ChatGPT and what to make of it… As I mentioned briefly at the end of my post last week, this technology is rapidly gaining popularity and pronouncements about its potential impact range from the mundane (helping kids to cheat in school) to the profound (like fundamentally altering our relationship with the Internet, even with each other).

But when people I respect suggest that ChatGPT is to consumer tech what the Beatles were to music, I want to at least establish a general understanding of what they’re talking about. And this isn’t just some fringe techie stuff, by the way. Recent announcements from Google and Microsoft, among others, about building similar tech into their search engines solidify the trend.

So this week, if you’ll indulge me, I wanted to see for myself what ChatGPT could offer in my realm. I created a free “research” account on the Open AI website and within minutes was watching the software generate content after entering this prompt:

“Write a 900 word blog post on personal finance using a conversational style”.

My first try left out the part about style and the writing seemed a bit boring, which is perhaps harsh since it’s being written by a computer. ChatGPT works best when we narrow down what we’re asking for. So I was curious if the software was capable of incorporating different writing styles. The output is below, unchanged by me. I then took this a little further and have included some of that interaction and other notes below.

I thought about cutting off part of ChatGPT’s response for brevity, but I think it’s more interesting in full, to get some sense of the software’s capabilities. And it’s not bad information either. I’m italicizing ChatGPT’s work to clearly differentiate it from my own. In short, I’m very impressed and a little unsettled, although it’s hard to explain why.

Personal finance is a critical aspect of our lives that many people struggle with. Whether you’re just starting out, trying to save for a big purchase, or simply looking for ways to be more financially savvy, there is a lot to consider when it comes to managing your money.

In this blog post, we’re going to talk about the basics of personal finance and share some tips and tricks for getting your finances in order. So, grab a cup of coffee and let’s dive in!

First, let’s start with the basics. What exactly is personal finance and why is it so important? Personal finance is the process of managing your money, including how you earn, spend, and save it. It’s a critical aspect of our lives because it directly impacts our ability to achieve our financial goals and live a comfortable life. Whether you’re trying to save for a home, a car, a vacation, or simply trying to build an emergency fund, your personal finance habits will play a big role in determining your success.

So, how do you get started with personal finance? The first step is to take a close look at your current financial situation. This means creating a budget, tracking your expenses, and understanding where your money is going each month. You can use tools like personal finance software, apps, or even a simple spreadsheet to keep track of your spending and see where you can make cuts or adjust your spending habits.

Next, it’s important to set financial goals. This could be anything from paying off debt, building an emergency fund, saving for a down payment on a home, or simply trying to save more money each month. Having clear goals in mind will give you a roadmap for your financial journey and help you stay focused and motivated.

One of the biggest challenges when it comes to personal finance is managing debt. If you have credit card debt, student loans, or other types of debt, it can feel overwhelming and like there’s no way out. But, with a little bit of planning and discipline, you can get your debt under control and start working towards a debt-free future.

One strategy for managing debt is to create a debt repayment plan. This means figuring out how much you owe, how much you can afford to pay each month, and what steps you can take to pay off your debt as quickly as possible. You can use the snowball method, where you focus on paying off the debt with the smallest balance first, or the avalanche method, where you focus on paying off the debt with the highest interest rate first.

Another important aspect of personal finance is saving and investing. Whether you’re saving for a big purchase, trying to build an emergency fund, or simply trying to grow your wealth, it’s important to have a solid savings and investing plan in place.

When it comes to savings, it’s a good idea to have a mix of short-term and long-term savings goals. This could mean having a savings account for unexpected expenses, a separate account for your emergency fund, and a longer-term savings plan for big purchases or retirement.

Investing can also play a big role in building wealth over time. There are a variety of investment options available, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). It’s important to do your research and understand the risks and rewards of each type of investment before making a decision. You can also consider working with a financial advisor to help you make informed investment decisions.

