Eric Rigby spent last week and the two bracketing weekends on a special holiday in Europe with his daughter, Meghan. Meghan, not born yet when Eric started what is now Rigby Financial Group, has grown up into a lovely, accomplished young lady with bachelor’s degrees in both Mathematics and Economics(!), and lives in Atlanta, Georgia.

The vacation spanned Eric’s birthday, which was July 18, and he was delighted to spend it in the company of his daughter.

Much of the trip was spent in Milan, where they toured the storied Duomo di Milano Cathedral, pictured above. Construction of the cathedral began in 1386, but was not completed until the 19th century.

The organ is especially beautiful:

The two also visited the Quadrilatero della Moda, a famous fashion district:

And how could they miss the Taylor Swift concert?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Still, they managed to hop over to France and tour vineyards in the Meursault district,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

before heading to the legendary Gevrey-Chambertin wine region.

 

 

 

 

 

 

 

 

 

 

As some of you certainly know, Eric is a lover of fine wines, and of travel in general. This was an especially priceless time, sharing his enthusiasms with Meghan.

What special memories have you made with your adult children? Sometimes it takes effort and planning, but it’s so worth doing.

Please click here to email us directly – we’d love to hear your stories!

Until next time –

Peace

Eric (by RFG)

According to the U.S. Census Bureau, family-owned companies make up almost 90% of U.S. businesses and represent between 54% and 57% of U.S. employment – they are the backbone of our nation’s economy.

People tend to trust family companies more than other similar businesses – and there are few greater advantages to any business than trust.

But family-owned businesses present special difficulties, too, both for employees and management, and these can lead to conflicts which are bad for both the business and the family itself.

Often, these difficulties center around irregularities concerning family compensation – and this can be the case whether the business employs only family members, or both family and non-family members.

Compensation Irregularities:

Compensation irregularities can arise in different forms:

• Family members may be paid more than non-family employees performing the same work.
• Family members may be paid according to their family position, rather than their contributions to the business. This family position may be based on generational differences, on the perceived need (by the family business owner) of one family member over another, or for other reasons.
• Compensation may be based on assumptions which are not discussed within the family or the business, creating misunderstandings.

 

No matter the form, compensation irregularities within a business are bad for everyone – and can be costly in money and more. They can create:

An Unhappy Team

Whatever the particular cause, irregularities in a business’ compensation program do not make for a harmonious work environment, nor for happy employees.

• Non-family employees, if they are doing their work well and adding value to the business, are more likely to move on to another position if they feel they not being adequately compensated for the same work as a family member.
• Family-member employees who contribute less to the business may feel that, by virtue of their family status, they deserve the same pay as other family members who are, in fact, making vital contributions to the business’ growth and prosperity. If a family business does, in fact, assign all family members equal pay, then the ones who contribute more may feel undervalued, and decide to take their skills and acumen where they will be better appreciated – and more fairly compensated.

 

In short, compensation irregularities are more likely to lose the family business their best workers whether these workers are family members or not.

How can we avoid this?

First:

Communicate! And Make Compensation Fair

We mentioned undiscussed assumptions – don’t let assumptions slide into the equation, and do discuss!

Make clear to the entire work team, including family members who work within the business or plan to, that all employees, whether family members or not, performing the same function within the business will receive pay based on:

• Position, and
• Performance

 

Evaluation of performance, in turn, should include whether the employee takes initiative to increase their skills, acquire new credentials, and successfully seek out new business for the company.

Fairness will pay in the long run, as will ensuring that everyone, in the family or outside it, knows what is expected of them and is incentivized to do their best for the business. This, in turn, will lead to a more stable, and more profitable business – which is definitely in your family’s best interests!

One major aid in ensuring such fairness is:

Written Compensation Policies and Procedures

Nothing beats having written policies and procedures. There’s something innately impressive, even to family, about the printed word.

And when everyone knows what those policies and procedures are, there’s no confusion. This allows all your team to make a real contribution, knowing they have incentives to do so and will be rewarded for their own and the company’s success.

These people are the team you want and need.

The result:

Buy-In and Harmony!

When you have fair, written standards, and communicate them clearly and calmly, family and non-family employees understand how the ball bounces at your business.

No special treatment, and no unrealistic expectations.

