Financial Symmetry: Balancing Today with Retirement

How closely did you look at your Medicare premium notice letter this past December? If it mentioned an IRMAA adjustment, and you experienced a life-changing event, you may want to look again. There's a few steps you can take that can save you thousands of dollars in Medicare premiums. In this episode, we are breaking down the the tax cliff known as IRMAA and how proper planning can help you avoid overpaying for your Part B and Part D Medicare premiums.

YouTube recap: https://youtu.be/BQ7K_DeJiHs

This often misunderstood or overlooked area of the tax code is how Medicare determines the premiums that are automatically taken from your Social Security check. IRMAA stands for Income Related Monthly Adjustment Amount. Understanding the IRMAA threshold is key to understanding your Medicare premium.

Generally, when you think about Medicare you think about age 65 and above. It's actually important to begin thinking about Medicare when you are 63. Your Medicare premium at age 65 is actually based on the income that you made 2 years prior. So if you were in one of the higher income brackets before you retired, your Medicare premium will reflect that. There are 5 tiers of IRMAA and if you go even $1 over you will be knocked into the next bracket. If you end up in the highest tier you could be paying over $4000 in extra Medicare Part B premiums.

Now that you know about IRMAA you can begin to plan ahead. If your AGI is $87,000 or less for singles or $174,000 or less for a married couple then you will qualify for the Medicare Part B baseline premium which is $144.66 per person per month. It's important to understand your income sources and whether they are taxable or not. Knowing where you fit in the IRMAA tiers will save you money. Listen in to hear more about IRMAA and how it can affect your retirement plans.

If you didn't plan ahead and are stuck with high premiums you may be able to appeal. You can appeal based on marriage, divorce, death of a spouse, work stoppage, work reduction, or loss of income. If you qualify for an appeal then you'll need to fill out an SSA44. There are 5 steps to follow to appeal process. Listen in to discover what you can do if IRMAA has got you down.

• [3:27] Which parts of Medicare does IRMAA affect?
• [7:20] An example
• [9:55] How can you appeal?

• IRMAA Tables

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How do you best invest at all-time market highs? In this episode, we are walking through the strategies and disciplines you'll need to be a successful long-term investor.

Short Youtube recap here: https://youtu.be/fEXnQ8GaCuk

Visit full article notes here: https://wp.me/p6NrVS-3i0

We often get the question of whether people should continue to invest given the all-time market highs. Well, let's take a look back to just a year ago. At the end of 2018, the U.S. stock market declined by 20% and everyone was worried about a potential bear market. But it turned out that 2019 was a fantastic year despite all the worries.

We can't tell you when will be a good time to invest in the short-term. No one can. No one has a crystal ball that can predict those outcomes. It is important to formulate a decision-making process that is not outcome-based. Financial decisions should always be processed based instead.

Think about where you were in December 2009. You probably weren't too optimistic about the economic future. But it turned out the S&P 500 was the best place to invest over the past 10 years. But in the 10 years preceding it was the worst place to invest.

There is never an easy time to be an investor. Investing always involves risk and many see that risk as a reason not to invest. There is always a risk and plenty of reasons not to invest. But when you look back, you'll realize recessions, while painful, happen quickly but the market rises over the long run.

After the S&P's strong run the past 10 years many people wonder why bother to invest internationally or why they should hold any bonds in their portfolio. Even though the S&P 500 performed quite well over the past 10 years, it was the worst place to invest during the previous 10 years. To protect yourself, you'll need to be diversified. Bonds can not only provide diversification but they can provide income and capital preservation as well. They may not be the most exciting, but bonds will ensure you don't have all of your eggs in one basket.

Once again we find ourselves in a time of uncertainty. There's the threat of war, a presidential election, and who knows what else could happen next. Given this time of uncertainty, what changes should we be making to our portfolios? The only sure answer is that you should only be taking as much risk as you can handle. Don't let recent market performance lull you into taking too much risk.

Listen in to hear the outlook for 2020 and beyond.

• [2:27] Short-term market forecasting is impossible to predict
• [5:35] Let's look at how the markets have performed in the long-term
• [10:52] Take a look at bonds
• [15:10] What has happened with consumer confidence?
• [17:35] Why hold foreign stocks?
• [20:15] What changes should we be making to our portfolios given the current climate?
• [23:54] What do the experts predict to happen over the next 10 years?

