planning | Live a Life By Design

Failing to Prepare Does Cost More

Posted on April 27, 2023April 27, 2023 by Jimmy J. Williams, CPA/PFS, CFP®

The old adage of “failing to plan is planning to fail” is particularly true when it comes to your future. It is most difficult to hit a goal in life that you do not set. I am a big believer in goals for all aspects of life. When I began my professional career in accounting in 1987, I wrote down my goals and some of them were long-term that took me thirty-five years to accomplish. These are called “marathon goals.”

To illustrate the importance of goals, think about the times in your life that you had thoughtfully planned for an event – buying your first home, birth of your first child, buying your new car, etc. Each of these events required you to define what you desired in the outcome and establish a plan of action to achieve the steps that led to the goal. For example, you wanted a new home while in your 20’s. You realized a down payment of 20% of the cost of the home may be necessary to achieve the level of funding and the interest rate you preferred.

While you were working hard in your early career, you set the goal down on paper and placed it in an area of your apartment where you would see the goal daily. This simple act of visualizing the day you walk into your new home served as a motivator for you to save for the down payment. Finally, the day of closing on your new home has arrived! You are excited and overwhelmed by the process.

After moving your small amount of furniture in your new home, you realize that more furnishings are needed. You identify another goal and set it to paper. Within twelve months you have reached this new goal of purchasing your furniture throughout the new home. This process continues throughout life.

Consequently, many individuals work extremely hard in accumulating their wealth only to fail to carefully plan for the distribution of their net worth when they expire. Over my thirty-five-year career as a CPA and Certified Financial Planner^® professional, I have witnessed more individuals fail to carefully plan for the transition of their estates and cause their heirs significant hardship and avoidable costs.

Two areas of primary challenge during retirement are healthcare and income. To rigorously evaluate each of these areas it is critical that you understand the application of your resources to resolve these challenges. First, healthcare costs continue to rise more than 8% per year. According to www.plansponsor.com, retirees will spend $315,000 on healthcare costs during retirement after age 65. These costs include co-pays, prescriptions, mobility aids, etc. Due to the size of this cost in comparison to your total budget, it is critical that you maintain a healthy lifestyle if you wish for your retirement assets to last you longer.

The second area of challenge is income. Many of us estimate we will spend fewer dollars during retirement than we did during our working years. This assumption is invalid. Our clients spend an equal amount of funds during retirement as they did while working because they have more time to travel and enjoy the activities, they were unable to do while employed. A plan for cash flow is critical to your facing retirement with all the costs that may arise in life. I often tell clients that one of the worst outcomes would be that you lived longer than your assets lasted.

Retiring for the first time is unnerving for many people. It is possible to feel confident about the process and increase your probability for success by collaborating with a Certified Financial Planner™ professional to create a plan. Make informed decisions and do not guess your future.

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Life Isn’t “Set it and Forget it”

Posted on February 27, 2023February 27, 2023 by Jimmy J. Williams, CPA/PFS, CFP®

“It’s the end of the world as we know it,” as the pop singer bellows out the first line of the chorus of a top song for their band. What a profound statement when we think of the chaos of the past few years and the impact economic factors have made on your net worth. For many Millennials and Gen-Z individuals it may appear as if their world has ceased to exist as they are accustomed to in their short lives. We have been here before and we will return to this state of the economy again.

One constant in U.S. economy is the fact that it will continue to cycle. The four phases of our economy have been recognized by financial experts for decades and with quite predictable accuracy – expansion, peak, contraction, and trough. Difficulty lies in defining which one of the phases we currently find our country.

Economists analyze several factors to determine the current phase of our economy. Gross Domestic Product, employment, interest rates and consumer spending are a few of the factors followed to determine trendlines within the four phases of the economy. Gross Domestic Product (better known as “GDP”) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. GDP can be computed on a nominal basis or a real basis. When accounting for GDP on a real basis, the consideration of inflation plays a significant role in the computation.

