retirement planning

Three Words You May Need to Know: Required. Minimum. Distribution. 

If you are of a certain age and have certain retirement accounts, you probably need to know about the annually required withdrawals from those accounts. The IRS calls them “Required Minimum Distributions”—RMDs.

One special note: Clients, many of you are already treating your retirement account like an orchard, taking out the fruit crop each year to live on. The RMD is not an “extra” amount on top of the crop: it is just a minimum. If you are already taking out 5% in monthly payments to fund your retirement, you don’t need to worry about what happens at age 73.

We’ll talk about the details here, then how it works out in practice.

People born in or before 1950 with any form of retirement account (other than Roth IRA) have already begun doing this RMD process each year (or should have). People born in 1951 or later will have to begin by the year they turn 73.

The actual amount required is a function of age and the prior year-end balance. For example, a 73-year-old has to take out a little less than 3.8%. In round numbers, this would be $3,800 per $100,000 in the account. But that fraction goes up a little every year: 80-year-olds are closer to 5%, 90-year-olds have to take out more than 8%.

Basically, the RMD needs to be calculated for each retirement account you have (except Roth IRAs). You must take out the total amount required by December 31, and you will receive a 1099-R showing taxable income.

Clients, you know we pay attention to this and strive to keep you informed about what needs to be done. But there’s one thing to be careful of: take this as an opportunity to check whether there is some account somewhere that we don’t know about, like a 401(k) from a former employer, an odd IRA balance somewhere, 457 or 403(b) plans, and so on. It happens, but it would be a pain to get yourself into some trouble over an account that’s been out of sight, out of mind.

Some people may choose to use the onset of RMDs as a time to consolidate all of their retirement funds into a single rollover IRA, to make this process simpler going forward.

One of the advantages of Roth IRAs is that they have no RMD requirement. As a matter of good planning, it may make sense to convert partial IRA balances to Roth, pay tax when you choose, and whittle down that balance that is subject to RMDs in traditional retirement accounts.

There are lots of ways to handle things! If you’d like to talk about it, we’re here for it. Email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

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Three Words You May Need to Know: Required. Minimum. Distribution. – 228Main.com Presents: The Best of Leibman Financial Services

This text can be found at https://www.228Main.com/.

In and Out of the Comfort Zone  

Once there was a man who was never satisfied, who always wanted more. He always needed to get to the next level. He had a goal of making a million dollars a year, then he wanted two million, and then a million a month, then two million a month. And that was not enough, either. He had wealth, he had fame, he had all the stuff money can buy, but he never had enough. 

Some preach that this striving is a virtue. “You can’t make progress unless you are willing to get out of your comfort zone.” Carried to the extreme, the mindset seems like a treadmill—or a trap, even. Always pushing, never satisfied? Sounds like it could be a sad way to spend one’s life. 

On the other hand, a friend told us a while back about her grandmother, who always said, “I have enough, and enough is as good as a feast.” One imagines that Granny was as content with life as a person could be. 

But taking that to the extreme, where would progress or innovation happen if everyone resigned themselves to living with things just as they were? Would anything change in a world where everything was perfectly comfortable and everyone had what they needed already? 

It is for each of us to sort out what we want out of life, how to get it, and the meaning of happiness. And that might mean figuring out what we need to do differently to get there, and then recognizing it once we have gotten what we need in terms of money and stuff. 

Then, once we’re comfortable in one area, we might turn our aspirations to more elevating topics—maybe helping family, developing new skills, or improving the community.  

For instance, can you imagine a community rec center in our little town? Or a scholarship endowment whose income would help any graduating seniors on their way to a trade or to higher education? More vibrant community organizations? These are some of the next-level things I’m dreaming about. 

We can be comfortable with what we have, and we can exercise our ambition to make the world better. We enjoy the satisfaction of our comfort zone in some ways and move ourselves out of it to dream big in other ways. 

Clients, if you would like to explore the ins and outs of your comfort zone, email us or call. 

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Play the audio version of this post below:

Three Words You May Need to Know: Required. Minimum. Distribution. – 228Main.com Presents: The Best of Leibman Financial Services

This text can be found at https://www.228Main.com/.

The Best Time To Start

“Well begun is half done,” the proverb says. And we tend to agree. Since it’s your journey, we don’t like to sweat the particulars: it’s never too early to start, but it’s also never too late.

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Would You Rather… Have a Pot of Gold or Have an Orchard? 

When I was young, I pictured my retirement account as a pot of gold. It would be there at the end of the rainbow, when my career is done, to fund my retirement.