• https://www.financialsymmetry.com/podcast-archive/
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The SECURE Act is the biggest piece of retirement legislation to pass since 2006.

On this episode, we discuss what the SECURE Act is and how it will affect you and your retirement plans. The acronym SECURE stands for "Setting Every Community Up for Retirement Enhancement."

Watch corresponding Youtube video here: https://www.youtube.com/watch?v=d0K8KBlCYhs&t=2s

In our breakdown of the new bill, you'll learn about the highlights including new IRA rules, changes to 401K's, non-retirement changes, and extenders.

One of the most impactful changes in the legislation deals with the Stretch IRA provision for non-spouse beneficiaries. Under the old law, upon a person's death, the non-spouse beneficiaries of their 401K's and IRA's could withdraw savings over the span of their entire lifetime.

Now, as of January 1, 2020, the Secure Act compresses that time period to only 10 years after the year of death, thus speeding up the timeframe for taxes to be paid on these pre-tax savings. This complicates some old strategies being used, but creates new planning techniques for others.

There are a few eligible designated beneficiaries that will avoid the 10 year payout. These include:

• the surviving spouse of the deceased account owner
• a minor child of the deceased account owner
• a beneficiary who is no more than 10 years younger than the deceased account owner
• a chronically-ill individual
• a disabled individual

Tune in to see how you may need to tweak your retirement withdrawal strategies to best work for you and your heirs.

The Stretch IRA wasn't the only thing that changed with IRA's. The required minimum distribution (RMD) age was raised from age 70 ½ to 72. This means, for those yet to reach 70.5 by 1/1/2020, that you won't have to take funds out of your IRA until age 72. You'll have a year and a half longer to convert those funds to a Roth IRA, depending on tax brackets.

Despite the RMD age moving back, you still have the option to make a qualified charitable distribution (QCD) at age 70. If you'd like a refresher for some of these financial acronyms we're mentioning, check out episode 63, our Financial Acronymology guide.

Additionally, those over 70 and still working can now contribute to a traditional IRA if they have earned income. In the old law, this ability stopped at 70.5. But people are living and working longer now (without adequate retirement savings for many), so the SECURE act makes this possible.

Finally, we get to the part about setting communities up for retirement. With the changes in the Secure Act, more small business owners will be able to offer 401K's to their employees.

The bill makes it easier to be auto-enrolled to help those people that never get around to setting up their 401K contributions. Part-time employees will also benefit from the new bill. Now part-timers who have worked 500 hours over the past 3 years will have access to 401K's. These changes are designed to make retirement savings a bit easier.

The Secure Act is a great reminder of how quickly laws can change. Without close attention, your original intent could no longer be the most optimal strategy for your retirement plans.

One of our primary responsibilities is to help you uncover tax saving or planning opportunities when they become available. Remember, financial planning is like putting together a puzzle. Make sure you have all the pieces by learning as much as you can to improve your financial opportunities.

Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for 20 years.

• [3:04] The biggest changes with the Secure Act are to IRA's
• [11:44] Small businesses will find it easier to offer 401K's to their employees
• [17:07] Non-retirement changes
• [18:55] The extenders

• Fidelity – The SECURE Act and You
• Fidelity – SECURE Act FAQ's
• Lexicology – The Good News and Really Bad News for IRA Owners Under the SECURE Act
• Kitces.com – SECURE Act and Tax Extenders
• Episode 63 – Financial Acronymology

• https://www.financialsymmetry.com/podcast-archive/
• Connect on Twitter @csmithraleigh@TeamFSINC
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Are you in the Social Security tax bubble?

Tax rules are complicated enough, and Social Security benefits during retirement years add another layer of complexity.

Watch corresponding Youtube video here: https://www.youtube.com/watch?v=0RnQY0NxhSM&t=39s

Your Social Security income can cause your actual tax rate to be much higher than expected. Not understanding how and when Social Security benefits are taxed can lead to an unpleasant surprise when Uncle Sam comes calling.

You'll also learn why multi-year tax planning is so important in retirement.

If you are approaching age 62 you may be considering when to take Social Security. It can be tempting to take that low hanging fruit as soon as possible. But we often recommend that you delay taking your Social Security benefit for as long as you can. If you don't take Social Security early then you need to think about how you'll make enough money to cover the costs of your lifestyle. Do you have IRA's, 401K's, or even an old-fashioned pension? When planning your retirement income you'll also want to think ahead to age 70 ½ when you'll have to take the required minimum distribution or RMD. Have you decided when to take your Social Security benefit?