In the United States, our real GDP rate is typically between 2% – 4% on an annual basis. To compare this with other countries, consider China who reports a real GDP rate of 8.1% for 2021 according to www.data.worldbank.org. As the country’s GDP rate goes up the production for labor, exports and other areas of the United States is performing at efficient levels. If other factors considered are increased over a previous period, the country may be in expansion or reaching its peak economically.

It is important to understand the cycle of our economy and use this information to your benefit. The New York Stock Exchange, the American Stock Exchange and London Stock Exchange are auction markets. It functions by a process that someone must sell a stock for someone to buy a stock. This is known as the secondary market.

Another of the statistics focused on by investors is the labor participation rate. The United States is currently experiencing one of the best unemployment rates in modern history due to the recall of millions of workers back to the workforce after the federal government shut down the businesses employing them. If the unemployment rate rises, this will be a leading indicator to possible negative economic conditions occurring.

There is not one magic number for purposes of determining the type of economy experienced in the United States. To study these factors and guide your investment philosophy requires discipline and patience. Many investors have been unable to fight the emotional battle of watching their savings plunge and staying the long-term course determined to be the most probable path to success. As wealth advisors, our goal is to provide understanding and education to our clients so they can make intelligent decisions. Emotions play no role in the process but can be intrusive to sound judgment.

Life changes on a daily basis. It is critical that you construct your affairs in a manner that allows for the disruptive periods of time to pass without substantial change to your long-term plans. To attempt to time the markets would, in my opinion, give greater risk to reaching your long-term savings goals than to simply design a fully-diversified portfolio to weather the storm. By consistently maintaining your acceptable level of risk in the portfolio through periodic rebalancing, your probabilities for reaching your goals are much higher.

If you’re concerned about the economic conditions or have questions pertaining to your investments providing for your future in the manner you desire, consider a complimentary consultation with a Certified Financial Planner™ professional. When you have a vision for your future that helps you see your goals accomplished, it is much easier to live through the economic challenges of life. See you on the jogging trail!

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Predicting Your Future

Posted on February 9, 2023February 9, 2023 by Jimmy J. Williams, CPA/PFS, CFP®

Prior to starting the new year, many of us sat down with a pen and paper to develop our desired goals for 2023. Well, some of us did. Gallup, a national polling organization, studied goal setting by U.S. citizens and the results are encouraging. The findings were that 79% of adults age 18 – 34 and 72% of adults age 35 – 54 are most likely set new goals for 2023.

Based on the annual study, more Americans are setting goals for improvement of life in 2023 than in prior years. Why is it important to set goals for your life? Because it is very difficult, if not impossible, to hit a target you do not set. In other words, you will become a wandering generality rather than a meaningful specific to use the phrase of the late Zig Ziglar. I often hear people complain about life but do nothing to improve their quality of life.

Goals are far more than simply writing down aspirations and unattainable ideas. To be successful in goal achievement, you must become effective in goal setting. One of my annual tasks is to take time in November each year to evaluate my progress on current year goals and set the new year’s goals. The outcomes in life have been phenomenal! For example, I address goals in all the aspects of my life – financial, educational, spiritual, vocational, physical and familial. To gain a better understanding of this process, an example of one of my “go up” goals may be “To read and implement the learning from twelve books on my reading list by reading one per month.”

Setting goals is only one step in the process. To monitor my progress, I perform a weekly review and check on various projects, activities and appointments for each week. If I haven’t made progress on a goal, say the monthly book reading one, I can quickly correct my course and spend time reading to catch up on this important goal. This process each week takes less than fifteen minutes. Generally, I will perform such review on Friday afternoon (unless it is a beautiful day and the golf course is open, but I digress).

When you analyze your ambitions and desires in life, your goals will rise from your thoughts and inspire you to grow as a person. Success is the accomplishment of your goals but more than a checkmark beside a written statement it is the person you are becoming that you desire to see in the mirror. I am often asked what the definition of success is to me. My reply is a consistent one. Success is the freedom to live where you wish, to control your time as you desire and to live a life of abundance. Nowhere in my statement do I mention wealth or money as a definitional term for success.

