I started looking around to see what kind of work I could do that I would like. I’d already been a hospital administrator, a commercial real estate broker, a life insurance agent, and a bank trust department business development officer for two different banks. None of those roles appealed to me. It would be like going backwards.

I had a nice pension from the Air Force and our kids were launched. So, I started to look around and found a lady named Sheryl Garrett on the internet who was starting a network of hourly financial planners who would not sell products or manage people’s money. It was called the Garrett Planning Network. I was intrigued. She had written a book on how to become an hourly financial planner. I read it and I was hooked. So I joined.

After paying several thousand dollars I headed to Kansas for three days of training. That was September 2002. On November 9^th that year, I opened my company, MainStreet Financial Planning, Inc. which was approved that day by the state of Maryland to start giving financial advice.

As with most new businesses, things started off slow. I bought yellow page ads and ads in the base newspaper at Ft. Meade (home to 5,000 military and 25,000 civilians) which was in the same town (Odenton, Maryland) where we lived. Nothing happened. No calls. No Facebook or LinkedIn yet, so it was word of mouth, and I didn’t know a single person who could send me clients.

I joined the other fee-only organization, the National Association of Fee-Only Financial Advisors (NAPFA) that November also. Now I belonged to two organizations that listed our firm and its location in Maryland. I started to get a few calls, but my first client was a referral from another Garrett planner who couldn’t handle them. It was January 2003 and I had my first engagement.

The key to ramping up my business was offering to help revitalize the local Baltimore-based group of NAPFA planners who came to know me and then started to refer clients their business model of managing assets didn’t accommodate.

My business started in the recreation room of our three-story townhome. After several part-time assistants, I consented to hiring Anna Sergunina full-time since she insisted on a large salary but promised me she wanted to be a Certified Financial Planner practitioner and see clients too. This goal of Anna’s offered us the opportunity to expand our company.

Our first expansion was to the District of Columbia. The rule was after more than five clients in one state you must be registered in that state (DC too).  We were getting a lot of clients who lived in DC but would come to our office in Odenton. Anna helped me find a DC office based on the way the people treated her (the “assistant”) when she and I arrived for interviews. It was the most expensive option, but I knew our clients would be treated very nicely too. We are still with Intelligent Office in DC 16 years later. They are fabulous.

Soon thereafter, we had to register in other states and open other part-time offices. First California and then New York. Business was booming. Since Anna became the owner in 2014, we expanded registration in Texas, Florida, and Nevada (because I moved there in 2016).

The world was changing and in 2006 I discovered Skype by engaging a lady in Sardinia, Italy to do research to see if enough American ex-pats living in Italy for me to make that a niche financial planning business. We did get some clients but never enough. We liked to vacation in Italy and had lived there in the 1970’s where both of our sons were born while stationed with the Air Force.

More remote work followed as clients become more comfortable with internet audio and video meetings. I started staying longer in Italy and increased working remotely. I even invited clients to come to stay with us for a few days. Several clients took us up on the offer.

When the pandemic hit, I was already working primarily remotely from Las Vegas where we had moved. Up to March 2020, I flew to New York monthly for a couple of days, took the train to Maryland and DC offices for visiting clients there, and then drove to Santa Barbara to see clients in the town that still contained our older son and his family. Ten days traveling and twenty days in my home office in Las Vegas. Life was great.

Now, as I enter retirement it’s been 100% remote work for two years. Not the best, because this is a people business and it’s nice to visit with people in person at some point in a relationship. Many people want to meet you in person first and then are fine with remote meetings after that. If you are a newer client reading this, I apologize we didn’t get to meet in person.

I am excited and proud to see what this business has become over the years. Together with Anna and all of you wonderful clients who entrusted us with your finances we’ve created an amazing team of caring, talented, and smart women (Liz, Cynthia, Jennifer, Vida, Kassy, Meggan & Desiree) to continue the mission of helping everyday people Make Smart Financial Decisions!