Your Social Security benefit can be taxed like any other income source. But there is a way to determine if and how your benefit will be taxed. You can use a special calculation that is determined by the IRS. To do this, add up your taxable income and add half of your projected benefit. If it is over a certain threshold then it will be taxed. You'll need to be careful when determining your income since tax rates increase slowly and then suddenly jump from 22% to 41%. You don't want those taxes to torpedo your retirement planning. Listen in to find out how to plan ahead.

Sure, you want to pay the lowest amount in taxes each year, but retirement tax planning is a bit more complicated. You'll want to consider your lifetime tax bill. You don't want to pay 0% in taxes this year only to be stuck with a 24% tax bill next year. You'll want to have a comprehensive retirement plan which considers when to take out more money for those big-ticket items that will inevitably come up. With a little bit of planning, you can spread your tax burden out over multiple years. You also need to consider that your 60's provide you with a unique opportunity to name the income that you won't have in your 70's. Discover why your 60's may be the most important tax planning decade by listening to Will Holt's tax expertise.

There are plenty of risks involved with retirement tax planning but there are also lots of opportunities to save on taxes as well. One tax opportunity you shouldn't miss is topping out your tax bracket with Roth conversions to help minimize your RMD once you turn 70 ½.

If you are planning to retire early the Affordable Care Act could throw you another curveball. It is important to understand the income levels needed to qualify for the subsidies available. There is a lot to consider when in retirement tax planning.

Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients by providing financial planning to the Triangle residents of North Carolina for 20 years.

• [1:27] When should you take Social Security?
• [4:12] A brief overview of the Social Security tax bubble
• [9:00] Why you should not only consider this year's tax bracket
• [13:22] Can you change your mind when to take Social Security?
• [15:44] Why would someone take Social Security early?
• [17:32] What are other considerations?

• Episode 99

• https://www.financialsymmetry.com/podcast-archive/
• Connect on Twitter @csmithraleigh@TeamFSINC
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What does it take to get to 100 podcast episodes?

In his book, Shoe Dog, Phil Knight describes his emotions upon starting the company that became Nike, as a crazy idea. When describing how he felt, he realized that many of the world's greatest achievements started as crazy ideas.

Watch corresponding Youtube video here.

What seemed like a crazy idea for us 4 years ago, has turned into more than we could have ever imagined. We recently shared about what motivated us to start the show in our review of FINCON.

In this episode, we're pulling back the curtain, as we reflect on our 4 year journey to episode 100. We discuss lessons learned, surprises we encountered along the way, and mistakes we made. We also reveal some of our favorite episodes and you'll also hear what's next for the Financial Symmetry show. But this exciting milestone wouldn't have been possible without you!

We were fortunate to start our passion project at a good time. The strong tailwind of meteoric growth for all podcasts propelled our show to a 600% growth rate in downloads since our first year. Most of our listeners find us on Apple Podcasts currently, but we included an article below discussing the growing popularity of Spotify as a podcast deliverer. Podcasts also allow for listeners that would otherwise never hear about us. To that point, 20% of our listeners are in California. The magic of a technical tool that will continue to expand and grow.

We've enjoyed using this medium to share our views about unique financial planning opportunities and uncover risks that our listeners may not be aware of. We've also learned how much fun creating a podcast can be. After overcoming the difficulties of getting started, we were reminded that consistency is key.

Mistakes are inevitable part of any journey. The key is to use them to propel you to be something better. Our podcast was a treasure trove of bumps in the road when getting started. Just dial up our a few of our first episodes, especially if you enjoy hearing someone reading directly from a blog post. Thankfully we learned fairly quickly to ad-lib and play off of each other.

Listening to yourself, also provides a great opportunity to critique your communication style. Inviting other experts in the firm, added a nice potpourri of voices as well. I'm sure our listeners appreciate the fact that we have learned to use an audio editor to improve the quality of our material. A key truth that translates to many areas of life. Bring your expertise to your specialties and find experts in other fields to do the rest.

Inevitably, some episodes are better than others. Regardless, our aim is to always provide you with content that plants a seed that might motivate you to dig a little deeper on a specific planning topic. But we also try to present the content in an entertaining and engaging way. A few of our favorite episodes include episode 20 where we drew comparisons of common financial planning conversations to one of our favorite movies, The Usual Suspects. Another favorite was episode 27, where we broke down Mike's top 10 investment lessons he'd learned just after turning 40. We share a few more along with the top 4 most listened episodes since we started.

We're continually learning how to improve our content and provide you with material that you can learn from and implement. We are excited to make better use of an editorial calendar to plan future episodes. Is there a topic that interests you that you think we should cover on the show? Let us know what you would like to hear by sending us an email with your suggestions.

• [2:27] Some listener statistics
• [6:27] What we have learned along the way
• [14:17] Surprises we have encountered
• [15:35] Mistakes we have made
• [19:26] Our favorite episodes
• [25:24] Most listened to episodes
• [29:12] What is to come on Financial Symmetry?

• Shoe Dog by Bill Knight
• Atomic Habits by James Clear
• Happy Money by Elizabeth Dunn
• Article – 20 Podcast Predictions for 2020 from Top Industry Leaders
• Episode 99 – Don't miss out on the Social Security joke!
• Episode 20 – The Usual Suspects episode (Chad's favorite)
• Episode 27 – Top Ten Investment Mistakes (Mike's favorite)
• Episode 4 – Setting Goals
• Episode 45 – How Likely You Are to Build Wealth
• Episode 24 – Investing Your Year-End Bonus Listen in to find out how!
• Episode 36 – Money Can Buy Happiness – the best ways to spend your money
• Episode 91 – The Retirement Secret Weapon
• Episode 60 – 5 Ways to Improve your financial decision making
• Episode 75 – The bear market survival guide
• Episode 61 – Planning a more enjoyable summer vacation
• Episode 48 – Making better decisions with the laws of wealth

• https://www.financialsymmetry.com/podcast-archive/
• Connect on Twitter @csmithraleigh@TeamFSINC
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Who you gonna call? Retirement Mythbusters!

Short Youtube recap here: https://bit.ly/2R0QJcA

Visit Full Article Here: https://wp.me/p6NrVS-3g5

Not as catchy as Ghostbusters, we know, but these retirement myths can be much more hazardous to your long-term financial health. Many of us have certain beliefs, internet rumors or family hearsay that are passed down about retirement rules of thumb. But believing in these stories could be detrimental to the long-term success of your retirement. On this episode, we do our best Mythbusters imitation (of Discovery Channel fame) to bust these common retirement myths. Listen in to hear why you may want to challenge conventional thinking, and discover what it could cost you to continue to buy in to the hype.

1. I'm not going to live that long. So many people don't think they will live until age 90. But the truth is, men who are 65 today have a 20% chance of living until 90 and women have a 33% chance. Couples have a 48% chance of one of them making it to age 90. You need to make sure your money will last as long as you do. Does your financial plan cover you until age 90?
2. I'll work until age 65. The actual median retirement age is 62. Many people plan to work longer, but they are forced into retirement early. Some people try out a second act. Whenever you do choose to retire, be sure that you are retiring to something, not away from something. Do you have big plans for your retirement?
3. Social Security will run out. Some people use this myth as an excuse to claim their Social Security benefit early. But claiming Social Security below your retirement age greatly reduces your lifetime benefit. If you delay until age 70 will result in an 8% increase per year!
4. Once I reach X amount of money I can retire. The reality is that everyone's situation is different. There is no magic number! There is so much more to retirement planning. What magic retirement number did you have in mind?
5. Paying the lowest amount of tax is always best. Are you trying to be too tax efficient? Think about optimizing your tax situation rather than minimizing your taxes. Consider working with a financial planner and an accountant to help you consider long-term tax planning.
6. When I retire my investments should be conservative. This isn't always the case. People are living longer than ever so you may need your investment portfolio to last you 30 or 40 years. There is actually a bigger risk of being too conservative rather than risky.
7. I need to pay off my mortgage now. A mortgage is the cheapest money you can get in a loan. So not paying it off and investing the difference actually makes more sense financially. But for some people paying off their mortgage provides them with peace of mind. Which camp do you fall into? Would you prefer the peace of mind that a paid-for house provides?
8. Retirement spending is the same throughout retirement. Retirement planning is more complicated than you think. Your spending in retirement changes throughout the years. In the first 5 years of retirement, people spend a huge amount of money. You may spend it on travel, fixing up your home, eating out, or whatever it is that interests you. You finally have the time to spend all the wealth that you have built. Then spending slows down as you do. Unfortunately, retirement spending tends to increase the older you get, but this time it's on medical expenses. Have you planned to spend the same amount each year in retirement?

Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for 20 years.

• [2:47] I'm not going to live that long
• [5:30] I'll work until age 65
• [9:22] Social Security will run out
• [13:12] I can retire after I have $1 million saved
• [15:10] Paying the lowest amount of tax is best
• [18:00] When I retire my investments should be conservative
• [21:00] I need to pay off my mortgage now
• [23:55] Retirement planning is more complicated than you think

• Episode 52
• BOOK - The New Retire-Mentality by Mitch Anthony
• BOOK - Your Retirement Quest by Alan Spector and Keith Lawrence
• Article – Starting Over in your 50's – What to do when you're laid off

• https://www.financialsymmetry.com/podcast-archive/
• Connect on Twitter @csmithraleigh@TeamFSINC
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How do you know if long term care insurance is worth it?

Short Youtube video here: https://bit.ly/3akBTVZ

This is a topic we discuss with our clients regularly. With an aging population comes increased options for retirement living, assisted living and nursing care options. Along with increased options come increased costs as well which can be exorbitant in some cases. If long-term care insurance has been on your mind, you'll want to have a listen to our objective viewpoints as we consider if long-term care insurance is really worth it.

There are 3 different ways that people may fund their long-term care needs. They may self-insure, or use their savings. They buy long-term care insurance, or they may rely on government funding. Many of our listeners are in the sandwich generation, where they are both helping their kids and helping their parents at the same time. As they watch their parents age they begin to see the emotional and financial stress that can arise and it affects the way they think about aging. 70% of people will need some sort of long-term care. Usually, a stay in long-term care is only a couple of years but 1 in 10 men will require a stay of more than 5 years and 2 out of 10 women will stay more than 5 years in long-term care.

As you probably know, long-term care insurance only gets more expensive as you age. But you probably don't want to buy into it too early, what if the insurance company goes out of business? We think the best time to buy long-term care insurance is in your mid-50s. Costs tend to jump about 6-8% each year that you wait. But even if you do buy early the premiums could increase. Often times the actuaries don't fully understand the risk and end up raising premiums for current policyholders.

Generally speaking, people go into long-term care when they can no longer perform the activities of daily living or ADL. This includes going to the bathroom alone, eating, moving about the home, or they experience a decline in mental state. Often the long-term care insurance covers a maximum period of 6 years or less. There is a daily benefit amount that you can choose from. Often that benefit is between $100-$200 per day. Many long-term care insurance packages come with an inflation rider. Your premiums will be related to the variables that you choose.

Long-term care is not cheap. A private room with skilled nursing can cost $100K per year. Going down the scale, assisted living averages about $75K per year. And home health can be about $50K per year, but you do have to factor in household expenses as well.

A 65-year-old couple can buy a long-term care insurance policy for $4800 per year with basic benefits totaling $180K. If that same couple waits until 75 to purchase a policy that amount will increase to $8700. You also need to consider the fact that not everyone gets approved. The longer you wait to buy a policy the harder it is to get approved.

It's important to have as much information as possible before making costly decisions. You need to understand all of the factors before you commit. We're here to help you make informed choices. Listen in to hear all of the factors that you should examine when considering whether to buy long-term care insurance.

• [4:27] Why do people consider long-term care insurance?
• [6:57] At what age should you buy long-term care insurance?
• [10:14] Won't Medicare cover this?
• [10:50] What am I paying for?
• [13:47] How much does it cost?
• [16:46] A case study about self-insuring
• [20:07] What types of policies are there?
• [23:25] What questions should you be asking yourself?

• Kiplinger - How to Afford Long-Term Care
• Genworth - Cost of Care Survey
• CNBC - Not having it can be serious
• Morningstar - An Action Plan for LTC
• Vanguard (PDF) – Planning for health care costs in retirement
• AALTCI – Long-Term Care Statistics

• https://www.financialsymmetry.com/podcast-archive/
• Connect on Twitter @csmithraleigh@TeamFSINC
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Does your place of employment offer an equity compensation plan? Are you one of the 76% of people who have not exercised their stock options or sold shares of their company stocks? Mike Eklund is back after a hiatus and he is jumping in with both feet. He dives deep into the nitty-gritty of equity compensation plans. Since this can be a complicated subject you may want to consult a financial professional before making any big decisions about what to do with your company stock options.

Watch corresponding Youtube video here.

Many companies offer equity compensation plans as a part of an overall hiring package. The main reason is to align the company and employees. If the stock price goes up then you make more money. These compensation plans can be a big draw when you are trying to decide where to work. There are 4 main types of plans offered by companies.

1. Employee stock purchase plans (ESPP)
2. Owning stocks directly
3. Restricted stock
4. Incentive stock options (ISO). These are non-qualified stock options.

It is important to know how these types of plans differ and what their advantages are. What kind of equity compensation plan does your company offer?

The biggest question of owning stocks is when to sell. Don't let the taxes wag the dog means don't let taxes impact your investment decisions. So many people choose not to sell a position simply because they don't want to pay taxes on it. It helps if you understand how the taxes work in each situation.

If you own stocks outright for over a year and sell then that is a long term gain and you will be subject to capital gains tax at the rate of 20% at most. If you own for less than a year then it is considered a short term stock and is subject to a higher tax rate of 37%. In this case, you'll want to own for over a year for the best result.

If you own ESPP stocks then it is important to know whether you hold a qualifying or disqualifying disposition. A qualifying disposition is better. It is tied to how long you own the stock. You'll want to own for at least a year before you sell.

Restricted stock is taxable when it is vested. Although restricted stocks are pretty straight forward your financial advisor can really help you with saving money in taxes.

ISOs can provide significant tax savings but they have many requirements. They are more tax advantageous than nonqualified stock options. You have more control over when the tax event occurs.

• What percentage of my net worth is tied to the company stock today?
• How secure is the company?
• How long do you plan to stay with the company?
• Are you willing to wait it out?
• Am I comfortable with the risk of owning a large share of company stock?
• Think about your limits. How will you feel when the stock rises or falls?

If you own a lot in company stocks you'll want to lower your risk and make sure that you are protecting yourself from a potential downturn. You can use these tools to think about how to create a framework for making better investing decisions.

1. Purchase a put option. This will ensure the stock sells at an agreed-upon price.
2. Trading plans allow corporate insiders to diversify stocks through prearranged stock selling plans.
3. Gift it to a donor-advised fund
4. Gift the stock to family or friends.

Listen in to hear how you can use a combination of these strategies to help you decide what to do when you own company stock.

• [4:17] Why do companies offer equity compensation plans?
• [7:25] Don't let taxes wag the dog
• [14:26] What can you do if you own a lot in company stock?
• [19:51] Some important questions to consider

• CNBC article on the risks of company stock options
• Things to know before exercising your stock options
• ESPPs and taxes

• https://www.financialsymmetry.com/podcast-archive/
• Connect on Twitter @csmithraleigh@TeamFSINC
• Follow Financial Symmetry on Facebook

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There's a lot of conflicting information about buying a timeshare. Some call it the worst financial decision you could make. But is that true? On this episode, we invite Allison Berger to discuss the pros and cons of buying a timeshare. If you've ever been roped into one of those high-pressure sales meetings you'll want to listen to consider if you made the right decision.

Short YouTube video: https://youtu.be/RqfiAvdPS-I

In this episode of Financial Symmetry, host Chad Smith talks with Allison Berger about strategies for spotting timeshare scams and thinking through decisions about timeshares.

If you have ever been on vacation at a nice resort you may have sat in on a timeshare presentation. These high-pressure sales meetings are designed to make you a buyer and they pull out all of the stops to get you to sign on the dotted line. They claim to only need 90 minutes of your time, but those 90 minutes can be pretty intense. According to the American Resort Development Corporation, 2018 was the 9th consecutive year of growth for timeshare sales. Out of 127 million households in America, 9 million own at least 1 shared vacation product. So 7% of families are also timeshare owners. That means they must not be too bad, right? But what exactly are you buying? What is a timeshare?

If you have ever stayed at an upscale resort, you may have sat in on a timeshare presentation. These high-pressure sales meetings are designed to make you a buyer and they pull out all of the stops to get you to sign on the dotted line. They claim to only need 90 minutes of your time, but those 90 minutes can be pretty intense.

According to the American Resort Development Corporation, 2018 was the 9th consecutive year of growth for timeshare sales. Out of 127 million households in America, 9 million own at least 1 shared vacation product. That means they must not be too bad, right? But what exactly are you buying?

