Finding someone you can trust with your money can be tricky. Go online and search “financial advisor near me” and you’ll get dozens of results. The search results will all seem to have a common theme: financial advisor, wealth management, etc., but as a consumer what do all these terms really mean and how can you differentiate one from the other?

Did you know that anyone can hold themselves out as a financial advisor? That can be a scary thought when you begin to look for someone to help you with your life savings. Hopefully the following story about ‘suit shopping’ will help you to remember the differences between the options available to you within the finance industry.

John has an important event coming up that he’d like to buy a suit for. He’s never purchased a suit so he calls his sister Jill to ask where he should start. Jill first tells John that there’s a lot of information and videos on the internet about how he could sew a suit himself. He only needs to go to the store, buy some fabric, and figure out his measurements. John tries this route, only to discover that he does not have a talent working with textiles. He’s left with random pieces of fabric that don’t work for him and is frustrated from wasting time and money.

Do-it-yourself (DIY): Maybe you feel the same way about managing your money: you see others do it and are self-proclaimed experts, why not you too? Like John DIY’ing his suit, you may decide to DIY your investments. This may turn out okay for you or maybe you end up like John. Unsure of your measurements (i.e. goals, risk tolerance, overall market knowledge), you piece a portfolio together. Before you know it, you are several years into investing, regretting your decisions and holding random investments that don’t fit.

After John’s failed suit making debacle, his sister suggests that he head to a department store to see if a salesman can help him find a suit. He goes to a name brand store, finds a salesman whose job is to place John in a suit that he can wear. He does just that, but the salesman doesn’t take the time to see if the suit fits John well. The sleeves are too long, his buttons are too tight, and it is in a color that John doesn’t care for. Nonetheless, the suit salesman has done his job and still gets a commission for the sale.

Broker/Financial Advisor: Relate John’s department store visit to that of a broker/financial advisor. Similar to a department store, a broker’s business may have name recognition and you may see the same business in most major towns you travel through. Similar to that of the store salesman, a broker’s job is to make sure that your investments ‘fit’ or are suitable for someone your age. This means that while decisions made may not be specifically best for you, a broker is doing their job. Also similar to that of the suit salesman, they will also make a commission for each ‘sale’ they make.

When John goes to his sister’s house to show her his purchase, Jill regrets her decision to send him to the department store. The suit John bought simply won’t work. Jill sends John to a tailor to make John a custom suit. The tailor takes John’s measurements, asks his preferences on fabrics and colors, and asks him to come back once the job is complete for final changes. When John and Jill return, the suit fits John perfectly and both are satisfied.

CERTIFIED FINANCIAL PLANNER™/Fiduciary: Just as the tailor in John’s story, a CERTIFIED FINANCIAL PLANNER™ professional must provide work that is custom to a particular client; not their neighbor, friend, or stranger on the street. A fiduciary is required by law to act in accordance with your best interest, not their own. Decisions are custom to a client and are not driven by sales or other potential conflicts of interests.

Whether it be a suit or investments, everyone’s needs and preferences are different. You may be confident in your abilities of some areas of your life, but also accept that there are others you may need to seek an expert’s opinion. If you find yourself shopping for someone to manage your money, I encourage you to ask yourself, ‘Do I have the right suit maker?’

Published in the Victoria Advocate

Sara Potts is a CFP® Professional and Operations Manager with KMH Wealth Management, LLC

Folks in my profession often refer to an employer-sponsored retirement plan match as “free money”. Are you lucky enough to work for a company who 1) offers a retirement plan, and 2) has a contribution match? The advice that follows “yes” to those questions, is typically to take full advantage, if at all possible. A message of caution to high earners or lofty savers is to work with HR and your financial advisor. Plan ahead to ensure you are taking full advantage of ALL of this free money.

To pocket this employer benefit, an eligible employee must choose to defer a specific portion of their salary to their employer’s retirement plan account. Employers can then fully or partially match the salary deferral in the form of an employer contribution, directly to the employee’s retirement account on their behalf. Free money for contributing to your own retirement savings is a win-win. The IRS does however limit contribution amounts, which can create complications for employees who wish to take full advantage of their employer’s match.