Finally, it’s important to protect your financial future by having adequate insurance coverage. This could include health insurance, life insurance

You’ll notice the piece got cutoff at life insurance, although I’m not sure why. So I asked…

What about life insurance?

Yes, life insurance is an important aspect of personal finance and helps protect your loved ones financially in the event of your death. There are two main types of life insurance: term life insurance and whole life insurance.

Term life insurance provides coverage for a specified term, usually ranging from 10 to 30 years. It’s typically the most affordable option and is ideal for people who need coverage for a specific period of time, such as when they have dependents or a mortgage.

Whole life insurance, also known as permanent life insurance, provides coverage for the duration of your life and usually includes an investment component. This type of insurance is more expensive than term life insurance but can provide a source of savings or cash value that you can access while you’re still alive.

When choosing a life insurance policy, it’s important to consider your coverage needs, your budget, and your long-term financial goals. You can work with a financial advisor or insurance agent to help you find the right coverage for your needs.

In conclusion, personal finance is an important aspect of our lives that requires attention, planning, and discipline. By taking the time to understand your finances, set financial goals, manage debt, save and invest, and protect your financial future with insurance, you can take control of your money and achieve your financial goals.

Remember, everyone’s financial journey is different and what works for one person may not work for another. The key is to find what works for you, stay disciplined, and stay the course. With a little bit of effort, you can achieve financial freedom and peace of mind.

And because I’m polite I said…

Thanks

You're welcome! If there's anything else you need help with, feel free to ask. I'm here to help!

What about how to find a financial planner?

Finding a financial planner can be an important step in taking control of your finances and achieving your financial goals. A financial planner can help you create a financial plan, manage your investments, and provide guidance and support as you work towards your financial goals.

Here are some steps to help you find the right financial planner for you:

Determine your needs: Before you start looking for a financial planner, it's important to understand what you need help with. Do you need help creating a budget, reducing debt, or planning for retirement? Knowing your specific needs will help you find a financial planner who specializes in the areas you need the most help with.

Ask for recommendations: Word of mouth can be a powerful tool when it comes to finding a financial planner. Ask friends, family members, or coworkers if they have a financial planner they would recommend. You can also ask your banker, lawyer, or accountant for recommendations.

Research your options: Once you have a list of potential financial planners, do some research to learn more about each one. Check their websites, read reviews, and look for any disciplinary actions or customer complaints.

Schedule consultations: Once you have a short list of potential financial planners, schedule consultations with each one. This will give you the opportunity to meet with the planner in person, ask questions, and get a sense of their communication style and expertise.

Consider credentials: When choosing a financial planner, it's important to consider their credentials. Look for a planner who is a certified financial planner (CFP), has a professional designation from a reputable organization, or is registered with the Securities and Exchange Commission (SEC).

Check for fees: Finally, make sure you understand the financial planner's fee structure. Some financial planners charge an hourly rate, while others charge a percentage of assets under management. Make sure you understand the fees and that they are within your budget.

By following these steps, you can find a financial planner who is right for you and who can help you take control of your finances and achieve your financial goals. Keep in mind that finding the right financial planner is an important decision, so take your time and choose wisely.

And because I was curious how it would respond, I asked…

Aren't financial planners all old white men?

It's a common misconception that financial planners are all old white men, but that is not the case. The financial planning industry is diverse and includes individuals of different ages, genders, races, and cultural backgrounds. In recent years, there has been a growing number of women and individuals from underrepresented communities entering the financial planning field, bringing a diversity of perspectives and experiences to the industry.

Additionally, many organizations and initiatives have been established to support diversity and inclusion in the financial planning industry. These organizations aim to increase representation and provide resources and support for underrepresented groups, including women, people of color, and the LGBTQ+ community.

So, while it's true that the financial planning industry has historically been dominated by older white men, that is changing. As more diverse individuals enter the field and bring their unique perspectives and experiences to the table, the financial planning industry is becoming more diverse and inclusive.

