One For The Money

We spend ample time, effort, and resources to ensure our children have a good education when they leave school. However, far too many young adults enter the world without understanding personal finances. In this episode of the One for the Money podcast, I provide information that will likely help your kids more than Pythagoras’ theorem or algebra. In the tips, tricks, and strategies portion, I share a tip to help understand interest rates and rates of return.

• We want the best for our children [01:52]
• Money communication [02:59]
• The power of interest [06:07]
• Teaching our mistakes [09:38]
• The Rule of 72 [12:16]
• Interest of stocks and bonds [16:49]

Wanting what’s best for our children is the remarkable selflessness of parenting. We want them to have a better life than we have. What our children know and believe about money will profoundly shape their lives and empower them to do greater things. However, the lack of knowledge can create conditions of predictable misery.

How can we expect our kids to speak to their spouses about money if we haven’t had these conversations with them first? Money issues are the leading cause of divorce. My mother and late father are an example of this. They were married for twenty-five years and were both loving and kind. However, they were raised with different philosophies regarding money that they didn’t discuss. While a lot of stress and heartache preceded my parents’ divorce, I believe that if they had talked about money with their own parents, they would have more easily been able to talk about money with each other.

Values determine how we manage our time and money. Jim Grubman, a family wealth psychologist, said, “Without an understanding of values, you can’t really make great choices.” Teaching children the value of a dollar or the satisfaction of earning and saving money requires conscious effort. 

The goal isn’t for everyone to have the same values. Rather, families can use these values to find common ground and create ground rules for decisions. A family may talk about the principles of lifelong learning or hard work, but how individuals apply these principles can differ based on personal values. 

Are we teaching our kids about budgeting, taxes, investing, Social Security, Medicare, and saving for retirement? If we haven’t taught them, who will? What mistakes and pains could we help them avoid? While most parents want their kids to have a better life than they had, we don’t often don’t teach them the principles required to achieve it. I offer a service to my clients to teach their children about the financial fundamentals of building wealth. Many have taken me up on the offer to discuss the principles of budgeting, discipline, saving, investing, taxes, and compound wealth with their children. While I am certainly no substitute for what parents can teach their children, I’m happy to augment these efforts. 

As a Certified Financial Planner, one of my main goals is to help clients and their children make sense of the financial world. When people understand finances, they make the best decisions wherever life and money intersect. With this greater understanding, we can create a plan so their life unfolds how they want it. 

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

• 78% Of Workers Live Paycheck To Paycheck
• Most Americans don't have savings to cover a $1,000 emergency
• 55% of Americans with credit cards have debt—here's how much it could cost you
• Putting Values at the Center of Wealth Planning
• Credit card interest rates hit record highs - CBS News
• How do bond returns compare with stock returns? - Ultimate Guide to Retirement
• It's all about the Benjamins, Ep #3
• The Case for Optimism - Part 2, Ep #32

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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Many Americans dream about owning property they can rent for passive income. In this episode of the One for the Money podcast, I examine whether investing in real estate or the stock market is better. Listen to the end when I share tax-saving strategies associated with selling real estate.

• All investments carry risks [02:22]
• Advantages of investment properties [06:24]
• Capital expenditures [11:04]
• So which is better? [15:41]
• The primary home exemption [17:14]

Owning a home is one of the more common American dreams. Many Americans also dream about owning an additional rental property to generate passive income. Many wonder which is the better investment: the stock market or real estate. Both stocks and real estate can be worthwhile investments, but all investments carry risk. 

Investing in real estate is hugely appealing. Real estate is tangible and practical. You can use the property yourself if you need shelter again. A stock or a bond can’t do that for you. Even if you own 10% of a publicly traded company, they aren’t going to allow you to move into their headquarters! Another reason people like the idea of investing in real estate is that it’s simpler to understand than stocks and bonds.

However, just because an investment on the surface seems easy to understand, that doesn’t make the investment any less risky. Income isn’t necessarily guaranteed. Additionally, squatters seem to have an insane amount of rights when they occupy a property, and evictions can be lengthy and costly. Even with a great tenant, there are still challenges. If you don’t have a big enough down payment, generating positive cash flow may take a long time. That means you will be funding losses each year.