Consider this: Bob has a $150,000 salary. As an employee benefit, his employer matches 401K contributions at 10% of Bob’s salary. Bob is eager to save for retirement and decides to defer 20% of his annual salary ($2,500/month) to his 401K. At this rate, Bob will exceed his employee contribution limit of $20,500 (2022 IRS limit) for the whole year by the end of September and must stop his future contributions. Since Bob cannot make employee contribution for October through December, he will not receive his employer’s 10% match for those three months. Consequentially, $3,750 ($1,250/month x 3 months) that could have been Bob’s is left in the company bank account. Matching rules are matching rules, even if you stopped contributions because of good reason, such as meeting the annual limit.

A small change to his benefit election, could mean the difference between receiving the full advantage and leaving “free money” on the table. If you wish to take advantage fully of this prized employee benefit, you may check with your HR department to see if you are able to contribute a set dollar amount instead of by percentage of pay. You or your financial advisor can easily calculate the appropriate salary deferral per pay check by reviewing the annual IRS limit or your remaining limit and dividing by the number of pay periods remaining in the year.

I am fortunate to have this benefit at my firm. It has been rewarding to see how participating in my firm‘s plan helps grow my retirement savings faster. You bet that I am taking advantage of the full benefit, and encourage you to do the same!

It’s matching season! With the year still young, you have plenty of time to reconfigure your max employee contribution per paycheck and update percentage or dollar amounts. Go get your free money!

Published in the Victoria Advocate

Beth Koonce is a CFP® Professional and Lead Advisor with KMH Wealth Management, LLC.

Wellness as defined by the Oxford English Dictionary is the state of being or doing well in life; happy, healthy, or prosperous conditions; moral or physical welfare. New Year’s Day has come and gone, resolutions have been made and hopefully you have eaten your fill of black-eyed peas and cabbage to bring you good luck and prosperity. The foundation of financial wellness, in my opinion, starts with preparing a financial plan. I cannot think of a better example than sharing with you the story of my clients, Tom and Kate.

Tom and Kate have been clients of the firm since 2003. They diligently saved throughout their careers to build a respectable portfolio of assets. In the fall of 2016, Tom and Kate agreed to prepare a financial plan. Kate had recently retired and Tom was contemplating following suit. The financial plan was prepared and the results were no surprise, Tom and Kate could comfortably retire. However, Tom and Kate were concerned the bulk of their savings were in pre-tax retirement plans that would be subject to required minimum distributions and might negatively impact the taxability of their Social Security benefits and the cost of their eventual Medicare premiums. Tom and Kate were both in their early 60s at this time. I prepared a recommendation for them to start with a multi-year Roth conversion regimen to manage their income and tax brackets to shift as much money as possible to Roth IRA accounts. While they would pay tax now, they would not owe tax on the distributions in retirement which would alleviate their previously mentioned concerns related to Social Security and Medicare. We began the annual Roth conversion regimen in the spring of 2017 and stuck to it religiously with the hopes of completing the entire conversion by the end of 2025.

Fast forward to March 2020. In the midst of a major market downturn caused by a pandemic with unknown impacts at the time, I received a phone call from Kate panicking about their portfolio and second guessing the decision to retire so young. After calming Kate down some, I pulled up their financial plan to update the numbers in real time. The pre-pandemic results showed a 95% chance of successfully funding all of their retirement goals. That day’s results yielded a 91% chance of success. Kate, while relieved that their retirement wasn’t sunk, still felt the need to “do something”. I told her I would be in touch after reviewing available options. I called Tom and Kate back the next day and proposed we accelerate 4 of the 5 remaining years of Roth conversions in to 2020 and take the final conversion in 2021. Tom and Kate reluctantly agreed and the results have been nothing short of stellar for them. Their portfolio is at an all-time high and they have completely alleviated their concerns in retirement about Social Security and Medicare taxation.

Tom and Kate are a great example of the value a financial plan can provide to make sound decisions in real time. As you review your New Year’s Resolutions, I would challenge you to add preparing a financial plan to your list. A CFP® professional can help assist you in preparing and maintaining this plan. You can find local CFP® professionals by visiting letsmakeaplan.org.

Published in the Victoria Advocate

Kyle W. Noack CPA/CFP® is Chief Financial Officer for Keller & Associates CPAs, PLLC and KMH Wealth Management, LLC.

In an (almost) cashless society, credit is king…or so it can often feel this way. A credit score is linked to a person just like their driving record or GPA. From applying for a loan to applying for a job, a decent score is necessary to thrive or at least not be squashed by outrageous interest rates. After conquering the feat of earning your own great credit, possibly learning the hard way, you may now face the question of how you can help establish and raise your child’s or children’s credit score to help set them up for financial success.

