understand how changes relate to your plan). It is best to have an estate planning attorney review your document periodically, such as every 5 years, to see if there are any updates necessary.

Schedule a Call to see how we can help you get organized.

originally published 8/30/2018

Linda Rogers 11/8/24 Linda Rogers 11/8/24

Backdoor Roth Conversion Tip [video]

Quick Tip - Doing Backdoor Roth Conversions for clients and it got me thinking...

transcript

I recommend doing the Roth Contribution and Roth Conversion in the same calendar year.

This is why - when you do an IRA contribution, it generates one tax form. When you convert to a Roth IRA, it generates another tax form. If you do the contribution and conversion in the same calendar year you will get both of those tax forms at the same time to put on one return.

When you do a Roth Contribution and Roth Conversion in different calendar years, you report that one transaction over two returns. It gets confusing.

If you do the contribution in 2025, for example, for the previous year, which is valid as long as you do it within the dates required, and then you do the conversion right after in 2025, you are now reporting that conversion over two separate tax years. The 2024 return has to show the IRA contribution and then the conversion is going to show in 2025. Acceptable - just a little bit more messy. I've seen people get tripped on up on it and have to amend their tax return.

Have PWR manage my money and do the Roth Conversions for me

Linda Rogers 10/25/24 Linda Rogers 10/25/24

Investing During an Election Year [video]

Feeling nervous about investing this election year? This video will put things in perspective and help you focus on what you can control.

transcript

The month of October in a US Presidential election year is the month of peak uncertainty. If you're feeling that way right now, that's completely normal. But our emotions should not dictate our investment strategy. Let me go through what I'm telling my clients right now with some charts to back it up.

Stay invested.

Presidential election years actually have higher than average returns historically, but money market inflows also tend to be significantly higher. What that means is that many people are missing out on those better than average returns because they're sitting on the sidelines waiting to see what happens.

Who wins the presidential election alone does not dictate what the stock market does.

This has been sliced and diced, and there's no proven correlation. There's a myth that with certain parties the stock market will perform better, but again, that's just not been proven. The President of course matters, but how it translates to the stock market is much more complex. There's the composition of Congress, tax policy, spending, regulations - all of this is complicated and it takes time for things to filter through the system. So with all of that in mind, picking on Election Day and changing your investment strategy with that one day in mind just doesn't make sense.

Making different sector bets or sector plays based on who wins the election likely will also not serve you well.

It may come as no surprise what a Presidential hopeful says they will do and what they actually are able to accomplish are not the same thing. Most people would have argued that Energy would have done well under Trump and Clean Energy under Biden, but the exact opposite happened. And that was just one example. There were other examples where what happened was different than what the pundits were predicting.

Focus on what you can control.

The things that I'm talking to clients about are things that we can do now that can help us maximize our returns and set us up to meet our financial goals, regardless of who wins the election. Things such as maximizing our retirement savings and HSA contributions by year-end, staying invested, and being smart about our withdrawal strategy in case the tax laws do change. So consider focusing instead on these things versus Election Day. My name is Linda Rogers, Owner of Planning Within Reach.

Linda Rogers 10/18/24 Linda Rogers 10/18/24

A Newlywed's Guide to Updating Insurance

Don’t wait too long after the honeymoon to dive into your finances as a married couple. Getting married is a “qualifying event”, giving you a rare 30-60 day window to change your insurance elections outside the annual enrollment period. Here is how to start reviewing your policies together as a newly married couple.

Life Insurance

Ask yourself the difficult question – what would you do if something happened to your spouse? Would you stay in the same house? Same city?

Many people come to marriage without any life insurance because there isn’t yet anyone dependent on their income. For couples that don’t own a home together or have children, getting married alone may not require a life insurance purchase.

That being said, a risk that you need to be aware of is that you may have a medical event that prevents you from being able to obtain insurance in the future. For example, I have clients who had heart issues, a cancer diagnosis, and brain abnormalities discovered in their 30s and 40s - all impacting their ability to secure insurance. If you are uncomfortable with that risk, you may choose to obtain a policy now to lock in coverage even though you don’t necessarily need the policy yet.