I then asked questions about how to find a financial planner, what sort of accrediting bodies and membership organizations exist, and so forth. I found the information provided by ChatGPT to be thorough, current, and accurate, which was surprising. It also seemed a little generic, which is understandable. I asked a more detailed question about how we should consider Monte Carlo analysis in the context of financial planning and was impressed by the thoughtfulness (if that’s an appropriate term in this context) of its answer. Yes, I could have found the answers via a traditional keyword Google search, but it would have taken much longer and obviously Google can’t toss out a blog post for me.

My understanding is that ChatGPT isn’t yet connected to the Internet but lives off of a trove of data that’s regularly updated while it’s learning from how we use it. We ask it questions and it responds contextually, which is fundamentally different from the relatively blunt tool of keyword searches. Once fully online and learning ramps up exponentially, well, flashes of that 2013 movie Her with Joaquin Phoenix and Scarlett Johannsen come to mind, but that’s probably a little much, right?

Again, this whole thing is quite impressive and a little unsettling, and it’s hard to tell what the investment/workplace/societal implications are at this point. But there are some, that much is certain.

Here’s a link to the OpenAI website to look into this further. The regular website has a quick tool to use but it’s been down each time I’ve looked. That’s why I created the free account. If you do so, just be careful what you ask and what information you share as there should be no expectation of privacy.

https://chat.openai.com/auth/login

Have questions? Ask us. We can help.

Originally when planning to write this week’s post it was going to be a longer piece about all the minutia of I Bonds, those investments made popular by excess inflation. But then I figured there’s so much out there online about these bonds already that I’d instead offer some thoughts on the purchase decision. Hopefully this will address your questions but I’m happy to discuss these and other details as needed.

Should you buy an I Bond?

The short answer is yes, but that’s mostly because I can’t think of a reason not to. Let me explain.

I Bonds are bought direct from the government via www.TreasuryDirect.gov. You’d hold them in electronic form and access all relevant information on that site. Yes, you can buy paper bonds but just with your tax refund. I don’t know why you’d opt for paper bonds these days anyway.

So, the first consideration is the hassle factor of yet another account on yet another website, and this time the site is pretty antiquated. Still, the process for setting up an online account, linking to your bank for funding, and actually buying an I Bond (or other types of savings bonds – you can do it all through this website) is clunky and prone to time-consuming mistakes. For example, my wife got locked out of her account and was told the only fix was to call Treasury Direct. We called and we’re told that too many people were calling and to call back some other time. We did so another day and had the same result. Frustrating.

That said, once you get the hang of the website’s quirks (and don’t get locked out) it’s pretty smooth. You can buy now, the money comes out of your bank account the next day and presto, you own an I Bond.

If we can get beyond the hassle factor, the reason to buy is that I Bonds pay an interest rate based on inflation measured by the Consumer Price Index. More on that below. And when CPI is high, as it is now, I Bonds aim to keep pace with it. Last year when inflation was ripping I Bonds were paying 9.62%. This sounded awesome since typical core bonds in your investment accounts may have been down by that much or more. The CPI has moderated in recent months so new I Bonds pay 6.89%.

Even at the reduced rate I Bond interest is still higher than the yield on the 10yr Treasury note, a key market benchmark, at about 3.5%, so what gives? Wouldn’t you just put all of your money into I Bonds at 6.89% and sail off happy into the future?

The answer is unfortunately no. The fundamental problem, if we can call it that, is that each person can only buy $10,000 worth of I Bonds per year. Maybe up to $5,000 more if you do so via your tax refund, but hopefully you’re managing your taxes better than letting the government hold thousands of your hard-earned dollars for a year at no interest, but I digress… You also can’t buy I Bonds in retirement accounts. I Bonds can only be held in your name, jointly with another person, your trust’s name, or with a beneficiary listed. “Entity” accounts are also possible but are beyond the scope of this post.