Employees will work on an even footing, as a team, to ensure the family business’ continuing success – it’s a win for everyone.

RFG has assisted many closely-held businesses, including family-owned companies, in developing policies and procedures which help ensure their fairness, security, and continuing success.

If you are the owner of a family business, and want to ensure you have a prosperous concern to benefit your loved ones, please click here to email us directly – helping you is why we’re here.

Until next time –

Peace,

Eric

The timing of the conversion of retirement assets to a Roth IRA can make a big difference to your taxes – and to your financial life.

Roth IRAs and Conversions – Background

As many, perhaps most of you, may already know:

• • Contributions to Roth IRAs, whether regularly scheduled or made via conversion, are made with after-tax dollars.
  • If you convert a traditional IRA, Simplified Employee Pension Plan (SEP), or Savings Inventive Match Plan for Employees (SIMPLE) IRAs, funded with pre-tax dollars, to a Roth IRA, you are liable for federal and state income taxes on the amount converted
  • Distributions from a Roth IRA, if taken after age 59½, providing the assets have been held for at least 5 years in that Roth account, are free from federal and state income tax liability. However, contributions made to a Roth IRA after you reach age 59½ are not subject to the 5 year holding rule.
  • The Setting Every Community Up For Retirement Enhancement (SECURE) Act of 2019 and SECURE 2.0, enacted in 2022, allow you to continue contributing to your IRA, traditional or Roth as long as you are working and earning income.
  • There are no required minimum distributions (RMDs) for the original Roth account owner; therefore, your assets can continue to grow after retirement tax free.
  • If you choose not to take any distributions from your Roth IRA, your heirs can inherit the account, and the tax-free distribution rules still apply. However, non-spouse beneficiaries of all IRAs inherited in 2020 or later must take distribution of the full amount inherited within 10 years from the original account owner’s death.
  • While there are income limits governing who can open and contribute to a Roth IRA (for 2024, single filers must earn less than $161,000, and married joint filers must earn less than $240,000), there’s no income limit concerning conversion of existing retirement assets.
  • For 2024, the amount of new contributions to any IRA, traditional or Roth, is $7,000 per individual, with a $1,000 catch-up contribution for those over age 50.
  • There’s no limit to the amount of existing retirement assets you can convert to a Roth IRA – however, we recommend you pay the income taxes due with non-retirement assets.

   

  How Does the Timing of a Roth Conversion Affect Your Taxes?

  That’s a question with more than one answer.

  • First, especially for those in their peak earning years, the tax liability on retirement assets effectively converted from pre-tax to after-tax dollars can be a heavy burden. And conversions at any point, if you convert significant assets, may push you into a higher tax bracket, if you aren’t already in the highest bracket. Or it may trigger an alternative minimum tax (AMT) liability.
  • The other side of this coin is that the distributions are free of federal or state income tax.

   

  How Do You Ensure You are Converting to a Roth IRA at the Right Time?

  The answer is, as so often, plan ahead! I’ve said it before, and it bears repeating: proper prior planning prevents poor performance (try saying that six times fast!).

  You can only start planning from where you are now, but, though it’s never too early, it’s also never too late to make the most out of the opportunities available to you.

  Roth conversions, as we see, need to be made in light of a number important factors. This is a nuanced and individuated decision which needs to be made according to IRS rules. We strongly urge you to consult with your Virtual CFO or trusted financial advisor, who understands your unique financial situation, goals, and perspective – and can tailor a conversion plan (if that’s the best idea for you) which takes into account every aspect which applies, and/or is important, to you.

  Here’s another favorite motto of mine – one size never fits all.

  If you are considering converting existing retirement assets to a Roth account, please click here to email me directly – helping you is my job – and I love doing it!

  Until next time –

  Peace,

  Eric

  For more on Roth accounts and conversions, check out:

  Roth IRAs and Income Tax Liability – How to Protect Your Assets

  SECURE 2.0 Enacted – Key Highlights

  Payout Rules for Beneficiaries of Inherited IRAs

  Roth IRAs – To Convert, or Not to Convert?

  The SECURE Act of 2019

This week, the United States of America – and we, its people – will celebrate the nation’s 248th birthday in a world at war.

Ukraine, Israel, all the nations joining in on either side, as well as other conflicts. We know so much and at the same time so little about what’s really going on in these conflicts.

