Tag: wealth management

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Inheriting Money Kevin Video

Inheriting Money: IRS Rules You Need to Know

In this video, Kevin Gormley and Travis Reader, both CERTIFIED FINANCIAL PLANNERs® from Leading Edge Financial Planning, dive into what you need to consider when you inherit money. Whether it's a taxable brokerage, IRA, or Roth IRA, understanding the tax implications and required distributions is crucial. Kevin and Travis explain the three most common types of accounts you may inherit and walk you through the key steps to take when you're a beneficiary. From determining the account type to understanding designations like eligible or non-eligible beneficiaries, they simplify what can be a complex process.

Kevin and Travis also discuss important terms like RMD (Required Minimum Distribution) and RBD (Required Beginning Date), and share strategies for handling inherited accounts based on your relationship to the deceased. This video is a must-watch if you're dealing with an inherited account and want to ensure you're making the best decisions for your financial future.


Watch now to learn:

○ The 3 most common types of inherited accounts: taxable, IRA, and Roth IRA.

○ What it means to be an eligible or non-eligible beneficiary.

○ Options to handle manage required distributions and tax considerations.

○ Key insights on how to minimize taxes and maximize the potential of your inheritance.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions.

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Education Kevin Retirement Video

The Three Bucket Approach: Securing Your Retirement Income

In this video, Kevin from Leading Edge Financial Planning breaks down the Three Bucket Approach — a retirement portfolio strategy as vital as oxygen for financial peace in retirement. He explains the importance of each bucket: a cash bucket for immediate expenses, a conservative bucket for steady income in the medium-term, and a growth bucket to guard against inflation and maintain purchasing power. Discover how this method can bring security and peace of mind, along with ideas to consider for managing your retirement portfolio using this approach.

Kevin also discusses some pros and cons about this strategy and offers insights on how to visualize these buckets to achieve peace of mind in retirement. If you're planning for retirement or just want to understand how to make your income last, this video is a must-watch.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions

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Education Rob

Is a Custom-Fit Financial Plan Right for You?

“The only sensible person is my tailor. He measures me anew each time he sees me.” ~George Bernard Shaw

Author:  Robert Eklund

 

Our lives here in the good ole USA are as varied as ice cream flavors nowadays. (Think Ben & Jerry's Marshmallow Sky or the tried-and-true Cherry Garcia).

We all enjoy and prefer different hobbies, places to live, and professions. We love different people, drive different cars, and enjoy different vacations and recreations; this variety helps make life exciting!

Thank God we are different; this would be a pretty dull world and nowhere close to the innovative planet we live on today if we all enjoyed the same things. Some people love science, others love art, some like flying planes, while others love finance. And some crazies actually enjoy both!


The Case for Tailored Financial Plans

NEWS ALERT - We are not the same, and never will be! These variations and aspirational differences make us uniquely...us. These differences illustrate why our financial plans should be more than just one-size-fits-all carbon copies. Our plans should be specifically tailored to our ambitions, values, and life goals.

The term tailors use to describe a suit that fits precisely to your body and no one else's is bespoke. We know there are all kinds of suits differing widely depending on the occasion, size of the individual, the expected weather, and the budget. Nevertheless, there are articles all suits should include, such as pants, a jacket, buttons, a tie, and shoes.

Similarly, our financial plans should be tailored to our circumstances, values, goals, income levels, time horizons, and risk tolerance. However, all competent, professional wealth management should include risk assessments, retirement planning, estate planning, education wishes, insurance needs, etc.

Ideally, everyone would have tailored clothing. However, for many people, a bespoke suit or financial plan is outside of their budget, and an off-the-rack suit or financial plan that fits their circumstances can put them on the right path to accumulating wealth. Once assets grow and circumstances become more complex, a bespoke financial plan may make more sense than the off-the-shelf answer.


Simple Plans for Simple Lives

Let us take a 23-year-old minimum-wage worker living paycheck to paycheck. Let's call him "Rooster." Rooster has ambition, is disciplined, and would like to retire at age 67. He wants to live a comfortable but not extravagant life in retirement. At this point, he does not have a family or much in the way of assets or complexity. His plan may look like this:

Step 1. Ensure Rooster has three-to-six months of living expenses in a high-yield savings account.
Step 2. Save 15-20% of every dollar earned in a Roth IRA.
Step 3. Put these dollars to work for Rooster in a low-cost target-date retirement fund for now.
Step 4. After Rooster begins to see the benefits and power of compounding, talk to a fiduciary advisor about how to invest those dollars more deliberately outside of a target date fund.
Step 5. Save for short-to-mid-term goals in a separate taxable brokerage account invested in a money market fund or short-term bond fund.


