The Joker Fund

The Joker Fund Financial Life Planning with Mike Morton

If you are like many of my clients, you might find yourself asking “why do I feel like I am running in place?” when it comes to your finances. With the rising cost of food, interest rates, inflation, and unexpected expenses…it’s no wonder people are constantly worried about not being able to save enough. Today, Matt Robison and I came up with a way to help alleviate financial anxiety using the Joker’s infamous line in The Dark Knight (2008): “Nobody panics when things go according to plan.” In a word: plan. We call it the Joker Fund.

Tracking Expenses

Before delving into the details of how the Joker Fund works, let’s address a crucial issue that many of us face: the inability to easily track expected but irregular expenses. Think about it – life insurance payments, Roth IRA contributions, kids’ summer camp fees, tuition bills, and even vacations don’t necessarily get billed monthly. They come up at different times of the year, but they always come up. So, what’s the best way to manage them without constantly feeling blindsided?

Meet my client whom I will call Dave. Dave embodies the epitome of financial anxiety. Every Zoom meeting with him inevitably revolves around budget discussions. Despite his meticulous tracking, Dave struggles to stay ahead of his expenses. It always seems like there’s “one more thing” popping up, leaving him feeling financially behind the eight-ball.

According to a survey by, Dave isn’t alone in his feelings. In fact, a staggering 76% of U.S. adults admit to feeling some level of anxiety about their personal finances. And for many, this anxiety translates into poor sleep quality, with 77% reporting that financial worries keep them up at night.

So, how can we break free from this cycle of financial stress? The answer lies in automation: a.k.a. The Joker Fund.

Automate Your Savings

The Joker Fund operates on a simple premise: turn the unexpected into the expected. Instead of being caught off guard by irregular expenses, anticipate them and proactively save for them. It’s about pre-saving for known expenses, even if the timing might be uncertain.

Here’s how you can implement the Joker Fund strategy:

  1. Identify Your Irregular Expenses: Make a list of all the expected but irregular expenses you incur throughout the year. This could include anything from annual insurance premiums to holiday shopping budgets.
  2. Calculate Your Monthly Savings Target: Total up all these expenses and divide by 12 to determine how much you need to save each month.
  3. Set Up Your Joker Fund: Open a dedicated savings account specifically for your irregular expenses – this is your Joker Fund. 
  4. Automate Your Savings: Set up an automatic transfer from your main checking account to your Joker Fund each month in the amount you calculated in step two. This ensures that the money is set aside before you have a chance to spend it elsewhere.
  5. Monitor and Adjust: Keep track of your irregular expenses and adjust your savings plan accordingly. If you have a particularly expensive month, you may need to increase your monthly savings target temporarily.

One of the key benefits of the Joker Fund is that it removes the temptation to dip into your savings for other purposes. By segregating your irregular expenses into a separate account, you create a mental barrier that prevents you from overspending.

Automation for the Win!

But what about tracking all these expenses? Won’t it be a lot of work? Surprisingly, no. Once you’ve set up your automated savings, you can largely set it and forget it. The beauty of automation is that it does the heavy lifting for you, leaving you with more time to focus on other aspects of your financial life, like vacation planning.

If you find yourself constantly stressed about financially running in place, it’s time to embrace the Joker Fund. By automating your savings and proactively planning for known expenses, you can take control of your finances and say goodbye to financial anxiety once and for all. 

IRA Beneficiaries: It’s all about the Benjamins

Don’t have a spouse or son named Benjamin? Fear not, I was talking about hundreds of $100’s you need to consider when choosing a beneficiary for your Individual Retirement Account(s) (IRA).

You’ve worked hard to build your retirement savings, and naturally, you want to ensure that it’s passed into the right hands after you’re gone. Choosing your beneficiary is a decision that goes beyond just personal preferences—it can have significant financial implications for your loved ones and even impact taxes. Let’s dive into why choosing the right beneficiary matters and what steps you can take to ensure your wishes are fulfilled.

First and foremost, you want your hard-earned money to benefit those you care about most. Whether it’s providing for your spouse, children, or other family members, selecting the appropriate beneficiary ensures that your assets are distributed according to your wishes. Additionally, considering the tax implications of your choice can potentially save your beneficiaries from unnecessary financial burdens down the line.

