Did you see this!?!

For the 38 years that I have been in business, I have always told my clients to pay themselves first. This means taking advantage of retirement accounts from your first paycheck. Deposit funds into your 401k, 403b, or IRA from the beginning of your career. Now congress wants to penalize those who have done so, invested wisely, and seen large growth in their IRA accounts.
The House Ways and Means committee would “require taxpayers to distribute retirement account balances that exceed certain thresholds,” according to the list, which is a draft of ideas lawmakers assemble before formally pitching them in the House or Senate. This proposal would require accounts at $5 million and over to take distributions prior to age 72 to get their balances down to a more “fair” balance. They account for less than a tenth of 1% of the roughly 70 million taxpayers with a traditional or Roth IRA, according to the most recent IRS statistics.
Some Democrats used the report from the Ways and Means Committee as evidence that the rich are using IRAs as a tax shelter rather than an account to build a nest. I thought the IRA was written as a tax shelter to help build a retirement nest – what am I missing?
There have been a lot of tax proposals put out by the administration since the second week of January 2021, nothing has been passed yet. If we open this door, where does it end? Please pay attention to what is being proposed.


That was then.

Today is my 35 wedding anniversary so I decided to take a look at what prices were in 1986. We complain about how expensive everything has gotten, let’s take a look.
If you wanted to buy a house, your mortgage rate would be 10.19% vs. 2.47% today.
A gallon of gas was .86 vs. $3.72
A Rib eye steak cost $3.89/pound vs. $8.00/pound today.
I drive an Audi, in 1986 I would have paid $17,800 vs. a starting price of $39,000 today.
A lot has changed for the worse in 35 years, what has not is how much I love my Husband – that has grown with the prices!


Is that really an emergency?

I know most of you are sick of me talking about an emergency fund. If that past 20 months have taught us anything, it is that an emergency fund is necessary. Many people have had to deal with unexpected emergencies such as illness, job loss, or accidents. These are the types of things that your emergency fund is for – to cover you when unforeseen circumstances arise. An emergency fund is not for the following:

Lend out to someone. We all want to be able to help our friends and family in need, but do not do this at the risk of your own security. I have learned that often a “loan” becomes a gift due to lack of repayment.

Invest it. Emergency funds are those that you cannot afford to put at risk. It does not matter how hot a tip is or how strong your FOMO is, you do not invest emergency funds.

A vacation is not an emergency. It may be tempting, but you can also start a vacation fund alongside your emergency fund. Buying furniture or a car is not an emergency either. If you have been in an accident, your insurance should cover a loaner so you can take your time to find another car. I don’t care how great the sale on that sofa seems either – these are not emergencies.

I call the emergency fund the “toe of the sock” money. You need to really have to reach in far to get to those dollars. Think twice before you open that sock drawer.


What are you concerned about?

During my regular review appointment I always want to know what issues are keeping my clients up at night in reference to their finances. As the last 18 months have been a bit wacky, many clients are concerned about sudden changes in their employment and the impact on their cash flow.
36% of Americans are worried they won’t do a good enough job saving for near-term goals as well as retirement. But the solution, once again, boils down to smart decisions and more judicious spending, coupled with making sure you have a larger than average emergency fund for this very uncertain time we are in. Furthermore, when you contribute to a traditional retirement savings plan, like an IRA or 401(k), that money of yours goes in tax-free. The result? An instant lowering of your tax bill, which makes saving more feasible.
How you choose to spend is often more important than what you can save.


Don’t want to run out of money before you run out of life?

Since none of us knows how much time we have left on this Earth, I choose to err on the side of longevity. When putting together a retirement cash flow plan for my clients I assume age 95 for life expectancy. With this in mind, put these tips to work now to make sure you have a successful retirement.
1 It’s never too late to start planning. Although it might be impossible to know how long you’ll live or what your health may look like in the future, there are things you can plan for now that can set you up well for retirement. Figure out what at age you plan to retire, how much you are saving, what your estimated expenses are, how much income you will need to live on and how much you already have saved for retirement. Don’t forget that inflation and taxes will have an ever changing impact on your spending.
2. The sooner you start saving, the more time your money has to grow. When I talk to people just starting out in the world, I always tell them to put 10% into their payroll deducted retirement plan. Make sure that you also have enough cash on hand for emergencies. I know saving a bunch into a low interest bearing savings account is not jazzy, but it will save you in case of an emergency.
3. Don’t forget to invest the money you save. Compound interest can work wonders for your money. Just as with saving, the earlier you start investing, the more your money can grow. Look at the options you have available in your retirement plan and put together a diversified portfolio. If you are diversified your investments will not all move in the same direction at the same time. Diversification should provide some protection if you do not have all your dollars invested in the same items.
If you are still working, time is your biggest asset. Don’t waste it.


This makes me angry, and it should make your angry also.

PayPal co-founder Peter Thiel’s invested $2000 in a Roth account in 1999. Today is has grown to $5 billion today, thanks in part to investments in private securities. Senator Ron Wyden, chairman of the Senate Finance Committee, has also proposed restricting contributions to Roth IRAs after they’ve reached $5 million Bloomberg reported. He had first proposed this rule in 2016, but has since revisited it after news broke of Thiel’s account balance.
Peter Thiel did not do anything illegal or against the tax code. He spent time managing his account through aggressive investing. This is not something that should be punished in my opinion.


A proposed tax law change that may help you!

Many of my clients do not need the funds from their Required Minimum Distribution (RMD), but the consequence of not taking it is not an option.
Under a provision in proposed retirement legislation pending in Congress, required minimum distributions, or RMDs, would start at age 75 by 2032, up from age 72 — which only took effect last year after the 2019 Secure Act raised it from age 70½.
If this provision passes, many retirees can use those extra years of tax deferred accumulation to determine for themselves if they want to pull funds early, make qualified charitable donations, or simply delay to age 75.
I will keep watching for the vote to keep you posted. I’m all for deferring as long as possible.