The Leaky Bucket - Tax-Advantaged Retirement Ideas by Eric Biddle

by Eric Biddle

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If you were to have a bucket with several holes the size of a pea you’d probably find a way to either fix it or replace it. Can you imagine the frustration of filling this bucket with a hose on the backside of your house only to lose a third of the water by the time you make it to the side of the house where the water is needed? This would be a terribly inefficient use of your water and your time. I recently had a bucket with a crack in the bottom and I decided it was worth the expense to pitch it and buy a new one.

Now, imagine that this leaky bucket is your retirement savings and you are trying to make it from here to the end of your life with a retirement vehicle that is tax-inefficient. Would you want to know there were other options? Would it be worth a small expense now to replace the old bucket and start saving smarter?

The retirement savings vehicle of choice for most Americans is a Traditional 401(k), Traditional 403(b), or a Traditional IRA. However, for most this is probably not the best choice. The logic for saving in one of these vehicles goes like this, “You are probably making more now than you will be during retirement and therefore you will be in a lower tax bracket during retirement.” This statement is true but it does not take into consideration the fact that 1. Income taxes are at historically low rates and most people you’ll ask believe tax rates will go up. 2. The earnings within a Roth 401(k) or Roth IRA will never be taxed. 3. You will not be forced to take Required Minimum Distributions from a Roth IRA. 4. Any money passed onto your heirs within a Traditional 401(k) or Traditional IRA will be taxed at the heirs’ tax rates while non-qualified investments, Roth money, and life insurance will be passed on tax free. Is it time to consider buying a new bucket?

Allow me to give brief summaries of some different tax-benefited strategies that may be more efficient for you. Of course, many of these strategies have complex rules surrounding them and should not be tried without consulting your financial planner.

Roth 401(k), Roth 403(b), and Roth IRA

The first strategy that most should consider would be to begin contributing to a Roth retirement savings vehicle. When we save to a Roth we are contributing post-tax. This means we are paying taxes on our money before we put it into the Roth which is the exact opposite of saving the money “pre-tax” in a Traditional retirement account. Here’s the difference illustrated in a very simplified way: Let’s say you put $5,000 into an IRA pre-tax and it grows to $40,000 by the time you retire. Congrats! You saved paying taxes on $5,000 worth of income and you are rewarded by paying taxes on $40,000 in income later during retirement. The other option is to put $5,000 into a post-tax Roth option, you pay taxes on the $5,000 but if it grows to $40,000 you will not owe a dime in taxes when you take it out. Would you rather pay taxes on $5,000 now or $40,000 later?

But aren’t there income limits for those contributing to a Roth IRA so that the affluent cannot benefit from a Roth strategy? Yes and no. First, there are no income limits which would prohibit one from contributing to a Roth 401(k) or Roth 403(b). There are income limits which would prohibit some from contributing directly to a Roth IRA but there is a loophole. There is nothing that prohibits one from contributing to a traditional IRA and then converting the IRA to a Roth IRA the next day. This is called a backdoor Roth.

Life Insurance

Most people know that a death benefit from a life insurance policy is tax-free (estate tax being the exception.) Therefore, if you want to pass tax free money down to your heirs, purchase life insurance with after-tax dollars and give your heirs a post mortem present.

What most people don’t know is that by “over-funding" a cash value universal life insurance policy in it’s early years and allowing the cash value to grow, you can access the cash-value through loan-provisions without the need to pay taxes. The best part is that some policies will lock in a loan rate (which is a good idea while we are in a low interest-rate environment) and they will allow the money you’ve loaned yourself to still be participating in the growth of the account. While this deal sounds amazing, let me temper your enthusiasm. 1. It makes the most sense to use this strategy once you are already contributing as much as you can to Roth accounts. 2. Watch out for life insurance salesmen who want to sell you the biggest policy when you really want to buy the policy that you can afford to pack cash into within the first five years. 3. There is still a cost for the life insurance premium which will diminish the cash value.