Too many people oversimplify the math. They assume they’ll pocket the difference between the rent and the mortgage, failing to account for various fees, taxes, maintenance, and vacancies. You must have experience and intimate knowledge of home values to do well with real estate. Without the time to gain that knowledge, purchasing properties at a discount can be difficult when up against a large corporation with cash offers. Of course, the same could be said of individual investors competing against large investment firms. 

Homeowners can save money on taxes and make money from property by taking advantage of the primary home exemption. The principal residence exclusion is an IRS rule that allows people who meet specific criteria to exclude up to $250,000 for single filers or up to $500,000 for married filing jointly in capital gains tax from profit when they sell their primary residence. To qualify for this exclusion, you must have owned and lived in the property as your primary residence for two of the five years immediately preceding the sale. That means you could move out of your primary residence for a few years and then rent it for income while still enjoying the tax savings when you sell it.

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

• Rich Dad Poor Dad
• Why Rental Properties Aren't Good Investments | Wealthfront
• 35 Insightful Landlord Statistics – 2023 - Flex | Pay Rent On Your Own Schedule
• Determining How Much You Should Charge for Rent - SmartAsset
• Top Reasons to Invest in Real Estate vs. Stocks
• Is Investing in Real Estate Better Than Stocks?
• How Much Does the S&P 500 Return Annually? - TheStreet
• S&P 500 Average Return
• Historical Average Stock Market Returns for S&P 500 (5-year to 150-year averages) - Trade That Swing

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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Economists are debating whether or not we will have a recession this year. The Wall Street Journal recently noted that this has become the most anticipated recession in recent U.S. history. In this episode of the One for the Money podcast, I share about recessions and my five rules of investing. Listen to the end when I share a tip about the amazing power of dividends.

In this episode...

• How to prepare for a recession [01:56]
• Five investing rules during volatile times [05:44]
• Avoid the negative hype [08:43]
• There’s no one right answer [12:25]
• The power of dividends in retirement [13:40]

Recessions receive a lot of attention, and rightly so. Few things strike more fear in the hearts of Americans than the job losses, bankruptcies, and plummeting stock markets associated with recessions. On March 6th, the Wall Street Journal published “Why the Recession Is Always Six Months Away.” The article noted that the next economic downturn has become the most anticipated recession in recent U.S. history. 

In episode 18, I shared a painful story of when I became spooked during a recession and made an unfortunate decision not to stay invested. As a result, I missed out on tremendous gains. What should we do about investments when we’re on the supposed precipice of a recession? The stock market can feel too much like a roller coaster, even investing with goals and a plan.

Believe it or not, a recession can be a good thing. While a recession has plenty of negative consequences, recessions are an inevitable and necessary part of the economic cycle. Recessions are a way for the economy to bring things back into balance after straying too far from reality. Many of us might remember the dot-com era when companies with nothing but a website domain name and no viable plan to make profits became valued at hundreds of millions of dollars. More recently, the stocks from companies that facilitated working from home soared only to come back down to earth when their profit potentials also came back down to earth.

How does this happen? The stock market is essentially a popularity contest where the stocks of popular companies are voted higher. Over the long term, the stock market will weigh a business precisely as businesses should be weighed: the ability to generate consistent profits. During recessions, companies are weighed the most regarding their profitability.

Recessions return money to businesses that generate reliable profits, enabling future growth. We have to cut back the overgrowth with pruning to have new growth. Pruning done via recession creates these growth conditions. For these reasons, my and my clients’ money is invested according to personal goals and financial plans, emphasizing value investing and corporate profitability. 

The ups and downs of the market can be scary. A good investment rule is to invest according to your goals and have a plan that isn’t dependent on the stock market’s status. Your time horizon is a necessary consideration. If you’re within five years from retirement, you must begin adjusting your portfolio. Otherwise, there is a significant risk that you could have a lot less to spend during retirement. If you are further than five years from retirement and can adopt a long-term perspective, a recession can be a great time to hunt for bargains and purchase undervalued assets.

Sometimes the best strategy is simply to ignore the markets and keep making periodic contributions via your retirement accounts. Dollar-cost averaging is a great strategy to invest at regular intervals, removing the emotion from investing. Over the past 100 years, the U.S. stock market has been up roughly three out of every four years. 