Is it worth the hassle factor to invest a relatively small amount of your nest egg? After thinking about this at length last year and again this year I think the short answer is yes. Why yes if I’ve been complaining about the hassle of dealing with an antiquated website? Mostly because I can’t think of a good other reason not to.

Some additional I Bond details –

There’s no secondary market for these bonds, so you won’t see their value fluctuate every day. The value of your I Bond sits there unchanged until interest gets applied every six months. That’s a psychological difference but may help a little at maintaining your sanity in volatile markets.

The money has to sit for at least 12 months but can be accessed prior to five years with a penalty of three months interest. Maybe I Bonds are good for extra medium-term savings that you’d prefer not to commit to the stock and bond markets? Otherwise, you could let the money accrue interest for up to 30 years.

The interest accrues tax-deferred until withdrawn unless you choose to report it each year. Then it gets taxed by the Feds and not the state.

And maybe no tax if you use the proceeds for higher education expenses and your modified adjusted gross income is lower than about $159,000 on your joint tax return. Those are current numbers, so this benefit may not materialize at the time if your income is too high, but at least in theory the interest could be tax free. If you know you’ll have higher income than this, I wouldn’t bother putting any money into I Bonds that would otherwise go into your kid’s 529 plan, for example.

The other issue for I Bonds is your average return over a longer period of time is likely to be less, perhaps substantially less, than current rates. The reason is that I Bond interest is a blend of a tiny, fixed rate and a rate that adjusts every six months based on the CPI. Assuming inflation gets back to the Fed’s goal of around 2%, I Bonds could end up averaging something much closer to that, perhaps less than the 10yr Treasury.

But again, worse case is you put some of your excess cash savings into something that ends up looking like a medium-term Treasury bond. What financial planner could find fault with that?

Have questions? Ask us. We can help.

Last week I laid out a schedule of sorts for my posts over the next few weeks. This morning I’m flipping that around a bit to talk about the SECURE Act 2.0 that was passed by Congress and signed into law during the wee hours of last year. I’ve been spending time in recent days going through the details, so it’s all very top of mind right now.

The original SECURE (Setting Every Community Up for Retirement Enhancement) Act was signed into law near year-end back in 2019 and disrupted the field of retirement planning. For example, the original Act included about ten major provisions like taking away the ability for non-spouse IRA beneficiaries to “stretch” required minimum distributions (RMDs) over their own lifetimes. These stretch provisions had been the go-to for years. Instead, the time limit became ten years and a whole bunch of complexity was added. The Act also bumped the starting age for RMDs to 72 from 70.5.

SECURE Act 2.0 had been talked about ever since and almost became law at least once before being watered down a bit in some ways for final passage. With this legislation we’re seeing a broadening of the retirement landscape amid maybe 100 provisions and more complexity. Interestingly, many of the changes will roll out over the next several years and some aren’t available in the marketplace yet because the financial industry needs time to respond. And as often happens anyway, Congress will weigh back in to fix mistakes that are inevitable within about 400 pages of text. So, the Act’s planning implications will unfold over time.

There’s a ton of detail so I’m going to list the points and some notes that I think are most relevant instead of bludgeoning you with all the small stuff.

RMDs -

Required Minimum Distributions now begin at age 73 instead of 72. So if you’re turning 72 during 2023, you can wait until next year to start your RMDs. Here are the age ranges:

If you were born before 1951, there’s no change – you’re still required to take your RMD.

If you were born during 1951 – 1959, your starting age is 73.

And if you were born in 1960 or later, you’ll start taking RMDs at 75.

Penalties for missing your RMD will drop from 50% to 25% of the amount you were supposed to take. And most people will pay only a 10% penalty assuming they correct their mistake quickly.

If you’re charitably inclined you’ll still be able to make Qualified Charitable Distributions from your IRA once you’ve hit age 70.5 (the actual age and not a day earlier). QCDs are generally a more tax efficient way to gift, especially if you’re taking RMDs.