Lastly, I’ll leave you with what I plan to do in retirement:

1. Become an author (already have two books on Amazon this year)

• • Don’t Miss This Road
  • The Retirement Saving Diets

2. Become a financial coach who talks procrastinating people “off the fence” (that business starts April 1^st, 2022. Procrastination Junction.
3. Speak at Las Vegas conventions (TBD);
4. Become a 180-pound person (half way there);
5. Live as a first-class traveler;
6. Hone my hobby as a good landscape and street photographer
7. Act as President of a virtual Rotary Club (effective July 1, 2022).

You can reach me at jimludwick@gmail.com or jim@procrastinationjunction.com. Look for YouTube and podcasts for financial independence procrastinators.

Thank you all for being a part of my journey!

The post Jim Ludwick’s Legacy appeared first on MainStreet Financial Planning.

So, how’s one to know if it’s really the Internal Revenue Service? First, the IRS doesn’t make phone calls without notifying you by mail they are auditing you and need to make an appointment. Additionally, you may owe money and they will send you a letter. More than one letter to be sure. No letter? Think scam.

Is the suspicious phone call about demanding payment? It’s not the IRS. The IRS sends bills through the mail. Then you can mail in a payment to the service center shown in the letter or go to their website irs.gov/payments.  Look for the https:/ symbol at the beginning of the address in the browser address bar. On my chrome browser there is the lock symbol just to the left of the address bar showing the connection is secure. If you click on the lock symbol it will tell you the connection is secure.

According to the IRS, scam callers may claim they are calling in the local police and will have you arrested for not paying. In addition, claims that they will revoke your driver’s license, business license, or immigration status are just not true.

In person visits by the IRS are rare, especially without an appointment. In certain cases when taxpayers have not responded to repeated mail attempts to contact them for payment, IRS employees or their bill collection contractors may make an unannounced visit at a home or business to collect nonpayment of taxes owed. They will only insist on payment directly to the U.S. Treasury. No gift cards or prepaid credit cards are ever demanded or accepted.

IRS employees and contractors will have two forms of identification. They’ll have copies of the letters that you ignored.

If you want to know more about the latest IRS related scams go to https://www.irs.gov/newsroom/tax-scams-consumer-alerts Besides the IRS website, you can all 800-366-4484. If you get a suspicious email, forward it to phishing@irs.gov they will appreciate the tip-off.

The post How Do You Know it’s the IRS? appeared first on MainStreet Financial Planning.

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Amazing results show that having zero percent of your portfolio in bonds resulted in the largest amount able to be withdrawn (Expected Dollars Out) over a 30-year lifetime of retirement. Starting with $2 million in savings and investments, his Table 3 shows these details:

Source: Stephen Larson, PhD.

These figures don’t show deductions for taxes and investment management fees. Dr. Larson used the time 1926-2020 and the resulting investment returns.

The purpose of the article was for financial planners and advisers like me to ponder a Required Minimum Distribution (RMD) withdrawal strategy using the typical stock to fixed income allocation of 50/50 with the expanded dollar out strategy pictured above using a lower or higher percentage of bonds. According to another study by Ameriprise Financial in a survey of more than 1,000 retirees with at least $100,000 in investable assets, 68 percent of retirees taking retirement distributions use the minimum RMD method (Barney, 2018)

The table above shows the variable swings in RMDs over time at different asset allocations of stocks to bonds. RMDs can be quite volatile depending on asset allocation as the table demonstrates. What I saw was the tradeoff between RMD volatility and total dollars expected out over a life expectancy.

Now is the time for pre-retirees to maybe rethink their asset allocation versus volatility and risk. Reward may come from more risk as this study shows, but it may not be the total answer.

As for me, I’m changing my mind about my asset allocation as I enter retirement soon. I’m willing to take more risk (volatility) for more reward, but I have five years in my Bucket 1 cash reserves not included in my asset allocation. If this commentary on Dr. Larson’s study causes you to reconsider your allocation, please consult your financial adviser. This takes a lot of thought and understanding of other dimensions too.

The post New Study Changes My Mind appeared first on MainStreet Financial Planning.

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The top seven things “not-to-do” financially when the new year begins:

Procrastinate. Don’t start worrying about your finances. Luck will take care of it. Maybe your parents or siblings will help you pay off those bills or fund your IRA. That weekend when you’ll get all the organizing done and bills paid is just around the corner you tell yourself.

