Echo Huang Blog

echo@echowm.com (Fang Huang) — Mon, 19 May 2025 01:22:45 GMT

A Decade of Growth, Trust, and Impact: Celebrating 10 Years of Echo Wealth Management

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Do Think Twice About Long-Term Care

echo@echowm.com (Fang Huang) — Sat, 03 Dec 2022 01:52:53 GMT

Do Think Twice About Long-Term Care

How important is long-term care?

It is important enough for you to plan it.

It is important enough for you to do it.

It is important enough for you to think twice.

That is why we observe National Long-term Care "Planning" Month in October, followed by National Long-term Care "Awareness" Month in November. The double reminder tells us that long-term care is critical in creating a healthy financial picture. It can be a meaningful gift that enhances peace of mind to the very end for you and your loved ones.

In the previous article, we discussed the following:

How long-term care is not as scary as you think
Long-term care as part of your wealth management plan
Why plan early for long-term care

Let's now expand the long-term care conversation to explore the most common questions people ask to help you gain clarity on the next steps.

What is long-term care, and why is it important?

Long-term care involves various services designed to meet a person's health or personal care needs during a short or long period. These services help you live as independently and safely as possible when you can no longer perform everyday activities independently.

What are the three basic levels of long-term care?

Care is usually provided in three main stages: independent living, assisted living, and skilled nursing. Nursing homes offer care at home or in the community. Nursing homes provide skilled nursing care, rehabilitation services, meals, activities, help with daily living, and supervision.

What is the monthly cost of long-term care?

According to Genworth's year 2021 data, monthly median costs for Minneapolis Area are $11,708 for a semi-private room in a nursing home facility. Homemaker services: $7,055.

How long do most people live in long-term care?

According to the latest AOA research, the average woman needs long-term care services for 3.7 years, and the average man for 2.2 years.

What are the significant trends in long-term care?

An AARP survey revealed that 90% of adults over 65 would prefer to remain in their homes as long as possible. This statistic should be significant to long-term care facilities because they must consider including in-home health care to meet changing consumer preferences.

What is commonly offered at long-term care facilities?

These services typically include nursing care, 24-hour supervision, three meals daily, and assistance with everyday activities. Rehabilitation services, such as physical, occupational, and speech therapy, are available. Remember that you might stay at a nursing home for a short time after being in the hospital.

Why is long-term care growing?

An aging population and the increasing prevalence of chronic conditions will drive up demand for long-term care services, including assistance with the activities of daily life.

What is the purpose of a long-term care policy?

Owning a long-term care insurance policy aims to help you maintain your lifestyle as you age. Medicare, Medicare supplement insurance, and the health insurance you may have at work usually won't pay for long-term care.

Thank you for exploring this important topic with us. For a complimentary long-term care plan review, schedule a time with an Echo Wealth Management team member. Together, let's identify possible action items to help you deliver continued peace of mind for your family.

Life Insurance Needs at Every Stage of Your Life

echo@echowm.com (Fang Huang) — Wed, 28 Sep 2022 00:05:21 GMT

Let’s explore how your life insurance needs may change according to the three primary stages of work and life.

According to LIMRA's 2022 Insurance Barometer Study, the secret to financial security is owning life insurance. Choosing the right products can help you to better protect your family’s lifestyle today and into the future.

No matter what your age or situation is, owning a life insurance policy is an excellent family protection strategy. It allows you to leave an inheritance without your beneficiaries having to pay income tax on the death benefit they receive. Your beneficiaries could use the death benefit to replace your lost earned income and pay for essential expenses such as food, shelter, credit card bills, funeral or cremation costs, student and auto loans, medical bills not covered by health insurance, and so much more. It can also be used to provide extra support for retirement and the unexpected such as injury or illness.

Whether you’re single, retired, or in any stage, life insurance can be a critical tool in a comprehensive financial plan. As a general rule of thumb, it’s an excellent idea to review your life insurance needs with a licensed financial professional every year to see where you stand regarding adequate coverage - should benefit increase or additional policies be necessary.

Let’s explore how your life insurance needs may change according to the three primary stages of work and life.

1. Primary years (single and early career)

Life insurance is often overlooked in the career establishment years, especially if you do not have a spouse or children who financially depend on you. The first step is to check with your employer and explore their benefits. Still, employer-sponsored policies typically offer coverage about 1-2 times your annual salary, which is a fraction of the coverage you may need. In addition, group life insurance coverage typically does not carry over with a job change. A good decision would be to purchase an individual or private life insurance policy outside of the workplace to supplement their coverage through work, especially if you have student loans or debt with a co-signer, support aging parents, or don’t wish to leave final expenses to family. Getting an early start on life insurance is smart as rates are typically much more affordable when you’re young and healthy.

Generally, level-term life insurance (20 to 30 years) works well for people who plan to have children in the future. Level-term life insurance means the premium does not change during 20 or 30 years, unlike the group term policy through work. For example, it can cost $250,000 to raise a child, and you have a student loan balance and a mortgage, paying less than $500 per year could potentially have $1 million coverage when you are under age 30 and healthy.

2. Growth years (married with children and mid-career)

At this stage, the need for life insurance coverage typically increases with your growing family and career advancement, so be wise in how you structure your policies. Consider the coverage you need to replace future lost earned income and any large debts that would burden your loved ones. In addition, factor in the cost of raising your children through college and add emergency savings for economic and lifestyle disruptions. Employer-sponsored life insurance benefits are typically not enough for your dual-income and household expenses, so consider increasing the benefits on your existing policy and purchasing life insurance for your spouse and children are great ways to help with maintaining adequate coverage for the entire family.

Suppose your income is high and you have maximized contributions to all retirement plans. In that case, you can consider buying a permanent life insurance policy that has cash value and will pay the death benefits regardless of how long you live. The cash value can be invested, and the earnings are not taxed each year which helps you pay for the cost of insurance.

3. Empty nest (estate/retirement planning and late-career)

In your final working years, you may have set aside a good bit of savings for retirement, but planning for your financial future doesn’t stop here. As you get older, you could tap into the cash value from your life insurance policy to help supplement your retirement income and may avoid paying income taxes on the earnings if you choose to borrow from the cash value. The unpaid loan balance will reduce the death benefit, which is all right as your beneficiaries may not need as much death benefit when you are retired and much older.

The primary purpose of life insurance changes from income replacement to wealth transfer when you have accumulated enough assets to retire.

If your estate is over $3 million, including the death benefit of your life insurance policies, consider advanced estate planning to reduce potential estate taxes. For Minnesotans, the estate exemption is $3 million per person for 2022, which means you may need to pay 13% to 16% Minnesota estate tax on the amount that exceeds $3 million.

Federal estate exemption is $12.06 million for 2022, but it may be cut in half after the year 2024. The amount above the estate exemption amount is subject to a 40% federal estate tax.

If you would like to minimize the shrinkage of your nest egg, using proper life insurance can be a solid strategy to address estate tax exposure. Setting up an irrevocable life insurance trust (ILIT) to own your existing permanent life insurance policies or buy a new one can remove the death benefit from your estate. In addition, you can gift annually to the trust to pay for the insurance premiums over time to further reduce your estate. Take advantage of an annual gift exclusion of $16,000 for 2022 and $17,000 for 2023 to fund the ILIT. You may not need to use much of your lifetime gift exemption as you file your gift tax return (Form 709). The ILIT with Crummey power gifts remains one of the most powerful estate planning tools for high-net-worth individuals. Done properly, you avoid entirely gift tax, estate tax, and income tax on your legacy to future generations.

For business owners with most of their net worth in their business, liquidity is an issue as the estate taxes are due nine months from the day of death. To preserve the business for the next generation and to avoid selling stock portfolios during market decline to pay estate taxes, consider using life insurance to provide the money to pay estate taxes efficiently.

Life insurance policies and tax laws are complicated, and they keep changing. I recommend you work with your trusted advisor who can help you assemble a financial dream team, including an estate attorney, a tax CPA, and a life insurance agent to give you customized recommendations and help you implement the strategies.

Whether you have general or specific questions about life insurance, you can schedule a meeting with an Echo Wealth Management team member at any time. We'll be happy to answer your concerns and help you to find the right policies to achieve adequate coverage at every stage of your life.

Make Protecting Your Income A Priority

echo@echowm.com (Fang Huang) — Tue, 31 May 2022 16:21:53 GMT

Four Situations and Its Disability Planning Solutions

You might be thinking…

Other people get disabled, not me.

My business can run without me.

I’d rather put my money into growing my business.

The truth is illness and injury impact all of us, even businesses. Whether you are a key employee or business owner, understanding the possible outcomes of a temporary or permanent disability will help you to identify smart solutions for your financial plan.

Let’s look at each situation and its solution.

1. As a high-income earner, having both a workplace policy (group long-term disability insurance) and a private policy (individual disability insurance) helps to ensure that you will have adequate income protection for everyday living expenses like mortgage, utilities, and groceries.

2. Suffering a disability does not mean that you must stop contributing to your retirement account. Having a disability retirement security policy helps you to make that dream a reality; it pays benefits to a trust to be accessed as retirement income.

3. The worst thing that can happen to a business owner is when s/he can no longer keep the business open. Having overhead expense insurance helps you to pay for necessary expenses like employee salaries, accounting fees, and office rent. The key benefit here is that you can either return to your financially sound business or sell the business that has not depreciated because of your disability.

4. As a business owner, it’s crucial that you have a funding solution for your business should you or another owner become too sick or hurt to work. Disability buy-out insurance funds a buy-sell agreement helping to buy-out the disabled owner’s interest in the event of a long-term disability. Benefits are typically tax-free, and the disabled owner is taxed only on the gain from the sale of the business.

If you are the main income earner in your family, even if you have group long-term disability insurance, it may not be enough to pay your basic living expenses as the benefits are taxable if your employer pays the premiums. You can consider buying an individual disability insurance policy that can supplement your current group coverage. Individual policies are not tied to employment that offers more flexibility as you may decide to change your job. Some policies can have an automatic increase in benefits feature based on your earned income without going through underwriting.

According to the Centers for Disease Control and Prevention, one out of four adults in the U.S. will suffer some type of disability. You work hard for your family and/or business, so make protecting your income a priority. Remember that a disability is more than just an accident. It can happen to anyone, anywhere, anytime. To get started on a complimentary disability plan review, get in touch with me today and together, let’s take the necessary steps to protect the financial future of your loved ones, business, and/or key employees.

Long-Term Care is Not as Scary as You Might Think

echo@echowm.com (Fang Huang) — Wed, 23 Feb 2022 17:17:03 GMT

Take Care of Your Future Self by Making a Long-Term Care Plan Today

Sometimes, the unknown can be a bit scary. Previously, I’ve shared several financial tips that will allow you to plan for your financial independence and to own your future. Today, I want to ask you to give me a few somber minutes of your time.

I am asking you to turn off your emotions and turn on your intellect only. This way, you will be protected from your emotions entering in and shutting you off from discussing a tough but important topic: Long-Term Care. Come out from under the blanket for a few moments to learn about this important element of financial planning. Let’s look at what it is, and I promise you, it’s not as scary as you might think.

Long-Term Care as Part of Your Wealth Management Plan

Yes, long-term care is just as important in your wealth management plan as is saving for your children’s education. Maybe I could make it easier for you to consider if I asked you to look at long-term care as a protection for your children/loved ones in lessening their burden when caring for you.

When her fifty-year-old husband suffered a fatal stroke, “Lily” came to me to figure out what financial decisions she needed to make for her and her daughter in case she ever needed long-term care. Neither she nor her husband had a long-term care policy because they assumed they wouldn’t need it until they were in their seventies or eighties. Like most people their age, they thought they had more time to think about it.

Another reason people don’t think about long-term care is the same reason they often don’t want to think about estate planning - they don’t want to dwell on their own disability. No one wants to think about being incapacitated and not being about to perform the six activities of daily living: eating, dressing, bathing, toileting, transferring, and continence.

Unfortunately, the reality is that many of us have to face this situation at some point in our lives. Too many people make the mistake of waiting too long to take out a policy to protect them from this eventuality.

Why Plan Early?

More than a decade ago, Congress passed a law to encourage more people, especially baby boomers, to plan early by buying long-term care insurance. Special tax benefits were offered to motivate people to plan ahead so that they didn’t end up on government assistance, either Medicare or Medicaid.

The government’s attempt to incentivize individuals to plan early was a good idea for a number of reasons:

First , monthly premiums are based on your age when you apply. This makes premiums less expensive when you’re younger.

Second , people often wait until their late fifties or later to buy long-term care insurance without realizing that predicting the withdrawal of the benefits is problematic - we rarely know when we will need long-term care. A stroke or a heart attack can happen to people in their forties or fifties.

Third , coverage is dependent upon your current health status. If you have a sudden heart attack or injury and have an extended hospital stay, the chances of getting a long-term care policy afterward dwindle away to almost nothing because of your preexisting condition.

It’s best to buy your policy when you’re young and healthy because not everyone can qualify if they wait longer. This is particularly true for those with a family history of Alzheimer’s. These individuals are more likely to use long-term care for a longer period of time, which makes it even more important to consider buying long-term-care insurance early before you may show symptoms and buy a longer benefit period than the average of three years.

I bought my policy before I turned forty. No one in my office at the time had heard of someone buying a policy this young. I had a good reason. For years, I had been calling home to my mother in China, and every time we spoke, she told me how difficult it had been for her to visit my uncle, who had Alzheimer’s and no longer recognized her. He was the oldest brother who put her through college after my grandfather died; he was like a father to her.

After nine difficult years with Alzheimer’s, my uncle passed away, and this made me realize how important it is to have long-term-care insurance, not just so that you get adequate care as you decline mentally or physically, but also so that the estate you’ve worked so long to build isn’t used to pay for this care or for modifications to your home if, for example, you can’t climb the stairs.

With the high cost of this care, paying out of pocket could leave your family penniless. The costs of long-term care often exceed what the average person can pay from their income and other assets.

If you think about all the possible health scenarios you could face in your life, it becomes apparent that a financial plan that doesn’t include long-term-care planning is not comprehensive.

Too often, people focus on investment planning or college or retirement planning without considering what would happen to their wealth if they were suddenly faced with the cost of long-term care, which can be upward of $7,000 a month.

If you or your spouse needed two or three years of long-term care, that could significantly derail your retirement plans. It’s important to be smart about your resources now so that you don’t leave yourself open to that amount of risk.

Very often, people do not plan ahead. This is due to a reluctance to think about getting older, developing a disability, becoming less independent, or needing help with personal care. At the same time, they often believe that health insurance, Medicare, and/or disability coverage will cover most long-term-care services should they be needed, so they don’t need to dwell on illness and aging.

Health insurance, Medicare, and/or disability coverage is very limited in its coverage. That means people are often living with a false sense of comfort that their needs, should they have any, will be taken care of long-term.

Thanks for bringing your head out from under the covers to read about long-term care. If you’d like to have a more personal conversation about what options and plans may be best for you, please get in touch with me today.

Echo Huang Awarded the Five Star Wealth Manager Award for the 11th Time!

echo@echowm.com (Fang Huang) — Wed, 12 Jan 2022 18:44:25 GMT

For the 11th year in a row , president and founder Echo Huang was awarded the 2022 Five Star Wealth Manager award . Using an in-depth research methodology with 10 objective criteria, including client retention rate, client assets, and households served, this award honors top local investment professionals for their commitment to professional excellence.

"I help clients build financial confidence to follow their passions and dreams."

-Echo Huang

Echo started Echo Wealth Management upon realizing a passion for helping clients design and implement financial plans to follow their dreams, and she has built upon an impressive career spanning 25 years of experience in the financial sector. For the latest on Echo’s adventures and appearances, follow her online at LinkedIn and Twitter .

Join Echo LIVE at this special event

echo@echowm.com (Fang Huang) — Tue, 28 Sep 2021 09:30:02 GMT

INSIDER virtual event “Master Your Money” - Join Echo LIVE for this special event

Just about everyone wants to give their kids a head start in life, and building generational wealth is an effective way to do it.

Join me at the next Master Your Money live event (free virtual hour-long bootcamp), “H ow to Create Generational Wealth” at 11 am CT on October 5, 2021.

We will discuss the different forms of generational wealth, why it's so much harder to create for some communities than for others, and how you can start building wealth that will outlast you.

11 Tax Changes You Need to Know in House Democrats’ Plan

Sat, 25 Sep 2021 09:49:34 GMT

11 Tax Changes You Need to Know in House Democrats’ Plan

What you need to know about the recent tax proposal and potential planning opportunities

In the past week, you may have seen that the House Ways and Means Committee released a draft of significant tax legislation. While the bill will not be debated in Congress and finalized in the weeks to come, I want to summarize eleven key proposed changes so that you can start taking action before the legislation is signed and specific planning windows are closed.

1. Single filers with income below $400,000 and Married Filing Joint Filers with income below $450,000 will probably not see the significant impact right away.

The top ordinary income tax rate would return to 39.6%. In addition, the current 37% top rate doesn’t kick in for joint filers until they have over $628,300 of taxable income. But the bill would impose the top ordinary rate of 39.6% on joint filers at $450,000 taxable income in 2022. This bill would dramatically re-increase the marriage penalty. While present today, the TCJA really reduced the impact. This bill does the complete opposite. Two high-income earners could soon save a LOT of money being “single”!

As a result, the taxpayers who will be most impacted by the new rates are those in the $400,000–$500,000 income range, who will see themselves move from the current 35% bracket to the new 39.6% bracket – as higher earners who were already in the 37% bracket will see ‘only’ a 2.6% increase to 39.6%.

It may make sense to accelerate income into 2021. Those with the highest income could benefit the most under the proposed plan from accelerating their income into 2021.

2. The Strategy of making non-deductible IRA contributions and then converting them to a Roth IRA - or the “backdoor Roth”- seems to end starting in 2022. The same goes for the “mega backdoor Roth” strategy inside of 401(k) plans.

This would create a need to take a close look at the convert-or-not decision if you have after-tax dollars in your IRA because this proposal is likely to become law, and the choice to convert may soon become now or never.

3. Elimination of Roth conversion for people over the income thresholds, but not until 2031.

Why would this effective date be delayed so long? Keeping Roth conversions for high earners alive for ten years to bring in more tax dollars and reduce the bill's net cost.

You can continue to work with your advisor to decide the right amount to convert from your IRA to Roth IRA by looking closely at the marginal tax rate in the next ten years.

4. Taxpayers with income over those thresholds should expect higher capital gains rates.

For people over the $400K/$450K income thresholds, capital gains increase from 20% to 25%, not the 39.6% in the “Biden Plan”. Unlike the proposed change to ordinary income tax rates that won’t take effect until 2022, the proposed top long-term capital gains rate change would be effective immediately, affecting long-term capital gains incurred on or after September 14, 2021.

If you have significant unrealized capital gains, you would not be able to sell such assets before the end of 2021 to avoid the higher rate.

5. The gift and estate tax exemption amounts would effectively be cut in half starting in 2022. That would still be over $5 million per person.

This change would create an urgent situation for taxpayers with estate larger at death than the reduced estate tax exemption. Using as much of the current exemption amount to gift assets before the end of 2021 will save significant estate taxes in the future. Ultra-high-net worth clients have likely known this would happen. For the high-net-worth clients, the decision of whether to gift assets now (and if so, how much) will be more complicated and difficult.

The bill also cracks down on Intentionally Defective Grantor Trusts (IDGTs) by including those trusts’ assets in their grantor’s estates. In addition, any sale between an individual and their own grantor trust will be treated as the equivalent of a third-party sale, and any transfer out of a grantor trust will be considered a taxable gift. Family Limited Partnership discounts would no longer be eligible for valuation discounts (though any remaining bona fide business assets would still be eligible for a minority and marketability discounts).

Clients should focus on creating SLATs (Spousal Lifetime Access Trusts), undertaking sales to grantor trusts (using valuation discount), and using their gift (i.e. unified credit) and GST tax exemptions before they lose them. It’s time to schedule a meeting with your estate attorney and financial advisor soon to get them done timely.

6. Application of the 3.8% Net Investment Income Tax (NIIT) to S-Corp distributions for taxpayers with income higher than $400,000 (individual) or $500,000 (married filing jointly ).

The 3.8% NIIT is currently applied to only investment income, not the pass-through income from S-Corp. This bill will increase taxes for the high-income business owners and reduce the major benefit of structuring a S-Corp.

7. 3% surtax on very, very high-income people.

3% additional tax on MAGI (Modified Adjusted Gross Income) over $5 million. This surtax is also going to apply to trusts with income of over $100,000. For clients who have left IRAs to a trust for the benefit of minor children, this income threshold may be reached faster than you expect given the 10-year requirement to deplete an inherited IRA.

8. Bigger RMDs for high income people and huge retirement accounts.

This proposal would create new RMDs (Required Minimum Distributions) for single filers making $400,000 or more, joint filers making at least $450,000, and retirement accounts worth more than $10 million, regardless of age.

Tech mogul Peter Thiel used $1,700 in his new Roth IRA to buy startup shares of a firm he co-founded that become PayPal. That account became worth more than $5 billion.

This proposal would take effect in 2022. The RMD amount would be equal to 50% of retirement account dollars in excess of $10 million and less than $20 million but 100% of the total amount over $20 million.

9. Limitations for investments inside IRAs.

IRA account owners would no longer be permitted to place or have funds in vehicles that are permissible only for accredited investors such as private placements and hedged funds. Funds that are currently invested in this manner must be removed from the offending vehicles by December 31, 2023. Failure to do so will cause the full balance of the account to be deemed distributed to the taxpayer under IRC 4975 and subject to penalties that can be equal to the amount of the prohibited investment.

Those who have one of these disallowed investments would either need to sell (if that is even possible) or take a tax reportable distribution that will most likely also be subject to penalties. These investments are often illiquid and may have very limited options to sell the position.

10. Step-up in basis was not included in this bill.

This bill did not remove the step-up in basis at death. Current laws allow the non-retirement assets to use the market value on the date of death as basis instead of the original cost basis. Beneficiaries can save taxes and avoid the hassle of tracking down the original cost basis of each asset.

11. The expanded child tax credit would be extended.

The current rules providing an annual Child Tax Credit with advance monthly payments would be extended into 2022. Starting in 2023, the Child Tax Credit would transition into a monthly child tax credit of $250 a month per child ($3,000 a year) for children 6 and older and $300 a month per child ($3,600 a year) for each child under 6.

It’s worth remembering that this bill is not yet in its final form – there may still be weeks of negotiation before it is passed. That said, you should be aware of these key changes and be ready to work with your advisor to act quickly, as many of the major proposals in the legislation are set to go into effect on January 1, 2022, and some will take effect as soon as the legislation is enacted… which may leave just weeks or even days to act if Congress proceeds.

Tax planning and estate planning can be complicated, so it may be wise to consult estate attorney, tax CPA and financial professionals to help you as you build your strategy. At Echo Wealth Management, our professionals can offer a depth of knowledge and breadth of experience in helping you create generational wealth. If you believe our wealth management services may be a good fit for your needs, please contact us today .

Listen to Echo on the Lead Your Day with Merilyn podcast

echo@echowm.com (Fang Huang) — Mon, 28 Jun 2021 14:32:08 GMT

Listen to Echo on the Lead Your Day with Merilyn podcast

Echo recently spoke on the Lead Your Day with Merilyn podcast about how to make wealth management simple. On the show she discusses what a financial independence day means, planning your retirement, and the necessary basic knowledge for portfolio management.

Echo Huang featured on Brave by Design

echo@echowm.com (Fang Huang) — Wed, 26 May 2021 17:00:02 GMT

Echo sat down with Brave by Design to share her personal story and talk about all things financial planning. It's an inspiring conversation that touches on everything from how to find inspiration to how to create a solid financial plan for a bright future.

Echo Huang featured on the Abundant Beans Podcast

echo@echowm.com (Fang Huang) — Wed, 19 May 2021 21:56:25 GMT

There is nothing more frustrating than finances being a reason that you can't do something.

Recently Echo spoke on The Abundant Beans Podcast about what business owners can do to break down the many things needed to run a successful business by creating a system that has your money working for you, from tax planning to exit planning and much more.

Six Tax-Efficient Investing Strategies

Mon, 15 Feb 2021 18:01:29 GMT

Consider Present and Future Tax Liabilities When Making Investment Decisions

Making investment decisions can be overwhelming because there is so much to consider; especially when you’re working toward meeting specific short- and long-term financial goals. This is certainly true of your investment strategy’s tax implications, as taxes can reduce your investment returns from year to year and jeopardize your ability to achieve your goals. This is especially true if you fall into a higher federal income tax bracket, making it even more important to consider the impact of taxes when making any changes to your investments. While you should always consult with a tax professional regarding your unique investment and tax scenarios, the following six tax-efficient investing strategies can serve as a guideline to help you benefit from your finances.

Strategy #1: Identify and Contribute to Tax-Efficient Accounts

If you’re eligible to contribute to tax-efficient retirement accounts, like traditional IRAs, Roth IRAs, and 401(k) accounts, you can help to reduce your current and future taxes. In the present, for instance, your traditional IRA contributions are tax-deductible depending on your income (subject to a dollar limit), and your 401(k) contributions are pre-tax and will reduce your current taxable income (subject to contribution limits). For the future, traditional IRAs and 401(k)s offer you the potential for tax-deferred growth, while Roth accounts give you tax-free growth potential.

Strategy #2: Diversify Your Accounts

Mixing and matching your income sources in retirement through a combination of investment account types can help you minimize your tax burden. Doing so is beneficial because different types of accounts offer disparate tax treatments. For instance, brokerage accounts offer you taxable growth potential. In contrast, traditional IRAs offer you tax-deferred growth potential, and Roth IRAs offer growth potential that won’t be taxed as long as you meet the requirements for qualified distributions.

Here’s an example of how using a combination of accounts can benefit you:

If you are eligible to take tax deductions in retirement, you won’t be able to do so unless you have taxable income. Withdrawals from a traditional IRA count as taxable income, so your strategy could be to withdraw just enough to offset your eligible deductions. You could draw the remainder of the income you need from your Roth IRA account. Those qualified distributions from your Roth IRA are income-tax-free, therefore do not increase your tax bills during retirement.

This is just one example of how splitting up your contributions to different account types now can help you reduce your future tax burden. This type of planning can be advantageous. However, it is only possible to enjoy these tax benefits in retirement if you start taking steps to diversify your contributions right now.

Strategy #3: Make Tax-Efficient Investments

Did you know that specific investments can carry tax benefits? One example is income earned from municipal bonds, which is always federally tax-free (and even state and local tax-free if you buy municipal bonds in your resident state). Other examples of tax-smart investment choices include tax-managed mutual funds, where the fund managers work purposefully for tax-efficiency. You can also choose to invest in index funds and exchange-traded funds (ETFs) that passively track a target index. Because the securities in the index funds are not traded as frequently as the actively managed mutual funds, they generate lower short-term capital gains distributions.

Strategy #4: Hold Your Investments in the Right Account Type

You can’t take full advantage of tax-efficient investments unless you’re also holding them in accounts matched to the appropriate tax treatment. This way, you can truly realize the full potential of the tax benefits you’re seeking – without accidentally increasing your tax liability.

Here are two examples:

Investments that generate taxable income are often better held in tax-deferred or tax-free accounts (401(k) plan, traditional IRA, Roth IRA, and Health Savings Account). So, you may want to utilize a traditional IRA for things like taxable corporate bonds or stock funds with high turnover to maximize your potential tax benefit. You do not need to report realized gains, dividends, and interest income from tax-deferred accounts each year on tax returns until distributions.

The tax-efficient investments such as municipal bonds, ETFs, or tax-managed mutual funds are often best suited in taxable brokerage accounts (individual account, joint account, or trust account). ETFs are more tax-efficient because of the structure that is different than mutual funds. You can use ETFs in both retirement accounts and taxable accounts for their liquidity and low-cost benefits. Holding ETFs in taxable accounts provides an additional tax benefit. You also have easy access to your taxable accounts before age 59.5 without penalties.

When you’re using this Asset Location strategy, ensure your decisions about where to hold various investments are consistent with your overall asset allocation strategy. Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash.

Strategy #5: Avoid Short-term Capital Gains Taxes by Holding Investments Longer

First, it’s important to note that it is usually not worth holding onto a stock you feel ready to sell to avoid taxes, but there’s one notable exception. Consider this: Gains on stocks held for a year or less are short-term capital gains and are taxed at ordinary income rates, but gains on stocks held longer than one year are taxed at the long-term capital gains rate. So, it could make sense to delay selling appreciated stocks until they qualify for capital gains treatment if your stock’s holding period is nearly one year. For 2021, a single filer pays 0% on long-term capital gains if you have an income of $40,400 or less; 15% if you have an income of $445,850 or less, and 20% if your income is greater than $445,850. Work with your tax advisor to ensure you use this strategy appropriately.

Strategy #6: Tax-Loss Harvesting

This strategy means using any investment losses you may incur to offset your gains each year, and it can help you reduce your income tax liability. If your investment losses exceed your gains, you are permitted to use them to offset up to $3,000 of earned income annually, as well. Plus, you can carry any additional losses forward to future tax years. If you’re a higher-earning investor, this can be a valuable strategy. Make sure that you avoid violating the wash-sale rule .

Final Thoughts

While the strategies above can be helpful, tax-efficient investing should not supersede your overall investment strategy. It’s an important consideration that can help you choose among various investment options. Still, it would be best to think about how your investments can help you reach your goals around diversification, liquidity, and risk level.

As always, when making any decisions that could impact your taxes, it’s wise to consult with a professional tax advisor. Tax laws change regularly, and every investors’ situation is unique, so it’s vital to have experts in your corner to help you make wise and disciplined decisions toward reaching your financial goals. If you would like some guidance, please contact me today to create a realistic plan for your investment goals.

Five Steps Single Parents Should Take to Safeguard Their Family’s Financial Future

Tue, 02 Feb 2021 21:08:32 GMT

In a two-parent household, raising children can be quite the task. Raising children as a single parent brings additional challenges, stressors, and responsibilities - many of which are financial.

Though financially stressful, it’s important to remember that it’s possible to raise a child on your own and have a stable financial life. It merely requires discipline and planning. So, if you’re a single parent and feeling a bit overwhelmed, use these steps as a guide to help you achieve financial security.

1. Prepare Your Estate Planning Documents

It’s hard to think about, but nobody knows for sure what the future holds or how much time we have left. So, unless you feel confident in leaving your personal and financial decisions to next of kin or to state officials, it’s essential to make time to sit down with an attorney to discuss your wishes should anything unexpected happen. People tend to procrastinate when it comes to getting their estate paperwork in place, but it’s important to be proactive so you can be sure that your wishes will be followed when you’re gone, especially about who will raise your children in your absence.

Since children under the age of 18 cannot take control of inheritance money or make any legal decisions, listing them as beneficiaries won’t be enough. You’ll want to choose a guardian in your will that determine who will take over responsibility for your kids should you be incapacitated or pass away.

2. Purchase Life Insurance

When it comes to life insurance, the general guideline is that if someone is dependent on your income, you should probably have life insurance. So, if you’re raising children by yourself, you’ll want the security of a life insurance policy to ensure you’re covering your family’s needs. Sitting down with a financial advisor will help determine how much insurance you’ll need in your unique situation. You should estimate how much raising your children will cost, which includes paying for college, assets you want to protect, or debt you wish to pay off. You’ll also want to speak to an attorney about how you can properly name a beneficiary for your life insurance policy.

There is an abundance of options to choose from when it comes to life insurance, so be sure to do your research and talk to those who are experts in the area and who you can trust. Though it may seem superfluous or extreme, life insurance policies can be an affordable and efficient way to protect your family.

3. Fund an Emergency Savings Account

While no one wants to live life considering every worst-case scenario, single parents must be prepared. Doing so can give you peace of mind, knowing that your children will be protected no matter what may happen. One of the best ways to be sure that you provide for your family is to have a fully-funded cash reserve on hand for emergencies – such as a worldwide pandemic, for instance. For a one-income household with children, you should aim to have at least six months’ worth of monthly bills and expenses saved.

This may seem like a lot of money, but you don’t have to save it all at once. Start small, with just a small percentage of your paycheck going away into savings each month. Slowly, you’ll see your safety net grows over time, giving you and your family added protection from unexpected expenses.

4. Contribute to a Retirement Account

It’s natural as a parent to want to put your children’s needs and wants before your own. However, you can’t forget about taking care of yourself either, especially if it’s just you. After you’ve put the proper risk management documents and saving practices into place, it’s time to focus on saving for your retirement. Your early working years are critical to your retirement savings goals, and the longer you wait, the more money you will need to save to have a secure retirement.

With the right planning, you can incorporate your retirement plan into your other wealth management plans. If you have access to a retirement plan at work, such as a 401(k), strive to save around 15% of your total income. Or, if money is tight, see if your employer offers to match your contributions and put in just enough to qualify for a full match. As you grow in your position and begin feeling more financially stable, you can increase your contributions.

If you don’t have a 401(k) available to you at work, look into opening an IRA . Both the Roth IRA and the traditional IRA can be great retirement savings tools. To decide which one is the best for you, you can listen to my recent interview on the Marriage, Kids and Money podcast h ere .

5. Open a 529 Account

The last step you can take to help put you and your children on solid financial footing is to begin saving for college, should your child decide they want to continue their education. A 529 account is a tax-favored education savings account that allows individuals to save for any qualified education costs that might come up in the future. The great thing about these accounts is that contributions are made on an after-tax basis. The money grows in the account tax-free, and any distributions you take out will also be tax-free when you pay for qualified educational expenses. You can choose various investments to grow the account.

Furthermore, anyone can contribute to these accounts. So, any grandparents or other family members that want to help you save for your child’s college expenses can help. Even if you don’t have enough extra cash to contribute to this account regularly, you can begin putting any money your child gets for their birthday, holidays, or other gift money into the account as they grow. Even if you don’t save enough to cover the entire cost of college, every dollar helps make footing that expensive bill easier.

Final Thoughts

Parenting comes with many stressors and being a single parent can make the task seem all the more daunting. It can be easy to get discouraged or overwhelmed by the amount of responsibility placed on your shoulders, especially financially. However, there are steps that you can take today to begin building a strong financial foundation that will protect you and your family long into the future. If you would like some additional guidance with your financial planning over the next decade, schedule a complimentary 30 -minute Discovery Call to learn more.

The Heirless Estate: Don’t Let the State Get It

Tue, 12 Jan 2021 22:35:35 GMT

Choosing an Heir for Your Estate

Being prepared sets you up for success. Estate planning is all about your assets’ disposition and, for many people, this involves determining how to divide assets among heirs. What happens, though, when you don’t have a spouse or children or other obvious heirs to your estate?

Unfortunately, many people in this situation don’t feel it’s necessary to plan where their assets will go, making it more likely that their money will end up somewhere they wouldn’t choose—specifically, the state. For this reason, it’s always wise to have a strategy in place and to plan for various outcomes.

Understanding Inheritance Law

While regulations differ a bit by state, the standard inheritance hierarchy looks something like this: surviving spouse, children, grandchildren. If none of those relatives cannot be identified, assets can go to parents, grandparents, siblings, and nieces and nephews.