Complex Strategies for Complex Lives

Now, we will consider a 59-year-old airline captain. Let's call him Captain Maverick. Now, Maverick is married to a younger bar owner who is 49 years old. You guessed it, her name is Penny.

They have one child they want to put through college and aging parents they will help care for. Maverick will retire at age 65, and Penny will retire at 55. They would like to continue their current lifestyle in retirement and aspire to travel the world. Penny wants a new Porsche 911 in retirement, and Maverick wants a new Kawasaki motorcycle and to fly his P-51 Mustang 10 hours a month.

Maverick is maxing out his airline’s 401k 2023 IRS 415(c) limit of $69,000 plus his $7,500 414(v) catch-up contributions (for folks 50 and older).

Luckily, Penny's bar does well because of all the drunken sailors. Unfortunately, she feels frustrated because even though her income is significantly less than Maverick’s, her income pushes their joint income into a much higher marginal tax bracket. She wonders if she should even waste her time with the bar since (seemingly) a substantial part of her income is going to the tax man!

Fortunately, Penny learned that she could contribute up to $69,000 to her Solo or Individual 401k because she is a self-employed business owner. The 401k is especially beneficial since Penny can contribute a significant percentage of her self-employed income. Furthermore, she can contribute pre-tax or Roth, just like Maverick!

Additionally, they both max out their after-tax IRA contributions and convert them to Roth including catch-up contributions ($7,000 for Penny, $8,000 for Maverick). They also contribute $15,000 annually to their Schwab taxable brokerage accounts using tax-efficient exchange traded funds (ETF) which can nearly mimic tax-deferred growth if invested correctly.

Maverick’s airline also contributes to a Market-Based Cash Balance Plan for their pilots, approximately $16,100 per year, including 401k spillover. You might have guessed that Maverick has a Navy pension ($54,000 per year) and a military disability benefit of $12,000 per year.


Preparing for a Secure Future

Developing a retirement income plan would help them determine if they are on track and ensure they can prepare for unexpected life changes that come their way.

Furthermore, their plan would be stress tested for potential market declines and evaluate the sequence of return risks and mitigate said risk using the Three Bucket Retirement Income strategy.

Here are other beneficial strategies Maverick and Penny consider helping to simplify the complexity of their financial lives:

  • College planning. What are the best places to save for Maverick (or Penny) Jr.’s education? What if Jr. Decides to skip college and attend a trade school or United’s Aviate program?
  • Long-term care planning. What if one or both has the need for long-term care during their lifetime? How can they help their aging parents in this difficult area?
  • Should they convert pre-tax dollars (401k) to Roth during retirement and before required minimum distributions begin?
  • Tax-loss harvesting strategies may be implemented for their taxable brokerage accounts thus reducing the potential tax drag due to capital gains taxes.
  • Utilize a risk-appropriate, diversified ETF approach to their portfolio to mitigate unseen risks to their investment strategy.
    Perform a thorough audit of life, liability, and health insurance needs.
  • A tax-efficient charitable plan could be developed to maximize their philanthropic contributions.
  • Legacy planning would be thoroughly discussed to help stabilize and solidify not only their financial futures but the future of generations to come.

As you can see the Maverick-Penny Plan is significantly more complex than Rooster’s. Maverick and Penny are likely to have quite a bit of income in retirement and they do not want to risk making a big mistake with their future.


The Value of Personalized Financial Advice

A bespoke financial approach could add tremendous value to Penny and Maverick’s financial lives, reduce their stress, and increase their peace of mind!

If you made it this far and are still awake, I thank you. As you now know, I am a fiduciary and vow to protect my clients' hard-earned money with the highest devotion to their goals.

If you want to chat further about your personal financial goals or any other subject, please give me a buzz at (719) 624-7055 or shoot me an email at robert@leadgingedgeplanning.com.
Until next time, I hope you have only tailwinds and blue skies!