Standard of living and quality of life are two different statements. Most people who chase only after a standard of living (i.e., money and wealth) do not experience a quality of life. However, with certainty, the people who seek a better quality of life achieve a better standard of living. Attitude is critical to achieve success. Gratitude is the fuel of passion that empowers you to achieve the proper attitude to reach success.

If you feel you are not making the progress you desire in life, it’s time you made a new plan. Seek out a Certified Financial Planner™ professional to assist you in forming a new plan in life that accomplishes your definition of success. At the end of life’s journey you will be more happy to say “I’m glad I did” rather than “I wish I had”.

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New Retirement Changes That May Secure Your Future

Posted on February 1, 2023February 1, 2023 by Jimmy J. Williams, CPA/PFS, CFP®

One of the best attributes about my profession is the constant change in the rules for which we give advice to our clients. One of the worst attributes of our profession is the constant change in the rules for which we give advice to our clients. This double-edge sword keeps our team of professionals motivated to learn new strategies each day. Another aspect of constant change is the challenge of providing long-term advice to clients.

On December 29, 2022, while many of us were preparing for a New Year’s Eve Party, Congress and the President were finalizing the printing and signing of the Consolidated Appropriations Act of 2023 which contains a substantial number of changes pertaining to retirement plans. To summarize the plethora of changes, the idea was to create greater opportunities for plan participants to save for their future. Congress attempted to simplify many of the complex rules pertaining to employer retirement plans and encouraged employees to become savers through automatic enrollment provisions within retirement plans.

To encourage smaller employers, defined as those entities with 50 employees or less, to establish retirement plans, the IRS will allow a tax credit for 100% of the start-up costs for a plan. This is an increase from the previously allowed 50% credit. To take advantage of this credit the plan must be started after January 1, 2023. Many smaller companies may find that a retirement plan serves as a wonderful retention tool to maintain their workforce.

For individuals reaching a certain age in which distributions from their Individual Retirement Account (IRA) are required, good news is included in the new law. Prior to 2023, required minimum distributions (RMD) were mandated by the IRS at age 72. If the individual failed to meet the minimum distribution amount in distributions, a penalty of 50% of the value required to be reported in income as was assessed on the appropriate income tax return. Starting in 2023, the age for required distributions from an IRA is 73. The law also provided for greater longevity of life in the United States in that RMDs will not start until age 75 beginning on January 1, 2033.

Some employers have desired to provide incentives to certain classes of employers to participate in retirement plans. The new law provides for employers to offer de minimis financial incentives, not paid with plan assets, such as low-dollar gift cards, to boost participation in workplace retirement plans.

One of the reasons for employees to deny participation in workplace retirement plans is that the money is required to be invested for a considerable period of time and access to the funds for an emergency is penalized unless certain criteria are met. Under the new law, employers may rely on the employee certifying that deemed hardship provisions are met. This will allow a short-term distribution of assets or a permanent distribution based on the needs of the participant.

Smaller employers generally establish SIMPLE (Savings Incentive Match Plan for Employees) IRA Plans or SEP (Simplified Employee Pension) Plans due to the lowered threshold of reporting and minimal administrative costs associated with such plans. Certain criteria must be met by the employer in the number and types of employees but overall these plans are effective in saving for the future while capturing current tax deductions for the employer. In 2023, SIMPLE IRA’s are allowed to accept Roth contributions (which are post-tax). Also, SEP contributions by the employer (employees do not contribute to these types of retirement plans if not an owner) may be treated as Roth contributions. This, my friends, is a big deal for younger workers who may wish to take advantage of a lower income tax burden early in their career.

One of the more tenuous debates in Washington, DC has been the student loan forgiveness ordered by President Biden. Many students have worked multiple jobs to pay their way through college while others applied for loans. Some of the animus results from the students who chose to attend college while working and now seem to be offended by the exclusion of their efforts from the forgiveness order. Further, some allege individuals who attended very expensive private universities would be favored since they chose to attend a university requiring significantly higher tuition than the student who attended a state-sponsored university.

