Tuesday, April 30, 2024

Retire on Fire Class Series: Key Take-Aways


As the author of a book about transitions in later life, I recently served as a presenter for one session of a five-week online course called Retire on Fire: How You Can Thrive in Retirement. It was a pro bono presentation but one of the perks for doing so was free registration for the course and an opportunity to learn from the four other instructors.

Because I love to learn, I decided to take that opportunity and attend the course as a student when I was not teaching myself. Below are nine take-aways that I took away from the course about planning for, and living in, retirement:


Core Activities- One of the instructors recommended having three core passions or activities that provide daily time structure and a sense of meaning and purpose.


Social Contacts- Students were encouraged to initiate calls, texts, and e-mails to others, to travel with friends, to join organized groups, and to try new things to see if you like them or not. One speaker referred to this as a “tapas life,” where you sample different activities, keep some, and drop some.


Go-Go Years Spending- Ages 65 to 74 are often called the “go-go” years when many retirees are active and healthy. It may be okay to spend more money in the early years of retirement because many people do not spend as much in the “slow go” years that follow. Check with a financial advisor or try several retirement calculators to be sure.


Retirement Happiness- Research about retiree happiness by Wes Moss found the following characteristics of the happiest retirees: 3.6 core pursuits, attend church at least 1-2 times a year, have 3.6 close connections, and one core social epicenter (e.g., a church or volunteer site or social group).


Retirement Phases- Research by Riley Moynes identified four phases of retirement: 1. Vacation (a.k.a., “honeymoon”), 2. Loss (i.e., a feeling that life lacks purpose without work; about 10-15% of retirees skip this phase), 3. Experimentation (try new things), and 4. Reward (reinvent yourself).


Longer Life Expectancy- Many older adults live well into their 80s or 90s and this is a gift. It is up to them to take ownership of their final phase of life. “Reframe” and focus on positive aspects of aging. Also, focus on relationships and growth. There is no growth in your comfort zone.


Family Togetherness- A speaker told the story of a client who moved across the country to “be with family.” His family, however, did not expect to spend so much time with him and it was awkward. The client was very lonely because he knew nobody in his new geographical area except his busy family.


Lack of Planning- A speaker who was a financial planner noted that about 90% of his clients haven’t figured out what to do with the rest of their life. If your entire retirement plan is to spend more time with family and friends, you better check in with them first.


Success Metrics- Put at least three things per day on your schedule, even mundane activities like bill-paying and walking. Completing them and crossing them off your to-do list is a measure of success.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.


Thursday, April 25, 2024

How to Get Ready for a Garage Sale


The weather is slowly getting warmer across much of the country and many people are starting to think about having a garage sale. Reasons for a garage sale include making extra cash, downsizing in preparation for a move, or simply clearing away unwanted items and household clutter.


Below are eight tips to prepare for an upcoming garage sale:


Develop a Plan- Decide when, where, and how often to hold a sale. For example, the “where” can be on a covered porch, in a garage, or outside on a lawn or driveway. The “how often” can be one time only or twice a month for three months.


Join Your Community- Find out if your local community has a garage sale for its residents and decide if you want to be part of a larger event or hold your own private sale. For example, my community has an annual garage sale, called “junk in the trunk,” in a big parking lot.


Select a Date- Avoid summer holiday weekends (e.g., Memorial Day, 4th of July, and Labor Day) when potential customers are often busy entertaining guests or traveling. Also, identify back-up dates in the event of bad weather.


Advertise Your Sale- Pick a method that works for you. Options include putting an ad in a local newspaper, social media posts, a flyer on a local supermarket bulletin board, flyers distributed to neighbors, and messages on a neighborhood e-mail list.


Price Items in Advance- Put a price on every item or group items together that have the same price (e.g., $1 table, $3 table, $5 table). Keep prices in 25 cent increments for ease of making change and get a roll of quarters and small denomination bills in advance to serve as a “bank.”


Set Up a “Store”- Station yourself at the place where people enter and exit the garage sale and keep your cash box there. This way, you can keep an eye on your merchandise and conveniently check out shoppers. Have a tape measure handy to measure the dimensions of items and an extension cord to test electrical items such as small  appliances.


