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September is the perfect time for a financial la rentrée!

September is the perfect time for a financial la rentrée!

I’ve been a Francophile for as long as I can remember. I’ve studied the French language (and used to be pretty darned good!). As I teenager, I spent two full summers as a student in the South of France in Aix-en-Provence and Grenoble. I fell in love with French culture, food, literature and, yes, even some cute French boys! When late August rolls around, I’m sure I’m not alone in wanting to emulate the French who, like the rest of Europe, almost completely shut down for a much needed (and completely un-American) two-week-long vacation. But there’s something new about France that I only recently discovered: the French tradition of la rentrée.

As you might expect, la rentrée does have some association with back-to-school season, but it’s about so much more than school children. La rentrée is a time when everyone—school children, yes, but also authors, politicians, and even newscasters—returns from the summer break filled with a nationwide sense of optimism for a fresh beginning. We may be thousands of miles away from Paris, but in the spirit of all things French, I’m on a mission to create our own financial la rentrée right here at home.

The best thing about la rentrée is that it doesn’t feel like a chore. There’s no word to describe it in English, but the closest I can come to putting it into my own words is that while there may be work to be done, each task is approached with hope and happiness and positive energy. Here are five simple steps to kick off your own financial la rentrée this month:

  1. Review your tax strategy.
    With autumn comes the final stretch of the tax year, which means that it’s your last chance to make changes that can have a real impact on your tax bill come April 15. While tax planning is important every year, the new Tax Law makes careful planning particularly important in 2018. As I wrote in my recent tax planning blog post, the current tax tables may understate your withholding, so now is the time to compare your actual withholding amounts with your projected tax bill, and to seek out other opportunities to optimize your taxes.

     
  2. Check your credit report.
    When is the last time you checked your credit report? Monitoring your account balances and financial transactions is very easy and it’s the best way to prevent identity theft and fraudulent use of your credit history. I recommend CreditKarma which offers unlimited and free access to your credit report, as well as a free credit monitoring service. I also like the idea of placing a credit freeze on your account which requires institutions to contact you before approving any new request for credit. Learn more about protecting your financial privacy in my blog post Getting personal about privacy.

     
  3. Weigh your cash balances.
    Cash planning is the foundation for any solid financial plan. If you don’t already have a sufficient “freedom fund” of cash, read why it matters and how to get started in my post There’s no such thing as an unexpected expense. If you do have your fund in place, take a look at how your balance has changed in the past year. If your balance is increasing significantly, you’re likely living below your means and may need to review your financial plan to be sure you are making your money work effectively. If your balance is decreasing, take a close look at why. If you’re living beyond your means or not saving appropriately for vacations, household purchases, and other “expected expenses,” an adjustment is in order.

     
  4. Review your long-term goals.
    Are your financial goals SMART: Specific, Measurable, Achievable, Relevant, and Timely? Are they in writing? As I wrote in my last blog post Am I on the right path?, whether you are investing your time, your money, or both, you need a plan. Reviewing that plan regularly to be sure you’re on track toward your vision of the future is a must. Sit down and spend some dedicated time to explore your goals today—alone or with your partner if you have one—and create a SMART plan to get there on time and on target.

     
  5. Get help with the details.
    When I was in my 20s, I was able to keep myself motivated and physically fit all on my own. These days, not so much. That’s precisely why I hired a personal trainer. Nancy S. knows how to get me in shape and how to keep me motivated throughout the process. Most importantly, she points out things I didn’t know about how to get and stay fit and healthy. When it comes to your finances personnelles, a Certified Financial Planner (CFP®) can be your dream coach. A CFP is trained to help you identify SMART goals and create a realistic plan to get you where you want to be when you want to be there. No matter where you are in your financial life, hiring a fiduciary advisor may be the best la rentrée activity there is.

