Peak Level Advisors NEWSLETTERS

These days most people have investments in some type of retirement plan. For those who are working for an employer or have been employed in the past, they’ve invested in their employer’s retirement plan, whether in a 401k, 403b, or some other type of plan. In addition, many have started their own personal retirement plans through IRA accounts that they moved former employer money into and/or contributed to on their own. In the process, they have probably taken advantage of the tax deferral that goes with those plans, receiving a current tax deduction or exempting the income for the contribution from being taxed as well as not having to pay taxes annually on the growth in the account(s). Being able to defer those taxes for a lengthy period of time is the good news of the story, but the key word here is defer. The tax benefits are the big incentive given to workers to help them save for retirement, but as the saying goes, “There is no free lunch”. While you can defer paying the tax for a while, there comes a point when the government wants to start collecting on those deferred taxes. One of the ways they do that is by mandating that you begin taking distributions from those plans once you reach a certain age in the form of Required Minimum Distributions (RMDs) as outlined by the IRS. There is no getting around the fact that you will eventually have to pay taxes, but with some planning and forethought, there are ways that you can make the best out of this mandate so that your investments are still working for your benefit. Understanding the Requirements of RMDs The first thing to understand about RMDs is what investments they apply to. You are subject to RMDs on any retirement account for which you did not pay taxes on the income that provided the contribution that has been shieled from tax on dividends and capital gains over the life of the account. That would apply to the money most workers contribute to their employer retirement plans as well as Traditional IRAs. For a very long time, the age at which you had to begin taking your RMDs was 70-1/2, meaning the year that you made 6 months past your 70th birthday. Technically you don’t have to take the distribution in that year and can wait until April 10th of the following year to make that year’s distribution, but if you choose to do that, you will have to take two distributions in the same tax year, so it may not be in your best interest to wait. As a result of the original SECURE Act passed in 2019 and SECURE Act 2.0 that passed in 2023, the RMD age is now 73 for anyone born before 1960 and is 75 for those born in 1960 or later. The amount you must withdraw is determined by the balance in your Traditional retirement accounts at the end of the previous year divided by a life expectancy factor determined by the IRS. Therefore, the amount of your RMD will potentially and likely change from one year to the next. Outside of the exception for the first year of RMDs, you must take it by the end of the calendar year, or if you fail to do so, you will be subject to a tax penalty of 50% of the amount you were supposed to take out. That penalty, of course, is in addition to the tax you owe on the distribution, which is the whole point of the RMD, allowing the government to finally collect on the tax money you haven’t paid throughout the years. What we have described thus far applies to retirement plans that you contributed to. However, if you inherited retirement Traditional funds and are continuing to defer taxes on that money, the calculation is a little bit different and beyond the scope of what we will cover in this article. Using RMDs Productively For some people, RMDs are a non-issue because they rely on the distributions from their retirement plans to supplement their other sources of income in retirement. However, for others whose income needs are largely met outside of such distributions, the RMD can end up being a nuisance and something that simply makes them pay more taxes on money they don’t really want to take out of their investment portfolio. If you fall in that second camp and have to take the money out just because the IRS is making you do it, you might as well make the most out of the distributions you are required to take. There are a number of ways to do that, but here are three ways you can make good use of taking money out that you otherwise wouldn’t want to: 1. Funding Life Insurance – By using the RMD to pay the premium on an existing or new life insurance policy, you are taking a portion of your taxable asset and creating a larger pool of tax free assets for your beneficiaries. 2. Re-Investing the Proceeds – If you want to make sure the funds stay invested, you can maintain the investments as they are by re-registering the investment to another account type and paying the taxes owed out of pocket or taking the amount remaining after taxes have been withheld and investing them elsewhere. This approach could be used for investments meant to serve you or others (e.g. funding a college funding account for children/grandchildren). 3. Using the Qualified Charitable Deduction (QCD) – If you make gifts to charity, by sending funds directly from your retirement account to the charity of your choice, you can achieve your desire of supporting the charity but not have to count the distribution from your retirement plan as income on your taxes because the income is offset by the deduction. In the first to examples, you still must pay the tax, but you are still using the funds from your retirement investment to build wealth for yourself or others. With the QCD, you essentially avoid having to pay the tax at all, while at the same time supporting a charity that you may have intended to help anyway. Executing the Roth Conversion to Mitigate the Requirement What if you could avoid the RMD altogether? One way of doing that is to convert your Traditional retirement assets to Roth retirement assets, which allow for tax free distributions when the necessary requirements are met. Once again, there is no free lunch. In order to convert your Traditional assets to Roth assets, you will owe tax on the amount of assets you convert in that particular tax year. However, once you have converted those assets, any growth you receive after that time is available to you tax free, along with the amount that you converted because you paid the tax on that when you made the conversion. Those newly converted Roth assets are not subject to RMDs because they would generate no tax money for the government anyway, so you can hold onto those funds as long as you want, and take the money out when you want to. You may be thinking, the problem with this strategy is paying the tax on the converted assets, which could be significant if you hold a large amount in your Traditional retirement accounts. But a Roth Conversion does not have to be an all-or-nothing proposition. One approach you could consider is to execute a series of smaller Roth Conversions over a period of years in amounts that allow you to better manage the amount of tax you have to pay each year you make a conversion. This approach is likely to be one that is more feasible before you reach your RMD age because you cannot use a conversion to serve as your RMD. As a result, if you attempt to do a Roth Conversion while you also are taking RMDs, you have increased the amount of taxes you will owe. On the other hand, if you were to convert one third or half of your Traditional retirement assets to Roth assets, that serves not only to lessen the taxes you have to pay each year on the RMDs unnecessarily, but you also have created a pool of assets from which you can make withdrawals that you are not required to pay any taxes on.