In instances where no such relatives exist, assets are escheated back to the state. Essentially, in the absence of a next-of-kin, the escheat process allows the state to lay claim to your assets and utilize your money for the public good.

Choosing Alternate Heirs

It’s not ideal to let the state decide the disposition of your hard-earned assets. So, you may want to consider choosing an alternative heir instead. Alternative heirs can be relatives, friends, or legally recognized non-profit organizations. Anyone can inherit your assets, so be thoughtful about who you designate as a beneficiary in the absence of obvious heirs. Of note: Some states will levy an inheritance tax, and it could be higher for a non-relative beneficiary.

If you choose a charitable organization to inherit your assets, you may also consider beginning your philanthropy while you’re still alive and able to witness your impact. If you’d like to go this route, you have several options open to you:

Charitable Remainder Trusts. With this irrevocable trust, you receive an immediate charitable deduction based on the present value of the cash or other property that you transfer. You also receive a reliable income stream from the trust, which could be for a set number of years or the remainder of your life. Upon your death, the non-profit receives the remaining assets.

Donor-Advised Funds. Here, you make an irrevocable, tax-deductible contribution of cash, securities, or appreciated non cash assets. You can then invest the funds for future potential growth and recommend grants to qualified 501(c)(3) charities you’d like to support. It’s relatively simple to set up a donor-advised fund and you can do it with a small amount, such as $50,000. You can learn more by visiting American Endowment Foundation , the one I’ve used for over a decade.

Private Foundations. A family or an individual often founds this type of non-profit organization. It begins with an initial tax-deductible gift, managed by a board of directors or trustees. Sometimes, these trustees are paid for their efforts in controlling the disposition of your assets. With a private foundation, you may grant funds to qualified 501(c)(3) charities, as with a donor-advised fund, but you’re not limited to just qualified charities.

As you consider the above options, think through how much control and supervision you wish to have. All three charitable options are suitable ways to plan your estate, so base your choice on personal preference, as well as guidance from your financial advisor. It may even be possible to combine several of the approaches described above to accomplish your estate planning goals. It would be best to work with a tax professional who has experience in charitable giving before you implement any plans. This will ensure you’re meeting your goals in the most tax-efficient manner possible.

Non-Monetary Considerations

While your financial assets’ disposition is a critical decision point, it’s not the only consideration in your estate plan. Beyond money matters, you’ll also want to designate a person who can make decisions on your behalf, should you become unable to do so yourself due to injury or illness. You’ll want to plan for each of the following:

Durable Power of Attorney for Finances. This legal document authorizes a person of your designation to handle financial and legal matters if you become incapacitated.

Durable Power of Attorney for Healthcare. This document is like the above but authorizes your designated person to make medical decisions, rather than financial, on your behalf when you are unable to do so yourself.

Living Will. This document details the medical interventions you would and, importantly, would not choose to undergo to keep yourself alive. In Minnesota, a Health Care Directive form combines Durable Power of Attorney for Healthcare and Living Will in one legal document. To learn more about Minnesota Health Care Directives, visit here: https://www.health.state.mn.us/facilities/regulation/infobulletins/advdir.html

Preparing the above legal documents ahead of time allows you to make your own, brassbound decisions. If you fail to take these steps, the state will determine your next of kin—possibly a very distant relation you had no contact with—to make decisions for you.

Naming an Estate Administrator

As you finalize your estate plans, you’ll also want to name an estate administrator, commonly called an executor or a personal representative. This is the person who takes over upon your death, handling matters such as probate court proceedings, distributing assets according to your wishes, sale of your property, and notification of your death to banks, credit card companies and other financial institutions. This step is critical to prevent identity theft.

When you have one or more heirs, it’s common to choose one of them to be your estate administrator. However, when you do not have an heir, you could instead select an attorney or accountant to serve in this crucial role. There are even professional executors available for hire in some states.

Be Prepared

Estate planning is vital at every age, though it becomes more crucial as you age—especially if you have no intended heirs. The sooner you’re able to choose an alternative heir, prepare for non-monetary considerations and name an estate administrator, the better. These decision points protect your estate and your financial and health decisions from being made in a manner you have no control over, and you can always revisit them if your situation changes and an heir emerges.

If you are making plans for your heirless estate and you’d like guidance, please contact us today . We can help take the complication out of the estate planning process and give you the support to make the best decisions that fit your distinctive situation.

Echo Huang Awarded the Five Star Wealth Manager Award for the 10th Time!

echo@echowm.com (Fang Huang) — Mon, 11 Jan 2021 15:49:09 GMT

For the 10th year in a row , president and founder Echo Huang was awarded the 2021 Five Star Wealth Manager award . Using an in-depth research methodology with 10 objective criteria, including client retention rate, client assets, and households served, this award honors top local investment professionals for their commitment to professional excellence. She is featured in the current issue of Mpls.St.Paul Magazine and a forthcoming Twin Cities Business Magazine .

“I am so excited and humbled to be recognized for all of the hard work that this firm does for our clients,” Echo exclaimed upon hearing the news. She continued, “We’re fortunate to serve an amazing group of clients with so many admirable goals for their financial futures, and I’m so appreciative to have a great team that strives every day to provide their best service.”

Echo started Echo Wealth Management upon realizing a passion for helping clients design and implement financial plans to follow their dreams, and she has built upon an impressive career spanning 25 years of experience in the financial sector. Echo is the author of Own Your Future: One Woman’s Story of Immigration and Financial Freedom and speaks on wealth building across several media platforms.

She draws from her experiences, ranging from leaving China at the age of 20 with only $800 to build a career in finance, become a committed Mom, and in her spare time competes in ballroom dancing. Her professional mission is to inspire and help others achieve their financial goals. For the latest on Echo’s adventures and appearances, follow her online at LinkedIn and Twitter .

Listen to Echo's Latest Interview on the Business Credit and Financing Show!

echo@echowm.com (Fang Huang) — Thu, 07 Jan 2021 16:13:28 GMT

Recently Echo sat down with the Business Credit and Financing Show to discuss how to safeguard and market-proof your financial portfolio in any crisis.

During this conversation, Echo talks about:

What it takes to own your financial freedom
Types of insurance to have
Wealth management strategies
Budgeting
How entrepreneurs think about personal wealth management
What makes a good financial portfolio and how to build it
And more...

Five Keys to Successfully Inheriting a Roth IRA

Tue, 05 Jan 2021 23:08:18 GMT

Getting the Most Out of Your Inheritance

There was a time when if you inherited a Roth IRA, you would be able to stretch any withdrawals out over your lifetime, letting the money grow over the years. Unfortunately, the rules have changed. The SECURE Act was signed into law in December of 2019, and it imposes a new rule on inherited IRAs for any account whose owner died after December 31, 2019. This now requires that beneficiaries must empty the account within ten years of the owner’s death (unless they qualify for an exception).

While this new law limits what you can do with an inherited IRA, there is still some flexibility in how you reap the benefits if you stay within the 10-year time limit. I would like to offer you five tips to guide you as you plan your strategy.

1. Make the switch to an inherited Roth IRA account.

Before you begin making plans for your newfound wealth, there are some administrative steps that you have to get out of the way first. Most importantly, you will have to move the funds from the inherited IRA into a new IRA account. If you inherited the Roth IRA from your spouse, then you can transfer the inherited funds directly into your Roth IRA account if you have one. If not, then you’ll have to open a Roth IRA and transfer the funds. If you are inheriting the Roth IRA from someone who isn’t your spouse, you need to open a new inherited Roth IRA account to transfer the assets into that account.

When it comes to IRAs, the two main types are taxed differently while similar. If you inherit a traditional IRA, you will be taxed when you withdraw from the account. If you were fortunate enough to inherit a Roth IRA, you would most likely be able to make withdrawals tax-free. Regardless of what type of IRA you inherited, you must open the same kind of account when you are getting ready to transfer over.

2. Check if you qualify for exemptions.

As mentioned above, there are exceptions to the new 10-year rule. You might qualify for a different distribution timeline if:

You’re a minor child. Though you have to begin receiving distributions from your inheritance immediately, they will be determined by life expectancy instead of on a time limit. So, any months or years you have as a beneficiary of an IRA before turning 18 won’t count towards the 10-year requirement. Once you are of age, however, the clock will begin ticking on your 10-year requirement.
The inherited IRA came from a spouse. Should the unfortunate event occur in which you are widowed and left the beneficiary of your spouse’s IRA, you can treat this account as if it is your own. That means for a Roth IRA, you never have to take distributions out, and if it’s a traditional IRA, you don’t have to take out any distributions until you are 72.
You’re chronically ill or disabled. If this is the case, you can receive your IRA distributions at your own pace and allow them to stretch out over your lifetime.
You’re less than 10 years younger than the account owner. Typically, this exemption is for siblings or unmarried couples who inherit an IRA from one another. However, no matter who the IRA comes from, if you were close in age with the account owner, then you qualify to stretch your IRA distributions out over your lifetime.

3. Boost Retirement Savings.

Should you not meet any of the above exceptions and find yourself with only 10 years to empty the inherited IRA account, it could be an excellent opportunity to ramp up your retirement savings. If you are financially stable enough to not need the inherited money immediately, consider using the distributions to cover your living expenses and contribute more of your earned income to your retirement plan. If you inherited a Roth IRA, this is easier to do, as your withdrawals are not counted as income and are therefore tax-free. Traditional IRAs will push you into a higher tax bracket. Make sure to prepare your cash flow projection for the next ten years to take more distributions in the years when your income is lower to avoid causing a very high-income year in the tenth year.

Note: you must have earned income from work to contribute to an IRA, and your contribution to a Roth IRA is affected by the amount of your modified AGI .

4. Take advantage of the opportunity to focus on other money goals.

Once you’ve planned out a way to enhance your retirement savings, or if you’re already in a good place with your retirement planning, this newly inherited money could be an excellent opportunity to tackle any other financial goals you may have. You could build a substantial emergency fund, pay down any debt or loans, give more to charity, or maybe even go on that trip you’ve been dreaming of.

5. Talk with a financial advisor.

Understanding the nuances of IRAs and how to make these accounts work for you can be complicated. For instance, if you’re close to retirement age, you may want to postpone collecting your Social Security benefits or retirement nest egg and live off of your inheritance for a while. Doing this would allow you to receive higher monthly Social Security benefits for the rest of your retirement. Or, if you’re young enough that retirement seems like a lifetime away, talking with a financial planner could help you prioritize and manage your inheritance along with your financial goals to figure out the best strategy for your inheritance.

Receiving an inheritance can be bittersweet, emotionally charged, and it can be challenging to make decisions. Regardless of your age and where you are on your financial journey, talking with a trusted advisor is the best way to be sure that you’re making the most of your inherited gift. If you need guidance with your inherited IRA, please contact me today to create a plan that’s tailored for your unique situation.

Should You Consider a Roth Conversion?

Wed, 23 Dec 2020 23:28:32 GMT

Timing is everything. Utilizing the proper timing can help maximize the benefits of converting your traditional IRA to a Roth IRA . A traditional IRA is a beautiful retirement savings tool. It allows you to minimize your current tax burden and pay taxes on your contributions later. However, there are some instances when you may want to take care of what you owe the government now so that you can avoid subsequent taxes later. If the latter is your goal, you’ll want to convert some of your traditional IRA balance to a Roth as Roth IRA distributions in the future, including all the gains will be income tax-free.

How do you know if a Roth conversion is right for you? Although you should always consider your unique financial planning needs, there are four scenarios in which it makes sense to consider a Roth conversion.

Scenario #1: When Youth is on Your Side

When you’re younger and not yet as established in your career, chances are you’re earning less than you will be in the future. This means you’re likely in a lower tax bracket than you will be in years to come. If you convert to a Roth now, you can pay taxes at what is likely to be a lower rate than when you reach a higher tax bracket later. Plus, converting to a Roth when you’re younger means you can take advantage of the magic of compounding to grow your savings further. For example, if you have a 401(k) plan balance with your last employer, you can rollover to a traditional IRA account without paying income taxes. Then you can decide if you want to convert some or all of the IRA balance to a Roth IRA by paying income taxes on the conversion amount. Suppose you have non-deductible contributions in your IRA before you rollover the pre-tax 401(k) balance to it. In that case, you use pro-rata rule to determine the taxable percentage to apply for the conversion amount.

Before 2010, only taxpayers who earned an adjusted gross income of less than $100,000 were allowed to convert any IRA balance to a Roth IRA. Since 2010, the IRS has allowed many individuals to convert their traditional IRA to Roth IRA regardless of income level.

Scenario #2: During a Market Correction

All investors know the market will take a dive from time to time and, while it can be painful to see the value of your investments decrease, it also presents an opportunity. If your traditional IRA was valued at $50,000 and a dip in the market causes it to fall to $40,000, converting to a Roth means only paying taxes on $40,000. When the market recovers and your investment value rises to $50,000 again inside your Roth IRA, you won’t owe any additional tax on those investment gains.

Scenario #3: Before Tax Brackets Increase

The Tax Cuts and Jobs Act (TCJA) of 2017 lowered tax brackets for nearly everyone, but these lower rates are set to expire at the end of 2025. This month the Congressional Budget Office (CBO) released its updated budget outlook—the first to incorporate the effects of the COVID-19 public health and economic crisis. CBO’s baseline, which is based on its July economic forecast, shows that the current crisis has substantially worsened an already unsustainable budget outlook. All major trust funds will exhaust their reserves in the next 11 years. CBO estimates that under current law, budget deficits will more than triple, rising from $984 billion (4.6 percent of GDP) in 2019 to $3.3 trillion (16 percent of GDP) this year.

In my opinion, it's possible to see major tax law changes in the year 2021 or 2022 because of the huge projected deficit. So, if you have concerns about your tax burden rising in the next few years, you can mitigate that risk by converting to a Roth now and saving in taxes before that happens.

For a more affluent married couple who are projected to be in a 32+ percent marginal tax bracket in the future when RMDs (required minimum distribution based on life expectancy and IRA balance) begin at age 72, it is a good idea to convert some IRA money to Roth IRA money for the next few years in order to fill up in the low tax brackets by paying no more than 24 percent federal marginal tax rate (staying below the taxable income of $326,600 for married filing jointly). Thus, the decision to pay taxes at today’s rates can generate potential tax benefits in the long term. See the tax brackets and other deductions for the year 2020 published by Tax Foundation .

Scenario #4: When You Face a Decrease in Income

An unexpected dip in income may not feel like a positive thing, but a Roth conversion gives you a chance to see the silver lining. Converting in a year where you drop to a lower tax bracket means paying less in taxes on the conversion. For example, if you convert $50,000 from a traditional IRA to a Roth and you fall in the 24 percent federal marginal tax bracket, you’ll pay the IRS $12,000. However, if your income decreases and you land in the 12 percent federal marginal tax bracket instead, a conversion of $50,000 would only cost you $6,000 in federal taxes. Many people face a decrease in earned income this year due to the pandemic and economic recession. For the people who have more than enough in their emergency fund and have enough money to pay income taxes on the Roth conversion, it’s the perfect time to make lemonade out of the lemons.

Securing a Financial Future for Your Second Marriage

Tue, 22 Dec 2020 18:30:58 GMT

Who doesn’t love second chances? Second marriages often bring with them a renewed optimism for the future. After all, you’re getting a second chance at a “happily ever after.” The best part is now you have the benefit of more life experience and wisdom.

On the other hand, you’re likely to have a significantly more complex financial life than you did going into your first marriage. This means you and your partner must be thoughtful and savvy about how you will manage your finances. The following seven steps can help cover your bases and ensure you remain on firm financial footing as you enter this new phase of life together.

1. Honesty is the Best Policy – The healthiest relationships are those based on transparent communication on both sides. To make a solid start together and avoid any surprises down the road—you should each disclose where you stand financially. This means sharing details on assets, debts, credit history, and any financial support you provide or receive based on a prior divorce decree.

2. Update Paperwork – If you are changing your name or updating accounts you plan to hold jointly, you’ll need to dot all your Is and cross all your Ts. Notify the Social Security Administration and any financial institutions of name changes, update all your car titles, mortgages, and financial accounts, and update beneficiary information for insurance and retirement accounts.

3. Discuss Family Obligations – Since you will each bring personal financial goals and obligations into the marriage, be sure you understand one another’s plans. For instance, your spouse may intend to fund their children’s college educations, while you might feel strongly about helping to support your aging parents. Decisions like this can help determine to what extent you will combine finances or divvy up expenses.

4. Revisit Your Estate Plan – Estate planning is essential for everyone, but it can be particularly crucial for blended families. Suppose you and your spouse are bringing significant assets into the marriage and either or both of you have children from previous relationships. In that case, you’ll need to take extra care in ensuring your wishes will be met. This is because probate laws aren’t usually written with blended families in mind, meaning you and your spouse may have considerations that aren’t adequately addressed. Having your up-to-date estate plan will make sure your assets are divided as you intend.

5. Discuss Merging Finances – While there is no right or wrong answer here, all new couples must have the “yours, mine, and ours” discussion. Some couples merge all of their expenses, cash, and debts, while others keep everything separate. Many choose to keep most things separate but set up a joint checking account for joint household expenses. Regardless of which will work best for you, it’s important to discuss things upfront and set expectations and ground rules that work for both spouses.

6. Create a Contingency Plan – At such a hopeful and exciting point in life, no one wants to think about the possibility of the marriage ending. However, as you well know, sometimes things happen that we never see coming. Talk together about the potential benefits of a prenuptial agreement that would spell out which assets remain separate and shared in the event you part ways in the future.

7. Build Dreams Together – Since you and your partner each had a previous spouse, you likely also had retirement savings plans that were designed with particular goals in mind. Now, you get the chance to plan for your new life together, determine your individual and joint goals, and develop a plan to achieve them. A financial advisor can be an excellent resource for you during this process by reviewing where you are and where you want to be and suggesting savvy ways to reach your short- and long-term goals.

Embarking on a second marriage is a hopeful and exciting time. Use this helpful checklist to start your new adventure on a firm financial footing, avoid bumps in the road, and live the life you’re dreaming of—together. If you’re ready to take the next step in securing your financial future, schedule a complimentary 30-minute Discovery Call to learn more.

Seven Strategies to Help You Build a Bigger Nest Egg—Even if You're Playing Catch-Up

Fri, 18 Dec 2020 22:57:57 GMT

Have you begun to save for retirement? It is never too early to start planning for your retirement, and in a perfect world, we would all start saving for retirement at age 25, and life would never throw any curveballs to send us off track. Of course, this is far from a perfect world, and that’s why so many Americans find themselves playing catch-up and carrying anxiety about never achieving their retirement savings goals.

In my last blog, I weighed the options of using stocks or bonds to save for retirement [HA1] . Today, I want to offer you some powerful techniques you can use to accelerate your savings right now—even if you’ve waited longer than you had hoped to begin saving. Below, we’ll look at seven tactics to help you get serious—and successful—about your retirement nest egg.

Maximizing Employer Contributions

Do you have an employer-sponsored retirement plan, like a 401(k) or a 403(b)? If so, you may just have a secret weapon available to you for retirement savings: the employer match. Many companies will match their employees’ retirement contributions up to a certain amount, meaning you can access free money just by contributing a certain amount from your paycheck each month. The key to maximizing this “second contributor” to your account is making sure you understand what your employer’s max contribution is – then do everything you can to make sure you get it. For example, if your employer matches 50 cents to a dollar up to 6% of your pay, you must contribute at least 6% of your pay in order to receive the maximum matching amount. This may mean setting aside more from each paycheck than you typically do, but the payoff in retirement will be well worth your trouble.

Tax-Advantaged Accounts

If you’re contributing to a retirement plan (such as 401(k) plan) through your job, or you have a traditional IRA, you can receive favorable tax treatment from the IRS, too. With these accounts, you won’t pay any federal income taxes on your contributions, leaving you with a greater ability to build your savings in the present. Then, you’ll pay taxes on your contributions and earnings when you begin taking distributions in retirement. These accounts do have contribution limits in place, which you can check out here for 401(k)s and here for IRAs .

Some 401(k) plans offer Roth contributions in addition to pre-tax 401(k). That means you can use after-tax dollars to contribute and the distributions including earnings will be tax-free. If you believe your future income is higher, then Roth 401(k) is more beneficial than the pre-tax 401(k). You are allowed to split between the Roth and pre-tax as long as the total doesn’t exceed the contribution limits.

Roth IRA is similar to Roth 401(k) in tax treatment. You can learn more about Roth IRA by reading this recent blog post .

Increase Contributions Gradually

As you learn about a potential company match and the IRS’ contribution limits for certain types of accounts, you can better goal-set for how much to set aside each month – especially if you’re not yet maximizing your savings. However, it can be daunting to learn that you need to save, say, an additional $600 every month. Rather than make such a big change all at once, use the “One Percent Trick” instead. Gradually increase your retirement contributions by just one percent each month or quarter, and soon you’ll be saving a lot more without feeling a big hit to your paycheck all at once.

Make the Most of Your Health Savings Account (HSA)

If you’ve heard lots of buzz in recent years about Health Savings Accounts, it’s for good reason. HSAs offer a triple tax benefit you simply can’t get with other types of savings accounts. You can max out contributions free from federal and state income tax and invest the money with no tax on your earnings either. You can also withdraw funds tax-free for qualified medical expenses. This particular detail makes HSAs ideal for retirees because studies show that the average retiree’s medical costs are 15 percent higher than their annual expenses. So, check to see whether your employer offers an HSA plan and if you’re already using one then consider upping your contributions. If you are self-employed and do not pay yourself a salary, you can set up a HSA account on your own and deduct the contributions on your income tax returns. Be sure to check out contribution limits .

Set Yourself Up for Growth Over Time

You know what they say, “With risk comes reward.” No, no one wants to take too much risk with their hard-saved dollars, but it makes sense to dedicate at least some of your savings to stocks because, historically, they offer the most potential for your money to grow over time. Every person’s risk tolerance is different, so aim for an investment mix that you feel comfortable with, while also positioning yourself for growth over the long-term.

Consider Delaying Retirement

This is probably not the advice you were hoping for because, let’s face it, no one wants to delay the retirement they’ve been dreaming of for years! However, working for just 2-3 more years can have a major impact on your nest egg. Consider the following example:

Maybe you’re 40 years old with nothing saved for retirement yet, and you have an annual income of $80,000 with 2 percent raises every year. Between your own contributions and matches from your employer, you can start saving 15 percent of your income annually toward retirement. Let’s say you decide to retire at 65 and you’ve earned a seven percent return on your investments each year before retirement, leaving you with about $830k. Not bad, right? However, consider what happens if you wait three additional years and retire at 68 instead: you’ll end up with $1.08 million in savings instead. That’s a full 30 percent more from just three more years of work. Check out your own scenario using this helpful calculator from Bankrate.

If you can change to a job or a career that allows you to work flexible hours, you may want to work longer than the normal retirement age and continue to receive earned income and benefits. I have seen clients easing into full retirement by starting a part-time job or a consulting business that keep their minds active and engaged in the community.

Seek Knowledgeable Advice

There are so many considerations that go into retirement, not to mention a plethora of tools and strategies to help you achieve your goals. Sorting through them on your own can be confusing and overwhelming. How much do you need to save? Are you on target to get there? Does your risk tolerance match your current portfolio? A seasoned financial professional can help you sort through these questions and more.

If you’re ready to partner with a financial advisor to level-up your retirement savings strategies, let’s start a conversation today . At Echo Wealth Management , we take the complexity out of financial planning and give you the confidence you need to follow your financial and life goals. Let us put our expertise to work for you today.

Weighing the Benefits of Stocks or Bonds to Save for Retirement

Tue, 15 Dec 2020 18:31:14 GMT

If you are planning for your future, then hopefully, you have put some thought into saving for retirement. When planning for retirement, there are many important factors to consider, such as how much investment risk is appropriate for your financial goals—and your comfort level. If what I have mentioned so far resonates with you, then the next question is, should you invest in stocks or bonds for your retirement savings?

There is a lot to unpack here because every investment has risks. When the stock market goes up, the usual pattern is that the bond market goes down (usually due to the Federal Reserve Bank increasing interest rates), but market cycles can be very strange indeed. In 2018, both the stock and bond markets lost money. In 2019, both the stock and bond markets had a great return. In 2020, the stock market had a sharp decline in the Spring and recovered, while the bond market has had a steady positive return as our country is in recession and dealing with the COVID-19 pandemic. This is precisely why everyone needs a solid education in investment planning, whether working alone or with an advisor, to determine risk tolerance and, on that basis, the right asset allocation to maximize after-tax risk-adjusted return.

Many investors fear volatility in the market because they worry a market downturn would erase their hard-earned savings, but there is no need to fear volatility. Yes, it represents risk in the short-term, but it also creates opportunities for investors with a long-term horizon to get into the market at attractive price levels.

I want to offer you a few sample investments and what they have returned over time:

U.S. Treasury Bills - Treasury bills are seen as an efficient proxy for money market accounts. According to Ibbotson Associates, from 1926-2018, these bills’ compound annual return is approximately 3.3 percent. Since inflation was nearly non-existent until 1960, this was quite an attractive return. Consider this: if you had invested just $1 into Treasury bills in 1926, your investment would be worth $21 in 2018.

Long-Term Government Bonds - In the same time period from 1926-2018, long-term government bonds returned about 5.5 percent annually. This means a $1 investment in 1926 would have produced $142 in 2008.

Stocks - Stocks have yielded solid returns for investors since 1926, as well. Large-cap stocks’ compound annual return is 10.0 percent from that time to 2018. Clearly, this is a much higher return than bills or bonds. To illustrate: that same $1 investment in 1926 would have become $7,030 in 2018.

What’s the Bottom Line?

It may come as a surprise that the long-term extremes for stocks and bonds are quite close, but both have shown 10-year periods of weakness and annual losses balanced against periods of double-digit gains. At the end of the day, though, stocks have produced higher average returns. For this reason, stocks are often identified as a superior investment vehicle for your retirement portfolio.

Although it can feel unsettling to assume risk in the stock market, with daily market shifts and occasional downturns, there’s no questioning that stocks provide the biggest bang for your buck over time. In fact, one thing that history has shown us is that the stock market remains on a long-term upward trajectory when you take the long view.

What Does This Mean for You?

What does this mean for your retirement planning? Well, you need to ensure you have positioned yourself for long-term growth by including a percentage of stocks in your investment portfolio. The percentage you invest in the market will likely be related to how close you are to retirement – you can afford to assume more risk with stocks if you’ll still be working for twenty years. Still, you may want to keep your portfolio a bit more conservative, investing a greater percentage in bonds and bills if you are only five years away from retiring and need additional stability in your finances. If you have guaranteed income from a pension or an annuity, you can lower the portion of bonds in your portfolio as the lifetime income acts like the interest income of bonds.

Keep in mind that the stability that comes with bills and bonds might be extremely attractive, but you must consider whether those investments will allow you to have your desired purchasing power and lifestyle in retirement. Consumer Reports research shows that the things we purchase double in price about every 14-24 years, so you will want to set up your retirement portfolio for continued growth, so you don’t find yourself struggling financially as you age.

On the flip side, bonds and cash have a rightful place in most investment portfolios, too, and their stability is useful for the money you will need access to in the short-term (within five years). However, the money you won’t need to access until ten or more years down the road will likely be better off invested in stocks.

To minimize your risk by diversifying across various asset classes, most investors should consider using low-cost exchange-traded funds (ETFs) and index mutual funds instead of picking individual stocks and bonds. If you don’t know how to start, get educated by reading some books and blogs, and start looking for an advisor you trust to help you get started early.

Weighing the Benefits

In the end, only you know your retirement goals. This means only you and your advisor can decide the asset allocation and investment mix that’s right for your future. Understanding which investments offer a higher return rate and establishing your retirement timeline are useful steps in evaluating your future financial outlook as you take steps to create the retirement lifestyle you’ve always dreamed of.

If you would like to discuss retirement further and weigh your options with a knowledgeable advisor, I invite you to schedule a complimentary 30-minute Discovery Call . My team at Echo Wealth Management and I can help you make the best decision for you and your family. Wealth management can be complicated, but it doesn’t have to be. Let’s chat and see how we can be of service to you.

Echo Huang Quoted on US News: How Financial Advisors View Selling Insurance

echo@echowm.com (Fang Huang) — Tue, 15 Dec 2020 17:22:45 GMT

Echo Huang was recently quoted by Kate Stalter in her article How Financial Advisors View Selling Insurance on US News & World Report. Below is an excerpt of this article:

Echo Huang, president and founder of Echo Wealth Management in Plymouth, Minnesota, says insurance is an important component of wealth management. If the plan reveals that clients need a specific type of insurance, such as life, disability or long-term care, Huang gives them the option of purchasing it through her.

"I still maintain my insurance license and disclose to clients that I receive some commissions from the insurance companies, and they are not required to use my insurance service to become my client," she says.

Huang keeps her insurance license to simplify client finances and provide ongoing reviews. "I believe I can do a better job for them than an insurance agent who doesn't know their entire financial picture and specific goals," she says. "Clients know that the commissions are paid to other insurance agents if they buy the same products from other agents."

Huang uses the fiduciary standard as the benchmark for a client's best interests.

"If a client needs an annuity for its tax-deferred or lifetime income benefits, then the right annuity can serve that purpose, and it's OK to reduce the assets in their investment accounts," she says. "In addition, using a cash-flow-based planning tool to show them the exact impact can help them make the best decisions. I generally recommend commission-free annuities, if possible, to lower the costs for clients."

The Surprising Pitfalls of Retiring at the Same Time as Your Spouse

Fri, 11 Dec 2020 21:21:39 GMT

On paper, retiring at the same time as your spouse sounds like a no-brainer! If you both retire together, then you would be free to travel the world, take up some new hobbies, and spend more quality time together as a couple. Chances are that you’ve not been able to enjoy these luxuries much over the past 20, 30, or more years. This is because, by the time we are nearing retirement, we have only recently said our goodbyes to our youngest child, and spouses have seen little of each other as day-to-day obligations eat up alone time.

It is for these reasons that simultaneous retirement has its appeal. However, it is vital, especially for women, to know where the pitfalls lie.

Peak Earnings

If you are considering leaving your job in your 50s or early 60s, you are walking away from your peak earning years. This doesn’t just affect your income now; it will also be impacting your earnings for years to come.

This is because cutting your 50s and 60s short will mean that you aren’t contributing as much as you could to Social Security, employer-matched 401(k) plan, and IRAs. These years are critical to safeguarding your finances, especially as you move into the later years of retirement.

Before you and your spouse decide to exit the workforce together, it will be essential to run through potential scenarios with your current financial plan and retirement savings to ensure you will be secure for the long term. There are many factors to consider during this review, and we recommend that you work with a financial advisor if you are considering early retirement.

If you conclude that you are unable to retire at the same time as your spouse, try not to get too discouraged. Your plan can still be adjusted to help you achieve financial independence. A few things that your advisor might recommend are:

Delaying retirement by a few years
Making catch-up contributions to your IRA and 401(k)
Converting some IRA money to a Roth IRA
Restructuring your portfolio for potential growth.

Social Security & Women

Social Security payments are tabulated based on your 35 highest-earning working years. Since women tend to spend quite a few of their working years raising children and/or caring for other family members, they usually need to make up for the lost time. Staying in the workforce at their peak earning time could make up for years of lower earnings earlier in life.

Since women tend to live longer, retiring earlier and missing out on potentially profitable years to save can significantly impact women—more than one may realize. This is mainly because early retirement means losing out on income now and a higher Social Security payout in the future.

Women, on average, spend more years retired than men do. Women also tend to have more costly health issues later in life and need more expensive long-term care. With a longer life comes the added expense, and if women start with fewer retirement funds to begin with, the chances are higher that they will outlive their savings. Currently, women are 80% more likely than men to be impoverished after the age of 65.

Delay and Save

Whether it is Social Security, your 401(k), your IRA, or taxable brokerage accounts, the longer you can wait to tap into it, the longer it has time to collect compound interest and grow.

If you can wait to claim your Social Security benefits, you will collect more money down the line. If your full retirement age is older than 66 (that is, you were born after 1954), you can still start your retirement benefits at 62, but the reduction in your benefit amount will be greater than 25%, up to a maximum of 30% at age 62 for people born in 1960 or later. Benefits rise roughly 7% a year until they reach a maximum payout at age 70.

Since the Social Security benefit is a locked-in, guaranteed payout that will last through your entire life, it works to everyone’s advantage to wait and delay as long as they can to maximize their overall payout. This is especially true if they are relatively healthy and have other assets that they can tap into before using Social Security. Be sure to consult with a trusted advisor to analyze your situation before claiming your Social Security benefits.

Suppose you decide not to retire at the same time as your spouse. In that case, the fact that your household income will go down may present opportunities to convert some of your or your spouse’s IRA or rollover pre-tax 401(k) money to a Roth IRA by paying income taxes at a lower tax rate to have money inside your Roth IRA grow tax-free.

For example, if your household taxable income goes down from $171,050 to $71,050 in 2020, you can convert up to $100,000 of your and/or spouse’s IRA to a Roth IRA by staying in the 22% federal marginal tax bracket (if your spouse does not collect Social Security benefits right away). If you do this for a few years before you retire and collect Social Security benefits at age 70 and start taking distributions from your IRA, you will be able to lower your taxable income during retirement years by reducing IRA balances, increasing Roth IRA balances.

Lower taxable income means lower Medicare insurance premiums in addition to more tax savings during retirement. Keep in mind that Roth IRAs do not have RMDs (required minimum distributions) at age 72. Allowing Roth IRA money to grow tax-free for a few more years before you need to begin withdrawing from it can add years to your solvency timeline.

So, when you’re tempted to make a quick jump into retirement, it is worth remembering that you will be leaving a lot of money on the table now which puts you at risk of outliving your money.

Change of Course

Of course, life has a way of intervening on even the best-laid plans. Even if the plan is to continue working, sometimes the health or caretaking of another family member may precede. This is why it is vitally important that people, especially women , take every opportunity offered to save for their retirement.

The simplest way is to take advantage of any 401(k)-employer match program and roll over any money left in a 401(k) plan at former jobs. You can also downsize living arrangements and make a stricter budget to allot more funds going into savings. On top of that, it is always a good idea to become educated on investing and taking a more active role in household retirement strategy.

Financial Security in Retirement

In a perfect world, everyone would retire with a healthy nest egg that will last them through their lifetime, and Social Security benefits would only function as an added security. This fantasy can be a reality with some advanced planning and budgeting. This might mean retiring at the same time as your spouse, or one spouse continuing to work and save, making the most of those peak earning years.

To truly maximize your retirement strategies, I recommend consulting with a financial advisor who can look at your overall financial picture and guide you along the way. If you are concerned that there’s just too much to know, I invite you to schedule a complimentary 30-minute Discovery Call . My team at Echo Wealth Management and I c an help you navigate these waters. Wealth management can be complicated, but it doesn’t have to be. Let’s chat and see how we can be of service to you.

Echo Huang Featured on The Confidence Connection Podcast

echo@echowm.com (Fang Huang) — Thu, 10 Dec 2020 15:18:48 GMT

Echo Huang recently sat down with Suzanne Sena of The Confidence Connection Podcast to discuss how to maximize your motivation and invest in yourself even during times of great uncertainty.