For those actively shopping for a home together or trying to start a family, that strengthens the argument towards being proactive and purchasing a Term Life policy now versus delaying.

Disability Insurance

If you become disabled due to an injury or illness, will you be able to maintain your lifestyle? Disability insurance typically covers 50-70% of your monthly salary. Confirm you are both participating in your employer’s disability plan if there is one, or shop around for a private policy.

Health Insurance

Now that you are married, you can apply for joint coverage as a family under one of your health plans if that is beneficial. You may consider a plan with a Health Savings Account (HSA) if it is available and you have the cash flow to support the high deductible and annual HSA contributions.

Auto Insurance

Confirm your spouse is added as a second driver of your vehicle. Now is also a good time to confirm that you and your spouse have adequate liability and property damage coverage. I review the policies of newlyweds all the time and coverages rarely match. Many times, one has sufficient coverage and the other doesn’t. Let’s get you both on the same page with where you need to be.

Homeowners or Renters Insurance

If you are moving into one of your residences or getting a new place together, cancel the policy associated with the old residence. Make sure the new policy has enough "contents replacement" coverage for both of your personal belongings and has both your names listed as policy owners/insured.

Umbrella Insurance

Umbrella insurance is an additional layer of liability protection to supplement your home and auto policies. It also covers other risks such as libel and slander.

If your combined net worth is more than the liability limit on your home and auto insurance (typically $300K-$500K), you may consider purchasing an umbrella policy to protect your assets and future income potential.

Combining Policies Under One Provider

Combining your insurance coverage under one roof is usually the best way to keep costs low since most providers offer bundling discounts. This will also ensure that you don't have gaps in coverage and that your limits match. If you and your spouse have separate insurance companies, discuss which company you like best and obtain a quote to see your options.

Help us review an analyze our combined coverages

originally published 2/7/2018

Linda Rogers 10/9/24 Linda Rogers 10/9/24

What is AD&D Insurance?

You can buy AD&D Life Insurance at work and the coverage is cheap - should you buy it?

Dear Linda,

I can buy AD&D Life Insurance at work. The coverage is cheap - should I buy it?

You can, but let’s confirm you’re clear on what it is. People often don’t understand how narrow this coverage is, leaving them with a false sense of security that their loved ones are protected if something happens to them. In reality, AD&D covers very few situations (which is why it is cheap) and is not a replacement for a Term Life Policy.

Accidental death and dismemberment insurance (or AD&D) requirements

AD&D policies payout to beneficiaries if the insured dies in a covered accident. There will generally be a partial payout if you survive but are severely injured, such as losing a body part or the ability to hear, see, or speak, due to a covered accident.

Accidents due to a dangerous hobby, such as skydiving, likely won’t qualify for a payout. If you have a heart attack first, which led to the accident, there will be no payout. Additionally, if you don’t die as a direct result of the accident, but instead from a disease or complication after the accident, there is no payout.

Payouts for Term vs. AD&D

Term insurance also has exclusions but coverage is much broader than an AD&D policy since it includes death due to natural causes, such as heart disease and cancer. Exclusions include involvement in criminal activity, death under the influence of drugs or alcohol, and death due to something undisclosed during the application process (a hidden smoking habit or a dangerous hobby). Suicide can also typically be excluded in the first couple of years the policy is in force.

Obtain the amount you need in Term Life

While AD&D coverage is not bad, I don’t typically recommend purchasing additional amounts above and beyond what your employer may provide for free. If you need life and disability protection, consider the much broader Term Life policy and a Disability Policy.

Help me evaluate my work benefits.

originally published 11/12/2018

Linda Rogers 10/9/24 Linda Rogers 10/9/24

How to Evaluate your Disability Insurance [video]

Learn how to evaluate your coverage, understand policy definitions, and make informed decisions about protecting your income.

transcript

Disability insurance protects you against loss of income if you have an injury, illness, or a condition that prevents you from working. If you get hit by a car, for example, and you cannot go back to work, this coverage will kick in. I do ask people to send me their policies during the planning process and many times they don't really know exactly what to send me or they'll send me something from their work portal that says 60% and that's it. So here's what I'm looking for and what you should be evaluating at a bare minimum to understand your coverage.