Standard Investment Account

Sometimes a good old-fashioned, no bells and whistles, individual or joint investment account will get the job done in a more tax-efficient manner than a Traditional retirement account. Read that again just to make sure you saw it correctly. Here’s how a standard investment account works: You put money in post-tax but as you sell the investments within your account, assuming you are holding the investment for more than a year, you are paying long-term capital gains taxes which tend to be lower than the ordinary income tax you would pay when you withdraw the money from a Traditional Retirement account.

Furthermore, when you pass down investments within a standard account to heirs, they will receive what is called a “stepped-up basis.” What this means is that if you bought an investment with $5,000 in cash and it grows to $40,000, when you pass, your beneficiaries will not have to pay capital gains tax on the $35,000 of growth. Instead, they receive a “stepped- up basis” which means they now own the investment and it’s as if they purchased it for $40,000. The heir would only have to pay capital gains taxes on the growth above $40,000.

How’s Your Bucket?

The summaries of the strategies above have many IRS rules surrounding them. You really need to speak to a financial planner to understand how these strategies can be tailored to your financial life. It costs money to have a financial plan done by a true planner but the tax-savings from an efficient plan will likely far surpass the cost of the plan. Is it time for a new bucket?

Fisher Wealth Management soon to be Rockpointe Financial by Eric Biddle

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We are excited to announce that as of June 1st, Fisher Wealth Management will be going by Rockpointe Financial!  Fisher Wealth Management, LLC has had a trusted and time-tested reputation.  This reputation started to be built by Brad Fisher in 2002.  He had the boldness to start a wealth management firm as a Registered Investment Advisor (meaning that the advisors hold to a fiduciary standard and must do what is in the best interest of its clients.)  Brad and I (Eric) continue to maintain this standard together . . . only with a new name!

 

Advice for your adventure

Life is an adventure!  Is it not?  Around every bend we find new opportunities for risk, relationships, and growth as individuals.  You have walked through major transitions during your life!  Perhaps you've graduated from school, taken a new job, taken a hand in marriage, had children, or even had grandchildren.  No doubt, you've faced difficult times and joyous times.  I'm guessing that 20 years ago you did not accurately imagine what the present would look like.  I certainly did not.  Furthermore, we don't know what transitions await these next 20 years.  What an exciting (and sometimes scary) thing!  

I love a good adventure!  I'm loving my journey and I would love having a part to play in yours! I count it both a privilege and a heavy responsibility to offer my clients peace-of-mind for their financial future.  Helping them reach their goals and being an encouragement to them along the way is one of my greatest joys!

If you'd like to sit down to look over your plan, review your life insurance strategy, or review your investments, I'd welcome the opportunity. 

Why Giving Will Actually Improve Your Life by Eric Biddle

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As a financial planner, I consult with clients concerning their financial lives.  We talk about the usual items such as efficient ways to save, appropriate amounts to spend, how to manage risk through insurance, and how to diversify investments.  However, every financial planning client I've had has also heard me talk about the importance of giving.  You might ask: Giving?  From a financial advisor?  YES!  I believe our financial planning process is not complete until we've talked about giving.  Deciding to give is a decision that will improve your life!

Here's why I talk about giving: 

1. Within each of us is a longing to make a significant difference in the world around us.  One of the ways we make this kind of impact is by giving our resources to enable worthwhile charities to keep making this kind of difference. 

2.When we give, it necessarily implies that we currently have more than we need.  This is directly opposed to the competing feeling that we always need more.  Generosity is a discipline that helps us to overcome our insatiable appetite for more.  Once we learn to give (along with saving and spending appropriately), we are able to truly experience a feeling of being wealthy.

3. Multiple studies have shown a direct correlation between giving and a feeling of happiness.  We are hard-wired to be givers.  When we experience the kind of life that we are hard-wired to live, we experience a slice of contentment, peace, and happiness. 

Where do you go from here?  Find a cause you feel passionate about, find an organization that you trust is helping this cause, and no matter how scary it feels DECIDE to be a giver.  For a list of organizations that my wife and I believe are making a positive impact in our world, check out my blog post from December 15th, 2016.  If this list doesn't strike you in your area of passion, you are in luck because there are thousands more charities worth considering.