$150k on the line: A True Story

Let’s take a look at this situation on a granular level. I have a client, whom I will call Karen. After her spouse Keith passed away, Karen found herself facing decisions regarding his $500k IRA. Initially named as the primary beneficiary with her son as the contingent beneficiary, Karen believed this setup would be the best way to pass on funds to her son. What Karen didn’t know was that by keeping the IRA in her name, she could withdraw funds over time, potentially reducing the tax burden. By choosing to keep the fund herself and then passing it to her son, she can spread the tax burden out over her lifetime (assuming an additional 15 years). This means a total of 25 years (15 for herself and 10 for her son), compared to her son withdrawing the entire amount within ten years. This decision ultimately saved her family a whopping $150k in taxes—a testament to the importance of thoughtful beneficiary planning.

IRA Balance Brokerage (After Tax) IRA Balance Brokerage (After Tax)
0 $500,000 $0 $500,000 $0
5 $570,000 $123,000 $651,000 $56,000
10 $605,000 $350,000 $834,000 $162,000
11 $606,000 $414,000 $0 $785,000
15 $578,000 $738,000 $0 $1,030,000
After-Tax Value $440,000 $738,000 $0 $1,030,000
Total Value $1,178,000 $1,030,000

How Do Beneficiaries of IRAs, 401(k)s, and 403(b)s Work?

Understanding how beneficiary designations work is crucial for effective estate planning. In the event of your passing, these designations dictate who receives your retirement account assets. If you fail to designate a beneficiary, the fate of your funds could be left to the discretion of the court, leading to potential delays and additional costs associated with probate.

For married individuals, spouses typically inherit retirement account assets automatically. However, for those who are unmarried or wish to designate alternative beneficiaries, it’s essential to specify these preferences through the appropriate channels.

Trust or True Love?: It’s not a matter of the heart

Deciding between naming a trust or an individual as the beneficiary of your retirement accounts depends on various factors, including your estate planning goals and the specific circumstances of your beneficiaries. While trusts offer certain advantages such as added control over asset distribution and protection against creditors, naming individuals directly may simplify the process and provide more flexibility in managing inherited assets.

A Handy Checklist

When it comes to reviewing beneficiary designations, it’s essential to assess all relevant retirement accounts. Here is a helpful checklist you can use to ensure all your accounts are…well…accounted for:

  • Individual Retirement Accounts (IRAs)
  • 401(k)s, 403(b)s and other retirement accounts
  • Checking and Savings accounts
    • Transfer on Death (TOD) or Payable on Death (POD)
  • HSA’s
  • Any other account that you own without beneficiaries (i.e. 529 already have a beneficiary)

What you can do now

Take proactive steps to review and update your beneficiary designations. Start by gathering information on all your retirement accounts and other relevant assets, then carefully consider who you want to designate as beneficiaries. Don’t forget to include contingent beneficiaries to accommodate for unforeseen circumstances.

The beneficiary designation for your IRA is a critical aspect of estate planning that could save your loved ones a tremendous amount of money with savvy tax strategies. Extending the amount of time your loved ones have to withdraw your savings after death could save them hundreds of thousands of dollars in taxes. Take action today to secure your financial legacy for tomorrow.

Don’t Panic: Overcoming Financial Avoidance

If you’ve ever logged onto your bank account or checked the receipt from your ATM withdrawal and felt that sick feeling that comes with panic and/or shame, then this podcast is for you. This week I am joined by Adam Koren who is both a friend and financial coach specializing in providing gentle, judgment-free support to help people untangle their unique money challenges.

Money management can be a daunting task for many people, leading to avoidance, stress, and even shame. Adam is here to share some strategies to overcome these challenges and help you gain control of your finances. Managing your finances involves much more than just numbers and game plans; there is a great deal of emotion involved in the landscape of personal finance.

You’re not alone

The first step in arresting the panic and shame is to recognize that in our society and culture, there is an abundant lack of financial education and open dialogue surrounding money matters. Many individuals carry the burden of feeling like they should inherently know how to manage their finances, despite a lack of formal education or familial guidance in this area.

Adding to the lack of education is the taboo our culture places on discussing money matters. Imagine chatting with a friend and casually inquiring about their salary. How about asking how they afford those two luxury cars, just out of curiosity. Cringing yet? What if we were able to speak about these issues openly and learn from each other’s successes and failures? Even if you can’t stomach the thought of inserting personal financial matters into polite conversation, you should be able to talk to someone about them. It is important to address the emotions associated with finances head-on rather than avoiding them.

Checking Balances

Are you one of those people that avoids looking at your bank account balances? Reluctant to review past expenses, knowing you will inevitably encounter a wall of regret from overspending on your last vacation or purchasing an unnecessary indulgence? It’s time to rip off the bandaid. Talking to a trusted friend or professional can alleviate some of the anxiety and shame associated with financial avoidance. By verbalizing fears and uncertainties, you can begin to address them in a supportive environment.