Every year we go through the recently concluded ritual of getting everything together to file our taxes. Some people complete the process earlier than others, especially if they are anticipating a refund check. It is pretty much universal that we see this annual ritual as a necessary evil as almost nobody enjoys what it takes to file their taxes. However, it is rare that people change the things they do at this time of the year. Most people have filed their taxes by now, but of course there are people who get down to near the deadline and come to the conclusion that they can’t get it all completed and will need to file an extension. Hopefully you are not one of those people who goes about it this way on an annual basis. Regardless, if you want to improve your experience with taxes next year, now is maybe the time to do the things necessary to make that happen while this year’s taxes are fresh in your mind. In other words, rather than wait until after the year is already over and there is nothing you can do about what happened in 2024, be proactive in your tax planning to help you get an outcome more like you want it to be when the time comes to start preparing for the 2024 tax season. While this issue of the newsletter is intended to help you think differently about how you handle your taxes, this should not be considered tax advice, and you should consult with a tax professional to determine what is right for you. Review Your Deductions If you typically take the Standard Deduction when you file your taxes, maybe this idea won’t be as beneficial for you. On the other hand, maybe you have not taken advantage of every deduction you could possibly use that could lower your taxes. With the changes that have occurred over the years, the ability to itemized deductions for many tax filers has decreased, but it could be worth your while to see if you have deductions that could help you lower your tax bill. Probably the most obvious one to consider would be the interest on your mortgage loan, and if you own a home the real estate taxes you pay to your county and/or municipality. While there are a variety of reasons homeownership can be a financially savvy move, the tax deductions are near the top of the list. Another common deduction is for charitable contributions. Those could be the monetary donations to the church you attend, churches you visit, or other non-profit organizations, but you also can consider other contributions you make to these organizations that might be considered donations of your resources. For example, if you donated some item of value to an organization, that item has worth and could be deducted. To quantify what you can take as a deduction, it helps to get some acknowledgement from the organization. Or if you participated in a clothing drive for a non-profit, not only might you be able to consider the clothing your donated as a deduction but also the mileage you drove to find those items of clothing could be a deduction as well. Returning to the category of homeownership for a moment, if you took out a mortgage and paid points when closing the loan, you can usually take a deduction in the year of the purchase, or if you have private mortgage insurance premiums you pay on your loan, those premiums can be deducted if your Adjusted Gross Income is within certain limits. There are other possible deductions that are available that you may not have known to take advantage of, and the point here is that by evaluating now, ideally in consultation with your tax advisor, you may have more opportunities than you recognized to improve your tax situation. Evaluate Your Withholding Chances are if you were anticipating a refund, you filed your taxes quite a while ago to get that money in your hands as quickly as possible. It is usually the people who think they may owe money who are the late filers. You’ve probably heard it before that getting a refund is not necessarily a good thing, but to amplify the point, when you get a refund, what that means is the government has been holding onto your money throughout the year and months after the fact returned it back to you. If it works better for you to use the refund as your windfall, you may know yourself better than anyone else, and that strategy may work for you. However, it is worth being honest with yourself about how you are actually going to use that refund and whether it is going to be used primarily for the purpose of improving your financial situation or to give you a little extra to buy some things you want. That leads to the question of your ongoing tax withholding. If you work as an employee and have taxes withheld from your paycheck, chances are you can get pretty precise on how much to withhold. If you do a good job of projecting what your tax liability is likely to be (again it’s a fairly straightforward estimate if you are an employee), you can get very close in tax withheld to the amount of your liability, which would leave you fairly close to a breakeven point when it is time to file your taxes. Financially speaking, that is actually the best outcome, to withhold about what you owe. Organize Your Records One of the big points of stress at tax time is pulling the documents you need together to get to your tax preparer, even if that person is you. If you’ve struggled with this year after year, use this post-tax season as a time to evaluate your record keeping and set up systems that will make it easier for you to handle tax time next year. If you haven’t created a dedicated file for your tax documents, that would be a good first step. In these days with so much of what we receive being electronic, you may choose to make your file an electronic rather than paper file, or maybe you want to have both. Either way, you should have a place where all of your documents can be stored for easy access. Within that filing system, you can have sub-sections that are categorized for different things that you will receive, like W-2’s, 1099’s, or other statements pertaining to income received, statements showing deductible items you paid out, and receipts for items you need to include for deductions that may not have already been filed with the tax authorities but for which you will need to show your records if you were to be audited. If you have loose items like receipts, make your life and that of your tax preparer easier by copying those items onto regular sized pages or scanning them so they are available electronically. If you have your system setup well in advance and can put the new information into those files as you go throughout the year, you won’t have to scramble to find everything and organize it when it gets down to time to file your taxes. If you have breathed a sigh of relief that tax time is over once again, and you don’t want to think about it again until next year, resist that temptation and put in a little time now so that when you get to this time next year, you can feel confident that you have put yourself in the best position possible to make the experience less stressful and easier to navigate.