About Suzanne:

Suzanne Sena is an on-camera meeting coach, offering virtual training for corporations, trial attorneys, experts and entrepreneurs who need to be impactful in virtual communication. Emmy-nominated host, anchor, entrepreneur.

Why Wealth Transfer Plans Are Critical for Estate Planning

Tue, 08 Dec 2020 21:10:42 GMT

When it comes to estate planning, there can be many moving parts that are difficult to keep track of. Usually, even having all of the proper documentation in place can still lead to confusion or errors. This is why you should make sure that you incorporate a wealth transfer plan into your estate planning.

Estate Plans

Another reason to have an estate plan is that, without one, your family could be left dealing with some or all of the following:

Expensive attorney and court costs
Much time spent handling the process
Stress and frustration
Distribution of assets with no regard for your wishes

Ensuring that you take the time to prepare the proper estate planning documents can prevent your family from dealing with any of the above. Doing this will also give you lots of flexibility in deciding who benefits from your assets. You can choose whether your assets get left your family, close friends, or even a charity.

Your assets could also be used to pay taxes, attorneys, or something similar. Having the proper documents drawn up before the end of your life means that your assets go where you want them to go in a relatively quick and low-cost transfer process. Additionally, when your wishes are clear and in writing, it can help keep or instill family harmony during a difficult time.

If you haven’t begun your estate plan yet, I recommend reaching out to an estate planning attorney to determine what types of documents you will need to meet your family’s needs.

One of the easiest ways to navigate this process is to use a financial planner/advisor who has experience in this area. This way, they will be able to recommend options based on your specific situation and coordinate with the estate attorney to implement the estate plan by changing beneficiaries and/or retitling your assets.

Wealth Transfer Plans

One of the most common mistakes in estate planning is to think that once you have your estate documents in order, you are finished. However, estate planning without including wealth transfer planning can result in a few sticky situations.

Here are a few of the most common:

· Family Drama – Too many families are torn apart by discord and jealousy brought on by poor estate planning. There can be feelings of jealousy and animosity when a family member passes away, and beneficiaries are revealed. Some heirs may feel short-changed or confused about the deceased’s decision-making, and feelings of hurt can quickly become anger. This type of discord is especially troublesome when a family business is involved.

· Loss of Wealth – It is not uncommon for family wealth to be gone by the second or third generation. Heirs are often unprepared to receive an inheritance, and they may make critical errors in tax planning and investing.

· Too Much Too Soon – “Sudden Wealth Syndrome” is truly problematic for heirs who receive a large sum and then spend with wild abandon, failing to understand they are quickly squandering a family fortune that took time and effort to build.

Luckily, it is relatively easy to avoid these situations. The best way to avoid family drama or sending money to unprepared heirs is to use a wealth transfer plan.

A wealth transfer plan is defined as a series of decisions you make and actions you take to prepare your heirs for what will happen after you die. Making your intentions as crystal clear as possible is the best way to make sure that everything goes the way you want.

Goals of a Wealth Transfer Plan

Perhaps the single most crucial part of wealth transfer planning is to openly communicate your goals and values as they relate to money and family. The following steps are also quite valuable:.

1. Be clear about your chosen heirs or beneficiaries, as well as time frames for asset transfers. Although this type of open discussion can lead to some bad feelings, you’ll have the opportunity to address issues while you’re still alive and put potential problems to rest.

2. Introduce your heirs to your financial planner, your attorney, and your tax advisor. If they have questions, it’s easier to address them now while you’re still living.

3. Build a foundation of financial understanding so your family will be better prepared when the time comes to receive your assets.

4. Discuss all the options for transferring your wealth, including the potential tax consequences of direct gifts or the importance of charitable giving when appropriate.

5. Help your heirs begin their own estate planning so they will have documents in place that make them better prepared to accept their future inheritance.

Estate planning is essential, but wealth transfer planning adds a critical layer of preparation for your family that is not included in conventional estate planning. Use both of these strategies to ensure that your assets are distributed and managed according to your wishes.

Obstacles Women Face in Leadership—and How They Can Be Overcome

Fri, 27 Nov 2020 17:00:08 GMT

Anyone who successfully serves in a leadership role—or who hopes to— should think about how others perceive them. Education, experience, and results mean little if you aren’t viewed as a leader, and so quite a bit of your potential success comes down to presence.

As women, we face unique challenges, and we need to be even more aware of how we carry ourselves. This is because studies repeatedly show we have four factors working against us in the workplace: Imposter Syndrome, Unconscious Bias, the Double-Bind Paradox , and Nonverbal Submission Signals.

Let’s dive into each one, and then we’ll talk about overcoming the obstacles.

Imposter Syndrome

Imposter Syndrome is the persistent inability to believe that one’s success is deserved or has been legitimately achieved as a result of one’s efforts or skills. This is the barrier to female leadership success that you’re probably most familiar with. It refers to the lack of confidence many women feel, even if they’ve been highly successful.

Have you ever found yourself downplaying your own success or even feeling like a fraud, believing you lucked into a result that had little to do with your true value? If so, you’re not alone. We often let our self-doubt impact our level of self-confidence, and in a visible way that can negatively impact our careers.

For example, consider this statistic from Hewlett-Packard’s 2014 internal research : women only apply for positions when they feel they meet 100 percent of the requirements. Men, however, apply confidently for jobs when they meet just 60 percent of the requirements.

Unconscious Bias

Today, most people would never outright say that they believe women don’t make good leaders, and this is because most of us are open-minded and consciously believe in a woman’s ability to lead. Unfortunately, many people remain saddled with an unconscious bias in favor of men as leaders—even women. For example, multiple research studies have shown that participants who are asked to draw a picture of a leader will nearly always draw a man.

Double-Bind Paradox

This particular barrier is probably a phenomenon you’re familiar with, even if you’ve never heard the technical name. It refers to the idea that women have to project authority and confidence in order to advance in the workplace, but the more powerful they appear to be, the less well-liked they become.

As women, we tend to care about what other people think of us, so this paradox is a real barrier to leadership success. Not surprisingly, men do not face this dilemma. They move up the career ladder and gain power and authority while easily maintaining their likeability.

Non-Verbal Submission Signals

Of all the roadblocks we women must surpass in building leadership presence, this is perhaps the one we can exercise the most control over by merely having more awareness. You see, as women, we tend to exhibit non-verbal cues of submission without realizing it. Here are a few examples:

The Head Tilt: Do you ever find yourself tilting your head as you listen to someone else speak? This is known as a prosocial nonverbal cue —one that is meant to help other people in some way. For example, the head tilt is something we often use to show concern or empathy, and making it a useful tool in interpersonal communication. However, use it too often in the workplace, and this nonverbal cue can be read subconsciously by others as submissive. (Consider the fact that a dog tilts its head to expose its neck as an act of deference to a dominant animal—this should make you think twice before using a head tilt during a presentation or when asking for a raise!)

Making Yourself Small: When you sit in a meeting around a conference table, consider your posture. Do you cross your legs, keep your elbows close to your body and your hands folded in your lap? Many women do, and this is a subconscious way that we condense our bodies and take up less space.

Unfortunately, this is incredibly damaging to leadership presence. It makes us appear less confident, powerful, and professional than we are. Instead, focus on ways to take up more space. These expansive body postures are sometimes called “ power poses .” If you do nothing else, though, keep your feet both flat on the ground and sit up straight in your chair during your next meeting.

Acting Invisible: We women often believe that if we just keep our heads down and consistently do good work, we’ll be noticed. Unfortunately, this just isn’t true. A human resources professional once told me that, all too often, senior executives look at a talented woman’s resume and say something like, “I have no idea who she is.” It’s a sad fact that has played out in recent Silicon Valley studies, too. It's not enough for women to do good work; we also have to make ourselves and our successes visible to our superiors. So, volunteer for crucial presentations, publicize your team’s successes, and look for mentors who will help to make your work more visible, too.

Why Overcoming These Obstacles is Worth It

If you’re working on your leadership presence, all of this information can begin to feel overwhelming. After all, there’s so much to consider, and some things, like unconscious bias, we simply can’t change. Remember, though—you’re worth it. Women are worth it. We need to make a concerted effort to improve our odds of landing leadership roles because we deserve it. What’s more, our organizations need us.

Consider these facts:

Women are highly educated. According to the National Center for Education Statistics , women make up more than half of college students nationwide—56 percent.

We boost innovation in our organizations. A study done by an economist at Carnegie Mellon discovered that teams with at least one female have a collectively higher IQ than teams made up entirely of men.

We increase profits for our companies. Research done by the Anita Borg Institute for Women and Technology showed that Fortune 500 companies with three or more female directors could expect returns on invested capital of more than 66 percent and sales increases of 42 percent on average.

If you want to succeed as a leader in your field, take this knowledge of the unconscious forces working against you and turn them into steppingstones to your success. The more you know and understand building a positive leadership presence as a woman, the better your chances are of achieving your career leadership goals. After all, knowledge is power—and power looks good on you.

It’s Your Estate—Don’t Procrastinate!

Tue, 24 Nov 2020 22:56:05 GMT

Nobody likes thinking about dying, or selecting a guardian to raise your children, or having to choose which of your children would best manage your money in your absence. But the critical point about estate planning is this: if you don’t do it, you lose your say. Without a will, your estate may end up in court, divvied up based on a judge’s decision—not your own.

Without specific terms set in place, you may not get the medical care you would prefer or the preferred custodial caretaker for your children. For those reasons, it is better to face the discomfort of our mortality and make sure everything is up to date and in order. With your estate planning checked off your list, you can rest assured that, in an unthinkable situation, you and your family will be covered.

So, where do you start?

Let the Decisions—and Paperwork—Begin

There will likely be many decisions you will have to make regarding your estate. Let's take a look at the primary documents you will need, which will guide you in making these decisions.

A Will. Your will designates who will inherit or control your assets when you die. A will is vital if you have young children, as in it, you can detail the wishes for their future care. In your will, you can name guardians and name fiduciaries to act on your behalf, and you can name trustees to manage a trust. You can also name an executor to oversee your wishes. If you have specific property, art, or investments that you would like given to certain people, charities, or organizations, this is also the place to do that.

When putting your will together, it’s good to look over how much you have to live on. Do you have excess capital that you want to give away while still alive to save on taxes after death? If the idea of giving away assets while alive is uncomfortable for you, perhaps giving away future growth after death may be better. If you own a business, you should consider an exit strategy or a succession plan, especially if you have children. If you plan to give money to children or grandchildren, you may want to consider limiting or postponing access by putting it into a trust. If you decide to put gifts into trusts, you will also need to consider who would act as trustee(s).

The key here is that your will tells the court what your wishes are for your assets.

Durable Power of Attorney . A power of attorney form is a document in which you authorize somebody to act on your behalf regarding financial decisions. This person is known as the attorney-in-fact. You can determine how much power the person will have over your financial affairs.

A “durable” power of attorney form is one that remains valid even if you become incompetent or incapacitated. You can design it to take effect immediately or stipulate that it only goes into effect when you become unable to make decisions for yourself. This is known as a “springing power of attorney."

If you were unable to manage yourself, your care, or your finances, a person close to you (often a spouse) would step in to act on your behalf. There are many reasons a spouse may not be the ideal person to take on this role, especially if they have health issues or other reasons that make them unfit. Often a child is then named for the role. The person granted power of attorney has a great deal of control in making choices for you and your assets, so choosing wisely and putting your wishes in writing is an excellent way to ensure your best interests down the line.

Revocable Trust. In addition to having a will, some people use a revocable trust should they become unable to manage their affairs. The benefit of this setup is that creating and funding the trust avoids probate, which is the process by which your executors submit your will to a court to transfer assets to your beneficiaries. There are two major benefits of using a revocable trust: privacy and time & cost savings to settle your estate. If you do not want people to know how much assets your children would inherit from you and have a significant amount of probate assets (not in your retirement accounts and life insurance), consider setting up a revocable trust to hold these assets. Trust assets can be transferred to your beneficiaries effectively based on the trust agreement provisions. You can be the trustee for the revocable trust, and you can appoint another person or corporation to act on your behalf and manage the trust.

If you have a trust over $1 million, and you don't want your spouse or one child to be the successor trustee upon your death, consider naming a corporate trustee that can act professionally and follows your wishes precisely. This arrangement may reduce the conflicts and tensions among the child who has control and the other children.

After this trust document has been signed and executed, do not forget to change your ownership of assets from individual/joint to your revocable trust. I have seen many cases where an estate plan was not appropriately implemented by forgetting to retitle assets and/or change beneficiary designation forms for retirement accounts or life insurance.

Health Care Directive. A health care directive, sometimes called a living will and power of attorney for health care, is a written document informing others of your health care wishes. It allows you to name a person (or “agent”) to make decisions for you if you are unable to do so. In most states, anyone eighteen or older can create a health care directive.

A health care directive is useful if you become unable to adequately communicate your health care wishes. The directive guides your physician, family, and friends regarding your care when you cannot provide that information. While you will still receive medical care without a health care directive, it will help you get precisely the care you would like, particularly near the end of your life when your interests may not be the same as those who survive you.

Before doing a health care directive, think about your goals, values, and preferences about healthcare, such as the type of treatment you do or do not want—for example, intubation or the use of feeding tubes. It would be best if you also considered whether you wish to donate organs, tissues, or body parts. You can also include wishes for funeral arrangements.

Without a health care directive in place, your doctor may provide you with medical treatments you may have otherwise refused. It is crucial to have a directive if there are disagreements within your family regarding how to proceed with care.

Irrevocable Life Insurance Trust. If your current estate exceeds the estate exemption of $3.0 million in Minnesota in 2020 and your assets are projected to grow to over $11 million during your lifetime, consider placing your life insurance policies in an Irrevocable Life Insurance Trust (ILIT). An irrevocable life insurance trust allows your life insurance proceeds to be available to your loved ones, such as your spouse and children. It also gives you more control over your insurance policies and the money paid out from them.

This ILIT strategy’s benefit is that the death benefit will not be included in your or your spouses' taxable estate. In addition, if you have a taxable estate that is above the estate exemptions, the death benefit can be used to help your survivors pay income and estate taxes and/or day-to-day expenses immediately after your death. Your trustee would not have to sell investments during a potential stock market downturn within nine months of your death to pay the estate taxes due.

It is an unpleasant thing to think about but having your estate in order before something happens is critical. The essential benefit of end-of-life planning comes from knowing that your wishes will be fulfilled if you cannot voice them. There is security in knowing your family will be provided for if something happens to you.

The good thing about estate planning is that qualified professionals can help you navigate through the process. Their goal is to fulfill your end-of-life wishes thoroughly and legally. At my company, Echo Wealth Management , we review each client’s estate plan and coordinate with a trusted estate attorney to work on a relevant plan based on their current financial situation and projected wealth in the future. If you have questions about your estate plan, be sure to schedule a complimentary 30-minute Discovery Call . I’m licensed in all 50 states and work with clients both locally and virtually long distance.

Attention Married Couples: How to Get in Sync with These Nine Essential Money Practices

Fri, 20 Nov 2020 21:28:48 GMT

Oh, the dichotomy of money talks with your spouse. They’re so vital to have, yet they are often uncomfortable. So, not surprisingly, most married couples aren’t properly communicating about financial habits and money values.

When a couple marries, they bring their individual money values into the union, which can be as unique as their fingerprints. These values have been created over a lifetime, often through observing parents, and most people are deeply entrenched in them. The trouble is that most couples don’t discuss these values.

The money discussion is an important one to have, though. To make the topics easier to broach, think of your spouse as a business partner. Viewing your household as an operating business may help set emotion and discomfort to the side and allow you to engage in meaningful conversations.

If you’re ready to get on the same financial page as your spouse, check out these nine ways couples can get in sync and avoid money conflicts.

Maintain Separate Bank Accounts, Plus One Joint Account

One common suggestion for married couples—especially those with divergent money values, like one saver and one spender—is to maintain individual bank accounts along with a joint account for shared expenses. This leaves each spouse some financial freedom while both commit to following any guidelines agreed upon for the joint account. All shared bills, such as utilities, mortgage or rent, car payments, food, and insurance, should come out of the shared account. How much each spouse contributes (especially if there is a difference in earnings) should be discussed, as a 50/50 split may not be feasible. What’s most important is that the shared account can track all household expenses through a system that both spouses agree on.

Create a Realistic Household Budget

If you’re taking the step of setting up a joint bank account for household expenses, you’ll need to consider all your bills. Understanding how much it costs to live your lifestyle as a couple is paramount to knowing how much you need to spend each month, as well as how much you want to save down the line. Tracking your spending and understanding how much is coming in and going out is a great way to get a handle on monthly expenditures. If finances are tight, careful budgeting also offers an opportunity to discuss all the extras (coffee, lunches out, pricey gym memberships, fitness coach, etc.) and decide together how to move forward with shared financial goals in mind.

Set Financial Goals as a Team

If you haven’t established any financial goals yet, it’s time to get started. Once you have your monthly budget determined, the next step is to discuss your long-term goals together. What do you want to do in retirement? Where do you want to live? What about the kid’s college costs? This is the time to layout your hopes, dreams, and fears for the future. Many couples find they have different goals, so the earlier you can start talking about this, the more time you have to devise a joint plan for your financial future.

Save, Save, Save

This is a big, important goal that every married couple should commit to. You need to be saving, even when times are tight. One of the most straightforward and most painless ways is to max out your 401(k) contributions to take full advantage of any employer match opportunities. When it comes to retirement savings, a good goal is to be saving at least 10 percent of your yearly income towards retirement.

If you have children, starting a 529 education savings account and making regular contributions can help the cost of college down the line. On top of that, have a joint emergency savings account that you can access for emergencies that may arise. Consider contributing to it every pay period through an automatic funds transfer.

While it may seem overwhelming to set aside so much, having enough savings can be the difference between a rough patch and a disaster, so make it a priority.

Handle Debt as a Team

In many marriages, each spouse brings their own debt, whether from student loans, credit cards, or something else. It’s vital to tackle these individual debts as a team, even if the debt is your spouse’s and happened before you were married. Remember that debt can affect you both, be it in quality of life or in the ability to get a line of credit or buy a house, so it’s critical that you be all-in when it comes to a payoff plan. Develop a plan to pay down any high interest, toxic debt first, then go from there. There are many ways to tackle debt—the important thing is that you do it together.

Live Within Your Means

A major step in paying down your debt is to start living within your means. Make sure you are taking in more than you are spending each month. This may mean a period of belt-tightening, but when both of you commit to it, it’s possible to quickly pay down debt. While taking these steps, keep your eye on the bigger picture—your shared financial goals and values.

Check-in Regularly

Life has a way of interrupting even the best-laid plans, so you mustn't stop discussing your financial goals after the initial discussion and planning. Schedule periodic meetings to check in with one another, keeping an eye on your budget and shared goals. Schedule these check-ins for quiet times when you aren’t likely to be disturbed. You want to ensure that you can have open, forthright discussions to continue moving forward together on a firm financial footing.

Face Hard Times Together

Even if you and your spouse are doing everything right, you could still find yourself falling on hard times. An unexpected job loss or medical issue, for example, could quickly deplete your savings and throw all your hard work out the window. Prepare for possible hard times together by aiming to have an emergency savings fund of three months to six months of your living expenses that is not invested in stock markets or inside your retirement accounts. Keep the emergency savings fund in a savings account earning higher interest than a checking account.

For example, Ally.com’s online savings account pays higher interest than most banks, currently at 0.60%. If you own a home, consider having a home equity line of credit (HELOC) available to you so that you do not need to have too much in the emergency fund. Suppose you tap into it to pay for unexpected expenses. In that case, the interest rate of HELOC is generally lower than credit cards and, you only pay interest on the HELOC debt balance.

Maintain proper health and life insurance and get regular medical checkups. Take care of your vehicles and home as best you can. Planning together can solve a host of financial issues, as well as keeping your marriage strong in the face of adversity.

Don’t Keep Secrets

This tip ranks high, as failing to follow it can have a profound impact on a relationship. Many marriages have suffered the fate of “financial infidelity”—that is, hiding spending, debts, or other financial issues from a spouse. Secrets of this nature are corrosive and lend themselves to more significant problems down the line. It’s much better to be honest and work through financial issues together, rather than getting caught up in deliberate deceit.

While money issues can easily cause discord in a marriage, they don’t have to. By following the nine steps above, you can stay in sync with your spouse and remain on firm financial footing together.

If you’d like to do a self-check with your finances, I invite you to read my book, Own Your Future , where I share seven life-guiding principles and give you tools and education to think properly about your money. Today is the best day to start on your path to financial independence!

The Why, What, and How of a Financially-Fruitful Career Pivot

Tue, 17 Nov 2020 20:22:05 GMT

2020 has been a year of pivoting—business owners pivoting to adapt to the changing market environment, and others having career changes “forced” upon them.

As humans, we prefer the familiar, the predictable, the strategy that gives us the long view. But when it’s not forced upon you, change can be incredible, especially as you begin to feel the urge to make a career change. Many people ignore the nagging feeling because it’s easier to maintain the status quo than embark on a transition that may be overwhelming or stressful. There can be fantastic opportunities and fulfillment waiting on the other side for those who boldly choose a career pivot.

If you’re considering a career change, I advise you to determine your Why, What, and How. Let’s dig in.

The Why

Everyone—business owners and career professionals alike—have moments when they question their career paths. It may be that you’re going through a tough season at work where you feel less than inspired, or it may be that you are truly ready for a change. Before making any big moves, it’s critical to evaluate exactly why you desire a change. Usually, your situation will fall into one of three categories:

You’re feeling unfulfilled at work.
You’re feeling unfulfilled in your personal life.
You’ve reached a growth ceiling in your current position.

If you’re feeling unfulfilled at work, dig in a little deeper and ask yourself a few questions.

How long have you been feeling unfulfilled?
Can you put your finger on what it is about your current role that isn’t meeting your needs?
Are you merely lacking a challenge, or is the work/industry not working for you anymore?

As you answer these questions for yourself, be realistic about whether a career pivot is what you need, and listen to your intuition.

If you’ve reached a growth ceiling, financial or otherwise, a pivot away from your current job or industry can seem quite appealing. However, consider whether something like consulting or freelancing within your current sector could meet your needs before you pivot away from your many years of experience.

Understanding the “why” behind your desire for change is an excellent indicator of your next best move. Make sure you spend some time identifying what it is before you determine your path forward.

The What

Once you decide to pivot, the possibilities may be vast. Whatever change you make will impact your life, not just your career, but also prepare for it. Typically, there are three ways to pivot:

Seek out a new job.
Forge an original path forward in your current industry.
Pursue a new industry.

Choosing to look for a new job could mean within your current company, with competitors, or in a closely-related industry. You might find a better salary, more convenient hours, or coworkers you jive with better than your current team. You might also find a way to utilize better a skill set you’d like to grow. Consider whether this solution can bring you the change you need to feel more connected and inspired by your work.

Sometimes, you may need to reimagine your future path at your current job to solve your work problems. For example, maybe you genuinely love the company you work for, but your middle management role has you feeling burnt out. In a case like this, it may be worth talking to your human resources department about possible opportunities within your company. For example, there may be a project management role that would allow you to utilize your skills and experience but not require managing people. Pivoting within your company in this sort of way can be an excellent solution because it allows you to leave behind the unfulfilling parts of your job while also preserving what you do like about it.

Pivoting to a brand-new industry is an exciting—and sometimes challenging—proposition. On the one hand, you might find that you have a specialization that fits nicely into a new field. On the other hand, you need to be sure that this type of change would accomplish what you’re hoping it will, providing more meaning and enjoyment in your work. The adage, “the grass is greener on the other side,” applies here, making sense to research before making this kind of career change. Talk to people already working within the new industry you’re considering and ask discerning questions. This process will help you ensure that your current work problems don’t follow you to your new job.

The How

Step 1: Choose Your Pivot

You examined your “why,” now you must choose you “what.” Determine what you want to accomplish with your pivot, weigh the pros and cons, then choose your path forward.

Step 2: Don’t Fly Blind

Even if you think you know enough about your chosen pivot, it’s essential to do lots of research. For example, If you’re pursuing a new industry, make sure you know the average salary. If you want to begin freelancing, make sure you understand the tax implications. Force yourself to think with your head instead of your heart so that you know exactly what you’re getting into financially.

Step 3: Set Your Expectations

Any career pivot will mean starting a new chapter in your life, both career-wise and in your personal life. While you might be very excited at the prospect of new day-to-day work, it’s essential to look outside of that. Will there be new demands on your time that will impact your friends and family? Will you have to take a pay cut that changes your ability to vacation with friends or drive a new car every few years? Think about the best- and worst-case scenarios and set reasonable expectations for this new phase of life.

Consider Utilizing a Financial Planner

You are worthy of a career that inspires you and gives your life meaning. However, you must also balance your financial goals against any career pivots. Making a decision too hastily or failing to think through an aspect like retirement planning could hurt you in the long run.

This is why it behooves you to brainstorm any proposed pivot with a financial advisor. I know that this might not be the first person you think of to discuss this with, but expert advice from someone with your unique goals and finances in mind can make all the difference in making your career dreams a reality.

If you’re ready to make a change, please contact me today. I can help you put a financial plan in place that supports your career moves now and into the future, allowing you to build the meaningful life and career you’ve always dreamed of. Schedule a complimentary 30-minute Discovery Call to learn more about how you can plan for your financially-secure future.

“Pay Yourself First:” An Essential Line Item on Your Monthly Budget

Fri, 13 Nov 2020 15:45:02 GMT

How are you at saving money? Have you ever wondered how to merge savings into your budget? What if there was a way to save efficiently without putting you in a panic about having enough money on hand to pay monthly expenses or for discretionary spending?

Think about your spending habits for a second. Most of the time, we don’t even think twice about swiping a card or dishing out cash for smaller purchases and monthly expenses. You likely pay rent or make a monthly mortgage payment. You might also have a car payment, utilities, or a mortgage. But what if you could also see savings as one of your monthly expenses? (I guarantee that you’ll thank yourself ten years down the road.)

The Key is Automation

The easiest way to save money is to set up an automatic savings plan. For years, companies have done this on behalf of their employees in 401(k) plans. The plans that offer automatic enrollment can electronically take a percentage of your earned income and put it towards your retirement. We can choose the desired percentage, but after that, we really don’t even look at the amount that is deposited into the plan.

The goal is to mimic this automatic plan with our own income in conjunction with our budgets, monthly expense, and ultimately, savings.

So, the most important step in automating your savings is tracking your monthly expenses. If your monthly expenses do not fluctuate much, then adding automated savings to your budget will be simple. But without some degree of predictability, the amount available for savings may be more fluid. Once you know your expenses, you are able to figure, with some confidence, the amount of surplus you will have for the month.

Many people view the surplus simply as extra money that they can spend. However, from a financial standpoint, saving as much as you can of the surplus, especially at younger ages, will put you in a strong financial position in the future.

Finally, automating monthly credit card payments can be beneficial because it lowers the chance that a payment could be missed. You are not even required to go online and pay it. (Although I do recommend making extra payments so you can pay the balance off sooner.) Automating bill pay for rent or mortgage, utilities, car payment, etc., can cut time and stress in addressing fixed monthly expenses. Automating savings works the same way.

Allocating Your Savings

It’s beneficial when saving money to determine what purpose you’re saving for. First, I always recommend establishing an emergency fund equivalent to 3-6 months’ worth of expenses. An easy way to do this is by opening a high-interest savings account and setting up an automatic recurring transfer on any given day of the month, for say, $250. This can be done early in a month during the first pay period if you are paid bi-weekly or during the second pay period of the month. Make regular savings a priority. What you are doing is automating the savings as if it were a monthly expense—making it more habitual and putting less thought into it. If you don’t see the money you might be susceptible to spending, you won’t hesitate to save it.

The same holds true for investing. If your emergency fund is healthy and you have added cash lying around outside, automating monthly transfers from cash accounts into investment accounts allows for more growth.

If you also have specific goals, such as buying a car in two years, you could create a savings account beyond an emergency fund. Then transfer an amount to that account each month to be allocated towards the goal you’re saving for. It depends on how comfortable you feel separating the funds. Either open another savings account separate from your emergency fund or have both held in one savings account, leaving you to be in charge of knowing what is allocated to your emergency fund and other savings goals.

If your income varies monthly, you can still set up an automatic savings plan with minimal amounts by giving yourself a task to review quarterly to make necessary adjustments. The key here is creating a healthy money habit by making Pay Yourself First a line item on your monthly budget to make savings and investing less stressful. It may take a few months to become accustomed to this habit, but with practice, persistence, and consistency, it will bring you peace of mind and put savings at the forefront of your financial focus.

For more tips to make saving easier and start to achieve your financial independence, I encourage you to read my book, Own Your Future: One Woman’s Story of Immigration and Financial Freedom. I share seven life-guiding principles, give you tools and education to think properly about your money, help you to identify who should be on your financial team, and offer insights into what each of them should deliver. Don’t delay. Today is the best day to start on your path to financial independence!

The Roth IRA: A Key Ingredient to Your Tax—and Retirement—Strategy

Tue, 10 Nov 2020 22:35:46 GMT

2020 is coming to a close. As you look back at what this year has brought, chances are, many other things topped your priority list before “tax strategy.” In a recent blog, I discussed tax strategies you should review before year-end. Today, I’d like to spend a little bit of time going a bit deeper into one of those strategies…Roth IRAs and 401(k)s.

As a refresher, a Roth IRA allows you to save after-tax dollars, and withdrawals including earnings from the account (after age 59 ½) are income tax-free. The Roth IRA allows you to pay taxes now at a certain rate instead of paying taxes later at an uncertain rate. This is a great way to hedge against future income tax increases.

Let’s explore a Roth IRA a little deeper.

What Makes Roth IRAs So Special?

Here are a few rules that make Roth IRAs special:

You can make contributions at any age.
You are not required to make a “required minimum distribution” (RMD) from a Roth IRA. (Traditional IRA account owners must start taking distributions at age 72, changed from 70.5 starting in the year 2020).
A non-working spouse can open a Roth IRA based on the working spouse’s earnings if they file tax returns jointly.
You can still make your annual contributions if you convert money from a traditional IRA to a Roth IRA in the same year.
You can contribute to a Roth IRA even if you participate in a retirement plan through your employer.

When it’s time to withdraw, you’ll pay the ordinary tax rate (typically higher than the long-term capital gain rate) on the distributions from the tax-deferred bucket (traditional IRA or 401(k) plan). You won’t need to pay any taxes on distributions from your Roth IRA after age 59 ½ or having met the five-year rule after converting some IRA money to Roth IRA. Because you use after-tax dollars to fund a Roth IRA, any distributions after age 59.5, including earnings, will be tax-free.

Can I qualify to contribute to a Roth IRA based on my income? The IRS determines the income limit each year for making contributions to a Roth IRA. If you are single, you must have a modified adjusted gross income (MAGI) under $139,000 to contribute to a Roth IRA for the 2020 tax year, but contributions are reduced starting at $124,000. If you are married filing jointly, your MAGI must be less than $206,000, with reductions beginning at $196,000. For 2021, the numbers are higher. The modified adjusted gross income for singles must be under $140,000; contributions are reduced, starting at $125,000. For married filing jointly, the MAGI is less than $208,000, with phase-out starting at $198,000.

What If Your Income Is Too High?

How do you start creating the three buckets of money (tax-deferred, tax-free, and taxable) I spoke about in my last blog, especially in your 40s and 50s when your earned income is too high to contribute to a Roth IRA? You can consider a “Backdoor Roth IRA.” Here’s how it works:

My client, “David,” is age 51 in 2020, his MAGI is $300,000, and he’s married, filing jointly. He is planning to maximize contributions to his 401(k) plan at work that is $19,500 plus $6,500 catch-up contributions for people age 50 and over in 2020. He can still contribute to his traditional IRA account up to $7,000 ($6,000 plus $1,000 catch-up contribution) because he has earned income.

The IRS has income limits to calculate how much of the contributions to an IRA are tax deductible and whether he is covered by a retirement plan at work. As his MAGI is over $124,000 and he is covered by a retirement plan at work, he cannot deduct any of his IRA contributions on his tax returns. However, the non-deductible contributions must be reported on Form 8606 when his federal income tax return is filed so that the IRS has a record of the cost basis of this IRA.

When he decides to convert this IRA balance to a Roth IRA in future years, he only pays income taxes on the earnings portion of this distribution in the year of the Roth conversion. If he does not have pre-tax dollars in this IRA, the taxes he will pay are minimal, and he creates a large Roth IRA over time. Therefore, do not forget to report contributions on your tax returns. As you convert any IRA balance to a Roth IRA, you’ll receive a tax form 1099-R that shows the distribution amount from your IRA, which must be reported on your tax return Form 1040.

Other Roth Strategies

Converting from an IRA to a Roth IRA: In a year (or a few years) in which their income is lower than usual, retirees should consider converting a small amount of their IRA to a Roth IRA each year by watching out not to get into the next tax bracket.

For example, looking at the 2020 federal tax rates , your next tax rate is 24% at $170,051 taxable income as a married joint filer, and your current projected taxable income for this year is about $135,000 (at a tax rate of 22%) because you just retired and decided to delay collecting social security benefits until age 70. Now you can convert an additional $35,050 IRA balance to a Roth IRA by paying taxes at a 22% rate. This way, you can increase your tax-free bucket without paying a high-income tax rate, which will help you keep taxable income low as you withdraw from your Roth IRA when your social security benefit starts at age 70.

If you started a new business and have reduced taxable income in the first year or two, it’s a good opportunity to consider converting some of your IRA to a Roth IRA by watching out for your next tax rate. I’ve converted a significant amount of my IRA balance to a Roth IRA myself twice over the past 16 years to dramatically increase my Roth IRA balance. As you must pay income taxes on the Roth conversion, it’s essential to start saving some extra money early in a non-retirement account. Invest less aggressively than your Roth IRA so that you can tap into it to pay for taxes on the Roth conversions.

Saving even more: If you can save more and have a sizable non-retirement account already, you can also consider switching from contributions from your 401(k) to a Roth 401(k) as well (if your employer offers Roth 401(k)). The annual maximum is the same, but you essentially have increased your retirement savings by funding it with after-tax dollars and distributions that will be tax-free after age 59½. As I mentioned earlier, paying taxes now at a certain rate instead of paying taxes later at an uncertain rate is a way to hedge against future income tax increase through tax diversification.

Use financial planning tools to project your future tax rates based on your projected taxable income year by year to age 95, and today’s tax laws will help you make smart decisions. Remember that you can contribute some to the traditional 401(k) plan and some to the Roth 401(k) plan as long as the total does not exceed the IRS maximum per year. In addition, your employer’s matching contributions will be taxable to you upon distributions.

To truly maximize your tax strategies, I recommend you consult with a financial advisor who is able to look at your overall financial picture and guide you along the way. If you are concerned that there’s just too much to know, I invite you to schedule a complimentary 30-minute Discovery Call . My team at Echo Wealth Management and I can help you navigate these waters. Wealth management can be complicated, but it doesn’t have to be. Let’s chat and see how we can be of service to you.

All-Important Tax Saving Strategies for the Affluent (and Those Who Want to Be)

Fri, 06 Nov 2020 20:18:11 GMT

When I worked as a tax CPA for KPMG in the late 90s, I served many corporate executives and wealthy families as their senior tax specialist and prepared many individual income tax returns, trust returns, and gift tax returns. Now I use that knowledge and expertise to help my affluent and high-income clients plan ahead to keep more money in their pockets by using smart tax savings strategies.