Waiting to take your RMD can and usually does make good sense in the near-term from a tax perspective, but it also delays and potentially compounds the tax problem down the road, especially for those who can wait until 75, by compressing a higher balance IRA into a shorter life expectancy and larger RMDs. QCDs help because the money is obviously no longer in your IRA and subject to RMDs because it’s been gifted away. Roth conversions help too by moving the money from your regular IRA to a Roth, from which RMDs aren’t required. The details around Roth conversions are beyond the scope of this post, but we should definitely discuss conversions if you’re now waiting until 73, or even 75, to start your RMDs.

Starting next year surviving spouses will be allowed to treat their late-spouse’s IRA as their own (the current rule) or they could play the role of the decedent, so to speak. This could work in different ways but, for example, an older person loses their younger spouse, inherits their IRA, and then takes smaller RMDs based on their late-spouse’s life expectancy. Doing so would save some taxes versus merging the inherited account with their own and taking RMDs on everything based on their own life expectancy.

401(k) Updates –

First, let me say that there are multiple types of retirement plans, but for brevity I’m focusing primarily on the 401(k) since it’s more prevalent.

If you’re still working past RMD age and have a Roth 401(k) at work, you won’t be required to take a minimum distribution from it. The benefit here should be obvious, but this provision starts next year.

Employers can make matching and profit-sharing contributions to a Roth, whereas previously it was only to the employee’s Traditional 401(k) balance. The catch for the employer is these dollars can’t have a vesting schedule attached, but the details of how this will actually work still have to be ironed out.

And for employees over 50 with at least $145K of wages, starting next year catch-up contributions will have to go into a Roth. In other words, the extra money an older employee gets to save wouldn’t be saved pretax. These details need to be clarified too.

Also regarding catch-up contributions, in 2025 those who turn 60, 61, 62, or 63 can add an extra catch-up amount. Maybe $12,000 versus $10,000 currently.

The Act also created a Roth SIMPLE and a Roth SEP. The industry has to respond because these account types don’t exist in the real world yet. Maybe this opens up soon or later this year, I’m not sure. But this is a big benefit since SIMPLE and SEP plans have for years been the oddball by not containing Roth provisions like a 401(k) does.

529 Plans –

If you’re not yet getting the sense that Roth accounts are favored, get this: A portion of unused 529 Plan balances can be rolled into a Roth IRA tax free. There are lots of details here, such as a limit on how much can be moved each year and a there’s lifetime max of $35,000. The 529 Plan also has to have existed for at least 15 years and contributions from the last five years aren’t eligible. The Roth IRA also has to be in the name of the 529 Plan beneficiary, which can be changed prior to moving the money.

Other interesting updates –

There are a host of provisions allowing different groups to withdraw money early from their workplace plans without penalty. Other provisions are for those suffering from domestic violence, a natural disaster, or who simply need cash in an emergency. If so, this “emergency” category will allow folks to take a relatively small distribution of up to $1,000 per year penalty-free that could be paid back to avoid taxes.

The thrust behind this last point created a new type of savings account for workplace plans that will, I suppose, sit beside a 401(k), only be invested conservatively, and would allow for pretax contributions and matching contributions from the employer. This seems an interesting attempt at keeping people from treating their long-term savings like an ATM.

For those with disabled adult children, starting next year ABLE accounts can be opened until age 46 versus the current limit of age 26.

Again, all this and more is brand new. The practical details will take time to emerge as Congress fixes errors, the IRS weighs in, and as industry responds. I’ll try to keep you posted along the way, but please let us know of questions.

Have questions? Ask me. I can help.

Wondering why your investments have been performing better lately? While I’d love to take the credit, the turnabout for stocks and bonds so far this year is, as always, due to a variety of factors. But the most important factor is still Federal Reserve policy. The Fed, and concerns about how its interest rate decisions would be implemented, dominated the conversation last year and helped send markets down often in the teens or more than 20%, depending on which index you look at. We’re still hyper focused on the Fed, but the rhetoric has changed a bit and so has the mood.

