Uncategorized Archives

Episode 71: How Can I Help My Grandchildren Save for College?

Written by Annie O'Rourke on June 6, 2022. Posted in Family & Finances, Financial Planning, Money Wisdom Question Series, Uncategorized.

The question is: if I want to help a grandchild or child save for college, should I be using a 529 savings plan or a custodial account? In addition to other ways of saving for future college expenses, these are two of the most popular options.

Custodial Accounts

Custodial accounts have been around for much longer and they’re a good way to put money away for a child or grandchild for their benefit down the road. An advantage of custodial accounts is that the funds can essentially be used for anything as long as it’s for the benefit of the child or minor. It doesn’t necessarily have to be school or higher education types of expenses. You can really use the money for anything.

The Downsides to Custodial Accounts

What are the downsides people often talk about with custodial accounts? When the child becomes the age of majority, which could depend on the state that they live in, whether it’s 18 or 21, it automatically becomes their money. If they want to take all the money out and spend it on what they want to spend it on, that’s essentially perfectly legal. They can do that. Another disadvantage of custodial accounts is in the federal needs based financial aid methodology. They will factor a little bit more heavily into that methodology versus a 529 savings plan.

529 Savings Plans

About 20 years or so ago came about the 529 college savings plans. If you definitely want to save for qualified higher education expenses, these are a really good way to do that. You do not get a federal tax deduction for putting money into a 529 college savings plan, but if you use your state’s plan, you might be able to get a state tax deduction.

Connecticut for example, where we’re primarily located, has a state tax deduction for contributions to a 529 plan. Up to $5,000 for a single individual or up to $10,000 for a married couple filing jointly. The state tax deduction is an advantage that you could possibly get for putting money into a plan. You also get tax deferred growth. If the money is growing and kicking off interest, dividends, capital gains and things like that, you’re not getting taxed on it. As long as you use the money at some point for qualified higher education expenses, the earnings on it is tax free. There are some ways to use the money for private school leading up to college, but there are some limitations.

Custodial Accounts vs 529 Savings Plans

In contrast to custodial accounts, 529 college savings plans don’t escape the federal financial aid methodology at all, but it will factor in a little bit less. A downside to a 529 college savings plan is if you take out the money and you’re not using it for qualified higher education expenses, there are some tax penalties in that year.

Thanks for joining me and I hope you found this information helpful!

P.P.S. Feel free to submit questions here for a chance to have them answered!

Podcast Episode 178: Are These Unreasonable Financial Requests?

Written by Doug Horn on December 11, 2020. Posted in Financial Planning, Podcasts, Retirement, Taxes, Uncategorized.

We all want to maximize our assets and push the limits of our financial planning abilities. It’s only natural to ask for as much as possible, but when do those requests start receiving push back?

On this episode of the Money Wisdom podcast, we’re talking all about those unreasonable requests. We’ll lay out a few examples of times when someone’s wishful thinking goes well-beyond what’s possible in a comprehensive financial plan.

The first things people want is bigger returns. That seems like a fair expectation, right? The problem comes in when you want that higher rate of return but you’re not willing to take on any additional risk. If there were ways to create better returns on your money without any of the worry, financial advisors wouldn’t need to work. We’d be on a beach somewhere enjoying an early retirement.

These unrealistic expectations seem to be much more prominent right now in an era of Robinhood traders and others that have seen massive returns over the past year. They haven’t seen much downside yet so there’s a misbelief that there’s no downside. Be careful getting caught up in this because corrections will always come.

The second unreasonable request we want to talk about is negotiating to lower fees. Everyone wants to get the best bargain for their money, but you pay for what you get in nearly every situation. Think about the sports car you’re willing to pay extra for when a much cheaper car will get you from point a to point b. You spend more because it’s worth it, right? That’s the same situation with a financial advisor. Experts get paid expert money for a reason. There’s additional value in return for those fees so keep that in mind when you want to pay less.

The final request we’ll hear from people is to eliminate the tax obligations for the money in their IRA and 401k account. There are ways to leverage those retirement accounts to make sure you heirs get as much of your money as possible, but there’s not a way to avoid taxes all-together. Tax planning is a big piece to retirement planning and we’re happy to go through the options you have to minimize your taxes.

Remember that you can set up your complimentary Money Map Retirement Review and we can get your retirement plan started and on the right track.

[1:12] – I want to get bigger returns with little to no risk

[6:21] – Can you reduce the fees for me?

[11:10] – How can I get out of paying taxes on the money in my IRAs and 401k accounts?

[12:02] – The Money Map Retirement Review

Thanks for listening to this episode. We’ll be back again next week for another show.

Retiring During The Recession – Timing Is Everything!

Written by Joel Johnson on June 24, 2020. Posted in Featured Articles, Uncategorized.

