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Author Archives: LarsonFinancial

Four Tips for Planning a Vacation with a Toddler

My spouse and I love to travel. Our vacations typically involved a long flight, an exotic location and very few pre-planned activities. It was so relaxing. Sleep in? Absolutely. Kayaking? Sure. Zip line? Why not. Stay in and read a book for the afternoon with an occasional nap. Absolutely!

We nearly always returned home rested. Sometimes, we even reached maximum relaxation at our destination and came home early for a bit more of a staycation, slowly ramping back up for work. It was perfection.

And then our son arrived…

Now, don’t get me wrong; I adore my son. Being Dad is the best and most important job I will ever have in my life. I didn’t know it was even possible to love another human to that degree. Despite that love for our son, eliminating vacations was just not an option for us, so we had to find a way to make vacation a reality with an infant and now toddler, just a month away from turning two! And we did.

Here are a few things we did that made vacation possible again.

  • For flights, less is more. I remember the first flight we scheduled was a three-and-a-half-hour flight. For several weeks prior to the trip, my anxiety level seemed to increase daily. As a frequent traveler for work, I could not shake the vision of the two of us, like parents on many of my recent flights, screaming child in between us repeatedly apologizing while bribing those around us with free drinks. We ended up having to cancel that vacation and made new plans that involved a much shorter flight. And the moment we confirmed our new plans, my anxiety immediately dissipated, and I experienced the excitement and chemical reactions in my body an upcoming vacation can and should induce.
  • Travel during nap time. Although sleep training was complete failure in our house, my son naps for two to two-and-a-half hours daily at roughly the same time each day. During our first one-hour flight, he played for about 20 minutes and slept for the rest of the flight. It may be inconvenient to try and schedule all possible vacation travel in the same two-hour windows each day but trust me: it’s well worth it.
  • Have a staycation before the vacation. We live in LA, roughly 25 miles from LAX. For those of you familiar with Southern California traffic, you are keenly aware that 25 miles can be 30 minutes or three hours depending on the day and time you get in the car. One of our earlier vacations was a three-hour trip and required us to be on the road at a rough time of day. Instead of waking up, packing the car, driving in traffic and just generally being miserable, we booked a hotel at the airport for the night before our flight. It was money well spent and had the added benefit of making the vacation feel longer.
  • Be ready to fill the gaps with screen time. Yes, I know, there are probably people who think we are horrible parents, and who can’t imagine putting an iPad in front of a 14-month old. I’ll take three hours of judgmental looks with a smiling child over three hours of complaining neighbors and a screaming child any day, period.

As I write this article, I am looking forward to our upcoming vacation to Whidbey Island in Puget Sound. Not only is the flight to Seattle a short one, we are flying out of Burbank. I’m already experiencing the benefits of the vacation (and have been since we booked the trip) with the one simple change; avoiding LAX!

If you’re ready to plan your family vacation but having trouble budgeting for it, read on to learn how to juggle multiple savings goals.

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.

Three Account Types and Contribution Caps You Should Know

Many of our clients utilize qualified accounts to fund their long-term accumulation goals. To take full advantage of these accounts, it is important to know the contribution limits and deadlines to fund the accounts and plan accordingly each year. This is something you should review with your financial advisor annually, and for many this is best done in the final planning meeting of the current year for the upcoming year. This planning process will help you budget appropriately and not miss out on any of the benefits offered by the plans. The IRS will periodically adjust the contribution limits to certain qualified accounts for inflation; however, the contribution deadlines do remain static and generally align with the calendar year or a tax filing deadline. While some accounts allow you to make contributions up to your filing deadline including extensions, this is not the case for all qualified accounts. Here’s a short list of some of the more common accounts:
  • IRA/Roth IRA: The current contribution limit to an IRA or Roth IRA is $6,000 per year, with an additional $1,000 catch-up contribution for those 50 and over. The deadline to make these contributions is your personal tax filing deadline, on or about April 15 of the following calendar year. The IRS does not allow an individual to make their IRA/Roth IRA contribution later if they file a personal extension.
  • 403b/401k: The current employee deferral limit is $19,000 per year, with a $6,000 catch-up contribution for those 50 and over. In most cases, the employee deferral is withheld from W2 earnings and contributed to the respective account on a calendar year basis. If you are starting in practice after the first withholding of deferrals in a given year and want to maximize your contribution that year, you will need to make the full contribution in the remaining months prior to December 31. For those doctors who are both the employee and employer, an additional $37,000 may be contributed for a combined contribution of $56,000—or $62,000 for those 50 and over. The employer profit sharing contribution may be contributed up to the tax filing deadline including extensions.
  • 457b: The current employee deferral limit is $19,000 per year, with a $6,000 catch-up contribution for those 50 and over. If you choose to contribute, the deferrals will be withheld from your earnings and must be done in the calendar year.
These are just a few of the common qualified plans, including current contribution limits and deadlines. For doctors who have more complex plans, there are various other qualified plans available with much higher contribution limits and flexibility in funding to tax filing deadlines including extensions. Regardless of your employment situation, I highly recommend you budget for the options available to you and learn more about the plan offerings from your employer or offerings you can provide to yourself and your employees.[/vc_column_text][/vc_column][/vc_row]

Are you hitting the contribution caps on your retirement accounts?

