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How Women Can Plan Their Charitable Giving

Women have the power to make a significant impact through charitable giving. By carefully planning and researching your donations, you can ensure that your money is being used effectively to support the causes you care about most while using tax savings to stretch you charitable dollars even further. 

When planning charitable giving, the first step is to identify your priorities. What causes are you most passionate about? Are there any specific organizations or programs that you would like to support? Once you have a clear idea of what you want to achieve with your donations, you can start researching different organizations and programs that align with your priorities.

When researching organizations, it is important to look at their track record, transparency, and effectiveness. Another important consideration when planning charitable giving is to diversify your donations. This means spreading your money across various organizations and causes rather than putting all your eggs in one basket. This can help mitigate the risk of your donations not having the impact you hoped for and also allows you to support a broader range of causes.

Tax considerations of charitable giving

Charitable contributions come with many tax rules that can be difficult to navigate. To ensure you are making the most of your donations, it’s best to consult a professional who can help you understand how these rules apply to your situation. In general, if you choose to itemize your deductions on your tax return, you can deduct gifts made to eligible charities in the same year they were given.

A smart way to give charitably is donating long-term appreciated stocks or mutual funds instead of cash. This approach provides a double tax benefit. First, you can deduct the fair value of the stock as an itemized deduction. Second, you can avoid paying taxes on the realized gains that would have been incurred if you sold the appreciated shares. This is because the charitable organization will sell the shares, and the donor will not be taxed.

The key to successful charitable giving is researching and planning your donations carefully. By identifying your priorities and research organizations, you can ensure that your money is making the most significant impact possible. If you’re interested in charitable donations and the potential tax benefits, contact us today to learn more.

Prioritizing Retirement Planning in the New Year

Financial security is the ultimate goal in retirement. But how do you get there? In this article, we’ll discuss what’s important to consider when setting your goals so that you can start planning for a comfortable and secure future.

 

How much will you need to retire?

A retirement plan is essential because it helps you determine how much you’ll need to save and ensures that your retirement goals are realistic. The key to setting a realistic retirement plan is knowing how much money you need each year after you stop working. This will help determine what kind of investment portfolio will give you the best chance at reaching this target amount within your timeframe.

 

What do you want your retirement lifestyle to be?

The first step to setting a retirement goal is determining how much money you’ll need to live on in retirement.

Two factors determine how much you need to maintain your current lifestyle:

If you want to start investing but don’t know how much money to put aside, it’s important to understand what you’re saving for and what kind of lifestyle you want after retirement. This will help you estimate how much money needs to be saved over time so that it will be enough for both short-term and long-term goals (such as college tuition) when the time comes.

 

What are your current expenses?

Planning for your future means understanding your current situation. You need to know your current expenses to know what income you have left over that could be used for investments. To find out what extra income you have to work with to reach your retirement goals, start by:

 

Is a Roth IRA right for you?

When planning retirement, it’s important to consider what investment vehicles may suit you. If you are self-employed, employed by a startup or small business, or your employer does not offer a retirement plan, consider setting up an Individual Retirement Arrangement (IRA). A Roth IRA is one type of IRA that offers tax advantages.

Roth IRAs are like traditional IRAs in many ways. Both types allow you to invest money on a pre-tax basis and grow your investments tax-free until withdrawal. The difference between Roth IRAs and traditional IRAs lies in how the contributions are treated once they’re made:

 

Conclusion

If you’re overwhelmed by these questions, don’t feel you have to answer them all right now. Take a step back, think about what matters most, and then move forward. If all else fails, remember that this is an ongoing process—it doesn’t need to be perfect on day one! If you’re seeking guidance on your retirement planning and wealth management, we’re happy to help. Contact us today for an introductory meeting.

What to Talk About at an End-of-Year Discussion With Your Financial Advisor

The end of 2022 is quickly approaching. Now is a great time to review your investment strategy and start planning for 2023.

Here are some things to discuss with your financial advisor before the end of the year.