It all starts with making time. By structuring conversations about personal financial matters, you can alleviate anxiety and create a safe space for open communication. Try scheduling a
a monthly or quarterly “financial date night,” to openly discuss finances with your partner. Use the opportunity to examine past behavior without blame or condemnation but rather as a springboard for future success.

Give yourself a break

The importance of self-compassion and gratitude in overcoming financial avoidance can’t be overstated. Instead of dwelling on perceived shortcomings or comparing yourself to others, focus on gratitude for what you do have in order to shift your perspective and foster a sense of empowerment.

While managing finances can be challenging, it’s essential to approach them with empathy, understanding, and self-compassion. By acknowledging and addressing the emotions associated with money, you can take meaningful steps towards financial empowerment and peace of mind. Whether it’s through open dialogue with a trusted individual, structured financial discussions with a partner, or practicing gratitude, there are various strategies available to help navigate the complexities of personal finance

Dude, Where’s My Money?

In today’s episode, Matt Robison and I delve into the exciting topic of financial flexibility, focusing on the importance of knowing where your wealth resides and ensuring it’s accessible for both current and future needs. 

Asset Locations

So, where is your money? Most listeners are pretty savvy when it comes to asset locations, especially after last week’s episode. Your money is likely distributed between things like home equity, retirement accounts, and brokerage accounts. Go ahead and take a look, I’ll wait. 

Now that you know where your money is, it is time to address the how. How accessible are your funds? If you need $60k in cash tomorrow, you are unlikely to get it from your home (sort of, keep reading to learn about home equity line of credit (HELOC) options). It would also cost you to take it from retirement accounts between tax obligations and penalties. The main point I am trying to make is that it is important to strike a balance between locked-up assets and liquid funds to maintain financial agility.

Sample: Let me give you an example

Let’s talk about my real clients, John and Jane (not their real names). Together, they make a good income, about $300k / year. They have 2 kids, ages 12 and nine. They have been saving, and live in a large home that they share with an aging parent. When I evaluated their asset locations, I found they had $750k in their home, $750k in their retirement accounts, but only $40k in their brokerage account. That’s almost $2 million, so what’s the problem? Well, what if there is an emergency? What if they want to go on an epic trip when the kids are in high school?

This is where the location of assets really makes a difference. Despite substantial wealth, John and Jane have their money tied up in their home and retirement accounts, thereby limiting their liquidity. It will take very careful financial planning to meet current expenses and future aspirations.

A Home Equity Line of Credit (HELOC) as a way to liquefy assets

As teased above, one way to release “locked up” assets in a home is to take a HELOC. This is not a loan. It is a line of credit offered for you to borrow against the equity you have in your home. You only take what you need, even if the HELOC allows you $100k, for instance. The downside is the interest accruing on the money borrowed is usually pretty high, somewhere around 9%-11% with today’s current rates. 

Show me the money

As Matt loves to say: this week’s episode is brought to you by math. Have a financial question? Try math!

What does math have to do with asset locations? As humans, it’s often easier to understand a story or a chart.  So, let’s use some math to put the above sample, example, into action:

Find your money and make a plan

Once you have your asset locations, making small tweaks for liquidity’s sake can be as easy as 1-2-3:

  1. Ask yourself: Do you have enough access to money if you need it?
  2. If not, where will you get that cash?  Can you open a HELOC?
  3. Create a graph like the above to track it over time and give yourself peace of mind!

Asset Location

In this week’s episode, Matt Robison and I discuss asset locations. No, we aren’t giving away CIA operatives’ whereabouts, we are talking about how where you put your investments can make a big difference on your return, to the tune of $74k!

Asset Location Matters

First, what are we even talking about when we say asset location? Simply put, it is where your investments are being held. For example, you might have a 401k, an IRA, an HSA, a 403b, or a brokerage account… these are all “locations”. The assets are your stocks and bonds. So, where you put your stocks and bonds, particularly bonds, is important. Why? Good question.

You know by now from previous podcasts which accounts you should put your savings into and in what order. You also know how to balance your portfolio. Now you will learn how to maximize your tax savings by putting your bonds into tax-free or tax-deferred accounts. You don’t want to hold your bond in your brokerage accounts. Why? Because as they earn interest, you will be taxed on the capital gains. If, instead, you have the bonds held in a 401k or an IRA, you will not be taxed on those dividends which are historically high right now. 