The reason for opening the debate door on student loans is that employers are allowed to make matching contributions to allowed retirement plans with respect to “qualified student loan payments” beginning in 2024. This will allow the employee to continue to reduce student loan debt while not forgoing savings for their future.

Emergencies do occur in life and many are caught without liquid funds to address the problem. In 2024, plan participants will be allowed a $1,000 early withdrawal without penalty to address emergency expenses. The participant has the option of repaying the withdrawal to the plan within three years.

Retirement does not have to be a complicated process. By planning accordingly with a Certified Financial Planner™ professional, you will feel more confident and comfortable about the future you choose. As I often inform clients, “You retire for the first time only once. It is better for your future that you do it right.” Go make your world a little brighter, smile at everyone you meet!

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How Successful People Gain and Retain Their Wealth

Posted on January 27, 2023January 27, 2023 by Jimmy J. Williams, CPA/PFS, CFP®

There is a TV show that I witnessed a couple of times that is titled, How Winning the Lottery Ruined my Life, or something to that effect. While watching the “lucky” family discuss their travails and trials of winning such a large sum of money when they previously were considered poor or bankrupt was interesting to me. The reason for suffering from winning such large amounts of money is that the person was attempting to apply their current capabilities and philosophy of life to a much larger asset base.

Having served as an advisor to wealthy individuals for many years, it gave me perspective to understand the devastation of which the lottery winner spoke. We all experience a stage in life that we are most comfortable. This level of living has given us the lifestyle we feel is good, or good enough, to provide us some comforts of life. The challenge is to understand that, as people, we must grow our philosophy toward money and wealth as we grow our lifestyle or trouble is on the horizon.

In simple terms, the person who has dominion over a few things must grow in mindset, knowledge and understanding about wealth to retain dominion over significantly more assets. The Bible tells us that the person who has much wealth, much is expected. That is a tremendous philosophical point about wealth. Another statement I often use is that self-preservation leads to mediocrity while charity leads to wealth. By giving away, in a reasonable and responsible manner, the assets you currently possess, you will receive greater assets from the marketplace.

To help you think like a wealthier individual, you should learn from those that possess great wealth. Read biographies of Cornelius Vanderbilt, Andrew Carnegie and John D. Rockefeller. What inspiration these men’s stories give me as I realize their generosity in developing the modern culture you and I benefit from. Libraries, hospitals and universities all over our great country bear their names as a testament to the great blessing we possess of being American citizens.

One of the common themes I discerned from reading their biographies is that they thought differently than most people. Their time was sacred and they didn’t waste it on trivial matters. Most of them created, for themselves, an approach to capturing the best information to make critical decisions that contained considerable risk. To accurately describe their approach to managing their time, they eliminated, delegated or elevated activities which became their goals for success.

Many menial tasks that would arise during the day would be disregarded unless they had some relationship to the important goals set by the entrepreneur. Business studies of behaviors inform us that most people major in minor things to the detriment of the business production they are seeking. In simple terms, I call this “busy work”. This type of activity has no sustained value or progress contribution toward your big goals for which you are seeking to attain. According to Gallup, a considerable number of employees polled report they are simply disengaged from the act of contributing their skills to their employer at some point during each day. That is startling when you realize these employers are paying significant amounts of money for training, retention and benefits for these “less than productive” employees.

Another strategy used by wealthy individuals is that they delegate tasks to others more capable or experienced in certain functions. For example, many didn’t write or type their own letters but utilized a personal assistant. Most of them didn’t drive themselves to destinations but used the skills of drivers and focused on their important tasks during the drive time. Delegation is not restricted to business professionals. Many of us delegate our lawn work and flower beds to companies that specialize in such services. Cleaning our homes and performing laundry are delegated activities for which others are most helpful. You should be focusing on those activities that create and retain your most passionate areas of life.