In the first issue of this two-part series on improving your financial security, we talked about ways you can situate your finances to mitigate threats to your short and long-term financial well-being, focused on how you can secure your income in the present, the future, and beyond your own life. It is unfortunate, but today those types of threats are not the only ones you have to be concerned with, because in a world that is becoming very much data driven and more reliant on being connected online, there are countless bad actors who are looking for ways to access your data and your digital footprint and use it against you. Ironically, in the midst of writing the first issue of this series, I had to engage assistance from IT professionals because of an intrusion into one of my social media accounts. Despite taking many precautions and attempting to follow best practices, there still is often something seemingly outside of your control that can put your data, and thus your financial security, at risk. Understanding that this is an area outside of my expertise, we will not attempt to cover all of the risks to your data, but we will highlight a few ways you might be exposed and how you can attempt to protect yourself as much as possible. Your Personal Devices The technology of today has allowed us to have incredible amounts of computing power at our fingertips almost anywhere we are. That provides us with the ability to do things that would have been unthinkable two decades ago, but it also opens us up to risks that go along with that power. Whether it is an actual computer, like a laptop, or even a smartphone, which is essentially a computer that can make calls, many of us find ourselves online constantly in one form or another and for a variety of different reasons. Getting online is so much easier now than it used to be because you can access a WiFi connection at so many more places now than you ever could. The bad news is that that easy access for you also means even easier access for the criminal element who want to take advantage of you. When using your personal devices, as much of a hassle as it may seem, it is important to utilize layers of security that make it harder for anyone to access your data. The first and easiest step is having passwords and lock codes that cannot be easily hacked, but that is only the beginning. Speaking of passwords, while it may be convenient to use one or a small number of easy to remember passwords for your various login accounts, doing so is putting you at risk. You should use different passwords for different logins and make them more complex, using combinations of letters, numbers, special characters, and capitalization to make it more difficult to hack. It is good practice to have security software on all of your devices, ideally one system that works on all of those devices to provide a consistent set of protections across your entire digital footprint. Having the security software is important, but it is also important that you keep it up to date by loading software updates as they become available. The last point with respect to personal devices is that sometimes the threat that gets you looks completely legitimate on the surface. No matter how legitimate an email or text message may look, if you get something you are not expecting, even from a source you do business with, look carefully before clicking anything that might allow a scammer to access your data, and if you can’t figure it out but have a suspicion, call that entity on a number you know if real and get verification. Organizational Data Breaches We tend to think of the threats to our personal data coming from us clicking on a link from a suspicious email or text, and that certainly is important to watch out for. However, in some cases, your data can be compromised in a way that you have nothing to do with, simply because your data is in the hands of some third party, and that data is compromised. As uncomfortable as it may be, we often have to share our personal data with the organizations we do business with, whether those businesses are in the financial realm or not. Because those organizations have access to a piece of your personal information, it is often the case that they have access to far more than just the information you may have provided them. In much of the business world, access to data on customers is critically important, whether that data has to do with their business interaction with you or not. As a result, these organizations, who typically store information on their customers in the cloud, are subject to being the target of hackers who know they can seek large paydays by hijacking data from these large organizations with presumably deep pockets. In recent years, there have been many high-profile organizational data breaches in many industries, from credit to banking to entertainment to even genealogy very recently. Providing the information necessary to do business with organizations is hard to avoid, so in order to protect yourself, it is very helpful to have access to services that can notify you about the potential of your data being part of a breach and that can help you clean up any issues that may result from your data being compromised. This access can come in the form of identity protection companies, internet security software, and from your own information technology resources, if you happen to have them. If you don’t have access to these types of tools, while there is a cost associated with using them, the cost could be far greater if you don’t have them. Storage and Disposal of Your Data While online threats to your data security are probably the most prevalent these days, some of the “old-school” ways of compromising your data still work extremely well. Because we are probably more vigilant about our online presence today, it can be easy to let some of the more traditional ways of maintaining data integrity fall by the wayside. Where and how you store your physical data is an important consideration. Many people today forgo receiving paper documents, but there are some things you will always receive in paper form, and if you have some type of system of storage, particularly for documents that has sensitive information in them, it needs to be as secure as possible. You may want to store important documents in a filing cabinet that has a key lock so that not everyone can get into it. For more sensitive information, you may go an extra step and put it in a safe that has something like a digital combination and/or a key lock to make it significantly more challenging to crack. Those are some things you can do with storage, but there may come a point when you have to dispose of the data you’ve stored, and that presents a whole new set of threats because it is hard to know who may see what you have thrown out. Whether you’re talking about paper documents, credit/debit cards, prescription information, or any number of other things that contain your sensitive information, just throwing them away is not a good idea, and even cutting them up may not be good enough. To be as safe as possible, shredding that type of information is perhaps the best solution. Something else you may not think of in an age where digital devices are made to be replaced in short order, you have data on your old device that could create problems in the wrong hands. You don’t want to just turn those old devices in where your data could be exposed or even reconstructed. You may need to go a step further and destroy the device or if you are turning it in somewhere, get professional help to ensure that your data is no longer accessible.