As always, this article serves as a general informational guide and we recommend working closely with your tax professional to determine what tax strategies are appropriate for your unique situation.

 

1. Retirement account contributions

Employers and employees are limited in how much they can contribute to a plan (or IRA) each year. Contributions and benefits can’t exceed certain limits spelled out in the plan. Depending on the type of plan, limits vary.

For 2022, the maximum employee deferral for 401(k), 403(b), and 457 accounts is $20,500, and individuals ages 50 and older can defer an additional catch-up contribution of $6,500. For SIMPLE IRAs, the deferral remains $14,000 and the catch-up is $3,000. You can visit the IRS website to learn about specific limits for each retirement plan type. 

If you aren’t maxing out your contribution to your workplace retirement plan, it’s a great time to think about bumping it up and benefit from any employer-matching contribution.

 

2.Roth conversions

Investing in a Roth IRA can be a great way to save for retirement. Unlike traditional IRAs, you won’t have to pay income taxes on withdrawals or be required to withdraw a minimum amount each year.

However, you can’t contribute to a Roth IRA if your income exceeds the limits set by the IRS. But, it is possible to convert a traditional IRA to a Roth IRA, which is sometimes referred to as a “backdoor Roth IRA.”

If you convert a traditional IRA to a Roth IRA, you’ll owe taxes on any money in the traditional IRA that would have been taxed when withdrawn. This includes both the tax-deductible contributions you made and the tax-deferred earnings that built up over time. In the year in which the conversion is made, that money will be taxable as income.

Converting a traditional IRA or funds from a SEP IRA or SIMPLE plan to a Roth IRA can be a good choice if you expect to be in a higher tax bracket in your retirement years. Your financial advisor can help you determine if a Roth conversion is right for you.

 

3. Tax-loss and capital-gain harvesting

Using tax-loss harvesting properly is like turning lemons into lemonade by converting market downturns into tangible tax savings. When you successfully harvest your tax losses, your tax bill is reduced without affecting your investment outcomes in the long run.

Tax-loss harvesting generally works like this:

By reducing your tax bills, a tax-loss harvest can increase your net worth. Because of this, we keep an eye out for harvesting opportunities year-round, so we can act whenever market conditions and your interests warrant.

That said, there are several reasons that not every loss can or should be harvested. Working closely with your wealth manager can help determine if tax-loss harvesting is a beneficial strategy for you.

 

4. Gifting strategies

Donating directly to a qualified charity or a donor-advised fund can help you achieve a federal tax deduction. However, this strategy will only be beneficial if you itemize deductions. Clients should discuss with their tax professionals whether their charitable contributions, along with other deductions, will exceed the standard deduction.

The deduction on cash contributions to donor-advised funds is capped at 60 percent of AGI, while the deduction on long-term appreciated assets is capped at 30 percent of AGI.

The qualified charitable distribution (QCD) rules have not changed, so clients older than 701/2 can donate up to $100,000 to charity directly. Married couples may exclude up to $100,000 from each spouse’s IRA. Further, QCDs can be beneficial from a tax perspective, as they reduce taxable income and satisfy RMD requirements.

 

Final thoughts

There’s a lot that goes into reviewing your financial performance over the year and looking forward to what strategies you might implement in the new year. Having these discussions with your financial advisor is important to helping you make informed decisions for your future. If you’re looking for helpful partners on your financial journey, contact us to see if we’d be a good fit for you.

Financial Planning Checklist for People Going Through a Divorce

Divorce is an emotional process. It brings a lot of stress that can affect your decision-making. We specialize in offering financial guidance and planning for women in transition, whether that’s through the death of a spouse or working through a divorce. 

We put together a checklist of financial tasks to cover to maintain your emotional and financial well-being when going through a divorce.

 

Covering the financial basics

Start with the information you need to ensure the fair division of assets. This includes gathering: 

Gathering the appropriate documents to sort through is an important first step. Another critical first step is hiring a certified public accountant (CPA) to advise on the tax implications of separating assets and transitioning from a married couple to a single taxpayer.