Looking at this Historical Tax Rate Chart 1913 - 2020 , you can see that the current top income rate is relatively low. Like the importance of diversification in investing, I think tax diversification is relevant as I help clients plan for their financial future.

I have five tax savings strategies I’d like to share with you today to help you keep more of your money.

1 – Diversify Your Income Sources

Investors should consider owning investments in three tax buckets:

1. Tax-deferred (401(k) or IRA)

2. Tax-free (Roth IRA, HSA)

3. Taxable (individual, joint, revocable living trust)

The tax treatments are different in each of the three buckets before withdrawal. You can sell investments with gains or losses inside the tax-deferred bucket and tax-free bucket without reporting them to IRS. You must watch for short-term or long-term capital gains, interest income, or dividend income each year inside the taxable bucket.

Since you cannot predict your future income tax rates, owning investments in all three tax buckets allows you to have the maximum tax planning flexibility during retirement to reduce taxes. For example, if our government’s deficit continues to be large, the tax rates may increase during your retirement for people earning over $200,000 annual taxable income. You may be able to withdraw money from your Roth IRA (tax-free bucket) instead of your IRA (tax-deferred bucket) to keep your taxable income below $200,000, therefore paying taxes at a lower rate. When tax rates go down because of a change in government (i.e., a new president or congress), then you can switch to withdrawing from your IRA and taxable accounts.

In my next blog, I will go more in-depth on how Roth IRAs, in particular, can enhance your tax strategy.

#2 – Help Your Children Fund Their Roth IRAs

If your children have a part-time job or a summer job, earning any amount of income, you should encourage them to open a Roth IRA now, which you can help them fund up to his/her earned income, with a maximum of $6,000 for 2020 and 2021. Even if they only make $4,000 per year and may be able to save $2,000 for the Roth IRA, you can help with another $4,000 to encourage saving now and investing for their retirement early. The long-term growth of this tax-free account is significant. You can teach them the magic of compounding over 50 years, and they won’t have to pay taxes on distributions regardless of their income level.

For the young people who are just starting in their career and their income is low enough to be eligible to contribute to a Roth IRA, generally I recommend maximizing Roth IRAs after they have contributed enough to get all the employer matching in their 401(k) plan (don’t leave money on the table).

#3 – Be Creative with Your Charitable Giving

Suppose you have appreciated stocks in your non-retirement accounts. Instead of writing checks to charities or using payroll deductions at work, you can simply set up a donor-advised fund through your financial advisor and transfer the appreciated stocks that you have unrealized long-term gains to this fund. You can deduct the fair market value as charitable deductions on tax returns in the year of funding the donor-advised fund, even though you don’t have to determine the recipients of your generosity until later years.

For example, if you usually give $5,000 to charities by writing checks, you can donate a total of $100,000 value of appreciated stocks (with a cost basis of $60,000) to your donor-advised fund, and you can save about $40,000 in income taxes this year. Then, when you sell the stocks to diversify to other investments inside the account, you don’t have to report the long-term gains of $40,000 on your tax returns, saving you an additional $12,000 in capital gains tax. If this account grows, you will have more money to help charities, and you can decide to choose the amounts and the charities during your lifetime.

Note: You do not take another charitable deduction when the money (grant) goes to charities from this account. Upon your death, the successors you have named will continue your legacy.

Other creative options also include a charitable remainder trust and a charitable lead trust. A charitable remainder trust helps you avoid capital gains taxes on appreciated assets. It also allows you to receive income for life and receive a tax deduction now for a charitable contribution that will be made after your death. A charitable lead trust avoids taxes on appreciated assets, earns an immediate tax deduction, and still provides an inheritance for your heirs later.

#4 – NUA Strategy

NUA, Net Unrealized Appreciation, refers to employer stock inside a retirement plan at work. Before the Enron crisis, many employers used to match company stock in the 401(k) plan, and employees kept the stock for many years. When you’re getting ready to retire and considering taking distributions from your 401(k), you have the opportunity to decide what to do with the employer stock.

If the cost basis is low (let’s say 20% to 30% of the market value), consider taking the stock out by transferring the shares to a non-retirement brokerage account (not an IRA account). The tax treatment is that you pay ordinary income tax on the cost basis in the year of taking the stock out of the plan. The appreciation from the cost basis will be treated as long-term capital gains when you sell the shares anytime in the future inside your non-retirement brokerage account.

I encountered this situation once when my client’s father suddenly passed away at age 80, and her mother (age 79) inherited a large 401(k) plan balance with about 40% in employer stock. The cost basis was about 20% of market value. I reviewed the most recent 401(k) statement and learned that the RMD for that year was about $50,000 that needed to be taken out immediately to avoid a 50% tax penalty assessed by IRS. After a thorough analysis, I concluded that taking out this employer stock in-kind and paying income taxes on a $75,000 cost basis was the best choice for her. This distribution of stock meets the RMD requirement for the year, and she would have over $350,000 worth of stock in an account that she can potentially pay lower long-term capital gain taxes if she sells anytime. If she leaves this low cost basis stock in the taxable brokerage account to her children upon her death, her children will receive a step-up in the cost basis (market value on the day of death) on this stock and can choose to sell it without paying any taxes.

#5 – Maximize Your Health Savings Accounts (HSA)

Maximizing your Health Savings Accounts , or HSA, is a strategy using tax-free dollars to pay for health care during retirement. If your employer offers high deductible health insurance plans, you should undoubtedly review this to see if you should choose it to save on monthly premiums and combine with the tax savings from funding your HSA.

Consider a Financial Advisor

While having a good tax accountant is essential, having a financial advisor, especially one who is a Certified Financial Planner™ (CFP®), is vital to making sure your investments are diversified from a risk standpoint and a tax standpoint. I am licensed in all 50 states, and my firm, Echo Wealth Management , handles clients from all over the US. If you would like to explore the ways a financial advisor can help you maximize your tax strategies along with other key investment strategies, please schedule a complimentary 30-minute Discovery Call . The year is quickly coming to a close, and you want to be sure to take full advantage of this year’s tax benefits.

A Man Is Not a Plan

Tue, 03 Nov 2020 18:28:48 GMT

Recently I heard a story from a 67-year old woman who had gotten divorced after twenty years of marriage. She had raised her daughter at home while she was younger, and she didn't get much from the divorce. She is now collecting about $900 per month from Social Security income and working part-time to get by while sharing an apartment with others. She is fearful about her financial future because she has never managed money before, and it's hard for her to find a job at her age.

I also heard another story about a woman who confided to her college-aged granddaughter that she had stayed in an abusive marriage for many years because she didn't have any control of money. Later, this woman's death resulted from falling down the stairs, which was confirmed not to be an accident. (Her abusive husband pushed her.) Staying because of money literally cost her her life.

Stories like these deeply sadden me, but they have also made me more certain that a man is not a plan. Gentlemen, this is not a slam against you; but ladies, you do face some unique challenges.

Challenges Faced by Women

Women face unique challenges in planning for a financially secure future. Here are a few of those challenges.

Women earn less than men, even though more women have a college degree. More women in the US have a college degree than men, but the average woman's unadjusted annual salary has been cited as 78% to 82% of that of the average man's as of 2015 (and hasn't changed that much today).

Women tend to choose occupations that are not highly paid. Much of that gap is due to occupational segregation —women clustering in low-paying careers, including cosmetology and childcare and men in more lucrative professions such as welding and automotive repair. In addition, more men choose highly paid careers that require a four-year college degree, such as science, technology, engineering, and finance. Women tend to choose nursing and education.

More women are single because American adults are far less likely to be married than they were two generations ago. Many women with successful careers still seem to think they can put off financial planning—everything from contributing to a 401(k) plan to buying a house—thinking, "This will all be taken care of when I get married.” Do not wait to make major decisions until you get married because the reality is, Prince Charming may never come.

The divorce rate is high in the United States. Overall, retirement savings for most Americans are insufficient, and divorced women have even lower retirement asset balances and income to plan for their financial future.

Women spend an average of eleven years out of the workforce, caring for a relative or children. That time is usually spent not saving for retirement. Women have lower Social Security benefits as a result, as those benefits are tied to earned income history.

Women live longer than men by about seven years. In the United States, the average life expectancy for men is 73.4 years, whereas the average life expectancy for women is 80.1 years. This means women need more income in retirement.

The fact is, an increasing number of women will end up managing money on their own because they've been divorced, widowed, or have never married. All these unique challenges for women make planning for a financial future even more important.

Actions Women Should Take Now

So what can women do now to own their financial future?

Ladies (and gentlemen who have female friends and relatives), I believe that meticulous planning now can prepare you for uncertainties in the future. You can start planning now, even with limited money.

Here are a few tips for women to take action now.

Educate yourself about the basic functions of personal financial planning, such as goal setting and budgeting. You can visit the Foundation for Financial Planning for available resources. In addition, you can sign up for my monthly newsletter on my company’s website to learn more going forward.
Set short-term and long-term goals, make them specific, and set deadlines. For example:

o Pay off the credit card balance in 12 months.

o Save $500 per month to put six months of living expenses in your savings account as an emergency fund by December 31, 2021.

o Contribute 6% of your earned income to your 401(k) plan to get the maximum employer's matching contribution.

Spend less than you make. Start creating a monthly budget and stick to it by using free online tools to see exactly how you spend your money. Remind yourself often your needs are different from your wants. If you haven't saved enough, review your discretionary expenses carefully and start trimming them now to direct the savings to your top priorities, such as paying off high-interest rate credit cards and saving for an emergency fund.
Create a financial plan before you invest. This plan can be a simple cash flow plan that shows your projected income and expenses over multiple years. Being able to see a detailed cash flow report helps you understand your time horizon and how much risk you can afford to take.
Maximize your contributions to your 401(k) to get 100% of employer's matching. Don't leave free money on the table because you might stay at the same job long enough to receive the vested matching contributions.
Diversify to invest successfully. Picking a few stocks does not provide enough diversification to reduce risks. Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance, and investment horizon. The three main asset classes - equities, fixed-income, and cash and equivalents - have different levels of risk and return, so each will behave differently over time.
Compound your return. The magic of compounding is more magical if you have the time and the investments are in tax-free accounts, such as a Roth IRA, Roth 401(k), and a Health Savings Account.
Assess your skills, strengths, and experiences in order to get a better- and higher-paying job. In order to increase your income and happiness, consider using these two tools: The Kolbe A Index and the DiSC Profile . Knowing yourself better can help you nail down the job that can use most of your strengths.
Network continuously to learn from others and to help others. Without networking, I would not have found my dream career in personal wealth management in 2000 while I was working as a tax CPA with KPMG. Without networking, I would not have had the courage and wisdom to start my own business in 2003 with LPL Financial.
If you are married but don't know how your husband manages your investments, it's time to be engaged in the discussions of what money can do for you and how you should create a plan to manage money better. You can work with an advisor to facilitate the discussions and create your financial plan based on your priorities and goals.

Empowering women can change the world for the better. I hope to empower more women to earn more, save more, and invest wisely in order to have a secure financial future.

Remember, your future is yours, so believe in yourself, and believe that success is achievable as long as you are willing to dream, learn from failures, plan meticulously and deliberately, and then take small actions to get you to the next goal. Monitor your plan over time, and position yourself to seize opportunities as they arise. This doesn't mean living with only the end in mind. Your dreams may change, so be flexible and adaptable.

And if you need help from a financial advisor along the way, I invite you to consider my firm, Echo Wealth Management . Schedule a complimentary 30-minute Discovery Call to learn more about you can plan for your financially-secure future. Wealth management can be complicated, but it doesn’t have to be. Get the right help, and make sure you enjoy the journey.

What Will It Take to Own Your Financial Future?

Fri, 30 Oct 2020 22:55:32 GMT

Ever feel like your finances just aren't running on all cylinders? Setting definite financial goals will help you stay on track, weather unexpected expenses, and gain peace of mind for your later years.

Today, I'd like to offer six goals that can help you get on track—and stay there—so you can own your financial future.

Live Within Your Means

We all know that we should live within our means, but it can be easier said than done. This is especially true when wages are stagnant, yet prices for everything from food to housing, to cars continue to rise. Seventy-eight percent of American workers live paycheck to paycheck; of those, three in four are in debt, and one in four have no savings. Walking that close to the financial edge means one unexpected expense, something as common as a broken-down vehicle, could become a personal financial crisis.

So, how do you live within your means and avoid these potential crises? Here are four tips to more easily live within your means:

· Know exactly how much money you'll have, after taxes, to pay for your lifestyle.

· Review all your expenses. You may be surprised at just how much money you're wasting on things like eating out, gym memberships, cable, and online monthly subscriptions.

· Come up with a realistic budget that you can stick to. Your ultimate goal, of course, is to spend less than what you earn.

· Find areas where you can change your spending habits. For instance, save up for that dream vacation (rather than putting it on credit cards), buy an older model car, or live in a more modest home.

To make peace with your new spending values, avoid competitiveness and comparison with your friends and family. Instead, focus on your long-term goal of financial security. In the end, this will provide you with much greater value than keeping up with the Joneses ever will. This isn't always easy, but it is always worth it!

Build an Emergency Fund

Having an emergency fund is a critical step when it comes to your overall financial health. Before paying off any significant debts, you should work toward establishing an emergency savings fund. This fund is your cushion for unforeseen expenses like a health issue, a needed big-ticket item, or other unexpected emergencies.

To start, set your sights on saving the equivalent of three to six months of your living expenses (preferably in a high-yield online savings account) earmarked for emergencies only. Once you have a nice cushion of emergency funds, you can begin paying off consumer debts.

Ideally, you want to be saving for retirement in retirement accounts, such as a 401(k) or Roth IRA, at the same time as building your emergency fund. However, if you're only able to do one at a time, build your emergency fund first.

Pay Down Debt

If you're working toward healthier finances overall, paying off debt is an important goal. There are many ways to approach paying off debt, so do some research and choose the path that's right for you. Helpful steps include consolidating debts to a fixed payment with a fixed term, always paying more than the minimum required payment, and paying off your most expensive or highest-interest debt first.

It takes discipline to pay down debts, but keep your long-term goals in mind: wouldn't it be nice to retire debt-free?

Maintain Good Credit

A strong credit score is integral to your financial health. Unfortunately, 30 percent of Americans have a credit score under 600, which is considered fair or poor. Good credit gets you better rates on mortgages, credit cards, and lines of credit.

To build and maintain strong credit, you need to be disciplined about money: don't carry large balances on your credit cards, pay off your bills on time, and don't open more credit accounts than you need.

Make it your goal to pay your credits cards off in full every month. If you aren't able to do that just yet, work toward always paying more than the minimum monthly payment.

It's also a good idea to keep old credit accounts open even if you aren't using them, as the longevity of your credit history is vital in building a strong credit score, too.

Set a goal to get up to a credit score of 700 before applying for a major loan. Monitor your credit score by getting a free copy of your credit report every 12 months from each credit reporting company from www.annualcreditreport.com . You can also open a free account at www.creditkarma.com to receive alerts when there's an essential change in your reports.

Maximize Your 401(k) Contributions

Taking advantage of employer-match 401(k) contributions is one of the easiest and most beneficial ways to save for retirement. Approximately 75 percent of companies offering a 401(k) savings plan offer a matching program, but one in five participants do not invest fully, unlocking the employer match option. Not maxing out your contributions is, essentially, like leaving free money on the table.

If you find it difficult to save money for retirement, set up an auto-deposit into your 401(k) so that you're investing in your retirement every paycheck without having to take proactive steps each month. If your employer's match is 50 cents to a dollar for every dollar you contribute, up to 6% of your compensation, you must contribute at least 6% of your compensation to get the full matching amount.

If you can save more, consider making contributions to Roth IRA or IRA ($6,000 in both 2020 and 2021). Look into maxing out all retirement savings plans annually and start as soon as you can. If you are getting a later start, there are catch-up IRA contributions of $1,000 (a total $7,000 in both 2020 and 2021) if you are at least age 50. The catch-up contributions for the 401(k) plans are $6,500 in 2020 that allow you to contribute a total of $26,000 in 2020. The catch-up amount is estimated to remain the same in 2021.

Create an Estate Plan

If you have any financial assets that you want to pass on to your loved ones when you die, you should have an estate plan, including a will. Your will is a legal document that ensures that your money, property, and personal belongings will be distributed as you wish after your death. The law doesn't require that you have a will, but your resident state will divide your property based on state laws if you die without one. If you want to leave property to someone outside of your family, like a friend or a charity, you will need a will. You also need a will if you want to prevent someone from inheriting some of your money.

Additionally, as you work with an estate attorney to draft your will, this attorney can help you prepare a power of attorney and health care directive so you can name the right people to make financial and medical decisions on your behalf if you become unable to do so yourself. Writing up an end-of-life letter of intent to detail your wishes for end-of-life care and funeral arrangements can also bring peace of mind to you and your family.

No matter where you are in your life, it's never too late to start setting financial goals for yourself. Maintaining a focus on these goals can sometimes be difficult, but staying on track to hit them will lead to long-term financial health and peace of mind for you and your family.

Suppose you'd like to do a self-check with your finances. In that case, I invite you to purchase my latest book, Own Your Future , where I give you the tools and education to think properly about your money and go into greater detail on each of the elements that make up a financial plan that leads to a happy and financially secure retirement. Don't wait…today is the best day to start on your path to financial independence!

8 Tips for Teaching Teens Money Management

Tue, 27 Oct 2020 22:34:43 GMT

It seems like yesterday when my daughter, Nina, turned one year old and was an adorable, chubby little girl. Now, she’s a beautiful 15-year-old teen who loves reading, skiing, tennis, travel, choir, and piano. As a parent, I feel the urgency to teach her essential life skills before she goes off to college, especially around financial literacy and money management, which are critical for her success and happiness.

So this blog post is written for her and the teens in your life. Be sure to share it with them.

Hello, Teens!

It’s never too early to start saving money and developing good habits where money is concerned. So, here are eight money tips to help you successfully start on your financial journey.

1. Write Down Your Needs vs. Your Wants

It's so easy to spend money. What's not easy is spending money wisely. One way to help you spend money wisely is to separate your wants from your needs and spend money primarily on your needs.

Think of needs as immediate and what you will need in the next few months. Write down what you need with those costs in one column, and write down what you want with those costs in another column. Now ask yourself, "Can I do without these wants?" and "Are there alternatives to my wants?". For example, you have decided that you need a cell phone. Is a used cell phone an alternative to a brand-new cell phone, freeing up money to spend on other items you need? Writing them down helps you prioritize your spending.

2. Start the Savings Habit

Setting money aside now, while you are young, can start a lifetime of healthy savings. You brush your teeth twice a day, and you don't even think about it because it has become a healthy habit.

So now, when you have any income, put some of it away for the future. This will go towards goals, such as buying a new video game (a short-term goal), a laptop computer (a longer-term goal), a rainy-day fund, and college expenses. A rainy-day fund can prepare you for unexpected opportunities, such as going to see your favorite singer in concert or attending a special school event. Once you have developed the savings habit, it comes naturally for you to save later in life.

3. Create a Budget

You may have some income from weekly allowances (say, $15 per week for a 15-year-old), birthday money from relatives, or a part-time job. When you create a monthly budget, list all your income first, then list savings and expenses. Notice that I said savings before expenses. "Pay Yourself First" means setting your savings goals before listing expenses. And remember basic math: your total income should = your total savings + expenses. If it doesn’t, go back and adjust your expenses and savings so that they do total your income.

Track how you spend money by writing them down on a notepad or using something like a Google spreadsheet. You should regularly compare your actual expenses to your monthly budget and make adjustments to stick to your budget. Budgeting tools, like Mint , are also helpful in tracking expenses and working your budget.

Eventually, you will open a checking account and get a debit card. A debit card allows you to buy things online, but unlike a credit card, you must have enough money in the bank before using it.

4. Be Careful with Credit Cards

When you go to college, you will find credit card companies often entice you to sign up for their credit cards. They will try to convince you that a credit card is like having free money to spend while you only pay the minimum amount each month. This money mindset can be very dangerous, as you are more likely to rack up credit card balances quickly and become inescapably trapped in a high-interest-rate nightmare.

For example, a $3,000 credit card debt with an 18-percent interest rate will take nearly 22 years to pay off, making only minimum payments, with more than $4,100 in interest charges accruing over that time!

I recommend that, before you use the credit card, you should have the money in the bank to pay off the credit card balance on time each month. If you are late in payments, you will pay the late penalty, and that will negatively affect your credit score. A high credit score will help you obtain loans at a lower interest rate, saving money on the interest you will pay over time.

5. Get a Job

To increase your income and gain valuable life experience, you can get a part-time job (when you’re old enough) or start a side business that matches your skills and what you enjoy doing.

· If you like taking care of kids, you can be a babysitter.

· If you love dogs, you can walk dogs for your neighbors.

· If you enjoy being in the garden, you can pull weeds, plant vegetables, grow flowers, and mow the lawn.

· If you can bake great cookies and muffins, you can sell them to raise money.

Having these work experiences now will help you learn problem-solving and people skills, which will enable you to find better jobs when you’re an adult.

6. Understand the Magic of Compounding

Answer this trick question: "Would you rather have $10,000 per day for 30 days or a penny that doubled in value every day for 30 days?" Today, we know to choose the doubling penny because, at the end of 30 days, we'd have about $5 million versus the $300,000 we'd have if we chose $10,000 per day.

Compound interest is often called the eighth wonder of the world because it seems to possess magical powers, like turning a penny into $5 million. The great part about compound interest is that it helps us to achieve our financial goals quicker.

7. Start Sooner Rather Than Later

The earlier you start investing, the better off you'll be. Consider the case of two investors, Lily and Anna, who both wanted to become millionaires. Lily put $2,000 per year into the stock market between the ages of 24 and 30, that she earned a 12% after-tax return and continued to earn 12% per year until she retired at age 65. Anna also put in $2,000 per year, earned the same return, but waited until she was 30 to start and continued to invest $2,000 per year until she retired at age 65.

In the end, both end up with about $1 million. However, Lily only had to invest $12,000 (i.e., $2,000 for six years), while Anna had to invest $72,000 ($2,000 for 36 years) or six times the amount that Lily invested, because she waited six years to start investing. It's clear that compounding can work magic when you have more time.

8. Give Generously

When you share games with your friends, it's a lot more fun than playing by yourself. Many people in this world are less fortunate and need help to get back on their feet. In addition to giving to your church weekly, you can do some research online to find the causes you want to support by using sites like Charity Navigator .

As you work on your monthly budget, consider allocating your income between these four categories: Save (30%), Spend (50%), Share (10%), and Invest (10%).

The Time to Start is NOW!

Parents, be sure to share your own money stories with your teens. Tell them about the mistakes you have made and the lessons you’ve learned. Be open to sharing your challenges in earning money and paying for unexpected expenses. Setting good examples yourself by following disciplined savings and investing principles will help you raise financially savvy kids.

Of course, your kids will make mistakes. We did, and they will too. But it’s ok, as they will remember what you have taught them.

If you’d like to do a self-check with your finances, I invite you to purchase my latest book, Own Your Future , where I share seven life guiding principles, give you tools and education to think properly about your money, help you to identify who should be on your financial team, and offer insights into what each of them should deliver. Today is the best day to start on your path to financial independence!

Outsourcing So You Can Do What Matters

Fri, 23 Oct 2020 20:02:24 GMT

We all know the classic saying, Time is money, right? We also know that time and money are the two things we often wish we had more of. The key to time management and overall life quality will always be finding that balance between what you have to do, what you want to do, and figuring out how to afford it all.

I know that I usually share about financial planning topics here. However, today, I wanted to share about something that's equally important and still related: the idea of outsourcing specific tasks and responsibilities in your life to free up time to do the more valuable—and profitable—things.

The Organization for Economic Cooperation and Development (OECD) ranked the United States 29th out of 34 countries in work-life balance. Outsourcing some of your daily tasks may be a more efficient use of resources than taking the valuable time to do it all yourself. Sure, we could all learn to change our oil or fix a leaky faucet, but by paying a professional to handle these tasks, we free ourselves up to focus on other things, like our work, which, in the long run, will make us more money than lose it.

For example, if you make $100 an hour at your job, and it takes you 3 hours to do a deep clean of your house, it essentially costs you $300 to clean your house. If you can have a service clean it for $150 in 3 hours, you're saving money outsourcing the labor. This is called " Opportunity Cost "—the next highest valued alternative use of a resource.

Outsourcing Can Save Money

I believe there are three essential commodities we trade, and most situations in life need two out of three of these: sweat (or energy), money, and time. It’s a great situation when you have a surplus of all three, but the usual case is that only two of these three are available, so there’s generally a trade-off.

For example, you may not be able to afford to refinish an old antique table, but with time and sweat, you could restore it yourself. Tending your yard, mending a tear in your pants, baking something for your child's bake sale need time and skills. If you enjoy doing them and have the time, ' that's one thing, but if you don't, it may be worthwhile to remove them from your plate. Remember that tackling a more significant DIY project could cost you money in the long run if you need to bring in a professional to fix your work.

Everything in life is a balance-game between how much time it will take and its cost. You may be surprised at how much more time and how much less stress you have when you outsource certain things on your to-do list. A good bookkeeper may help streamline your company budget and expenses, for example. Hiring a shopping service or an afterschool service for your kids can carve out more productive work time in your day.

The more space you free up from your schedule, the more you can focus on your actual paid work and the things you enjoy doing.

Outsourcing May Improve Your Business Productivity

Outsourcing can make you more productive at work as well as at home. You may find your day tangled up checking emails, returning calls, updating social media accounts, and other things that eat up your schedule and your productivity. It may make more sense to outsource more of the little things, through apps or digital assistants, that need time more than expertise, so you can focus on what is most important in your workday.

Outsourcing here cuts out the fluff so you can accomplish the more vital aspects of your job. Outsourcing gives you the best of both worlds, a huge talent pool to choose from without a new employee's time and cost .

Outsourcing Frees Up Space for You

Outsourcing to make your schedule more productive both at home and work is terrific. Making time to be present with your loved ones by not being bogged down in your to-do lists will also improve your day-to-day life. But another significant benefit to outsourcing is that it gives you more time for, well, you.

In 1930, the economist John Maynard Keynes predicted a 15-hour workweek by 2030 as society becomes more affluent and more time to enjoy "the hour and the day virtuously and well." Unfortunately for us, the exact opposite has happened, as Americans are working more hours, and only 28% plan use all of their allotted vacation time .

Taking time for yourself should not be seen as a luxury but a necessity. Getting enough rest, taking time for healthful meals, regular exercise, and checkups should be the norm and not the luxury. Outsourcing some of your daily responsibilities will help carve out that much needed and deserved time. (This will also pay off in the long run as you'll be healthier and happier when retirement rolls around.)

Outsourcing Gives You More Free-Time

The most apparent benefit of outsourcing is the time you gain. The less you have to run all over town on errands or climbing ladders to get leaves from your gutters, the more time you have in general. The other benefit of outsourcing to free up your schedule is that the work will most likely be done better by a professional than if you had done it yourself.

For example, hiring a trusted financial advisor who has the expertise and experience in helping people get financially organized and execute effective investment and tax strategies can free up so much of your time to do things you love. If your background is not investment research or tax planning, doing research on investments and monitoring your portfolio's risks would cost you precious time.

There are no do-overs at retirement. The right advisor will liberate you from layers of stress and provide better outcomes.

We're all so busy and often over scheduled, freeing up time to create memories with friends and family is an invaluable investment and well worth the money to outsource. If you would like to explore ways a financial advisor can help you gain back more time to do the other things you need and want to do, please schedule a complimentary 30-minute Discovery Call with my firm, Echo Wealth Management . During this time, we can discuss whether outsourcing your financial planning tasks is right for you. I look forward to hearing from you!

What You Need to Know about Health Savings Accounts (HSAs)

Tue, 20 Oct 2020 22:04:05 GMT

Open enrollment season is quickly approaching, and I want to make sure you take full advantage of all that's available to you, especially a Health Savings Account (HSA). The HSA is a powerful tool to help you save and invest in paying for your qualified medical expenses (QMEs) now and into retirement. It's become popular as more employers move to high deductible health plans (HDHP) to reduce insurance premiums. A critical note about an HSA is that you must choose an HDHP instead of traditional (lower deductible) health insurance plans if you wish to make contributions to an HSA.

Six Essential HSA Facts

I have used HSAs for 10+ years and find them to be very beneficial. Here are a few essential facts I'd like to share with you:

1. The HSA provides triple tax benefits. Contributions are made with pre-tax dollars (free of federal, state, and FICA taxes) through payroll if your employer offers it. If you purchase an HDHP on your own in the insurance market, you can set up your own HSA online and make contributions before the tax return filing deadline. You can choose how to invest the balance, and the growth is tax-deferred. Distributions are income-tax-free if they are used to pay for qualified medical expenses (QME). "Typical" retiree expenses on health care are often as high as $500/month (or $1,000/month for a married couple), much of which is HSA-eligible QMEs, including Medicare premiums and out-of-pocket medical costs (although Medigap coverage doesn't count).

Once enrolled in Medicare, you can no longer contribute to an HSA. But you can take distributions from your HSA for QME.

2. How much can I contribute per year? The annual limit on HSA contributions for 2021 will be $3,600 for self-only and $7,200 for family coverage, which is about a 1.5 percent increase from the 2020 limits. This represents an increase of $50 for self-only coverage and $100 for family coverage compared to 2020.

3. Unlike the Flexible Spending Account (FSA), the HSA balance does not expire. This feature is a crucial difference between the HSA and the FSA . The FSA balance (also funded by your pre-tax dollars and your employer) must be spent by the end of your plan year, while funds contributed to the HSA can be invested and grow for many years to come.

In fact, I recommend that clients set aside extra cash in their savings account to pay for non-deductible medical expenses instead of taking distributions immediately from their HSAs so that the HSA balance can be invested for growth—treating this account as the tax-free bucket for inevitably higher medical expenses during retirement.

One other exciting difference between the HSA and the FSA is that, with the HSA, you can save your QME receipts, and, as long as you've not included them on your tax return as part of your itemized medical deductions, you can choose to get reimbursed for those expenses in the future.

1. The HSA can be more beneficial than a 401(k) to maximize wealth accumulation. Consider this: Pre-tax 401(k) plan distributions will be taxable in the future, and a Roth 401(k) requires using after-tax dollars to fund it to have tax-free distributions. On the other hand, the HSA balance—funded with pre-tax dollars and distributed tax-free—can be distributed before age 59½ without paying taxes and penalties.

In addition, it can even be more beneficial than some 401(k) plans with matching employer contributions.

For example, if your employer matching is 25% of contributions to your 401(k) plan, your future income tax rate must be lower than 25% in order to surpass the contributions to your HSA. Additionally, if your future tax rate is projected to be 40%, then $1.25 to your 401(k) plan equals $0.75 after paying 40% future income tax, which is 25% lower than the $1.00 going to the HSA. Clearly, the HSA had significant advantages.

2. Coordinate with your spouse to avoid excess contributions. If you and your spouse each have your own HDHP, then it's critical you coordinate your contributions, so your total in one tax year does not exceed the maximum contributions for a family as set by the IRS.

Also, be sure to account for any employer contributions in the overall contribution total. If your employer contributes $500 to your HSA, then this amount reduces the maximum you can contribute to your HSA.

If you happen to contribute too much, you can withdraw the excess contributions by your tax return filing due date, including extensions. Otherwise, you will pay a 6% excise tax on the excess contributions.

3. What happens to your HSA upon your death? The answer here depends on who the beneficiary is. If your spouse is the designated beneficiary, then he or she can own this account balance, and it continues as an HSA account. Suppose the designated beneficiary is someone other than your spouse. In that case, the account stops being an HSA, and the fair market value of the account becomes taxable to the beneficiary in the year you die. If your estate is the beneficiary, the account's value is included on your financial income tax return.

Prioritizing Your Savings

According to Fidelity's annual "Health Care Cost Estimate" study for retirees, a 65-year-old couple will need an estimated $245,000 to cover health care expenses in retirement. Think of your retirement savings (IRAs and 401k) as going to other retirement expenses such as food, shelter, and clothes, and you can see that you need to jump-start your savings in your HSA for your health care costs.

I understand that you may have a few goals competing for your resources. Here is my proposed ranking of wealth-maximizing actions for investing and paying down debts:

Contribute the maximum to an HSA (if eligible) and contribute enough to a 401(k) plan to get the maximum employer match.
Pay down high-interest-rate debt. If the interest rate is greater than 6%, pay down the debt quickly as investing may not generate a 6% annualized return over the short-term, and you don't control the sequence of returns in stock markets.
If you can save more and have college-bound kids, contribute to a College Savings 529 Plan if it produces state income tax savings.
If you can still save more, then contribute to a Roth IRA if your income is below the IRS limits .
If you can save more, then maximize contributions to the unmatched portion in your employer-sponsored retirement plan accounts (401k or403b).

Health care costs in the U.S. are increasing, and having an HSA is a great way to save for both your current health expenses and especially for your expenses in retirement. And, with the upcoming open enrollment season, it's vital that you set aside some time to compare health insurance plans, including HDHPs. Work with your health care professional and your financial advisor to analyze your health and tax situation to make the best decisions for you and your family.

And if you need help and guidance on this, I invite you to schedule a complimentary 30-minute Discovery Call with my firm, Echo Wealth Management . I'm licensed in all 50 states and would be very glad to see how we can be of service to you and your family.

What Should Your Savings Goals Be?

Fri, 16 Oct 2020 20:32:21 GMT

When you’re young and just starting out, retirement seems so far away, and there are more pressing things to spend your money on. Then you find the love of your life, maybe buy a house and start a family. Then, before you know it, you’re kids are looking at colleges, and, “suddenly,” retirement seems to have sneaked up on you. Hopefully, you’ve not encountered too many of life’s obstacles and unforeseen expenses that can often derail a good savings plan. Life happens, though.

Today, I’d like to walk you through how best to save at different points in your life. Perhaps you feel like your nest egg is growing too slowly. That’s ok; time and perseverance will get you where you want to be. Or perhaps you’re on the opposite end, and you’re not sure if you’ve saved enough.

Regardless of where you are in saving for retirement, one of the best ways to save is to set up small savings goals to help you feel that you are making progress along the way. Hitting the small goals can keep you going, especially when finances are tough or when something comes along that derails your plan.

Retirement Savings Tips for the Ages

No matter what your age, it is never too late—or too early—to start saving for retirement. Here are a few age-based savings tips to get you—or keep you—going.

Early 20s

If you are in your early twenties, there is a good chance that you are a recent college graduate with some debt and that you are in an entry-level position. Rent and basic living expenses are probably eating up the bulk of your paycheck, leaving you with little to save.

Your first savings goal should be to have a fully-funded emergency fund to help cover any unexpected expenses. I recommend saving enough to pay your living expenses for at least three months. It is often an emergency that wipes out a savings account, so saving for this first will make a big difference.

The next step is getting proper health insurance. Investing in your health early on will pay off later in life. Regular exercise and checkups are just as important as your bank balance.