If you are interested in pointing your children in the right direction, begin with education. Smart money decisions are learned characteristics that begin at home. Money does not grow on trees and purchases made with credit cards must be repaid. As your child watches you swipe your “magical card” to pay for things, cultivate the knowledge of what credit is and that it must be repaid, or face consequences. Explain how you will receive a bill for the purchased items/services at the end of the month. Then you will spend your real money to pay the bill. It might be fun to associate lines on your statement with physical items purchased during that period. A way to practice this concept is having your child become a library member. They can “swipe” their library card to borrow books/DVDs/games at their leisure, but will have a due date and penalties for late fees, similar to a credit card.

Remember the “piggyback” rides you gave when your child was a toddler. Do some stretching, they are back! Adding your older child as an authorized user on your credit card can help the minor “piggyback” on the good credit behavior of the original card member. However, be warned, the authorized user approach works both ways. All users’ credit history can be enhanced or hurt. This is only recommended if you can be confident you will make regular and on-time payments on the card. You don’t even have to supply your minor access to the credit card, but entrusting them with the ability to purchase certain items (like gasoline or school supplies), can help promote independence and responsibility.

Another way to help your child maintain unscathed credit, is by monitoring their credit report annually for fraud and identity theft. Children 13 years and older can check their credit the same way as an adult, by visiting ANNUALCREDITREPORT.COM annually and requesting a FREE credit report. Unfortunately, children are an easy target of credit fraud and identity theft, since they typically have an unused credit until later in adulthood. Keeping your child’s personal information safe and reviewing their credit is invaluable.

Having a good credit score is almost as essential as having a valid ID. When your child faces the ultimate requirement of having a credit score, help ensure their credit worthiness by early education, utilizing your great credit history, and reviewing their credit report annually.

Published in the Victoria Advocate

Beth M. Koonce CFP® is a Lead Advisor for KMH Wealth Management, LLC.

There is a fine line between living in the moment and saving for retirement.  The balance is the challenge.  Fleeting thoughts, or maybe not so fleeting, are vacations abroad, a dream car, a ranch, and/or helping the adult children with the purchase of their first homes.

This balancing act begins at any age.  My adult children are saving for houses and I am saving for travel coupled with educational opportunities.

My parents taught me saving habits that began as a small account at our local Savings and Loan bank. College courses, being married to a CPA, CFP® Professional, and working at an RIA firm have certainly enhanced my savings savvy.  Now my savings are more traditional with the typical 401k plan, IRAs, and other accounts consisting of mutual funds, stocks, bonds, and cash.

The juncture is here of adding a hard retirement date to my calendar.  How much money do I want to spend in my digital nomad life?  Do I want to leave money for my children to inherit?

A basic withdrawal rate of your investments falls in the 4%-5% range.  However, inflation can complicate this rate. Consider this example:  Ignoring taxes for simplicity’s sake, if a $1 million portfolio earns 5% each year, it provides $50,000 of annual income.  However, if annual inflation pushes prices up by 3%, more income of $51,500 would be needed the following year to preserve purchasing power.  An additional $1,500 must be withdrawn from the principal to meet expenses, which reduces the portfolio’s ability to produce income.  This can accelerate the depletion of the portfolio and you could find yourself not having the savings you need for the 20 or more years you live in retirement.

The average 65 year old can expect to live for 19 more years according to the National Center for Health Statistics Data Brief.  Additionally, 1 in 5 men who have reached age 65 will live to 90 and among women, it is 1 in 3.

We just met with our CFP® Professional, as we prefer an independent opinion.  He built into our retirement model our current salaries.  This is an extremely important cornerstone.  What major expenses are in our future?  We could have two more weddings, increased travel, and more real estate ventures.  Additionally, there is the abyss of healthcare.  However, some of our expenses such as work-related expenses, (commuting, clothing, dry cleaning, payroll taxes, and retirement savings contributions), will decrease.  So, will it take our current annual salaries to live the type of retirement we want or can we live on 60-80% of our current salaries?

My first goal is to cut some expenses so I can increase my travel budget.  I also do not want to make the mistake of spending extravagantly early in retirement, as the market will continually have its ups and downs.  However, I will live a bit more in the moment, as time is passing quickly.

The bottom line:  You want to maximize the ability of your personal savings to provide annual income during your retirement years, close the gap between your projected annual income needs and the funds you will receive from Social Security.

Published in the Victoria Advocate

Phyllis Keller, MBA is the Chief Information Officer for KMH Wealth Management, LLC and Keller & Associates CPAs PLLC.