But the world was not a peaceful place in 1776, either. England was in conflicts with France, Spain, and the Dutch Republic during the period in which the American Revolution was fought. The Russo-Circassian War, part of the greater Caucasian War (which lasted from 1763 to 1864), was being fought, as were other wars and rebellions.

In fact, the world has never been a peaceful place, as much as we’d all like to think it could be.

As a nation, we look ahead with worry about what the future will bring for our children and for their children. And this year, we look back as well.

America has lost a lot of great legends in 2024. Willie Mays’ passing has left us bereft – the grace and hope of his play seem more gone from the field than before, though he hadn’t played for decades. How old are we, anyway? Bill Walton (whom we wrote about here), Chet Walker, Jerry West have joined the celestial basketball roster.

Writer Alice Munro, comedian Richard Lewis, actors including Tony award-winner Chita Rivera and Oscar-winner Louis Gossett, Jr., are among 2024’s notable casualties. One of Gossett’s early television roles was on The Young Rebels, which treated America’s early revolutionaries.

But while the talented will always leave us (like everyone else), talent doesn’t die – nor does life die with even a hero’s death. And, as Alexander Pope put it,

“Hope springs eternal in the human breast:
Man never is, but always to be blest.”

Hope never need die. I’m proud that our country was founded on visionary hope, on truly revolutionary principles of a shared human liberty and equality, even if those principles are, have always been, and always will be a beacon up ahead, a goal to be striven toward, rather than a current state of being.

As Thomas Jefferson wrote:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

Let’s celebrate the freedoms we have as Americans – as citizens of a nation which was the first to recognize, at its inception, that human beings have rights not granted by government, but unalienable (or, alternately, inalienable).

Yes, it’s a scary world today – but it always has been. We celebrate in the face of danger. Every time we do celebrate, we know life is all too brief – and that all paths have their perils.

But our Founders were men who stayed the course, who kept their heads in the face of massive opposition, internal to the nation as well as external from it. And it didn’t stop them taking joy in life, any more than it halted their drive to independence for the nation.

So let’s honor them by celebrating what they’ve left us – the knowledge that we have the right to direct our own lives, to climb our own mountains, forge our own destinies.

The right to take joy and pleasure in life where we find it – despite wars and rumors of wars.

We can choose fear, or we can choose joy. Honoring our Founders practically mandates we take the latter path.

And, I promise, we’ll have a lot more fun on that road!

What are your thoughts on our nation’s founding, its legacy? What does being an American mean to you?

Please click here to email me directly – I’d love to hear your thoughts on this.

Until next time,

Peace,

Eric

For more thoughts about our nation’s founding, and its Founders, read:

Independence Day

Temperance and Discipline – on These Hang Other Virtues

When we set out to plan our estates, most of us want to leave our children equal inheritances.

Easy, right? Just divvy up each of your assets in equal shares!

But, is “equal” always “equitable?” In other words, does leaving equal portions of each asset ensure equal post-tax inheritances for your children?

In some cases, the answer may be “no, it doesn’t.”

How Can Equal Not Be Equitable?

Consider the following scenario, limited to the disposition of assets held in qualified retirement accounts:

Marjorie is a 70 year-old widow. She retired 5 years ago from a successful career in technology, having amassed $5 million in retirement assets, broken down as follows:

• Traditional IRAs totaling $3 million
• A Roth IRA totaling $1.5 million, which assets have been held in that account for over 5 years

 

Marjorie has two children:

• Nancy is a well-paid physician; her husband is a prosperous attorney. Together, their earned income puts them well into the 37% income tax bracket.
• George is a construction worker; his wife is a homemaker who works part-time. Together, their income is just low enough that they qualify for the 12% income tax bracket.

 

Marjorie has designated Nancy and George as equal beneficiaries on both the traditional and Roth IRAs. Her traditional IRAs have been funded by pre-tax dollars, making distributions taxable at her beneficiaries’ ordinary income tax rates. Her Roth IRA was funded by after-tax dollars and, since the assets in that Roth IRA have been held for over 5 years, the distributions are not taxable to her beneficiaries.

