Initial Financial Overview (IFO)
The Initial Financial Overview (IFO) is our flagship service and one we are proud to offer. The IFO provides a snap-shot of the client’s overall financial picture and is a direct reflection of the hard work the client has put into their financial plan up to that point. Often prospective clients come to us with the question of “How much longer do we need to work in order to secure our retirement?” The IFO allows us to perform a cash flow analysis that looks at their assets, income, expenses, and personal goals, and determine if they will have a successful outcome in the future, or if they have some work to do in order to achieve their financial goals. The IFO is just the first step in providing peace of mind to our current and prospective clients.
Are you ever really prepared to say goodbye to your loved one, even if their death was expected? Our clients were married just shy of 63 years when one spouse died. We were the surviving spouse’s first phone call. Our client was an instrumental griever, whom wanted a plan of action and wanted to cross items off a list. We arranged a meeting in our office with the attorney and were able to accomplish many of the items on the list. From there, we began the asset transfer process, informed Social Security of the death, assisted with transferring utilities over to the surviving spouse’s name, etc. In these life transitions, we act as a co-pilot with our clients and take the financial weight off their shoulders, so they can focus on their families and their own grief and healing.
A client came to us after finishing Medical school at the age of 47 years old. He graduated with $250,000 of school loan debt, all through Stafford Loans. In addition, he wanted to retire in 10-15 years. After analyzing his cash flow in great detail, we designed a loan repayment plan to have all student loans paid off in 10 years, while at the same time, providing him a yearly savings goal of $150,000 to reach his goal of retiring in 10 years. We revaluate that goal and his projections each year. Setting a customized strategy for him allowed him to enjoy his new profession, while knowing that in 10 years, his loan would be fully paid off, all while investing in his future as well.
Medicare is complex and making a coverage decision can be a daunting task. Our 64-year old client came into our office confused and overwhelmed after receiving a barrage of mailings for Medicare plans. He also heard from friends whom had terrible experiences with premium increases, penalties, gaps in coverage, etc. Needless to say, he was drowning in information and didn’t know where to begin. Our team created a presentation that provides a simplified breakdown of the various Medicare parts and supplemental coverage options. We reviewed the presentation with the client and discussed his individual needs and options. After making sure the client understood the process, we put him in touch with a trusted agent, who walked him through choosing a plan and completing the applications. The client was beyond relieved and able to rest assured that he had made an informed decision with the help of our guidance.
Tax Planning – Avoiding Underpayment Penalties
A client presented a situation where they had fallen way behind on tax estimates, due to their own stubbornness and apathy towards estimated payments. They were going to be heavily penalized for underpayment of taxes. They were in a position to pay the projected balance due, but it was too late in the year to sufficiently increase payroll withholdings. We suggested a strategy where they take an IRA distribution with enough taxes withheld to cover the projected balance due, and then within 60 days, deposit the full amount back into the IRA. This allowed them to achieve sufficient withholdings to eliminate the underpayment penalties, and also not increase their taxable income, which would have normally resulted from the IRA distribution.
Tax Planning – Roth Conversion (Business Owner)
Our client owns a distribution company that is heavily tied to the RV Industry. In 2018, the RV Industry was having a down year, which lead to many factories being shut down for long periods of time. Meaning, most of his customers were not buying as much products from him. This led to a situation where he was facing a rather large loss for the year. Through our financial planning efforts and working closely with his CPA, we identified this early in the year and brought up the idea of a Roth Conversion. He then had several months to decide between converting to a Roth IRA and having a large Net Operating Loss. We presented both sides of his current and future tax situation to him. Ultimately, he chose to do a Roth Conversion. He was able to convert over $250,000 from an IRA to a Roth IRA and not pay anything out of pocket.
Tax Planning – Roth Conversion (Retiree)
Each year for certain clients, we review their taxable income for the year. We then compare it to their projected tax brackets once they reach age 70 ½, which is the age for Required Minimum Distributions (RMD). If the client is in a position where their current tax bracket is equal to or less than their projected tax bracket at that age, then we can convert funds from a pre-tax account in the amount that will help them reach the top of their tax bracket. We also check if this additional income will affect the client’s Medicare costs to ensure there are no unintended consequences with their Medicare B&D premiums.
With all of the changes in tax laws, we pay close attention to clients with charitable intentions. Prior to the change in laws (2018 tax year), we recommended to many of our clients to fund a Donor Advised Fund. This is a specific type of account allowing the owner to take a charitable donation deduction for the full amount in the year it was funded, but then gradually make gifts over time to the organizations they choose. The other advantage of this strategy is that the funds can be invested, allowing the contribution to potentially grow.