Lastly, the wealthy are excellent at scaling their process for producing wealth. They create a unique process and elevate it to capture market share or other investors. By concentrating on your unique abilities to create value for others, you will quickly realize that a “better mousetrap” is in your possession.

Each day, plan your activities and review them to note what should be eliminated, delegated or elevated to give you the greatest opportunity to serve others and grow your wealth in life.

The world needs you to show up everyday to contribute your talents to helping others. It is only when we all find our purpose in this world and implement a means to using that purpose to help others that we truly are wealthy. Mark Twain, one of my favorite authors, stated it well when he said, “The two most important days in your life are the day you are born and the day you find out why.”

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To retire, overcome these three challenges

Posted on January 13, 2023January 13, 2023 by Jimmy J. Williams, CPA/PFS, CFP®

Retirement planning of itself has many challenges for individuals. It is an area of life that has many concerns and questions because of the unknowns in the future. It is as the Boy Scouts would say, you must be prepared for anything. To help you accomplish your goal of retiring with a worry-free lifestyle, we believe you should overcome three challenges in the planning process, as well as the remainder of your life. The first of these challenges is longevity.

Longevity

Longevity is that period of time for which you may outlive your sustained investments. Too often, we are asked by our clients, “How long do you think I will live, and how much money do I need to live comfortably?” This is a question, of course, that we cannot answer with any certainty. No one knows what tomorrow may bring. However, it is critical that you provide a savings plan for your future with the hope of reaching the longevity goal you establish for yourself. It is not an answer any of us know with a degree of certainty. For example, I have a friend who is dying from cancer at the age of 45. However, my grandmother lived to the age of 100 years and 10 months. Why this happens, we don’t know. However, we must be prepared for either event.

Inflation

The other challenge to overcome in retirement planning is inflation. It is critical to understand that inflation cycles throughout the economies through the decades of life. No one knows what the next cycle of inflation may entail. However, let’s review what has happened in the past. Over the past two and a half years, our inflation in the United States has increased to a height of 9.1%. It is critical to understand that the cost of buying goods for your everyday living has increased by 9.1%, and certain sectors of the market increased much more. Food and fuel have increased far more than 9.1% over the past two and a half years. It is critical that you understand this large increase takes a tremendous toll on the investments you may have saved with a planned distribution rate of a much lower amount than the inflation factor.

One of the challenges you experience with inflation is that you do not know the length of time or term the inflationary period will be. The height of inflation and the term of which it lasts, both play a role in the use of your retirement funds.

Taxation

The third challenge, as mentioned in the previous paragraph, is taxation. It is true that as Americans, we are taxed on many things, from income, the purchases we buy, and the real estate we own. Taxation impacts literally every aspect of our lives in the United States. However, there are areas that you can control in your cash flow to assist your savings for retirement in lasting longer.

The timing of certain events with your retirement savings can help mitigate the tax burden you are impacted with on an annual basis. It is also a measure of how you invest that you will be taxed. For example, shouldn’t most of your retirement savings be in a qualified plan, such as your 401(k), or an IRA? These types of savings require taxation on the first dollar to be distributed from the respective plan.

However, for most of the wealthy, additional investments are made in those types of companies, or assets, that grow in value. This growth in value is not taxed until such a time as you wish for it to be taxed. For example, you must sell or liquidate the investment for a taxable event to occur. Once you decided and have liquidated the investment, capital gains at a much lower rate that ordinary income tax rates will be attached to the event. If you were invested primarily in growth-type companies and/or assets, your maximum rate on those capital gains in today’s law is 20%. This is a much lower rate than the 37% maximum ordinary income tax rates.

The wealthy in the United States pay an effective lower rate of tax than most Americans that are wage earners. This seems to be an abnormality. However, it is due to the impact and control these wealthy individuals exert over their investments and the realization of gains on a basis for which they control. For example, if you had property that you invested a very small amount in, and sold for a much larger amount, two to three times what you paid for it, the capital gains would then be applied to that portion you sold. Twenty percent tax rates on capital gains has been the effective rate on capital gains for many years now. It allows the planning for such events to have a little more certainty.