La rentrée is all about optimism and creating a fresh start.My personal la rentrée this year has been focused on rediscovering my love for French. I’ve been brushing up on my vocabulary and grammar using the Duolingo app (if you want to discover or rediscover any language, I highly recommend it!), I’ve been nose-down in Martin Walker’s Périgord-based detective series Bruno: Chief of Police, and I just discovered a French-language podcast called Coffee Break French that I can’t wait to start. I’m on my way to better, more proficient French and having fun along the way. I hope you’ll join me by embarking on your own la rentrée to improve your finances. What a wonderful way to slip into autumn. And if you do need help to make it happen, you know where to find me. À bientôt!

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Even during the dog days of summer, tax planning is at the top of our agenda

Even during the dog days of summer, tax planning is at the top of our agenda

Holy moly, it’s hot out there!We’re deep in the dog days of summer, when laziness and lethargy rule. Luckily for me (and my clients too!), I’ve been tucked away for two and half days in a perfectly chilly conference room at the IRS Nationwide Tax Forum in San Diego. I’m here, thwarting the dog days, to study up on something that matters more to your finances than you may realize: the new tax laws and how they affect your tax strategy for 2018.

While I am sure this may not be most people’s vision of a perfect late-summer escape, here’s why it is at the top of my list—and why that matters to you and your wallet:

  • The new tax law is (very) complicated!
    While the idea behind the Tax Cuts and Jobs Act (TCJA) may have been to simplify the tax code, getting the details of the law hasn’t been easy for CPAs, EAs, CFPs—and even the IRS! Even now, in mid August, we’re being told that certain forms and regulations are not yet available, but that they are “imminent.” Not only is that less than comforting, but the lack of information is also making it extremely challenging for us to create strategies for our clients that we can be confident will be effective. That said, the topics at this forum are advanced, and they do cover the new rules, laws, and regulations that are clear at this time. I’m here to study the facts, ask questions, and get answers so we can create smart strategies that are compliant and that are designed to work in your best interest.

     
  • Taxes and financial planning go hand in hand.
    As a CFP (Certified Financial Planner professional), my number-one goal is to help give you greater financial confidence. I do this by helping you create and protect the wealth you need to live your ideal life and (here’s the key!) by working to maximize your after-tax cash flow from your income and investments. Considering that the “average” American with an “average” annual income of just under $75,000 pays out a whopping 24% of their income on taxes (excluding sales, FICA, and Medicare), building a smart, compliant tax strategy is a key part of that equation. In down markets, that may mean harvesting losses for use at optimal times. In any market, it means locating assets in appropriate accounts where they’ll be tax efficient, planning backdoor Roth IRAs to give higher earners the benefits of a Roth IRA, determining when and how to defer Social Security claims, and much more.
  • Not all financial planners get it.
    It’s true that the CFP® curriculum includes tax planning and strategy, and CFP candidates are all required to study individual and business tax laws relating to trusts, estates, property, passive activity, at-risk rules, charity, stock options, inter-family matters, state laws, and more. Unfortunately, many financial planners don’t keep up with changes in the tax laws once they’ve passed the exam. (Don’t even get me started on the practices of uncredentialed “advisors”!) The people I have been fortunate to be sitting with for the past two days are all committed to tax planning excellence, and I love that I’m learning as much from them as I am from the IRS team that is hosting the event. These are “my people”!

     
  • There’s simply no such thing as “tax season.”
    August may seem an unlikely time to focus on taxes, but from a planning perspective, tax season lasts all year long. All too often, people opt see a tax pro when they need forms filled out just in time for April 15th. When they take that approach, they miss out on the greatest benefits of tax advice: planning. In reality, the sooner we can start building effective tax strategies under the new law, the better. As an IRS Enrolled Agent, one of my promises to clients is that all of your planning and investing decisions include tax optimization as a top priority. Fulfilling that promise takes training, continuing education, and practice. And that’s precisely why I’m here. (The air conditioning and the San Diego breeze are pretty nice perks as well.)