Determine your benefit amount.

So this is the amount of coverage that you actually have and it can be listed in percentage or dollar form. Sometimes it will say something like it's 60% benefits up until a max of a dollar amount per month or per week. If that's the case, you do want to calculate if you're hitting the max and if you are, what is the actual percentage because it may be less than 60%. We will need that when we do our evaluation to determine if you have sufficient coverage.

Determine the definition of disability for your policy.

It may say that you're covered for your own occupation or any occupation. This is really important, especially if you have a highly specialized skill, like a surgeon. If you are unable to do surgery due to an accident, but you can still do paperwork or you can still lecture, the policy that you have may not pay out depending on the definition of disability that is written there, and that will be a substantial reduction in your income.

The elimination period or the day that benefits begin.

This is really important for us to know so that we have a sufficient cash reserve to cover that gap for you while you're waiting for your benefits.

What's the duration? How long do benefits last?

That may be listed in weeks, months, years, or until SSNRA. What's that? Social Security Normal Retirement Age or your Full Retirement Age. That's going to be listed on your Social Security Statement.

You want to be clear on the taxation of your benefits.

If your employer is paying the premiums for the policy, the benefits will come out taxable. If you're paying the premiums, it will be tax free. I'm also seeing more often that your employer is giving you the option if you want to pay the premiums or if you want them to pay them. So that's interesting.

If you don't have enough coverage or any coverage through your employer, you still have options. You can look at a private policy.

They do tend to be more expensive. However, one thing that you can try is to find a professional organization that you're part of. For example, for me, that would be the Financial Planning Association, because many times they do group people together and get a group rate. So you may be able to find a policy there that is more affordable than just going out on your own.

This is a general overview, but of course, things can get a lot more complicated with cost of living adjustments, riders, and coordination with other benefits. Get personalized advice if you have any questions. My name is Linda Rogers, Owner of Planning Within Reach.

Linda Rogers 9/30/24 Linda Rogers 9/30/24

Ask Linda: Which type of life insurance should we buy?

We typically recommend Term Life over Whole Life. Here's why.

Dear Linda,

My husband and I need life insurance. Should we purchase a Term Life or Whole Life policy to protect our young children? What is the difference?

The purpose of life insurance is to protect those who are dependent on your income in the event of your death. A dependent can be a spouse or a young child, but it can also be a sibling or a parent whom you help financially. While there are exceptions, we typically recommend Term Life over Whole Life for the following reasons.

Term Life is simple, customizable, and affordable.

You can choose a finite time, such as 10, 20, or 30 years. Most people obtain a policy that covers them until their planned retirement age. You can also layer multiple policies so the amount of coverage declines as your need declines.

Alternatively, Whole Life covers you until you stop paying premiums or reach a certain age, such as 100. When you die, your beneficiaries will receive your investment accounts and real estate equity. If you don’t have anyone dependent on you financially, that is likely sufficient.

Whole Life’s higher premiums may become unaffordable when you most need the insurance, forcing you to drop or greatly reduce coverage.

Both Whole and Term Life premiums are fixed, but Whole Life premiums can be up to 10X more expensive. Given this price difference, many people simply can't afford the amount of coverage they need if they purchase a Whole Life policy.

Here’s the other thing - even if you can afford the higher premium today, life changes. Think about how different your cash flow was 3 years ago. If money gets tight for whatever reason - a job change, a new baby, or a new car payment - you can temporarily stop contributing to your Roth IRA, 529, or 401k, but you can't stop paying insurance premiums without the risk of losing coverage.

The Whole Life investment component, or cash value, is overrated.

Both Whole and Term Life have an insurance component (death benefit), but only Whole Life has an investment component (cash value). The cash value is often sold as a benefit, but the returns are often barely keeping up with inflation. When you die, the cash value typically goes to the insurance company, not your beneficiaries. If you borrow from the cash value, the loan amount plus interest is deducted from your death benefit.