 

Decide on the primary residence

One of the biggest issues to tackle is what to do about shared properties such as a home. In many instances, one partner wants to keep the house they live in. This requires getting the title and mortgage in a single owner’s name, and there may be compensation needed for the other party if the one individual wants to stay in the home. Additionally, some couples decide to sell their home before the divorce is final because of the tax implications. Your tax accountant and divorce attorney can help you make the decision that is best for you.

 

Looking toward the future

While a lot of divorce proceedings are focused on the here and now, it’s always a good idea to keep an eye on your future and what that looks like. 

Long-term investments and retirement planning can help offer you the financial stability that you need. Retirement assets divided by a Qualified Domestic Relations Order should not be subject to tax.

Additionally, if children are involved, you want to ensure they are set up for their futures as well with college planning. Decide how college accounts are funded and have that account information.

 

Take your time

Divorce is difficult, so it is common for people to want to rush through to just be done with it. But you want to ensure that assets are being divided fairly and you are getting the support you need to begin a new chapter of your life. Take your time through the settlement so that you have a clear picture of what your financial future looks like.

 

As a single earner, there is a pull between the desire to be present with your family and the struggle of preserving and providing resources for the future. We come alongside you as a partner to guide you through the financial decision-making and to provide the accountability to stay the course for the long term. If you’re going through a divorce, contact us for financial guidance.

 

Three Misconceptions about Female Breadwinners

When you hear the phrase, “female breadwinner,” what image comes to mind? A woman in a power suit marching into a boardroom and working late into the evening to return home to tuck her kids into bed and then pour herself a glass of merlot as she taps away on her laptop, bringing the office home with her?

Whatever you may think you know about women who are the top household earners, you may need to reformulate that thought. Let’s unravel a few of the misconceptions society holds about female breadwinners.

 

1. They’re not responsible for any home-management tasks

It’s popular belief that a female breadwinner has a male partner at home who has taken over the household and family responsibilities that are so readily attributed to a woman’s role. But that’s far from the case.

Data from the American Community Survey found that among married, heterosexual couples in the U.S., a quarter of wives are the primary breadwinners in their family. And yet, according to a 2019 Gallup poll, a majority of women are still doing the majority of the household tasks. And of those household tasks, traditional gender roles are still certainly at play with women tending toward duties such as caring for children and laundry, while men are more likely to do the majority of yardwork and vehicle maintenance. Further, the same Gallup study showed in households where both parents work, men shoulder slightly more of the burden of chores than do men in single-income households.

So even if a woman is the breadwinner of her household, she’s not likely to be free of all household duties. It’s also naive to believe that female breadwinners have a partner at home. While Prudential’s study on the Financial Experiences and Behaviors Among Women claims that of the women surveyed, 44% are the breadwinners in their family, but 33% of respondents are either single, divorced, or widowed. This means that approximately one-third of respondents are the sole earners of their household. The reality is that even if women are the top earners of their household, they are still shouldering quite a bit of household responsibilities.

 

2. They’re power-driven and don’t make family a priority

Most children who grow up in the United States today will be raised in households in which all of the adults work. They are most likely to be raised by a single working parent or two married parents who are both employed, and only a minority of children will grow up in families with a full-time, stay-at-home parent throughout their childhood. Hedging against traditional gender roles and stereotypes, a Gallup study found that the majority of women prefer to work outside of the home. Despite this, the lack of preference for tending to household duties does not equate to women being less involved and interested in their families. Striving for a successful career and caring for your children are not mutually exclusive. There is time and value in both. And many female breadwinners find satisfaction in both.

 

3. Women can’t manage their money

Despite working women’s significant contributions to our economy, far too many don’t have confidence in their financial management capabilities. While 45% of men feel well-prepared to make financial decisions, only 23% of women felt the same. Many women simply feel unprepared for what will happen when they stop working. Despite women’s knowledge and experience in finance, many women get stuck in misconceptions that keep them from gaining confidence in their financial decisions.