The progress we have seen in the past 50 years has been remarkable, and the pace of positive change will only increase and continue. Investing in the stock of companies is investing where innovation happens. Life has improved for everyone in this beautiful world over the years. For example, in the 1980s, 50% of the world lived in poverty. Now it’s less than 10%. If we focus on the negative, we miss seeing how bright the future can be and the opportunities around us. 

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

• Economists in WSJ Survey Still See Recession This Year Despite Easing Inflation
• The Recession Is Always Six Months Away, Complicating Fed Chair Powell’s Inflation Fight - WSJ
• Ben's 4 Common Sense Rules of Investing
• How Dividends Juice Your Returns in the Stock Market - A Wealth of Common Sense
• The Best Time to Invest, Ep #10
• When Life Gives You Lemons, STAY INVESTED!, Ep #18 
• The Case for Optimism, Ep #17
• Ways to Avoid Running out of Money in Retirement - Most Accidents Happen on the Way Down, Ep #20

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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99.9% of businesses across the U.S. are small businesses, with eight out of ten being owner-only businesses. In this episode of the One for the Money podcast, I share strategies that small business owners can consider to save on taxes. This episode is the second of two on the subject. I recommend you listen to episode 35 to hear other strategies. Listen to the end when I share an approach to tax deductions for vehicles used in your business.

• Kids earning income [01:41]
• The power of a Roth IRA [04:18]
• The Augusta Rule [07:36]
• Tax deductions on vehicles in your business [11:08]

Business owners can save on taxes by paying their children for work they do at the company in a family-run business. Sometimes the entire family is needed to keep a business viable. The whole family commonly runs family restaurants and family farms. In these instances, the children can be paid for the work they do for the business. Because the children will be earning an income, they must pay taxes at a certain level. As a reminder, that level is anything above the standard deduction of $13,850.

If your children each earned $13,850, they would pay $0 in federal income taxes. That money could be used to help them pay for their own expenses, such as cars and clothes, all while your business gets a deduction for their salary. That’s a much better thought than having the business owners receive their taxed income and pay for the same expenses.

One of the best things you could have your kids do with this earned income is to fund a Roth IRA. With retirement accounts, you always have to pay income taxes. Of course, you’d want to pay taxes when it’s to your advantage and when rates are lowest. The tax rate for children can be as low as $0. If your kid earns $6,500, they could contribute that to an IRA and pay nothing in federal income taxes. Because it’s a Roth IRA, taxes on that money won’t have to be paid again.

The best thing you can do as an investor is to increase your time horizon. Having your kids set up a Roth IRA gives them decades more time for their investments to benefit from compound interest. While hiring a child may not be top of mind for many business owners, there can be a surprisingly broad array of tax and other benefits. The caveat is that the child must be doing age-appropriate work for a reasonable wage.

If you use a vehicle for your small business, how and when you deduct the business use for the vehicle can have significant tax savings. The cost of operating vehicles used for business activities is typically deductible, along with the cost of the vehicles as equipment. You can calculate expenses using the IRS’ standard mileage rate for most vehicles. For 2022, that average is between 58.5 cents per mile and 62.5 cents per mile. The other option is to add up actual expenses, including gas and oil changes, tires, repairs, etc. The vehicle doesn’t have to be owned by the company itself but can also be owned by the employee.

If your business leases a vehicle, you can calculate the deduction using either the standard mileage or the actual expenses method. For new and pre-owned vehicles put to use in the tax year of 2022, the maximum first-year depreciation write-off is $11,200, plus an additional $8,000 bonus depreciation. If you use the vehicle for personal and business use, you can split the percentage between the two. Be sure to keep excellent records and speak with an accounting professional. 

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

• Small Business Statistics Of 2023 – Forbes Advisor
• Business Use of Vehicles - TurboTax Tax Tips & Videos
• The Augusta Rule - Tax Free Rental Income | HLB Gross Collins
• Hiring Children In The Family Business For Tax (And Other) Benefits
• Saving Strategies for the Self-Employed, Ep #7
• It's All Very Taxing - Part 1, Ep #8
• Time to Pay the Piper, Ep #33
• The Brass Tacks on Small Business Taxes - Part 1, Ep #35

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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Small business owners have much to consider to maximize their tax savings. In this episode of the One for the Money podcast, I share strategies that small business owners can consider to save on taxes. As there are many strategies to consider, this will be the first of two episodes on the subject. In the tips, tricks, and strategies portion, I share an additional business tax strategy utilizing the home office deduction.

