planning | Live a Life By Design

Simplify Your Life, Consolidate Your IRAs

Posted on November 8, 2019November 7, 2019 by Jimmy J. Williams, CPA/PFS, CFP®

Diversification is a common term heard by most investors. However, its true meaning is sometimes lost. Recently, we were meeting with a new client of ours that is retired. When the woman brought her giant, purple, three-ring binder to the first meeting, we were somewhat puzzled. Near the end of our first meeting, she opened up the binder to reveal that she owned six, yes six, different IRAs with a total of three advisors!

She must have noticed the look of shock on my face and responded with a phrase we hear, although erroneously, that this is a form of diversifying her portfolio. We examined her statements for the different custodians and asked if we could provide her a “second opinion” as to the state of her investments according to her goals. She quickly responded affirmatively and we set the next meeting.

After much review of the statements, we noticed a trend among the various advisors. Each advisor had taken a similar strategy to helping the client meet her lifetime income goals! Further analysis explained what we previously thought about her approach to diversification – the client had not truly diversified her portfolio but had concentrated her portfolio, inadvertently, by never informing the advisors of her use of multiple advisors. In other words, she was highly concentrated in certain assets classes within her total holdings that exposed her to significant risk. We use the term “overlap” to describe the result of using several advisors that essentially invest in the same assets classes.

During the second meeting we verified her goals, risk tolerance and cash flow needs to confirm our understanding. We provided her a consolidated report of all six IRA statements and she was alarmed at the problem she created with so many accounts. After explaining our recommendation of diversification in many different forms – asset classes, geographically, market sectors, etc. – she was ready to simplify her life.

By combining all of her IRAs into one account, she reduced the amount of paperwork necessary to be maintained for tax purposes and monitoring of her investment positions. Additional diversification was achieved by including asset classes not previously in the portfolio that would reduce her exposure to risk while maintaining her need for immediate cash flow each month. Her smile was all we needed to see to know that we had provided her the highest level of response and service as well as a resolution to a worry she had been carrying for some time. She also through away the giant, purple binder!

If you have multiple accounts with multiple advisors, you should consider a simpler approach to achieve your desired result with a consolidated account of truly diversified investments. We have a saying in our company, “To make things complex is simple. To make things simple is complex.” In other words, let us help you make life simple that you can enjoy retirement on your own terms. Stress? We don’t think it’s necessary when you work with a retirement planning specialist.

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Strategies for Filing for Medicare Benefits

Posted on July 1, 2019June 28, 2019 by Jimmy J. Williams, CPA/PFS, CFP®

One of the most complex benefits provided by the federal government is Medicare. Numerous elections that affect your lifetime benefits cause people much anxiety. You will learn when and why to file for certain benefits under the Medicare laws in this article.

While working, employers generally provide health insurance benefits for its employees. The coverages are broad and provide a level of safety for the participants. However, when a worker turns age 65, some strategies must be considered about filing for Medicare in a timely and appropriate manner.

Medicare Part A is the program that provides hospitalization coverage for in-patient care, hospice care, skilled nursing facility care and home health care. The cost for this coverage is free to individuals who have worked forty (40) quarters during their career and contributed to the system through payroll deductions. When examining your paystub, the payment for this program is deducted from your gross pay at 1.45% per pay period. All qualified individuals should file for Medicare Part A coverage upon turning age 65 regardless of employment.

If an individual continues to work beyond age 65, Medicare Part A serves as a supplemental to the person’s employer-provided group coverage if the plan covers equal to or more than 20 employees. However, if the employer plan covers fewer than 20 employees, additional research will need to be performed with your employer-plan provider. The insurance company may or may not cover your healthcare needs as the primary insurer.

Medicare Part B is the program that provides medical insurance for out-patient care. This type of coverage will provide payment for services from your doctors, durable medical equipment costs, preventive services and home health care. The premiums for Medicare Part B are borne, partially, by every participant. For 2019, the monthly premium for Medicare Part B is $135.50. However, some participants may be required to pay an additional amount referred to as the “Part B income-related adjustment amount” if his or her modified adjusted gross income is greater than $85,000 for a single person or $170,000 for a joint filer. Modified adjusted gross income is defined as adjusted gross income plus tax-exempt interest.