 

Working with women in transition, whether it is divorce, a bread-winning promotion, or the loss of a spouse, our goal at Hiley Hunt is to empathize, educate, and advocate for women to be confident in their financial decisions and build wealth to help them meet their goals. If you’re looking for guidance on your financial investments and decisions, contact us to set up an introductory meeting.

What to Know About Behavioral Finance

The study of behavioral finance focuses on how psychology affects investors and financial markets. It explains why investors often lack self-control, act against their own interests, and make decisions based on bias instead of factual information.

An important aspect of behavioral finance is the identification and explanation of financial market inefficiencies and mispricings. It demonstrates that humans and financial markets do not always make rational decisions and often make mistakes. Behavioral finance offers answers and explanations to questions about how emotions and biases affect share prices.

Psychologists Daniel Kahneman and Amos Tversky and economist Robert J. Shiller developed behavioral finance in the 1970s and 1980s. They studied how people make financial decisions based on pervasive, deep-seated, subconscious biases and heuristics. Meanwhile, finance researchers began to suggest that the efficient market hypothesis (EMH), a popular theory that the stock market moves rationally and predictably, isn’t always correct. The reality is that markets are filled with inefficiencies because investors often think incorrectly about price and risk. 

Understanding Behavioral Finance Biases

Cognitive biases result from inaccurate judgments and beliefs based on economic and financial assumptions. Some of the most common cognitive biases are:

These biases and the methods that helped create them affect investor behavior, market and trading psychology, cognitive errors, and emotional reasoning.

How to Reduce Effects of Financial Bias

In order to reduce the effects of financial bias on decision-making, it’s best to assume that you have these biases. The following investment strategies can also help you avoid the traps they create:

Final Thoughts on Behavioral Finance

Understanding behavioral finance has two advantages. First, being aware of the biases that can affect your decisions can help you avoid making them. Second, you can make use of the knowledge. At Hiley Hunt Wealth Management, we understand that not everyone is the same. Each person has their own unique circumstances and goals. We work with you to understand your current financial situation and where you want to be in the future. We help you create an investment portfolio that is balanced and can help you achieve your goals. To get to know us better, contact us today.

 

Three Wealth Management Basics for Small Business Owners

An entrepreneur forges their own path. One of the biggest advantages is that you only have to answer to yourself. A con, however, means you are in charge of the big decisions. However, if you are well-educated and have proper guidance, this can also be a positive for small business owners.

Here are three wealth management basics to understand as a small business owner.

Saving for Retirement

Many people are used to the 401(k) plans offered by their employers. But if you’re a small business owner, it’s on you to find an investment vehicle to save for your retirement. 

SIMPLE IRAs, or savings incentive match plans for employees, are retirement plans available to small businesses. This is a great option if your business has employees.

Small businesses and their employees may also contribute to simplified employee pensions (SEPs). Similar to a SIMPLE IRA, a SEP allows small business owners to make tax-deductible contributions on behalf of eligible employees, and employees won’t pay taxes on the amounts an employer contributes on their behalf until they take distributions from the plan when they retire.

IRAs are an option if your company doesn’t offer retirement benefits to its owners or employees. A Roth IRA lets you contribute after-tax dollars and take tax-free distributions in retirement, whereas a traditional IRA lets you contribute pretax dollars, but you’ll pay taxes on the distributions. 

Communication is Key

At Hiley Hunt, we strive to be educators and partners in our client’s wealth management. We want our clients to have an active role in their financial and investment decisions, and we have open communication to ensure they have all of the information they need. 

Wealth management consists of complex products and strategies. We work with our clients to simplify complex information and help them navigate life events that can have a financial impact. While we have recurring touchpoints with our clients throughout the year, we always encourage clients to reach out to us whenever they have something to discuss or get our input on a financial decision. 

We know what it’s like to run a small business. There can be lots of tasks to juggle and time can quickly pass by. We know your time is valuable, but we want to make sure you are up to date on your investments and can access us at your convenience for any questions or discussions. It could be to your advantage to set a recurring task on your calendar once a month to check in on your investments and brainstorm any financial questions to might have for us. 