How to save $74,000

Not convinced? Let’s take a look at the math using a real client story (I changed her name): 

Jane is about to retire. She has $1m in her portfolio and is ready to leave her job next year. We’ve run the numbers and she’ll be fine with her retirement lifestyle. However, I noticed that she has a lot of cash, money market funds, and bonds in her taxable account and is more aggressive (80% stocks) in her 401k. The interest and dividends in her taxable account are a big tax drag. According to research done by Vanguard, moving the bonds to a tax-free account can boost her returns by .3%. While that may not seem like much, over 30 years and with compounding, that number comes to $74,000!

How to Review Your Asset Location

Now that you see the benefit of planning your asset locations, let’s talk about how to make that happen. 

  1. Review your account types: Do you have Traditional, Roth, and Brokerage?
  2. Keep taxable fixed income in tax-advantaged accounts and low-cost index funds (equities) in taxable accounts
  3. Higher-dividend stocks and active funds belong in tax-advantaged accounts where dividends and capital gains are not taxed every year: keeping more money in your pocket!

This sounds like a lot of work!

At the end of the day, if this all seems like too much, don’t worry. I have a tried and true “good enough” strategy for you:

  1. Save 15% of your gross income
  2. Invest aggressively, 70% – 90% in stocks with low-cost index funds

Optimizing asset locations is like the icing on a cake – nice to have but not imperative to a delicious dessert. 

Anne Lester on Personal Finance

This week I am joined by special guest Anne Lester to discuss the importance of educating young individuals about finances. In particular, we discuss Anne’s latest book titled Your Best Financial Life: Save Smart Now for the Future You Want and its focus on individual financial responsibility. We also talk about the shift towards personal financial management, overcoming behavioral biases in saving and investing, the benefits of automated savings, and the significance of educating young individuals about finances.

Watch on Youtube


Retirement Savings – You’re on your own

Anne and I begin our chat by acknowledging a historical shift in retirement savings. Back in the day (our parents’ generation and even ours, to some extent), companies would take care of their employees with pensions and retirement packages. It was normal for an individual to spend years, decades even, at the same job, or at least employer. The same cannot be said for today’s economy in which most people spend a maximum of five years in any one given position. 
Why does this matter? If your job isn’t actively preparing you for retirement, that responsibility now falls on your shoulders. There is a lack of education and an abundance of complication when it comes to personally managing long-term savings. Let’s break those key issues down to their impact on you:

Educating kids and young adults on personal finance

Math in elementary school covers the basics. In high school, it gets more complicated with advanced computations but most public schools do not spend much, if any time on personal finance. It is up to us parents to teach our kids about credit (cards, lending, etc), real estate (purchase, lending), and arguably most important: long-term savings. These concepts are not intuitive and they accompany two significant behavioral biases: loss aversion and present mindset.

Loss Aversion and Investing

We’ve talked about loss aversion in the past on this podcast, in particular in the episode Be More Aggressive. Anne revisits this behavioral bias that is well defined by the Decision Lab as a “cognitive bias that describes why, for individuals, the pain of losing is psychologically twice as powerful as the pleasure of gaining. The loss felt from money, or any other valuable object, can feel worse than gaining that same thing.”
Winning $10 is cool I guess, but losing $10 is a CRUEL WORLD!
How does this impact investing? It explains why so many people are afraid of the stock market. Even if they know that historically speaking, they will always gain money from investing in stocks, watching the tickers and tuning into the day-to-day market volatility wreaks havoc on the psyche and impacts one’s decision making. Putting money in a savings account feels safer than investing, even if we know that it is a financially detrimental decision. We just talked about this last week!
Anne breaks it down further by running some numbers. Investing $5k in the market today will likely grow to $100k in 40 years. So how do we overcome, or teach our kids to defeat that behavioral bias? Well, first we have to acknowledge that living in the moment isn’t always a good thing.

Present Self vs. Future Self 

Have you ever tried telling your young child that if they eat those chocolate-dipped, deep-fried oreos from the fair they probably won’t feel well in an hour or so? You probably then held their hair or rubbed their back as they made a sacrifice to the porcelain throne.
Trying to explain to a young person the concept of regret in the face of instant gratification is a lot like banging your head against a wall, repeatedly. We all remember the feeling, and likely still indulge (binge-watched any shows into the wee hours of the morning lately? You know you have!). Ane talks about the challenge we all face when it comes to present self vs. future self. Luckily, she also has some tips for overcoming the tendency to prioritize the now over the later.