• Small businesses and the economy [01:10]
• What are payroll taxes? [03:20]
• Saving for retirement as a business owner [04:58]
• Personal Defined Benefit Plans[10:29]
• The home office tax deduction [13:37]

Most of us are familiar with prominent companies here in the United States, but the majority of companies in the U.S. are much smaller. In fact, 99.9% of businesses across the country are small businesses. Despite their minimal size, their importance cannot be understated. Over the past 25 years, small businesses have added nearly two out of every three jobs to the economy. Because of the incredible importance of such businesses, I want to share some provisions the tax code has that small businesses should know. 

Nearly eight in ten businesses have no employees besides the owner. Often individuals are paid as independent contractors or 1099s. However, these individuals may want to add themselves to the ranks of business owners and incorporate instead of being paid as a 1099 employee. Being a corporation can save money on payroll taxes. Social Security and Medicare are the two most common examples of these taxes paid to the government for social programs. Collectively, they are called your FICA taxes. Employees contribute 6.2% to Social Security, and employers make a matching contribution. Employees also make a 1.45% contribution towards Medicare, which employers also match. Altogether that’s 15.3% of a person’s income being contributed before any state and federal income taxes.

Taxes are even more expensive for the self-employed because they must pay both the employee and the employer contributions. Individuals who receive a W2 pay a total of only 7.65%, while sole proprietors pay double that. But, self-employed individuals can form a corporation, and the IRS allows corporations to pay employees a reasonable wage. The rest of the funds can be transferred as a quarterly distribution instead. There are expenses to consider and rules on reasonable wages and distributions, so you would want to enlist the work of accounting professionals with this area of expertise.

As the business owner, you are solely responsible for saving for your retirement as there isn’t a company making a matching contribution from your employer. Many business owners reinvest much of their money into their businesses but miss out on years of investments compounding in the stock market. Diversifying investments outside of your business is critical, and doing so early, even in small amounts. The best thing you can do to increase your investment returns is to increase your time horizon. Small amounts can grow to enormous sums given a lot of time. 

A self-employed individual has several options for saving for retirement, and choosing the right one ultimately depends on income. The simplest option is an Individual Retirement Account, either Traditional or Roth. These types of accounts are only taxed once with ordinary income taxes. You decide when. With a traditional IRA, taxes are applied in retirement. With a Roth, taxes are applied now. There are many factors to consider, so it’s recommended that you check with a certified financial planner.

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

• Small Business Statistics Of 2023 – Forbes Advisor
• 25 Home Business Tax Deductions | LendingTree

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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Springtime symbolizes renewal and new beginnings. How ironic that this season is when we’re required to file our taxes and look back at the previous year’s finances. In this episode of the One for the Money podcast, I share why not only is assessing our tax strategies essential but also assessing the tax code in general. Listen to the end when I share a strategy regarding significant tax savings that could be hiding in your 401k.

• The electric vehicle tax credit [02:07]
• Standard vs. itemized deduction [04:01]
• The deductibility of state and local taxes [06:01]
• The progressive nature of the tax code [09:24]
• Fairness and unfairness in the tax code [10:48]
• Tax advantages hiding in a 401(k) [12:20]

Many question the fairness of the tax code. While it’s anything but fair, you may be surprised by who does and does not benefit. The common argument is that people should pay their fair share. But change is constant in the tax code, as is the refrain about making the tax code fair. Here are a few examples that show who benefits and who does not. 

First, let’s consider the electric vehicle tax credit. The federal government provides a $7,500 tax credit to people who buy an electric or hybrid vehicle. A tax credit is way better than a tax deduction because a credit is dollar-for-dollar elimination of taxes that would otherwise be paid. So if someone purchased a $200,000 electric vehicle that qualifies, they would pay $7,500 less in income taxes. While this is a significant tax break to the purchasers of these vehicles, is it fair that people who purchase gas-powered vehicles pay more taxes?