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.
More information can be found regarding contribution cap limits and increases on the IRS website here.

Americans Lose Trillions in Social Security

by Elaine Floyd, CFP®

According to a recent study, retirees will collectively lose $3.4 trillion in potential income that they could spend during their retirement because they claimed Social Security at a sub-optimal time.

The graph above says it all. The age at which most people claim Social Security (green line) is opposite to the age at which they SHOULD claim Social Security (purple line). In a report from United Income, “The Retirement Solution Hiding in Plain Sight: How Much Retirees Would Gain by Improving Social Security Decisions,” the researchers state, “retirees will collectively lose $3.4 trillion in potential income that they could spend during their retirement because they claimed Social Security at a financially sub-optimal time, or an average of $111,000 per household.”

Nearly all of this income is lost because one or more retirees in a household claim Social Security too early, which means their Social Security benefit is lower than it would be if they had waited. For instance, a person that would receive a $725 monthly benefit if they claimed Social Security at 62 would see that benefit increase to $1,280 if they had delayed until their 70th birthday, an increase of 77%. Spread out across the population of individuals that are claiming Social Security sub-optimally, those extra dollars add up to a substantial amount of money.

Only 4% of retirees make the optimal claiming decision! The study found that a claiming age of 62-64 is optimal for only about 8% of adults (primarily those with short life expectancies or the spouses of breadwinners)—yet about 79% of eligible adults in the sample claimed at those ages. A claiming age of 70 is optimal for 71% of primary wage earners—yet only 4% of the adults in the sample claimed at that age. The comprehensive study observed 2,024 households, considering each household’s outside resources, spending, health, and longevity to determine how much income and wealth they would have if they had taken Social Security at the various ages of eligibility.

This appears to be the first study of its kind to consider the impact of claiming age on not just the Social Security income, but other assets and income as well, as optimal Social Security claiming can lead to higher account balances, which in turn generate more income.

Although later claiming typically caused wealth to drop during retirees’ 60s as they drew down their personal retirement accounts, this wealth drop was more than made up for by the late 70s when Social Security income was higher. In order to isolate the effect of claiming age, the study did not consider the effect of working longer, but in real life, a person who decides to maximize benefits by claiming at 70 might choose to work a few years longer, and this would mitigate some or all of the wealth drop in their 60s.

Among those at the highest wealth levels, 99% make suboptimal claiming decisions. Yes, you read that right. 99% of higher-wealth households make suboptimal claiming decisions. While wealthy individuals can perhaps afford to leave Social Security benefits on the table, very few people want to get less than they are entitled to.

Sadly, financially suboptimal decisions add up to a loss of $2.1 trillion in wealth and a loss of $3.4 trillion in income. In its conclusion the report mentions a few ways to deal with this, including:

  • Make early claiming an exception, reserved for those who have a demonstrable need to claim benefits before full retirement age.
  • Change the way we refer to early or delayed claiming, labeling a claiming age of 62 as the “minimum benefit age” and 70 as the “maximum benefit age.”
  • Provide the Social Security Administration with more resources, perhaps in partnership with third-party fiduciaries, to help households determine their optimal claiming age. The authors note, “That limited investment could help recapture some of the $5.5 trillion lost in wealth and income to retirees and the U.S. economy because of the struggles retirees currently face making the right decision.”

We believe that households contemplating Social Security strategies can benefit from a customized analysis that shows the lifetime impact of the various claiming options. With the help and advice of an advisor, you have a shot at being one of the 4% who end up making optimal Social Security claiming decisions. Not only will this increase your Social Security income, it may lead to higher income and wealth from other sources as well.

More nonretired Americans expect comfortable retirement

Meanwhile, a recent Gallup poll found that 57% of nonretired Americans expect they will live comfortably in retirement, a six-point increase in positivity since last year and the highest reading since 2004.

Only 33% of non-retirees see Social Security as a major source of income in retirement (compared to 57% of retirees). Eighteen percent of non-retirees aren’t counting on it at all. Instead, they tend to focus on 401(k)s, IRAs, and other retirement savings accounts as being a major source of income.

