Won’t you join me? I’m getting in the spirit! A little personal reflection for this fine holiday week.
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family lessons
An IRA for All Seasons
Maybe you’ve heard the phrase “kiddie IRA”: it’s not a technical term. It refers instead to the use of a Roth IRA to help a young person start their investing career. Never too young?
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A Lesson at One Chapter’s End
In one of life’s great ironies, quite a few people pass away around retirement age, a short time before, or just after. Many of us have seen this up close: for me, it started with my father, then my oldest brother, then my wife. All passed away at the age of 62.
Each had enjoyed life and family, found satisfaction in their work, had travelled some and seen some sights. None planned to be done when they were; all had plans for more.
We’re thinking recently about what could have been… and what could be. This is all about the past and the future. When we focus too much time and attention on those, our capacity to enjoy the present is diminished, the ability to just be.
There’s a beautiful chaos in today, so staying present is a beautiful way to be. One way I interpret this idea: that we better have a little fun every day. This is the formulation that’s been popular in my home. My late wife Cathy once embroidered it on a small wall decoration.
With appreciation for the past, and having made plans for the future, we were striving to have some fun every day.
And I still do.
The balance between the present and the future is a grounding influence on our work. Our saying “invest wisely, spend well” is all about that idea. Investing wisely is about the future; spending well is about the present.
If you would like to talk about that balance in your life, or anything else, please email us or call.
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Play the audio version of this post below:
A Lesson at One Chapter's End – 228Main.com Presents: The Best of Leibman Financial Services
This text can be found at https://www.228Main.com/.
Resilient Parents, Resilient Wallets?
You’ve heard us talk before about the long run. We are all about the long run at 228 Main! Goals with their longest reasonable time horizon benefit from the space to flourish, in our opinion.
The way we and our families weather challenges might say something about our resilience—the capacity for “getting back up again.”
In fact, some research suggests that approaches to parenting may be related to future financial benefits for families and communities. It seems life costs more later for children who don’t have a chance to learn resilience.
How can parents help? The research suggests that the factors that matter most are how parents respond to their children and how parents set expectations and make demands. Together, these two forces help people learn and grow in a safe way.
Consider relationships you’ve witnessed in your life. Maybe you’ve met folks who “had every advantage” but were never challenged as children, or maybe people who had demands put on them as children but didn’t receive the feedback to feel safe enough to stretch themselves.
It turns out “sensitivity”—that is, responsiveness—in relationships can contribute to a person’s sense of stability. No matter one’s financial standing, a sense of stability can have impacts on our financial success: we may make very different decisions when we feel less confident about the future.
We don’t choose our first families, but I have a feeling we can help each other develop resilience at any point. Clear feedback and meaningful expectations? They may be tools to stronger relationships—and more resilient wallets.
Clients, we’re here for the long haul. Thank you for joining us.
Call or write, any time.
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Play the audio version of this post below:
Resilient Parents, Resilient Wallets? – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
College Savings Ideas When There’s More Than One Kiddo
Some things that seem complicated can be made simple. Other things, like college funding accounts for descendants, may get more complicated over time when more than one child is involved.
Consider how disparities may develop across account balances:
- Imagine that, upon their birth, the first child receives a one-time deposit of $1,000; the second-born receives $100 monthly from birth to age 18; the third on the way is set to receive the same deal as either of the first two. However, this third child will necessarily have less purchasing power from the same amount in contributions. Why? In the years that have passed, inflation will have done its work.
- One-time deposits may go in at a more advantageous time to invest for one child than another.
- Equity among children will remain a shifting target as asset values and college costs change over time.
… And all this is before we even consider the differences in children’s needs.
One approach to simplify this reality is to think of college funding as a consolidated endeavor for the group, not as individual accounts. With a 529 plan owned by grandparents or a Roth IRA earmarked for education, this can be done. (We should note: owners of 529 college savings plans may change the beneficiaries among siblings or cousins with no adverse tax consequences.)
Consider this example. If there are seven grandchildren, you can allocate 1/7 of the total college fund balance to the oldest, then 1/6 of what remains to the second-oldest, and so on as each grandchild reaches college age.
In the case 529 college savings accounts are used, transfers may be needed to set up the oldest with the proper balance. If a Roth IRA is used, a withdrawal in the proper amount can be made by the grandparent to meet education expenses, then the “paid” child is removed from the beneficiary (or contingent beneficiary) provision.