Please let us know if we can help you on your journey to financial peace and prosperity! Click here to sign up for our newsletter or click here to schedule a time to chat about your circumstances in more detail. Also, check out our Pilot Money Guys podcast, where we regularly discuss these types of financial topics along with some fun airline news updates and interesting guest interviews—even the editor and founder of Aero Crew News – Craig Pieper

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning and are subject to change at any time due to the changes in market or economic conditions.

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Charlie Education

What is Legacy Planning and Why it Matters to You Now?

Yes, I’m a Tim Mcgraw country music fan. I think at this point, he might be considered old school country music. Nonetheless, when we unpack the subject of planning for our legacy, we conclude with the idea that we must first face our own mortality.  

  • What is it that we really want out of our lives?
  • What purpose or cause are we excited about?  
  • What will we look back on at “the end” that will have truly brought us joy and fulfillment
"Begin with the end in mind."

One of my favorite sayings is, “Begin with the end in mind.” I don’t know who said it first, but I know it’s the premise of the book “The Seven Habits of Highly Effective People” written by Stephen Covey. 

When we begin with the end in mind, i.e., our own mortality, it gives us the right perspective and context around the decisions we make today. It gives us the passion and urgency to impact those around us in a positive way. It also enlightens us as to what values we would like to pass on to our children. 

 
Legacy Beyond Financial Wealth
I turn fifty years old this July 2024, and I'm starting to feel a sense of urgency about what I am passing on to the next generation. Don’t get me wrong, I’m not concerned as much about how my children will handle gobs of money when I die (not yet anyway!). On the other hand, I’m more concerned about setting them up for success and not passing on certain dysfunctions I have battled through in my life.
I want my kids to be more secure in who they are than I was. I want them to know that in all situations, they are worthy, they are loved, and they are valued. You might say, these are our family values that I want to be intentional about passing on. 
Furthermore, I sincerely believe that I may have been a better military and commercial airline pilot if those values had been part of my natural identity from the start. When I think about creating my family, or community legacy, these are the things I think about.

 

Steps to Create an Intentional Legacy
This is an article about money and finances, so how do our values fit or apply to passing on wealth?  My answer to that question is this: 

If all I do is pass on financial wealth, there is a good chance my money may do more harm than good if the values I believe in are not part of my legacy as well. In essence, if I only pass on money to the next generation, I may actually set them up for failure.

  • Passing on character, values AND financial wealth is a very difficult thing to do. In fact, most millionaires in the United States are first generation millionaires

In a recent article in Business News Daily, author Stella Morrison says it this way:

”...around 68 percent of those with a net worth of $30 million or more made it themselves. Further, a second study by Fidelity investments found that 88% of all millionaires are self-made, meaning they did not inherit their wealth.” 

Let’s face it, airline pilots are earning more money now than ever. Many of you will be able to pass on significant wealth to the next generation or causes you care about. Furthermore, you will leave a legacy whether you know it or not, whether it’s good or bad.  Why not take the time to make it a good one? When you’re facing the end of your time on this earth, what will you value the most? Allow those questions to guide your life right now. 

Below are some practical steps and points to ponder to help you begin to think about how to proactively design your life and legacy. Because if you don’t take the time to be intentional about it, it will happen to you, and you may not like it!


Define the Problem:
You work your butt off to create income, wealth and a good life.  But your children probably didn’t see you overcome the obstacles and the challenges it took to get where you are. Money is not like other areas of our lives where we can expect our kids to pick up on our good habits and characteristics without significant effort and intentionality.

The other day I asked a friend of mine how his son got interested in the weightlifting team at his high school. He shrugged his shoulders and commented that his son must have been influenced by seeing him and his wife work out consistently over the years.

Learning about money and personal finances, on the other hand, is very different. Often families have great money habits, but if these principles and habits are not clearly communicated misperceptions can form.

For example, “my parents don’t spend lavishly, therefore we must be broke.”  In this example you may have excellent money habits but unless your money values and your intentions are clearly communicated you may unintentionally pass on an attitude of scarcity versus an attitude of abundance.


Here are three steps to consider if you want to be intentional about passing on your legacy:
Your children may not see all the hard work and sacrifice you put in to become a high-income airline pilot. All they see is you home three to four days a week trying to catch up on house chores before you pack your bags again. “That’s not so bad...I like this airline stuff!”

