Tips to Avoid Costly Financial Mistakes Through Planning

During annual reviews and meetings with new prospective families, I have been reviewing a plethora of 401k plans and documents. I wanted to share my 4 BIG takeaways and provide potential real-life next steps for you to consider. ☑ Don’t Save Too Fast In almost every other area of life, saving and investing more is encouraged. With an employer-sponsored retirement plan, that is not always the case. In many plans, you only get your employer match during the period you make contributions. In other words, if you max out your plan before the final paycheck of the calendar year, you could be forfeiting a portion of the employer match. You must understand your employer's plan. Fortunately, every plan must make a plan document available to you upon request. Your plan provider can provide a wealth of insight with a simple phone call. ☑ Beneficiary Designations While this one might seem obvious, mistakes happen way too often. Find the beneficiary tab of your employer plan online and confirm you have the correct beneficiaries. Common mistakes: parent instead of a spouse, ex-spouse, minor children ☑ Breaking Up with Your Target Date Fund For most employer-sponsored retirement plans, your investment contributions go to a target date fund by default. This is based on the year that you turn 65. For example, if you were born in 1980, your default investment option might be the ABC Target Date 2045 Fund. I do not think a person’s age should determine how their investments should be allocated. On average, I see that the average expense ratio in large employer plans is generally 0.40 to 0.45%. Inside the TDF, the fund allocates the funds to a combination of U.S. and International Stocks, Bonds, and cash. If you have a written financial plan, it should detail the investment asset allocation to help you optimally pursue funding your dreams. This could often be achieved by selecting 3-5 index funds without your 401k lineup. I see that passive index funds have an average expense ratio of 0.05%. ☑ Rebalance and Redirect When changing from target-date funds to your own mix of index funds, there are essentially 3 critical steps. First, you need to rebalance your existing holdings to the desired mix. Second, you need to re-direct future contributions to the desired mix. Finally, you need to select a date to do an annual rebalance. Hopefully, the plan provider will have an option for you to select to make this happen automatically. ★ Conclusion In a recent Vanguard study, Vanguard attempted to quantify the value of advice. They suggest that financial planners can add .45% of value by recommending low-cost index options and .35% for rebalancing. Hopefully, by reading this post, you improved your lifetime annual returns by 0.80% per year. Cheers, Nic #National401kDay

It’s easy to make mistakes with IRAs and 401ks. Here’s 3 you can avoid. — IRAs are more than retirement funds; they're a key part of your estate. But get it wrong, and your hard-earned savings could end up in the wrong hands or devoured by taxes. Here’s what you need to know: — 1. Outdated Beneficiary Designations: -> The heart of the problem: People forget to update their IRA beneficiaries all the damn time. -> Real case: An IRA went to an ex-spouse instead of the children. We ended up in court to claw it back. A simple update could have prevented this. — 2. Asset Protection for Inherited IRAs: -> Post-Clark v. Rameker, inherited IRAs aren’t safe from creditors in many states. -> Solution: Using a Standalone Retirement Trust (SRT), or a standard revocable trust with solid retirement plan language, can offer a layer of protection. We structure it so your beneficiaries enjoy the IRA's benefits, minus the vulnerability. — 3. Tax Traps with Traditional IRAs and 401ks: -> Traditional IRAs don't get a step-up in basis. Heirs could face hefty taxes. -> Strategy: Gradually liquidate the IRA beyond RMDs during the owner's low-tax years rather than forcing a 10-year draw-down during a beneficiary’s highest tax years. Consult a financial advisor to align this with your overall tax strategy. — **Why This Matters:** - It’s not just about who gets your IRA; it’s about maximizing its value and ensuring it's protected. - Each decision - from beneficiary designations to asset protection and tax planning - can significantly impact your estate plan. — 🛡️ A retirement plan is more than a retirement account; it's a legacy. Protect it right. — Legal information, not legal advice. If this caught your attention, repost ♻ and follow for more insights into savvy estate planning. #IRAs #EstatePlanning #AssetProtection #TaxPlanning #LegalTips

Some unexpected events can throw finances into disorder - a job loss, medical emergency, home or car repair, etc. And wihout warning, any expense can blindside your budget, leaving you scrambling to cover costs. But with some practical preparation, you can pivot more smoothly when the unexpected arises. The key is financial preparedness. It means having a financial cushion and plan that enables you to handle surprises without desperation. Here are 5 straightforward steps to shore up your finances for uncertainty: 1. Review your budget regularly and align spending with your values and savings goals. Account for building emergency savings and plan for irregular expenses. 2. Actively manage debt by avoiding high-interest accounts and paying down debts. Less debt equals greater adaptability during difficult periods. 3. Educate yourself on personal finance basics and plan for major future expenses like college savings or retirement. Foresight and knowledge build resilience. 4. Diversify income streams with passive income opportunities, side jobs, and long-term investments. Multiple revenue sources allow for flexibility if one drops off. 5. Secure key insurance for health, life, property, and disability. Insurance protects you when substantial unforeseen costs hit. Your financial readiness will help you roll with the changes when life throws curveballs. Follow these steps to prepare and face surprises with poise.