Talking with folks, it seems like the pot of gold is the type of thing lots of people think about when the subject is retirement. Whether it’s finding their “number,” amassing a big enough balance to feel “safe” enough to retire, or hitting a nice round goal like $500,000 or $1 million, the lump sum is the thing.

The challenge with thinking in lump sums is, we live our lives moment to moment, month to month. We have food to buy every week, bills to pay every month, and holidays or travel or projects to fund every year.

In other words, life happens with recurring income—not a lump sum.

A pot of gold sounds nice, but when you take gold out to do something or buy something, it’s gone: you can only spend it once. This may be why some people with substantial resources still don’t feel comfortable with the idea of hanging up their earning power. They’re stuck on discrete balances instead of ongoing flows.

Long ago I realized that what we need in retirement is an orchard, not a pot of gold. The orchard produces a fruit crop, and the crop is what meets our income needs for a year. And when it’s over, we still own the orchard! Next year, another crop. When the orchard is sustainable and can produce a fruit crop big enough to live on, we’ve become financially independent—and don’t need to sell our labor to pay our bills, anymore.

One of the best things about the orchard is that it does not matter how long you live. If the fruit crop each year is big enough, you won’t run out of resources. We tend the orchard and keep it healthy enough to supply the crop.

And when you are done with it, “you can’t take it with you” as they say, so the orchard gets passed down to people or causes you love. You don’t just leave an empty pot, where the gold used to be. Instead, the ground can be made ready—for whatever’s next.

Email us or call if you’d like to talk about turning your pot of gold into an orchard.

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Play the audio version of this post below:

Would You Rather… Have a Pot of Gold or Have an Orchard? – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228main.com/.

It’s Never Too Early, and It’s Never Too Late

Quite a bit of the news around retirement research focuses on shortfalls. How many of us have heard a headline lately about how many people aren’t saving enough for retirement or aren’t hitting their retirement goals? 

It can sound bleak. But when you get into the numbers, things are a little more nuanced. (Examples: people sometimes overestimate what they think they’ll need, and even when they “fall short,” people tend to make do with however much they do end up with.) 

According to survey findings from Allspring Global Investments, most retirees agreed that they were glad they had started preparing for retirement when they had… but most retirees also wished that they had started earlier. Turns out humans are a tricky bunch to satisfy! 

Retirement is such a huge topic, and our emotions around it can affect how willing we are to take a closer look at our situation. We don’t need to let fear call the shots, however. Avoidance is a survival skill, not a “thrival” skill. 

“Being clueless about money is no longer affordable,” writes Kate Levinson in her book Emotional Currency. (Ouch, right?) But Levinson points out that this challenge is also an opportunity: any day is a great day to get started. 

Not only is it never too early to get started, it’s also never too late to get started. Ever ripped off a Bandaid or taken a flying leap into the deep end? Ever opened that email or that bill you were dreading? 

Ever crossed a finish line after you thought it would be impossible to even get started? In the face of the unknown, it’s easy to let fear tell us stories about how hard things will be. We don’t have to accept the first story our fear tells us. 

Instead, let’s let the journey be as pleasurable as it can be. We can embrace this very moment as the best possible one to take the next step. It’s never black-and-white. Sure, maybe we could’ve started yesterday, and after all, there’s always tomorrow. 

But it’s also really nice to be here with you, today. Call or email us, any time. 

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Play the audio version of this post below:

It’s Never Too Early, and It’s Never Too Late – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

So, What’s Included? The Value of a Research Team 

Clients, since becoming an SEC-facing Registered Investment Advisor, we’ve been bulking up our in-house processes. There’s more documentation, but there’s also more intentionality: we have to know what we’re doing and why.

You’ve probably heard it before, but we often talk about our work in terms of three key activities. The first, of course, is the work we do with you. We meet, we talk, and you let us get to know the story of you. The other two are investment research and portfolio management. With the increasing wealth you’ve brought to us, these activities are more important than ever.

So what’s included in that work? Here are some of the things we like to think about (which means you don’t have to!).

Trying to discern which daily or weekly or monthly events are most relevant to the long run. Not all “market moves” are created equal. Movement can come from investors’ expectations for and reactions to even the littlest of day-to-day events. How do we recognize which will matter in the next year, five years, or fifty years? We try to learn from history; we try to understand where things might be headed next. (And, spoiler alert, our choices are rarely driven by knee-jerk reactions or TV news). We do our best to bring some perspective to our choices.