Lastly, this is the time to take advantage of any employer-offered 401(k) plan or employer match programs. I suggest contributing enough to receive the maximum matching from your employer and follow the out-of-sight, out-of-mind method—you won’t miss that little bit taken out each paycheck. The earlier you start, the longer your investments have to grow.

Early 30s

In your thirties, you have been working for some time, and hopefully, you’ve moved up in wages. You might now be married, have a family, or are looking to buy a home. While your twenties were about finding stability, your thirties have to now be about looking further ahead.

The first order of business is getting rid of your debt, especially student loans and credit cards. Typically, these are high-interest, aggressive debts that will only grow the longer you make only the minimum payments. It may be time to seek outside help, like speaking to a debt specialist or using an online program.

If you are thinking about buying a house, you will also want to be saving for a down payment. Ideally, you want to have 10-20% to put down. If you have children, setting up 529 plans to help save for their education may also be helpful, as that money grows tax-free and is earmarked specifically for schooling. This is also the time to draft up a will and get a life insurance policy, especially if you have dependents. By this time, you should also be saving 10-15% of your annual income.

Early 40s

By your forties, you should be even more established in your life and career, and this is a critical decade for long-term savings. Some good goals are to eliminate any debt that isn’t tied to a mortgage. Start planning for how you will pay for your children’s college education. Ideally, you started 529 plans in your thirties (see above) and have been regularly putting money away.

It may make more sense for your children to take out their own loans, especially if you are coming late to the savings game or are trying to pay off debts. This is the time to look over your finances, getting serious about college expenses, and talking to your children about what you can afford and what their expectations for assistance from you should be. It’s important to be honest and realistic with them. By this time, you should also have twice your annual income saved, in addition to a separate emergency fund.

Early 50s

By your fifties, you should be well on your way to saving and looking ahead. At work, you should be maxing out any employer contributions. This is also a great time to meet with a financial advisor to have them look over where you are and where you want to be and help you get on track.

If you hadn’t been saving as much as you’d wanted, this is also the time to start playing catch up. Current regulations allow people 50 or older to contribute an additional $6,500 ($26,000 total) in a 401(k) plan. You can also contribute an additional $1,000 (or $7,000 total) to a traditional IRA (unless your taxable compensation is less than $7,000). You can consider making contributions to a Roth IRA instead of a traditional IRA if you believe your future tax rates during retirement may be higher than now because Roth IRA contributions are made on an after-tax basis and distributions are tax-free. However, keep in mind that your eligibility to contribute to a Roth IRA is based on your income level. If you file taxes as a single person, your Modified Adjusted Gross Income (MAGI) must be under $139,000 for the tax year 2020 to contribute to a Roth IRA, and if you’re married and file jointly, your MAGI must be under $206,000 for the tax year 2020 [1] .

If you are out of consumer debt, in a good place with your savings and college costs, this also may be a good time to pay extra toward your mortgage with the goal of paying off your home sooner.

If you are on track with your retirement savings, consider looking into long-term care insurance to reduce potential costs of paying for long-term care. You can share the risks with an insurance company so that you don’t let your own long-term care event destroy you and your spouse’s retirement savings. It’s much cheaper to buy this insurance in your fifties when you are relatively healthy.

Early 60s

With retirement closer than ever, this is the time to make good choices that will affect your long-term retirement. With that in mind, this is the time to again meet with a financial planner and go over your long-term goals and the likelihood of reaching them. This is also the time to start considering if and when you will downsize, where you plan to retire, and what you will do with that time.

If you are behind on your savings, this is the time to take advantage of any and all catch-up options and pay off any outstanding debts while you still have a regular income.

No matter where you are, getting serious about your financial future is important. What you do now can greatly affect your future. Taking a little time to create a plan and a goal can make all the difference down the line for you and your family.

And you don’t have to do this alone. I would be happy to meet with you to discuss your current situation. Schedule a complimentary 30-minute Discovery Call to learn more about how I and my firm, Echo Wealth Management , can help you make sure you’re on a prosperous path.

Echo Huang Featured on the Moms with Dreams Podcast

echo@echowm.com (Fang Huang) — Thu, 08 Oct 2020 14:04:48 GMT

Echo Huang recently sat down with Erica Blocker of the Moms with Dreams Show to discuss her personal story and share some professional insights.

During this conversation, Echo talks about:

Wealth management isn’t just for the wealthy
Myths about financial planning that prevent women from making a career in this industry
How she succeeded in the financial planning industry
Her favorite financial planning tips for women and more…

Echo Huang Featured on the Money Savage Podcast Hosted by George Grombacher

echo@echowm.com (Fang Huang) — Wed, 07 Oct 2020 14:46:28 GMT

This podcast provides a savage approach to personal finance featuring financial professionals and subject matter experts.

In this episode with Echo, she discusses the role that perspective plays in life as well as with investing, how to remove complexity from financial planning, and why a good team of advisors is so important. Listen to learn why you should check your home investing bias!

For the Difference Making Tip, scan ahead to 18:23!

Now’s the Time to Reset Your Financial Goals

Fri, 02 Oct 2020 17:28:07 GMT

This year certainly hasn’t been the year any of us expected. Sadly, too many have lost loved ones, found themselves in financial uncertainty, and have concerns about their job security. 2020 has also given us many life lessons and a significant pause, which provides a rare opportunity to reflect and focus on what you want for your financial future.

While many people wait until the end of the year to determine their short- and long-term goals, I believe there’s no time like the present to reset this decade’s financial goals. Now’s the time to think about what you want your life to look like five, ten, even twenty years from now—and specifically, where you will be in your financial journey.

I recommend looking into the future and working backward to understand how goals can be achieved.

It's Time to Map Out Your Next Ten Years

Here are some tips you can use as a roadmap as you begin planning for a financially successful decade ahead.

Ten Years Out

When you’re looking this far into the future, I know it can be difficult to know just where to begin. And, it’s even harder if your current finances have you feeling a bit stretched, stressed, or overwhelmed. It’s crucial when you’re only looking at the month-to-month situation, not to miss opportunities to make meaningful progress toward your long-term goals. So, where do you begin? I say, start by turning off the outside noise and thinking about the big picture.

What are your goals for the next decade? Maybe you want to:

· Buy a home

· Pay off your student loans

· Start a family

· Pay for children’s college expenses

· Pay off your current home mortgage

· Start your own business

· Buy a vacation home

· Improve your portfolio

· Retire/Retire early

Whatever your goals happen to be, the important thing is to identify them, believe in your ability to achieve them, and then start working towards them by getting as specific as you can with each one. For example, you decide you want to buy a home. So, your next step is to get more specific by identifying the amount you want to save for a down payment.

Do things change? Of course, they do. You may have entirely different goals in five years. However, working toward your current goals will still pay off.

Five Years Out

After you’ve identified your ten-year goals, consider where you need to be in five years in order to make them happen. After all, ten-year goals can seem overwhelming and unattainable if you don’t establish mini-goals along the way.

Are there big life moves you need to make? Is there a dollar figure you can identify? Have you taken into account any major expenses you can foresee?

Here are some tips for a few of the goals mentioned above:

· If you are saving money to buy a home in the next five years, consider including some short-term and intermediate bond ETFs in your non-retirement brokerage account to potentially outperform the interest rate you can earn in your savings account. You generally cannot use your retirement assets before age 59.5 without penalties, and it’s prudent to have some non-retirement assets for buying a home, buying a car, and extra cushion to deal with job changes.

· If you plan to live in your current home for at least five years, now may be the right time, with mortgage interest rates at a historical low, to work with your advisor and your mortgage consultant to see if refinancing is right for you. If you are near retirement or just retired and you are able to pay higher monthly payments, refinancing to a 15-year fixed mortgage may be the right choice now as the interest rate for the 15-year fixed mortgage is lower. The key decision is to make sure you still have some cushion to continue funding other goals, such as paying for college, when you choose the 15-year fixed rate with higher monthly payments.

· If your child is going to college within five years, the 529 plan fund allocation should be adjusted accordingly to shift from stocks to bonds gradually.

· If you are planning to retire in five years, make sure that you have reviewed your detailed cash flow projections with your financial advisor who can help you design the right asset allocation for you to stay invested in the stock and bond markets during good and bad markets after you have set aside an adequate emergency fund.

One Year Out

Big goals start with small steps, so don’t lose sight of how powerful one year can be. When planning for a full decade, combine your long-term vision with short-term actions to get you to your desired financial destination. However, it’s important not to focus only on the things that need your immediate attention. Try tackling one or two things in the coming year that aren’t crises, but rather are things that will contribute to your getting closer to those five- and ten-year goals.

I recommend breaking your one-year goals down into actionable monthly items. Even if they seem small, think of each small success as a seed planted for something bigger in the future.

I set my one-year financial goals to focus on savings for retirement goals, college funding goals, reducing debt, increasing my earned income, reviewing tax strategies, and estate plan (if major changes happened). I use the Evernote app to write down my goals and my ideas to achieve these goals as it’s easy to review them from all devices anytime.

Don’t Feel Discouraged

The old adage that Rome wasn’t built in a day couldn’t be more true, especially in these trying times. Even our best-laid plans can be derailed by unforeseen circumstances (such as we’ve experienced this year), and sometimes we get knocked down harder than we expected. Other times, we simply forget to focus on our long-term goals.

If you find yourself faltering from your one-, five-, or ten-year financial plans, don’t despair. Progress doesn’t have to be perfect, and the road to success isn’t always a straight line. Celebrate your wins big and small, show yourself some grace by forgiving yourself for imperfect execution, and keep your sights set on the potential in front of you.

And if you’d like some help on this journey to own your future, I invite you to schedule your complimentary 30-minute Discovery Call to learn more about your financial planning needs. It’s one way I can help out during these changing times.

Echo Huang Talks to Michael Kitces on the FA Success Podcast

echo@echowm.com (Fang Huang) — Mon, 28 Sep 2020 17:25:47 GMT

A BOUT

Michael Kitces is Head of Planning Strategy at Buckingham Wealth Partners , a turnkey wealth management services provider supporting thousands of independent financial advisors.

In addition, he is a co-founder of the XY Planning Network , AdvicePay , fpPathfinder , and New Planner Recruiting , the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com , dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

Echo Huang recently sat down with Michael Kitces of the Financial Advisor Success Podcas t to talk in-depth about how she built her career starting out in the industry from scratch as an immigrant to the U.S. and how she actually built her independent advisory firm to serve the clients she wanted to serve.

Be certain to listen to the end, where Echo shares the unique challenges of being what she terms a triple minority of being Asian, female, and a new immigrant coming into the financial planning profession.

WHAT YOU WILL LEARN IN THIS EPISODE:

Echo’s Journey From Arriving In The US With Only $800 To Providing Financial Planning For Fortune 500 Executives [04:56]
What Led Her To Pursue Personal Financial Planning [16:10]
How She Made The Jump To Work At An Intra-Firm Startup And Then Decided To Build Her Own Broker Business As A Solo-Practitioner [21:33]
How Echo Weighed The Risk To Make Big Changes, Try New Things, And Move Past The Fear Of Failure [44:22]
The Tech Stack And Solutions That Echo Chose For Her Firm [52:04]
What Her Vision For Echo Wealth Management Looked Like Starting Out [01:00:35]
What Echo Wealth Management Looks Like Today And How Echo Charges For Her Services
How Echo Attracts Her Ideal Clients [01:17:07]
How Client Referrals Have Fueled Echo Wealth Management’s Growth [01:23:53]
What Surprised Echo The Most About Building Her Advisory Firm And Her Low Point On The Journey [01:31:04]
What Advice She Would Give To New Advisors And How She Defines Success [01:44:30]

Are You Paying Attention to Your Financial Dashboard?

Mon, 31 Aug 2020 14:00:02 GMT

Driving requires a glance at the dashboard on a regular basis to monitor all of the various gauges that let us know when things are on track and when we don’t have enough gas to get to our destination. The same is true for your finances.

In our time together, we have driven through financial planning at a relatively high rate of speed. From investment planning , tax strategies , and estate planning , to looking at your financial independence day and the financial dream team that will get you there, we’ve covered a lot of ground.

Throughout this road trip, I’ve mentioned that every good financial team needs a tool to help consolidate all your information to help in planning for your wealth management. At Echo Wealth Management, I have used a tool called the Echo Dashboard for over 15 years, developed and supported by eMoney Advisor. Today, I want to show you the value of utilizing a tool like this.

The Echo Dashboard – A Powerful Tool

A tool like the Echo Dashboard allows you and your financial advisor to see everything you own in a private, secure location where all your data is consolidated into one clear financial picture. This makes getting organized simple.

The Echo Dashboard shows a client’s current and projected income, net worth, and expenses year-by-year to age ninety-five based on some key assumptions, including date of retirement, inflation, and target rate of return. Each night, it pulls the balances and the security positions from the institutions where the client has accounts. The balances are then recalculated to keep the client up to date as his/her account values change.

In short, the Echo Dashboard gives clients the ability to connect everything they own so they know what everything is worth. No matter where a person is or what they’re doing, those who have knowledge of what they have fare better than those who don’t.

Exploring Options

Making data available in the dashboard account at any time means we are in a position to run “what if” scenarios. These scenarios are key to establishing a proper wealth management plan. This process makes it very easy to see how outlays and savings or other actions over the long term affect a wealth profile. Since the dashboard projects a profile up to the age of ninety-five, running scenarios makes it possible to view the potential impact of a decision, not just today, but throughout a client’s lifetime.

The Echo Dashboard shows you the impact of your decisions on cash flow, tax planning, estate planning, college funding, and insurance, as well as the impact a premature death, disability, or long-term care would have on your family members. This allows you to make adjustments in order to have a solid, comprehensive financial plan that protects you and your family into the future.

This tool is just one element in your wealth management plan. Make sure your financial advisor offers you a similar way to monitor all of the various elements of your financial plan.

Your Next Steps

As I have stressed many times throughout these blogs, the first step in any plan should be goal setting . Goals must be specific and have deadlines.

Then should be reflecting on which actions you can take to have a meaningful impact. It may be making time to see your financial advisor to discuss areas that have been overlooked in your financial plan. This could be adjusting your charitable giving strategy or refining other areas that are working but could work better.

Another area worth reflecting on is your possible behavioral biases . Challenge yourself to make sure you are not making wealth management harder than it needs to be.

Another point of action or reflection could be examining your dreams. Retirement planning isn’t just about planning for your financial freedom; it’s about knowing what you want that phase of your life to be like.

One last point about dreams—and men, stick with me on this, as you may have women in your life this could pertain to. I hope that women who grew up with the stereotype that boys are better in math and science can see that this isn’t true and that this profession offers them a viable opportunity to take control of their own plan, ask the right questions, and evaluate the performance of their own team.

Many women with careers seem to think they can put off financial planning—everything from contributing to a 401(k) plan to buying a house. Too often, women say, “This will all be taken care of when I get married.” You should not wait to make major financial decisions until you get married because the reality is that Prince Charming may never come. And with 50 percent of marriages ending in divorce, saying “I have a husband who manages our investments” is not a solution.

Women earn about 75 percent of men’s income. Women also live longer and spend more time out of the workplace. Women spend an average of eleven years out of the workforce caring for a relative or children. That time is usually spent not saving for retirement. Women spend as many years caring for their elderly parents as they do raising their children.

The fact is, an increasing number of women will end up managing money on their own because they’ve been divorced or widowed or have never married. All these unique challenges for women make planning for a financial future even more important.

It is my greatest desire to equip you with the information you need to create a wealth management plan, and that is why I am so excited about my new book, Own Your Future . I elaborate, in detail, on all the strategies and recommendations I have made in my previous blogs.

Your future is yours, so believe in yourself, believe that success is achievable as long as you are willing to dream, learn from failures, plan meticulously and deliberately , and then take small actions to get you to the next goal. Monitor your plan over time and position yourself to seize opportunities as they arise.

Remember that while wealth management can be complicated, it doesn’t have to be , so get the right help and enjoy the journey. And I am always here to help. I’m licensed in all 50 states, and it would be my great honor to assist you on your journey to financial freedom and owning your future!

Is It Better to Give than to Receive? Answer: BOTH!

Fri, 28 Aug 2020 16:57:55 GMT

When you’ve reached a point where your wealth management strategies have paid off, and you are comfortable in life, giving back is something you can do that will bring a great sense of fulfillment to your life and allow you to leave a legacy in the community, people, and causes you care about.

However, there is still a lot of confusion about giving and ways to give. Most people write a check and fail to benefit from the tax reduction opportunities to maximize the good they are going to do for themselves and for their charity of choice.

Charitable giving can give you a sense of satisfaction that can enrich your life. Charitable giving is a win-win experience.

Let’s now explore a few best practices in charitable giving.

What Is Charitable Giving?

A charitable donation is a gift made by an individual or an organization to a nonprofit organization, charity, or private foundation. Charitable donations can be made in cash, real estate, motor vehicles, appreciated securities, or other assets or services. It does not include giving gifts to your friends or family.

You cannot, for example, donate $1,000 to your dog, but you can donate that money to an animal rescue organization. From a personal financial planning perspective, contributions to a charity can be deducted on your income tax returns if you choose itemized deductions instead of standard deductions. However, based on the recent CARES Act, up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions is available to people who take the standard deduction (for taxpayers who do not itemize their deductions). It is an “above the line” adjustment to income that will reduce a donor’s adjusted gross income (AGI), and thereby reduce taxable income.

People often think that to give charitably and reduce significant taxes, they must set up a private foundation. That is not the case. There are far more feasible options available, which I detail in my book, Own Your Future .

Other people think that they don’t have enough money to make charitable donations, but there are ways to give as little as $1,500 per year. Creating a small scholarship fund is one option. Additionally, being able to give clothes, household goods, or other valuables should not be discounted.

These are all deductible and can be listed on Schedule A of your federal tax return. You can save yourself several hundred dollars in taxes from this simple practice of non cash donations, as long as you keep good records, and you can benefit the recipient in the process.

Unfortunately, people do make mistakes when giving of their money and assets. Let me show you five common mistakes most people make when gifting. Then I will outline the nine best practices for giving that will help you reach your gifting goals.

Five Common Giving Mistakes

People often reach a point in their life where careful planning has led them to a place where they can afford to give back and have the desire to do so. Unfortunately, they can oversimplify the process and make the following mistakes that don’t maximize the benefit of their gift.

1. Donating tax-inefficient assets, using checks, payroll deductions, or credit cards

2. Not keeping track of donations, disorganization, or frustration

3. Selling appreciated assets without tax planning or charitable giving planning

4. Rushing to make donations at the end of the year

5. Giving stock in too-small amounts

Nine Best Practices for Charitable Giving

There are many practices and strategies available to ensure that you are effective in reaching your giving goals, from setting up special funds, considering alternative beneficiaries on your retirement accounts, and benefiting from charitable contribution deductions while you’re alive. Details of these practices can be discussed with your financial advisor.

1. Gift appreciated securities to avoid capital gains tax – If you have held these securities in your non-retirement accounts for more than a year, you can deduct the full, fair market value of the stocks on your tax return. (So much better than writing a check.)

2. Time your gifts wisely – It’s always wise to time your gifts based on your income expectations (i.e., receiving a large bonus, exercising stock options, or selling your business for a profit).

3. Name a charity as the beneficiary of your retirement plan – Instead of naming an individual, name a charity as the beneficiary of one of your retirement plans, and it will receive 100 percent of the funds because it’s tax-exempt. It’s more tax-efficient to leave non-retirement assets to individuals as they receive “step-up” basis upon your death.

4. Don’t wait until you die to make gifts – While gratifying, you can also take advantage of income tax deductions and remove more assets from your estate for tax purposes.

5. Gift your IRA assets every year – Due to the required minimum distribution (RMD) from your IRA over age 72, gifting allows you to avoid increasing your tax burden. The SECURE Act made major changes to the RMD rules. If you reached the age of 70½ in 2019 the prior rule applies and had to take your first RMD by April 1, 2020. If you reach age 70½ in 2020 or later, you must take your first RMD by April 1 of the year after you reach 72.

6. Bundle multiple years’ donations —Give multiple years of donations in one year to boost your deductions over the standard deduction and gain higher deductions on your tax return.

7. Set up scholarship funds – This is a great way to support education and help out deserving students.

8. Take advantage of low interest rates with a charitable lead trust – Be sure to talk with your financial advisor if you are interested in trusts as a form of estate planning.

9. Inspire your heirs by setting an example of how you have helped others – Aside from your financial legacy, you can leave a moral legacy.

Once you have achieved financial independence, ask yourself what else your money can do for you. Most people want money to provide security, freedom, and, hopefully, joy. One way to maximize the joy of having money is to support the community, people, and causes about which you care.

Thankfully, statistics show that many people who have reached a place of means are generously thinking about others and seeking ways to increase their well-being. As you can see, charitable giving is not as simple as just writing a check.

You can make a substantial difference in how your wealth is distributed and how others benefit from it if you follow some of these effective strategies.

Remember, you don’t have to wait until you’re wealthy to think about charitable giving. Nor do you have to donate money or assets. You just need a solid strategy that is tailored to your means.

Remember, life is about more than just investing and make the most money possible. It’s also about how to utilize all your resources to maximize your return on life.

What is one of your favorite ways to give? One of mine has been writing my book, Own Your Future . Tell us your story below and maybe inspire someone else .

What Don’t You Want to Deal With?

Thu, 27 Aug 2020 16:25:48 GMT

I know certain topics are hard to talk about. Let me help you face your fear of discussing a difficult element of your wealth management plan, Long-Term Care. In our last time together , I pulled you out from under the covers and introduced you to Long-Term Care, what it is, and the importance of planning early.

Today, we will finish up the subject by talking about the different types of plans and how they work.

Types of Long-Term Care

Although it’s difficult to predict how much or what type of care any one person might need, on average, someone age sixty-five today will need some form of long-term care for three years or more. This care will generally take the form of one of four services:

1. Care or assistance with activities of daily living at home from an unpaid caregiver who can be a family member or friend.

2. Services at home from a nurse, home health/home care aide, therapist, or homemaker.

3. Care in the community.

4. Care in a long-term facility.

While some people need long-term care in a facility for a relatively short period of time while they are recovering from a sudden illness or injury, someone who is disabled from a severe stroke, for example, may need long-term care services on an ongoing basis.

If a person’s needs can no longer be met at home, moving into a nursing home or other type of facility-based setting for care that is more extensive for supervision, may be the only option. This is often the case with dementia or Alzheimer’s.

The Cost of Care

The cost of long-term care in the United States is substantial. Unless you have a long-term-care insurance policy, you’ll find that existing medical coverage, Medicare, Medicare supplement, or an HMO will provide little if any coverage for long-term-care costs and most of the services you need will not be covered.

Many people are not aware that Medicare and/or disability coverage do not pay for most long-term-care services. Everyone is entitled to Medicare when they turn sixty-five if they have paid into Medicare/Social Security throughout their life. However, even with a Medicare supplemental plan, most of your long-term-care services will not be covered.

Medicaid covers the medical costs of low-income families and individuals. It’s the major source of financing for long-term care for the elderly and persons with disabilities, accounting for 42 percent of national spending on long-term care and almost 50 percent of spending on nursing home care.

Medicaid provides critical assistance to people with long-term-care needs in the community and nursing homes, covering services often excluded from Medicare and private insurance.

Unfortunately, to qualify for Medicaid, you need to have very limited financial resources.Ultimately, I have found that the best option to plan ahead for long-term care is to buy long-term-care insurance, especially if you are still relatively healthy and not too old.

How Long-Term-Care Insurance Works

Nursing homes emerged in the 1960s to provide long-term care outside the family. At the time, many people had no option but to sell their homes or deplete their savings to pay for this care. This gave rise to a need for an insurance plan to cover these costs.

By the late 1970s, long-term-care insurance was being offered across the country. Unfortunately, by the 2000s, it became clear that insurance providers had underestimated the rise in health care costs and the number of people who would need care and claim benefits. Many could not make a profit in this product line and decided not to offer long-term-care insurance products anymore.

Today, there are only a few insurance companies that offer long-term-care insurance. The two types of policies are: a traditional long-term care insurance policy and a hybrid long-term-care policy (life insurance with long-term-care benefits).

Traditional Long-Term-Care Policy

There are two types of traditional long-term care policies: reimbursement and indemnity.

When you buy a traditional reimbursement policy (for example, a monthly benefit of $5,000 for five years, for a total benefit of $300,000), the insurance company reimburses your long-term care expenses up to the benefit amount per month. If your expenses are $7,000 a month, the policy will still only reimburse you to the benefit maximum of $5,000 a month. With this policy, you can choose an inflation rider to receive a higher benefit amount.

While the reimbursement type of long-term care policies are cheaper, offer more variety, and are more readily available than an indemnity policy, the drawback is that you must incur qualified long-term care expenses in order to get reimbursed.

The indemnity policy pays cash, and you can decide how to spend it, such as hiring your daughter to take care of you at home. Generally, indemnity policies are at least 30 percent more expensive than reimbursement policies; therefore, you must compare and decide if getting paid in cash up to the benefit amount (when you cannot perform two or more daily living activities) is very important to you.

The major drawback of both traditional reimbursement and indemnity policies is that future premiums are uncertain. Insurance companies have increased the premiums in the past years and will increase the premiums if they apply and receive approval in your state.

Hybrid Long-Term-Care Policy

On August 17, 2006, President George W. Bush signed into law the Pension Protection Act of 2006, which contains a section that made federal law, particularly individual tax law, more hospitable to hybrid products involving long-term care insurance and annuities and life insurance. Tax-free exchanges are possible between annuities and life insurance. The tax-free transfers are called a “1035 Exchange.”

The hybrid long-term care insurance policies have gained popularity because insurance companies designed life insurance products with long-term care benefits and the insured can make a 1035 exchange to use the cash value of a life insurance policy to pay for this new hybrid life insurance with long-term care benefits without paying taxes on the gains inside the current policy.

An example of this hybrid policy: the widow, Lily, decided to use a portion of her portfolio to pay the hybrid policy’s single-pay premium of $104,000 for a policy that came with a death benefit of $120,000 and a total long-term-care benefit of $405,000. It included a ninety-day elimination period for a nursing home facility, assisted living facility, and facility hospice care, but no elimination period for home health care, care coordination, home modification, caregiving training, and adult day care center.

This policy structure translated into a long-term care payout of $6,000 monthly for six years. It had a 5 percent simple inflation rider so that the benefits would grow to $885,000 by age eighty, with monthly benefits of $11,250 at age eighty.

By investing $104,000 in her policy one payment at the age of fifty-five, the internal rate of return (IRR) on her long-term-care benefits at age eighty worked out to be 7.82 percent per year, tax free.

This hybrid product offers death benefits and long-term-care benefits that are both income-tax-free.

Too often, people work on their investment portfolio, college funds, their retirement plan, and their estate plan, but don’t plan for long-term care. They then find out that the substantial cost of this care exhausts their wealth and undermines a lifetime’s work. Don’t wait until it’s too late to start planning for your health and long-term care needs. You never know when you will need care.

We will be discussing charitable giving next time. We will look at the smiles both giving and receiving can produce.

What planning tasks might you be hiding from? Anyone brave enough to share with us below? I’d be very happy to help you face these tasks.

Echo Huang Featured on the Your Resource for Success Podcast with Kimberly McLemore

echo@echowm.com (Fang Huang) — Mon, 24 Aug 2020 14:07:39 GMT

Echo Huang just finished this podcast interview with Kimberly McLemore, the host of Your Resource for Success Podcast! She is excited to share her personal journey in personal wealth management business and hope to educate and inspire more women to pursue this career path.

Only 23% of Certified Financial Planner professionals were women in 2000 when Echo passed the CFP exam (today, it’s still 23%). Only about 20% of all financial planners in the US have the CFP designation.

The WSBI " Your Resource For Success" Podcast Program is created for inspiring entrepreneurs and women owned small businesses. Every week you will get the opportunity to meet a new business owner. Each episode will go behind the scenes to discuss their inspiration, challenges and successes of being in business.

Do Yourself a Favor and Avoid These 7 Estate Planning Mistakes!

Fri, 21 Aug 2020 15:03:23 GMT

Let’s face it. Nobody likes to make mistakes. So it’s better to learn from someone else’s than to learn from your own. This is especially true when it comes to our finances and our loved ones.

In my last few blogs, I introduced you to estate planning , the various pieces of it, and the purpose of it. I think it is equally important to review mistakes that can be made with estate planning. My thought is, you’re going to do it, then let’s do it right.

Seven Estate Planning Mistakes People Make

Mistake 1: Having No Estate Plan at All

No one can escape death, yet the biggest mistake people make is not having an estate plan at all, not even a simple will or power of attorney . Thoughtful planning for what may occur after your death is one of the most important things you can do to ensure your personal and financial affairs are handled properly when the inevitable occurs.

Mistake 2: Failure to Implement an Estate Plan Properly

When you sign the legal documents at your attorney’s office and are handed a binder with all the documents, you still have more work to do to implement this plan, either doing it yourself or working with your financial planner and/or attorney.

Remember that the beneficiary designation forms for retirement accounts and life insurance policies trump your will . If you have one beneficiary on your retirement account and another on your will, the former will inherit the account.

Many people make the mistake of updating their wills to change beneficiaries without changing the beneficiaries for their 401(k) account. This often happens after a divorce.

Mistake 3: Not Updating Your Estate Plan

Common events that affect your estate plan include changes in family circumstances (such as a child, marriage, or divorce), a new property acquisition, health issues, major tax law changes, and business profits. When you have minor children, you need to make provisions that won’t be necessary when they become adults. Your financial situation may change, and your estate plan should be changed along with it. You may accumulate wealth outside a retirement plan, buy real estate, or set up another profitable business.

With each of these life-changing events, it’s advisable to consult your estate attorney about more sophisticated estate strategies to transfer your wealth.

Mistake 4: Failing to Make Gifts to Reduce the Estate Tax Liability

According to the Internal Revenue Code, gifts up to $15,000 a year per donee do not need to be reported. If you have a large estate that may be subject to estate tax when you die, you can start gifting now without using any of your own estate tax exemption.

Mistake 5: Choosing the Wrong Person to Handle Your Estate

Your spouse or child may not be the best person to handle your estate. It’s possible that someone else less personally invested can objectively handle the extensive duties and demands required of an executor, trustee, or guardian.

You can select a trust company to distribute assets to your beneficiaries rather than making your oldest child a trustee, which could mean the other children would have to ask for money from the trust for many years.

Mistake 6: Failing to Transfer Life Insurance Policies to an Irrevocable Life Insurance Trust (ILIT)

If, for example, you have a $3 million life insurance policy, that amount will be added to your estate along with your other assets when you die. Although the federal estate tax exemption is currently high, at $11.58 million in 2020, people with very high net worth and a large policy could find themselves over the exemption amount. Minnesota estate exemption amount is $3 million in 2020 and the highest estate tax rate in Minnesota is 16%. Many Minnesotans have more than $3 million estate.

However, with an ILIT (that we discussed in my last blog), you can gift at least $15,000 per year to the ILIT to pay annual insurance premiums (reducing your estate), and the death benefit from the insurance policy is paid to this trust upon your death. The trustee then manages and distributes it to your beneficiaries.

Unlike a revocable living trust, an ILIT avoids estate taxes as long as it follows the IRS rules.

Mistake 7: Failing to Investigate Tax Loopholes

If you want to leave stocks to your son during your lifetime, the best strategy is to do this when he is in a low tax bracket and not a dependent on your tax returns. If you transfer $15,000 of stock you have owned for at least a year, with a cost basis of $5,000 to him when he is making less than $52,400 earned income a year, and he sells the stock to realize long-term capital gains of $10,000, he’ll end up not owing any capital gains tax because current income tax laws offer no capital gains tax for those with lower incomes (i.e., single filer, taxable income of $40,000 in 2020).

If you sell the stock and give your son cash, you have to pay either 15 percent or 20 percent long-term capital gain taxes, plus a potential 3.8 percent net investment income tax, as you are not in a low tax bracket.

In addition, you don’t need to file a gift tax return because the gift is $15,000, the exact annual gift exclusion. Therefore, transferring stock to your son when he is earning very little is a good strategy for keeping more money in your family.

Wealthy business owners with private companies can reduce taxes by forming family limited partnerships to hold the businesses and then gift an ownership interest to children over time. The value of the gift is discounted because the IRS allows minority discounts, and there is a lack of liquidity discounts on privately-held companies.

There are ways to reduce the legal fees involved in settling your estate by setting up trusts and by properly designating beneficiaries to your life insurance and retirement accounts and turning your individual investment accounts into revocable living accounts.

There are also many ways to reduce the tax bill that would be due upon your death during your life. Make sure you talk to your financial planner and your estate attorney.

Estate planning can be a complicated process, so make sure to include an estate attorney and financial planner on your dream team and make sure they are working in tandem to help grow your wealth and guiding you to avoid many of the common mistakes people make when it comes to estate planning.

Next time, I will introduce you to Long Term Care: the value of having it, the costs associated with it, and the types available.

We all make mistakes. What is a valuable lesson you’ve learned from a mistake?

Echo Huang Featured on The Remarkable People Podcast

echo@echowm.com (Fang Huang) — Fri, 21 Aug 2020 14:04:07 GMT

Talking About Perseverance, Drive, Wealth, & Owning Your Future

Have you heard the one about the young Chinese girl who came to America with only $800 in her pocket, but now owns her own wealth management company, has several advanced degrees, and manages over $150 Million in client assets? You know, the one who authors best selling books, ballroom dances, holds CFP, CPA, CFA designations, and plays a concert piano? Well if you haven’t, hang on and enjoy this episode of the Remarkable People Podcast , the Echo Huang Story!

“I knew this was not where I belonged forever. I knew I could do better. It was just a matter of waiting for the right opportunity to arise.“

— Echo Huang

Core Themes: Financial Independence, own your future, financial freedom, financial planner, financial planning, retirement planning, wealth management, TOELF exam, networking, courage, determination, passion, goal setting, daring to dream, meticulous planning, discipline, hard work, drive, perseverance, CFP exam, estate planning, control your emotions, investing tips, investment advice for today, Invest in Yourself
Mentions: BTK Innovations, Pam Heinold Realty, Interview Connections, UWF, PSC, PCC

Are You a Candidate for a Living Trust?

Fri, 14 Aug 2020 18:08:05 GMT

In my last few chats with you, we’ve been discussing estate planning , and in my last blog, I tried to simplify estate planning by using a pie metaphor… a cherry pie, cut in half. Today, I thought I would change it up to a pizza pie. One half of the pie is will-based planning , and the other half is trust-based planning. Both are important parts of your overall wealth management process, and your financial advisor and estate attorney are key to helping you decide which is better for your situation. Let’s look further into trust-based planning.

Trust-Based Estate Planning

High-net-worth individuals and individuals who have assets in different states or those with blended families (e.g., children from two marriages) have a more complex situation that requires a more sophisticated estate plan.

They often need to take a trust-based approach. Essentially, the trust allows a third party to hold assets on behalf of your beneficiaries. In this plan, you will need a pour-over will, a revocable living trust, health care directive, and a durable power of attorney. Since we discussed these last two slices in my last blog , let’s take a look at the remaining three.