Assume Marjorie passes away in 2025, with Nancy and George remaining in the same tax brackets over the 10 years they have to withdraw all their inherited retirement assets. Over those 10 years, the total tax they’d each pay, and the after-tax amounts they would each have the use of, would look like this:

That’s $735,000 in taxes paid by Marjorie’s heirs, and George’s after-tax inheritance of $2,070,000 is $375,000 more than Nancy’s of $1,695,000, while Nancy pays over three times what George does in taxes – $555,000 versus $180,000.

But, what if Marjorie left her Roth IRA entirely to Nancy, along with $750,000 of her traditional IRA, and left the remaining $2,250,000 in the traditional IRA to George? Then, under the same assumptions, their taxes and after-tax inheritances would be:

This second example saves Marjorie’s heirs almost $200,000 in taxes overall. George would pay $90,000 more in taxes under this scenario than under the first, but he’ll still pay less in taxes than Nancy and the tax amounts paid by each will be similar. In addition, it brings the after-tax amounts inherited by each heir much closer to parity than under the prior example.

As you can see, it literally pays (though tax savings) to consider your heirs’ tax brackets when splitting retirement accounts as inheritances. And it can ensure your heirs get more nearly equal after-tax inheritances.

There are, of course, many other considerations that should factor into your estate planning, but they are often less tricky than retirement accounts to divide with reasonable equivalence. We have discussed many of these before, and undoubtedly will again (see below for some of our previous posts on estate planning).

We urge you to consult with your virtual CFO or trusted financial advisor to thoroughly review your assets and you estate plan in light of your heirs’ financial and tax circumstances. Some people may prefer to benefit a less well-off child more than a wealthier one, some may prefer to leave equal (or as nearly equal as possible) portions. But it’s always best to make decisions based on the most thorough understanding and information you can obtain.

If you think your estate plan might need updating in order to best protect your heirs and your legacy, please click here to email us directly – we are always here to help.

Until next time –

Peace,

Eric

For more on estate planning, see:

Is Your Estate Plan Due For a Check-Up?

Why You Need to Update Your Beneficiary Designations

When Do You Need a Trust?

The Family Meeting on Your Financial Affairs – and Why You Need to Have One

Why You Need a Financial & Estate Organizer – and What to Put in It

The Unlimited Spousal Deduction Explained

Wills and Powers of Attorney – Why You Need Both

Leverage the 2023 Estate and Gift Tax Exemptions – While They Last!

Beneficiary Designations and Why They Matter

Creating a Digital Estate Plan

Strategies for Generational Wealth Transfer

How Tax Increases May Impact Your Succession Plan: Things You Should Know

Are You Doing Enough — Or Any — Succession Planning?

Bill Walton, NBA superstar and sportscaster, passed away on May 27, 2024, leaving many who remember his dedication, stellar play, and commitment to teamwork much saddened.

First NBA draft pick in 1974 after leading the UCLA Bruins to two NCAA championships, Walton went on to play center, first for the Portland Trail Blazers (1974-1979), where he led the team to their first NBA championship in 1977; the Portland team were underdogs up against the highly-favored Philadelphia 76ers. In 1978, despite the Trail Blazers’ loss to Seattle’s Supersonics (at least partially attributable to Walton having broken his foot), he was named NBA MVP.

Walton then went on to play for the San Diego Clippers (1979-1985), and, finally, for the Boston Celtics (1985-1987), alongside fellow NBA legend Larry Bird, winning another NBA championship with that team in 1986 over the Houston Rockets.

Bill Walton retired from professional basketball after the 1986-1987 season. His recurring problems with his foot, as well as other injuries, finally sidelined the man many have called one of the very greatest all-around basketball players in history.

His devotion to the game was lifelong and tireless – his body had its limits, but his love for the game didn’t. Coaches have said he loved everything about it, strategizing, thinking, practicing, playing – it was all part of the game he loved.

So, what could Bill Walton possibly have in common with The Grateful Dead – America’s best-loved, perpetually touring (prior to Jerry Garcia’s death in 1995) band of hippie stoners?

Actually, Bill Walton and The Grateful Dead had a few things – and one essential mindset – in common.

Bill Walton was, first, last, and always, a team player.

In his own words:

“In basketball, you can be the greatest individual player in the world and still lose every game, because a team will always beat an individual.”