Tax Advantages

You should consult with a tax professional for personalized advice. This article is not intended as recommendations or advice and is for informational purposes only.

As a small business owner, you have certain opportunities to get the most out of your tax planning. There are several options for structuring your company. Depending on your needs, you may choose to operate as a sole proprietor, partnership, limited liability company (LLC), S corporation, or C corporation. Tax implications vary depending on the business structure.

Changing your business’s structure might be an option if the one you have now no longer suits your business. For example, LLCs can elect to be taxed like a C corporation by filing Form 8832 with the IRS.

Businesses that are “pass-through”, such as sole proprietorships, partnerships, LLCs and S corporations, are not subject to corporate income tax. Instead, the company’s net income “passes through” to the owner’s individual tax return, where the highest tax bracket is 37%. For LLC members in the top tax bracket, a tax status change may result in significant tax savings.

Of course, tax savings aren’t the only factor that goes into selecting a structure for your small business. Before changing your tax status, consult with a tax professional who can help you crunch the numbers and run a cost-benefit analysis.

Owning a small business brings a range of emotions. From exciting and fulfilling to overwhelming. If you’re a business owner who needs some financial guidance on your wealth management, we’re here to help. Contact us at 402.504.9347 to set up an introductory meeting today.  

Prioritizing Wealth Management to Fit Women’s Unique Needs

It’s impossible to generalize an entire gender’s needs. Still, it’s safe to say that, generally speaking, women’s needs and goals differ from their male counterparts. 

Focusing on advising women at Hiley Hunt Wealth Management, we understand the challenges and opportunities for women to invest in their financial future. 

Here are some factors we consider when advising our female clients.

Their unique investment style

Women are focused on the long-term, which is ideal for wealth management and investing. They are focused on maintaining their wealth and investing for long-term goals such as retirement. Women tend to be more conservative with their investing than men and feel less confident when investing. 

The good news is that female investors are excited to learn more. They seek education about investing and wealth management. At Hiley Hunt, our goal is to be an advisor who partners with our clients to help them understand their financial decisions and help them reach their goals. 

Women’s decision-making power

Single or partnered, women make 90% of household financial decisions. This extends beyond the day-to-day decisions such as grocery buying. When properly informed, women are comfortable making their own decisions about their financial management. Being open to collaboration and confident in that decision-making power makes us excited about working with female clients. 

Their communication preferences

There’s ample opportunity for female investors to communicate more frequently with their advisors. In a survey by Accenture, only 35% of women talk to their advisor quarterly or more about retirement planning or to see if their goals are on track. At Hiley Hunt, we strive to have open and regular communication with our clients to ensure they have the education they desire to help them make decisions to reach their goals. We understand that not all women have the same investment goals or life trajectories. Taking into account where each woman is at in her life and where she wants to be, helps us develop plans and portfolio guidance specific to each client. 

No matter what drives women to invest, we’re here to help. Female investors are rising, and we’re excited to see them succeed. Women in transition are the focus of Hiley Hunt Wealth Management. Taking an advisory approach to help women understand their finances and create a plan to meet their goals, we understand their unique life challenges and opportunities. Contact us today if you’re ready for financial guidance to help you meet your goals.

 

How We Can Leverage the Strengths of Women Investors

Women investors are on the rise, which is a stat we like to see, considering females represent nearly 51% of the U.S. population, according to the 2020 U.S. Census. No matter the reason for a woman to get into investing, no two women are the same when it comes to planning their future and managing their investments. But a study by Wells Fargo found a few common strengths related to the investment success of the female investors they surveyed: a willingness to learn, discipline, and a selective approach to risk-taking.

As financial advisors, how can we work with these strengths to help women build a successful investment portfolio that achieves their goals?