For you to be successful in retirement, it is vital that you overcome the challenge of longevity, inflation, and taxation. If you desire some guidance and seek some form of assistance, contact your local CERTIFIED FINANCIAL PLANNER™ professional for a complimentary consultation. You will be glad you did. See on the jogging trail!

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Reflection for Direction

Posted on December 28, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

Happy New Year! It is so awesome to open a new calendar and smell the fresh ink and clean pages of opportunity. The blank calendar pages are awaiting your input of a remarkable life in the new year. 2023 looks very promising. Not from the world’s perspective but from the perspective of each of you accomplishing great things in your life.

One of the most important tasks I undertake as a new year begins is to reflect on the previous year to glean from it that I have learned, where I have grown and use this information to determine where I wish to go in life. The most amazing opportunities lie in front of you if you know what to look for and how to place these occasions into action.

In 2022, I worked on goals in a variety of areas. Most of the goal may have been accomplished but the finish line lay ahead of me. In 2023, I will be focusing on the remaining portion of these goals and seeking to finish strong in the first quarter of the year. To many goal constructionists, once the period of performance has lapsed you either pass or fail at the attempt to reach the goal. Allow me to grant you some “Grace Space”. The world has become somewhat disjointed with the economic and geopolitical challenges we face every day. Am I making excuses? No. Am I giving myself additional space to be my best self? Yes.

There were opportunities in 2022 that allowed me to grow as a person. Did you identify those areas for your life? If we are looking introspectively, glaring times of interactions that could have been better or statements made in public that could have been crafted more eloquently stand out. How are you capturing the important memories in your life? For me, I journal to record the moments and memories of life’s occurrences that are worth sharing with my heirs.

Volumes of these journals line library shelves. What book have you read that would be more impactful to your children and grandchildren than the life you lived and the decisions you made? Your personal memoirs are so impactful that your influence in the lives of your heirs will continue for generations beyond your terminal point.

How is this investing in your yourself? By learning from our mistakes and capitalizing on our accomplishments, we can create a world that is full of blessings and benefits that allow us to live in a more desirable society. War is absent in many countries on the globe; however, that does not mean peace is present. Our mindset is so important in determining our approach to life’s challenges. By maintaining positivity in our thoughts and actions, we can infect others with a smile and kind word that will spread faster than any virus on the planet.

It is an honor to share my thoughts each with week with you. The pages of this column are a means for me to reflect on our world and how we can make the best of difficult situations and take advantage of breaks that will give you the edge to greater discovery of yourself.

Open your calendar and your planner today. Map out the future you wish to see come true. It is yours for the taking. Make it happen by bringing your best you to the day. Interact with others in a positive and pleasant manner that creates a compounding effect of peace on earth. See you on the jogging trail!

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The One Constant is Change

Posted on October 21, 2022October 21, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

Remember as a younger person when you first heard the phrase, “the only constant in life is change”? At the time you, perhaps, thought the person to be either a great philosopher or speaking gibberish. As I am approaching the inspirational age of 60 years young, the aforementioned statement of change has been proven true more times than I can recall. To provide additional truth to this historic statement, the IRS does its part by changing the laws governing your annual filing of income tax returns.

The standard deduction is the allowance of a certain amount to accommodate your lifestyle needs such as food, shelter, and clothing without the need to itemize these deductions on your individual income tax return. Each year the IRS considers the inflation rate in the United States to determine if adjustments should be made to the standard deduction amount for the various filing statuses. In recent years, the IRS simplified this process by combining the original standard deduction with the exemptions a filer could claim to reduce his taxable income.