As we muddle through these last days of summer, make tax planning a priority. At the conference, I attended several sessions about the new Section 199A Qualified Business Income deduction (ask me about it). I also learned that the current withholding tables probably understate withholding, so it’s vital to compare your actual withholding amounts with your projected tax bill now to avoid surprises. It doesn’t stop there. For 2018 there is no unreimbursed employee business expense deduction; ask your employer to consider an accountable plan so he/she can capture the deduction. Look for opportunities to amend prior year returns for items like depreciation and 179 deductions. Personal exemptions have been eliminated but may be made up through increased and additional credits for children and other dependents. Most importantly, if you get a notice—any notice—from the IRS, contact us right away so it can be addressed quickly and properly.

It’s true that the new tax law is confusing (that’s a polite word for it!), but the good news is that knowing the facts and participating in smart planning can have tremendously positive results on your financial picture. While on a break at the conference, I received a call from a client I’ve worked with for years. Gary was walking into his estate attorney’s office with numbers I had provided regarding some community property and the inherited basis. “This looks too good to be true, Lauren. Are you sure the numbers right?” I assured him that, yes, the numbers were accurate—and I let him know that the happy surprise was due to changes in the tax law. Knowing that those changes (and my knowledge of them) saved him a bundle had me smiling all afternoon.

When it comes to your finances, it’s often easier to focus on the things that make the headlines: gaining a few tenths of a percent on CD yields, the dramatic highs and lows of the stock market, and more. But it is taxes that often have the greater impact on how much of your income and your investment returns stay in your pocket. The new tax law includes lots of changes. Know that we’re paying close attention to those changes in the dog days of summer and all year long to help ensure the tax law is being applied in your best interest and, hopefully, in your favor.


NOTE: BEWARE OF IRS SCAMS!
This has been a big topic at the conference. Scams are more prevalent than ever, and phishing scams have bilked more than 15,000 people out of an estimated $272 million dollars! Remember that the IRS will never contact you via phone or email demanding payment! If you are contacted and suspect a scam, forward it to  This email address is being protected from spambots. You need JavaScript enabled to view it. . And talk to us first before handing your hard-earned dollars over to anyone claiming to be from the IRS. We’re here to help!


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Caveat Emptor: It’s your money. It’s your responsibility.

Caveat Emptor: It’s your money. It’s your responsibility.

When Linda and Bill came into my office, I could sense their hesitancy right away. And when they told me their story, I could understand why they were so apprehensive about meeting with a financial advisor. They had, quite simply, learned not to trust.

Like many people, they’d realized they needed to stop being “do-it-yourselfers” and begin working with a financial professional. What they didn’t know was how to find a good advisor whose advice was based on their needs—not the advisor’s pockets. Unfortunately, it took them many years to understand the difference. “When I retired, our advisor gave me all the reasons why I should roll over my retirement savings into an IRA, and it seemed like a good idea,” said Linda. “But what I didn’t understand was that it was probably more of a good idea for him than for me.” That understanding came when a friend pointed out the fees she’d paid—and how much her advisor had earned in commissions from the transaction. Linda handed me the article her friend had shared with her that called out the practice of advisors receiving big perks (“say, a six-day, five-night resort vacation in Maui”) for selling a particular product. Ouch. Then Bill chimed in: “When I was 68 and had been collecting Social Security for two years already, someone told me I should have waited to claim until I was 70…that it would have added 30% to my monthly check,” he said. “When I asked our advisor why he hadn’t advised me on this, he said I’d never asked. I hadn’t, but I didn’t know what I didn’t know!”

The conversation got me thinking: with news about Trump signing an executive order delaying the DOL Fiduciary Rule—and even potentially doing away with the Dodd-Frank Wall Street Reform and Consumer Protection Act, investors need more education than ever. And if these regulations do fall away in the wake of the new administration, caveat emptor—or “let the buyer beware”—should be the phrase on everyone’s lips, and it should be driving every financial decision you make, from how and where to invest your hard-earned savings to whom you choose to work with to help guide your financial decisions.

The good news for consumers is that many of the anticipated benefits of the DOL Fiduciary Rule have already taken root. The media attention on the rule brought the idea of “fiduciary responsibility” into the mainstream, shining light on the difference between a fiduciary who is legally bound to act in the best interest of his or her client and ensure no conflict of interest, and a non-fiduciary advisor who is typically compensated by commission and is held only to a suitability obligation. (For more on this topic, see my blog When did it become ok to be financially illiterate?) But even with that knowledge, how do you choose an advisor who is not only working in your best interest, but is also a good fit for you?