Tips for teaching/embracing long-term financial planning

What’s the easiest way to help your kids achieve success in retirement planning? Automate. Show them how to take the decision and the tendency toward instant gratification out of their hands. You can’t spend money you don’t have, right? So start by saving off the top. Use those employer benefits to contribute to any and all savings vehicles offered to you including (but not limited to): 401k’s, Health Savings Accounts (HSA’s), 403(b), TSP, etc.
Next, automate transfers to those savings vehicles that don’t come directly from your paycheck. Set up an auto-transfer for the day after you get paid to 529’s, IRAs, Brokerage account and more. Sure, your newly minted adult child might not be able to manage a huge contribution if they want to make rent and eat, but they can plan to set-aside a percentage of their yearly raise to savings goals. You can’t miss what you never had, right? The less they have to think about it, the easier it is to let their money grow overtime. Future selves for the win!

Your Best Financial Life

Book: Your Best Financial LifeAnne Lester was a truly delightful guest to have on the Financial Planning podcast. Our conversation shed light on the evolving landscape of personal finance, particularly in terms of retirement savings and the imperative for financial education among young individuals. As we navigate a world where traditional employer-provided pensions are increasingly rare, the responsibility for long-term financial security falls squarely on individuals’ shoulders. Anne’s insights underscore the importance of equipping the younger generation with the knowledge and tools necessary to navigate complex financial decisions, combatting behavioral biases such as loss aversion and present bias. By emphasizing the benefits of automated savings and instilling the value of long-term financial planning early on, we can empower our kids to take control of their financial futures and strive towards their best financial lives. Anne Lester’s expertise serves as a valuable guide in this journey towards financial literacy and security.

Risk: Why Timeframe Matters

Risk: It bears Repeating

Anything worth saying is worth repeating. – Humble the Poet
We’ve talked about risk many times in the past. In particular, how you view risk. The reason the conversation bears repeating, other than the fact that I field this topic on the regular, is because it is tied to a strong emotion: anxiety.

Not taking a risk is the biggest risk

Many people “feel” like the safest way to save money is to hide it under a mattress (ok, not really, but savings accounts are today’s mattresses). Why? Watch the news. The stock market ticker runs at the bottom throughout many newscasts. People have market changes pinged directly to their phones. Do you know how often the market fluctuates, daily? If you do, then you know exactly what I am talking about.
Do you view taking a risk as losing money? Then this podcast is for you! Join Matt Robison and I this week as we discuss how you should be looking at risk. Spoiler alert: risk isn’t losing money, it is losing purchasing power.

Risk: How long until retirement?

When deciding how to invest, consider the timeframe – it all depends on when you will need to spend the money.

  1. 30+ years until retirement: You are just starting in your career, maybe you have one or two young children at home. Your best option for long-term investments are stocks. Over long periods of time (40+ years), stocks have always outperformed any other type of investment.
  2. 10-20 years until retirement: Your kids are (mostly) grown, you’re paying college expenses, etc. The strategy here is almost the same as above: Stocks are still your best bet for 10+ years of investment. However, you need to balance that with anticipated costs for the next couple of years. For instance, the 529 account for your high school junior should be invested more conservatively than your 401(k).
  3. About to retire or retired: Congratulations! Now your main concern is having your money last, being available when you need it, and keeping up with inflation. See below for the Retirement Bucket strategy!

These time frames are important when you look at historical market returns.

Retirement Buckets

Now that you are about to retire, or even better – you have already retired – you need to keep a close eye on your portfolio to ensure it will keep up with your ongoing needs.

  1. Cash: Keep the next 1-2 years of expenses in cash and money market funds. You don’t want to lose that money!
  2. Bonds: The following 2-7 years of expenses can be invested in very safe bonds or bond funds. This will get you some nice return (hopefully!) while not losing value.
  3. Stocks: Any money that you plan to spend in 7+ years from now, you can consider investing in low-cost stock index funds. Stocks tend to ourperform over long periods (10+ years) and you want your retirement portfolio to keep up with inflation

The first two buckets above (1+2) are your war chest: the money you need to have to cover expenses over the next 5-7 years in case the stock market crashes.

Stocks for the Long Run

Need more proof that stocks are your best bet? Let’s pretend that you were around in 1802 and you were rich. You had a crisp $1 to save. Had you put it under your mattress and pulled it out this year, it would be worth a whopping $.04. Yes, you read that correctly. Four cents. Do you see how the dollars don’t make sense? Had you invested that $1 in the stock market, it would now be worth $1,601,184.