Blanket advice is comfortable. But you weren’t made for comfort, you were made for greatness. Here’s how you can avoid the biggest blind spots of blanket advice and super charge your planning 💪 1. 3-6 month emergency fund (Not just bank but High yield savings) 2. Adequate disability, life insurance (Not just from work, supplement to bridge major gaps) 3. Clearly defined vision and goals (Not just the internets goals, dream as a family and craft your vision) 4. Generosity plan (Not just with money but by giving your time and talent… make sure you get the tax benefits too 😉) 5. Saving 20% of income (Not just cash, get your money working for you for goals beyond 2 yrs) 6. Retirement plan (Not just from work, diversify your taxes, access to dollars, and market exposure) 7. Investment plan (Not just S&P 500 but also the other 8 asset classes rebalancing at appropriate times) 8. Risk Mgmt plan (Not just risk tolerance, but also the risks of the goals themselves) 9. Cash flowing assets (Not just real estate, businesses, dividends from stocks, etc) 10. Estate plan (Not just for the ultra wealthy, necessary will and trusts) There’s a lot that goes into the picture. No 2 plans are the same. Build your life aiming for what matters most. Message me when you’re ready. God bless you, Jack 🙏 P.S. What are the most common blind spots you see? Bonus : kids savings plan (Not just 529)

Class of 2024, Here are 10 common financial mistakes to avoid as a new practitioner (in no particular order): 1️⃣ Paying Excessive Interest: Many pharmacists underestimate the long-term impact of student loan interest. As a result, the total cost of loans is typically much higher than one assumes it will be. Consider loan forgiveness or reducing interest through principal payments or refinancing (if interest rates come down). 2️⃣ Underutilizing PSLF: For those who work with a qualifying employer, Public Service Loan Forgiveness can save substantial sums in the form of tax-free forgiveness. You can minimize out-of-pocket payments (and therefore increase the amount forgiven tax-free) by reducing your adjusted gross income (AGI) through traditional 401k/403b and HSA contributions. 3️⃣ Neglecting an Emergency Fund: Prioritize building a 3- to 6-month emergency fund to handle unexpected expenses that will inevitably come. An emergency fund helps provide peace of mind and prevent incurring additional debt or dipping into other savings goals. 4️⃣ Lacking Income Protection: Insure against income loss due to disability or death with term life and long-term disability policies, ensuring financial stability for your loved ones. That said, shop with caution. Not all policies are created equally, and it's just as easy to have too much insurance (or insurance you don't need) as it is to be underinsured. 5️⃣ Assuming Fixed Income: Many pharmacists tend to make a great income coming out of pharmacy school, but that income may stay relatively flat throughout their careers. Diversifying income and bringing in additional revenue streams can help accelerate other financial goals. 6️⃣ Postponing Retirement Savings: Start investing early to leverage compound interest for long-term wealth accumulation. Time value of money is one of the greatest lessons a new practitioner can learn. 7️⃣ Overlooking Tax-Advantaged Accounts: Maximize contributions to tax-favored accounts like 401(k)s, HSAs, and Roth IRAs for tax benefits and long-term growth. 8️⃣ Filing Taxes without Strategy: Engage in year-round proactive tax planning to optimize withholdings, deductions, and credits. 9️⃣ Misaligned College Savings: Prioritize retirement savings over college funds, as loans are available for education but not for retirement. As a new grad drowning in student loan debt, it's natural to want to prevent the same for current (or future) kids. There's nothing wrong with that but it needs to be in the proper order. 🔟 Choosing Professional Help That Isn't a Good Fit: The term "financial planner" or "financial advisor" means very little in and of itself. If you choose to work with a professional, find someone who is a fiduciary, fee-only, and has relevant credentials (such as a Certified Financial Planner-CFP®) who can provide trustworthy and comprehensive guidance. #pharmacist #pharmacy #commonfinancialmistakes #classof2024 #newpractitioner