The first step is to do your research. Get referrals from investors and other financial professionals, and be sure the advisor is a fiduciary who is, indeed, working in your best interest. When you meet face to face, here are five questions to ask to help you get the information you need to make a smart, informed choice:

  • What are your credentials? The most trusted in the industry are Certified Financial Planner® (CFP®), Personal Financial Specialist (CPA/PFS), and Chartered Financial Consultant (ChFC). This article talks about the benefits of each.
     
  • How are you compensated? Fee-only advisors minimize conflict of interest by receiving compensation only from the client. Fee-only advisors receive no commissions or other perks for the products they recommend. Other compensation models include fee-based, which is a combination of fees and commissions, and commissions only. If the advisor does earn commissions, ask if they come from product sales, from securities trading, or both, as well as specifically how much that commission is. (Yes, it’s okay to ask!)
     
  • May I see your ADV? Every Registered Investment Advisor is required to file a Form ADV with the SEC. The ADV outlines the details of the practice, including compensation, experience, service offerings, and any disciplinary history. Consider the ADV your advisor’s resume.
     
  • What services do you offer? Know what you want and, even more importantly, what you need. Investment management may be at the top of your list, but what about financial and retirement planning? Do you need a Social Security claiming strategy? Do you have the right type of insurance and the right level of coverage? What about estate planning? Understand what your advisor offers and if she has a network of trusted professionals to support the needs she doesn’t provide in-house.
     
  • How can you help me simplify and improve my personal finances? Like Linda and Bill, you may not know what you don’t know. This question can help you uncover unexpected ways the advisor can help you make changes that can lead to greater financial confidence and a better long-term financial outlook. After all, your financial success—today and far into the future—is the ultimate goal.

In our own Investment Policy Statement (and no matter who you choose to work with, be sure you receive and review this contract carefully!), we break down the roles and responsibilities of the three key partners in the road to financial wellness: the custodian (whose job it is to hold and protect your assets), the advisor (whose job it is to design and implement a financial and investment plan based on your needs and goals, and to regularly monitor the performance of that plan), and the investor—that’s you!—who has three key responsibilities: 1) to oversee your advisor, 2) to understand what you want to achieve and communicate those goals to your advisor even as they change over time, and 3) to carefully review your statements and be sure you understand how your money is being invested, how you are being charged, and if your plan is fulfilling your needs. If you’re clear about those roles and responsibilities and do your part, a well-chosen advisor should serve you well.

No matter how you feel about what role the government should play when it comes to protecting consumers, ultimately, you alone are responsible for managing your money. Trusting your advisor is important, but the person you really need to trust is yourself. Keep in mind the definition of caveat emptor: “the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.” And remember, it’s your money. It’s your responsibility.

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Retirement stress: When “living the dream” doesn’t come easy

Retirement stress: When “living the dream” doesn’t come easy

I came into financial planning in the second half of my career. It is truly a calling for me. As a CFP®, I adhere to a code of ethics that holds competence as a core principle and requires a commitment to lifelong professional education. Because there is always more to learn and new ways to help my clients achieve their goals, I recently began coursework through the Sudden Money Institute to become a Certified Financial Transitionist®. It’s a natural fit for me, and I’m thrilled to say that after completing Part One of the program, I’m already putting some of the lessons into action.

One of the topics we covered in the first session last weekend was the importance of mindset in how one defines and handles the stress that comes with every life transition. Mindsets exist at two ends of the spectrum, with a growth mindset at one end and a fixed mindset at the other. People with a growth mindset see stress as a challenge, while people with a fixed mindset see stress as a threat. Every transition comes with stress, but your mindset dictates how you respond when something you care about is at stake.