What does it mean to be secure financially? Depending on your situation, the answer may be different today than it will be tomorrow. This question comes to mind because more than ever, there are a variety of forces that can put your financial life in peril. Around this time of year, because of my affiliation with the Financial Empowerment Conference hosted by Turner Chapel AME Church, my mind goes to the topic of emphasis for the conference and ongoing series of programs. The emphasis for this year’s conference series is how to “Secure Your Money in an Insecure World”. The conference will be held on March 8-9, 2024 at the church, and anyone interested is invited to attend either in-person or virtually, and you can register using this link . When we consider the idea of financial security, there are two broad categories that are probably most important to consider. The first is how you position yourself to have the ability to address your financial obligations and desires. The other is how you keep your finances and the data that is connected to your finances secure from external threats. With that in mind, we will embark on a two-part newsletter series aimed at helping you understand how you can better improve your financial security in today’s world. Income is the Key to Financial Security For Part 1 of this series, how you set yourself up for financial success and security, we are going to focus on the importance of income. Why? Because when it comes down to it, your ability to generate or have the income necessary to take care of your needs and wants is the barometer of financial security. However, it is not just the income you have right now, but the income that will be available into the future, so let’s explore that more fully in three areas. Income Now When it comes to feeling secure with our income right now, most of us would look at what we are earning, assuming we’re still working for our money. If you have advanced to the point where you are no longer working to earn a living, you very likely are looking at how much is coming in from sources of income like Social Security or a pension. In either case, the question being asked is whether that income is enough to pay the bills and take care of the other things that make life enjoyable. Clearly, it is important to know that your income is covering expenses you are expecting to have. It may be worthwhile to expand your thinking, however, to whether you are being as effective as you can be in managing the income that you have available. If your Income Now is coming up short, it may be that rather than there not being enough income, you may need to be more mindful about how you are using the income you do have to ensure that you are taking care of the most important things in your life. Another important piece of your current income security is protecting yourself from the threats to that income. For example, if you were to lose your ability to earn income for some period of time, you want to have provisions in place to still be able to run your household. That relief could come in the form of a cash reserve of available savings that would allow you to draw from it to cover your expenses until your income restarted. If the reason for your loss of earnings was due to illness or injury, disability income insurance could serve as a protection mechanism to help you bridge the gap until your normal earnings resumed. These are just some of the ways to secure your current income, but important ones because your available income is the lifeblood of your current financial security. Income Later While it is perfectly normal to be focused on current income and the financial security it provides us in the moment, it is also extremely valuable for your peace of mind to know that your future income needs will be covered as well. Even if your current needs are being met, you are likely to have some level of anxiety if you feel like you are going to be forced to struggle financially in the future. For that reason, it is important to plan and establish a strategy for taking care of your future income needs. It could be the need to pay for certain major expenses that will come in months or years down the road, such as replacing a car or buying/upgrading a home. For situations like that, you will likely need to set aside some of your current income and hopefully put it to work where it will generate a return for you so that by the time you are ready for the purchase, you have accumulated adequate funds for it. On the other hand, your future income needs may be for a higher level of expenses that you are likely to have. Considering the examples of the car or home, if you financed a portion of the purchase instead of buying them outright, you would likely be incurring a higher level of expense for a period of time to pay off that loan. Then, of course, there is funding your lifestyle when you are no longer working. Since most citizens receive a Social Security benefit, that can generate a base of income you can count on. For those who will receive a pension benefit in retirement, that can be another core piece of your income security. Otherwise, you are likely looking at drawing down funds from your personal savings and investments, or if you created sources of passive income (e.g. investment real estate), that could help to fund your lifestyle once you have left the world of working for pay. Income if You’re Gone The first two pieces of income security are easily understood and practiced by a large number of people. The last one, however, is sometimes not as deeply considered, unless you are inclined to ensure your loved ones are able to benefit financially from the life you’ve lived once you are no longer around. While we tend to think of income as a regular stream of payments, speaking more broadly, income can come in many shapes and sizes. You could share the assets you’ve accumulated with loved ones in the form of a lump sum payout or a series of payouts over time. If you want to do so in the most efficient and orderly way possible, it is very helpful to have a comprehensive strategy in place. Part of that strategy is having your estate planning documents in place to ensure your wishes are executed as intended by law, and there may be steps you want to take in terms of structuring to lessen the potential that what you pass on to your loved ones is eaten away in taxes and/or legal fees. Another way to secure income once you are gone is through the use of life insurance, which allows you to put away a relatively small amount of money and turn it into a much larger pool of income for your loved ones. While these approaches often will not benefit you directly, should you desire to leave a positive financial legacy well beyond your own life, they can provide you with the comfort of knowing you’ve secured your finances both in life and in death.

Right before the new year, I had the pleasure of being asked to provide some financial tips to a broadcast audience, but rather than just list some tasks to perform, the hope was to leave some wisdom that could lead to long-term financial success. Many of us make new year’s resolutions with great intentions at the time, but quite often, the motivation to stick with the resolution fades as the year wears on. If you’ve ever been to a gym in January, you tend to see it at its fullest because so many people have resolved to exercise more in the new year; however, often by February or March, the crowd has thinned out to the usual attendance once again. The same type of scenario occurs regularly when people make financial resolutions. There is excitement and desire initially, but when it gets more challenging as the year wears on, it can be hard to sustain the momentum. That is why rather than just outlining a resolution or a set of tasks to engage in, it is valuable to think about what lies ahead as making a change in mindset or a lifestyle shift. The other analogy we can draw is people who want to eat better may go on a diet at the beginning of the year. The problem with a diet is that once you stop doing that diet, you are likely to go back to what you are accustomed to, and reverse whatever the diet did for you. Rather than a diet, health experts talk about making more healthy lifestyle choices. Like healthy lifestyle choices, financial lifestyle changes are much more sustainable and can serve you well for the rest of your life. With that in mind, in this first issue of 2024, we will provide a few tips and the principles you can incorporate into your lifestyle that will hopefully allow you to maintain your focus well past the start of the year. Tip #1: Get Organized Financially The Principle: Order breeds confidence and clarity. Whether it is in your bedroom, your kitchen, or your desk at work, when your space is cluttered, it is much harder to operate effectively. Financial organization is a critical part of financial success. Having your financial house in order can consist of a variety of things, including but not limited to having systems to make sure your bills are paid in a timely manner, knowing where all of your financial accounts and contracts stand, having your estate plan in place, or having a written financial plan. You may not have the bandwidth to tackle all of items you need to do at one time, but if you take the time to work on the areas that need to be re-organized, it may help you see more clearly what you need to do to achieve what you want to financially to have a more fulfilling life. Tip #2: Automate Your Savings Plan The Principle: Automated systems can help you avoid making poor decisions. A