 

1. Share your experiences, challenges and struggles with your loved ones.
Consider sharing more of your experiences with your family. At the appropriate time, discuss some of the challenges you overcame to become that highly skilled, highly sought after airline pilot.
  • Your kids may scoff (mine just laugh) at you a little when you share but they will remember you struggled and overcame obstacles.  
  • Hopefully, when inevitable challenges come their way, they will remember that even though you struggled at times, and you were able to overcome obstacles and achieve your goals.  At least they will know enough to not expect the path to always be smooth sailing. 
  • Unfortunately, this means we must be a bit more vulnerable and open about some of our challenges. Personally, I like to make people think it was all a breeze. That would mean that I’m smarter, tougher, stronger than I really am. That’s not what our kids need to see.


2. Communicate with your spouse, significant other or trusted friends.

Often, we are creating a great legacy and positively influencing those around us without thinking about it. It may just come naturally to you.  However, for the rest of us, the first step is to literally say it out loud. What is it you want? Bring the subconscious into the conscience by discussing it with someone. I often forget that my wife doesn’t know what’s on my mind or doesn’t know what I’m trying to accomplish by talking to our kids about “who they are.”

•    Better yet, write it down. There is something very powerful that happens when you write down your goals, vision for your family, or family core values.  If you search the internet, “why is writing down my goals important” you will get a slew of great articles about how you are 42% more likely to achieve your goals if you write them down. 

One article from Inc.com written by Peter Economy, The Leadership Guy says, “writing your goals down not only forces you to get clear on what, exactly, it is that you want to accomplish, but doing so plays a part in motivating you to complete the tasks necessary for your success. The process of putting your goals on paper will force you to strategize, to ask questions about your current progress, and to brainstorm your plan of attack.”


3. Write down what you want people to line up to thank you for on your deathbed.
A little morbid, I know. However, let's just admit that we’re all going to die someday. And all the toys you’ve accumulated will not be on your mind when that time comes. What will be on your mind? What do you want your epitaph to say?
The next time you’re flying from New York to San Francisco… 
•    Take some time to ponder what the top five things you want to say about yourself before you’re gone.
•    Take some time to plan what you want to be remembered for, forever.
•    Write down what non-financial character traits and values you would like to see in your family passed down for generations.  Is it your faith? Is it something specific to your family such as an attitude of service before self or leadership. Be intentional and plant the seeds now.

 

Values to Pass on to Future Generations
In closing, here are a few of the values we are trying to pass on to our young children.

1.    An attitude of stewardship versus an attitude of ownership. In other words, we’ve been blessed with something (money, health, relationships) and it is our responsibility to take care of them, nurture them and hopefully bless others along the way.

2.   An attitude of generosity. Study after study shows that giving makes us happy. That’s all there is to it, so help them build habits of generosity now.
3.   An attitude of abundance versus scarcity. I believe if our kids are secure in who they are, they will not feel the need to get more for themselves at the expense of someone else.
4.   An attitude of ownership and responsibility. We want to teach our kids that it’s okay to make a mistake or even fail at something.  It’s part of the growth process. I want my kids to know they can fail and overcome the situation or face the consequences and it’s okay. If we shortcut or insulate the struggles our kids may face or go through, we cheat them out of the opportunity to find out what they really want and what they are willing to do to get it.

Final Thoughts
What we do now will impact multiple generations, possibly hundreds of years. Passing on financial wealth is the easiest form of capital to pass on but it can be the most destructive if we haven’t prepared the next generation to handle the responsibility of wealth.

 

Hopefully, you found this article interesting and helpful.
If you have any questions, contact us at 865-240-2292 or Charlie@leadingedgeplanning.com.
Also, please tell us if we can help you on your journey to financial peace and prosperity!
Click here to sign up for our newsletter or click here to schedule some time to chat about your circumstances in more detail. 
Also, check out our Pilot Money Guys podcast where we regularly discuss these types of financial topics along with some fun airline news updates and interesting guest interviews.  Even the editor and founder of Aero Crew News – Craig Pieper!

 

Disclaimer
Leading Edge Financial Planning LLC (“LEFP”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where LEFP and its representatives are properly licensed or exempt from licensure. For additional information, please visit our website at www.leadingedgeplanning.com.
The information provided is for educational and informational purposes only and does not constitute investment advice, and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability, or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such.