He practiced hard, honed his skills with purpose and intelligent application. Walton worked with many teammates under a good number of coaches – he always did his work, and gave his best to his team. But practices are regimented, and there’s an element of improvisation to every game – that’s why the game is played – because you don’t and can’t know in advance what the outcome will be.

The Grateful Dead were masters of improvisation – and this was part of how they practiced music offstage, as well as onstage in concert. It was integral to their performances. But no matter how far afield their notes took them, they’d bring it all back round to the song itself. And then, on to the next number.

But they played music, whether they were performing in front of a crowd or playing amongst themselves – they lived and breathed it as Bill Walton played, lived and breathed basketball. Sometimes they all lived in the same house.

The Grateful Dead were, effectively, a family, though some members came and went – willingly or otherwise (we all know about keyboardist, drummer, and harmonica-player Ron “Pigpen” McKernan’s tragic death at age 27, in 1972).

Bob Weir, one of the Dead’s original quintet, singer/songwriter and guitarist, said:

“The concept of the band was always group improvisation, not merely playing behind Jerry’s solos. The Grateful Dead’s goal was to play together in a seamless mesh.”

So there’s a common theme between the two legends – it wasn’t all about the frontman, or the franchise player, it was about everyone playing – music or basketball.

And, artistic performance or sporting event, it’s a little about the fans, too.

Bill Walton was himself a fan of The Grateful Dead – he followed them, attending over 850 of their concerts over the decades, becoming known as “Grateful Red.” He wore their shirts while broadcasting in later years, and, once, performed (on drums) with the band at the Giza pyramids.

During his media career, which lasted a lot longer than his playing years, Walton was the subject and star of ESPN’s 2003 Bill Walton’s Long Strange Trip; he later hosted a satellite radio show, One More Saturday Night. I probably don’t need to point out that the first title references the refrain from Truckin’, while the second takes the name of one of the Dead’s go-to numbers.

Walton, who organized a Celtics outing to a Dead concert shortly after signing with the team in 1985, understood the synergy this way:

“The music and the basketball were the exact same thing.”

“You have a team with a goal, and a band with a song, and fans cheering because they’re happy, but also to make the players perform better, faster, and to take everybody further.”

“During the game, during the song, everybody goes off, each in their own direction, playing their own tune. But then with the greatness of a team, the greatness of a leader, and the willingness to play to a higher calling, they’re all able to come back and finish the job together — to win the game and send the people out into the night ecstatic, clamoring for more.”

But to be able to do that, you have to become great at what you want to do – whether it’s basketball, music, or anything else. Bill Walton’s high-school basketball career wasn’t stellar, but he put in the effort, and had the talent, to become great.

Jerry Garcia maintained he didn’t work hard at music – for him, playing music wasn’t working. But I don’t think he’d have denied he put in time and energy – i.e., effort. He could barely play an instrument when he joined his first band. And yet, he became one of the great guitar legends, as Bill Walton became one of basketball’s.

Neither of those greatnesses was achieved by accident, but by love, effort, and purpose. Both these artists were passionately focused – they gave it their all, whether in practice or in a live performance. And not in a vacuum, but side-by-side with others.

So, let’s run it down:

It’s not just about you, it’s about your team, your band.

It’s about putting in the effort to become great at what you love.

And it’s about the love that gives you the dedication to realize that greatness.

For the team. For the band. For the game, for the music. For the love.

And for the fans.

Any thoughts about Bill Walton or The Grateful Dead? On basketball, music, or anything else that takes both individual dedication and team-oriented goals?

Please click here to email me directly – I’d love to hear your thoughts.

Until next Wednesday –

Peace,

Eric

For more thoughts on music, literature, and sport, see:

Jazz Fest 2024 – Showing the Kids How It’s Done!

The Circle of Life

Yes, You Really Can Schedule Creativity!

At Last! JazzFest Returns to New Orleans

Amanda Doherty’s Journey

JazzFest’s Return Delayed – But Don’t Give up Hope!

What JazzFest’s Return Means to Me

Humble and Kind

Talent – or Skill?

Success

Invictus

Saints Rammed by the Zebras

Thoughts on a Legend’s Retirement

Success With Humility – The Manning Way

When I started my accounting career, I had a serious desire to help others. I went to work for one of the Big 4 national accounting firms with offices in New Orleans. I footed general ledgers, prepared tax returns, and performed other seemingly menial tasks for somewhere between 14 and 16 hours a day.