key to building wealth is being able to pay yourself because income alone does not allow you to build wealth. As the saying goes, “it’s not what you make, but what you keep”. Many people have a desire to save, but they take the approach that they will save what is left over after they’ve paid all of their expenses. In most cases, that approach doesn’t work well because by nature as humans, we are cultured to spend rathe than save. So, if there is anything “left over”, our tendency will be to spend it rather than save it. Therefore, if you want to ensure that you do save some money, it is best to “take it off the top” or “pay yourself first”. You can do that by automating your savings, much like is the case when an employer takes money from the employee’s check to go into a retirement plan account. When you don’t see the money, you aren’t tempted to spend the money, and in the process, you very likely can accumulate a more substantial amount whether that is in a savings account, investment account, or retirement account. Decide up front to make it automatic, take the decision in the current moment out of your hands, and you will thank yourself later. Tip #3: Stay on Top of Your Credit The Principle: Your credit reflects your financial character. It may not seem fair, but how you are viewed by financial institutions is based on your credit profile. You may not be in the market for financing and feel like it doesn’t matter what your credit standing is, but that is not looking at the bigger picture. You credit doesn’t only come into play when you are seeking financing, but it can be a factor in lots of other ways, such as a residential lease, applying for insurance, and even for employment. Because of this, it is important to know where you stand with your credit and if improvements need to be made. You should pull your credit report at least 3 times per year, which you can do for free by requesting your report from the 3 major credit bureaus via www.annualcreditreport.com . Because what shows up from each bureau may not be exactly the same, it helps to get all three over the course of the year, and by spacing out the frequency of making the requests, you can discern where changes are being made. If you want to see your credit score, you can often access a score either through a financial institution or a credit tracking service. You should understand that there are many different credit scoring models, so if you see different numbers, that should not alarm you. What you want to make note of is how any particular score is trending over time, and hopefully it trends upward if you are making ongoing improvements. Tip #4: Invest in Your Financial Education The Principle: No matter how much you know, there is always more you can learn to be better. Whether you are dealing with financial challenges or feel like you are in very good financial shape, there is benefit to increasing your knowledge through financial education. If there are areas of your financial life where you are falling short, increasing your knowledge base can help you improve in those areas. Even if you are doing well in a particular area, the financial world is constantly changing, and you can benefit from learning something new that can take what you are doing perhaps to a higher level. Getting yourself financially educated doesn’t mean that you are doing things wrong; it means that you are seeking to improve yourself to be better in the future than you are today. If you take that approach, not only is it likely to serve you well as you seek to build wealth, but it will also serve as an example to those around you and encourage them to seek financial growth, making a positive difference beyond yourself.

As we approach the end of another year, it is common for us to reflect on what has happened during the past year and beyond, and one area that is often looked at is finances. Unfortunately, the idea of financial planning can bring about anxiety in people because there may be things in the past they would rather not think about, and they are uncertain about what the future holds. If that rings true to you, welcome to the club, but I would challenge you to reconsider whether you want to remain a part of that club. Because many of us are inclined to pay more attention to the negative thoughts that come into our minds, we may take a negatively skewed view of our financial situation. That isn’t to say that you should sweep problems under the rug, but instead you should try to take a balanced view of your situation and recognize that there very likely are some positives that you can take from what has happened for you financially that you can build on to give you encouragement to take more positive steps in the future. As I often stress to clients, rather than focusing on end results, which you don’t necessarily control, focus on the process and doing the things you have control over to the best of your ability, and it is more likely that you will achieve the results you are looking for. With that in mind, in this final issue of the newsletter for 2023, we will attempt to provide some tips for how to more effectively shape the future you want to achieve. Gain Proper Perspective from the Past As the saying goes, you can’t know where you’re going if you don’t know where you’ve been. One of the important things to do when it comes to looking to your financial past is to look at it for what it is and try to detach some of the emotion from it. It is very easy to allow past missteps and disappointments to make you question your ability to succeed. That doesn’t mean you shouldn’t face the realities of things that haven’t gone as intended. You should look at everything that has happened – the good, the bad, and the ugly – and both honestly and objectively evaluate what happened and why. If you had a challenging experience, rather than treating it as a negative, use it as a learning opportunity rather than beating yourself up. In addition to that, you may have to work at it, but look for positive steps you have taken, and use those to not only make you feel better but also to reinforce good behavior and habits that led to that success. There is even benefit to taking a moment to celebrate your successes. In a world where more emphasis is placed on problems and bad news, you can put yourself in a better mind frame by using past successes to propel you forward. Be Realistic About Where You Are Today While we are prone to looking at our past to gain perspective, the only reality of our lives is the present moment. We cannot change what has already happened, and we cannot predict the future. The things we do in the present moment can impact how the future looks, which is why working the process is so important. We can’t skip to the end of the story without turning each page that gets us there. When dealing in the present, it is important to objectively assess where you stand. That doesn’t mean that if everything isn’t exactly the way you want it, you should get down on yourself; however, you need to look at where you are and determine if you are doing the things necessary to put yourself in the best position possible for the present and the future. Financial planning by its nature is a futuristic exercise, but if it is done properly, it also addresses what is happening in the present, working to lay a strong foundation so you can look to the future with an understanding that you have taken care of the necessities of life. Some valuable basics to look at for where you are presently would be: Do you have an adequate level of Cash Reserves to cover unexpected situations? If you have debts, especially consumer debts, are you on a path towards paying them off? Do you have insurance protection to cover more catastrophic circumstances? Are you regularly saving money to provide current stability and to build for the future? Have you put the necessary structures in place to ensure that your financial house is organized and can function if you are no longer able to manage it yourself? If you are not fully satisfied with the answers to those questions, perhaps you should consider changes you can make so your current situation is on better financial footing. Envision a Bright Future As stated earlier, the future is impossible to predict, but by putting the past in proper perspective and by taking stock of the present and putting it in a better place, you can help shape a brighter future for yourself. No matter what type of experience you have had or are having, you can use them to learn and grow so that you do better the next time you encounter a similar situation. What will happen in the future is largely a function of the decisions you are making today, so use the tools you’ve gained from your good and bad experiences to help you make good decisions that will put you on the path you seek. An important part of financial planning is giving yourself permission to shake off limiting beliefs of what is possible and envisioning the future you want for yourself. Outsiders may tell you that your vision is unrealistic, but only you can write the script for your life, and you shouldn’t let others tell you what is and is not possible. Almost anything is possible, but the questions is whether you are willing to do what is required to make it possible. Be willing to think outside the box and imagine what you want your life to look like, and then you can decide if the sacrifices that may be necessary to bring it about are worth it for you. Then you can turn what would otherwise just be a dream into a plan, and by working the process, you can bring that plan into reality.