When filing taxes, we can choose the standard deduction or the itemized deduction, which is the base amount of income on which you pay $0 in taxes. If you have items that add up to more than the standard deduction, you would take that amount in 2023. The standard deduction for an individual is $13,850; for a married couple, the deduction is double that amount. 

The itemized deduction is where the questions of tax fairness come into play. One major contributing factor to one’s itemized deductions is the ability to deduct the interest paid on one’s mortgage. Are homeowners more virtuous than renters? If mortgage interest is deductible, but rent isn’t, then renters are required to pay more taxes and subsidize property owners. Is that fair? On average, homeowners are from the middle and upper-income tax brackets. Is it fair that poor renters provide a benefit for richer owners? The mortgage interest may incentivize some to purchase a home, though that’s debatable. Is it fair for the government to tip the scales in a homeowner’s favor versus a renter’s?

As you can see, there isn’t anything simple about tax matters. What about the progressive nature of our tax code? Those with higher incomes have to pay a higher dollar amount in taxes and a higher percentage. On average, higher earners pay a higher percentage than those who earn less. According to data from 2018 on the top 1% of US taxpayers, those who earned more than $540,000 per year made 21% of all the US income but paid 40% of all the individual federal income taxes. The top 10%, those who earned $152,000 or more, made 48% of the income but paid 71% of federal income taxes. The bottom 50% of earners, earning $43,600 or less, made 12% of the income and paid 3% of all the income taxes.

There are many other examples of fairness or unfairness in the tax code. Most would agree that the tax system in the United States is complex, confusing, and inefficient. The point of this podcast is to show that the critical thing is to focus on your tax planning rather than trying to determine whether the tax code is fair or not. Understanding the tax code and implementing better tax planning strategies will lead you to pay taxes better. Strategies to consider could take many forms, such as Roth contributions or conversions in low or lower-income periods. It could mean deductible retirement contributions during higher income periods, HSA contributions, or other strategies I highlighted in previous episodes.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. 

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

• Small Business Statistics Of 2023 – Forbes Advisor
• 25 Home Business Tax Deductions | LendingTree
• It's All Very Taxing - Part 1, Ep #8
• It's All Very Taxing - Part 2, Ep #9
• Time to Pay the Piper, Ep #33

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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We all make choices. But in the end, our choices make us. While a better life results from actions you have taken via better planning, outside factors need to be considered to implement better planning strategies. One of those forces is the reality of our national debt and its impact on our taxes. Mitigating these effects is the subject of this episode of the One for the Money podcast.

• The Pied Piper of Hamelin [01:29] 
• The US national deficit [02:59]
• Interest on the debt will only increase [05:31] 
• What can we do about the deficit? [07:46] 
• Prepare for potential increasing taxes [09:40]
• Tax mitigation strategies [12:23]

The story of the Pied Piper of Hamelin takes place in the 13th century. The town of Hamelin had a rat infestation, and a man in colorful clothes offered to get rid of the rats for a fee. The town agreed, and the man played a pipe to get all the rats to drown themselves in a nearby river. When the Piper came to collect his payment, the townspeople told him they would not pay because they now had no reason to make good on their debt. As revenge, the Pied Piper played his pipe to get all the town’s children to follow him away. 

This analogy is most appropriate given our national deficit. Like the people of Hamelin, America has run up a bill. But like the Pied Piper story, our children will likely ultimately pay the price. As I’m recording this episode, Congress is in a standoff debate about raising the debt ceiling. However, there’s no discussion about the debt itself. 

Many people blame the deficit and spending on their opposite political party. But the truth is that despite the political divide in the country, we’ve had broad bipartisanship support for spending. We’ve had multiple administrations from both parties over the past several decades, and we’ve only had five instances where America spent less than it took in. Clearly, overspending is not a partisan issue but a bipartisan one. 

So what can we do about the deficit? We have two choices as I see it. The first is considering voting for new candidates who will take the national debt seriously. That means more people would need to be active in the election primaries to get the candidates they want in November. The second choice would be deciding to be proactive in tax planning. Too many Americans don’t have a plan in which they implement strategies to reduce their lifetime tax liability. We’re fast approaching the 2022 tax season, which provides an excellent assessment of strategies you have utilized or need to consider.