Move the bills from one pile to the other pile. No sense in getting organized or prioritizing your bills. They always send you a second notice anyway. Just wait for those emails or letters to pop up. The bigger the print the sooner you should pay them, right?

Look at last year’s expenses. Who wants to know how much they spent at Starbucks or Macy’s? How many pairs of shoes did you buy? It doesn’t matter, does it? And, it might make you feel bad. I’m sure you’ll do better this year by not knowing where all the money went.

Look at your investment results. Why would want to do that when the stock market was such a bummer the last quarter of the year? If fact, just put everything in cash or the money market so it can’t go down anymore. That way you can sleep at night and not worry about the stock market. I’m sure someone will tell you when it’s safe to invest. By the way, that won’t be me.

Forget about that will. There are lots of famous people who die without a will and nothing else bad can happen to them that’s worse. Remember Aretha Franklin, Prince, and Michael Jackson? No biggie. The family will be ok, and the attorneys will help for a nice fat fee.

Keep emergency money in your checking account. It may not pay any interest, but you can get to it quickly. ATM card, checks and online banking are convenient. It wouldn’t be that much money if you took all that time and effort to find some insured savings account that paid you 2.5% interest. It’s too hard to figure out how much you’d earn anyway.

You’ve got until October to do your taxes. Yes, everybody talks about April 15th, but it just comes too fast. Unless you’re getting a giant refund, why spoil spring and summer? When it starts to get chilly again is time enough to do your taxes. What’s a little delay anyway? I hear all those business people wait until the last minute and look how smart they are.

So, there you have it. When complying with my not to-do list you will see it doesn’t take much effort at all.

Now, what not to-do for 2022?

The post The What Not-To-Do Financial Checklist appeared first on MainStreet Financial Planning.

The Dollar Cost Averaging vs Lump Sum question usually comes up when someone receives or inherits a large sum of money to be used for long-term investment purposes. It is a very frequent question, probably a top ten financial question, in my opinion.

There is plenty of research on this topic/question. The latest study comes from Northwestern Mutual, a life insurance and investment company.

This 2021 NW Mutual study featured different stock to bond allocations and different rolling ten-year time periods beginning in 1950 to the present day. The bottom-line conclusion was lump sum outperformed dollar-cost averaging 75% of the time regardless of the asset allocation of stocks and bonds.

This latest study supports previous studies published in the Journal of Financial Planning and by Vanguard.

There are several factors that might keep you from investing all your money at one time.

• Timing the market – you get a feeling the markets are about to go down and you want to wait until you feel it’s about to go back up. Most people wait too long using this approach.
• Past experience – The last time you invested a large sum, the market went down right after you did that. People just keep waiting and nothing happens until it’s obvious it’s too late but that experience keeps them frozen.
• The press or pundits say the market is “overvalued”. By the time most articles say the worst is over it turns out historically to be too late.
• Timeline – The need to use this money for another purpose sooner (say 3-5 years) rather than long-term investing can inhibit people from putting the whole enchilada to work immediately. Risk of loss is higher for time periods less than ten years, even in a diversified portfolio.

The ultimate answer to the question of DCS vs LS, is “it depends” on your time horizon. Over ten years, the odds are way in your favor for lump sum to avoid the risk of waiting too long or not investing at all. After a few years, you’ll know lump sum was the right decision.

The post Top 10 Question: Dollar Cost Averaging or Lump Sum? appeared first on MainStreet Financial Planning.

First and foremost is the tax consequence. Your income will go up because the conversion recognizes the transfer (conversion) as income. Your Adjusted Gross Income will go up. You may enter an increased tax bracket both federal and state if your state taxes income. (My state, Nevada, is one of 9 that doesn’t tax income, just so you know.) If you have a tax preparer, ask them how much you can convert before entering the next higher bracket.

Secondly, you might be thinking that taxes will be higher in the future. So, what if your federal income tax goes up 2% this year because of a conversion? Remember we have a graduated system so only the last dollars are taxed at the higher rate (24% instead of 22% for example). If you estimate you will be paying 5-10% more in taxes in the future, a Roth IRA conversion will reduce the future amount of Required Minimum Distributions that begin at age 72. That’s a double benefit you may want to obtain by converting now.