Feed women’s hunger for financial knowledge

I think what’s most exciting is knowing that female investors are hungry to learn about investing. At Hiley Hunt Wealth Management, educating our clients and helping them have an active role in their investments is what fuels us. We want our clients to understand to the best of their ability how the market works and how they can create an investment portfolio that works for them. We grow and evolve with our clients and continue to learn about the financial market so that we can appropriately advise our clients.

Enjoy women’s financial discipline

Developing a financial plan, sticking to it, and working with an advisor are among the factors we believe can lead to better investment results for women. According to a Fidelity Women & Investing Study released in 2021, women tend to outperform men by 40 basis points, or 0.4%. While this may not sound like much, it can result in tens of thousands of dollars in additional value over an investor’s life. 

This outstanding performance by women investors is likely due to women’s discipline in investing. They tend to take a buy-and-hold approach, which pays off in the long run. This is the appropriate mindset to have when investing in the stock market. While we know that the market cycles through peaks and valleys, investing in the long term will achieve the most significant ROI.

Understand women’s approach to investment risk-taking

Women tend to be more conservative with their investments than their male counterparts. Determining risk tolerance is a significant part of building an investment portfolio and allocating assets. We work with each of our clients to understand their goals and current financial situation and consider their comfort level with investment risks. 

Whatever the reason for women to get into investing is, we’re here for it. We’re excited to see the rise of female investors and watch them achieve their goals. Hiley Hunt Wealth Management is dedicated to partnering with women in transition. We specialize in working with female breadwinners and women going through a divorce or widowed. We understand the unique life circumstances that apply to these demographics and take an advisory approach to help women understand their finances and create a plan to reach their financial goals. Contact us today if you’re looking for financial guidance. 

 

3 Reasons Why Women Should Be Well-Educated in Wealth Management

For decades, wealth management has been a male-dominated endeavor. But there’s a shift in the air. Compared to a few years ago, 30 percent more married women are making financial and investment decisions, according to recent McKinsey research on affluent consumers. Younger generations of women are getting more involved with their financial decisions. 

Let’s take a look at why women should be taking an active role in their wealth management.

Women live longer than men

There is a five-year difference between the average life expectancy of men and women in the U.S. For men, the average life expectancy is 76.1 years. For women, it’s 81.1 years. Additionally, in almost every country in the world, women outlive men. What this means is that women should be saving more for their retirement than men. Whether a woman is married or not, it’s critical for her to have ample retirement savings.

Women control more than half of the U.S. wealth

According to research by New York Life Investment Management, women control 51% of the personal wealth in the U.S. — an estimated $22 trillion. Additionally, that number is expected to jump to 30% over the next 40 years as intergenerational wealth is passed along. This leaves a lot of opportunities for investment. Despite this, Fidelity reports that as of 2021, only 33% of women actually see themselves as investors. And only 42% feel confident in their ability to save for future milestones like retirement.

Women account for more than half of the workforce

At the end of 2021, women represented 54.3% of the U.S. workforce. With so many women earning income, it’s crucial for them to be well-educated about their financial options, including investing. Whether a woman is the top income earner in their household or not, women should understand the benefits of investing and building their own wealth. 

The takeaway is that women aren’t taking a backseat to their financial futures. They’re building careers, moving into leadership roles, and driving the U.S. economy. It’s time for the financial industry to focus on women and their unique goals.

Hiley Hunt Wealth Management is committed to guiding women on the major financial decisions in their lives. We enjoy partnering with women on their unique financial journeys. We want to help you evaluate your financial plan so you can make the most of the investments that are most important to you and your future. To set up an introductory meeting, contact us today.

Investing in I Bonds: Making Lemonade Out of Inflationary Lemons

Is rising inflation souring your financial plans? As we covered in our articles, “Interest Rates, Inflation, and Investment Strategy,” protecting the bulk of your wealth is mostly about building and maintaining a well-structured investment portfolio with a few anti-inflation elements. Outside of your core portfolio, there is also a potentially sweet deal for turning some of inflation’s lemons into lemonade. We’re talking about U.S. Series I Saving Bonds (“I Bonds”).