Proceeds of a gift via Roth may of course be used for purposes other than education, a house down-payment for example.
Some clients who have 529 accounts for grandchildren make adjustments from time to time among grandchildren’s accounts to reflect each child’s individual needs and to maintain a better sense of equity. Others deposit equal amounts for each grandchild and do not worry about differences that emerge later.
One general rule in college funding: the more removed the funding is from the child, the less impact it may have on college aid formulas. A 529 account owned by the child is 100% available for college expenses, but a Roth IRA balance of a grandparent or parent has little or no impact.
Clients, we talk about options and alternatives; you make decisions. If you would like to talk about strategies for your children or grandchildren, email us or call.
Prior to investing in a 529 plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax-free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
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Play the audio version of this post below:
College Funding Ideas When There’s More Than One Kiddo – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
HOW TO RETIRE: PANDEMIC EDITION
What a year! The events of 2020 have reached into every facet of our lives. Many careers have been changed or upended.
People working happily at advanced ages have told us they are leery of workplace exposures, so many are on leave or have retired. Others have been displaced from jobs they would have preferred to keep. And some are helping descendants cope with “distance learning” or a loss of childcare options instead of working at jobs.
One friend retired just before the pandemic, planning an ambitious travel schedule. That isn’t happening. And another, who had planned to retire, now works from home: they figure they might as well keep working, since they cannot travel or engage in activities they had planned for retirement.
No matter what 2020 has thrown at you, the basics of retirement planning have not changed. It is a five-step process. We need to figure out…
- how much money it takes to run the life we prefer,
- monthly income amounts and timing from Social Security or pensions,
- lump sums required for one-time goals or needs, like a bucket list trip or boat,
- lump sums available from savings, investments, 401(k) plans, and other wealth, and
- the sustainable monthly cash flow that might be withdrawn from net long-term investments, after the lump sums are accounted for (we help people with this step).
There are nuances to each step—options to analyze, lifestyle decision to make. Retirement planning works out best when it is a process over time. We have noticed that people learn more about their objectives and their finances as time goes on, and things change. So your retirement plan adapts and changes over time, too.
If the pandemic has shaken things up for you as it has for others—or if it has just gotten to be that time—call or email us when you are ready to work on your plans and planning. Clients, if changes need to be incorporated in your plans, let’s keep talking.
We’re glad to help.
STOCK SPLITS AND SWEETS
Arithmetic is important in our line of work, but its lessons can be found all over.
My older brother gave me one such lesson when I was very young. There was a particular joy in convincing any of my siblings to share candy or treats with me. One day, my brother offered to split a piece of taffy.
“Mark,” he said, “how would you like a fourth of this piece?”
“Yes!” I said.
“If you think that sounds good, what about a tenth of this piece?”
I didn’t know much then, but ten was definitely bigger than four, so this development was promising. I nodded.
“Great! But how about a twentieth of it?”
I could barely contain my excitement. What a deal!
By the end of this process, we settled on a figure. My brother tore me off the tiniest corner of the taffy, and I learned a valuable lesson about math.
At the risk of oversimplifying, we thought of this story again with this news of some major companies executing stock splits.
A stock split is what it sounds like: a company increases the number of shares issued to holders by splitting each existing share into some fraction. Apple recently split four-for-one; Tesla just split five-for-one. (Unlike the taffy lesson, they don’t keep the other pieces! Shareholders went from owning one share to owning four or five, respectively.)
Why split stocks? In years gone by, the idea was that soaring prices made some companies out of reach for smaller investors. A stock split on an expensive company made a single share more affordable, and in theory more investors could get a piece of the action.
Today, many trading platforms allow investors to purchase “fractional shares,” which are also just what they sound like: even if you can’t afford a whole piece, plenty of platforms will still sell you a corner of it.
So why a stock split? Even if it’s not doing much to make the company more accessible to more investors, the move still communicates that idea. It’s a strong marketing campaign for valuable companies.
What does it mean for us? Not much. Remember, we want a piece of the action: any way you slice it, the ingredients and quality of the piece haven’t changed.
A stock split changes the mechanics of how the company is traded. It does not change the mechanics of the company—its outlook, its output, its fundamentals.
Math will always be important in our work, but in this case, we’re not going to let the numbers complicate the situation. Whether we’re splitting the taffy in two pieces or twenty, we know what we’re getting.
Clients, if you want to talk about this or anything else, please write or call.
Stock investing includes risks, including fluctuating prices and loss of principal.
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