Managing the players in our investment universe. Companies come and go. They can split. They can consolidate. Some industries are seasonal or cyclical; some do better in tough times, and some boom when others do. Part of our work is keeping an eye on the wider investment universe as well as our active lists. We’re always monitoring some number of prospective players who haven’t quite made the cut, watching for the moment they might reach bargain status. Doing our own analysis is crucial before a holding gets promoted to the Buy List, and even then, we’re always reviewing our criteria as a team as each holding’s story continues to unfold.

Finding and following patterns and changes in our everyday lives. Investing, for us, is not about what’s happening in boardrooms around the world. It’s more about what’s happening in our backyard—and yours! “Your money, your life” is about how you choose to save and spend your resources but also about connecting your money to the real life you lead. What does it mean to own a piece of the action? Well, it means that we pay attention to what we’re seeing in our real lives today and try to imagine the advances and opportunities of tomorrow. Here’s a taste of the research questions we’ve been asking in recent years:

  • How is the pandemic affecting retail? What’s the future of delivery look like? What sort of shopping experiences will people come to expect? How do technology, consumer behavior, and the supply chain affect each other?
  • What’s happening in the energy revolution? How are energy sources changing? What materials and services will be necessary in the next chapter? How will renewable resources continue to change everyday life? How will the evolution of the automobile continue to unfold?
  • How are devices shaping our work, schools, and homes? As demand grows for semiconductors and screens, who may be positioned to meet that demand? Which companies may benefit from the changing technological landscape?

There are, of course, other pieces that are just part of the research process. We try to practice good humor and compassion, to sprinkle in some folksy metaphors—and to bring our enthusiasm!

And while there’s no sense in trying to put a value on any of the individual line items discussed here, we do think they’re worth mentioning. We love to work hard for you, and with you.

Thank you for joining us. Reach out, anytime.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not a guarantee of future results.

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So What's Included? The Value of a Research Team – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

“You Have As Many Hours In A Day As Beyoncé!”

What would happen if flowers bloomed all hours of the day, every day of the year? Would we still appreciate the beauty?

Humans and plants have one thing in common; we can’t be at our “best” every single day. We struggle, we grow, and when we bloom, it is beautiful. We are allowed to give ourselves some time to produce new fruit.

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Where Does the Treasure Map Lead?

We believe in saving for the future, but the present is where we live. Your retirement flow might go toward any mix of spending: cash for bills, a stash for unexpected events, or maybe it’s for that adventure in the Florida Keys! None of it takes a pile of money: instead, we tend the orchard for the fruit crop.

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Happy Baby, Happy Investor

One of the few childhood pictures of me shows a happy baby. My sister says I’ve always been a happy baby. Optimism has been a lifelong trait, for sure.

I can’t know what delighted me all those decades ago, when the photo was taken. But when I survey my finances these days, I still feel the same way the baby in the photo looks.

I like what I own—percentages of ownership in a couple dozen companies. Iconic names, dominating their sectors. Some companies that are working to sort out the future of their industries, which are in flux. A few enterprises in lines of work that did not exist when I was young. The largest player in a fragmented, but consolidating, industry. Producers of vital materials for the age we are in.

These diverse firms have one thing in common: our research team believes their shares of ownership may be more valuable in the future than they are today. No guarantees, of course.

What I own is only part of it. How I own is another key. With a large fraction in a Roth IRA, gains are free of tax as they compound, when they are taken out and spent in my real life, or when left to people or causes I love. All the income tax freight was paid in advance for all time, on those smaller balances I converted to Roth—not the compounding tax-free wealth I now own.

And really, all of that is the proverbial cherry on top. The greatest source of my joy arises not from what I own nor how I own it: the knowledge that my resources exceed my needs, that’s the big thing. It was not that way when we started out, was it? Now, I have enough.

A dear friend once related to me what Grandma always told her: “I have enough, and enough is as good as a feast.” I love this thought.

Oh, my holdings go up and down too, just like yours. Sometimes a company we own messes up. But we know how this works, don’t we? We believe our principles and persistence will get us through, and knowing that is another source of joy.

Clients, if you would like to talk about what you own, how you own it, or what makes for enough, email us or call.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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Play the audio version of this post below:

Happy Baby, Happy Investor – 228Main.com Presents: The Best of Leibman Financial Services

The text for this episode is available at https://228main.com/2023/08/02/happy-baby-happy-investor/.

Have Your Cake, Eat Your Cake
They say you can’t have you cake and eat it, too… but what if your cake had the potential to grow over time? Who says you can’t snack when you’re hungry and still save some for later?

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