Due to the altitudinous inflation experienced in the United States in the past two years, most recent rate provided by the U.S. Bureau of Labor Statistics to be 8.2%, the IRS recently issued the increased standard deduction amounts for the 2023 tax year (i.e., your return you will file in 2024). For those filing jointly, the standard deduction has increased $1,800 over the 2022 amount to a deduction of $27,700. If you qualify as a single filer or choose to file as married but filing separate from your spouse, the standard deduction is $13,850 which is $900 higher than the previous allowed deduction. For those individuals who are single and maintain a household for a minor or special dependent, the head of household status allows a greater deduction than a single filer. Their amount for 2023 standard deduction will be $20,800 which is $1,400 higher than in 2022.

For taxpayers that owe little or nothing for a residence, contribute smaller amounts to charities and have medical coverage for major illnesses or infirmities, the standard deduction provides a benefit. Time is a considerable savings for filers who do not meet the standard deduction limit with their itemized deductions. To simplify the process of filing your individual return each year, consider the standard deduction amount allowed and perform a quick mathematical equation to confirm your potential deductions are more than your standard deduction.

The United States Tax Code provides seven tax rates, or brackets, for purposes of calculating your annual income tax liability. From a rate as low as 10% on taxable income of $11,000 or less to a maximum rate of 37% for filers with taxable income above $578,125 for single individuals and above $693,750 for married filing joint taxpayers. To add a little complexity to the process, the Congress assesses a surtax on certain filers to assist in the funding of the Medicare and Social Security programs.

One of the easiest methods of completing your annual tax filing obligation is to start early. Employers are required to mail Forms W-2 to employees on or before January 31, 2023. Start now by gathering your potential itemized deduction receipts and as income documents are sent you, begin the process of completing your returns. It is recommended that you file electronically to facilitate the processing of your returns and, hopefully, the electronic deposit of a refund check to your bank account.

A quote attributed to one of the greatest planners of the last one hundred years, President Dwight D. Eisenhower, as the commanding general in WWII, “In preparing for battle I have always found that plans are useless, but planning is indispensable.” applies to tax “battles.” The planning for targeted outcomes is critical to the realization of your goals.

Tax planning is necessary for you to prepare yourself for the best results possible in filing and paying your annual income taxes. If you need assistance achieving your retirement planning goals, one of which should be the lessened impact of taxation on your wealth, seek the assistance of a CERTIFIED FINANCIAL PLANNER^™professional to guide you through this important planning process. Go play in the Autumn breeze this weekend!

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Medicare Benefits Planning

Posted on October 17, 2022October 17, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

One of the most critical benefits affecting American citizens is the Medicare Program. For those individuals who qualify at age 65, this program provides health coverage for inpatient care (Part A), outpatient care (Part B), prescriptions (Part D) and other areas. This article will focus on these three most common areas of care.

To qualify for Medicare benefits, you must have worked in a job that withheld Medicare contributions from your paycheck while working at least forty quarters (i.e., 10 years). This is a very low bar to meet eligibility for such a comprehensive medical plan. Of course, as with many federal laws, exceptions apply to the general guidelines.

The important concept of medical coverage through Medicare is that it functions similar to the private insurance you may have received while employed in your career. For example, Medicare covers 80% of your covered qualified medical charges for inpatient care. This means your hospital stay may be covered but you will be expected to pay the remaining 20% unless you purchase a Medicare Supplement Plan.

Supplement plans are relatively inexpensive and can be the difference between destroying your lifetime savings and the security your family needs. There are many carriers of such plans and each state may differ as to the carriers available. It is critical that you determine the appropriate Medicare Supplement Plan you desire that is contracted with your various medical providers. Supplement plan consultants are often helpful to narrow the field of possible plans and to assist in the selection of a plan that meets your budget.

To enroll, or to change plans, you should be aware of the upcoming Open Enrollment Period. For 2022, the period is October 15 through December 7. It is critical that you review your current plan for potential savings as new plan changes and plan providers are introduced into the marketplace. Often people will purchase a supplement plan and, like the infomercial, “set it and forget it”. This is a big mistake that could cost you thousands of dollars.