Congress and state governments have looked for ways to increase taxes significantly. Some factors they have considered are increasing the top ordinary income tax rate, raising the top long-term capital gains tax rate, and creating new minimum distribution requirements for taxpayers with high-income and mega-sized retirement accounts. While the federal government wasn’t successful in implementing these, several states are considering similar measures. According to the Washington Post, legislators in California, Connecticut, Hawaii, Illinois, Maryland, New York, and Washington state plan to release a series of bills this week that will target high-income and ultra-high-net-worth residents for tax increases. 

While the specific proposed measures vary by state and include taxing unrealized capital gains, raising state income tax rates, and reducing the state tax exemption limits, certain proposals would also create a first of their kind of wealth tax. For those who think that high-income and ultra-high-net-worth individuals should be taxed the most, we need to remember that they always are, but also that they are the first subject of these taxes who will hire lawyers and accountants to avoid them. Also worth noting is that several European countries that initiated wealth tax have since abandoned it due to problems.

• National Debt Clock
• Pied Piper of Hamelin - Wikipedia
• History of the US Federal Budget Deficit
• Historical US Federal Individual Income Tax Rates & Brackets, 1862-2021
• Billionaires in blue states face coordinated wealth-tax bills
• The State Wealth-Tax Alliance - WSJ
• The Fiscal & Economic Challenge
• When it Comes to Early Retirement - Start with Why, Ep #1
• Are you on FIRE financially?, Ep #2
• Meaning & Purpose in Retirement, Ep #6
• Saving Strategies for the Self-Employed, Ep #7
• It's All Very Taxing - Part 1, Ep #8
• It's All Very Taxing - Part 2, Ep #9
• The Ticking Tax Time Bomb in Your Retirement Account, Ep #12
• Maxing Out Your Life with a Mini-Retirement, Ep #26
• Healthy, Wealthy, & Wise, Ep #29

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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I’ve heard it said that pessimists sound smart, but optimists make money. In episode 17 released this last July, I shared the case for why we should be optimistic about the future. In this episode of the One for the Money Podcast, at the beginning of a year when many believe we will see a recession, I make an additional case for why we should remain optimistic. In the tips, tricks, and strategies portion, I share a tip on how to ensure you can earn the most interest on your savings and how most Americans are not. 

• Acknowledging 2022 [01:21]
• Advancements in the last century [03:52]
• The progress of human well-being [12:05]
• Earning more interest on savings [14:40]

If you read or watch the news, you would be forgiven for thinking that much is not right in the world. 2022 provided quite a bit of negative material. Investment returns were historically bad. Stocks faced the 7th worst loss since the 1920s, and particularly shocking was that the bond markets suffered too. Bonds historically have been a safe haven, with only four previous down years in the last forty-six that were down less than 3%. But in 2022, the bond market was down 13%. 2022 was the third worst year ever for a stock/bond portfolio.

2022’s stock and bond performance, coupled with the forecast for the year ahead, can make us feel less optimistic about the future. However, the narrow focus on the last and current year can cause us to forget about the unmistakable and remarkable progress humanity has made and will continue to make. 

In the past 20 years, global poverty rates have been reduced by 50%. A hundred years ago, three-quarters of the world’s population lived in extreme poverty; today, that number is less than 10%. Just 24% of people had modern sanitation, but now 70% of the world does. Murders are down roughly 17% over the last 25 years or so. The number of deaths due to wars and genocide is also down dramatically. Today, child mortality is at the lowest it has ever been. Human life expectancy has doubled over the past century from 36 years in 1920 to more than 72 years today. 

Even the environment has had many improvements in the last century. In 1920, the deadliest environmental problem, pollution, was four times more likely to kill you in 1920 than today. In the 1920s, half a million people were killed by weather disasters, whereas the death toll in the last decade averaged 18,000. A decade ago, environmentalists declared that Australia’s Great Barrier Reef was nearly dead, killed by bleaching caused by warming ocean temperatures. This year, scientists revealed that two-thirds of the Great Barrier Reef shows the highest coral cover since records began in 1985.