Life Planning for Single Parents by Eric Biddle

  Image credit: Pixabay:   Jill111

Image credit: Pixabay:Jill111

Written by guest-blogger Jackie Waters of www.hyper-tidy.com

Life planning is more than simply setting goals: it’s a journey of self-discovery and it’s important for you and your children, especially if you’re a single parent. The foundations you set now are crucial for your future happiness with your family. A life plan can make you more productive and boost your confidence. If you have older children, it’s great to have them participate.

Consider Financial Responsibilities

As a single parent, your financial responsibilities are far-reaching. There are many things to consider, including life insurance, college funds and your retirement plan. Try not to get overwhelmed by this part of your life planning by breaking each section down. How far ahead you need to plan will depend on how old your children are and at what stage in your life you are developing your life plan.  

Plan your estate: What you need to think about now is drawing up a will and planning your estate. You can use this not only to allocate your money and possessions, but also to name a guardian for your children in the event that something happens to you.

Set financial goals: Project your cash flow, even if you have an irregular source of income. That way, you can adjust your lifestyle accordingly. Set short-term goals, such as paying off debt, and long-term goals, such as investing for retirement.

Get a savings account: You should also try to keep an emergency fund at all times so you have a financial safety net.

Discover What Makes You Happy

Once you have figured out what makes you happy in life, you have a sense of purpose and direction, which in turn makes you feel more fulfilled. A good way to work this out is to imagine your life in the future and how you would most like it to be. From this picture, you can work backwards and figure out each stage along the way. Think about which obstacles are preventing you from achieving happiness and how you can eliminate them.

Make a list: Write down the things that make you happy and why.

Examine your life: Take a look at where you are in your life right now and see what changes you can make to achieve greater happiness.

Identify the negative: Pinpoint the sources of unhappiness in your life and consider what you can do to eliminate them.

Make Time for Family Fun

Spending fun time together with your children is important. If you are co-parenting, it’s even more important to plan a schedule. Sit down with your kids, go over the calendar, and mark out blocks of time when you can do fun activities.

Extracurricular activities: Make sure you have time in your schedule to participate in any extracurricular activities with your kids.

Plan vacations: Talk to your co-parent so you can schedule vacations and special days with your children.

'Tis the Season to Give by Eric Biddle

 Image from www.showhope.org

Image from www.showhope.org

Americans are in the giving mood!  Christmas always has a way of re-engaging us with our desire to live beyond ourselves.  It is usually this time of year, more than any other, that we are reminded of how blessed we are and how we hope to be a blessing to others as a result.  This spirit of giving, paired with the desire for individuals and businesses to make charitable contributions before the year’s end, make this time of year the season of giving.   

One of the major reasons I got into the business of Financial Planning was because I knew I could help make a difference in people’s lives as they moved toward having a proper relationship with money.  I wanted to encourage people to give, save, and spend wisely.  My hope was that marriages would improve, peace of mind would increase, anxiety would decrease, and people would be better prepared to walk in financial freedom.  I also was excited to get into the business because I hoped that I could make the world a better place for those in need by encouraging charitable giving.

In an effort to accomplish both of these goals, I’m going to list some charities that I believe are making a positive impact in our world and I encourage you, if you do not have other charities you are already giving to, to consider giving to one of these organizations that my wife and I have grown to care about:

Dots Tots Foundation - www.dotstots.org  Dot's Tots Foundation is a 501(c)(3) not-for-profit established in 2012 to provide support to families offering foster care, children with debilitating disease, injury, and/or illness; and teenagers in their higher educational pursuits.

Show Hope - www.showhope.org Show Hope is a movement to care for orphans. They work to restore hope by breaking down the barriers that exist between waiting children and loving families.