Let’s review the outcomes of such a person who failed to obtain a supplement plan and suffered a significant health issue. While in the Intensive Care Unit of a major hospital, the medical care she received was excellent. She left the hospital after 10 days of care and felt so much better… until she started receiving the bills! The total cost of the hospital stay was more than $120,000 for all the medical care provided her. Without a supplemental plan, she was responsible for more than $24,000 of the total cost.

Medicare Part D is a complicated area of law. It is vital that you seriously consider enrolling in this program when you are first eligible or you will be penalized for each month you delay enrollment. This sounds rather harsh but the method of funding the program is through premiums assessed individuals who utilize the benefit. Considering that most people may live a relatively healthy life until age 75, the ten-year period of qualification to election date may cause you to incur a significant penalty at a time when you may need your savings for other priorities.

The cost of medical care continues to rise at an unprecedented pace in the United States. We highly recommend those individuals enrolling for their Medicare Benefits to seriously consider purchasing a supplement plan. Monthly premiums vary depending upon the level of care and the carrier issuing the policy.

If you are approaching your 65^th birthday, it is critical that you file for your Medicare Benefits approximately 60 – 90 days prior to your birthday. It will be a lot easier to blow the candles off your cake if you aren’t worrying about medical bills. Seek the assistance of a CERTIFIED FINANCIAL PLANNER™ professional to guide you through this critical and difficult process. Make it a wonderful week!

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Thriving in Volatile Markets

Posted on July 7, 2022July 7, 2022 by Jimmy J. Williams, CPA/PFS, CFP®

Do you dread challenging markets? Do you break out into a cold sweat when your investment statement arrives in the mail? Many of us don’t understand the positives, yes, I said “positives”, of the opportunities that present themselves in volatile markets. Retail investors exhibit several common traits. First, they typically like to “buy high” and “sell low” based on fear and not sound research. Second, their idea of diversification is to own several different accounts with a myriad of investment positions in each one. This is not only a complicated method of living but fraught with issues such as investment overlap and possible sector concentration.

A better method of achieving your long-term investment goals is to develop a plan of investing that does not change with market cycles. This type of approach will serve you well in the long-term since you are dollar-cost averaging by investing each month (or some predictable cycle). In a market expansion, your constant investment amount will buy fewer shares or units of a particular investment. However, in a declining market, such as the one being experienced in the United States at this time, your consistent investment amount will buy more shares of a particular investment due to the lowered buy price.

Dollar-cost averaging doesn’t guarantee success of your portfolio but it does utilize the natural market cycles to help you achieve a potential lower average cost in the shares/units you purchase over time. For example, if you are investing $1,000 each month in your portfolio and the shares are $50.00 each, you may buy 20 shares during the month. However, if the market is declining and shares are now $40.00 each, you may buy 25 shares during the period. Over time you may experience a lower average cost of investment in each share.

In our previous example, assume the investment is a company that has a history of paying excellent dividends and has weathered many difficult business cycles. The company’s management gives you confidence that it will, once again, keep the company moving in a positive trajectory despite the economic hardships. By focusing on facts and not emotions, the probability that you will achieve your investment goals is much greater. Remember the quote from the “Oracle of Omaha” Warren Buffett, “If you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes.”

I understand it is difficult and takes great courage to weather some of the more difficult economic cycles the United States has suffered. However, remember that you will be using the totality of your investments for supporting your lifestyle in retirement and it took you many years to accumulate the funds. One or two negative market cycles will give way to more positive cycles at some point. The future isn’t hard to predict if you create it yourself.

Establish your investment plan based on sound logic and economics. Don’t attempt to time or “outsmart” the markets. Many bankrupt individuals have attempted these approaches. If you have questions on establishing an appropriate strategy for your lifetime accumulation of retirement funds, contact a CERTIFIED FINANCIAL PLANNER^TM professional. The best counter to emotional disruption during a negative market cycle is to think long-term and stay with the plan you developed. Now, go out and enjoy your day. You got this!