 

I Bonds are not a cure-all for inflation. And there is a thing or two to know about them before you decide whether to proceed. But as one of few holdings whose payouts are indexed to inflation, they may offer a refreshing haven for a portion of your emergency funds or similar cash reserves.

 

What Are I Bonds?

I Bonds are inflation-indexed savings bonds issued by the U.S. Treasury. Practically speaking, the interest you earn on your I Bond is the sum of two rates:[1]

 

Fixed Rate + Inflation Rate = I Bond Composite Rate

 

The fixed rate is based roughly on prevailing economic conditions. The inflation rate is based on inflation, as measured by the Consumer Price Index for all Urban Consumers, or the CPI-U. However, the U.S. Treasury guarantees your I Bond will never be worth less than what you paid for it, so your composite rate will never drop below 0%.

 

The Treasury adjusts I Bond rates every six months, on the first business day of each May and November. What are current rates for I Bonds purchased from May–October 2022? The fixed rate is an annualized 0% for the life of the bond. The inflation rate is an annualized 9.62% for at least the first six months. After that, your bond’s inflation rate may rise or fall over time, based on the Treasury’s semi-annual November/May rate changes.

 

In other words, if you purchase an I Bond today, you are essentially guaranteed to earn a 9.62% annualized interest rate for the next six months. If inflation remains high after that, so too will your I Bond’s interest payments.

 

No wonder I Bonds are receiving increased attention—and investor dollars—even though they’ve been around since 1998. Where else can you earn nearly 10% annually, essentially risk-free, on relatively accessible cash? If you’re aware of similar opportunities, please let us know!

 

The Rules of I Bond Engagement

So far, so good. But before you prepare to pile your life’s savings into I Bonds, let’s review their “operating instructions.”

 

Maximum Investments: You can only purchase up to $10,000 in I Bonds per person, per year, although you also can direct up to $5,000 of a tax refund into paper I Bonds on top of that. (Paper bonds can be converted to electronic ones with extra effort. You also can gift I Bonds to others, and invest in them through a business entity. We won’t cover the details here, but we’d be happy to discuss them with you in person if they’re of interest.)

 

Liquidity: The money you tie up in an I Bond is relatively, but not entirely accessible to you for cashing out as needed. Once you purchase an I Bond, you must hold it for at least a year (with a few hardship exceptions). You may hold it for up to 30 years before it comes due. If you cash out after 1 year but before 5 years, you are penalized three months of interest. This represents more of a speed bump than a road block if you want or need your money back during that period.

 

Tax Ramifications: At the Federal level, I Bond interest is tax-deferred. As described in this TIPSwatch “I Bond Manifesto” article, “You can elect to report [I  Bond] interest annually if you prefer, but most investors choose the default tax deferral option and thus only pay tax on the accumulated interest when they eventually redeem the I Bonds.” (Hint: This also offers you the opportunity to deliberately redeem the bonds in tax-favorable years.)

 

I Bonds are exempt from state and local income taxes, offering extra incentives if you live in a high-tax region. There’s also a Federal tax exclusion if your income level qualifies you, and you spend the proceeds on qualified educational expenses. To be eligible in 2021, your Modified Adjusted Gross Income (MAGI) had to be under $98,200 for single, or $154,800 for married filing jointly filers.

 

Logistics: I Bonds are only sold directly to you, the public, through an account you establish at TreasuryDirect.gov. This means we, as your advisor, cannot open or manage your I Bond account for you. We can coach you as you access the TreasuryDirect system, and advise you on the financial, investment, and tax-planning logistics. But unfortunately, you must hold your I Bonds outside of your primary portfolio. On the plus side, because this is a direct deal between you and the Federal government, there are no ($0) investment fees. If you purchase a $1,000 I Bond and hold it for at least 5 years, you will receive $1,000 back, plus all interest earned.