One area of the Medicare Programs that many people don’t understand, or utilize appropriately, is Medicare Part D, the prescription drug coverage. Anyone that is needing prescription drugs on a regular basis for their care should consider the benefits of enrolling in Medicare Part D. There are several punitive measures for failing to enroll at your first opportunity. Many different carriers provide plans for this program and a professional should be consulted to determine which plan is most appropriate for your needs.

Medicare is a wonderful program for those qualified individuals. You don’t have to worry or wonder if you are utilizing the program to its fullest extent. Consult a CPA or Certified Financial Planners^TM practitioner to assist you in enrolling for this important coverage. For additional information about retirement benefits and strategies, please go to our Compass Capital Management Resource Center.

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Planning for Disasters is Good Business

Posted on June 17, 2019June 6, 2019 by Jimmy J. Williams, CPA/PFS, CFP®

Recently, many American citizens have been subjected to tornadoes, flooding and other natural disasters. During these times of stress, it is critical to possess a plan that helps you stay focused and prevent panic. We believe the best time to prepare for inclement weather is during the time of sunny days.

The first item on your Disaster Plan should be the accountability of all family members (including our beloved pets). Communicate where and what should be the actions of each family member should a fire, flood or a tornado strikes the residence. Educate children on the location of preparedness kits (I hope you have one!) and the safest shelter area within your home or at a local FEMA-Certified Safe Area. It is during these frenetic times that we often overlook simple steps that could mitigate or prevent significant loss of family and/or assets.

A properly designed Preparedness Kit should contain, at least, the following items:

Weather radio
Blankets
Prescriptions and other medical equipment
Flashlights with extra batteries
Water and non-perishable food for at least a couple of days
Pet food and treats (keeping our pets stress-free is important to their health)
First Aid Kit
Cellphone and/or tablet
Clothing and coats/jackets
List of important numbers (i.e., doctor, veterinarian, insurance company, other family members, etc.)

Next, place the preparedness kit in the safe area or in a known location that is readily available for a quick trip out the door. Designate someone in the family to be responsible for the kit including its contents along with its placement in the safe area.

If the disaster is fire-related, discuss the plan of each family member meeting at a specific location away from the home to account for everyone. This could be a tree, a neighbor’s house, etc. Again, don’t forget your beloved pets. However, if it is a decision to save your family or your pets, we respectfully understand the love of our pets, but believe it is in the family’s best interest to focus on the human family members first. If your home is designed with more than one floor, an escape rope ladder should be stored in a convenient location upstairs to allow for family members to easily descend the upper floors to reach safety.

Lastly, inform the local fire and police departments that your family has a safe area and may need to be checked on in the event of a disaster. This piece of communication could be critical if your safe area is within the home and the structure is razed to the ground by tornado.

To help our clients during these tumultuous times, we have developed a Preparedness Kit Checklist which includes review dates to determine the kit is maintained properly. To request this complimentary checklist, simply go to www.compasscapitalmgt .com and look under the “Resources” tab. While you are on the site, you may wish to look at other helpful videos and white papers to improve your family’s lifestyle.

Don’t let Mother Nature dictate your future, take charge of your life by being prepared. You will be glad you did!

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Father’s Role in Financial Planning

Posted on June 14, 2019June 13, 2019 by Jimmy J. Williams, CPA/PFS, CFP®

Happy Father’s Day to all fathers reading this column! This is your special day. You may be wondering what a financial column and Father’s Day have in common. From the days of the founding of our country, fathers have played a special role in the family unit. In the past, fathers were the breadwinners of the family while mothers were responsible for the household and children. Being a father myself, I now see the inequity in this allocation of duties, but I digress.

Father’s Day is not simply a time of celebration but also a recommitment of our priorities and dedication to our loved ones. If your family is not experiencing the joy it once did, it is time to evaluate your role and contribute in a different manner to the family’s benefit. It is not the making of money that brings happiness to your children. It is the investment of time, your time with them that creates lasting memories and provides a platform for your children to learn valuable lessons that will serve them well in life.

Lesson 1: Find something you are passionate about in life and choose it as a career.

In most cases, your passion will provide the courage and defiance to failure that is needed to reach success. Water collected in a puddle does not produce much energy. However, water heated to 212 degrees produces such force that it can power an locomotive! Fathers should teach their children to be resilient in the face of challenges and think creatively to become the next Steve Jobs or Thomas Edison.