Pour-Over Will

If you have a trust in place, your will is only used as a safety net to catch any assets that you didn’t transfer into your trust prior to death. In this case, your will is called a pour-over will, and it contains minimal instructions since your revocable living trust is the main document governing your estate plan.

A Revocable Living Trust

Also known as a living trust, a revocable living trust is a legal entity created to hold ownership of an individual’s assets. It’s generally drawn up by your estate planning attorney.

Once the trust is created, you must sign and date it to execute it. From that point on, you as the person who formed the trust is known as the “grantor.” Some grantors prefer their attorney to act as trustee, but in most cases, the grantor also serves as the trustee and continues to control and manage the assets that are placed in the trust.

A revocable living trust contains a detailed set of instructions covering three important periods of your life: what happens while you are alive and well, what happens if you become mentally or physically incapacitated, and what happens after your death.

The trust allows you to organize and determine to whom you want to give assets. They can be distributed immediately to beneficiaries or be managed by the successor trustee to distribute to them over time, depending on how you wrote your trust provisions.

By avoiding probate, these assets and their beneficiaries remain private—since probate is entered into the public record—and are more efficient and, therefore, cheaper in terms of attorney fees after your death.

Generally, probates also take much longer to complete than the administration of revocable trusts.

Wills vs. Trusts

Whether you should take a will-based approach to estate planning or a trust-based approach to your estate plan depends on the complexity of your wealth and your needs in terms of beneficiaries.

One advantage a will-based plan has over the trust-based plan is the initial cost. The latter will cost a couple of thousand more than the former in legal fees at the beginning, but if your situation is complex, it’s probably worth the investment, as you may save a lot more in attorney fees and taxes after your death.

The main benefits of using a revocable trust include avoiding probate. Probate is very cumbersome and time-consuming, which means a major benefit of using a trust-based plan is the hassle and time it saves your beneficiaries, as well as affording privacy to your heirs because your estate does not go through probate court and therefore does not become public knowledge.

A second advantage of the trust is that it allows you to decide whether you want to grant your assets as a lump sum to one beneficiary or control it in more specific detail.

You can make a lot of provisions that you think are reasonable after your death. The trust also gives you the option to control the timing of the distribution.

The trust can also be designed so that it’s protected from your beneficiaries’ creditors. This level of control afforded by the revocable living trust is often called “control from the grave.”

Tax Considerations

Despite its advantages and ability to avoid probate, a revocable living trust will not allow you to avoid paying estate taxes. In 2020, federal estate and gift tax exemption is currently $11.58 million per person or $23.16 million for married couples. State taxes vary from state to state. In Minnesota, the state estate exemption is $3 million per person in 2020. That means, if your estate, including your life insurance death benefit, is over $3 million, your estate may need to pay up to 16% state estate taxes. These high exemption amounts may decrease in the future, especially when the deficit has been increasing.

Regarding life insurance, one way to reduce estate taxes is to set up an irrevocable life insurance trust (ILIT) to be the owner and beneficiary of your policy. You should not plan to withdraw money from this ILIT and must name a trustee to handle the payment of the insurance premium.

By taking advantage of the annual gifting exemption of $15,000, you can put $15,000 a year into your ILIT to pay your annual life insurance premium without using any of your lifetime gift exemption.

If you have a $2 million death benefit (with you as the insured), that benefit will be paid on your death to your ILIT, rather than being counted as part of your estate.

An ILIT is different from a revocable living trust because your gift to the ILIT is a complete gift, and you do not access the assets inside the ILIT for your own benefit. Therefore, if you follow the IRS rules properly, the assets, including death benefits, can bypass your estate to save estate taxes.

After discussing all the pieces of the metaphorical pie called Estate Planning, I hope you have seen the benefits of this planning. Estate planning is meant to offer you comfort, knowing all your financial and personal affairs are documented and in legal order.

Next time, we will review the mistakes people make in estate planning. It’s always better to learn from someone else’s mistakes than from your own. Until then, tell me what concerns you might have about estate planning.

Group of MN women financial planners ring in 25th anniversary with $25,000 donation to promote women, diversity in the industry

Mon, 10 Aug 2020 14:36:55 GMT

For immediate release:

Saint Paul, Minn. – A local group of female financial planners, the Goddesses of Financial Planning, today announced a $25,000 donation to the Center for Financial Planning initiative in honor of the group’s 25th anniversary. The funding will support the initiative’s work to promote women and diversity in the financial planning industry.

Founded in 1995, the Goddesses of Financial Planning is a group of more than a dozen women financial advisory firm owners in Minnesota. The group meets regularly to share strategic advice and best practices to support each other in the financial planning industry. In addition to the Goddesses of Financial Planning, each member also belongs to the Financial Planning Association of Minnesota (FPA MN), a nonprofit organization of more than 900 financial planning professionals.

“The Goddesses of Financial Planning has been invaluable to me in the past 20 years, especially when I started my own business in financial services in 2003 as an Asian woman immigrant planner,” said member Echo Huang, owner of Echo Wealth Management. “With our donation to the Center for Financial Planning, our group hopes we can help aspiring planners find the same support as they begin their careers.”

Approximately 23% of certified financial planners in the U.S. are women and less than 3.5% are black or Latino. The Certified Financial Planner Board of Standards (CFP Board)’s Center for Financial Planning initiative is working to attract, onboard and train women and people from diverse communities to become the next generation of financial planners.

Members of the Goddesses of Financial Planning include Dana Brewer and Kay Kramer of Birchwood Financial Partners, Cassidy Burns of WR Baird, Ellen Dubuque and Joan Rossi of Rossi Dubuque Breckenridge LLC, Echo Huang of Echo Wealth Management, Laura Kuntz of Laurel Wealth Planning, Kathy Longo of Flourish Wealth Management, Kelly Olson Pedersen of Caissa Wealth Strategies, Lauri Salverda of Castle Rock Financial Planning, Janet Stanzak of Financial Empowerment, Amy Jensen Wolf of AJW Financial, and Susan Zimmerman of Mindful Asset Planning. A photo of the group is available for download here .

About the Financial Planning Association of Minnesota

The Financial Planning Association of Minnesota is a nonprofit organization that provides professional development, volunteering and networking opportunities to financial service professionals. With more than 900 members, it is one of the largest Financial Planning Association chapters in the country and its members include CERTIFIED FINANCIAL PLANNING® professionals, educators and students. For more information, visit fpamn.org .

For more information:

Grace Rose

grace@goffpublic.com

612-615-2719 (c)

Echo Huang Talks Financial Freedom with KC Rossi

echo@echowm.com (Fang Huang) — Thu, 06 Aug 2020 16:49:05 GMT

Echo recently sat down with Business Mindset coach, blogger, and host of the Women Developing Balance Podcast , KC Rossi to share her story and tips for how to shape your financial future.

In this episode:

Echo's Journey And Her Investment Path
Listen to Echo share her story and how her love for numbers and investing began. She also reveals the importance of taking complicated ideas and breaking them down into simple and actionable steps that serve her clients.

How To Start Your Journey in Wealth Management And Succeed

You don't need to be wealthy to invest. Echo reveals how she started building her wealth with $800, hard work, and patience. She calls herself your financial quarterback and encourages you to find the team that will help you thrive. She dives deep into her three tips for success and how you can set yourself up for long-term gains.

Words Of Wisdom - Daring To Dream
You have to be daring to dream. Echo believes that the future is yours and it's important to share your big ideas with others to help them manifest. One of her big dreams was to become an author. She used her 20 years of experience and wrote a top selling book to realize her dream and help others. Learn her strategy for success and achieve your goals.

Bonus advice: Learn Echo's top tips for donating to charity, making a positive impact and still getting the most out of your money.

Echo Huang Featured on the Coz Green Audio Experience

echo@echowm.com (Fang Huang) — Thu, 06 Aug 2020 16:49:03 GMT

Echo sat down with Coz Green to share her story of coming to the United States at age twenty with nothing but $800 and the hope of achieving the American Dream. And how her journey through the business world over the next twenty years, gaining experience working in financial planning firms of all sizes before venturing off on her own, has brought her to where she is today.

Watch the full interview here:

Estate Planning – It’s Like the Comfort of Grandmother’s Pie

Wed, 05 Aug 2020 23:02:37 GMT

Imagine, if you will, a delicious pie, warm and fragrant, just coming out of your grandmother’s oven. Those were the days when pies were homemade! Hopefully, your grandmother made her pies knowing that her financial planning had been done and her affairs were in order, and she could just enjoy her time with you.

This pie, if you will, is a part of her overall wealth management plan, and, for our purposes today, represents Estate Planning. (I know it’s a stretch with the pie metaphor, but why not make estate planning sweet and delicious while discussing it?) One half of the pie is will-based planning, and the other half is trust-based planning.

Now each half also has its slices. In my last blog , we reviewed one slice of the will-based half, the last will and testament. The remaining two slices of the will-based half will be discussed today: health care directive and durable power of attorney.

Health Care Directive

A health care directive, sometimes called a living will and power of attorney for health care, is a written document that informs others of your health care wishes. It allows you to name a person (or “agent”) to make decisions for you if you are unable to do so.

In most states, anyone eighteen or older can make a health care directive. A health care directive is useful if you become unable to adequately communicate your health care wishes. The directive guides your physician, family, and friends regarding your care at a time when you are not able to provide that information.

While you will still receive medical care without a health care directive, it will help you get exactly the care you would like, particularly near the end of your life when your interests may not be the same as those who survive you.

You should also consider whether you want to donate organs, tissues, or body parts. You can also include wishes for funeral arrangements. A health care directive can be general or specific, but you should include the following information:

1. The name of the person(s) you designate as your agent or joint agents to make health care decisions for you and alternate agents in case the first agent is unavailable

2. Directions to joint agents, if assigned, regarding the process or standards by which they are to reach a health care decision

3. Your goals, values, and preferences about health care

4. The types of medical treatment you want or do not want, including instructions about artificial nutrition and hydration

5. How you want your agent(s) to make decisions

6. Where you want to receive care

7. Your preferences regarding mental health treatments, including those that are intrusive through the use of electroshock therapy or neuroleptic medications

8. Your desire to donate organs, tissues, or other body parts

9. Your funeral arrangements (for example, burial or cremation)

Take the time to make your document personal so that it reflects your wishes. Give a copy to your doctor and/or health care agent, and keep a copy handy at home and at work.

Durable Power of Attorney

A power of attorney form is a document in which you authorize somebody to act on your behalf regarding financial decisions. This person is known as the attorney-in-fact.

You can determine how much power the person will have over your financial affairs. A “durable” power of attorney is one that remains valid even if you become incompetent or incapacitated.

You can design it to take effect immediately or stipulate that it only goes into effect when you become unable to make decisions for yourself. This is known as a “springing power of attorney.”

You can choose to give your attorney-in-fact power to do some or all of the following:

1. Use your assets to pay your everyday expenses and those of your family.

2. Buy, sell, maintain, mortgage, or pay taxes on real estate and other property.

3. Manage benefits from Social Security, Medicare, other government programs, or civil or military service.

4. Invest your money in stocks, bonds, and mutual funds.

5. Handle transactions with your bank and other financial institutions.

6. Buy and sell insurance policies and annuities for you.

7. File and pay your taxes.

8. Operate your small business.

9. Claim property you inherit or are otherwise entitled to.

10. Hire someone to represent you in court.

11. Manage your retirement accounts.

As we conclude this blog and the series on tax strategies to maximize savings, I want you to remember that tax planning is not just for tax season. You don’t do some planning and forget about it. It’s important to think about tax planning in the same way you think about investing.

The idea of meticulous planning, building on this plan, creating an investment strategy, and executing and monitoring it also applies to tax planning. This is particularly important when there are major changes in tax laws.

Ask yourself, what type of tax planning you have done this year with the tax CPA on your dream team . If you don’t have a tax CPA on your team, you’ll need to have basic knowledge and keep up with tax laws so as not to overpay your taxes.

Second, ask yourself what your federal marginal tax rate was last year, and identify how much more taxable income you can earn before you reach your next tax bracket.

Review and identify two actions you can take now to potentially improve your tax situation next year and into the future.

Remember, tax planning is not only for April. It means all-year-round planning and even multiyear tax planning using projection tools.

I know reviewing these tax strategies may have felt like a long race for you. Thank you for pushing through and absorbing all my tips and strategies. I encourage you to take one step at a time, or like in a marathon, one mile at a time. Your finish line equals maximizing your tax savings.

Have any of you ever run a marathon? What was the hardest mile for you? Let me know below.

Next time I will introduce a new topic, estate planning. I know it might sound unpleasant, but I promise to shed much light on the subject.

Estate Planning – So Much Better than GPS

Fri, 31 Jul 2020 21:15:26 GMT

I like GPS, and I use it most of the time, but I also need that assurance of the road signs. We all know that GPS can sometimes land us in the middle of an open field, lost, frustrated, and let down. Estate planning can save the ones you leave behind that lost, frustrated, and let down feeling. Today, we will take the next step in your wealth management training to look at some of the basics of estate planning and advice on how to go about working jointly with an estate attorney and your financial advisor to plan ahead, thus making the journey much clearer and easier, for those you love.

What Is Estate Planning?

Estate planning is the systematic approach to organizing your personal and financial affairs in order to deal with the possibility of mental incapacity and the certainty of death.

Mortality is not a subject on which most people want to focus, but without a proper estate plan to address issues relating to mental or physical incapacity and death, you could give your loved ones unneeded headaches and unnecessary costs relating to handling your estate.

An adequate estate plan must ensure that your assets are properly used to support you during life, ensure that your remaining assets are distributed according to your wishes at death, and must be structured so that you can implement your plan in order to minimize fees, costs, and taxes.

Depending on the size of your estate and personal situation, estate planning will generally follow either a will-based plan or a trust-based plan approach.

A will-based plan tells the probate court how you want your assets distributed after your death. It names whom you want to have your assets pass to and how you want them distributed. Since the probate court oversees the process, it is open to the public.

A trust-based plan includes a revocable living trust and is suitable for high-net-worth individuals and those who want privacy and more control over how their assets are distributed. This trust holds the title to your assets during your lifetime and transfers them to your named beneficiaries upon your death outside the probate process.

This plan requires more up-front work, but if you are a high-net-worth individual, it can help you reduce estate administration costs, provide privacy, and potentially lower your tax liability after your death.

Let’s look at each type of plan in more detail.

Will-Based Estate Planning

In most states, will-based estate planning would include three essential legal documents: last will and testament, health care directive, and durable power of attorney.

The laws of your state may dictate the need for other estate planning documents. If this is the case, your estate attorney will be able to assist you in preparing all of the estate planning documents that you will need.

LAST WILL AND TESTAMENT

Your last will and testament, or simply your will, is a legal document that ensures that your money, property, and personal belongings will be distributed as you wish after your death. The law doesn’t require that you have a will, but if you die without one, your resident state will divide your property based on state laws (called “intestacy”).

If you have a spouse and children, the property will go to them by a set formula; if not, the property will descend in the following order: grandchildren, parents, brothers and sisters, or more distant relatives.

If you want to leave a property to a friend or a charity, you will definitely need a will. You also need a will if you want to prevent someone from inheriting some of your money.

You can name a guardian for your minor children in your will. This guardian must be someone over eighteen who is willing to assume this responsibility.

Your will also names a personal representative, also known as an executor or administrator. This person oversees the payment of your debt and distribution of your assets according to your will. A personal representative is considered a fiduciary and must observe a high standard of care when dealing with your estate.

Most people choose their spouse and adult child or relative, a friend, a trust company, or an attorney to fulfill this duty, but any competent adult can be named a personal representative in a will. Since your personal representative will handle your assets, you should always pick someone you trust. Your personal representative is responsible for starting the probate process and filing tax returns.

Probate is the legal process of settling your estate in court after you die. The process begins by filing an application or petition with the probate court and ends when all debts and taxes are paid, and all assets are distributed. During the process, your property is gathered and inventoried, your debts are paid, and everything left over is divided among your beneficiaries.

Second, ask yourself what your federal marginal tax rate was last year, and identify how much more taxable income you can earn before you reach your next tax bracket.

Review and identify two actions you can take now to potentially improve your tax situation next year and into the future.

Remember, tax planning is not only for April. It means all-year-round planning and even multiyear tax planning using projection tools.

Have any of you ever run a marathon? What was the hardest mile for you? Let me know below.

Next time I will introduce a new topic, estate planning. I know it might sound unpleasant, but I promise to shed much light on the subject.

As Economic Futures Remain Uncertain in the Wake of COVID-19, A Triple-Minority Financial Expert, Echo Huang shares her Timeless Plan for Wealth Creation

Tue, 28 Jul 2020 12:11:43 GMT

The term “wealth management” doesn’t only apply to wealthy people. The release of Echo's new book "Own Your Future" tells the story of how a poor immigrant came to live the American dream and how you can too. It’s a story of dreams manifested as a result of the guidance offered by the author’s seven core principles: daring to dream, being adaptable, respecting education, setting goals, utilizing smart and deliberate planning to achieve success, seizing opportunities when they arise, and benefiting from the wisdom of others.

MINNEAPOLIS (PRWEB) JULY 09, 2020

As COVID-19 continues to spread, workers are still losing their jobs, health care systems are being stressed, and local businesses are at risk of closing permanently. Many are witnessing the most tangible and consequential failure of government in recent U.S. history, and Americans are bracing for recession. The timely release of a recent Wealth Management bestseller serves as a call to action, especially for women, looking to protect and grow their wealth in these uncertain times.

Some women prefer talking about money with female financial planners, but only 20% of all financial planners hold the respected Certified Financial Planner® (CFP) designation, and only 23% of CFP professionals are women. There simply aren’t enough female CFP professionals to serve other women effectively.

Echo Huang is a female, Chinese-American immigrant and a mother in the male-dominated industry of wealth management and financial planning. Her firm Echo Wealth Management manages over $115 million in assets for clients, many of whom are Fortune 500 executives. As nine-year recipient (2012 – 2020) of the Five Star Wealth Manager Award, Huang states, “I believe that increasing the number of female CFP professionals in America will help transform the financial industry and income inequality between men and women. There has never been a time when people have to be smarter about their money.”

Globally, individuals are concerned about their income sources, retirement funds, stocks, bonds, and real estate assets in the current climate. Huang provides solid strategies for recovering from financial loss and how to safeguard and grow wealth – regardless of who wins the November elections. She is specifically passionate about educating and assisting single mothers, immigrants managing money globally, and helping more women become successful in the financial industry. Her recent bestseller, Own Your Future , tells her personal story of overcoming adversity as an immigrant and a woman working in American financial markets.

“Echo has a rare combination of technical expertise and empathy. This enables her to provide a unique perspective on wealth management that is both informative and motivating,” reports Jerry Young, retired General Mills controller.

In her book, Huang provides a variety of guides and tips, such as teaching the nine cognitive and emotional biases holding you back from financial independence, explaining that you can donate to charity the wrong way, and that it’s possible to claim your social security benefits improperly at significant cost to your financial future.

Own Your Future is available now at all major booksellers. Learn more at http://www.echohuang.com

Echo Huang is available for interviews by contacting TGC Worldwide. Contact us at bookecho@tgcworldwide.com.

About Echo: Echo Huang is Certified Financial Planner® (CFP) professional with over 25 years of experience in the financial services and accounting industries. She helps executives and entrepreneurs across the country take the complexity out of their personal and business finances. Born and raised in China, she came to the United States with $800 in her pocket in hopes of pursuing – and achieving – the American dream. Through higher learning, continued education, and hard work, she gained valuable experience and extensive knowledge about wealth management, investment strategies, and tax planning. After years of working as an accountant, a financial advisor and partnering with other financial firms, she founded Echo Wealth Management in 2015. She offers in-depth financial planning and personalized investment management services for professionals, executives, and entrepreneurs. She is an expert in stock options, trading plans, and Deferred Compensation Plans. As an investment professional with CFP®, Certified Public Accountant (CPA) license and Chartered Financial Analyst (CFA) charter, she is sought after to create personalized financial plans and execute the holistic strategies.

Tax Planning Isn’t Just a Once a Year Thing

Wed, 22 Jul 2020 15:50:23 GMT

We tend to think of tax planning season being February-April each year. But that’s an incorrect belief. Tax planning is a year-round thing. Recently, I’ve been sharing the eight tax strategies with which I help my clients. I introduced you to how diversifying your income sources and utilizing IRA , can effectively reduce your taxes. Then I showed you how you can help your children open and fund their own IRAs, how you can be creative in your charitable giving, and why it is important to open a health savings accounts.

In my last blog, we continued learning about how to utilize municipal bonds and understanding net unrealized appreciation as ways to positively affect your tax situation.

Today, I will wrap up this part of your wealth management process by explaining how to manage your tax bracket and harvest gain, as well as how to manage your deductions. All these strategies can plan a key role in maximizing your tax savings. And who doesn’t want to save?

Strategy 7: Manage Your Tax Bracket and Harvest Gain

Long-term capital gains are generally taxed at preferential tax rates rather than ordinary income tax rates.

A recent tax cut offered a series of tiered preferential rates, from 0 percent for those in the lowest tax brackets, to 15 percent for those in the middle, and 20 percent for the highest-income taxpayers. You can refer to the year 2020 federal tax rates on both ordinary income and long-term capital gains here .

Unlike tax-loss harvesting, which helps lower your income tax bill by selling investments that are currently trading for less than their purchase price and then using those losses to offset other capital gains or reduce taxable income, capital gains harvesting is a strategy by which you can turn unrealized long-term capital gains into realized capital gains by paying taxes at a lower rate now if you expect your tax rates to go up in the future.

When you convert the money in your IRA to a Roth IRA, you pay ordinary income tax, not the capital gain tax rate.

When you sell appreciated securities that you have held for at least one year inside your taxable accounts, the realized long-term gains are subject to the long-term capital gains tax rates.

Capital gains rates have their own brackets that differ from ordinary income tax rates, and good tax planning lies in capturing the 0 percent and 15 percent capital gains tax rates.

I’m going to provide the general considerations on the order of when to do partial Roth conversion and when to realize long-term capital gains when selling appreciated securities inside your taxable accounts:

For people who have negative taxable income (i.e., deductions exceed income), partial Roth conversions will effectively have a marginal tax rate of 0 percent at the federal level. Therefore, absorbing any negative taxable income with a partial Roth conversion should come first.
From there, it’s hard to beat 0 percent on the long-term capital gains rate by realizing some long-term capital gains in your taxable accounts.
Once the 0 percent long-term capital gains bracket fills up, for those households that already have too much in Social Security benefits, pensions, passive income, RMDs, or other income sources, and are no longer exposed to the alternative minimum tax (AMT), it may be more beneficial to conduct partial Roth conversions by paying the 22 percent or even 24 percent tax rate, to avoid the 32+ percent brackets.
In the most extreme cases, for people who will always be at the top tax brackets (over $622,050 taxable income for future years), it may be advisable to harvest partial Roth conversions at 32 percent or 35 percent tax brackets to avoid the very top (37 percent) tax bracket in the future.

Strategy 8: Manage Deductions

In 2017, the standard deduction was increased.

Today, only 15 percent of people benefit from itemized deductions because the standard deduction is actually higher than their itemized deduction.

For example, a retired couple that no longer has mortgage interest to deduct loses a big component of itemized deductions. If they give $5,000 to charity each year, this still does not put them over the $28,100 standard deduction for a married couple (if over age 65 in 2020).

In addition, in 2019, the tax law changed again so that state income tax and property tax, which used to be unlimited, is now capped at $10,000 a year.

A retired couple whose property tax and charitable giving only amounts to $15,000 falls far below the standard deduction for married couples. However, they can use a donor-advised fund to maximize their deductions.

For example, if they have stocks in Apple and Ecolab that have a substantial unrealized long-term gain, they can donate the appreciated stocks with market value of $50,000 in a donor-advised fund. This can be added to their $10,000 property tax deduction to give them an itemized deduction of $60,000 this year that is $31,900 more than standard deduction, saving more taxes by using itemized deduction. For the years you don’t make major charitable gifts, you can choose the standard deduction and still request grants from your donor-advised fund to benefit your favorite charities.

Another strategy for tax savings to benefit the family involves contributing to a college savings 529 plan, which produces some state income tax savings and funding for the future qualified education costs of a loved one.

Second, ask yourself what your federal marginal tax rate was last year, and identify how much more taxable income you can earn before you reach your next tax bracket.

Review and identify two actions you can take now to potentially improve your tax situation next year and into the future.

Remember, tax planning is not only for April. It means all-year-round planning and even multiyear tax planning using projection tools.

Have any of you ever run a marathon? What was the hardest mile for you? Let me know below.

Next time I will introduce a new topic, estate planning. I know it might sound unpleasant, but I promise to shed much light on the subject.

Are Your Tax Strategies Like a Good Homemade Soup?

Thu, 16 Jul 2020 21:51:57 GMT

I enjoy making homemade soups. Sometimes I use recipes, and sometimes I try different ingredients not on the recipe. One day, I was making “stone soup” with all my leftovers in the kitchen. I roasted 4 carrots, 1 yam, and 1 baked potato. I them pureed them and added them to my chicken stock. I was so excited when the broth took on the creaminess of those roasted vegetables. I then proceeded to add the other normal ingredients of chicken and orzo. To my delight, the addition of these extra ingredients kicked my soup up on the delicious scale.

Today, I am going to show how you can do the same for your tax strategy soup.

I have eight strategies that help you to maximize your tax savings. Thus far, we have discussed four of those strategies: diversifying your income sources and utilizing IRAs , helping your children fund their own IRAs, charitable giving, and health savings accounts.

Today we continue on by learning about how to utilize municipal bonds and understanding net unrealized appreciation.

Strategy 5: Using Municipal Bonds

If you are a high-income earner, incorporating municipal bonds into your taxable accounts may be a good tax strategy.

When your portfolio construction calls for some fixed income allocation for the purpose of diversification to reduce risks, various bonds, such as high-yield bonds, corporate bonds, and government bonds, can be purchased in your IRA account because the interest income is not reported on tax returns each year. Remember, you only have to report income from an IRA when it is distributed out of an IRA to you.

If you buy the municipal bonds in your resident state, interest is tax-free at both the federal and state level. If you buy municipal bonds in other states, you still receive tax-free income at the federal level.

For example, an investment-grade municipal bond in Minnesota that matures on February 1, 2030, and pays 3 percent annual interest, is equivalent to a corporate bond that pays 5.44 percent. How did I figure this? First, let’s presume you’re a resident of Minnesota, your federal income tax bracket is 35 percent and your Minnesota tax bracket is 9.85 percent. This makes your combined tax bracket 44.85 percent. The calculation for tax equivalent rate is: 3 percent is divided by (1 minus 0.4485) = 5.44 percent.

If you cannot find the similar credit rating and maturity date of corporate bonds that pay as high as 5.44 percent, then consider buying municipal bonds to receive tax-free income inside your taxable account (joint, individual, or revocable trust account).

Strategy 6: Net Unrealized Appreciation Strategy (NUA)

Before the Enron crisis, many employers matched company stock in employees’ 401(k) plans, and employees kept that stock for many years.

As they retired and considered taking distributions from their 401(k), they had to decide what to do with the employer stock. Before deciding to sell the stock inside the plan and rolling over the entire balance to an IRA, an analysis of cost basis and tax situation should be completed.

If the stock’s cost basis (the original purchase price) is low and in the region of 20 percent to 30 percent of the current market value, it may make sense to transfer the shares to a taxable brokerage account (such as joint, individual or revocable trust account, but not an IRA account). You would pay ordinary income tax on the cost basis only in the year of taking the stock out of the 401(k) plan.

Any appreciation above the cost basis is treated as long-term capital gains when you sell the shares inside your taxable brokerage account.

The mutual funds inside your 401(k) could be sold, and the entire balance must be rolled over into an IRA in the same calendar year as you take the stock out of the plan. The benefit is to pay long-term capital gains tax (maximum 20 percent, lower than the ordinary income tax rate) on a substantial portion of the appreciation.

In December 2018, my client Mary’s father passed away suddenly at the age of eighty, and her mother, Susan (age seventy-nine), inherited a large 401(k) plan balance with about 40 percent in employer stock. The cost basis was about 20 percent of market value.

I reviewed the most recent 401(k) statement on December 14 and learned that the required minimum distribution (RMD) for the year 2018 was about $50,000. This needed to be taken out immediately to avoid a 50 percent tax penalty assessed by the IRS.

After analyzing her other assets, Social Security income, and pension income to calculate her projected tax rate in the future along with her estimated living expenses, it became apparent that taking out this employer stock in-kind and paying income taxes on the $75,000 cost basis was the best choice for her because this distribution of stock met the RMD requirement for the year.

She would have over $350,000 worth of stock in a taxable account on which she would potentially pay lower long-term capital gain taxes on the appreciation above $75,000 cost basis when sold at a later time.

This timely action before the end of the year resulted in an immediate savings of $25,000 in IRS penalties and gave her peace of mind.

A lesson for you all: never wait until the second half of the year to take the RMD, as it may take a few months for the beneficiary to figure out how to take the RMD in a timely fashion.

When she passes away, her children will inherit this stock with stepped-up basis so that they don’t pay any taxes if sold.

I know some of you are saying, whew! Again, this is a great example of the need for a financial planner, a quarterback, one who knows what to do, when and how to do it, all in order to save your money.

I will wrap up the last 2 tax strategies our next time together. Until then, I would like to hear about your favorite unexpected ingredient in your soups. Please share below, I’m hungry. (P.S. - If you don’t know the story about stone soup, research it. It is a great teaching story.)

Are All Piggy Banks Pink?

Thu, 16 Jul 2020 21:39:04 GMT

Do you realize your child’s financial education started with their first piggy bank? I can imagine you explaining the value of saving. Even though years have passed, don’t let your child’s age interfere with continuing to educate them about saving. Share your knowledge. Talk to them about opening an IRA.

Last time, I began sharing information with you about my eight tax strategies : tax brackets, diversifying your income sources, and the differences between Roth IRA and Traditional IRA.

Today, I want to continue talking about tax strategies and the ways that are available to help your children, your charities, and yourself.

Strategy 2: Help Your Children Fund Their Roth IRAs

So many people are more concerned about their children than themselves, which in and of itself is not a bad thing, but stay with me on this one. They see a terrible job market, insecure jobs, or a lack of full employment. Their children aren’t getting the jobs for which they went to college. They have student loans.

In today’s economy, children often don’t have a great financial foundation or an understanding of basic financial planning. Therefore, many people are asking: Is there something we can do to help out our children in the long term and into retirement?

If your children have part-time or summer jobs, you should encourage them to open a Roth IRA and then help them fund up to a maximum contribution of $6,000. Even if they only make $4,000 per year and save $2,000 for their Roth IRA, you can match that with another $2,000. Those starting out in their career should also contribute enough to their 401(k) plan to get the benefit of their employer’s full match.

If the employer matches fifty cents to a dollar of contribution up to 6 percent of compensation, your child must contribute at least 6 percent of his or her pay in order to receive the full match (i.e., 3 percent of his or her pay). This gives a 100 percent return on his or her investments without much risk.

When they are starting out in their career, generally it is better to contribute to a Roth 401(k) than a traditional pretax 401(k), as their income is likely to increase in the future. This will encourage them to start saving now and invest early for their retirement.

The long-term growth of these tax-free retirement accounts is significant because they can leave it there for fifty years. This comes back to the idea of meticulous planning : by accumulating small amounts consistently over time, even a 5–6 percent rate of return compounded over fifty years will become a big account.

The Roth IRA allows you to pay taxes now at a certain rate instead of paying taxes later at an uncertain rate. This is a great way to hedge against future income tax increases.

Strategy 3: Be Creative with Charitable Giving

If you have any appreciated stocks in your non retirement accounts, instead of writing checks to charities or using payroll deductions at work, you can choose to donate the appreciated securities that you have held for at least one year to the charities. You can deduct the market value of the securities on the date of gifting as a charitable deduction.

This is a better way than paying taxes on the realized capital gains when you sell them and then writing checks to the charities.

If you want to have a major charitable deduction to lower your taxable income in one year, but are uncertain about which charities and how much you want to give each year in the future, you can consider setting up a donor-advised fund through your financial advisor and transfer the appreciated securities on which you have unrealized long-term gains and deduct the fair market value as a charitable deduction on your tax returns in the year you fund the donor-advised fund.

A charitable remainder trust can avoid capital gains taxes on appreciated assets, allowing you to receive income for life and receive a tax deduction now for a charitable contribution that will be made after your death. A charitable lead trust can avoid taxes on appreciated assets, earn an immediate tax deduction, and still provide an inheritance for your heirs later.

Strategy 4: Open a Health Savings Account

A health savings account (HSA) is an important part of any tax diversification strategy. It also offers triple tax benefits. Think of your retirement savings (IRAs and 401(k)) as going to pay for other retirement expenses such as food, shelter, and clothes, and you can see that you need to jump-start saving in your HSA for your health care costs (including Medicare premiums) in retirement.

An HSA can be a powerful tool to help you save and invest now and then pay for your qualified medical expenses during retirement. First, contributions are made with pretax dollars through payroll if your employer offers it. If not, you can purchase a high deductible health plan (HDHP) on your own in the insurance market, set up your own HSA online, and make contributions before the tax return filing deadline.

Distributions are income-tax-free if you use them to pay for qualified medical expenses. Typical retiree expenses on health care are often as high as $500/month, much of which are HSA-eligible qualified medical expenses.

An HSA balance doesn’t expire. Unlike a Flexible Spending Account (FSA), you don’t need to spend the balance within the calendar year. As long as your medical expenses aren’t reported on tax returns, you can be reimbursed from your HSA many years from now.

Unlike an IRA, the HSA balance can also be distributed before age 59 ½ without incurring taxes and penalties.

Today, we continued our eight tax strategies discussion by reviewing; Helping Your Children, Being Creative with Charitable Giving, and setting up a Health Savings Account. I hope I have encouraged you to talk to your children about opening a Roth IRA. As I mentioned before, in today’s economy, children often don’t have a great financial foundation or an understanding of basic financial planning. It is my deepest desire to help you help your children as well as yourself with my blogs and my book. When I talk to you again, I’ll review other tax strategies to maximize your tax savings.

I am curious to know: how many of you had a piggy bank? Did you like to save? Let’s share below.

Are All Your Eggs in the Proverbial “One Basket?”

Mon, 13 Jul 2020 17:06:03 GMT

In our next few chats, I want to explore what’s in your financial basket. Are all your eggs in one basket? Do you even know what’s in your basket? There are strategies you can implement to maximize your tax savings. Everyone likes to save money, right? And certainly we all want to decrease our taxes. Come along with me as I introduce you to my eight tax strategies.

Just as diversification is important in investing , income source diversification is also important when it comes to planning for your financial future. While today’s top income rate of 37 percent is relatively low compared to historical income tax rates, which were as high as 94 percent during World War II, it’s still vitally important that you diversify your income sources in order to have more flexibility in dealing with potential future tax increases.

The US progressive tax system ensures that all taxpayers pay the same rates on the same levels of taxable income. The overall effect is that people with higher incomes pay higher taxes. For tax planning, you need to understand the difference between your marginal tax rate and your effective, or average, tax rate.

Your marginal tax rate, or tax bracket, is not the tax rate you pay on all of your income after adjustments and deductions. Rather, it’s the rate applied to your additional income over a certain threshold amount. Your effective tax rate is the total taxes you pay divided by your taxable income.

