My Final Quarterly Webinar Summary of 2024

 As 2024 winds down next week, it’s time for my final quarterly summary of take-aways from recent personal finance classes, conferences, and webinars that I attended. Below are some “nuggets” that you might find useful in your personal financial planning:

Offense and Defense- Financial offense involves earning money from one or more sources (e.g., paycheck, interest). Financial defense is spending what you earn with a plan. Just like football teams, offense and defense are both very important to achieve financial well-being. 

Couple Finances- One study found that 43% of couples merge all their money, 34% have a joint account for shared expenses only, and 23% keep all their money separate. There is no one “right” way for couples to set up financial accounts but many experts do advise paying bills in proportion to each spouse’s income in proportion to total household income.

Working Past Age 70- Benefits of continued work include: increased Social Security (if earnings replace low-earning years from young adulthood), increased retirement plan savings, the “still working exception” for required minimum distributions (RMDs), continued access to employer benefits, and fewer years to support yourself without a paycheck in later life. Pitfalls are possibly triggering a Medicare sign-up penalty and premium surcharges called IRMAA.

Retirement Challenges- Five issues in later life are longevity (outliving savings), stock and bond market volatility, inflation (reduced purchasing power), cognitive decline, and sequence of return risk. The latter is when an investment downturn occurs early in retirement, people need to sell shares for living expenses, and funds are no longer available for a rebound. Also, with tax-deferred retirement plans subject to RMDs, savers are “in a partnership with the IRS.”

Diagnostic Tools- Useful documents to understand an individual or couple’s finances for planning purposes are net worth and cash flow calculations, saving and investment account statements, and income tax returns. Investors should also review their portfolio (e.g., asset allocation weights and investment performance) “for 2-3 hours every 2-3 years.”

Emerging Adulthood- Many adult children are still on “the family payroll” with only 45% of young adults age 18-34 completely financially independent from their parents. Sometimes, subsidies total thousands of dollars that parents could have saved for retirement. For example, a transfer of $8,000 to adult children over the course of a year for rent, auto insurance, cell phone, etc. could have funded the maximum 2024 IRA contribution for a worker age 50+.

Prenup Analogy- A prenuptial agreement, a legally binding contact between soon-to-be married individuals, is similar to an auto insurance policy. You are planning for the possibility of an accident (i.e., divorce), but want to do everything possible to avoid it. Every married couple has a prenup: one they prepare themselves or decisions made according to state law.

Barbservations From a Free Dinner Seminar

Not a week goes by that I don’t receive colorful tri-fold invitations to free meal seminars for investments and preplanned burials and cremations. Sometimes as many as five a week. Living in a 55+ community in a state (Florida) with many older adults undoubtedly makes me a target. 

Recently, some neighbors and I decided to attend an investment seminar, primarily to see the venue, which is a high-end private golf club in a gated community that is not generally open to the public. I also figured that I would get some useful content for a blog post in addition to the free meal.

Below are five “Barbservations” about the seminar format, content, and take-aways:

You Will Get Hungry- I typically eat dinner around 6:30 pm, which is when the presentation was slated to start. Actually, it was more like 6:45 pm. The meal did not get served until 7:45 pm. Luckily, I expected this might happen and brought a granola bar to tide me over when my stomach started to growl loudly. I couldn’t help wondering if everyone else was getting very hungry also. I saw a few people looking at their watches.

Content Did Not Match the Invitation- Ten topics were listed in the seminar invitation. Only a few were actually addressed in the presentation, which included the presenter’s life story, topics not listed on the invitation, and a variety of “industry-speak” phrases (e.g., “duly licensed”). There were, however, several very instructive stories (e.g., a client who never changed a beneficiary designation from his deceased father to his wife, had no contingent beneficiary, and the asset took 13 months to go through probate, thereby delaying much needed income to the spouse).

Changes in Guaranteed Income- This is an important topic for retired married couples, who comprised the bulk of the audience. A story was shared about a couple that had $6,000 in income and only $2,000 when the wife was widowed and lost all pension benefits and was left with only one Social Security check. I’m not sure why this was so. Fear mongering? Under the 1984 Retirement Equity Act, workers cannot waive survivor benefits without the written consent of their spouses. There should not be any unexpected surprises. Take-away: a good question for spouses to ask each other is “If you die first, how much money will I receive?”

Fees Erode Wealth Accumulation- The presenter asked for a show of hands to answer questions about attendees’ knowledge of prices for consumer purchases (e.g., food and gas). He then went on to make the point that, unlike food and gas prices, many investors do not know what they pay in fees for investments and investment advisory services. Point well taken. If someone pays 2% of a $100,000 portfolio in fund + advisor fees, that is $2,000 a year and $20,000 in ten years!

Payable on Death Designations- The presenter rightly noted that Payable on Death (PoD) designations on bank accounts (as well as Transfer on Death (ToD) on investments) are a form of estate planning so non-retirement account assets can pass free of probate. Like beneficiaries, PoD and ToD designations must be kept updated. An excellent piece of advice was to keep adding PoDs to new CDs that rollover from previous CDs because they are a new contract.

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.