Originally published in Journal Inquirer

Should I Retire During a Recession?

A recession is defined as a general decline in economic activity over two consecutive quarters. The mere definition doesn’t begin to describe the magnitude of what people experience during this decline. The U.S. economy has dealt with recession 14 times since 1907. The most recent was the financial/banking crisis of 2008 when the government created an economic stimulus package to energize the economy. Age, timing and long-term financial goals play a pivotal role in how people are impacted by a recession. The current recession is a little different than the others because on top of a crippling financial crisis, we have a world-wide health pandemic wreaking havoc on individuals across the nation and globe.

Strategically, retiring during a recession may not be the ideal scenario for many. During these times, often those with the most assets stand to lose the most, therefore it is important to create a comprehensive financial plan that looks at your entire portfolio.

Phase I – Early Planning

As part of the financial planning process, complete an income analysis that will shed light on a couple of key points: 1) Do you have enough money to retire right now? And, 2) if you will be okay, what rate of return do you need on your money?

Health insurance and medical expenses, which can become a very costly expense during retirement, need to be part of your financial planning process. Are you eligible for Medicare? Can you go on a Medicare supplement? Or, what can you do to bridge the gap until you are eligible for Medicare at age 65? Your Health Savings Account (HSA) is portable so if you lose your job, the funds belong to you and can be used to pay for out-of-pocket medical expenses or insurance premiums (through COBRA).

Stress testing your portfolio is another valuable component of the financial planning process. What this means is running your portfolio through various scenarios to gauge investment risk and analyze performance against market volatility. Many individuals nearing retirement are taking too much risk with their investments. By performing a stress test, you would be able to see if that risk is too high and potentially sabotaging your retirement dreams.

Phase 2 – Riding the recession ripple

By building a strong savings account and protecting your current income, it’s less likely you will need to dip into your retirement investments. If your planned retirement occurs during this recession, seriously consider extending your employment a little bit longer. Continuing to work for an additional year or two can increase your level of income from Social Security benefits.

If possible, delay starting Social Security benefits. According to the Social Security website, if you were born in 1955 your full retirement age is 66 and 2 months which means you would receive 100 percent of your monthly benefit. However, if you wait until age 67, you would get 106.7 percent of the monthly benefit because you delayed receiving benefits for 10 months.

If you have a variable rate mortgage, now may be a smart time to refinance at a low fixed mortgage rate so your monthly payments don’t increase. Also, consider downsizing and cutting expenses. Most likely, a quick analysis of your expenses would highlight areas where costs could be cut and savings could be increased.

Phase 3 – Recovery and moving forward

During recovery, meet with your financial advisor to review your portfolio and see if modifications are necessary to mitigate any losses that might have occurred. If your savings weathered the storm relatively unscathed, consider the best options for gaining momentum to secure your ideal retirement plan.

Thinking ahead and focusing on the long-term, re-balance your portfolio to maintain your desired level of risk. Your risk level may have fluctuated during this time and therefore your asset allocation must reflect those changes. If you had previously stopped, resume investment contributions to take advantage of post-recession growth. And lastly, review your estate plan to ensure it still aligns with your final wishes.

Timing plays a central role in most of life’s decisions and retirement is no different. Although retiring during a recession may not be the ideal time, there are strategies you can follow to help secure the retirement you always dreamed of.

Joel Johnson, CFP®

Johnson Brunetti Celebrates 100 Years of Women in Military

Written by Annie O'Rourke on December 10, 2018. Posted in Uncategorized.

After 100 Years of Service, Female Vets Have Yet to Receive Proper Recognition

Together with the Manchester Elks Lodge, Johnson Brunetti helped to celebrate 100 Years of Women in Military at the 3rd Annual Veterans Luncheon. The luncheon took place on Thursday, December 6, 2018 – the day before Pearl Harbor Day. Veteran attendees enjoyed a delicious warm lunch, the national anthem, and “God Bless America,” speeches, presentations, and a feature about women in combat. Thanks to Zahner’s Clothiers, the veterans also took home with them warm winter apparel like socks, vests, gloves, and jackets, as well as personal toiletry items.

This year, the guest of honor was 101-year-old Julia Lempeck, a New Britain resident and veteran of World War II. She served stateside with the Women’s Army Corps as a clerk typist. In July 1946, she was honorably discharged. At this time, she earned the American Service Medal, World War II Victory Medal, and Good Conduct Medal. Unfortunately, her brother Andrew was killed in action during the war.

There were many other women in attendance who were honored on that day, and Johnson Brunetti was thankful to have been part of such a wonderful event. “Of all the things we do every year, this event is the one that all of our staff ask about. The folks involved today – it’s not something they’re required to do, it’s something they asked to do.” – Eric Hogarth, CFP®, Managing Partner of Johnson Brunetti.