Effective tax rate only matters as a group of taxpayers is compared to another group of taxpayers to illustrate how much taxes each group pays based on their income levels.

For individual tax planning, your focus should be on your marginal tax rate because you can take some action to reduce taxes by not getting into the next higher tax bracket.

How Tax Brackets Work

What if your taxable income is $78,950?

Married filing jointly in 2019 puts you in the 12% tax bracket, but this doesn’t mean you pay 12% on all your income. Here is the math:

First tax bracket: $19,400 x 10% = $1,940

Second tax bracket: ($78,950 - $19,400) x 12% = $7,146

Total Federal Income Tax: $9,086

This tax table shows a 12% marginal tax rate, but an effective tax rate of 11.51%.

What if your taxable income is $321,450? If married filing jointly in 2019, you will be in the 24% tax bracket. Here is the math:

First tax bracket: $19,400 x 10% = $1,940

Second tax bracket: ($78,950 - $19,400) x 12% = $7,146

Third tax bracket: ($168,400 - $78,950) x 22% = $19,679

Fourth tax bracket: ($321,450 - $168,400) x 24% = $36,732

Total Federal Income Tax: $65,497

This tax table shows a marginal tax rate of 24%, but an effective tax rate of 20.38%.

Some people think if they earn more money, all of their income becomes subject to the next-highest tax bracket. They think they will pay more taxes and possibly have less money left over than they would have had they earned less.

As you can see from these examples, that is not true. Each dollar you earn only affects the tax rate and taxes owed on additional income and not to the dollars earned in lower tax brackets.

Eight Tax Strategies

Now that you know how the progressive tax system works, I want to introduce you to eight strategies you can adopt to maximize tax savings. Today we will talk about the first strategy.

Strategy 1: Diversify Your Income Sources

Since you cannot predict your future income tax rates, owning investments in all three tax buckets gives you the flexibility you need to reduce taxes.

Many people miss out on opportunities to save taxes by failing to realize that they are making tax-inefficient decisions and by failing to own investments in all three tax buckets: tax deferred (401(k) and IRA), tax-free (Roth IRA and HSA), and taxable (individual, joint, revocable living trust).

These three buckets provide different opportunities: by maximizing your after-tax-rate return, you pay only the taxes that you are required to pay, you can reduce your tax bill, and you can position yourself better for the long term.

A taxable traditional IRA withdrawal is taxed at the highest ordinary income tax rate. People often forget how much the financial climate can change. For example, a higher income earner could find himself/herself with a tax hike down the road if the government finds itself in need of money.

People often overlook the importance of having a Roth IRA account. Because Roth IRA contributions do not reduce their current tax bill, they may not see the benefits of putting a small amount in a Roth IRA and leaving it to grow for twenty or thirty years.

At retirement, if you find yourself in a 55 percent tax bracket because the political climate has changed, and with it the tax laws, having a tax-free account will offer you a lot of flexibility. You can treat the taxes you choose to pay now on the Roth conversion as “tax insurance” because it helps to manage the risk relating to potential future tax rate increase.

There are other advantages to having a Roth IRA:

You are able to make contributions at any age even after age seventy as long as you and/or your spouse have earned income.

You are not required to take a required minimum distribution (RMD) from a Roth IRA when you turn age 70.5.

A nonworking spouse can open a Roth IRA based on the working spouse’s earnings if they file tax returns jointly.

You can still make your annual contributions if you convert money from a traditional IRA to a Roth IRA in the same year.

You can contribute to a Roth IRA even if you participate in a retirement plan through your employer.

The Roth IRA allows you to pay taxes now at a certain rate instead of paying taxes later at an uncertain rate. This is a great way to hedge against future income tax increases. Roth IRA contributions are made on an after-tax basis. However, keep in mind that your eligibility to contribute to a Roth IRA is based on your income level. If you file taxes as a single person, your Modified Adjusted Gross Income (MAGI) must be under $139,000 for the tax year 2020 to contribute to a Roth IRA, and if you're married and file jointly, your MAGI must be under $206,000 for the tax year 2020. The maximum total annual contribution for all your IRAs combined is:

$6,000 if you're under age 50
$7,000 if you're age 50 or older

Even if your income exceeds the limits for making contributions to a Roth IRA, you can still do a Roth conversion, sometimes called a "backdoor Roth IRA." You can make non-deductible contributions to your IRA and report the contributions to the IRS using Form 8606 when you file income tax returns for the year.

When you convert a traditional IRA to a Roth, you will owe taxes on any money in the traditional IRA that would have been taxed when you withdrew it. That includes the tax-deductible contributions you made to the account, as well as the tax-deferred earnings that have built up in the account over the years. That money will be taxed as income for the year you make the conversion. If you have made non-deductible contributions to your IRA due to high income, then this portion is not taxable and you will follow the pro-rata rule to calculate the taxable portion using form 8606 when you file your tax returns for the year you do the Roth conversion.

One reason that a conversion might make sense for you is if you expect to be in a higher tax bracket after you retire than you are now. That might happen, for example, if your income is unusually low during a particular year (for example, you were furloughed or lost your job during the COVID-19 pandemic) or if the government raises tax rates substantially in the future.

Helping you learn how to save money is an important goal of mine. Understanding the tax codes and advantages and disadvantages of specific types of income, and specifically IRAs, is the first step in maximizing your tax savings. Next time, we will discuss how to help your children fund their IRAs, being creative with charitable giving, and opening a Health Savings Account (HSA).

Until then, think about your financial basket and what eggs you have in it. I’m curious how many of you have a traditional IRA and how many have a Roth IRA? Please share below.

Who are Your Financial Special Teams Players?

Tue, 30 Jun 2020 21:13:58 GMT

If you know football even just a little bit, you know there are different positions with different purposes and skill sets. There is the offense, run by the quarterback, the defense, and then the special teams unit. All have unique responsibilities, but not all play the same amount of time or have the same amount of influence.

As mentioned in my last blog , your financial planner is your financial quarterback. He or she knows your overall financial picture, your money history, and your dreams and goals. There are also special teams players on your financial dream team. They are just as important but play on a limited basis. Today, let’s talk about a few of them.

Tax Certified Public Accountant

Tax CPAs specialize in taxation. They are required to get 120 continuing education credits every three years to retain their credentials, so it’s advisable that you work with a tax CPA who has an active license, as it means the continuing education criteria along with the ethics requirements have been met.

Some CPAs focus on individual tax returns, and some work on both individual and business tax returns, which means if you are a business owner, you need to make sure you work with a CPA who is proficient in both types of returns and is accountable and credible.

There are many reasons why the dream team of high-income and high-net-worth people should have CPAs to prepare their tax returns. First, tax laws are becoming increasingly more complicated, especially for those in a high-income tax bracket. Second, your time is valuable, and preparing tax returns is time consuming.

Estate Attorney

An estate attorney drafts legal documents, such as wills and trusts, healthcare directives, and financial powers of attorney. This person is a key player on your team, yet an astonishing number of people don’t have estate plans in place. If you don’t have an estate attorney but have a trusted financial planner, ask your financial planner to introduce you to an estate attorney and integrate both into your team.

From there, your financial planner should be given a copy of your estate plan so that different scenarios can be run for different contingencies, including whether you should die tomorrow or twenty years from now. If you do have an estate plan in place, make sure you’re not making the common mistake of failing to implement it properly.

When looking for an estate attorney, ask one of your current trusted financial planners for a referral. Check the attorney’s credentials online and interview them to determine their specialty. When you interview them, ask them about the planning process, various available strategies, fees, who will implement your estate plan, and how frequently your plan is reviewed.

Independent Insurance Agents

An independent insurance agent, unlike a captive agent who works for a single company or sells the only the products of one company, is another key player on your dream team. When looking for an independent insurance agent, it’s important to find one who is licensed, trustworthy, and knowledgeable.

Sometimes your financial planner may be able to fill this role if he/she has the proper licenses. If you choose not to get insurance through your financial planner, make sure you work with someone vetted by your financial planner. At the very least, make sure you work with someone with experience and knowledge who is not selling you something you don’t need. He or she should have many tools in the toolbox and is not just selling one or two products from a single company.

What you need on your team is someone who can work with the rest of your team and be willing and able to develop a long-term working relationship with you. A willingness to work with you and your team speaks volumes about the integrity of your insurance broker.

Other Team Members

While your financial planner, tax CPA, estate attorney, and insurance agent are important players on your team, it’s important to make room for a few more. They would include your long-term care specialist, college consultant, banker, or mortgage consultant. If you’re a business owner, a bookkeeper should be on your team as well. As you age, your family doctor should be included, especially if you are developing aging issues. Similarly, a trusted friend and a next-generation family member should also be on your team in case of a diminished mental capacity.

Having these players on your team can help you avoid some of the horror stories we hear of people being exploited in their declining years. Safeguarding against this is also part of your financial plan and part of the responsibility of your team.

It’s a good idea to have a written plan in place with your financial planner that includes other team members and friends and family with whom he or she can communicate.

Your financial dream team is not only essential to owning your financial future, it’s also essential to owning your future long into your declining years when you may have diminished capacity and need, not only a trusted friend, but also a financial quarterback you can count on.

Make sure you put enough thought into forming your team and introducing them to each other. When thinking about your team, ask yourself:

1. Who are your most trusted professionals?

2. Have you taken steps to introduce your financial planner to the other key professionals in your circle so that they can collaborate to serve you?

3. Are your team members experienced and equipped to maximize your wealth opportunities and support your lifestyle?

4. Who are your closest friends? Do you have a plan to make yourself bulletproof against fraud and elder abuse?

I hope this blog, as well as the last one, have helped you better understand who you need on your team and what each of their responsibilities are. In my next blog, I will begin sharing with you eight tax strategies that I find most helpful.

So, do you have a financial planner? If so, what do you like most about them? I would like to know.

Who is on Your Financial Dream Team?

Thu, 25 Jun 2020 20:24:27 GMT

In our last few chats we have talked about the “how” and the “what” and the elements of forming a solid investment plan. Today, we are going to discuss the “who” and the “why.” Who should be on your financial dream team and why they play an important role in your financial plan as well as your life.

Remember when we talked about the football team’s head coach in my last blog? He spends hours planning and strategizing about his team: who should be on it, what position they play, and what value they offer the team in making it successful. Again, I can’t help but use the same analogy to your financial dream team. Each member of the team contributes to your successful wealth management. This means that to be successful at building and managing wealth, you need to assemble a dream team.

Financial Planner

Your financial planner is your financial quarterback. He or she knows your overall financial picture, your money history, and your dreams and goals. When you are about to make an important financial decision, such as buying a home, retiring, or exercising your stock options, your financial planner is the first person to see. He or she should help you plan ahead, make sound investment decisions, and make sure all the members of your dream team are in alignment and meeting your needs.

It’s always a good idea to get recommendations from people you trust, such as your boss, CPAs, colleagues, or friends, to gain some insight into how a given financial planner/wealth manager works. There are three key attributes to look for in any financial planner, advisor, or wealth manager: trust and credibility, experience, and a growth mind-set.

Here are some of the acronyms used in financial planning. Are these individuals part of your dream team?

CFP® - Certified Financial Planner
CLU - Chartered Life Underwriter
CPA/PFS - Personal Financial Specialist
ChFC - Chartered Financial Consultant
CFA - Chartered Financial Analyst
CMT - Chartered Market Technician

Trust and Credibility

Titles and credentials may reflect the level of education and the breadth of professional service on which he or she is licensed to advise. For example, a chartered life underwriter (CLU) offers insurance, a certified public accountant (CPA) is licensed to provide accounting services, and a chartered financial analyst (CFA) charter holder is globally recognized for professional portfolio management.

The CFA charter is a harder credential to obtain because it requires spending four to five years in study and the passing of three levels of exams. The credential also stipulates that he or she follows a fiduciary standard, which requires acting in the best interest of clients. This makes the CFA designation the gold standard for investment management.

For managing your investments and your overall wealth and lifestyle plan, a financial planner with Certified Financial Planner (CFP®) certification is the best option.

You may also opt to work with a financial planner with the certified financial analyst (CFA) charter. The main difference between CFA charter and CFP® designation is that the latter focuses on overall financial plan including taxes, insurance, cash flow, retirement plan, investment plan, and estate plan, while a CFA’s training focuses on deeper knowledge of statistics, economics, investment analysis, and portfolio building for both individuals and institutions such as insurance companies, mutual funds, banks, endowments, and foundations.

Think of it this way: the CFP® certificate holders are family doctors, and CFA charter holders are specialists, such as neurosurgeons or cardiologists. If your financial planner does not have the CFA charter, it would be helpful if there is a CFA charter holder on the team either in house or outside the firm in order to offer more robust research into global economics and securities analysis to help build customized investment strategies. It’s important to know how fees are charged.

Today, over 60 percent of planners in the United States are fee-based, meaning they charge an annual fee based on the account balance they manage rather than the products they sell. When hiring a financial planner, make sure that your service level expectations are clear so that you can see if this partnership offers a good fit between what you are looking for and what the financial planner can and is willing to deliver.

Experience

The second quality to look for in a financial planner is experience. It’s increasingly important today that you find someone who has a global perspective and uses a broad set of investment tools. It’s helpful to look for someone who works with clients who have similar goals or face similar constraints as yours. This will allow you take full advantage of the planner’s experience.

A Growth Mind-Set

A financial planner may have a lot of credentials and experience, but it’s important that they have a growth mind-set and have processes in place to deliver consistent results. To know if your planner has a growth mind-set, pay attention to their willingness to actively seek new information, minimize biases, and routinely adapt their processes to grow your accounts.

In addition, pay attention to how this planner utilizes his/her team and actively invests in continuing education by attending industry conferences and study groups. You should also choose a planner with whom you feel comfortable discussing money issues and trust to act in your best interest.

Today, we talked about the quarterback of your financial dream team, the financial planner. This person sees the entire field before a play is made. They survey the defense and make decisions based on many factors. Your financial planner has the same responsibility; he or she knows your overall financial picture, your money history, and your dreams and goals. They make sure the team members are in alignment and meeting your needs. In my next blog, I will introduce you to the other members of your dream team: the Tax Certified Public Accountant, the Estate Attorney, the Independent Insurance Agent, along with a few others.

Tell me, did you ever play on a team? If so, what position did you play? Were you able to see how your position was part of the overall team? Tell me about your team experiences below.

Echo Huang Featured on The Authors Unite Show

echo@echowm.com (Fang Huang) — Fri, 19 Jun 2020 13:14:58 GMT

Echo Huang recently sat down with Tyler Wagner of The Authors Unite Show to discuss her new book Own Your Future that was released on June 9, 2020. She shared her unique personal story, and discussed some investment strategies including hedged equity and structured notes to deal with current stock market volatility and the 0% interest environment.

Having That Perfect Game Plan

Wed, 17 Jun 2020 20:08:56 GMT

Do you love football? Do you watch the calendar for that first game of the new season in the fall?

Have you ever wondered what the coaches do during the off season? Are they off on an island vacation, resting and relaxing from a long season? I would bet that most would love to do that, but probably more important to them, is beginning to think about the next football season.

I envision the coaches huddled in meetings discussing: Goal Setting what it will take to win the championship, Preparing new plays other teams have not yet seen, considering the Risk of special plays on certain downs, and the Construction of the best 11 players on the field at particular times.

These scenarios are very similar to my Five Steps to A Solid Investment Plan. Previously, we discussed Steps 1-3 ; Goal Setting, Preparation, and Risk , and Portfolio Construction . Today, I want to review the final 2 steps: Implementation and Monitoring & Evaluation.

Step 4 - Implementation

Implementation means executing your investment plan by buying and selling securities in various accounts.

There are several areas that need to be considered before trading. These are asset location, cost basis review, concentrated stock position, and municipal bonds.

Asset Location

Where your advisor chooses to buy an investment and into what type of account is called asset location.

Most clients have at least two types of accounts that have different tax treatments: tax-deferred, such as an IRA, or pretax 401(k), and taxable, such as an individual account, joint account, or revocable living trust account.

Tax-deferred accounts allow you to defer any income and gains until you take distributions.

Taxable accounts generate tax form 1099 every year to report interest, dividends, and realized capital gains or losses that you must report on your income tax returns.

To maximize tax efficiency, proper asset location can generate an additional after-tax return when tax-inefficient assets (i.e. high yield bonds) are placed in the retirement accounts, and tax-efficient assets (i.e. growth stocks, municipal bonds) are placed in a taxable account.

Review Cost Basis, Short-Term, or Long-Term Unrealized Gains

Part of implementing your investment plan means that you or your financial advisor should identify securities that should be sold immediately, such as those that are too high cost, have a poor track record, or do not fit your current investment plans.

When reviewing your taxable accounts, any securities you decide to keep that have unrealized short-term gains that may turn into long-term gains soon should be held and monitored. If you sell a security with realized capital gains, this security needs to be held for at least a year to get the long-term capital gains tax treatment.

The goal is to generate long-term gains instead of short-term gains in order to pay lower taxes because short-term gains are taxed at an ordinary federal income tax rate that could be as high as 37 percent, while the long-term federal capital gains rate is a maximum of 20 percent.

Concentrated Stock Position

A concentrated stock position arises when you have a large portion (over 10 percent) of your stock portfolio in a single stock. This can happen often when people hold employer stock. This situation has a correlated risk because the person’s human capital (i.e., ability to earn a living) is tied to the risk of the investment capital that you have saved for future retirement or other goals.

Remember Enron? The employees not only lost their jobs, but they also lost the value of Enron stock inside their investment accounts.

Uncompensated risk is the level of additional risk for which no additional returns are generated on an investment. If you owned one stock with high concentration or too many stocks in a single market sector, you would have significant uncompensated risk.

Risk that can be eliminated by adding different stocks (or bonds) is uncompensated risk. The objective of diversification is to minimize this uncompensated risk.

Municipal Bonds

If you are a high-income professional living in a high-tax state like New York, California, and Minnesota and have a sizable taxable account (above $1 million), it’s worth considering high-quality municipal bonds. If you buy your resident state’s municipal bonds, the interest income from these bonds are income-tax-free at both the federal and state level.

To diversify, you can buy other states’ municipal bonds as well. These nonresident state bonds are tax exempt at the federal level but not at the state level.

Step 5 - Monitoring and Evaluation

Every portfolio needs care and maintenance over time, and the best way to make this process more effective and efficient is to use a tool. For example, the iRebal tool we use at Echo Wealth Management assigns each client’s customized portfolio to a model that matches their risk number so that we can be alerted when a particular security’s value has gone out of the specified range.

If you don’t have this type of professional tool, use an Excel worksheet or other tools to monitor this closely. The models must be reviewed periodically to overweight or underweight certain asset classes based on market conditions and your worldview.

Without these cutting-edge tools, it would not be easy to monitor the risks of many accounts effectively and execute trades efficiently.

So as we conclude these five steps, I hope I have helped you understand the importance of forming a solid investment plan and the steps that are necessary to do so. Constructing your investment plan is a large undertaking, similar to being the head coach of a college or professional football team.

You must set your goals and prepare a solid financial plan first. You must figure out your risk tolerance and timeframe, construct your portfolio, implement your investment plan, locate assets, review your unrealized gains, correct your concentrated stock position, and continue to monitor and evaluate your portfolio. Whew, does this sound overwhelming?

I am committed to educating and coaching clients to promote an understanding of the value of having a solid investment plan. Just like in football, it’s important to build a financial dream team, to achieve your goals. Coaches always remind their players, there’s no “I” in team. So don’t feel alone or overwhelmed; I am here to help.

So who is your favorite team? No, it doesn’t have to be a football team, but I just love that analogy.

College Costs Women More – But We Can’t Get Mad About It

echo@echowm.com (Fang Huang) — Tue, 16 Jun 2020 15:51:06 GMT

Vote

Financial literacy classes could also help level the playing field. “I believe students should be required to learn about budgeting, loans, prepare a simple tax return, basic insurance, retirement planning and investing principles,” says Echo Huang, CFA, Founder and President of Echo Wealth Management. She encourages people to work with local lawmakers to put these measures in place.

This is an excerpt from an article written by Samantha Kostarason thesimpledollar.com on June 15, 2020. Please click below to read the full original article.

How to Save for Retirement During the Coronavirus Crash

echo@echowm.com (Fang Huang) — Tue, 16 Jun 2020 15:30:07 GMT

Take advantage of an automatic savings plan

"Some people with the means to save for retirement may know they need to do so, but they often have difficulty sacrificing present consumption because of a lack of self-control," notes Echo Huang, CFA, CFP®, CPA, founder and president of Echo Wealth Management. "These people may find excuses not to do so, like 'It's hard to make money in the stock markets now,' or 'I'll save and invest later when the situation gets better.'" To overcome what she calls "a self-control bias," Huang recommends finding "ways to save more that don't rely on self-control." For example, you could consider enrolling in automatic savings in your 401(k) plan and increasing savings when you get a raise. Up your financial smarts by learning these 19 personal finance tips you were never taught, but need to know.

This is an excerpt from an article written by Michelle L. Black rd.com on April 24th, 2020. Please click below to read the full original article.

Is Your Investment Portfolio a Recipe for Success?

Fri, 05 Jun 2020 15:56:55 GMT

Do you enjoy eating or baking that molten chocolate lava cake? If so, you know how important a good recipe is. There are certain amounts of specific ingredients which need to be added together to create that sensational end product: a delicious dessert. (I could have used a building-a-home analogy, but lava cake just sounded so much more enticing.) Financial portfolios are similar in that there are certain items in certain amounts necessary to construct a solid investment plan. In my last blog , about developing a solid investment plan, we discussed Step 1, Goal Setting and Preparation, and Step 2, How to Think about risk, volatility and time frames. Today, I will introduce you to Step 3 - Portfolio Construction.

Portfolio Construction

Your ideal asset allocation is the mix of investments, from most aggressive to safest, that will earn the total return over time that you need. Once you have identified your target risk number and asset allocation, it’s time to identify an appropriate combination of securities in various retirement and non-retirement accounts in your portfolio.

There are endless combinations when constructing a portfolio. The securities you can select include mutual funds, exchange traded funds (ETFs), individual stocks, and bonds. You must do research on a wide range of securities to select the ones you want to buy to build your portfolio.

In general, when constructing your own investment plan, it’s important to determine how much to allocate to the three major categories: stocks (for growth), bonds (for income), and cash (for capital preservation). Bonds with different maturity dates are part of your fixed income allocation; they do not grow as much as stocks, but they pay 2 percent to 5 percent interest income subject to credit quality, liquidity, and duration. Cash means checking, savings, and money market funds that provide you the liquidity you need with minimal return. Stocks are your main growth investment, but you should have a ten-year or longer time frame before you need to sell because a major market downturn, such as the 2007–08 financial crisis, could be five years away and may take four or five years to recover.

As part of your investment plan, your cash flow plan should include the projected amounts you need to withdraw from your portfolio per year after receiving Social Security, pension, or annuity income. As you live in retirement, you’ll need to sell equity or fixed income securities to rebalance your portfolio and park more in cash (about one year’s worth of expenses) for withdrawals.

At Echo Wealth Management , we have developed a framework to determine the best combination of securities in order to construct a customized portfolio that addresses equity needs, manages distribution requirements, and monitors allocation. It helps us create a plan that is low cost, tax efficient, and diversified in order to accommodate clients’ goals, resources, time frame, and risk number.

As you construct your portfolio, alone or with an advisor, it’s important to remember to select an asset allocation that matches your risk profile and the rate of return you need to meet your goals.

Diversification

Some people have fears about managing money. Often, this is because they had a bad experience, made mistakes on their own, or worked with an advisor who didn’t explain the risks and created a portfolio that was not comfortable with their risk tolerance level. The answer to this fear is creating a good blend of securities and being willing to take calculated risks across a diversified portfolio.

For example, when our clients see their cash flow on the Echo Dashboard and see a detailed analysis of their current portfolio and their time frame and goals, they can see projections and the adjustments we can make to ensure they still meet their retirement income needs in the long term. This tool shows them that their portfolios are adequately diversified so that should a bear market scenario arise, they are less likely to be forced to sell stocks, even if they incur a temporary loss of value. Showing detailed projected cash flow and withdrawals from various accounts for the next five years is key to building confidence in investment decisions.

For longer-term (over ten years) goals, where you have the capacity to weather a bear market, you can invest more aggressively.

For intermediate-term (three to ten years) goals, a diversified portfolio including cash investments, bonds, and some stocks can help to balance your risk and return potential. The closer you are to your goal, reduce your risk accordingly.

For shorter-term (less than three years) goals, a sound approach is to invest in a heavier mix of historically less-volatile investments, such as cash investments and short-term bonds.

Investing with A Global Perspective

While many investors tend to buy domestic stock, it’s a good idea to invest with a global perspective. This means understanding that emerging markets and developed markets, such as Europe, Japan, and Canada, also present opportunities.

When looking for global investment opportunities, it’s important to look beyond projected GDP in these regions and pay attention to the valuation of the stocks you want to buy when they are relatively cheap compared to the long-term average.

American investors tend to underweight emerging markets stocks, but it is advisable to have at least 10 percent of the stock portion of your portfolio in emerging markets stocks in order to potentially maximize return in the long term. China and India together constitute about 36 percent of the world’s population. By 2030, emerging markets will account for 62 percent of total growth in global consumption.

If the dollar weakens or if US economic growth and earnings growth slow compared to overseas growth, the return on international equities will be amplified. This means investing with a global perspective could be a solid strategy in your investment plan.

So as we begin to construct your portfolio for a solid investment plan, we need to think about the mix of investments, just like the mix of ingredients for our chocolate lava cake. A beautiful dessert consists of a variety of ingredients in different amounts. The same is true for your solid investment plan. Your ideal asset allocation is the mix of investments, from most aggressive to safest, that will earn the total return over time that you need. Determining how much to allocate to the three major categories: stocks (for growth), bonds (for income), and cash (for capital preservation) is key in constructing the portfolio of your Solid Investment Plan.

When we meet again, I will review Step 4 - The Implementation in Forming a Solid Investment Plan.

Until then, I would like to know about your favorite dessert? How many ingredients are in it? I’m salivating already, so please share. And if you’d like to share about something you’ve learned or have a question, I’d love to read that as well!

Five Easy Steps to a Solid Investment Plan

Tue, 02 Jun 2020 16:09:25 GMT

Have you ever attended a wedding reception and your first thought was WOW? You were so impressed by the décor, the flowers and the food presentation. That “wow” took some planning to pull off.

One of my guiding principles that I shared in an earlier blog was developed from my childhood. I benefited greatly from my parents’ meticulous planning for our future and in escaping our poverty.

Clearly, having a plan is very important in achieving the results you are looking for. Investments and retirement require the same energy and effort.

Do you have an investment plan? Did you do it yourself? Are you feeling confident in your strategies? When was the last time you looked at it? Take a minute and think about these questions. If you are feeling a bit unsure, let me show you how I put together an Investment Plan for my clients. I want to guide you through developing a solid investment plan by utilizing my five-step approach. Today, we will explore Steps 1 and 2.

Five Steps to a Solid Investment Plan

Too often I see people buying a random collection of funds and stocks without any particular framework or an investment strategy. They have goals, but there’s often a mismatch among those objectives, their financial resources, and their risk tolerance. In other words, they don’t have a viable investment plan.

In order to reach your required rate of return to achieve retirement or other financial goals, you must work on financial planning, and to do this well, you must understand the five basic steps required, regardless of whether you are working alone or with a financial advisor.

Step 1 - Goal Setting and Preparing an Investment Plan

The first step toward creating a solid financial plan involves setting goals. At my company, Echo Wealth Management , we like to learn about clients’ dreams and goals in addition to gathering their financial data in order to implement a customized financial plan for them. We also assess clients’ risk tolerance, time frame until they need to start withdrawing, and how much they need from their portfolio. A good financial advisor will never skip the planning phase, so make sure your financial advisor covers all these bases.

Once we have dreams and data in place, it’s time to use a planning tool, like the Echo Dashboard , to run different scenarios to explore outcomes based on changes in risk tolerance, revised expenses, or changes in return on investment (ROI) expectations. Exploring scenarios and determining the outcome of different strategies and decisions is the best way to begin to build a solid and achievable financial plan.

Step 2 - How to Think about Risk

Every investment has risks. The usual pattern is that when the stock market goes up, the bond market goes down (usually due to the Federal Reserve Bank increasing interest rates), but market cycles can be very strange indeed. In 2018, both the stock and bond markets lost money. This is precisely why everyone needs a solid education in investment planning, whether working alone or with an advisor, in order to determine risk tolerance and, on that basis, the right asset allocation to maximize after-tax risk-adjusted return.

Risk tolerance is a critical ingredient in any investment plan, but contrary to widely held beliefs, risk doesn’t mean risking the loss of all your money. It refers to volatility or a temporary value change in your portfolio. Therefore, the question to ask when preparing your investment plan is not can you tolerate the loss of your investment, but rather, how much of a swing in value can you tolerate?

Fortunately, there are tools on the market to help you identify your tolerance level by assigning you a number that can then be used by your advisor to design the right asset allocation for you.

RISK NUMBER

Picking investments that are riskier than you can tolerate can lead to some ugly outcomes. Often in market downturns, people see a 50 percent drop in their portfolio, and they panic and start to sell, which I mentioned in in my recent discussion on behavioral biases , is precisely the wrong time to sell. On the flip side, choosing investments that are not risky enough—that is, that do not have the high potential for growth—can be a roadblock to reaching your financial goals.

Discovering your risk tolerance doesn’t have to be a trial and error process. There are tools available to help you. Some offer you a detailed questionnaire from which it calculates a risk number that reflects your willingness to take risk. Generalizing a client’s risk tolerance doesn’t work in my opinion. Risk is personal, and it needs to be viewed through a client’s own unique lens to gauge risk and return trade-offs. Therefore, I look at how much risk clients can handle over the short term to hit their long-term objectives.

VOLATILITY

Many investors fear volatility in the market because they worry a market downturn would erase their hard-earned savings, but there is no need to fear volatility. Yes, it presents risk in the short term, but it also creates opportunities for investors with a long-term horizon to get into the market at attractive price levels. Therefore, don’t fear volatility; a good advisor will help you embrace it and use it to your advantage.

TIME FRAME AND WITHDRAWAL

Once you’ve taken the first step to identify your risk number, the next step is to identify your time frame to withdrawal in order to adjust your investment plan in a way that will allow you to achieve your long-term goals. Long-term investors are in a position to allocate a larger portion of their portfolio in higher-risk investments, such as stocks, because a longer time horizon (over ten years) allows you to have the capacity to weather a few down days or even a bear market.

In short, there are three points to remember when devising your investment plan:

1. Different types of investments have different levels of risk.

2. The longer you keep your money invested, the better your chances of overcoming a declining market.

3. Your investment gains can grow exponentially over time as your earnings are compounded.

Today, we began to explore the five steps to a solid investment plan. In Step 1 we looked at goal setting and preparation, and in Step 2 we learned about risk tolerance, volatility, and identifying your time frame in relation to your withdrawal needs.

In my next blog, we will review Step 3 in creating a solid investment plan: your Portfolio Construction.

Do you consider yourself a risk taker? Can you share an example of a risk you took and what the outcome was? I look forward to reading your stories below.

Echo Huang Featured on Girls Gone Boss Podcast

echo@echowm.com (Fang Huang) — Mon, 01 Jun 2020 13:12:56 GMT

Echo recently sat down with Gaby Ortega & Alex Pender of the Girls Gone Boss Podcast to share her unique story, and discuss the importance of educating women about financial planning as a personal practice and a viable career path.

About the podcast:

"Girls Gone Boss brings you amazing conversations with real women, overcoming real obstacles yet defying them with style & grace. We want to empower and motivate the next generation of women to always dream big. We realize the importance of elevating women everywhere and know that together we are capable of much more. Our hope is to spark the flame within you and empower you to pursue all of the desires of your heart."

Do Women Face Unique Financial Challenges?

Wed, 20 May 2020 20:36:48 GMT

If you are a woman and someone says you are “unique,” how does that make you feel? The confident woman might say it is a complement, and others might say it is a negative statement.

No matter your self-perspective, I’ve noticed that women face “unique” financial challenges. First, the facts show us that women today work about twelve years less than men, mainly due to having caregiving responsibilities for children, relatives, spouses, and parents.

Next, according to the US Census Bureau, women had median weekly earnings that were 82 percent of those of their male counterparts. Since Social Security and many employer retirement benefits are tied to earnings, women end up with lower levels of guaranteed retirement income. As a result, women’s median income in retirement is only 58 percent of men’s.

Another reason women face unique financial challenges is that women live longer than men, so their money must last longer. Lastly, women are more comfortable talking about money with female financial advisors and are more inclined to seek help from women, but only 23 percent of CFP® (Certified Financial Planner®) practitioners are women. Only about 20 percent of all financial advisors /planners in the US have the CFP ® designation. In other words, there simply aren’t enough CFP ® practitioners to serve women.

There are, however, some practical tips that women can implement on their own. Let me share some with you today.

Six Tips Specifically for Women

Whether you’re a woman or have a special woman in your life, here are six practical tips for women.

If you are a woman, the first tip to reaching your financial independence day is to start retirement saving early in your career because you have fewer years in the workforce. This is essential for long-term financial health.

Second, if you are a married woman, it’s important to actively participate in financial planning and not leave it totally to your spouse. Engage in the conversations about how you feel about your money and your short-term and long-term goals when you and your spouse work with a planner. Women have different concerns compared to men about their retirement years, and if they are not participating in the discussion and planning, their concerns will not be addressed.

Third, in my experience, we live in a culture in which it’s believed that men are better with investments , including picking stocks . Women therefore all too often leave financial decisions to their spouses, no matter how smart or successful they are in their careers. I’ve noticed that the financial landscape then becomes frightening to women when they become widows. For this reason, it’s important to participate in all financial decisions as early as possible.

Fourth, women should not overlook their physical health. Health is a valuable asset in your financial strategy. Women who invest in maintaining healthy lifestyles can enjoy better health with lower medical expenses for decades. In other words, health and wealth go together, and investing in the former is as important as investing in the latter.

The fifth tip for women is having a balanced plan. A growth investment strategy needs to be put in place to keep up with inflation so that guaranteed income from pension, Social Security, and annuities can help pay for basic expenses after retirement. Putting in place adequate insurance protection in the event of significant losses, such as life insurance, disability insurance, and long-term-care insurance, is key.

Sixth, it’s important to consult an expert. While wealth management doesn’t have to be complicated when working with a trusted expert and the team, financial products are getting more complicated.

Therefore, instead of doing nothing, it’s better to talk to a few financial advisors to find a partnership that is a good fit for you.

There is no way to avoid meticulous planning when you are trying to reach your financial independence day. No matter where you are or what your net worth is, having a plan at whatever stage of life you’re in, even if it’s not perfect, is critical to getting you on the right path.

It’s also important to recognize the roadblocks on your path. Ask yourself:

What are the biggest challenges you face?
Have you done any planning to address these? For example, if college funding is a goal, have you consulted anyone about making this provision in your plan?
If retirement planning confuses you, have you identified someone you can trust to offer advice? If you are still in the job market, do you have an alternative means of generating income from other assets in case of emergency?