Orphan World Relief - www.orphanworldrelief.org  Orphan World Relief was founded in 2008 after President, Doug Riggle, experienced first-hand the needs of homeless and orphaned children in Ukraine. Upon returning to the states, further research shed light on the global crisis and the millions of orphaned and at-risk children around the world. They purpose to inspire and connect passionate people who meet the real needs of kids around the world

Evangelical Friends Church - Eastern Region - www.efcer.org The Evangelical Friends Church organization has a single purpose: helping local churches meet the spiritual needs of the people in their communities. To this end, the World Outreach Center in Canton, Ohio, serves the 14,000 EFC-ER church members, working to fulfill Jesus' Great Commission to mobilize, equip, and send workers to spread the love of Jesus.

Vista Community Church - www.vistacommunitychurch.org  Vista Community Church is a local church with campuses in Dublin, Hilliard, and Worthington.  They are a movement of worshipful, relational, missional people living at the intersection of Jesus and real life.

The Bridge - www.thebridge.io  Located on the west side of Columbus, the bridge is partnering with those among us who most need help - the refugee and the homeless -
in ways that foster healing, dignity, community, and peace.

Preemptive Love Coalition - www.preemptivelove.org  Preemptive Love Coalition believes that every day, you make choices that either sustain conflict or transform it.  In the face of terror, you can confront fear with preemptive love and remake the world.  They are serving in conflict-zones to bring emergency relief and opportunity to those in need. 

3 Mortgage Myths Worthy of Consideration by Eric Biddle

 by Brad Fisher

by Brad Fisher

Admit it. You played with one of these plastic houses when you were a kid. I always thought it was hilarious to make the little black and white dog drive the car.  And remember the red barn that would "Moo" when you opened the barn door?  Those were the days, huh? We had a house, a barn, and all the land in the world...and we didn't even need a mortgage for any of it!

Then we grew up.  And now we find ourselves writing big monthly checks to the bank, longing for the simpler days.  In light of that, I figured I'd pen a few helpful things about your decision to payoff, or not to payoff, your mortgage. Here are 3 myths you may find helpful:

Myth #1) If I make extra payments toward my mortgage, and then need that money back...no problem...I'll just get a home equity line of credit or refinance my current loan and get some cash out.

Careful.  Banks don't like to lend you money when you *need* it. Believe me, I've tried. If you've lost your job, for example, and decide you need money... no bank will refinance your home and give you cash. If you've recently divorced, banks may be leery to lend to you.  And what about that home equity line that you established a few years back? Well, be warned, it could be shut off by your bank and it may not be there when you need it. Perhaps I'm being dramatic here, but go back in time to 2007 - 2009. Remember that? When the housing market crashed...? We saw our clients' equity lines evaporate before our very eyes. Oh, and don't forget the 10 year rule.  10 years is the point when many Home Equity Lines of Credit can be reset.  Here is a good article from the Chicago Tribune written last summer about it: http://www.chicagotribune.com/business/sns-201505291930--tms--fmoneyctnoc-a20150601-20150601-story.html

2) Paying down your mortgage as fast as you can is ALWAYS the smartest decision.  Those who know me well understand that I rarely use words like NEVER or ALWAYS when advising clients.  What works for one client may not be the right fit for another.  This is the case with paying down a mortgage.  So, when is making those extra payments toward your mortgage a not-so-good idea? Well,  for starters, if you are facing an upcoming expenditure such as college tuition, a new car, or even retirement; and you don't have the cash set aside somewhere else...pouring money into your home equity could prove unwise for the same reason as #1 above.  You'd be better off sticking that cash where you know you can get your hands on it when you need to.  Another reason is your career choice.  If you are an entrepreneur or a business owner, for example, your situation probably warrants greater financial flexibility than that of the average worker.  The key here is liquidity.  A slow business cycle could mean you need to rely on available cash resources for a season.  Or more optimistically, if a solid business deal falls into your lap, you need to be as prepared as possible to jump on that opportunity quickly! Home equity is not the place to keep your money in situations where cash is king.

3) Keeping a mortgage for as long as possible, making just the minimum payment, and then eventually refinancing it for another few decades is ALWAYS a great decision.  Well, I couldn't only write about paying down your mortgage as I did above without showing the other side of the coin.  There are those who will convince you that keeping a mortgage for as long as possible always makes better financial sense than paying it off early.  They are correct; and they are incorrect.  Remember, I rarely use ALWAYS or NEVER when advising. 