Track Your Sales- Use a list or envelopes to keep track of how much money you are making. If more than one household is involved in the sale, keep separate records for each seller and do not comingle money earned from each other’s merchandise.


Plan for Leftover Items- Decide what to with items that don’t sell. Some people may decide to hold another garage sale or two while others may decide to donate unsold items to a non-profit agency thrift shop, sell them at a consignment shop, or gift them to family members or friends.


One person’s trash is often another person’s treasure. Best wishes for a successful sale.

Thursday, April 18, 2024

Forensic Accounting: Barbservations and Recommendations


For most financial bloggers, their “best” posts reflect real life experiences with learning lessons for themselves and their readers. So it is with this post that describes recent steps taken to help settle my late brother’s estate. I write from the perspective of a next-of-kin relative.


Forensic accounting is defined by Investopedia as “a combination of accounting and investigative techniques.” While generally used to investigate financial crimes (e.g., embezzlement), it can also apply to exploring the finances of a deceased person following their death. For three full days earlier this year, I used my skills as a certified financial planner® to practice forensic accounting.


Below is a brief description of process steps that I used and recommendations for Money Talk readers to seriously consider implementing to reduce post-mortem hassles for loved ones:

Process Steps to Do Financial Forensic Accounting


Gather Resources- Review the deceased person’s financial filing system. My brother, for example, used hanging folders in a home office desk that were organized alphabetically by the name of product or service providers or by a description of specific documents. It took six weeks to find his digital assets inventory so data from online sources was not immediately available.


Construct a Net Worth Statement- Expect this to take time. It took me two full days to hunt down documents related to my brother’s assets and debts and calculate an estimated net worth. Tools that I used included bank statements, a checkbook register, and tax records (e.g., 1099-R form for IRA withdrawal). Later, with access to his devices, e-mails and texts were also helpful.


Cast a Wide Net- Check out possible sources of additional assets and income. For example, I did a search with MissingMoney.com to see if there was any money being held by New York State in his name. Sadly, there was not. I did, however, notice small deposits for royalties on his book and sponsored advertising on his website. Prior year tax returns also provided useful information.


Recommendations to Reduce Hassles For Loved Ones


¨   Prepare a list of digital assets and give it to trusted parties with a brief overview explanation

¨   Share the location and filing system for your legal and financial documents with trusted parties

¨   Prepare a “When I Die” folder with a draft obituary and list of tasks to be performed after death

¨   Update a net worth statement (assets – debts) annually and place it in the “When I Die” folder

¨   Make a list of beneficiary, Payable on Death, and Transfer on Death (POD/TOD) designations

¨   Prepare an autopay inventory by making a list of bank accounts or credit cards that bills are charged to

¨   Alert family about 2-factor authentication (2FA) on accounts so they keep cell service active

¨   Teach PC-using heirs how to navigate Apple devices or Apple-using heirs how to navigate PCs

¨   Teach heirs how to navigate unfamiliar e-mail and account logins (e.g., 2FA and security keys)

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Thursday, April 11, 2024

Individual Retirement Accounts: What You Need to Know


The 2023 income tax filing deadline is only days away (April 15, 2024 in most of the U.S.). It will be a busy weekend for many taxpayers and tax preparers who are filing tax returns or tax filing extensions.

One of the few things that taxpayers can do to reduce their income taxes after a calendar year ends is to make a tax-deductible contribution to a traditional individual retirement account (IRA) or a SEP-IRA (for small business owners and/or their employees). The maximum contribution for traditional IRAs for 2023 was $6,500 for workers under age 50 and $7,500 for those age 50+.


I recently attended a Financial Planning Association (FPA) webinar about traditional and Roth IRAs presented by Ed Slott, a nationally recognized expert on IRAs and frequent presenter at conferences for financial advisors. Below are nine take-aways from his presentation:

Roth IRA Contributions- Roth IRA contributions are funded with after-tax dollars (i.e., money that has been taxed) and can be withdrawn at any time for any reason tax-free and penalty-free.


Taxpayer Services- There is a big difference between tax preparation and tax planning. Tax preparation is based on past history; i.e., what already happened during the previous calendar year. Tax planning involves looking ahead and projecting future income and tax write-offs.