When There’s a Will, There’s a Way

 

The phrase “when there’s a will, there’s a way” is generally used to describe a personal trait that some people call “willpower” or “grit.” People with grit have a strong determination to do something, often against great odds. They keep on going and “push through” against obstacles big and small and, in the case of personal finance, temptations to spend money.

 

“When there’s a will, there’s a way” also makes a great title for a post about wills. Below are five important things to know about preparing a will and what happens when people lack one:

Purpose of a Will- A will is a written document that sets forth directions for the disposition of property when someone dies. This includes the naming of a personal representative (executor) to manage the estate distribution process and a guardian to provide care for minor children. The laws of each state specify requirements for a legal will (e.g., number of witnesses and notarization and who qualifies to serve as an executor). For example, in Florida, executors must be a state resident over age 18 or a blood (or adopted) relative. A friend living in New Jersey would not qualify.

 

Dying Without a Will- When people die without a will, state intestacy laws determine to whom their assets pass and when they pass. Without a will, an estate can be tied up in probate court, possibly for years, and there will likely be higher estate administrative costs (e.g., bonding for an appointed personal representative). Probate is the court-supervised process of gathering data about a deceased person’s assets, paying off creditors, and distributing assets to named beneficiaries.

 

Ambulatory Document- A will is ambulatory, i.e., it can be changed throughout the creator’s lifetime. It only becomes final when the creator dies. There are three essential sections: who the creator is, what assets the creator has, and who the creator’s assets will go to (e.g., family, friends, charity). Even if not required by state law, wills should be notarized so they are “self-proving” and heirs don’t have to scramble to locate the witnesses, often decades after a will is signed.

 

Excluded Assets- A will does not distribute assets that have named beneficiaries. This includes beneficiary designations on life insurance policies, annuities, and retirement savings accounts such as 401(k)s and IRAs as well as payable on death (PoD) designations on bank accounts, transfer on death (ToD) designations on investments, and assets with a joint tenancy with right of survivorship (JTWROS) title. When a will and title conflict, the title to an asset takes precedence.

 

Personal Representative- A named personal representative (i.e., an executor in a will) can be an individual (e.g., family member or friend) or legal or financial services industry fiduciary (e.g., attorney or bank trust department), if qualified under state law. When there is no will, or a named executor is unwilling or unable to serve, a known or unknown (to the deceased) personal representative will be named. As noted above, this can increase the cost and time frame for estate settlement. An upside, however, is that there may be greater court supervision. This can be a plus for people who have “nobody left” or nobody they can trust to manage their assets.

Beware of Frauds and Scams

 

Not a week goes by, it seems, when we don’t hear about the hacking of a large third party data base that stores our personal information for its clients (e.g., hospitals and employers) without our knowledge or consent. This makes us vulnerable to online scams and fraud in general.

 

Below are important things to know to avoid becoming a fraud victim:

¨    Nobody is Immune- Scams can happen to anybody regardless of age, income, educational level, etc. That said, older adults are often targeted because they have more wealth and are generally less tech savvy than younger generations. For example, the 352 area code in central Florida is a prime target because it includes a large older adult community called The Villages.

 

¨    Decision Rules are Helpful- Here are three examples. 1. Do not answer the phone if you do not know who is calling. Let it go to voice mail and block the number. 2. If someone cold calls to “verify your identity,” hang up. 3. Don’t “sit on it” if you think you were defrauded. Act immediately to report a scam by calling your bank, credit card company, and/or local police department’s non-emergency number. In other words, get help immediately!

 

¨    Common Fraud “Red Flags”- Here are three examples. 1. Banks, the IRS, Social Security, and Medicare will not call you to “verify information.” 2. If there is actually a warrant for your arrest, authorities will come to get you; they will not ask you for information or money. 3. Requests to pay fees for prizes or to “fix’ fake crimes are common giveaways, as are requests to send money using Bitcoin ATMs, prepaid debit cards, and the numbers on gift cards.

 

¨   Grandchild Scam Methods- A victim gets a call claiming to be from a grandchild in trouble. Perhaps a realistic snippet of their grandchild’s voice is harvested from social media or created using artificial intelligence (AI). A red flag for a grandparent scam is the fake “grandchild” saying something like “I’m badly injured….please talk to this person [fraudster].” The best protection is checking it out. If you are a grandparent, call your grandchildren or their parents.

 

¨   “Love” Can Hurt (Financially)- Romance scams often go on for months so fraudsters “build a bond” before asking victims for money. They often begin on social media and dating apps where fraudsters tell victims they want to get to know them. Connections are also made via  online games such a poker and “Words With Friends.” After a while, they will try to speak to victims on the phone and may send a fake photo. There may even be talk of a future wedding. Fraudsters then ask for money with an excuse such as medical bills or paying for a plane ticket. Experts advise ceasing all communication and never sending money to people you meet online.

 

¨   Fake Shopping Deals- This is where fraudsters pretend to be a legitimate business (e.g., Walmart, Talbots) and bait people with extremely low prices, often with fake ads on social media. They then take victims’ personal information and money but never send ordered items. The best way to avoid this scam is to only click on online shopping links that you search for.

    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.