I would see companies whose books showed serious financial issues, and I’d ask managers if we couldn’t figure out a way to help these companies. One example was the audit of a tugboat company, which occurred in the middle of an oil field crisis. I asked the supervisor on the job if we couldn’t we help them refinance their boats, get them a little working capital? I was told, “Just go back to your cubicle, finish the accounts receivable portion of the audit.” I was not happy.

After two years, I was asked whether I’d considered taking a job with one of the firm’s clients. “No,” I replied, “I want to be a partner here. Did you see the client I brought in? And the retainer check? They want us to do an inventory study for them.”

“Well, who asked you to do that?” “No-one, I just wanted to help them.” “Go back to your cubicle and foot some general ledgers.”

They weren’t much happier with me than I was with them, and eventually I left, with the intention of setting up shop on my own.

Serendipitously, a friend from college called me; he had been with another of the Big 4, was currently working for an oil and gas construction firm, and was beyond swamped. I said I’d help him out, maybe three days a week, and found myself with a job I could live on (complete with health insurance and 401(k)) and time to build my own business.

I hustled – I had to. My evenings were spent at Charity Hospital, now sadly gone, recruiting clients among residents who moonlighted on weekends. You see, residents could earn extra dollars – $100 was about the usual hourly wage, and back then, that was money – spending their weekends manning emergency rooms in Port Sulphur and other areas outside New Orleans. Taxes weren’t withheld, as these doctors were treated as independent contractors, and often we were talking about extra income amounting to $50,000 to $60,000 a year, for residents making something like $30,000 per year at LSU or Tulane.

I started putting up signs all over the downtown New Orleans medical corridor hospitals, and snagged one doctor. One became two, two became four, four became 16. Some of those doctors are clients to this day, and I cherish them all, thankful they trusted a hustling sole practitioner who was entirely unknown to them.

Finally, it got through to me. I was not only helping entrepreneurs, I was an entrepreneur myself. By nature, by inclination, by temperament.

And being an entrepreneur gave – and still gives – me insight and empathy in helping my clients solve their unique problems. Because I’m one of you. I know what the benefits, the advantages, and the risks of entrepreneurship are, and what they mean. I’ve faced them all, and I face them still.

In short, entrepreneurs, I hear you. With RFG, you are seen. I can help you deal with all the rewards and all the challenges entrepreneurship encompasses – they are my own, I know them inside and out.

From the inside, I empathize with you completely. And from the outside, I can bring an objective vantage to help you navigate the entrepreneurial waters we all sail on.

Embracing entrepreneurship meant embracing who I am. While it’s sometimes been scary, I would never trade what I’ve learned, the experiences I’ve had, the clients I’ve been able to help, the people I’ve worked with, for a past, present and future of nothing but grinding out tax returns and general ledgers at a big firm.

What – or who – has helped you find who you are? Was it a lightbulb moment, or a gradual dawning?

Please click here to email me directly – I’d love to hear your stories.

Until next time –

Peace,

Eric

We all make mistakes – that’s part of the awful and wonderful journey of being human – and retirement planning is one area where we can stumble.

Below are the 5 most common mistakes we see when it comes to retirement planning.

Asset Allocation

When was the last time you sat down with your virtual CFO or trusted financial advisor to thoroughly review your asset allocation?

If your advisor is conscientious and proactive, s/he will reach out to you to suggest asset allocation adjustments when circumstances indicate it’s advisable – such as in times of market fluctuations, for example.

But when you are looking retirement in the face, it’s time to take a hard look at your changing financial situation and needs, and your ultimate goals for the assets you’ve worked so hard to build up.

You may have been a savvy risk-taker, with a long-term vision and a high risk tolerance while you built up your assets.

However, retirement can change that. Absent a regular paycheck, what income do you need to finance the lifestyle you want?

You may want a continuation of the lifestyle you have now, or a simpler and/or scaled-back version. Or you may want to take up new, possibly costly goals (such as the international travel you’ve put off and are now looking forward to).

The important thing is to understand what you envision your post-retirement lifestyle as, what your income needs are going to be, and where that income will come from. You may need more income, or less – either way, you will need to structure your portfolio accordingly.

And don’t forget that, while you want your assets to generate income for you, you should balance that with continued asset growth, as well.