Help me determine the best type of insurance for my needs.

When Whole Life Makes Sense

There are situations where a Whole Life policy may make sense, such as if you have an estate tax issue or a special needs child, but the situations are limited. In our practice, Term Life is the best solution for most people because it allows you to obtain the sufficient amount of life insurance when you need it, at a much lower cost.

originally published 7/23/2018

Linda Rogers 9/19/24 Linda Rogers 9/19/24

The TSP’s I Fund is Changing [video]

The TSP is changing the benchmark for its I Fund. Here are the details. Non-participants may also find the content relevant if you have an international fund or want to get exposure to that space.

trancript

What kind of International Fund do you have?

You may think that most International Funds are the same - just investing in non-U.S. companies, but it actually can be a little more complicated than that. So let's go through why, using as an example, the most recent change to the TSP's I Fund.

International funds can have different compositions.

A fund can be categorized as International, but just have exposure to Developed Nations such as the UK, Japan, Australia. Or it could be just having exposure to Emerging Nations like India, Brazil, Mexico. Or it could have exposure to both. Or it could also exclude other countries besides just the US.

The TSP's International fund, the I Fund, is undergoing a change that will be done by the end of this year, end of 2024. Originally, the benchmark had exposure to just Developed Nations - it was the MSCI EAFE. The benchmark is changing to have exposure to both Developed and Emerging Markets, so it's going to be more broad and more diversified. The new index will be the MSCI All Country World (Investable) Market Index ex US ex China ex Hong Kong.

In the past, you may have known that the I Fund only had exposure to Developed Nations, so maybe you had an additional slice of Emerging Markets Funds in the rest of your portfolio to complement that. If that's the case, you may start to want to unwind that Emerging Market market position now that the I Fund is changing and will be more comprehensive.

Don’t depend on a Fund’s name.

Even if you don't have the TSP, this is a good reminder to just look a little deeper at your International Fund. Let me give you an example. Even at Fidelity, there is a Fidelity International Index which only has exposure to Developed Nations. Then there's a Fidelity Global ex US that's Developed and Emerging Markets. You can see how people can be confused by just looking at the name.

So you do need to look a little deeper. Neither is better or worse - it's just what do you want, what you're looking for. I personally do like the more comprehensive fund that has both Developed and Emerging Markets.

What to do when your International Fund doesn’t have a ticker.

If a fund has a ticker symbol, then it's fairly easy to go ahead and do the research and just see what the composition of that fund is. But it is harder when you have something like the I Fund that doesn't have a ticker symbol or these Collective Investment Trusts (CITs) that I do see a lot in 401ks. They're great - they're broad, they're low cost, they're diversified - but we don't have a ticker symbol. So we need to look at the benchmark and be very clear. What is the benchmark it's tracking? Then we can look at the composition of that benchmark to know, okay, Developed, Emerging, whatever it is, so that we can do our portfolio allocation.

So now, armed with all this information, go ahead and find out what International Fund you have and reach out with any questions. My name is Linda Rogers, Owner of Planning Within Reach.

Linda Rogers 9/11/24 Linda Rogers 9/11/24

Homeowners Policy Review - Part 2 of 2 [video]

Let's review our Homeowners Insurance policy together. We're talking Coverage B - Other Structures, Non-Covered Hazards, and Personal Liability Coverage in this video.

transcript

Next up, we're going to look at Coverage B - Other Structures.

We talked about the Dwelling Protection, which is the structure you live in and all attached structures. But if you have an unattached structure, like a garage or a shed, that's going to be covered in this Coverage B. Make sure the default looks okay. Look at the amount, especially if you've recently made a change. We bought a house that had no garage. Over the course of a few months, we built a garage with a loft. We needed to go back and make sure that we increased that amount to protect our investment.

Next, let's review your Non-Covered Hazards.