After 3-1/2 years, last month the pause for federal student loan payments ended, marking the conclusion of the relief measure the government put in place early in the COVID-19 pandemic. Recognizing that many people paying on student loans were workers who may have their pay negatively impacted by the pandemic, the government instituted an initial pause on federal student loan payments that kept getting extended and ultimately lasted until September of 2023. Prior to that, the issue of student loan payments had become a sore spot for many with balances and payments that looked more like mortgages. Because of the length of the pause in payments, it would be easy for payers to forget about the impact of this obligation, but now that the pause has ended, reality may be hitting them squarely in the face. Many people had hope that even if the blanket $10,000 to $20,000 of forgiveness that had been proposed didn’t wipe out their debts, it would at least provide some additional relief, but that proposal was challenged in court and struck down. If you still find yourself subject to having student loans weighing on your mind and your finances, included in this issue of the newsletter are a few tips to help you deal with the return of this most unwanted debt payment. Face Your Payment Situation Head-On When you haven’t had to pay a bill in over 3 years, it isn’t surprising that you may have an instinct to forget about what life was like when you had to pay it. Unfortunately, forgetting about paying it and having the bill actually go away are two different things. While it may make you feel better for a little while to bury your head in the sand and not think about your student loan payment, that approach will only lead you into further problems in the future. Rather than taking the “nothing to see here” approach, you should instead make sure all of the administrative things needed are in place to make the best of an unwanted situation. The first step in that process is to contact your loan servicer. An important note is that for some people, your old servicer may not be your current one because some servicers are no longer in the business of servicing federal student loans. You can find out for certain by logging into your account at https://studentaid.gov . When you talk with your servicer, you can find out more than just what your balance and scheduled payment is. You can also determine the status of your loan; for example, if you had your loan in forbearance before the pause, is that still the case? This would also be a good time to ask about your repayment options and whether any other options could provide you with a more affordable payment and/or forgiveness options you may not have been aware of. Explore Whether Loan Forgiveness is an Option for You While the aforementioned blanket student loan forgiveness was struck down by the courts, there are other routes to having your federal student loans forgiven, but you may have to do a little work to find out if you qualify for it. The forgiveness program many people have heard about is the Public Service Loan Forgiveness (PSLF) program, which allows people who work in certain fields or service to the public to have their federal student loans forgiven after 10 years of payments. You can read in much more detail about this program in Volume 196 of the Newsletter. The PSLF program has been around for a very long time, but historically, that program did not work as intended, and often disallowed people who met the criteria from having their loans discharged. Over the past year, the U.S. Department of Education has made a concerted effort to ensure anyone who meets the criteria is able to take advantage of this program. Many people who had previously qualified have automatically had their remaining loan balances discharged, and others who are on a path to receiving forgiveness are being recorded in the system to make it easier to complete the process. If you don’t work in a field where you would qualify for PSLF, all forgiveness hope is not lost. The U.S. Department of Education is also currently in the process of implementing what is called the IDR Account Adjustment (IDR is for Income Driven Repayment), which allows past student loan payments that may not have otherwise been counted to now count towards the 20 to 25 year forgiveness provisions that have been part of almost all student loan repayment plans for years. The way this program works is that it takes payments made under one of the other loan repayment plans to be counted even though they were not made under IDR. It even can count periods of deferment and forbearance to count towards the time requirement for loan forgiveness. Under this program, a borrower could have their remaining debt balance discharged if they receive enough credit, or it could move them closer to the time frame required for discharge. If you want to find out if this program might work you, you should contact your loan servicer to explore your options. Select a Repayment Plan that Works for You The federal student loan repayment program has long been a source of confusion because there are several repayment plan structures, each with their own requirements and provisions. As with many programs, new repayment plans have been added over time, but the old plans have remained, even if they are not as widely used. Today, the majority of federal student loan borrowers choose to go with some type of IDR plan because they often require a lower monthly payment amount. However, not everyone is aware that there are different IDR plans. Within the past year, a new IDR plan has come onboard called the Saving on a Valuable Education (SAVE) plan, which may significantly reduce the amount of the monthly payment a borrower would have to make. That is the case because of how it calculates the payment requirement, using a larger percentage of the federal poverty guideline to determine your discretionary income and only requiring 5% of that amount rather than the 10% called for in the Revised Pay As You Earn (REPAYE) IDR plan. In addition to potentially lowering your payment amount, another benefit of the SAVE plan is that if your loan payments are not enough to cover the interest on each payment, the remaining interest will not get added to your principal balance like it is with other plans. A couple of considerations for the SAVE plan are that your loan has to be a Direct Loan in good standing, and the reduction in percentage of discretionary income to 5% does not take effect until July of 2024. If you are inclined to choose an IDR plan, or any other plan for that matter, it is worth your while to walk through the options with your loan servicer to see what will be the best fit for you.