Oddly (or so I thought so at first), one of the most stressful transitions I could think of with my clients is one that is viewed as a positive change: retirement. In nearly every case, approaching retirement is full of a crazy amount of stress. So much for that vision of the happy couple laughing hand in hand as they stroll on the sand! Instead, retirement often comes with a ton of uncertainty, fear, disagreement, and emotional chaos. Here’s an example:

My clients Wendy and Brian have been looking forward to retirement for years. Brian is five years older than Wendy, so he retired a few years ago. Wendy is still working at a job she loves, but Brian wants to travel, hike and fish, and do all the things he’s afraid they’ll soon be too old to enjoy. They agreed on a retirement date for Wendy, and with my help, they’ve been working toward that goal. Now that date is just around the corner, and instead of feeling joyful, Wendy is completely stressed out. When she and Brian met in my office last week, I could feel the tension between them, and despite my best efforts, I couldn’t seem to help them focus on the rational aspects of their retirement plan. Both Wendy and Brian were swimming in emotion, and their upset was palpable. When life changes, money changes—and that’s stressful.

Wendy’s mindset about retirement was a fixed mindset. She had a negative view of stress, and every decision felt life-threatening. When I asked Wendy what she was thinking and feeling, she said, “I realize how confused I am about what my life will look like after I leave my job. Who will I be? What can I afford? Will we have enough money to live like we do now? Brian wants to travel the world, but I’m not sure that’s at the top of my list,” she said. “Everything feels upside down. I realized I’ve been running so hard to get to the end of work that I haven’t been able to face what is beyond. What is retirement? There are so many things I need to understand before taking the leap!”

Brian’s mindset about retirement was a growth mindset. He realized all the changes he would have to address, but he was excited and challenged. Although Wendy and Brian were in sync with their goals and dreams, their different mindsets triggered very different responses to the stress that comes with the transition to retirement. Given that there are two sides to money—the technical and the emotional—our work together will address the emotional side first so Wendy and Brian can rise to the challenge of the next phase of life, connect with others, and learn and grow together.

If your retirement (or another life-changing event) is around the corner, here are three steps to get you started on a path toward your “new normal”:

Step 1: Examine your mindset about stress
By taking a deeper look at how stress triggers your responses, you can harness the power of stress and position yourself to learn and grow. Do you act or react to major change or loss? Are you reactive and closed off, or are you responsive and open? Acting puts you in a growth mindset, while reacting puts you in a fixed mindset. Explore ways to take control of change. Share your stories and your history so you can better understand yourself and those who share your life.

Step 2: Know what’s at stake in the future
This iswhere you move towards the stress to name it, understand it, and embrace it. When life changes, money changes, and this is important. At this stage, it’s important to name your fears. Are you afraid of being a bag lady, or are you afraid of failing to live the life of your dreams? Maybe you’ve always wanted to write a novel, but your career got in the way, and you now have the time to realize your dream. Maybe you want to see the Northern Lights or spend more time with grandchildren or take up a second career (perhaps a service-based career like the opportunities I talked about in my recent blog Inspirations: Finding purpose in your second half of life). There are no rules. Take the time to explore how you want to live it so you can make it happen.

Step 3: Harness the power of stress
With a growth mindset and a clear idea of what is at stake—for you—you will be more open to opportunities and learning. Now you can work on the technical side of money; set realistic budgets, set meaningful goals, and strive to build a community of friends and family. Remember that after 50, changes come fast and furious, so when the next change comes (and it will), you’ll have created the capacity to be responsive rather than reactive. You’ll get a little older; you’ll get a little wiser, and the trade-off will be a good thing!

When I meet with Wendy and Brian meet next week, we’ll follow these steps, taking the time to dig into each area to help them find a deeper connection, decrease stress and, most importantly, have a shared growth mindset that will serve them well through this transition and all the rest to come.

Remember: endings bring transitions, and every transition leads to a new normal. Fostering a growth mindset through transitions will enable you to harness the creative power of stress so you can get to your “new normal” with as little uncertainty, fear, disagreement, and emotional chaos as possible.

Having troublesliding smoothly into retirement? This email address is being protected from spambots. You need JavaScript enabled to view it.  to schedule a time to chat. As always, I’m here to help!

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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >