All in Financial Planning

Planning Continues Upon Retirement for Business Owners

As a business owner, you have invested a great deal of time and effort into building your company over the years. You know the amount of planning needed to maintain daily operations and grow your business. Now, you may be ready for retirement. But, the planning does not end. What you do next, and how you navigate potential tax issues and regulatory pitfalls, can make a big difference in the long-term success of your retirement.

Here are some of the more “taxing” concerns you may face associated with retirement:

Early retirement and early withdrawals.

If you take withdrawals from your qualified retirement plan before age 59½, you may be subject to a 10% Federal income tax penalty. There are certain instances in which early withdrawals may be taken without penalty, such as death, disability, or substantially equal periodic payments. Otherwise, at 10%, the penalty tax can be significant, so it is important to plan accordingly.

Waiting too long. You must begin taking required minimum distributions (RMDs) from your traditional Individual Retirement Account (IRA) by April 1 of the year after you reach age 70½. If you fail to do so or do not withdraw enough, you will be subject to a 50% penalty tax, which will be incurred on the difference between your RMD and the actual withdrawal amount. Your RMD amount is based on the previous December 31 balance, divided by your life expectancy (or the joint life expectancy of you and your spouse, if applicable).

Working while receiving Social Security.
If you receive Social Security and also continue to work, a portion of your benefits may be taxable. For more information, refer to Internal Revenue Service (IRS) Publication 915, Social Security and Equivalent Railroad Retirement Benefits, or consult with your tax professional.

You may be subject to the “give-back” if you are under full retirement age (based on the year of your birth), receive Social Security benefits, and earn income. The law requires a give-back of $1 for every $2 earned in excess of $17,040 in 2018 for those individuals between the ages of 62 and full retirement age who are receiving a reduced Social Security benefit.

For the year in which an individual attains full retirement age, the give-back is $1 for every $3 in excess of $45,360 for 2018. Starting in the month in which the individual attains full retirement age, the give-back is eliminated. If you are under full retirement age and thinking about taking Social Security benefits while still working, it is important to understand the potential tax consequences of doing so.

Where you live in retirement matters.
Each state has its own rules on income, estate, sales, and property taxation. Your tax and legal advisors can help you assess the potential tax advantages and disadvantages of your retirement destination.

Planning Continues through Retirement

Your personal retirement plan probably involved building a nest egg with regular savings over decades. Now that you are preparing for retirement, continue with your planning.

Time IN the Market > TimING the Market

The belief that you, or a particularly talented financial manager, can foresee the direction of the stock market is a seductive one. Some investors are confident that, with proper research, they can make money by snapping up equities when prices are low, and shifting their investments into cash or bonds when the market hits its peak. Even worse, they believe they can pay someone else can do it for them. But longitudinal studies have shown time and time again that no one can consistently predict the direction of the market in the short run.

However, many armchair investors persist in the belief that, by carefully following business news and trusting their “gut” instincts, they will be able to beat the market. Some study the stock tips in personal finance magazines, others hope to glean additional insight from analysts’ reports and specialized investment newsletters, and still others attempt to mine all the available data, crafting complex simulations of how the market is likely to behave in the future.

But if financial professionals struggle to keep ahead of trends, private investors are even less likely to outfox the indexes. As soon as a piece of business or economic news hits the airwaves and the Internet, analysts and brokers react immediately to the information. Because these financial professionals act so rapidly, the stock market almost always reflects all the known information at any given moment in time. And even if an individual investor were able to develop an analytic model with some real predictive value, unexpected events—such as a terrorist attack or a natural disaster, or even a political scandal—could lead to sudden and dramatic market fluctuations that no model based on historical data could have anticipated.

It is only natural that investors would want to find some way to sit out bear markets and get back just in time for the next bull run. It is useful to keep in mind, however, that even the slowest equity markets have some bright spots. A diversified portfolio will help you protect against loss and capture whatever gains might occur in a market downturn.

Investors run a big risk by selling when they believe stocks have reached their peak. They may turn a profit when cashing in their equity holdings, but they could also miss out on some of the market’s best cycles. Being absent from the market for only a few of the days or weeks with the highest percentage gains can decimate a portfolio’s returns over time. Market timers who sell frequently also lose money to transaction costs and taxes, and miss out to a large extent on the compounding effect that benefits investors who remain in the market consistently. Instead of trying to time the market, investing in a properly allocated diversified portfolio driven by a goals-based financial plan is a much better strategy.

Trying to pinpoint the right time to invest in the stock market is an exercise in futility. If you have a longer period to save, owning equities provides the most effective hedge against inflation and taxation available. Since it is impossible to know where the market might go from here, it makes sense to start investing now and continue investing on a regular basis, regardless of market conditions. Remember: long-term investment success is achieved not by timing the market, but by time in the market.

My mission is to help 80 households be more generous over their lifetime. And that’s it. 

What’s a household? Partly it’s a way for me to measure how many people I’m helping. So it’s a family, a unit, it could be a husband and wife and their kids. Or, it could be an individual whose committed to the process of working together to make wise financial decisions. 

Why just 80 clients? There’s not a lot of science that goes into it for me. It’s a feel but also an understanding of my capacity. I want to give my full attention to my clients when they need it. I know I can do that with 80. So I’m capping it there. At least, that’s my conviction now.

I also believe there will be enough of a ripple effect with 80 committed clients working together for the next 5, 10, 15, 20+ years, that I’ll have plenty of reasons to feel like I made enough of a difference in enough people’s lives. Plus, it takes a long time to work one-on-one with clients to get clear on their goals, values, and action items. Then, there’s course corrections that happen as life happens. To do quality work, at some point you have to limit the quantity of work. Unless of course you’re building a corporate empire to scale, which I am not.


Why the focus on generosity? Of course there’s more that goes into a financial plan than being generous, but for me, that’s where all roads have to end up if I’m doing my job properly. 

Let’s take retirement, for example. Why do people want to retire. Well, there’s an infinite number of reasons, but there are a few main reasons. For some people it’s to rest, for others it’s to get away, for some it’s to spend time with family, and yet for others it’s to do nothing but their hobbies and passions. My thing is that retirement ought to be more of a change towards something else rather than an end in and of itself. And, I think the way to get it to be a change towards something new, is to have a reason outside of just making yourself more comfortable. Comfort is important, but at some point you max out on comfort. Then what? That’s where generosity comes in. I think we’re more fulfilled when we have an aim that involves giving something to someone else without expecting payback in return. To me, there’s an endless amount of financial planning work to be done in 80 households’ lives to maximize the generosity in each one, and thus the positive impact all around the world.

 Also, I feel that almost no one has anyone in their life challenging them to be more generous, nor teaching them wise financial principles to get to the point where they feel like they have “enough” or even “extra. For the most part, no one talks about their money at all to other people, let alone their closest family or friends. And it would be far too risky to tell someone what you think they should do with their money. So, that where my calling comes in. I’m not telling people what to do with their money, rather coming along side to provide a personal financial framework for you how and what to do to get the most out of what you have. 

The #Fiduciary Rule is Dead

But Clients Should Ask Their Advisor This Simple Yes or No Question

Over the past year, investors have been receiving notifications about the U.S. Department of Labor’s fiduciary rule that would have impacted financial advisors and their clients. Simply stated, the DOL’s new “fiduciary duty” standard would have required financial professionals who receive compensation for transactions to act in their client’s “best interest.”