Medical advances have allowed people to live much longer than previous generations. While modern medicine has given us tools to stay alive, it doesn’t necessarily eliminate the natural wear and tear our bodies and minds take over our lifetimes. As a result, our later years can sometimes come with a variety of health issues that are not easy to deal with. The better we can take care of ourselves when we are younger, the more likely we are to lessen the health challenges faced in older age. However, even if you’ve taken excellent care of yourself throughout your life, as the saying goes “Father Time is Undefeated”, and if you live long enough, you are likely to have some health concerns that go along with advanced age. If you find yourself in that place or are caring for someone who is, there can be a physical, emotional, and financial toll taken on all who are involved. In this issue of the newsletter, we will look at just a few things you can do to better prepare for living in or caring for someone going through the challenges of aging. Understand What Health Care Will and Will Not Do For this discussion looking at aging adults, we are talking about people well past age 65, which is the age at which you gain eligibility for Medicare. Some people may work past age 65 and still have health insurance outside of Medicare, but most people at that point in life will be enrolled in some form of Medicare. It is important to understand you’re your Medicare options are, but breaking down all of the nuances of Medicare is beyond the scope of what we will cover here. Many people assume that if they have Medicare in one of its many forms, that insurance covers any costs related to their health care. Unfortunately, that can be an incorrect assumption depending on what you are dealing with. Medicare, like health insurance in general, is intended to pay claims for treatment that is employed to prevent or resolve a health situation, and depending on how the Medicare coverage is structured, it often does an excellent job of covering the vast majority of costs associated with care. What neither health insurance nor Medicare is setup for is to pay for health situations that are expected to persist indefinitely. Those are the types of situations that often come with aging. Whether it is a chronic disease, inability of the body to do things it once was able to, or cognitive issues, many of the conditions that come with aging may not be able to be cured. If that is the case, there is a real limit to what health insurance, including Medicare, can do to cover the associated costs of care. Have a Plan in Place for Long Term Care Because there are such limits to health insurance coverage, it is worth your while to have some type of plan to address health issues that may persist long term. That plan can take many forms, but it is important to have a plan rather than just relying on things to be taken care of for you. For some, having family or friends serve as more informal caregivers is the route they want to go. As long as the people tasked with the caregiving agree to serve in that role and are up for the commitment, this often is the most cost-effective way to handle caregiving. The challenge is that if those people are not skilled in the role of caregiving, the recipient may not receive all of the care they need to live safely and comfortably with the health issues they have. The next type of care is to engage more skilled individuals to provide the needed caregiving support as much as is needed. When this type of caregiving is contracted on a limited basis, while usually more expensive than the informal caregiving, it can also provide a relatively cost-effective solution, where the caregivers are typically paid by the hour. Quite often, as a person ages, they may have more limited caregiving needs initially, but as they continue aging, those needs may increase. Using skilled caregiving in this scenario as needs progress can begin to become more financial difficult to sustain. It is then that you may want to consider other options for caregiving and/or look at other ways to cover the cost. If you have substantial assets and/or income, you may be able to self-fund the cost of care. However, if those resources are limited, some other form of long-term care protection may be appropriate. Options include traditional long-term care insurance, life insurance that provides living benefits that can be accessed for chronic illnesses, benefit riders from annuities, and what are called hybrid products that typically blend annuities and life insurance in some fashion to cover claims associated with long-term care costs. These insurance related products tend to require that the individual needing care be unable to perform 2 out of the 6 activities of daily living (ADL) because that is often when the need for some type of caregiving is warranted. Outside of engaging caregivers to take care of people in place, you may find that moving the aging person into some type of skilled care facility is a more economical solution. That is not because these facilities are inexpensive, but because they have resources in place who can serve the needs of a collection of residents under one roof. Of course, there is a cost for the access to the resources, but the cost is spread out to all of the residents, so it may provide the needed level of care at a lesser cost than trying to contract the services independently. Identify Someone to Advocate for You Switching gears from insurance and cost issues, the issue of care itself is a critically important one, which if neglected, can end up being more costly than necessary. Part of a plan for care in older age is knowing who will help to ensure you get the care you need. It is important that you have the necessary written documents that provide the legal basis for your intended health care agents to act according to your wishes. That can be executed through the use of a Living Will, Health Care Power of Attorney, or Advanced Directive for Health Care. As important as having the legal structure in place is, it is also extremely important that you have representation locally to advocate for you if you find yourself in any type of health care facility. That includes the hospital, a rehabilitation facility, assisted living facility, or nursing home. All like facilities are not created equal. Some have workers who are more skilled or more caring than others, but even for those that have competent and caring workers, the reality is that the staff is often stretched thin, so some patients may not get all of the attention they need. If there is one thing from this article you should make it a point to do, that would be to identify someone(s) who you know will be present and visible to the health team that is tasked with caring for you if you have to spend time in any health facility. Their presence will naturally bring more attention to the situation and hopefully result in a higher level of care.