All your goals, those that have changed and those which remain the same, need to be taken into account, and your asset allocation adjusted according to your individual needs, to ensure you can achieve those goals, for yourself and for your posterity as well.

Your Estate Plan

We’ve said it before – estate planning isn’t a matter of “set it and forget it.” It’s a fluid process, and an effective estate plan takes into account everything you want your wealth to do – for yourself and your family, now and in the future.

Remember that if Congress doesn’t take action before the end of 2025, the estate and gift exemption will revert to its 2017 level of $5 million per individual, as adjusted for inflation (estimated at $7.5 million per individual and $14.5 million for married couples) as of January 1, 2026. For 2024, the exemption is $13.61 million per individual, and $27.22 million for married couples.

It’s never wise to underestimate Congress’ ability to raise taxes. Take advantage of the higher estate exemption while it’s are available to you – you and your estate won’t be penalized for acting under current law after the law changes, if it does.

Healthcare Costs

It’s a fact that our healthcare costs increase as we age. And, once you retire, any employer-based health insurance is time-limited (so far as its cost is concerned) to COBRA coverage limits, or 18 to 36 months. Some plans may offer extension of coverage at your own expense for longer, but be sure you know your options!

You can be enrolled in Medicare and retain your employer-sponsored or COBRA coverage. However, not enrolling in Medicare within your initial eligibility window can result in penalties for late enrollment in Plan B, so start your Medicare enrollment before your turn 65 (we recommend 3 to 6 months before your birthday).

A healthy 65-year-old may not quite comprehend that life at age 80 will likely require an entirely different approach to healthcare than what’s currently appropriate for them.

Healthcare costs are on the rise – currently at a rate of 3% per year. There are so many new wonderful technologies and treatments available, and more will come – but they all cost money. And some procedures may not be covered by Medicare or other insurance. Out-of-network providers, too, can be extremely costly – and the specialist you absolutely must see may not be in your network.

Further, you may want to lock in long-term care insurance at a younger age, which could give you more favorable rates; you may want to purchase space to live in in a community with flexible care, adaptable to your needs, at today’s lower prices.

In light of all these variable, don’t underestimate the cost of post-retirement healthcare! Plan ahead so that you won’t deplete assets you want to leave to your heirs and beneficiaries.

Family Communication

The dynamics of money and family can make for uncomfortable topics.

But this is a conversation you and your loved ones need to have together, openly and as a family, in order to avoid bigger issues or surprises down the road.

One, or even two or three family meetings can help ensure everyone understands what’s going on now financially, what’s coming in the future, and how you plan to protect them and their own futures, while caring properly for your own.

I’ve known people who found themselves tangled in financial morasses while they were experiencing crushing grief over a loved one’s passing – and all because that family meeting never happened.

Don’t put those you love the most to you through this. Take control, make sure your wishes and desires, for yourself and your loved ones, are understood and will be carried out.

Insurance Beyond Healthcare

With retirement, a whole series of questions arise as to what insurance you need – what coverage do you keep, what coverage do you drop, what coverage do you add or increase?

If your employer provides disability insurance, that generally will cease when you retire. If you have private disability coverage, you probably obtained it in order to protect your family from the loss of your income – when you retire, that need normally no longer exists.

Life insurance, too, needs reviewing prior to your retirement. What was the purpose for which you insured your life? What would the purpose of life insurance be for you, now?

And what about your umbrella insurance coverage? If your net worth has increased significantly since you last reviewed your coverage, it’s time to take a look at it again.

In short, retirement is a major life event – one you should plan for carefully – so that you can assure yourself of the retirement lifestyle you want as well as your plans for your family’s future – well in advance.

Consult with your virtual CFO or other trusted financial advisor about every aspect of your life to which retirement will bring change – the above is only a list of a few commonly overlooked areas needing your attention.

Don’t leave your loved ones unprepared, guessing.

If you are approaching retirement, RFG can help you get your ducks in a very tidy row! Please click here to email us directly – we are always here to help.

Until next time –

Peace,

Eric

For more on planning for retirement, see:

What Your HSA Can Do for You – Now and in the Future

Increased Retirement Plan Contribution Limits for 2024

Roth IRAs and Income Tax Liability – How to Protect Your Assets

SECURE 2.0 Enacted – Key Highlights

Ensuring a Happy Retirement

Taxation in Retirement – Be Prepared!

