More than Money with Gene Dickison
“Real Life Questions – Real World Answers”
“I lost my husband three years ago. I have two IRAs, my 401(k), an annuity, two bank accounts, and my house. I have a small mortgage on my home.
What is the best way to have my estate shared equally by my four children?”
This must feel like a lot of moving parts. You are facing the prospect of making important plans without the counsel of your husband. This must cause you anxiety.
But it need not. Use the counsel of an experienced estate planning attorney and a quality financial advisor. These two professionals will guide you. I think you’ll be pleasantly surprised at how straight forward the solutions will be. Your IRAs, your 401(k), and your annuity can each have your four children named as equal beneficiaries. At your passing, with just a bit of paperwork – and without going through probate – your children will receive equal amounts of these assets. You can accomplish nearly the same effect with your bank accounts by employing a Transfer on Death (ToD) designation. Again, your children will receive their shares with just a bit of paperwork and no probate.
This leaves your home. I believe you will want to pass this through your will. Your attorney will guide you on the drafting of that document as well as a Power of Attorney (PoA), and a Medical Directive. While this asset will pass through probate, the process should be quite straight forward and free of drama.
Take the process one step at a time, work with advisors you trust, and you’ll not only put your estate in order you’ll put your mind and heart at peace.
“I retired about three weeks ago – so far so good! My wife and I listen to your radio show every Saturday over breakfast.
We recently heard you talk with a listener who had just retired as well. You suggested they keep two or three years of their budget in ‘safe’ money. We’ve always kept about six months in our savings. Why would we want so much in savings now that we’re retired?”
Remember – everyone’s situation is different. You may not need two or three years in ‘safe’ money. You may not need any ‘safe’ money. You may need all of your investments to be in ‘safe’ money. How are you to know?
The key is your cash flow. You must have a very confident handle on your personal budget. What do you need to spend on a monthly basis to be happy, healthy, and have your bills paid? Then identify all the sources of income you may have (social security, pensions, rentals, etc.) that you receive before your consider the impact of any income you might pull from your savings. The gap between what you have coming in and what you must spend to be happy, healthy, and pay your bills is the amount your savings must provide each month.
For some folks the gap is very small or zero. They spend the same or less than they receive from their social security, etc. They might choose to have very little ‘safe’ money in their investments. Since there is no pressure on their investments to pay current bills they can select investments from safe to quite aggressive – as it feels right to them.
For some folks the gap is quite large. If they don’t have a significant stream of reliable income to supplement their social security, etc. they cannot pay their bills and will be in trouble quite quickly. These people need large (perhaps even 100%) of their savings in ‘safe’ money.
Most folks are somewhere in between. They do need some income from their investments to pay bills, but they don’t need to commit all of their funds for day to day expenses. In these cases, many folks look at splitting their funds into two ‘pots of money’. The first pot is safe and provides reliable income in the amounts they need. The second pot may well be invested for growth to provide for ‘extras’, future expenses, or legacy goals.
One point about ‘safe’ money – it comes in many flavors. Banks and credit unions offer a variety of insured safe accounts. Many types of bonds (treasuries, municipal, corporate, etc.) might be safe investments. Money markets. Fixed annuities. Variable annuities with guaranteed lifetime income riders. Index annuities. Each of these has elements of both safety and risk. Once you’ve determined your need/wish to have some of your investments in ‘safe’ money – take the time to explore your ‘safe’ money options and select the one or the combination of many options that best fit you and your goals.
Many of the initial consultations (2nd Opinion Meetings) our More than Money Advisors provide to folks just like you center of this very question. If you would like to explore your personal situation and discuss ideas specifically appropriate to you – please contact our office and schedule a free consultation.
“The man who did my taxes messed me up. I’m 71 and did not take the $17,000 RMD from my IRA. I guess he misunderstood the rules or just didn’t know.
I still wouldn’t know about his problem except I had a 2nd Opinion Meeting with your More than Money Advisor and he went through it with me.
I know the penalties are really bad, but your advisor thought there might be a way out. I was so upset I didn’t listen very well. Could you help me so I can tell my husband?”
Take a deep breath – and remember to let it out! You aren’t the first and certainly won’t be the last taxpayer who didn’t get this RMD thing correct the first time out – and the IRS knows it.
IRS Form 5329 is for reporting a missed RMD and providing the IRS with your explanation. You will likely need to file an amended return (1040X) to properly report your RMD and the appropriate tax.
All of this should be done for you by your tax preparer – at no charge. His mistake.
Once he has fixed it – find yourself a new tax preparer.
“My husband is 29 and I am 28. We have good jobs, own our home, and would like to start a family in a couple of years.
The problem is we’re carrying a lot of debt. We have student loans, credit cards, and a mortgage. We would love to be debt free. Is there a plan for us to follow?
The plan I’m going to share with you will answer two questions – the one you asked and the one you would have asked a little further down your financial road.
Getting out of debt (or at least getting your debt down to your mortgage) is a very wise goal. Start by constructing a very detailed (stringent if necessary) budget that allows you to live on your husband’s income alone. This will free up your entire income to use only for eliminating debt. Continue paying the minimum required payments on all your obligations. Then select the smallest debt you have and put your entire paycheck on that one debt until it is paid off. They take the payment on the first debt and your paycheck and pay on the second smallest debt until that is paid off. Continue this ‘snowball’ of payments until you have eliminated all your debt except for your mortgage.
If you can comfortably carry your mortgage on your husband’s income alone – take a breath. If not, we need to pay that balance down to the point where you can carry it on his income alone. If necessary we’ll look at refinancing the mortgage to a payment that can be comfortable paid on your husband’s income.
Once you’ve reached this point – answering your first question – you have also answered your second (unasked) question – how do we afford to start a family? With your debt (largely) gone and your budget based on your husband’s income alone you are in a strong financial position to start your family.
Starting a family free of the financial stress that comes with debt gives you and your husband the best possible opportunity to truly enjoy your children and your lives together. Please keep in touch as you make progress. Other questions (life insurance, estate documents, 401(k)s, etc.) will pop up. We want to be there with you each step of the way.
Have Breakfast with Gene every Saturday Morning at 8:06 as
More than Money with Gene Dickison airs on AM790 WAEB.
all with your questions live at 610-720-7900
Two Full Hours – 8:06 through 10:00 AM.
Who would you like to see interviewed on our radio or television show?
What topics would you like Gene to discuss?
Send your suggestions to JoAnne@AskMTM.com
Words are Powerful Tools for American Freedom
Though this probably wasn’t his given name, Confucius – who lived more than 2,500 years ago – is one of the most recognized thinkers in human history. Though his ‘sayings’ number in the thousands, I have selected one I believe speaks to our America of today:
“To put the world in order, we must put the nation in order. To put the nation in order, we must put the family in order. To put the family in order, we must put ourselves in order. And to put ourselves in order, we must set our hearts right.”
I couldn’t begin to count the number of times in recent years that friends, family, clients, and colleagues has asked, ‘What can possibly be done to save the United States?’ My answer was and remains – pray.
Confucius – as it appears – agrees with my advice. He bases the formula for setting our country (and the world) right all the way back to having our hearts right. Some would say that phrase ‘set our hearts right’ doesn’t really tell us how to accomplish that ‘rightness’.
Twenty-five years after Confucius lived Gene completes his wisdom:
“To set our hearts right, pray without ceasing so we may know the way of God. Praying and staying in alignment with God will surely set and keep our hearts right.”
Please allow us to serve you and those you love.
P.S. Listen to what the still, quiet voice of God tells you!