Post-incident reflections
Age adds a particular perspective to such issues as financial recommendations. It’s interesting to reflect on what I thought I knew, having been a CPA and CFP with graduate degrees, but nothing is quite like going through the experience and looking back to see what worked and what didn’t.
The ideas below are top of mind and maybe not comprehensive but are nonetheless hopefully instructive. I sometimes wish I could do everything over again, but you deal with what you have and trust in God to move on.
In any event, here are some financial and other ideas from someone who has learned from successes and failures:
Careers
Few know what they want to do in life. Yet God has gifted each of us with a unique combination of abilities that fit just as well in the secular world and our church life. If you want an interesting and easy career, it may be good to understand your spiritual gifts and pursue matching careers.
Indeed, part of what you do in life is determined through your willingness to pursue God’s will. There are not enough career and life counselors with the right insights and with your interests at heart to guide you here. God’s will is not only the best recommendation; it is sometimes your only guide.
Where you live is often dependent on your career. For example, some careers, such as fashion, advertising, and investment management, dictate a large metro setting. Most others allow for much more flexibility—just something to consider.
Concerning post-education, I might have gone to more of a liberal arts institution (like Hillsdale) and then gone on for a master’s or Ph.D. Some would be better off with alternative training, particularly with the state of college.
Lending and Borrowing
As a practical rule, never lend. If someone is in need and you feel moved by the Lord, give rather than lend. Proverbs 19:17 states, “Kindness to the poor is a loan to the Lord, and He will repay the lender.” Nothing destroys relationships more than an unpaid loan.
In retrospect, I would have matched my savings with my giving. I didn’t, so I can’t testify to this validity, but it’s a worthy theory.
There is little choice to borrow for things we need, such as homes and cars. With the availability of the Internet, used cars are a more viable option. As much as I would like a smaller home, like “the not-so-big house,” builders sell on bigger is better, and smaller homes are often in less desirable areas. Again, God’s will trumps this.
If I could do everything over, I would survive only on debit cards. Credit cards tend to get away, especially with their purchase motivations. You probably need a credit card for credit purposes (FICO) and emergencies, but I would still depend on the debit card where possible.
Taxes
Nothing benefits tax planning like correctly running a Sub Chapter S tax corporation – usually through an LLC.
401(k) ’s and IRA’s are all the rage because of the tax deduction for the contribution. The ROTH plans are often overlooked and usually a better option, or at least a good option to add. Roth plans don’t allow for a tax deduction, but if you have a plan for five years and once you turn 59 1/2, all withdrawals and holdings are tax-free. This is a big deal and should be considered by everyone. Additionally, if you start a one-person LLC with an S election, you can set up a 401(k) Roth and be allowed much higher deductions.
Investing
After many years in the investment business, I can honestly say that the best investments are insider information. That, however, unless you’re in Congress, is illegal. Short of that, the Nobel awards in Economics always go to those who proposed a passive, market-weighted investment strategy. However, most of the investment world proposes and sells an active approach. Although it’s been proven repeatedly that a passive strategy beats an active investment (some of which is due to lower fees), active strategies pay more and are more aggrandizing to those who are “investment professionals.”
Two of the best investment managers on the Internet who practice this passive approach are Betterment and Wealthfront. Still, most flock to the significant brokerages with higher fees and lower returns – oh well.
Retirement – Medicare and Social Security
No one under 65 knows anything about Medicare and Social Security because we ignore it. It doesn’t apply to us, and it’s easy to claim it won’t be there when we retire. Going beyond that, it is essential, and you can understand it very quickly.
You generally qualify for these benefits by paying into the system – FICA and Medicare for 40 calendar quarters. Notice: even if your spouse is not qualified, they will qualify under your benefits. If at all possible, make sure both spouses qualify for 40 quarters.
Social Security is relatively easy. You and your spouse will be paid a monthly benefit based on how much you earn and when you retire. For example, $3,200 a month is like having $768,000 in an account paying 5% per month – so Social Security is a big deal.
- 62 is the early retirement age – to which you will receive 25-30% less than your total retirement amount
- 65-67 (depending on birth date) is full retirement
- 70 Delayed retirement – to which you will receive 20-30% more (however, you need to weigh the increase against the loss of benefits for 3 to 5 years.)
Medicare is a bit more complex but not bad. Medicare is well-received by most doctors and hospitals. It is not an inferior insurance. It is often preferred. Don’t underestimate it. You qualify for Medicare when you turn 65 and your spouse turns 65 – unlike Social Security, which both qualify when the first person turns 65. Medicare is broken into parts.
- Part A is a hospital, nursing facilities, home health, and hospice provided by the government.
- Part B pays 80%, less a small deductible for outpatient care. Your fee, based on AGI 2 years ago, is deducted from your Social Security.
- Part D is a separate policy covering drugs and deducted directly from your social security.
- Medical health plans cover the deductible from Parts A and B and range from HMO to PPO.