So far this year we’ve seen a marked difference in performance from last year. The S&P 500 is up almost 8% through last Friday, foreign stocks are up nearly 9%, small caps up 13%, and even bonds, the real disappointment last year, are up 3%. Check out the chart below. The green line is the S&P 500, blue is foreign stocks, orange is small caps, and bonds get to be lavender this week.

It’s still early days yet for 2023, but this is obviously a welcome sight over last year, even if short-lived. As a reminder, here’s what last year looked like for the same indexes.

So what gives? Investors are still wondering and worrying about inflation, the likelihood of recession, and how Fed policy could impact it all. If the Fed keeps raising rates too much too quickly a recession is likely because money costs a lot more to borrow, and that gums up the system. For example, the Prime Rate, a key consumer finance benchmark, was 3.25% a year ago but is now 7.75%. This impacts the cost of credit card balances and HELOCs, among other things, and when it’s high consumer spending is sure to slow, perhaps quickly. But if the Fed turns kinder and gentler and takes more of a wait-and-see approach, consumption could stay strong, corporate profits remain relatively high, and maybe we’d avoid a recession. That’s the thinking anyway. As all this unfolds market participants scrutinize everything coming out of the Fed, looking for clues about which Fed we’ll be dealing with. This makes the Fed’s interest rate decisions and, perhaps more importantly, how the information is delivered by the Fed Chair incredibly important – the words and tone used, the body language, all of it impacts markets.

That might sound a little farfetched but it’s true. For years the Fed chairperson has held a live press conference following the announcement of its interest rate decisions. Prior to this it was just a press release without much accompanying color. These press conferences offer the media a regular formal opportunity to ask questions about the economy, if the Fed felt growth was too hot or too cold, and what it was planning to do about it. As you can imagine, these pressers could sometimes be a snooze fest, only interesting to people who really pay attention. But other times, such as during the pandemic’s early days and over recent months as inflation was catching everyone off guard, watching the Q&A felt like living history and markets often responded negatively, but sometimes positive in a big way.

Such was the case last week when Fed Chair Jerome Powell took to the lectern to deliver his remarks and take questions from the financial press. Inflation is still too high but has been waning, he said, using the term “disinflation” several times. He described how the tough work they’ve done by raising rates so much has been working without causing too much havoc in the economy. The job market is strong with unemployment at 3.4%, a historic low, with nearly two jobs available or every job seeker. Risk of recession is still present, but there’s a decent chance the economy avoids recession, or at least a major one, as inflation gets back to acceptable levels. And Chair Powell elaborated more than usual on how a so-called soft landing could play out and peeled the layers back further on some of the metrics he uses to keep tabs on the economy.

Ultimately the Fed opted to raise short-term rates by 0.25% instead of 0.5%, as had been become normalized in recent months. This smaller increase, coupled with Chair Powell’s relatively upbeat remarks, was cheered by markets. Only time will tell, of course, if we can get out of this situation relatively unscathed, but here’s hoping for the best-case scenario!

While you don’t have to watch these press conferences regularly, consider watching last week’s. Powell doesn’t make investment recommendations or try to sell a narrative. Instead, it’s about 45 mins of how, arguably, the most important person in the financial markets right now feels about inflation, our economy, and the outlook. All important context, straight from the source. 

Here’s a link to the Fed’s homepage. The video plays right from the home screen.

https://www.federalreserve.gov/

As an aside, I just finished some intro stuff about ChatGPT and feel compelled to offer that I personally wrote everything above, for better or worse. One quality peice I read about this new tech floored me a bit when I got to the end and was informed that ChatGPT had written about 2/3rds of the article. And then separately my research folks used today as the 59th anniversary of the Beatles landing to suggest that ChatGPT is as much of a societal gamechanger as the boys from Liverpool. Quite the statement! If you haven't already, take a few minutes to check this out. Here's one of very many videos on the topic.

https://www.youtube.com/watch?v=Pm34OBs9W_g

Have questions? Ask us. We can help.