 

Timing: Here’s another tip from the I Bond Manifesto: “Interest is earned on the last day of each month and is posted to your account on the first day of the following month. So, if you own your I Bonds on the last day of any month, you’ll earn that full month’s interest.” In other words, if you buy an I Bond toward the end of the month, you can keep that money working elsewhere until then, and still receive the full month’s interest. Reverse that logic by selling I Bonds toward the beginning of the month, and still accruing that month’s interest in your TreasuryDirect account. Your one-year holding period also starts at the beginning, not the end of the month in which you purchase the bond.

 

Are I Bonds Right for You?

I Bonds are an attractive opportunity at this time. But are they the right opportunity for your greater financial needs? Before you buy, here are a few caveats to consider.

 

Complexities: Having a TreasuryDirect.gov account filled with I Bonds purchased over the years represents one more set of financial details to track. The inconvenience multiplies if you also purchase any paper I Bonds, directly or through tax refunds. There are due dates to remember, rates to monitor, taxable interest to report, and account security to manage. Is the hassle factor worth it to you? Maybe yes; maybe no. Financial planner Allan Roth reminds us in his AARP article:

 

“Later on in life, we are all subject to cognitive decline, and decluttering the number of accounts helps protect our nest egg. … [The Treasury does] not send out statements or 1099-Int forms, so make sure your spouse and heirs are aware you have this account. Many executors discover accounts of the deceased by reviewing statements and tax returns, and these I Bonds won’t show up for them.”

 

Best, Highest Use: It’s always satisfying to score strong returns on any given holding. But if you do decide to purchase I Bonds, where will the money come from, and how else could you have used it? If you’re thinking about tapping your greater portfolio to buy I Bonds, let’s incorporate the action into your structured investment plan. If you plan to use cash reserves already allocated for upcoming expenses or emergency reserves, let’s make sure the one-year holding requirement won’t become a cash-flow problem if unexpected expenses arise.

 

In short, even if we’re unable to directly manage your I Bond accounts for you, we can still add value as you make use of this enticing, inflation-busting opportunity. How much money can you comfortably allocate to I Bonds? How can we make best use of their tax-planning possibilities? What other questions can we answer for you? Before you buy, let’s talk.

[1] The actual calculation is a little more complicated, but essentially ends up being the sum of these two rates.

Financial Planning for Women Going Through a Divorce

This article discusses general financial planning for divorced persons. Every situation is unique to the person. This information should not be considered legal advice, and you are encouraged to discuss your specific financial situation with your attorney and accountant or financial advisor. 

Hous In addition to the legal process of ending a marriage, there are many other pieces to sort out as each person begins a new chapter of their life. 

For a divorced woman whose husband may have handled all of their financial affairs, suddenly being in charge of their own financial situation can be overwhelming and even scary. 

At Hiley Hunt Wealth Management, we specialize in guiding women through their financial journey after impactful life events such as divorce. 

Here are three key financial areas to consider during and after a divorce.

1. Your monthly income

Carefully look at your monthly income and expenses before your divorce is finalized. You may have your own monthly income from a job, which could be more or less than what your spouse earns. Take into account your living expenses, and discuss them with your attorney and accountant so that you can request and hopefully receive the appropriate spousal support.

2. Your house

Your home is likely a sentimental place of comfort. Perhaps it’s where you raised your children or is simply your dream home. It’s important to set your emotions aside and consider if you can afford to remain in your home after the divorce. If not and it is decided to sell your home, get it appraised as soon as possible so you and your spouse can agree on a selling price. Understanding your monthly income and expense can help you determine what house you can afford.

3. Your retirement assets

Retirement investments are another important factor to consider in a divorce. This is definitely an area in which you should include an accountant in your discussions with your divorce attorney, as it can be challenging to properly transfer these assets. A private-sector retirement plan such as a 401(k) or pension will require a court-approved division of those assets through something called a Qualified Domestic Relations Order (QDRO). Your employer will also have to approve any QDRO.

If you are going through a divorce and would like some guidance on how to plan your financial future, we’re here to help. Contact us today to set up an appointment.