Here is where the purchasing power comes into play. That dollar bill in 1802 could probably purchase dinner for the whole family. Uh, not so much in 2024! You can see from the chart that a dollar from 1802 has lost so much purchasing power that it can only buy 4.7 cents worth of goods. Bonds have done better, with a modest return from $1 to $1,746. Obviously, stocks far outpace cash and bonds. That’s why we say “stocks for the long run.”
It is a common mistake to equate risk with volatility. Separating the two can help assuage the stress and anxiety brought on by market fluctuations if you just keep reminding yourself that time and strategy are on your side.

Bitcoin ETF

Have you heard the news? There are now Bitcoin Exchange-Traded Funds (ETFs)! I can hear your head scratching from here but don’t worry. Matt and I are here to break down these new trade floor offerings on this week’s episode and give you the information you need to make an informed decision when it comes to investing in this new product.

What is a Bitcoin ETF?

Let’s start by breaking down Bitcoin and ETFs. In a prior episode, we talked about cryptocurrencies in depth and how buying into them is more speculation than investing. At the time, two and a half years ago, cryptocurrencies were dangerous due to their associated risks, including regulatory, security, insurance, fraud, market, and liquidity. That hasn’t changed much in the meantime. We also did an episode on ETFs. In it, we discussed how ETFs are wrappers for financial products. So what is a Bitcoin ETF? Essentially, it is an easier way for you to enter the cryptocurrency market.
By purchasing a Bitcoin ETF, you gain exposure to cryptocurrencies without the complexities of directly buying, storing, and managing the actual “coins.”

Features of a Bitcoin ETF

Here’s a summary of how they generally work:

  1. Structure: Bitcoin ETFs are traded on traditional stock exchanges rather than cryptocurrency exchanges.
  2. Underlying Asset: The ETF might be backed by actual Bitcoin holdings (physically backed), or it may use derivatives like futures contracts to track Bitcoin’s price (futures-based). These new Bitcoin ETFs are set up to hold actual Bitcoin, so you do not have the peculiarities of Future contracts.
  3. Accessibility: Since it’s traded like a stock, investors can buy and sell shares of a Bitcoin ETF through regular brokerage accounts. This makes it accessible to a wider range of investors who may not be familiar with or comfortable using cryptocurrency exchanges.
  4. Regulation and Safety: ETFs are regulated financial products, which means they are subject to the oversight of financial authorities. This provides a level of security and legitimacy that direct cryptocurrency investments may lack.
    1. Custodial security: Your ETF is held by a Custodian (i.e. Fidelity) that is regulated by the SEC and has insurance against fraud
    2. Avoidance of technical complexity: Trade it like a stock, and you own Bitcoin.  You do not have to create new digital wallets, accounts, cold storage or any of that.
  5. Risk Management: Investors get exposure to Bitcoin’s price movements without dealing with the risks associated with holding the cryptocurrency, such as hacking or loss of access to their wallets.
  6. Tax Efficiency: For some investors, particularly in certain jurisdictions, investing in a Bitcoin ETF can be more tax-efficient than holding Bitcoin directly. Basically, the reporting is the same as your other investments – Bitcoin will be represented in the year-end report so you don’t have to track the cryptocurrency exchange personally.
  7. Liquidity: ETFs are generally more liquid than holding the cryptocurrency directly, as they can be quickly and easily traded during market hours.
  8. Fees and Costs: Investors should be aware of the fees associated with Bitcoin ETFs, which might include management fees and the potential costs associated with the fund’s method of tracking Bitcoin’s price.

Now that you know what a Bitcoin ETF is, you can make an informed decision about investing in this new technology.

Financial Portfolio Yearly Review Checklist

It’s January. The W-2’s and 1099’s are beginning to roll in. Your tax accountant is chomping at the bit to get your documents so they can begin preparing your returns. Why not take this opportunity to review your financial well-being? Join Matt Robison and me this week as we present a handy checklist of things you should examine every year to reach your financial goals.
While it may seem daunting, taking the time to perform this review saves you money on taxes and makes you some extra cash with a few small tweaks to logistics. There are six main areas of concentration for you to review: a personal assessment, cash flow considerations, asset and debt factors, tax implications, insurance planning, and legalities. I’ve put this all in a handy dandy downloadable checklist, just click below to receive your free copy and keep reading to learn more about each category you should review.

Don’t just take my word for it…tune in and hear Matt talk about how he “earned” about $1,000 an hour by taking the time to complete this review!