When I started this firm eight or so years ago I really wasn’t sure what my goal was other than being able to work with clients in the best way possible. For me this meant charging out on my own, leaving the brokerage world and its sales culture behind, and building from the ground up. It was rocky along the way, both in the struggles of business and, at times, the markets, but I never considered turning back.

As my business grew I brought Brayden on to assist. That was over four years ago and now he’s a Certified Financial Planner and ready to take on additional responsibilities within the firm. And like I mentioned a couple of weeks ago, we’ll soon be onboarding a team of highly skilled virtual assistants to take some of the administrative stuff off both of our plates. I’ll share more about them as we get closer to their start date. So, we’re growing and taking steps to account for that.

This week’s post will cover updates to some of the services we provide, how we’ll provide them, and what we’ll be asking of you.

Retirement Plan Updates –

This is a big part of what we do every day in addition to managing investments for most of our clients. I’ve been doing this work myself with Brayden’s help, and now he’ll take on a more active role. The buck, as they say, still stops with me but hopefully you’ll realize benefits from two CFPs working on your behalf.

We’ll reach out to our ongoing clients (those who we manage investments for) twice per year to ask a couple fundamental questions like:

• Are there any changes to your financial life that we should be aware of? Such as…
  1. Income changes?
  2. Planning to retire or perhaps going back to work?
  3. Births of children or grandchildren, marriages, deaths, or other family status changes?
  4. Any need for larger amounts of cash in the near-term?
• What questions do you have and how else can we help?

As always, we know you’re busy and you can feel free to add our emails to the delete pile until they’re relevant. If anything is truly time sensitive, we know where to find you.

But if your answer to any of these questions is Yes, then let us know and we’ll take it from there. Brayden will often take the lead on this but, importantly, please know that we work as a team. You can talk with either or both of us and that will never change. We’ll put our heads together and get back to you with questions, relevant documents requests, and next steps.

Tax Planning –

This is something we’ve been approaching slowly along with the evolution of software. Now we’ll be doubling down on offering this service to you as the software is exceptional and we have more experience with it. Our ongoing clients receive this service at no additional cost whereas our hourly clients will pay accordingly based on complexity.

Here’s how this works...

We need your last year’s tax return in a digital format. Paper can work but it’s not as clean as a PDF. Ask your tax preparer for a digital copy of your return. They all use software so this should be a simple thing to get. And if you can make a mental note to get us a copy every year at tax time, that would be great.

You can upload your return securely on our website www.ridgeviewfp.com. No login is required – here’s the link, but it’s easy to find in the Clients dropdown and by clicking on “Secure File Upload”. We can also email you a link at your request. Our system encrypts your file and adds it to the encrypted folder we already have for you – securing your data is critically important and we take that seriously.

https://ridgeviewfp.sharefile.com/share/getinfo/r715b255e9dd4afaa

Once we have your return we’ll need the answers to a few questions before getting started.

• Since we’re looking at last year’s taxes, how will your income change this year?
• Have you bought a home, started a business, or have other changes to deductions?
• Any sizeable capital gains or losses?
• What are your big tax questions?

We’ll run an initial analysis and look for planning opportunities. Worse case there aren’t any and you’ve spent a few minutes uploading a document and confirming you’re in good shape. Best case is we’re able to present you with some options to potentially save money now, in the future, or ideally both. Tax law changes frequently and the SECURE Act 2.0 has added more complexity, but also more opportunity. We’ll delve into retirement accounts and savings rates, Roth conversions, assessing the impact of extra income and timing of distributions, RMDs, capital gains and losses, and more. We’re also willing to interact with your tax person to ensure they’re onboard with anything you might end up doing. Brayden will often do the initial analysis here too, and then we’ll confer before communicating our findings to you.