As a former player and long-time fan of the game of tennis, I have been fascinated watching the resurgence of American tennis players at this year’s U.S. Open. For those who may not be as into the game, the U.S. Open is the last of the Grand Slam tournaments, the major tournaments of the sport, and some consider it to be the toughest of the majors to win. Tennis is very much a global sport, and in the past decade plus, with some notable exceptions, Americans have not been nearly as successful as they have been historically. At least for the moment, that seems to be changing. Having observed the many Americans who have done well at this year’s U.S. Open as well as some of the other top players in the game, I can see parallels between the success those players have achieved and how you can achieve success in your personal finances. So, whether you are a tennis fan, fan of sports in general, or not, in this issue of the newsletter, we will attempt to illustrate how some of the attributes of these top-level athletes can show you ways to become champions in your financial lives. Stay Focused on the Right Things Having played tennis since childhood but doing so many years ago, I am amazed at how the game has advanced. The power that today’s players exhibit when hitting the ball as well as the physical condition they are in is incredible. While we see them perform in tournaments when the lights are on, the work they’ve done in practicing and perfecting their craft is the key to their success. They put in lots of work in practice and training and have to believe that will translate to success on the court. An excellent example of this is first-time Grand Slam semi-finalist, 20-year old American, Ben Shelton. In his first year on the pro tour, he struggled tremendously between the first Grand Slam of the year, the Australian Open, where he made it to round 5 of 7, and the U.S. Open. Between the two events he never won two matches in a row from February to August. However, even though his work in practice wasn’t yielding victories in tournaments, he continued to trust the process and it paid off in an unlikely run in this year’s U.S. Open. Similarly, in your financial life, there may be times when things don’t seem to be progressing at the rate you would like. However, if you have a solid plan that identifies your current and desired situation and gives you a well thought out path to follow, success may be just around the corner. Rather than focusing on outcomes, which you may not have total control over, focus on taking the things you can control, taking the steps that have been proven over time, and often the outcome takes care of itself. It is also important to remember that to achieve financial success, you typically have to play the long game. As the saying goes for many difficult endeavors, it is a marathon and not a sprint. This is another characteristic you see with the most successful tennis players: endurance. A player that embodies that as much as anyone is now 24-time Grand Slam champion following his victory in the finals of the 2023 U.S. Open, Novak Djokovic of Serbia. While his talent and skill is undeniable, one of his greatest attributes is that he will outlast almost anyone he competes against, maintaining his high level of play for as long as it takes to win. In your financial life, there will be ups and downs that occur, but if you stick to your game plan, over the long run, you will tend to find success. Think Next Play This mantra is a common theme in sports, which essentially means don’t dwell on what has already happened, but instead move on to what’s in front of you. Whether in sports or in life, it is easy to get stuck in the past and lament what didn’t go right, but in doing so, you may miss out on the opportunity in front of you. On the tennis court, one of the best at thinking next play is Carlos Alcaraz of Spain, the #1 player men’s in the world coming into the 2023 U.S.Open. As is the case in most professional sports, all the players have tremendous skill and talent, but what separates the best players often is their approach to the game and their mentality. This is perhaps more the case with tennis, as a one-on-one sport, where you are relying on yourself rather than having teammates who can cover for you. Outside of his incredible talent, the beauty of Alcaraz’s game is that he usually plays with a smile on his face as if he recognizes it’s only a game. Even if he has made an egregious mistake on a previous point, he seems to be able to shake it off and have the confidence that he is going to win the next point. It is that kind of resilience that is also necessary in your financial life to put aside missteps that may have occurred in the past. We can all think of things we wish we had done differently, but there is no time machine that will allow you to change what has already happened. All you can do is shape the future, which may involves using lessons learned from the past, but only doing so as a way of helping you make the best decisions possible for what is yet to come. Once again, having a comprehensive plan is a major advantage, not because you expect it to predict the future accurately, but because it gives you a framework to make decisions that will help you focus on what will make the greatest impact on your future results. Experience Matters But Isn’t Everything In sports it is rare that someone comes out of nowhere to reach championship level. There is usually a learning curve that is required and some failures that take place to provide the lessons needed to give you the necessary experience to reach the pinnacle of success. Experience gives you a reservoir of knowledge and wisdom to draw from to help you navigate the situations you face. While that experience can provide you with the muscle memory that leads to success, it is not the only way you can get to success. Again, take 2023 U.S. Open men’s semi-finalist, Ben Shelton, as an example. In the match that put him in the semi-finals, he played against fellow American, Frances Tiafoe, a 25-year old veteran who made the U.S. Open semi-finals in 2022. On the surface, you would expect that Tiafoe had the advantage, having already achieved that level of success a year prior. However, the youthful exuberance and belief that Shelton had overcame the experience of his compatriot and “big-brother” in the sport. This is a lesson for young people or even older people who may not have had a successful track record when it comes to finances. Without question, having experience is a good thing, but not having it does not preclude you from setting your sights on big things. If you have the desire and the persistence to achieve financial success, even without the past success to lean on, you too can chart a path to make your dreams come true. Younger people or people who may not see themselves as having significant financial means may assume that planning is something that won’t benefit them. Nothing could be further from the truth. Anyone who wants to put themselves in the best financial position possible can benefit from having an organized plan of action. Get to the Next Level with Great Coaching It is true that tennis is a sport where you are competing head-to-head against an individual opponent, but at the professional level, every player has a team of people behind them to help them prepare, train, and execute on the court. I remember from my youth what it was like to play tennis against friends and family more for the fun of it than anything else vs. the elevation of my play when I started to receive some formal instruction from people who really knew the game. While I did appreciate the growth in my game, I wasn’t inclined to pursue the sport at a level that would have taken me into higher ranks; however, players on the professional circuit have had to make a more significant investment in order to compete at the highest level. One of the brightest young stars in the women’s game today is Coco Gauff, a 19-year old from Florida, who turned pro at the age of 15. In her first years on the pro tour, she was coached by her father, who clearly did an excellent job with her as she not only turned pro at that young an age but beat some of the best in the world. Despite the promise she has shown for several years, including reaching a Grand Slam Final at the French Open in 2022, her results were still somewhat inconsistent. Only in the last several months have the results begun to catch up with the promise in terms of consistent excellence and expectations that she is considered a mainstay as one of the best in the game, and now a first time Grand Slam Champion with her win at the 2023 U.S. Open. That leap has coincided with her making a change to her team, adding new coaches with professional experience, who have built on the coaching her father provided and made some strategic adjustments that have taken her game to a level where she is regularly competing for championships. In your financial life, it is entirely possible for you to manage everything yourself and do a good enough job to achieve your goals. However, there can also be benefit in having a team of advisors committed to your success that you can lean on to provide you with strategic advice, leveraging their knowledge and skill, that will allow you to spend more time on what you want to do, while they provide the financial knowledge and experience to help you achieve a higher level of success.