Meticulous planning can start anytime in life, but starting now will make a big difference down the road. Burying your head in the sand is the last thing you should do. It’s never too early to start recognizing gaps and filling them in your plan. For example, if you don’t have a budget , it’s time to start working on one. If you don’t have a projection tool or a financial advisor , find a tool online that will help you calculate how much you need to have by a certain age in order to retire. If you don’t know how to do it, finding a trusted financial advisor should be your first order of business.

Finally, it’s important to think about how you’re going to spend your time. To go from being a busy working woman to being retired requires a lot more than pre-retirement planning. Net worth, income, and expenses will need to be continually monitored.

As you can see, there are many moving pieces in getting to your financial independence day. If it seems too complicated, remember that it doesn’t have to be. I am here to help you. I have titles, which I am quite proud of--I am a CFP® (Certified Financial Planner) professional and CPA (Certified Public Accountant) and a CFA (Chartered Financial Analyst®) charter holder—but more importantly, I am a woman who cares about YOU and helping you achieve your financial independence day.

Next time, we will look at Five Steps to forming a Solid Investment Plan.

Do You Know Your Financial Independence Day?

Fri, 15 May 2020 19:38:50 GMT

Independence Day is one of America’s favorite summer holidays. What is one of your favorite traditions on Independence Day: fireworks, hotdogs, parades? In this blog, I want to talk about another kind of Independence Day, your Financial Independence Day.

If money and time were not an issue, what kind of activities would you be doing over the next twelve months? The day when work becomes optional—when you can choose to stop working and start doing those activities that you enjoy while maintaining your current standard of living—is the day you’ve reached your financial independence day. This day is the end result of a process of determining your retirement income goals, the actions, and decisions necessary to achieve those goals. Retirement planning is, in essence, preparation for life after paid work ends, not just financially, but in terms of lifestyle choices, such as how to spend time in retirement, where to live, when to completely quit working.

A Plan for Every Stage of Life

People often deny themselves their dreams because they don’t understand the resources needed. This is why it’s important that I get their list of dreams during a discovery meeting in order to explore options and tell them what’s realistic. If a goal is unrealistic based on current net worth, income, and expenses, I can make suggestions for changes to get them to a better place. I can run some scenarios to show if they are spending too much now to retire in their target year, and I can offer recommendations. Financial independence isn’t necessarily just about retirement; it could involve pursuit of a new career.

Let’s take a look at Planning TIPS for three specific stages of life.

Planning for Financial Independence in Early Adulthood (Ages 21-35)

When you’re in early adulthood, ages twenty-one to thirty-five, you have time on your side to put plans in place that will help you later. This makes your guidelines to financial independence a little different than those designed for older adults. Student loans and young children are factors in the planning during this stage.

Start saving and invest early, even with a small amount of money. Compound interest will work extremely well for you over time.

The initial planning and ongoing monitoring can help you focus on what you can control, such as performing well at work and saving regularly.

Planning TIPS (Age 21-35)

Start saving and investing early, even with a small amount of money.

Open a 401(k) plan and/or a Roth IRA.
Form healthy money habits by creating a monthly spending plan.
Create and maintain good credit scores.

Planning for Financial Independence in Early Midlife (Ages 36-50)

Most people who come to a financial advisor tend to think they can’t become financially independent, at least not when they want. They don’t know what to do now to make it possible later.

People in this age bracket are hoping to fund the private schools and college educations of their children and also explore the possibility of early retirement. They may have done some investing, but are not confident in their financial decisions and are fearful of making the wrong move, so many don’t make any move.

Planning TIPS (Ages 36-50)

Continue to fund your 401(k) plan. Consider maximizing contributions as your income increases.

Consider choosing an HDHP (High Deductible Health Plan) instead of a traditional health insurance plan to save on monthly premiums. Maximize contributions to a health savings account (HSA) because they are tax deductible and distributions are tax free if used to pay for qualified medical expenses.

If you have limited income and didn’t start saving for retirement until your mid-thirties, consider increasing retirement savings before saving for college because many institutions will lend money to your children for higher education, but no one will lend you money to retire. Otherwise, consider funding a college savings account (a 529 plan) because distributions are tax free if used to pay for qualified education expenses.

Make sure you have proper life insurance and disability insurance so that your loved ones don’t have to withdraw early from retirement accounts should something happen to you.

If your income is too high to contribute directly to a Roth IRA, consider funding a traditional IRA (maximum of $6,000 in 2019; $7,000 for age fifty and over). IRA contributions may not be tax deductible due to income limitations if you participate in a 401(k) plan, but traditional IRA contributions are worth making because the earnings are tax deferred and you can convert the balance later to a Roth IRA.

Planning for Financial Independence in Late Midlife (Ages 51-65)

For those approaching retirement age, it’s important to include Social Security planning in the overall retirement plan. Retirement plans, pensions, marital status and age of each spouse, along with the health of each are factors to be evaluated during this stage of life, along with decision of at what age to take social security benefits.

Planning TIPS (Ages 51-65)

As you are approaching retirement, your investment risk tolerance should be lower in order to avoid losing too much right before you retire or in the early years of retirement when you don’t have the luxury of time to wait for a market upswing.

These may be your high-income years, so maximize the catch-up contributions to your 401(k) plan and your IRA.

Consider buying long-term-care insurance to reduce your long-term-care expenses when you are still healthy and you are on track with your retirement savings.

You cannot enroll in Medicare until age sixty-five, so if you retire before sixty-five, your financial plan needs to include some estimation of additional health insurance costs for the years that you have retired without an insurance plan provided by an employer.

Include Social Security planning in your overall retirement plan. If you have other resources and you are relatively healthy, it’s best not to take Social Security benefits before your full retirement age because the benefits will be greatly reduced.

Today we have looked at planning for your Financial Independence Day - the day when work becomes optional—when you can choose to stop working and start doing those activities that you enjoy while maintaining your current standard of living. I have included Planning TIPS for each age bracket, and hopefully, got you thinking about financial decisions you should be considering at your age.

Next time, I want to talk about unique challenges women face concerning their Financial Independence Day. Did you know most women work 12 fewer years than men?

So, what stage are you in and have you already accomplished some of the Planning TIPS? I’d enjoy hearing about it below.

Echo Huang Featured on the Wine and Dime Podcast

echo@echowm.com (Fang Huang) — Fri, 15 May 2020 14:51:07 GMT

Echo Huang recently sat down with Amy Irvine of the Wine and Dime Podcast to discuss her views on financial planning as a "triple minority" as well as actionable advice you can implement in your financial planning!

Echo Huang Talks Managing Finances in a Crisis on the Balance Boldly Podcast

echo@echowm.com (Fang Huang) — Wed, 13 May 2020 14:56:08 GMT

Echo Huang recently sat down with Naketa R. Thigpen of the Balance Boldly for Ambitious Women in Business Podcast to discuss managing your finances during a crash and how her own journey has shaped her current approach.

Listen in to learn how she transformed from being an accountant to a financial advisor running a solo practice when the economy was in a crisis. You will also hear some of her tips on how you can take advantage of the COVID-19 crisis to make beneficial financial decisions.

“We all have to figure out how to thrive in this crisis, figure out different ways to make yourself happy, hopeful, healthy, and seize opportunities.”

— Echo Huang [40:26]

What you will learn:

How she transitioned from a senior tax specialist to a financial advisor entrepreneur when it was uncommon and the country was in recession.
How to become adaptable to thinking ahead before selling products. How she started offering financial planning for a fee.
Echo’s one guiding principle of daring to dream.
The importance of education as a way to invest in yourself and choosing the right role models.
How she defined herself by learning, evolving, and surrounding herself with inspiring people.
Why she wrote her book, what it’s about, and how it helps people.
The importance of having a financial advisor with the right tools to keep you disciplined.
The purpose of staying prepared for a possible market crash.
How she gives herself permission to pause and prioritize her health by pursuing two hobbies, dancing, and piano playing.

Clearing the Behavioral Bias Hurdles in Your Wealth Management Plan

Tue, 12 May 2020 21:26:33 GMT

Do you have biases? Perhaps you never thought about it, but consider how you look at someone different than you. Have you ever been “caught up” in the environment in which you were in and reacted in a way the others were reacting? Does college pledging ring a bell?

Behavioral biases can act as a contact lens by which we view the world. Some have blue-tinted contacts which influence how we see the colors or the world.

In my last blog, I explained that we are all wired differently psychologically, with different behavioral biases. These behavioral biases fall into two categories, emotional biases and cognitive biases, and last time, we discussed emotional biases.

Today, I will review Five Cognitive Biases. These biases stem from basic statistical, information-processing, or memory errors; cognitive biases may be considered the result of faulty reasoning.

Overconfidence Bias

Overconfidence bias occurs when clients demonstrate unwarranted faith in their own intuitive reasoning, judgments, and/or cognitive abilities. It is a cognitive bias that may result from overestimating knowledge, abilities, and access to information. They may rely on faulty reasoning, a “gut feeling” and emotional factors, such as hope, all of which leads to prediction overconfidence and certainty overconfidence.

To challenge potential overconfidence bias, make sure you don’t study individual investments in isolation, and make sure to keep a comparative analysis perspective. This can help keep your own assessments realistic. Think of the investment as being part of a set of comparisons, and then ground your analysis in the average risk and return for that set. In addition, review your trading records, identify the winners and losers, and calculate portfolio performance over at least two years.

Representativeness Bias

When faced with uncertainty, we have seen some clients relying on a mental shortcut known as representativeness bias. Representativeness bias is a belief perseverance bias in which people tend to classify uncertain information based on past experiences. We tend to estimate the likelihood of an outcome or return by comparing it to an existing base point that already exists in our minds.

To overcome the adverse result of representativeness bias, make sure you identify appropriate long-term investments by using a diversified asset allocation strategy that will increa se the likelihood of better long-term portfolio returns that meets your financial goals. Then stick with it.

Anchoring and Adjustment Bias

The Anchoring and Adjustment bias occurs when an individual makes new decisions based on old or anchored information. This was evident during the housing crisis. A house value that inflated to $1 million just before the crisis may only have been worth $750,000 in normal market conditions. Owners still anchored their property value at $1 million. This is an example of how people tend to cling to the purchase price or arbitrary price level of an asset. The property was never worth $1 million, but in the owner’s mind, it’s anchored there because at one point they could sell it for that much.

Remember that past prices, market levels, and reputation provide little information about an investment’s future potential and thus should not influence buy-and-sell decisions to any great extent.

Therefore, it is advisable to consider a typical research process: establish some sort of baseline expectation of an economic forecast or stock price, and then to adjust according to changes in those expectations. Always look at current information to reevaluate your initial estimate from time to time rather than simply anchoring future analysis around an initial study.

Mental Accounting Bias

Mental Accounting bias is an information-processing bias in which people treat one sum of money differently from another equal-sized sum based on the mental account to which the money is assigned. They make the decision about what to do with the money differently depending on its source, such as whether the money is from salary, a bonus, an inheritance, gambling winnings, or business profit. The accounts can also be mentally categorized based on the planned use of the money. For example, some people will put 10 percent of their salary away for retirement, but not 10 percent of a bonus. They think that since they’re already saving from the salary, the bonus can be used for something else.

An effective way to detect and overcome the Mental Accounting bias is to recognize when you are not taking correlations between investments into account in your overall portfolio. To do this, combine all of your assets onto one spreadsheet to see the true asset allocation of various mental account holdings. Then, to avoid the trap of treating investment income and capital appreciation differently, think in terms of total return, and allocate enough assets to lower income investments, such as stocks, to allow the principal to continue to outpace inflation.

Loss-Aversion Bias

Loss-Aversion bias is a bias in which people tend to strongly prefer avoiding losses as opposed to achieving gains. Some investors hold onto losers even if those stocks have little or no chance of recovering. Some studies have suggested that the experience of losses is twice as powerful, psychologically, as gains. The consequence of Loss-Aversion bias is that you can hold investments in a loss position longer than justified by fundamental analysis.

The way to overcome loss-aversion bias is through education and seeking the counsel of a trusted advisor.

An important step to wealth management success is to be aware that these biases exist, challenge yourself to see if you are guilty of one or more of them, and then take actions to overcome them.

In reviewing our blogs on Behavioral Biases, I hope you have learned that all humans have biases. They are a natural part of how our brain works. We also know that returns on long-term investments are impacted by the short-term beliefs, emotions, and impulses. Therefore, to ensure that your biases are not compromising your investment goals and ability to manage your wealth, you need to not only understand how capital markets work but also challenge any biases affecting your decisions.

Anyone willing to share one of their cognitive biases? How did you overcome it?

Are You Wired for Wealth?

Thu, 07 May 2020 15:31:29 GMT

It’s an interesting question: are you wired for wealth? I believe we all are, but we have different biases that can cause us to stumble or get in the way of achieving the financial independence we desire. In our last conversation , we talked about how a financial advisor should get to know you, like I do through a Discovery Meeting. Today, I want to dive a little deeper into why you do what you do--financially. Let’s see how you are wired and how those influences and biases may be affecting your decisions concerning your assets and wealth management planning.

The Psychology of Investing

In the fields of psychology and economics, it’s largely accepted that people are wired with natural biases that adversely affect their self-interest. This means that being a good investor is not just a matter of being informed; it also means you need to understand what’s motivating your behavior. Could it be your wiring? Let’s take a look at overcoming behavioral biases and how those biases affect wealth management .

The first step to successful wealth management is to be aware that these biases exist, challenge yourself to see if you are affected by one or more of them, and then take actions to overcome them.

Emotional Biases versus Cognitive Biases

In general, behavioral biases fall into one of two categories: emotional biases and cognitive biases. Each comes with its own particular set of drawbacks.

Emotional biases stem from impulse or intuition; emotional biases may be considered to result from reasoning influenced by feelings. Both types of bias lead us to make decisions that are very different from the type of rational decisions finance has traditionally assumed people make.Cognitive biases/errors stem from basic statistical, information-processing, or memory errors; cognitive errors may be considered the result of faulty reasoning.

Let me introduce you to some of the common biases that may be causing you to make suboptimal investment decisions that are affecting your bottom line. In this blog, I will present four common emotional biases that you will want to be aware of, as well as some advice on how to modify your behavior and adapt to these biases.

Four Common Emotional Biases

Status Quo Bias

The Status Quo bias is an emotional bias in which people do nothing instead of making a change.People are generally more comfortable keeping things the same than with change and thus do not necessarily look for opportunities where change is beneficial.

The consequences of this bias are that you could unknowingly maintain portfolios with risk characteristics that are inappropriate for you. You may then fail to explore other opportunities instead by quantifying the risk-reducing and return-enhancing advantages of diversification and proper asset allocation. Status quo bias can be exceptionally strong and difficult to overcome.

Self-Control Bias

Self-control bias is an emotional bias in which people fail to act in pursuit of their long-term, overarching goals because of a lack of self-discipline. People know they need to save for retirement, but they often have difficulty sacrificing present consumption because of a lack of self-control.

To mitigate the negative impact of self-control bias, it’s important that you create a financial plan to address retirement savings and have a personal budget. A trusted financial advisor can help you with setting clear and actionable savings goals and then help you stick to them. This plan needs to be in writing so that it can be reviewed regularly. It is advisable to consider ways to save more that don’t rely on self-control; for example, automatic savings in your 401(k) plan, increasing savings over time, and increasing savings when you get a raise are all good ways to ensure that you have enough money later.

Inheritance/Endowment Bias

This is a common emotional bias in which people may irrationally hold onto securities they already own, particularly inherited investments , either for reasons of loyalty, or in some cases, taxes or transaction costs. This can lead to a failure to sell certain assets and replacing them with an appropriate asset allocation for investors’ levels of risk tolerance and financial goals because the investor has an emotional attachment to the inherited assets.

The Inheritance/Endowment bias is closely linked to the next bias, the Regret-Aversion bias, and the Status Quo bias which we just reviewed. This bias often causes us to hold on to securities long after they’re no longer relevant to our goals.

One way to overcome inheritance bias is to ask yourself, “If an equivalent sum to the value of the investment s inherited had been received in cash, how would I invest the cash?”

Regret-Aversion Bias

Regret-aversion bias is an emotional bias in which people tend to avoid making decisions that will result in action out of fear that the decision will turn out poorly.

One consequence of Regret-aversion bias is overly conservative investment choices, which are often based on risky investments and losses in the past. This can lead to long-term underperformance and potential failure to reach investment goals. A classic example of this bias is people being reluctant to sell when they should because they fear that the position will increase in value and then they will regret having sold it.

An important tip for dealing with this bias includes setting price targets to take the emotion out of the buy or sell decision, as well as making sure that each decision is well researched and consistent with your asset allocation strategy and long-term goals.

I hope you found this discussion about the emotional biases helpful in identifying areas where you might be struggling. These biases can affect your wealth management planning. Recognizing your biases is a great first step in being open to a new way of thinking concerning your assets.

Next time, we will learn about Cognitive Biases and how they affect your wealth management planning. So which of the 4 emotional biases discussed have you struggled with? How did it affect a decision you had to make? Let me know below.

Echo Huang featured by Reader's Digest: How to Save for Retirement During the Coronavirus Crash

echo@echowm.com (Fang Huang) — Mon, 04 May 2020 15:01:33 GMT

Whether you're in your 20s or close to retirement age, chances are high that the global pandemic has had an impact on your retirement plans.

Take advantage of an automatic savings plan

"These people may find excuses not to do so, like 'It's hard to make money in the stock markets now,' or 'I'll save and invest later when the situation gets better.'" To overcome what she calls "a self-control bias," Huang recommends finding "ways to save more that don't rely on self-control." For example, you could consider enrolling in automatic savings in your 401(k) plan and increasing savings when you get a raise. Up your financial smarts by learning these 19 personal finance tips you were never taught, but need to know.

This is an excerpt from an article written by Michelle L. Black on rd.com on April 24, 2020. Please click here to read the full original article.

You’re More Than Just a Number

Thu, 30 Apr 2020 20:58:50 GMT

Ever feel like you’re just a faceless number? You shouldn’t. And you shouldn’t be treated that way by someone who’s going to be handling your finances. In my last blog, I began to demystify the idea of wealth management so that you can better understand how to start on this path of engaging a wealth manager should you opt to engage a professional financial advisor /planner. I presented some questions for you to ponder and I pointed out 4 common problems found in personal finances.

If you choose to use a financial advisor or wealth management professional, they will want to meet with you. I certainly would! Today, I want to walk you through how I conduct my initial client meetings and what we would be discussing. Basically, I want to get to know you. This first meeting is what I call the Discovery Meeting .

Gathering Data about Your Values and Priorities

During this Discovery Meeting, I start of by asking a few questions, such as: “What is your earliest money memory?” “How do you discuss and manage finances with your spouse?” “What activities would you like to do now if you just learned that you have one year to live?” “What does financial independence look like for you?” I want to learn about your values and priorities. Perhaps this isn’t what you would think of as first questions, but it’s important to understand these points.

The goal of a discovery meeting is to understand the client in order to propose a plan that offers them choices.

After gathering data about your net worth, we would discuss your lifestyle. I want to know more about you: how you live, how you play, how you save.

Discovering Patterns by Categorizing and Tracking Earning and Spending

Once we have discussed the income side of your life, we then move on to discussing your expenses. Analyzing credit card statements can capture spending patterns, especially if you use them a lot. We would then look at your checking and savings account balances and debts, including mortgage accounts.

Most people seem to find spending patterns the most tedious part. They don’t want to bother with the trouble of tracking their expenses. Regardless what tools you use to create a budget and track expenses, doing this exercise of categorizing expenses into two major categories, essential expenses and discretionary expenses, provides a clearer picture of your financial health. Then, creating subcategories will provide clarity on how you earn income and how you spend money. After three months of tracking expenses, you will have much better sense of which areas you can improve to increase savings.

Where do you want to go and when?

Even if a client is clear about their goals and their strengths, they are likely not a “do-it-yourselfer.”

Most successful and intelligent people I meet don’t want to have to put in more than 10-20 hours a year into their wealth management . Think about it—you don’t paint your house; you hire that out. It’s not that you don’t know how to paint; it’s that if you are earning $300,000 a year in a job that involves equity compensation, such as stock options, it’s probably not worth your time to try to deal with painting your house.

It’s the same with wealth management , except the financial markets and tax laws change constantly. It’s probably not worth your time to try to deal with it on your own, especially if you don’t know how to maximize various benefits offered by your employer.

What were the best and worst financial decisions you ever made?

This question is designed to give me an understanding of a client’s money story. Remember Violet from my last blog ? She was the 50-year old executive who lost her job and was investigating the option of becoming a consultant. I asked her what were the best and worst financial decisions she ever made. Her answers provided great insights into her choices and how she might have learned lessons as a result of those choices. These answers helped me understand more about who she was and how she would make decisions in the future. The better I understood how she reacts, the better prepared I was to guide her along the way.

It would be the same for you if I was meeting you for the first time. I would ask you about your health, your job satisfaction, your career path, and where you think you’re going. I may ask you if you would be willing to delay retirement or reduce living expenses if the financial planning projection for the target retirement date does not look feasible. I also want to know your family longevity history and find out how you feel about longevity. I’ll ask you what you think you will do after retirement, because an early retiree may live thirty more years, and if that happens, you will need to find a passion in order to be engaged and stay healthy.

After gathering all the information we just discussed, you will able to look at scenarios that offer you choices between cutting back on expenses and early retirement or maintaining your current lifestyle but delaying retirement.

So as you can see, the Discovery Meeting is not so scary or complicated. It just requires honesty and transparency. Remember, the goal of a discovery meeting is for a financial advisor to learn more about you in order to propose a plan that offers you the best choices.

Next time, we will discuss Behavioral Biases and how they affect your financial life. Yes, most of us have them.

If I were to ask you, “What is your earliest money memory?” what would your memory look like? Where were you?

How old were you? Was it a good memory? Please share your memories with me below. Thanks!

Examining Your Personal Assets, But How?

Mon, 27 Apr 2020 21:21:12 GMT

Remember how simple things were when you were a kid? Life was good. Everything you owned could fit into a box. All your worldly possessions were in one safe place, which made you feel secure. Then, as time passed, you collected more things and more boxes, and life became less simple. Like many people, you may have suddenly noticed that life had gotten more and more complicated, and you’d arrived at a point in time where you didn’t know where everything was or what everything was worth. Then you noticed that acquiring assets and new accounts has led to a complex account management and tax treatment. You knew you needed to get involved in wealth management , but it sounded so complicated, you didn’t know where to start.

The bottom line is this: if you have accumulated substantial assets, you need a wealth management service, and the more assets you acquire, the more complicated management becomes. Life circumstances and career advances change wealth management needs.

Don’t despair! Yes, WEALTH MANAGEMENT CAN BE COMPLICATED (BUT DOESN’T HAVE TO BE)!

I want to demystify the idea of wealth management so that you can better understand how to do this yourself or how to talk to a wealth manager should you opt to engage a professional advisor/planner. The first step to demystifying wealth management is understanding some of the common problems we have with our finances.

FOUR COMMON PROBLEMS

The most common issue I encounter when people come to me for help is that they have never organized their assets in such a way that they can answer the question “What is your net worth?” Without knowing their net worth, they can’t achieve their goals, particularly retirement goals. Many people don’t know where they are right now or what they need to get to where they want to go.

A second issue is emotional investing. Individual investors in particular are more likely to make quick and emotional decisions. They often make the wrong decisions during market downturns. They panic when the market drops and sell, which means they sell low, then sit the market out and wait until it takes an upturn to get back in, which means they are buying high.

The third mistake many people make is too infrequently reviewing their insurance needs and coverage, particularly long-term disability insurance.

An executive with earning power or someone who earns $600,000 a year, for example, and has a stay-at-home spouse and three children in private school, will have a financial plan that relies on their ability to earn income. If they become disabled, their plan won’t work.

Many people, those in their 40s in particular, fail to take the time or develop the expertise (or consult an expert as part of a team) to correctly analyze their insurance needs. As a result, they tend to underinsure in terms of disability insurance. Some breadwinners don’t have enough life insurance coverage to replace their earned income if they die before retirement.

Another common issue I encounter is that of people who, over the years, accumulate accounts in different places end up with fifteen or more statements coming in every month. Not only does this incur a lot of fees, it makes determining net worth even more complicated. It is almost impossible to monitor asset allocation closely to execute investment strategies timely.

Meet Violet and see if you can relate to her.

Violet is a 50-year-old VP of marketing at a large, publicly-traded company. She came just after she lost her job with an idea to begin consulting rather than seeking new employment. She needed to know if she could afford to make this decision based on her accumulated assets. She had a highly concentrated position in her former employer’s stock, a 401(k) plan with the company, and investments in fifteen mutual funds that she had opened directly with different fund companies. She also had two 401(k) accounts from old employers with balances that were never transferred.

Since her mutual funds were not held by one custodian/brokerage firm, they could not be easily monitored. As a result, she got quarterly statements from each company, so struggled to know her net worth. She was also paying a lot in fees and expenses. She had a tax accountant who did her tax returns , but he was not working with her financial advisor . She had no trusted advisor monitoring all her investments and their performance in terms of risk and reward. There was no one to tell her how or where to adjust. Her portfolio was scattered due to the piecemeal advice she had received over the years.

Violet’s situation is not uncommon. Many people get into this position by starting out in her career with very little money and an investment only in a 401(k). As their career advances, they get promoted and have more money to invest but don’t have the time or interest to do it with any sort of educated or informed decisions or meticulous planning. They don’t know their net worth and haven’t done a financial plan to determine whether their current retirement savings are enough to retire at a given age.

The loss of her corporate job was a major transition in Violet’s life. She was at a critical decision point. She had a goal but didn’t have the information, knowledge, and expertise she needed to make an informed decision. She needed expert help to do this planning.

Violet had a clear trigger point. Others simply come to see us because they have gotten to a point where they are tired of the financial chaos caused by a badly managed or haphazard portfolio and realize they desperately need a financial plan.

Let me help YOU get started on YOUR own wealth management plan and get rid of the financial chaos in your life.

Can you answer these questions:

· Do you know your net worth?

· Are you an emotional investor?

· Have you reviewed your insurance needs and coverage recently?

· Do you know where your money is located and how many accounts you have?

I hope you are beginning to understand why you should start your wealth management plan. Remember, if you have accumulated substantial assets and managing investments is not your expertise, you need a wealth management service. It is a step by step process which I am walking you through. Today, we looked at some common problems faced in our finances. Next time we will get started on understanding YOUR financial reality. I look forward to seeing you as we discuss a discovery meeting.

Don't Be Constrained by the Lack of Running Water in Your Life

Wed, 22 Apr 2020 18:22:51 GMT

Some people may say I am a Rags to Riches story, some may say I am the Woman-Hear Me Roar song, but I say, I am a woman who ran through snake and leech infested rice paddy fields in rural China to being a five star wealth manager with over $100 million assets under management.

Not only did I immigrate to a new county, but I immigrated away from governmental constraints, sexism and poverty. I had no running water in my home as a child, but I had dreams, and they were big ones, and I also had inspiring people in my life. I would like to be one of those people for you.

So, to that point, before I start sharing many of my financial tips and insights, I'd like to share with you a few of the principles that got me from that poor village in China to my successful life as a financial advisor in the US. I call them my 7 Guiding Principles, and I use them every day to keep myself on the path of a happy and successful life.

7 Guiding Principles for Life and Wealth

Do you dream?

From my earliest days, I yearned to see the sky from different places all over the globe. I was born in the village of Xintian, which is translated, New Skies. Traveling the world was a pie-in-the-sky dream for a young girl in a poor village in The People’s Republic of China, where we had neither the money to take a vacation to the next town nor the political freedom to leave the country, but I still looked at a map and said, “Someday I will travel around the world.” GUIDING PRINCIPLE 1 - Dare to Dream

Are you Adaptable?

We had very few toys, but we had plenty of trees to climb. We made kites using old newspapers. We didn’t have glue, so we used sticky rice as glue and then tied the kites with thin strips of bamboo. Necessity, they say, is the mother of invention, which was why, from a very young age, I learned to respond to circumstances by being inventive and adaptable. Today, even the most deliberate and best-laid plans need some flexibility. Always be adaptable. GUIDING PRINCIPLE 2 - Be Adaptable

Do you enjoy learning?

I was fortunate to be born from two teachers. My mother was top of her class and had ambitions to go to college, even though sending a girl to college was very unusual in those days when society favored boys over girls. Her determination to get an education paved the way for me to later realize my dreams. Her pivotal decision to forge ahead with her schooling would eventually get our family out of the paddy fields and ultimately allow me to become the successful financial services business owner I am today. GUIDING PRINCIPLE 3 - Respect Education

Do you set goals? What are they?

Because my father had to remain two hours away to teach in his assigned territory, my maternal grandmother lived with us to help my mother, who had a full-time job as an English teacher, raise her children. As a result, my grandmother greatly influenced me. I helped her grow vegetables and raise chickens for eggs. Eggs were a precious food, so much so that when I received a perfect score on an exam, my grandmother rewarded me with two eggs. Winning those eggs taught me a valuable lesson at a young age; it’s important to set goals. The night before a new school year, I would lie awake setting goals. GUIDING PRINCIPLE 4 - Set Goals

Do you prepare?

When I was eight years old, my parents moved to a bigger village called Lankou. They were finally able to work in the same school, and I was finally able to see my father every day. There we had running water and electricity. For the first time, I saw a glimpse of modernity, and I wanted more. Four years later, at twelve years old, I got my wish when we made an even more transformative move to the city of Shenzhen. My parents spent two years applying for jobs in Shenzhen. Opportunities were few in China and not to be squandered. From this experience, I learned the importance of meticulous and deliberate preparation in order to be in a position to grasp an opportunity when it arose. GUIDING PRINCIPLE 5 - Meticulously prepare for every single thing

Do you weigh opportunities versus risks?

In the early 1980s, people called Chinese politician Deng Xiaoping “the architect” of a new brand of thinking that combined socialist ideology with pragmatic market economy. He made Shenzhen the first Special Economic Zone (SEZ) in China. My parents could see that Shenzhen was the place to be, but regulations within the education system as well as government control made it very difficult to move. It wasn’t enough to plead that the move would be good for you; you had to convince those in authority that the move would be good for others too. My mother had majored in Russian in college but never had a single Russian student. However, having this language expertise made her application stand out, so she persisted until she convinced someone that she had a unique skill set that justified her move to the city. GUIDING PRINCIPLE 6 - Seize Opportunities

Do you listen - really listen to others?

As a teenager, I began reading everything I could by Sanmao, a Taiwanese writer also known as Echo Chan, who wrote books about her travel experiences in over fifty countries. As a citizen of Taiwan, she was free to travel, unlike a Chinese citizen from mainland China. I was so inspired by her life that, not only was my childhood desire to travel the world fueled by her adventures, but I also took her name as my middle name when I came to the United States. GUIDING PRINCIPLE 7 - Value the wisdom of others

These principles keep me on a solid foundation and heading in a positive direction in my life. Look for opportunities every day apply even just 1 or 2 of the principles and you’ll see positive changes in your life. In my next blog, I want us to dive a little deeper and examine your own personal assets, your personal strengths, and traits. We will also discuss some common financial problems.

Until next time, I’d love to know: What are your dreams? Who influenced you? Please share below!

Echo Huang, CFA, CFP®, CPA Featured on the De La Fit Podcast

echo@echowm.com (Fang Huang) — Sun, 19 Apr 2020 15:05:35 GMT

The lack of understanding about the Corona-virus breeds fear among us as a nation, people have become increasingly paranoid, and with paranoia, inevitably comes fear and hate-filled reactions. Many U.S. citizens specifically (Asian and now African descended) have had to deal with an increase in xenophobic behavior fueled by the fear of the Corona-virus. Echo Huang joined SunMoon Bey on the De La Fit Podcast, Friday April 17th, to discuss "Corona-virus/ Xenophobia" fear within the Asian-American community.

Listen to Echo on Rock the Podcast

echo@echowm.com (Fang Huang) — Thu, 20 Feb 2020 16:30:42 GMT

Echo recently sat down with Jessica Rhodes and Margy Feldhuhn to discuss business, planning and her upcoming book release!

In this client feature episode of Rock the Podcast, Jessica interviews Echo Huang. Echo is a female Chinese immigrant who moved to America with only $800 in her pocket at the age of 20 and founded Echo Wealth Management as a Registered Investment Advisor (RIA) in 2015. She is passionate about educating women that Financial Planning is a viable career path for them and that increasing the number of female CERTIFIED FINANCIAL PLANNER™ (CFP®) professionals in America will help transform the financial industry and income inequality between men and women.

Echo has over 20 years of business experience in a very male-dominated industry. She first worked for KPMG in Minneapolis for almost four years as a Senior Tax Specialist. It was there that she began to gain valuable experience in personal financial planning for corporate executives, especially honing a knack for incorporating stock options strategies and tax planning in individualized financial plans.

Realizing that this was the professional role she was meant to play, she changed her career from that of a tax CPA to becoming a financial advisor in 2000 when only 20% of CFP® professionals were women (today, it’s only 23%). She is the author of Own Your Future: One Woman’s Story of Immigration and Financial Freedom and speaks frequently to teach people how to build their financial competence so they can achieve their dreams.

Echo Huang, CFA, CFP®, CPA Awarded the Five Star Wealth Manager Award for 2020!

echo@echowm.com (Fang Huang) — Mon, 06 Jan 2020 16:14:20 GMT

In conjunction with Mpls. St. Paul Magazine and Twin Cities Business , Five Star Professional has recognized Echo Huang with the 2020 Five Star Wealth Management award. Echo Huang has been a nine-year recipient (2012 - 2020) of this award.

Check out Echo’s online profile and feel free to share it with your colleagues and friends who may be looking for a trusted wealth manager.

The Five Star Wealth Manager award program is the largest and most widely published award program in the financial services industry. Five Star Professional conducts this research to help consumers with the decision of selecting a service professional in their area.

About the Research Process

Candidates for the award are judged on ten eligibility and evaluation criteria that are associated with providing quality services to clients. These criteria include: industry credentials, experience and assets under management, number of households served, among other factors. Professionals do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Wealth Managers are defined as the individuals who help their clients prepare a financial plan and/or implement aspects of their financial plan.

Echo Wealth Management Celebrates $100 Million AUM and a Big Move to Their New Office Space

echo@echowm.com (Fang Huang) — Mon, 02 Dec 2019 16:17:03 GMT

Check out our Open House Video!

In October 2019 Echo Wealth Management moved to a new office suite at ATRIA Corporate Center in Plymouth, MN. Our Open House Celebration that was held on October 25th featured Fresh Sushi and Thai Food from Lucky Street, Virtual Reality Car Racing from Aventures with VR and the wonderful company and conversation of our clients, colleagues, family, and friends.

Fall 2019 proved to be a milestone season for us. In addition to moving to our new office space, we reached $100 million AUM.

Echo Huang on MPR News: Renting vs. Buying

echo@echowm.com (Fang Huang) — Wed, 07 Aug 2019 15:38:39 GMT

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Echo Huang was recently featured on MPR News to discuss the advantages and disadvantages of buying vs. renting with guest host Chris Farrell and co-guest Herb Tousley, director of the real estate program at the University of St. Thomas.