Wealth Management Blog

Posts published in September 2018

Let’s Talk Gray Divorces

By JJ Burns

September 12, 2018

Breaking up is hard to do, and it's something that's made even harder when it happens later in life. "Gray divorces," as they're called, are indeed on the rise. According to Pew Research Center, the divorce rate among folks aged 50 and over has doubled since the '90s. Most people in this boat find themselves in completely new terrain. The single life can be a disorienting new reality for those who've built a decades-long life with their partner.

Divvying up your assets and debts comes with the territory for any divorce, but I've learned over the years that those who split up later in life usually have more moving parts to consider. If emotional heartbreak is one side of the stress coin, disentangling your finances is the other.

Being thrown into new financial waters is often jolting for both parties, especially if you're the spouse who wasn't the breadwinner during the marriage. For the first time ever, you may find yourself 100% financially on your own. Do you know how to confidently manage your budget, long-term goals, and investment portfolio? Taking over the financial reins can be an intimidating experience for anyone, particularly those reeling from a midlife divorce.

Even if you were the primary earner, splitting up could majorly rock the lifestyle you've grown accustomed to living. Transitioning to the single life—which may or may not include alimony—is bound to disrupt your financial health. At JJ Burns & Company, we sit down with our clients and help them develop a detailed, customized financial strategy before any divorce plans are in motion. This is the best way to get a realistic snapshot of your new financial norm.

If you're contemplating a gray divorce of your own, it's wise to check in with your financial advisor about the best way to move forward. Doing so can help you sidestep these common pitfalls.

How it Might Impact Your Lifestyle (Especially in Retirement)

When all is said and done, the average cost of a divorce comes in at about $15,500, with some paying more than $100,000. This could potentially put a major dent in your retirement nest egg, especially if you're already behind on saving. What's more, your retirement accounts could very well be considered joint assets, and how they're split up varies from state to state. I won't dive too deeply into the legal technicalities here, but before you do anything, you need to know if you live in an equitable distribution state or a community property state. This directly dictates how your assets and debts are divided.

So what does this have to do with your retirement? While your original plan may have been to live out your golden years together, drawing on the same funds, a divorce may translate to a smaller payout for you. If you're approaching retirement age, this could mean downsizing your lifestyle or finding ways to make up the difference (i.e. delaying retirement or picking up a part-time job after you retire). Divorcing also means eventually cashing in on one person's Social Security benefits instead of two.

Again, there are a lot of moving parts. Every couple is different, but knowledge is power. Before making any decisions, we always advise our clients to zoom out and look at the big picture. The end goal is knowing you can still enjoy a comfortable quality of life should you divorce.

How the New Tax Law Factors into the Equation

Making the decision to divorce is one that's inherently emotional. Be that as it may, some couples know deep in their bones that going their separate ways is the healthiest path forward for everyone. Couples who agree that divorce is the best option are in somewhat of an unorthodox situation these days—thanks to the new tax reform plan taking effect January 2019, it might be in your financial best interest to split up sooner rather than later. Why? As the law reads right now, alimony payments count as a tax deduction. Once the new tax reform goes through, the tax break for spousal support payments will be eliminated.

In simple terms, divorcing will most likely get even more expensive. In no way are we encouraging married couples to break up—anyone who's endured a divorce knows how painful it is. However, if divorce already feels right in your heart, the new tax reform is worth your attention.

While money certainly can't buy happiness, it can empower us to live a life that's more in line with our values. As gray divorces continue trending, it's definitely worthwhile to weigh the financial repercussions before signing on the dotted line. At the end of the day, being our client means knowing that we're taking the long view when it comes to your financial health, whether you're partnered or single.

Budgeting for Charity: Figuring Out How Much You Can Give to Your Favorite Cause

By JJ Burns

September 10, 2018

Everyone believes in a good cause and wants to support a charity close to their hearts. Whether it’s donating goods or services, volunteering or making a financial contribution, any contribution helps.

While some people have more financial resources than others, there is a chance that may change at various times in your life. When you’re just starting out, you’re learning about savings and how to create a budget. Then, you may be thinking about a family and looking to purchase a home. Later on, it’s time to retire and you may have more disposable income to allocate.

As CFP® professionals, we can help you evaluate your financial situation to include the right amount of giving to an organization that means a lot to you—without impacting your other goals. Here are some key ways to determine how much you can reasonably give.

  1. Look closely at your current situation. What are your regular expenses each month such as housing, entertainment, personal services and loans? No matter what your financial situation, before you give to charity, you want to ensure that all the basics are taken care of – including long term retirement savings goals. 
  2. Determine a percentage of your income. A rule of thumb for most people is to give about two percent of their yearly income. However, if you tithe, it may be 10 percent or more. With this number in mind, you can plan on how to reach your giving goals.
  3. Be strategic – and creative. If your company offers matching contributions, take advantage of their generosity. Perhaps decide on putting aside a certain percentage of your yearly bonus to charity. Or maybe you have an interest or a skill that you can use as an entrepreneurial business and donate the proceeds.
  4. Examine the trade-offs. If giving is important to you, you may want to rearrange things in other areas of your life. Does leasing your vehicle rather than purchasing give you additional financial options? Can offering a week at your vacation home when you’re not using it provide something extra for your favorite charity? Simple changes can make a big difference.
  5. Prioritize your giving. If you regularly offer $500 here, $2,500 there, as well as purchase a table at a couple of benefit auctions, you can quickly derail your charitable budget without realizing it. Lead with your head instead of your heart and select a few organizations that are most important to you to maximize your giving impact.
  6. Consider monthly vs. yearly contributions. If your income fluctuates each month, it may make sense to make a one-time donation each year; if you like the feeling of having a recurring payment made each month, that’s terrific, too. It all comes down to your preference. Whether it’s monthly or yearly, your charity will be most appreciative.
  7. Make your money count. Take the time to research how the organization spends its money. What percentage goes to salaries and overhead costs compared to the charity’s mission? Charity Navigator, BBB Wise Giving Alliance and Charity Watch are watchdog groups that can help you make informed decisions.
  8. Maximize your tax deductions. When you give, you not only want the personal satisfaction of helping a good cause, but also a financial benefit. While it’s fun to attend a gala or participate in a golf tournament, you may make your money go farther if you write a check directly to the charity. If you itemize your taxes, you can deduct the full amount of your donation. On the other hand, when you attend an event, you can only write off a portion of your ticket, because the costs associated with the event, such as dinner or entertainment, are not counted as part of your donation.

As always, do your due diligence. Not every charity is what it says it is – in fact, it may not be a charity at all and simply use a similar-sounding name. The above-mentioned charitable watchdog organizations are a good place to start when choosing which organizations to support.

For more information and guidance on charitable giving, a CFP® professional can help you clarify your financial objectives and determine which charitable giving options are best suited to help you meet your goals.