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We have a new law! The “Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.” That is a mouthful for sure but it did pass on December 20, 2019 and President Trump signed it into law. The Act includes a number of retirement savings and employee benefit changes. Rather than go into the whole act in this one post…I thought it would be best to focus on one piece at a time. Hence the “pt. #1” of the title.
Pt. # 1
One of the key changes is the modifications to the Required Minimum Distribution (RMD) Rules. That is the age where you are required to start taking money from your traditional IRA’s. The age which was formerly set at age 70 1/2 is increased to age 72. This will be effective and applicable to distributions required to be made after December 31, 2019, with respect to individuals who attain age 70 1/2 after that date. Other plans that also are modified include 401(k), 403(b) and governmental 457 (b) plans.
The RMD rules have also changed for the beneficiaries of IRA’s and defined contribution plans. The new law states that payments to non-spousal beneficiaries must be completed by the 10th calendar year following the year of the participants death. This is regardless of whether RMD’s began before death. This effectively eliminates the “stretch RMD” option often utilized to mitigate the tax effect.
Many of our reps deal with “High Net Worth Investors.” High-net-worth investors face investment challenges that some would consider unique to their financial status. The fundamental tenets of investing apply equally to them as with any other investor, but the affluent investor needs to be mindful of issues that typically arise only from substantial wealth.
Let’s examine a few of these.
Being Too Conservative — When an individual has more assets than they think they’ll ever spend, there can be a tendency toward conservative investment. This may result in lower long-term returns that may shortchange the impact of bequests to charities or the wealth that will transfer to the next generation.
Collectibles — The affluent have a tendency to invest in their passions, and many collectibles have performed well over the years. However, one common mistake is not keeping up-to-date appraisals on record, which may have adverse consequences with regard to estate liquidity and taxes.¹
Concentrated Equity — Some senior executives accumulate large stock positions in the company that employs them.² This creates a unique risk and potentially can be managed in several ways.
DIY Mentality — Some wealthy investors have achieved a high level of success in their careers in large measure due to their intelligence, hard work, and self-confidence. This very success often carries over to the belief that building or managing successful enterprises is not dissimilar to managing great wealth. In fact, it can be quite different, requiring a whole different body of knowledge and experience.
Too Many Advisors — Affluent investors often place their investment assets with multiple advisors thinking that better results will arise from that. However, many of the key needs for larger portfolios such as risk management and tax efficiency will suffer, since there is no overarching view into the larger picture of an individual’s entire portfolio. The independent actions by separate advisors, all with the best of intentions, may actually work to sub-optimal outcomes.
With increasing wealth come even more unique challenges beyond those covered by this discussion. Consequently, if you are dealing with specific challenges with affluent investors, we encouraged you to call us for guidance that may be best suited for your clients particular needs and circumstances.
‘Tis the holiday season when many of us look forward to the upcoming festivities only to find ourselves tugged into the whirlwind of over-booked calendars, copious amounts of sugar, and the crazy rush of shopping malls. The following observation by writer and social critic James Baldwin might describe how many of us feel:
If the hope of giving
is to love the living
the giver risks madness
in the act of giving.
During the holidays many of us find ourselves drawn into the “madness” of gift-giving because it’s simply holiday custom. But beyond the mere ritual of gift-giving is the larger purpose, as Baldwin points out, to “love the living,” or to show appreciation.
Of course, this is how “madness” and anxiety ensue as we throw ourselves into the dizzying process of determining which gift best expresses the appreciation we’re hoping to convey.
Sadly, even as we decide which gift is the right one, we might still fail at fully accomplishing the real point in giving it.
In his article, “The Real Point of Gift-Giving,” Peter Bregman points out that the act of giving presents is based on a common misconception. The misconception being: “The bigger, more valuable the gift, the more it expresses our appreciation.”
But why isn’t this the case?
“Because gifts don’t express appreciation, people do. And when people don’t express it, neither do their gifts.”
If the point of giving gifts is to show appreciation, then why don’t we simply express it directly?
One reason may be that this kind of appreciation is uncommon. Unfortunately, many of us fail to see people beyond the ways they do or don’t make our lives better. This is especially true in organizations where people are hired to fulfill certain roles and serve specific functions.
Tony Schwartz suggests that another reason we fail to show appreciation is because “we’re not fluent in the language of positive emotion at the work place”…to the point that their expression can seem awkward, contrived, or dripping with disingenuous sentimentality. Sadly, we’re more likely to be practiced at expressing negative emotions such as frustration, defensiveness, and blame.
And yet, as Schwartz observes, “Whatever else each of us derives from work, there may be nothing more precious than the feeling that we truly matter.” That we matter as people; that we matter simply for being.
This holiday season take a break from the hustle of the commercial mall. Instead spend a quiet night with a stack of thank you cards and write why you appreciate your co-workers. Here are a few suggestions Bregman offers about expressing appreciation:
Tell them why you appreciate them.
Not for what they do for you. Not for what they help you accomplish. Not even for what they accomplish themselves. Just for being who they are.
If you’re hesitant — maybe you think it’s too touchy-feely, too sappy — just think about what it would feel like to receive that type of note from the people around you.
Once you’ve written your notes of appreciation, all that’s left is to deliver them.
Appreciation can save us from holiday madness and, “if the hope of giving is to love the living,” might be gift enough for us all.
I have been writing my blog for over 3 years now. It has been a great experience for me as I learn to find my voice, reach my audience and share information on a much broader level than I ever did before. The feedback I have gotten from my peers, my clients and my contemporaries has all been positive. Many of them ask me the same question – How can I begin to write my own Blog?
With that in mind, I wanted to share some of the important lessons I have learned. Of course the most important is – “Start Now” – it is easy to set up a blog site (I use WordPress but there are many other great services available) but the hard part is just writing. Begin. Start now…that is my best advice. Other lessons I have learned include:
Help clients protect their business – The Principal Way!