Big banks still pay nearly nothing on savings, but their customers aren’t moving much of that money to higher-yielding alternatives. As a result, Americans are missing out on billions of dollars in interest. The Federal Reserve has raised interest rates to their highest level since early 2008, yet the most prominent commercial banks still pay peanuts to savers. In theory, savers could have earned $42 billion more in interest in the third quarter of 2022 had they moved their money out of the five largest U.S. banks and deposited it into the five highest-yielding savings accounts.

Those five big banks, Bank of America, Citigroup, JP Morgan, US Bank, and Wells Fargo, paid an average of 0.4% interest on consumer deposits in savings and money market accounts during this most recent quarter. The five highest-yielding savings accounts paid an average of 2.14% during the same period, according to data from bankrate.com. The five banks collectively hold about half the money kept at U.S. commercial banks.

Why haven’t savers moved their money? Some customers aren’t aware of how much money could be made by switching. That’s been the case for several clients to whom I’ve made this recommendation. Others think the switch is difficult, though it can be done in less than thirty minutes. Others don’t want to be bothered. You can’t blame the banks if they can maintain customers without paying for them. I recommend you look at what you’re earning at your current bank, find out what the online banks are offering, and consider transferring some to an online account.

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

• The Case for Optimism, Ep #17
• Good News, the World Is Getting Better | AIER
• U.S. Carbon (CO2) Emissions 1990-2023 | MacroTrends
• Climate Change Indicators: U.S. Greenhouse Gas Emissions | US EPA
• American Airlines Announces Agreement to Purchase Boom Supersonic Overture Aircraft, Places Deposit on 20 Overtures
• Ridley: Good News Is Gradual, Bad News Is Sudden
• Is humanity doomed? Five ways the world is actually doing better – in data | Euronews
• The world has made spectacular progress in every measure of well-being. So why does almost no one know about it?
• 2022 Was One of the Worst Years Ever For Markets
• The World Really Is Getting Better - The Atlantic
• The $42 Billion Question: Why Aren’t Americans Ditching Big Banks? - WSJ

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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Every once in a while, Congress makes changes to your retirement. In this episode of the One for the Money podcast, I talk about recent, significant changes. Your financial plan must take advantage of these changes because there are always winners and losers when Congress makes changes. In the tips, tricks, and strategies portion, I share tips on reducing your taxes in retirement.

• The SECURE Act [01:05]
• Required Minimum Distributions(RMD) [03:31]
• Transferring funds from a 529 to a Roth IRA [06:24]
• Lowering your RDMs [10:01]

In December 2019, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act. And in December 2022, they passed the SECURE Act 2.0. Before looking into the follow-up version, it’s essential to understand the original. The 2019 law brought massive changes to retirement planning. The most notable was the death of the Stretch IRA. 

The stretch IRA was an estate planning strategy where your child would inherit your not-yet-taxed retirement account and distribute it over their entire lifetime, giving them significant tax savings. So a daughter who inherited a million-dollar IRA could spread out the distributions over a few decades, significantly reducing the taxes she would need to pay. As of 2019, a non-spouse must take those distributions in just ten years. This results in their paying significantly more in taxes because they would have to distribute much larger amounts over a shorter period. Beneficiaries will be paying way more taxes than before the 2019 SECURE Act.

When you contribute money to a pre-tax retirement account, you have elected to pay taxes when you take the money out in your retirement, hoping your income and tax rate will be lower. Since you haven’t paid taxes on this money, Congress forces you to take money out each year starting at a certain age. In 2019, Congress raised the age from 70.5 to 72. One of the reasons is that people are working longer because they didn’t save up enough for retirement. 

In the new SECURE 2.0 Act, Congress pushed out the RMD required dates even further. Those born between 1951 and 1959 are required to start taking money out at age 73. People born in 1960 or later can wait until age 75. That’s a great thing because it allows their money to grow longer without being taxed. Some people might consider not taking their RMDs, but the IRS would penalize them for that. The penalty for a missed RMD used to be 50%. So if the requirement were $10,000, the IRS would charge $5,000. Now that amount is 25%, and if corrected promptly, the penalty is reduced to just 10%. 