Personal Assessment

  1. Do you need to assess the progress you made toward your goals last year? If so, consider the following:
    1. Review and compare your financial models, comparing a snapshot of where you are today to last year and/or a prior time. Inventory your recent accomplishments to identify what strategies worked well.
  2. Have you identified new goals for this year or the future?
    1. If so, assign a priority and time horizon, and incorporate them into your overall plan.
  3. Are there any life events that are likely to occur for yourself or your immediate family this year (e.g., move, marriage, birth, higher education, job change, retirement, illness, death)?
  4. Do you need to confirm whether you or any family members will reach a milestone age this year? If so, reference the “Important Milestones” guide.
  5. Are you concerned about any variables or circumstances that could potentially impact your plans for this year?


Cash Flow Considerations

  1. Do you expect your household income and/or expenses to change materially this year?
  2. Do you need to review your cash flow plan?
    1. If so, evaluate your actual income and expenses, and adjust your spending plan as necessary.
  3. Do you need to review your employee benefits to ensure that you are taking advantage of what your employer offers?
    1. If so, consider maxing out annual contributions to any retirement accounts, Health Savings Account, Flexible Spending Account, and/or Dependent Care Flexible Spending Account.
  4. Are you able to contribute to an IRA?
    1. If so, consider the following: Fund a Roth IRA, make deductible contributions to a traditional IRA, or make after-tax contributions to a traditional IRA, depending upon your eligibility.
    2. If you are married and your spouse does not have earned income, explore spousal IRA options.
  5. Do you need to confirm that you are adequately saving toward your goals?
    1. If so, review your target savings and funding rates. If you fully fund some goals early in the year, continue saving toward other goals.
  6. Do you have funds left in your FSA from last year?
    1. If so, consider spending such funds before the expiration of any grace period.
  7. Are you subject to taking RMDs (including from inherited IRAs)?
    1. If so, consider the following: If you are charitably inclined and age 701⁄2 or older, you can do a QCD to satisfy your RMD. Note the “first dollars out” rule.
    2. Time the satisfaction of your RMD to support your goals, and be sure to review your withholdings.
  8. Do you make annual gifts?
    1. If so, make a plan to fund strategically, and track the use of your annual exclusion amount for non-charitable gifts.


Asset and Debt Factors

  1. Do you need to adjust or replenish your emergency fund?
  2. Are you planning to buy or sell business, personal, or real property this year?
  3. Do you need to review your investment risk tolerance?
  4. Do you need to review the performance of your investment accounts?
  5. Do you need to rebalance your investment portfolio or otherwise adjust your asset allocation?
    1. If so, consider the following: Be sure to consider the tax consequences and trade strategically. If you made any trades last year that were meant to be short-term (e.g., due to tax loss harvesting or to avoid capital gain distributions), revisit your strategy and reposition as necessary.
  6. Do you need to review your asset location across the accounts in your portfolio?
    1. If so, consider holding tax-efficient investments in taxable accounts, and tax-inefficient investments in tax-preferred accounts.
  7. If you have a mortgage, should you explore refinancing?
  8. Are there debts that you would like to eliminate this year?
    1. If so, strategically target debts with the least favorable terms first.
  9. Are you a co-signer/guarantor on any loans/agreements?
    1. If so, check in with the other interested parties to confirm the terms, payment history, current status, etc.
  10. Will you potentially need to borrow funds this year?
  11. Do you need to review your credit report/score?
  12. Do you need to freeze your credit?


Tax Implications

  1. Do you need to collect tax forms and organize other documents in preparation for filing income tax returns for last year?
    1. If so, use last year’s filings and/or a tax organizer to begin to gather all information necessary for filing Form 1040 and any state returns.
  2. Did you make taxable gifts, or do you want to split gifts for last year?
    1. If so, collect the documentation necessary for filing Form 709.
  3. Would Roth conversions be beneficial this year?
  4. Did you fail to make an IRA contribution for the prior tax year, but would you like to do so?
    1. If so, you have until Tax Day (excluding extensions) this year to make a contribution for last year.
  5. Do you own investments in taxable accounts that are likely to make capital gains or income distributions (e.g., certain mutual funds and ETFs)?
    1. If so, consider your cost basis and whether it might be advantageous to sell in advance of such distributions.
  6. Do you need to review your unrealized gains and losses and create a harvesting strategy?


Insurance Planning

  1. Do you expect any changes with regard to your health or medical treatments?
    1. If so, consider reviewing your health insurance coverage and alternate options.
  2. Do you need to review your life insurance coverage?
  3. Do you need new or increased disability insurance coverage?
  4. Is it time to explore (or review existing) LTC insurance?
  5. Have you made any improvements to your property or acquired new valuables?
    1. If so, consider reviewing your property insurance (homeowners, renters, etc.), increasing coverage and/or adding riders as appropriate.