What happens if you find out after the first of the year, that your Roth conversion was a mistake. That’s the third issue. Not to worry if you decide early enough. You can complete a “recharacterization” (reversal) of a Traditional IRA to Roth IRA conversion if you complete the transfer back to your IRA by the due date of your tax return, including extensions as detailed in IRS publications 590-A.

Here at MainStreet, we have additional resources for you to view:

SHOULD AGE 65+ DO ROTH IRA CONVERSIONS?

The post Converting Traditional IRA Money to Roth IRA Before Year End appeared first on MainStreet Financial Planning.

I had retired from the Air Force as a hospital administrator and all my siblings had gone to college in Santa Barbara. I had visited many times. I found a job at a small local hospital and bought our first Santa Barbara house.  A year later I lost my job. We sold our expensive house at a small profit and moved into a rental we could afford on my Air Force pension.

I went into commercial real estate leasing and selling properties. I made a lot of money. Two years later we put $50,000 down on a home four houses away from our previous location. Since I was working on commission we could only qualify for a small mortgage and had to negotiate a five-year second mortgage from the seller who was a real estate broker and understood our situation. We bought a more expensive house knowing it would go up in value.

All was fine until the 1991-1992 recession. People stopped buying houses, leasing buildings, and buying buildings in the US and in Santa Barbara too! I wasn’t making much money as a real estate broker during this period. The five-year note was coming due. The house had gone down in value. We couldn’t refinance as we had no equity left. It was time to sell. The offers wouldn’t even fund paying off the two mortgages.

We had to put the closing costs on our credit cards to pay the realtor. She got the former seller to discount the balance on the five-year note to close the selling. That was when we found out we had to put loan forgiveness on our tax return and pay taxes on it. They treat the concession as income.

It took five more years before we could buy another house, but it wasn’t in Santa Barbara. We could no longer afford houses there. What lesson did we learn? Don’t buy more than you can really afford and don’t think prices won’t go down. See if you can live on one income and still maintain your mortgage payments. We didn’t.

It’s painful to recall this mistake. I hope telling this story will help someone avoid thinking real estate values will never go down. 2008-2011 again proved to us it can happen. This time we were ready and even though our home went down in value we were prepared to wait it out. I’m afraid it’s going to happen again. Be prepared.

The post My Biggest Financial Mistake appeared first on MainStreet Financial Planning.

Here’s a chart I made up from information on the healthcare.gov website. When looking for health insurance in the Marketplace be sure to include all household income for anyone on the tax return or might file a tax return (a child, for example).

Once you have Marketplace insurance, don’t forget you need to report changes as soon as they become applicable. If you don’t report changes you can miss out on more savings or must pay some or all the subsidy back on your next tax return.

If this is your first time looking for health insurance in the Marketplace here’s what we recommend:

1. Go to HealthCare.gov
2. Click on Get Coverage
3. Pick your current state residence in the drop-down menu
4. Click on the “Visit Your State” button
5. Full speed ahead or click on the “Need Assistance” button
6. You can also access local brokers for assistance too. Click on that button.

There are many ways to lower your AGI and MAGI. The easiest and most beneficial are retirement account contributions in your 401k/403b, SEP or similar income reduction before income taxes. At this time of year, you must act fast to have any effect on this or next year’s income.

If you do enroll in a Marketplace plan for the first time, be sure to look over IRS form 8962. You can find instructions at https://www.irs.gov/instructions/i8962.  If you’re already enrolled, look for the 1095-A statement. You should also have received two re-enrollment letters. One comes from your insurance company and one from the Marketplace.

Health insurance is a tool to reduce your financial risk of owing hospitals and health care practitioners large amounts of money. It’s costly and complicated, but in your best interest to stay informed.

Look for good, reliable information from HealthCare.gov and AARP.org Both do a good job supplying information, alternatives, and help you make cost-effective decisions regarding health insurance in the ACA Marketplace.

The post ACA Wants MAGI, Not AGI appeared first on MainStreet Financial Planning.