Baby Boomer Challenges- Baby boomers (born 1946-1964) were the first generation with the ability to save money for retirement in 403(b)s, 401(k)s, and IRAs for decades (their parent’s generation had pensions). Many have accumulated significant sums and need tax planning help.


Roth Conversions- Any pre-tax dollar funds that are converted (e.g., from a traditional IRA to a Roth IRA) must be included as ordinary income in the year that a Roth conversion is made.


RMD Inevitability- Required minimum distributions (RMDs) are inevitable if you have a traditional IRA (unless you make qualified charitable distributions), SEP-IRA, or qualified employer retirement plan (i.e., 401(k), 403(b), 457, or Thrift Savings Plan). There is no way out.


Five-Year Clock- The five-year clock to determine tax-free withdrawals of earnings on a Roth IRA starts on January 1 of the year of the first contribution or conversion to any Roth IRA.


Roth Conversion Opportunity- Between 1944 and 1963, the top U.S. tax bracket was over 90%. Mr. Slott noted that we are currently at some of the lowest tax rates ever and that people should consider moving money from traditional to Roth accounts now- before tax rates rise again.


Strategic Planning- Taxpayers with large tax-deferred accounts were described as “sitting ducks.” Two proactive strategies to mitigate taxes are 1. elective withdrawals between age 59½ and 73 (or 75) to spread taxes out over more years and 2. a series of small Roth conversions. Do Roth conversions near the end of a year when you have a better idea of your income for that year.


Charities As Beneficiaries- People may decide to name a charity as the beneficiary of their tax-loaded retirement savings accounts and gift money in taxable accounts (with a stepped-up basis) to family members. This relieves family members of RMD hassles and the only loser is the IRS.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.


Thursday, April 4, 2024

Highlights of Recent Webinars: First Quarter 2024


Every quarter, I like to review and summarize my notes from webinars I attended during the last three months. Below are some interesting tidbits from recent programs that I attended:

Future Self Thinking- Many people often think of their “future self” (who they will be decades in the future) as a stranger. As a result, they don’t think about the consequences of doing something now because their actions are affecting another person rather than themselves personally.


Required Minimum Distributions (RMDs)- Only IRAs and 403(b) plans (for school and non-profit sector employees) can be aggregated to calculate RMDs. All other tax-deferred plans, like 401(k)s and the thrift savings plan (TSP), must have RMDs calculated separately.


Saving Money on College Expenses- Suggested strategies include going to community college first, living at home with parents, going to a public college in your home state, applying for scholarships, buying used textbooks or renting textbooks, and getting a job at a college.


Loud Budgeting”- This is where people (mostly young adults) post videos, primarily on TikTok, about ways they are reducing expenses and saving money. In many cases, they are repackaging “tried and true” strategies from the past but are doing so to appeal to a new generation.


ChatGPT- This program, developed by Open AI, is the most popular large learning model (LLM). It is trained on a massive data set of text, pulls information from multiple sources, and consolidates it to create brand new content in response to prompts by users.


Financial Trauma- The textbook definition is any negative experience that affects how people handle money (e.g., saving and credit). The trauma can be “little t” (relatively minor) or “Big T” (a major event). Financial advisors should always remember that people are the expert of their life.


Roth Conversions- It is best to move money from a pre-tax account to a Roth account in low-taxable income years, during stock market downturns, and/or in small increments over time. When you do a Roth conversion, you are front-loading taxes to avoid taxes at higher rates later.


A Dollar Too Much- RMDs often push older taxpayers into a higher marginal tax bracket. Just one extra dollar in income can trigger tax on Social Security benefits, higher Medicare premiums, and the 3.8% net investment income tax.


IRMAA Medicare Surcharge- The income-related monthly adjustment amount (IRMAA) is an extra amount that high-earning retirees pay for Medicare coverage. Currently about 7% of retirees pay IRMAA and there are five IRMAA income thresholds beyond the standard Medicare premium. IRMAA is based on income earned two years earlier (e.g., 2022 for 2024) and can be avoided by lowering adjusted gross income or making an appeal to Medicare based on life events.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.


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