Lesson 2: Giving your time to those in need is a wonderful use of one’s day.

In today’s environment, the “me” attitude has created a selfish mode within our country. Most Americans are generous with their money. However, to forsake one’s personal goals to contribute to a needy cause does not inspire some people. I have been a member of McAlester Lions Club for most of my career. The most memorable times in my volunteer career have been those days spent helping less fortunate individuals reclaim their lives and rebuild families. By helping these individuals capture a second chance at a productive life, I received a feeling of accomplishment that can’t be measured in money or net worth.

Lesson 3: Saving for the future should be a habit.

Fathers teach their children many habits during their lifetime – some good, some bad. However, the habit of saving for the future should be a family legacy that each generation continues. By creating a habit of saving each pay period, each month, whatever frequency your cash flow creates, you will grow in confidence, security and capability. Typically, you need to save in three “buckets” in this order:

Emergency Fund (next 90 days)
Lifestyle Fund (cars, homes, education, vacation, etc.)
Lifetime Fund (retirement and legacy)

Focus one hundred percent of your initial savings on the first bucket, Emergency Fund. After saving sufficiently to cover 90-days’ living expenses, then start saving in the other two buckets.

Becoming a father is a simple act. Being a dad takes commitment, time and resources. You have the capability of all three of these characteristics. Take action and hug your kids today. The gifts you receive on Father’s Day are your children’s respect, love and admiration!

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Maximizing Your Day

Posted on June 10, 2019June 6, 2019 by Jimmy J. Williams, CPA/PFS, CFP®

Have you looked at your calendar lately? If many of you are like me, the days seem to be passing quicker than I experienced in my younger days. Now, I am not focusing on the topic of aging. I am, however, focusing on the more important aspect of time – maximizing the enjoyment of time’s passing.

When was the last time you sat down and simply wrote about the day’s events and documented the memories of the day? I highly recommend journaling to my clients, friends and family as a means of storing memories, working through difficult decisions, dispensing of emotional feelings without the fear of reprisal and, most importantly, to provide yourself the time needed to remove thoughts from your mind for complete and total rest. For many years, I have kept journals that are private and will not be reviewed by my family until my passing. The hope is that the stories will inspire my heirs to contribute to their communities, provide for those neighbors in need, seek a spiritual solution to many of life’s challenging times and to simply live a life by their design that leaves the world in a better place than they found it.

During my daily interaction with people, I often seek times to help others see the world for more than a harried existence where one day looks the same as all the others. We have three important facts of life to be thankful:

We were born as human
We were born or live in the United States of America
We can change our future by making decisions against nature

To be born human is vital in that we can utilize a highly sophisticated brain to change our futures for better. We can form or build our environment to our own liking. Unlike some reptiles, we can place warm clothing on our bodies and brave the frigid temperatures to accomplish our goals for the day. Unlike other mammals, we can elect our leaders in a formal election versus a duel or fight to the death to be the alpha male.

Living in the United States of America is one right, and privilege, many of us take for granted. Watch CNN, Fox News or any other news channel and watch the turmoil that is thrust upon the citizens of other countries by tyrants and other factions who wish to impose their will. Despite the sometimes disruptive nature of our freedoms and rights, the USA is the most sought after country for personal freedom, opportunity and a brighter future by those who are under despotism, tyranny and socialism. We are not a perfect country; however, our citizens have the right to participate in the development of the country’s future.

Changing our future is easily performed by writing down our desired outcomes and formulating the steps to achieve them. This is the reason for a semi-annual review of our goals. We, as humans, can change course today and seek a better outcome than we have experienced the first half of the year. Don’t simply allow your life to be drifting in the proverbial winds of chance. You have an opportunity to close the chapter of last month, last week or yesterday and form a brighter future.

Seek out positive, impactful and complimentary information by listening to podcasts, reading good books and associating with people that have kindness as a personal trait. One such podcast we recommend is “Live a Life by Design”. This podcast can be found on iTunes, SoundCloud, and right here on livealifeby.design.

Remember the words of Zig Ziglar, the renowned motivational speaker and author, “You were designed for accomplishment, engineered for success and endowed with the seeds of greatness.” The secret to success on this planet is to make tomorrow your best day ever! Then simply repeat this step everyday.