Legal Issues

  1. Do you need to review your estate plan?
  2. Do you need to review the titling/ownership of your assets?
  3. Are you, or will you be, serving as a fiduciary?
    1. If so, consider the following: Review your duties and your performance to ensure that you are upholding applicable standards.
    2. If you are an Executor or Trustee of an irrevocable trust, consider whether a distribution and election under the 65-Day Rule would be prudent.
  4. Have any new laws gone into effect that might impact your financial plan?
    1. If so, consider how your saving strategies, income tax situation, estate plan, etc. might have been affected and what steps might be necessary.
  5. Are you subject to any new contracts/agreements, or did any such arrangements expire?
  6. If you own a business, are there any changes on the horizon this year?
  7. Are there any state-specific issues to consider?


How to use your After-Tax 401k Contributions

Legit Money Laundering: After-Tax 401k Contributions 

Are we really talking about money laundering in a financial advice podcast? Yes, but it is completely legit and could give you an extra $25k/year! This week Matt and I explored a unique and powerful strategy for maximizing savings and potential earnings: After-Tax 401k contributions. The short story involves using your taxable brokerage account for living expenses and contributing your maximum amount to an often overlooked employee benefit: after-tax 401k’s.

Does this strategy apply to you?

Let’s break it down with the long story. First, who does this strategy even apply to? 

  1. Anyone with access to make after-tax 401k contributions as an employee benefit or people not maximizing their contributions to the pre-tax 401k (check with human resources to find out if you are offered this benefit) AND
  2. Anyone with long-term investments in a brokerage account

Now that we’ve established the ‘who,’ let’s look at the what:

But I can’t save more money!

The ‘money laundering’ strategy involves transferring funds from a taxable brokerage account into a 401k, but it’s not a direct transfer because that isn’t permitted. In order to make contributions to a 401k (pre-tax, post-tax or after-tax), the money must come directly from your paycheck. But Mike, if I am transferring even more money from my paycheck into my 401k’s, how will I pay my mortgage and feed my kids? Good question. Here’s where the laundering happens. 
Refer back to number two in the above “who” guidelines. That money sitting in the brokerage account gets transferred to your checking account for you to spend on your everyday life. The goal is to bridge the gap between contributions to the 401k and general budgeting, allowing for the full after-tax contributions to be made.

Why bother with all these transfers?

Why bother with this? Won’t you have to pay capital gains on the money taken out of your brokerage account? The answer is yes, but the benefit far outweighs the tax. 

Let’s take a look at the following chart to see the difference between that money staying in your brokerage account or growing tax-free as after-tax 401(k) contributions. Using the following assumptions, it is clear that choosing the right account type makes a significant impact on your overall savings.

  • Compounding Growth: 6% Growth + 2% Dividends (8% total)
  • Income Tax Bracket: 24%
  • Capital Gains Tax Bracket: 15%
Account Balance Value (After Tax) Account Balance Value (After Tax
0 $30,000 $30,000 $30,000 $30,000
10 $61,946 $58,123 $64,768 $64,768
20 $127,911 $116,193 $139,829 $139,829

Let’s talk specifics: How to implement this strategy

While this might seem overly complicated, it only involves some adjustments at the beginning of the year to achieve this goal. So, how do you make this strategy work for you?

  1. At the beginning of the year, make adjustments from your employee portal to add/increase your contributions to 401k and after-tax 401k from your paycheck.
    1. Ensure that your after-tax 401k contributions are being rolled into the Roth “side” of your 401k
  2. Set an auto-transfer from your brokerage account to your checking account in the amount you would have received in your paycheck.
  3. Live your life and watch your money start working smarter for you.

What if you don’t have access to after-tax 401k contributions?

Bummed that you don’t have an after-tax 401k at your place of employment? This strategy can also be used with 529s, HSAs, and IRAs. The key takeaway: tax-free growth versus taxable growth.  After-tax 401k, 529, HSAs and IRAs all grow tax-free whereas your brokerage gets taxed every single year.  That yearly tax slows down your compounding growth!
Wouldn’t it be cool watercooler fodder to say your money laundering has earned you an extra $25k? Tune in to this podcast to learn all about this strategy in order to optimize your savings and investments. By strategically utilizing after-tax 401k contributions, you can unlock additional earnings and set yourself on a path to financial success. The key lies in understanding the process, assessing your circumstances, and seizing the opportunity to make your money work smarter and harder.