Mathematically speaking, and therefore financially speaking, it *could* be a great way to boost your savings over the long term.  How? Simple. By taking money that you would have used to pay down your mortgage, and instead, investing those dollars in investments that earn a rate of return that is greater than the interest you pay on your mortgage.  The catch? First, you have to make sure you actually invest those extra dollars. Many who claim this strategy is for them end up deciding somewhere along the line that they need a new car, and another vacation, and a new boat, and mysteriously they arrive at retirement with little cash, lots of toys...and of course, a mortgage payment.  And second, your investments have to actually earn the necessary rate of return (and we all know there are no guarantees when investing). A disciplined investor can benefit from maintaining a mortgage and investing elsewhere for the long-haul, but if you tend to be a spender, this strategy could leave you in a pinch down the road.

In summary, mortgages are just another financial tool that should be used with careful consideration.  What works for you, may not work for your neighbor, and that's okay. 

We've Redefined "Wealthy" by Eric Biddle

 by Brad Fisher

by Brad Fisher

Money is a funny thing.  Some people have a lot of it, others not so much.  But one thing is for sure – we all have to deal with it!  After reflecting on the many clients we have worked with over the years, we have decided that we are going to change the way we think about what it means to be wealthy.  So here is the definition that we came up with:  Wealthy – Living within your means so that you can live beyond yourself. 

Said another way, spend less money than what you bring in, and take some of your money, even just a small percentage, and use it to make a positive impact somewhere. Perhaps you have a favorite charity, perhaps you can increase your tithe to your church; or maybe you simply offer to pay for someone’s gas when they pull up next to you at the pump.

 When you live within your means, you’ll live with less financial stress overall; and when you choose to find ways to live beyond yourself – that’s when we believe you’ll begin to understand what it means to be wealthy.

 So why even bring this to your attention? Because we think we have been giving people the wrong impression, albeit unintentionally, all along.  You see, the name of our company is Fisher Wealth Management. And that word, wealth, conjures up a whole variety of meanings for different people.  On average, we find that people have one of the two following thoughts when they are introduced to our firm: They’ll either think to themselves, 1) “I do not consider myself wealthy, therefore they probably wouldn’t even want me to be their client;”  or 2) “They probably only work with people who are much wealthier than I am.” 

Neither is correct.  Our clients range from beginning investors who are trying their hardest to put money into their Roth IRAs each month, to seasoned retirees that are freely living off of their sizeable retirement portfolios.  I have entrepreneur clients that are facing hardship in their business who are coming to me for advice about that; and I have successful business owner clients worth many millions. 

If you are willing to take your financial future seriously and want to enjoy a more peaceful financial journey by taking the time to put a plan into action – we would love to work with you - and we’ll do that regardless of the balance in your investment accounts. 

Actively Manage ALL of your accounts by Eric Biddle

How many jobs have you had in your lifetime? If you're like the average American born toward the end of the baby boom, the answer is 11 or 12. If you're of a younger generation, you're likely to have even more jobs in your lifetime according to researchers. And odds are that you've participated in some of their employer-sponsored retirement plans. When you transitioned from one position to the next, did you move your retirement funds into anew or existing retirement plan?

Roll Over Your Funds
If you do have money in a former employer's plan, consider rolling those funds into an IRA. With an IRA, you'll have significantly more investment options and control over your money. Many IRAs include thousands of stocks, bonds, mutual funds and other types of investments that aren't generally available in employer plans. IRAs also offer more flexibility. For example, if you find that some of your investments aren't performing well, it may be easier to switch them within an IRA than in a 401(k).

Note that you can roll multiple retirement plans from past employers into a single IRA. Managing your funds in one account is more convenient and makes it easier to assess your investments.

Give Your Financial Advisor the Full Picture
Putting money aside in employer-sponsored plans can be a smart retirement strategy, but it does require proper management. Take some time now to get your past accounts in order. Financial advisors can make more insightful recommendations and more effectively help you achieve your financial goals when they have full visibility over your entire investment portfolio.