While it is likely that Social Security benefits will turn out to be a more important source of income than current non-retirees think, most people will be better off financially in retirement if they work on getting other sources of income together. It is possible some of the 57% of current retirees who see Social Security as a major source of income didn’t feel that way when they were working. But circumstances—the financial crisis of 2008, forced early retirement, lack of savings, disappearing pensions—have turned it into a lifeline.

Have Questions?

Copyright © 2019 by Horsesmouth, LLC. All rights reserved. For customized help, visit a financial advisor who has the tools necessary to analyze Social Security claiming strategies and can put together a retirement income plan that makes sense for your individual situation.
Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.

When Paying Down Debts, is Your Mortgage Top Priority?

Debt is a tricky subject because typically, people feel pressure to get rid of it as quickly as possible. And when you think about your large debts, what sorts of things come to mind? Probably your house and vehicle, so it would make sense to pay those off as quickly as possible, right? Not exactly—at least, not when it comes to your mortgage.

For starters, mortgage interest is usually the lowest interest rate debt—not always, but often.

Assuming cash flow allows for the additional annual payment or a lower mortgage term length, such as 15-year mortgage instead of a 30-year mortgage, I would recommend investing the excess money or the payment difference between the 15-year and 30-year mortgages in an appropriate investment for your income, time horizon, risk tolerance, etc.

Be aware: this recommendation is predicated on your comfort level with debt. If you’re absolutely debt averse, we may accelerate—though it’s rare. Your advisor can always run side-by-side comparisons to show the difference between paying down the debt and investing.

Here are some key points to consider:

  1. Potential for higher rate of return in a separate investment.
  2. Investment, such as a brokerage account, is liquid and available to you in the event of an emergency or opportunity. While subject to market risk, this strategy provides greater flexibility.
  3. If invested in a liquid account like a brokerage, you can simply access the monies. If you use the money to pay down the mortgage and need access to cash and don’t have it on hand, you would need to borrow from the equity of the home. This is done after approval from the bank and is subject to prevailing interest rates.

In a nutshell, unless you have a significant cash reserve, a high monthly excess available beyond what you need to meet financial independence and other goals, I would not recommend rushing to pay off your mortgage. And, even if you did have the huge cash reserve and high monthly excess, I would still likely recommend other investment options to help accumulate wealth independent of your home.

As always, each individual investor’s situation is unique and should be evaluated accordingly. Your advisor can help you dig down into the debts you have and help you choose what to focus on paying down.

Do you need advice on which debts make sense to focus on?

Dealing with Debt: Balancing Your Emotions and Logic

We often hear that advisors have more conversations about debt than almost any other topic (except perhaps taxes). These conversations tend to begin with a brief, “There is good debt and there is bad debt,” followed by a summation of why a particular debt meets one of the criteria with examples—for instance, a mortgage with tax benefits or even a low-interest debt with no tax benefits.

However, the financial impact is only one variable in the decision-making process as it relates to debt elimination. The other equally important factor for many of our clients is the emotional impact of carrying the debt. And frankly, not every financial adviser is equipped to have that conversation with a client, and not every client is willing to have that conversation with their financial adviser.

The conversations can be awkward for either party. Feelings are messy; embarrassment, regret, childhood experiences of money, perception of debt as always being bad, etc. are not easy to identify and address with logic so it’s not possible to have conversations about debt without factoring in emotions.

If you can have the conversation with your financial adviser, you’re in a good place to factor in both the financial and emotional. In my experience, once the debt is written down, your financial adviser can create a plan to both reduce or eliminate debt, and save or invest. It is often the unknown or lack of a plan that exacerbates the emotional.

What you ultimately decide will depend on your individual circumstances. However, before you press ahead with a plan, I would encourage you to consider the following in your process.

  • Employer plan: If your employer provides a match for contributions to a 401k, 403b or other employer-sponsored plans, it may be wise to contribute at least the minimum amount required to obtain the full match.
  • Emergency fund: Be sure you have or are contributing some amount toward a reserve fund, so you have cash available for an emergency. If you are eliminating debt and do not have a cash cushion, you may end up adding to your debt and, depending on the type of debt you are eliminating, it could be higher interest consumer debt.
  • Interest rate: Not all debts are created equal. If your debt has a low interest rate, you may want to consider paying the minimum amount due and investing the difference, or at least a hybrid of debt elimination and investment.

Whether you decide to accelerate debt, pay the minimum and invest or some combination of the two approaches, I highly recommend you discuss your situation with a skilled financial adviser. It has been my experience that having someone else review your debts, your cash flow and your investment options through an employer or individually can make a significant difference in the comfort level with and commitment to the plan you choose.

How comfortable are you with debt? We can discuss your options and approach together.

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.=
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.