Five Little-Known Services Your Financial Planner Should Be Offering

The financial planning landscape can be pretty confusing.  Not only is it difficult to figure out who has your best interests in mind (as the debate over the fiduciary standard is pretty confusing), but it’s also difficult to figure out who is in the business of EARNING their fee, vice collecting it.  This article should serve as a quick snapshot (and starting point for discussions) on what a consumer should consider to be the minimum standard for hiring a financial planner.  Meeting these criteria doesn’t necessarily mean success, but failing to do so should prompt you to keep looking for someone else. Continue reading

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Roth Conversion of a TSP Account: A Case Study

I’ve written several articles about Roth conversions, particularly tax planning considerations & marginal tax rate impacts.  This article serves as a case study to help visualize how a Roth conversion strategy could work, and how the tax liability can fluctuate based upon the timing of Roth conversions.   There are many variables that affect tax liability for Roth conversions, including:

  • Time horizon: The more time you have before required minimum distributions (RMDs) begin, the more years you can spread conversions.  This can allow you to maximize conversions during years with low taxable income & lower conversions during years of high taxable income
  • Amount to be converted
  • Total taxable income: The lower your taxable income, the more you can take advantage of conversions at the lowest tax brackets.  Additionally, the lower your income is WITHIN your current bracket, the more you can convert without spilling over into a higher bracket
  • Investment returns on the traditional account: The higher your investment returns, the more you will have to convert.  For example, if you start with $500,000, you not only have to account for that amount, but for the future gains in that account.
  • We’re also disregarding the Medicare Tax on Investment Income, which is 3.8% of income over $250K.

In this article, we’ll use a fictional example of a military family looking to do a Roth conversion from their traditional TSP account to an IRA as they transition to post-military life.  However, we won’t focus on the WHY.  Instead, we will solely focus on three ways they could do so, and which manner presents the lowest overall tax liability–the HOW.

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Transitional Compensation for Abused Dependents

I recently received a question regarding the taxation transitional compensation for abused dependents.  In researching my answer, I noticed that there is a lot of information on the subject.  However, most of this information seems to be in the form of laws, directives, and instructions, which doesn’t make it user-friendly for the people who might need it.  This article is my attempt to make this topic a little less intimidating for the people who might need to take advantage of this program.

This article is written primarily for the mil-spouse who might need to find out more information.  However, it’s also written for the benefit of friends or family members who might be trying to help that mil-spouse, who might not be aware that such a program exists.  Finally, this article is a primer for the accredited financial counselors (AFCs) who might have heard about this program, but are not familiar with the references and instructions.  For AFCs, I’ve listed the DoD & service-specific references throughout this article so you can learn more about how to help your customers through the application process. Continue reading

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Back to Basics: Why a HELOC Does Not Equal Liquidity

Most financial planners and counselors advise their clients to maintain emergency savings of somewhere between 3 & 6 months’ living expenses.  As I’ve mentioned in a previous article, saving 3-6 months’ expenses sounds so daunting that many people don’t know where to begin.  When you throw in paltry returns on savings accounts, some folks might not even try.  In fact, why bother when you can use a HELOC & tap into your home equity?  After all, it’s pretty easy to tap into, and you can put your money to work in other ways, right? Continue reading

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Back to Basics-What’s Your Marginal Tax Rate?

Tax planning is one of the most fundamental aspects of financial planning.  In fact, many people would argue that financial planning without respect to taxes is not really financial planning.  Yet, in order to fully understand how tax planning works, it’s important to understand what your marginal tax rate is. Continue reading

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What’s Your Value Proposition?

As servicemembers exit the military, one of the biggest challenges we face is finding post-military employment that is commensurate with what we bring to the table.  Many times, I’ve heard the story of someone who works hard, networks well, and ends up in a job with great promise.  A year later, that person is dissatisfied and feels like they were sold a bad deal.  From the employer’s perspective, that person is filling every single requirement for that job description, so this could be a one-way street.  Or, if that person’s resentment is great enough, it could spill over in the form of workplace friction until one or both parties decide to part ways.

But is it all the company’s responsibility?  Perhaps we owe ourselves and our prospective employers a more defined value proposition. Continue reading

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Why I Became a Financial Planner

As my financial planning practice grows, I’ve noticed that people are asking me how to become a financial planner.  The other day, I answered an email from someone asking how to become a financial planner.  It was at that point that two things occurred to me:

  • At the time of this writing, I’ll have written about 150 articles on this website. None of them talks about why I became a financial planner.
  • Military in Transition contains an “About Me” page, but it doesn’t really explain my journey from the military to becoming a financial planner.

This article is a first step towards outlining my path to becoming a financial planner. Continue reading

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Why the ‘You Just Gave Uncle Sam an Interest-Free Loan’ Argument Doesn’t Work For Many Transitioning People

Executive Summary

Every year at tax time, you see pundits talk about ‘giving Uncle Sam an interest-free loan.’  While the concept of lowering tax withholdings is sound, there are several problems with its practice.  In this article, we’ll discuss:

  • The ‘common’ wisdom behind this interest-free loan concept
  • The major problems with its practical application during transition
  • Situations in which this is actually wrong

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Homeowner Insurance Regulatory Offices By State

In a previous article, I described my homeowner’s insurance claim process.  In this article, I discussed how difficult it was to understand what I was entitled to under the law.  I was finally able to reach a better understanding once I became familiar with the Florida Homeowner’s Insurance Bill of Rights.

Since the insurance industry is regulated at the state level, these rights can differ from state to state.  Moreover, most states don’t even have a clearly defined ‘Bill of Rights.’  However, each state does have a homeowner’s insurance page that can help you understand what resources exist for your situation. Continue reading

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12 Lessons Learned From My Homeowner’s Insurance Claim

Executive Summary

This story is about my personal experience in dealing with a homeowner insurance claim for a roof replacement.  Although virtually every other home in my neighborhood experienced the same damage (from a freak hailstorm), my insurance claim became a long, drawn out affair.  While the settlement terms are beside the point, I hope this story will help steel someone for the challenges they might face if they’re dealing with a particularly tough insurance company. Continue reading

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