One of the best changes made by SECURE 2.0 is that it made it possible to transfer funds from a college savings account, also known as a 529, to a Roth IRA for the beneficiary. This process can start in 2024, but several conditions must be satisfied before a transfer can be valid. The Roth IRA receiving the funds must be in the name of the beneficiary of the 529 plan. The 529 plan must have been maintained for 15 years or longer, and any earnings and contributions to the 529 plan within the last five years are ineligible to be moved to a Roth IRA. 

The annual limit for these transfers is whatever the individual’s limit is for a Roth IRA that year. The maximum amount that can be moved from a 529 plan to a Roth IRA in an individual’s lifetime is $35,000. This new strategy could be used for higher net-worth families to prime the retirement pump for children, grandchildren, and other loved ones. A meaningful contribution could be made to a 529 plan when the child is born. Then, after the account has existed for over 15 years, the account’s funds could be moved to a Roth IRA for the child’s benefit. The transfer rules require that the child have compensation, such as from a summer or part-time job, to make the transfers. The child’s Roth IRA balance by age 65 could potentially approach or even exceed a million dollars, all tax-free

• Secure Act 2.0 Detailed Breakdown
• Maxing Out Your Life with a Mini-Retirement
• Too Much Money & Too Few Memories

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

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Let’s talk about the B-word: budget. In this episode of the One for the Money podcast, I share information about budgeting, why it is essential, and how to use it to invest in your future self. In the tips, tricks, and strategies portion, I share a powerful tip on why you want to avoid credit card debt. Listen in to learn how having a spending plan can help you aim to reach your goals.

• Using a budget to steer [01:00]
• The purpose of a spending plan [02:45]
• How to make a budget [04:58]
• Is your budget working? [06:52]
• More than minimum [08:59]

Not long ago, I read my boys the classic Treasure Island by Robert Louis Stevenson. The book tells the story of a few men and their mutinous crew sailing from England to Treasure Island on a ship called the Hispaniola. This large ship could not have made such an impressive journey without the aid of a small rudder to steer. As a certified financial planner, I see a parallel between a rudder steering a ship and a budget steering someone into a better financial future. Without a rudder or a budget, we would never reach where we want to go.

Many people view budgets as a financial straightjacket, sucking the joy out of life. Some view it as a diet for money or a middle seat on a long flight, unpleasant but necessary. Regardless of your view, budgets are essential, and we must see budgeting in a better light. One way to do that is to use a different term: spending plan. 

Spending plans, or budgets, aren’t designed to deny you lattes or your Amazon Prime subscription. Instead, they are a way to plan a satisfying lifestyle for both now and in the future. When I work with clients, I advocate for two people: the client’s present self and the client’s future self. I want both people to have wonderful and fulfilling lives, and a spending plan can make that possible.

Spending plans also ensure you’re making the most of your financial opportunities, maxing out retirement contributions, getting the highest rate on savings accounts, or reducing your insurance premiums. The plan also ensures you’re not wasting money on old gym memberships or streaming services that you no longer use or have forgotten. One study found that the average American spends $237/month for subscription services and that 84% of consumers underestimate how much they spend on these services each month.

One way to tell if your budget is working is if you have revolving credit card debt that’s non-medically related. Reviewing your budget is imperative if you don’t have an emergency fund of at least three months worth of expenses and aren’t saving at least 10-15% for retirement. The necessity of addressing spending priorities applies especially to those who have credit card debt rolling over each month.

People with credit card debt are sadly living in a fantasy, without incomes to support their lifestyles. Plenty of credit card companies and auto dealerships are more than happy to charge Americans thousands of dollars in interest each year to help them believe in the fantasy of their unsustainable lifestyle. If your financial ship is sailing with a compromised rudder, you can end up in dangerous waters. Like a ship off course, you must make the corrections to get yourself back on the path. With an honest assessment of your spending and regular reviews of your spending plan, you can help ensure a bountiful future.

• Treasure Island by Robert Louis Stevenson
• Quote by Charles Dickens
• Average consumer spending $273 per month on subscription services
• Credit Card Debt Explained With a Glass of Water

• https://BetterPlanningBetterLife.com 
• Connect with Jonny on LinkedIn

Subscribe to ONE FOR THE MONEY on

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