Typical examples of these are earthquake and flood. You want to see if you want to get a separate policy for anything that you're at risk for. For my clients in California, across the board, I do recommend they obtain earthquake insurance. For clients nationally, clearly I don't know where every fault line is, so I do look at an earthquake hazard map to see where fault lines are. I've been surprised to find clients in certain parts of Tennessee or South Carolina that are actually on a fault line or very, very close in a high risk area. So just presenting them with the risk and then letting them decide if they want to get a separate policy for that. My insurance company also, when I log in, shows me the risk for things like flood and earthquake for each property. You may find something similar when you log in or check with your insurance provider if you're not sure of your risk.

Personal Liability Coverage

So this gives you financial protection if someone is injured on your property due to your negligence. This is the main thing it covers. There's a lot of nuances and there's exclusions so you want to be super clear, especially if you have high risk things like a pool, a dog, a trampoline - being crystal clear on what is covered and what's not. When you get a new policy, there's a lot of checklists, and I feel like they do a really thorough job making sure that you have the appropriate coverage. But it's when you add things after having a policy in place, things can get missed. Like you later got a dog, you later got a pool. So make sure that you are adding things as needed.

For the amount of liability protection that you should get, you want to look at your net worth, so your assets minus liabilities. See that amount and get coverage equal to that. That's a broad definition, though. That's just saying, what do you stand to lose in a lawsuit, but you may want to also consider your future earning potential. For example, if I have a young doctor that doesn't necessarily have a large net worth but a big earning potential down the road, I'm going to increase more coverage than just the net worth. The most you can typically obtain is $500K for this. If you need more, then I'm going to recommend an umbrella policy that will sit on top of that. So your home liability coverage will kick in first, and then if you need more, the umbrella will come in next.

Let me know what else you want to deep dive into for next time. My name is Linda Rogers, Owner of Planning Within Reach.

Financial Blog For Busy Families & Impact Investors

What many people don’t realize is that we can actually do in-kind distributions to satisfy that RMD.

Instead of selling that $10,000 of a mutual fund, we can move $10,000 worth of those shares and transfer them to the brokerage account.

Common Estate Planning Mistakes

1. Not having a plan in place.

2. Not thinking through the Guardian for your minors.

3. Not explaining your plan to those involved.

4. Not titling assets in the name of your Trust.

5. Not keeping your beneficiaries up to date.

6. Not updating your plan with law changes.

I recommend doing the Roth Contribution and Roth Conversion in the same calendar year.

When you do a Roth Contribution and Roth Conversion in different calendar years, you report that one transaction over two returns. It gets confusing.

Stay ​invested. ​

Who ​wins ​the ​presidential ​election ​alone ​does ​not ​dictate ​what ​the ​stock ​market ​does. ​

Making ​different ​sector ​bets ​or ​sector ​plays ​based ​on ​who ​wins ​the ​election ​​likely ​will ​also ​not ​serve ​you ​well.

Focus ​on ​what ​you ​can ​control. ​

Life Insurance

Disability Insurance

Health Insurance

Auto Insurance

Homeowners or Renters Insurance

Umbrella Insurance

Combining Policies Under One Provider

Accidental death and dismemberment insurance (or AD&D) requirements

Payouts for Term vs. AD&D

Obtain the amount you need in Term Life

Determine your benefit amount.

Determine the definition of disability for your policy.

The elimination period or the day that benefits begin.

What's the duration? How long do benefits last?

You want to be clear on the taxation of your benefits.

If you don't have enough coverage or any coverage through your employer, you still have options. You can look at a private policy.

Term Life is simple, customizable, and affordable.

Whole Life’s higher premiums may become unaffordable when you most need the insurance, forcing you to drop or greatly reduce coverage.

The Whole Life investment component, or cash value, is overrated.

When Whole Life Makes Sense

What kind of International Fund do you have?

International funds can have different compositions.

Don’t depend on a Fund’s name.

What to do when your International Fund doesn’t have a ticker.

Next up, we're going to look at Coverage B - Other Structures.

Next, let's review your Non-Covered Hazards.

Personal Liability Coverage

Stay invested.

Who wins the presidential election alone does not dictate what the stock market does.

Making different sector bets or sector plays based on who wins the election likely will also not serve you well.

Focus on what you can control.