The tax world is going through demographic issues just like everywhere else, so there’s a shortage of tax professionals to help with stuff like this. We’re not CPAs and don’t want to be, but we can help fill the gap that often exists between the filing of a return and longer-term planning.

Again, this is potentially a big benefit and all we need is your tax return.

For clarity, and just in case you’re wondering, I have no intentions of retiring or otherwise getting out of this business anytime soon. I see my time horizon as lasting decades. Instead, we’re evolving to serve you as best we can for the duration.

Have questions? Ask us. We can help.

Good morning out there. We’re only into the second week of 2023 and already it seems like this will be another busy and eventful year. There’s lots of information that I’d like to share all at once. But in the spirit of brevity this morning’s post is a summary of more detailed content that I’ll be sending out over the next few weeks or so.

From Me to We –

My first inclination is to do things by myself. As you likely know, I left the brokerage world over eight years ago to start this firm on my own. I enjoy running long distances, often alone, and tend toward solo sports. It’s not “me against the world” or an ego problem (at least I hope not) that finds me preferring to work alone. I’m just wired for independence.

But of course that only gets you so far, and the complexities of business and life require more sets of hands.

My assistant-turned-paraplanner, Brayden, and I have been working together since 2018 and it’s been great helping him grow in his career. I’m happy to report that Brayden has just completed his relevant work experience requirement to become a Certified Financial Planner after previously passing the national board exam. Brayden will now be taking on more responsibility within the firm as a financial planner and in his place we’re bringing on a team of highly skilled virtual assistants. More to come on that and other operational details next week.

Secure Act 2.0 –

Just when you thought the Congress couldn’t tie its own Velcro… they passed the so-called Secure Act 2.0 and expanded the retirement savings landscape. This had been percolating for a while but snuck under the radar as part of an appropriations package that wasn’t signed into law until the final days of last year. I’ll be working on a better summary for a post a couple of weeks from now, but here’s some of the bigger news:

Required Minimum Distributions now begin at age 73 instead of 72. So if you’re turning 72 this year and were planning to start taking RMDs from your retirement accounts, you can wait until next year.

The main reason to wait is that it reduces your taxable income. Of course this only helps if you have other money to cover your spending needs. This isn’t the case for most people, but there are quite a few who are being forced into paying taxes unnecessarily due to the RMD rules.

These changes don’t impact folks who are already taking RMDs.

Another big change: if you were born in 1960 or later, your starting age is now 75.

Penalties for missing your RMD have been reduced from 50% to 25%, and perhaps to as low as 10% if you fix the problem quickly. In many ways the Act presents a kinder and gentler set of rules. More to come on this soon.

An update on I Bonds –

I Bonds were all the rage last year for good reason, at least superficially. The bonds pay an interest rate that gets reset as the Consumer Price Index (the generally accepted measure of inflation within the economy) changes. So it makes sense that as inflation was spiking, so would the rates on I Bonds, reaching as high as 9.6% last year.

But nothing is that simple for long. As inflation wanes so has the rate that I Bonds pay, currently about 6.9%. This sounds higher than the rates available on short- and medium-term Treasurys for example, of around 4.25% and 3.5%, respectively. (If those rates seem backwards, that’s an inverted yield curve for you.) Higher yes, but if CPI keeps trending lower I Bond rates will follow. They’re variable and are meant to be held longer-term, so we end up looking at an average rate over, say, five or more years that could be about the same as Treasurys.

So are I Bonds still a viable option for some of your hard-earned savings? The short answer is that it’s complicated. We’ll discuss that soon. In the meantime, the Treasury Direct website has a couple updated explainer pages that are pretty good.

https://treasurydirect.gov/savings-bonds/i-bonds/

https://treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/

Otherwise, I hope you and your family have been okay during the recent storms, flooding, power outages, and so forth. That’s a lot of water in a short time, so hopefully it goes a decent way to relieving drought conditions.

Have questions? Ask me. I can help.