We all know about the incentives to get you to buy a timeshare (or even just to sit in on the sales meeting), but what other positive experiences can be had from buying a timeshare? You will guarantee yourself a vacation each year if you buy a timeshare. The accommodations are typically very nice and often include two-bedroom suites with a kitchen. This beats staying in a cramped hotel room. Typically the break-even point of buying a timeshare is between 8-14 years, so if you vacation every year for 20-30 years you'll come out ahead.

But there are many negatives that come along with timeshares. Even though the average maintenance fees are only about $1000 a year, the average sales price is $21,000. If you change your mind and wish to resell the timeshare you may be out of luck. There isn't much of a market for timeshare resales. Timeshares are complicated and can be challenging to book. If you don't know the jargon of the timeshare company you could be lost and stuck vacationing somewhere you never wanted to be. Tell us about your experiences with timeshares. Shoot us an email, we'd love to hear your stories.

Resources Mentioned in the Episode

• Consumer Reports: Why inheriting that beautiful timeshare can bust your wallet
• Don't Fall for Timeshare Exit Scams
• Article - Considering a Timeshare? Don't You Ever
• What is a timeshare and how does it work?
• Breakdown of Sales Process using Robert Cialdini's book - Influence

Every year there are approximately 140 million tax returns filed with the IRS and of those, 4 million will receive an IRS letter stating that there is a discrepancy. Your first instinct might be to panic, but don't overreact. Grayson Blayzek is here to help us understand what you can do if you receive the dreaded CP2000. You'll want to listen in not only if you have received a letter, but also to learn what you can do to prevent receiving one in the first place.

Short Youtube video recap here: https://bit.ly/2NBiVkm

There are 2 different approaches when dealing with an IRS letter. You can take a proactive approach or a reactive approach. The reactive approach happens after you receive the letter, but a proactive approach helps you get in front of any tax confusion and reduce the chances that you will receive a letter. Here's what you can do to take the proactive approach.

1. Keep accurate and complete tax records, including W2's, 1099's, and investment documents.
2. Make sure you receive all the tax information before you submit your tax return. Be patient as you go through the filing process.
3. Check your records as they come through. Make sure the information looks accurate.
4. Include all of your income. Make sure you don't underreport any income
5. Follow the instructions when you fill out the 1040 and fill it out completely and accurately.

The first step to amending your tax return is to realize where your mistake was. Did you transpose a number? Did you receive a tax document after your return? A tax professional can help you look at your return and find the problem. Sometimes a backdoor Roth strategy is the culprit in a tax return error. Funds that were converted to IRA's might get reported on the tax return when they shouldn't. The process of filing an amended tax return is similar to filing an original return. But instead of filing a 1040, you'll file a 1040X.

If you do receive a letter from the IRS it will come via snail mail. They will never email you, text you, or send you any other type of message. The letter you will probably receive is a CP2000. 4 million taxpayers receive a CP2000 each year. Basically this form is stating that something in your tax return doesn't match the IRS records. It isn't a bill, but do realize the burden of proof is on you to correct the error. Here's what to do if you receive the CP2000:

1. Review the letter and determine what the IRS is saying and make a note of the response date.
2. You typically have 30 days to respond. If you don't respond to the 30-day letter they will issue a notice of deficiency or 90 day letter. At this point, you'll have fewer rights to appeal, so it's very important to respond to the first letter in a timely manner.
3. You can agree or disagree with the letter. If you agree, then complete the response form, send in the taxes due and you're done.
4. If you disagree you'll need to gather the relevant information and mail it to the IRS.
5. After you have responded to the notice it will typically take 6-12 weeks before you get a response.

Taxpayers spend the first 3-4 months of the year gathering documents and working through the tax filing process so it can be frustrating to receive an IRS letter stating that there is a discrepancy. But make sure that you don't ignore it. Read it carefully and don't overreact. Take time to digest the information to get a clear understanding of what the IRS is proposing. Get tax advice if you need it. No one likes paying taxes but it is a function of our society. Annual tax planning can reduce your tax burden but we still have to pay the appropriate level of tax fro our level of income. Maintaining appropriate tax records is a great way to avoid a tax notice from the IRS.

• [1:40] Every year there are approximately 140 million tax returns are filed with the IRS
• [3:22] What should you do if you get a letter?
• [8:40] How do you amend your tax return?
• [12:54] All information you receive from the IRS will be through the mail
• [15:30] What steps should you take if you receive a CP2000?

• Do's and Don'ts for Taxpayers
• Understanding Your CP2000
• Episode 81

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