Roth IRAs – To Convert, or Not to Convert?

Should You Roll Your 401(k) Into an IRA When You Retire?

The Ins and Outs of RMDs – Explained

Allocating Your Retirement Portfolio

Planning for Retirement in a Volatile Market

How the SECURE Act Changed Retirement Plans

The SECURE Act of 2019

We’ve written a good deal about changes to the rules governing required minimum distributions (RMDs) for inherited IRAs consequent to the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), signed into law in December of 2019 and effective January 1, 2020, and the SECURE 2.0 Act, enacted in December of 2022 and effective January 1, 2023.

However, the new rules, especially following SECURE 2.0’s changes, have caused a great deal of confusion, leading to the IRS waiving penalties for certain missed RMDs from inherited IRAs for 2023. Last month, the IRS extended this waiver through 2024.

Why? And what does it mean? Read on!

The SECURE Act:

Eliminated the “stretch” rule on inherited IRAs, via which the beneficiary of an inherited IRA could take RMDs over the course of their lifetime, for all but a small list of “eligible designated beneficiaries.” These beneficiaries include:

• The deceased account owner’s spouse.
• A disabled beneficiary.
• A chronically ill beneficiary.
• A beneficiary not more than 10 years younger than the deceased account owner.
• A minor beneficiary who is the child of the deceased account owner.

 

Any other beneficiaries are considered “non-eligible designated beneficiaries.” This category includes children of the deceased account owner once they reach majority.

Non-eligible designated beneficiaries of inherited IRAs must take full distribution of all inherited IRA funds within 10 years.

The SECURE Act also raised the age at which RMDs must be taken by the account owner from 70½ to 72.

SECURE 2.0:

Further raised the age at which RMDs must be taken by an IRA owner to 73 (for those who turn 72 after December 31, 2022) as of 2023, rising to 75 in 2033 for those who turn 74 after December 31, 2032.

Cut in half the penalty for RMDs not taken – from 50% of the RMD, not taken, which the SECURE Act left unchanged, to 25%. For account owners, the penalty can drop to 10% if the full RMD is ultimately taken and an amended tax return for the applicable year is filed in a timely manner.

Confusion:

These changes were significant; many account owners as well as beneficiaries of inherited IRAs were confused as to when they had to begin taking RMDs.

The IRS was asked for “transition relief” as account owners, beneficiaries, and their advisors adjusted to and planned for the changes – and the IRS granted some relief, waiving the 50% or 25% penalty on certain missed RMDs for 2021, 2022, 2023, and now, 2024.

In fact, in some cases, when penalties have already been paid, a refund of the penalty may be applied for.

But the tricky part is – which missed RMDs are eligible for penalty relief?

It Depends . . .

At present, the IRS says its rules governing RMDs under the SECURE Act and SECURE 2.0 will be fully effective January 1, 2025.

Some considerations regarding penalty relief eligibility are:

• Whether the account owner took distributions as RMDs under age rules which had been superseded by the SECURE Act and/or SECURE 2.0.
• Concerning inherited IRAs, when the IRA was inherited, and for which tax year(s) an RMD or RMDs were not taken, may make a difference as to eligibility for penalty relief.

 

How Can You Protect Yourself?

You could just take your RMDs – whether you are the account owner or their beneficiary. But should you?

We strongly recommend consulting closely with your virtual CFO or other tax advisor to determine how best to proceed, S/he is abreast of developments and can help you cut through any confusion as to what RMDs should be taken, and when.

We invite you to consult with us – at RFG, we’ve been in the tax, tax planning, and estate planning business a very long time, and would love to set your mind at rest.

Please click here to email us directly – we are always here to help!

Until next time –

Peace,

Eric

For more of our coverage on RMDs, the Secure Act, and SECURE 2.0, see:

The Secure Act of 2019

How the Secure Act Changed Retirement Plans

The Ins and Outs of RMDs – Explained

The End of the Stretch IRA – and Ways to Compensate

IRS Proposes Changes to the New 10-Year Payout Rule on Inherited IRAS

Payout Rules for Beneficiaries of Inherited IRAS

SECURE 2.0 Enacted – Key Highlights