Financial Planning for Geeks

Alex, I’ll Take Potpourri for $500

- Potpourri

I’ve picked up a couple of obscure pieces financial information lately, and one of my clients had the brilliant idea of writing a newsletter with a small selection of interesting tidbits, gotchas, and “Did You Knows” that the average person might not know…and could benefit from.

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Hello, everyone,

I’ve picked up a couple of obscure pieces financial information lately, and one of my clients had the brilliant idea of writing a newsletter with a small selection of interesting tidbits, gotchas, and “Did You Knows” that the average person might not know…and could benefit from. 

So here’s my top 10 in the category of Financial Potpourri:

  1. Board Membership: if you serve on the board of a nonprofit, condo association, co-op, or similar organization you may want to ask if they are incorporated and have board insurance. If they are incorporated, there is no issue because that provides legal protection for individual board members. But if they are not incorporated and don’t have the insurance, you could be held personally liable in case of a lawsuit against the organization.
  2. Estate Tax Planning for Married Non-US Citizens: if you are not a US citizen your federal estate tax exemption could be at risk. Be sure to talk to your estate planning attorney about your citizenship status; they can add language to your documents to ensure that your exemption is preserved.  
  3. Life Insurance: there is a common misconception that life insurance does not pay out in cases of suicide. Generally speaking, this is only true during the first two years the policy is in effect. After that, the policies typically do pay out in even if the insured person has committed suicide. 
  4. Long-Term Disability Income Insurance: a typical company in the Seattle area will pay about 60% of an employee’s salary only (NOT bonus, stock awards, or stock options) if they are unable to work for more than 90 days. This benefit is also taxable, so most people would end up taking home less than half of their usual pay if they are hurt or sick for more than 90 days. There are individual insurance policies you can buy to help close this gap, and I highly recommend that you look into them if you can’t live on half your salary. Just contact me for help. 
  5. Long-Term Disability Income Insurance II: this coverage is so often overlooked or poorly understood that I thought two items were in order. If you have ever seen a chiropractor for your back (even if it’s just for maintenance), individual disability insurers will typically exclude your back from coverage, meaning they will not pay the benefit if you get disabled because of your back. Similarly, if you’ve taken sleeping pills or had treatment for sleeplessness, anxiety, depression, etc., many disability companies will exclude these health issues from coverage. Sometimes the exclusion isn’t permanent, and you can request a review after two years or so. 
  6. Long-Term Care Insurance: this is the kind of insurance which covers you for conditions that don’t get better, like Alzheimer’s or just becoming old and frail. Most people aren’t even aware that their health insurance won’t cover these cases, but after any medical issues have been addressed your health insurance won’t pay for help getting dressed, cooking, or taking medicine, for example. You will generally need a specialized long-term care insurance policy to address this risk…and it is a HUGE risk. According to Genworth, the annual cost of a semi-private room in a nursing home in the Seattle area is over $116k! It’s easy to see how this kind of care can wipe out all of your hard-earning savings pretty quickly. Again, email me if you have questions about this kind of policy. 
  7. Market Downturns: on average, the US stock market experiences a downturn of more than 20% every six years (American Funds, citing Capital Research and Management Co.). But this volatility is what allows for higher long-term returns. You have probably found that your cash doesn’t experience 20% declines very often, but you also won’t earn 9% a year on it over the long term. You will have to accept some level of volatility to get the returns you need to keep up with inflation and taxes. 
  8. Alimony Payments: you may have seen this one in another post, but it’s such a big change I thought I would mention it again. If your divorce becomes final after 12/31/18, the person paying alimony can no longer deduct those payments from their federal income taxes. The personal receiving alimony also won’t include those payments in their federal taxable income.
  9. ABLE Accounts for People with Special Needs: ABLE accounts allow people with special needs to own a tax-advantaged account to help pay for their care. These funds generally don’t affect the beneficiary’s eligibility for benefits like Social Security or Medicaid (up to your state’s maximum account balance). The annual contributions to an ABLE account can’t be more than $15k from all sources and must be made with after-tax dollars, but as long as you use the money to care for the beneficiary the growth in the account is not taxed. See the ABLE Account website for details or reach out to me for help. 
  10. It’s Not All About the Money: another of my wonderful clients crystallized this point for me recently by asking “should I invest in Company X if I don’t agree with their business practices, even though they seem like they will keep being successful”? My short answer is “no”: there are plenty of fish in the sea when it comes to investing. We advisors have more socially responsible AND successful investment options available for you all the time, and not just for $1M accounts. So no, it’s not all about the money. It’s about your values, too!
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Penny Farthing

I, Penny Farthing (non-wizarding name Kerry Read ), actually have a day job in the world of finance. This blog came into being because of my deep and abiding love for geeks and Personal Finance.