Category: Protecting Your Family

Successful financial management is about more than cash flow – what are the other areas you should consider to minimize downside risks?

Benefits Enrollment Season 2025: Essential Tips

Benefits enrollment season is in full swing for 2025! It’s the perfect time to re-evaluate the options that can help you secure and strengthen your financial future. Whether this is your first enrollment period or you’ve been through it many times, reviewing your benefits is key. Your choices should be aligned with your personal and financial goals.

Here’s what you need to know to make this season count.

1. Health Insurance: Evaluate Your Needs, Don’t Just Renew

Health insurance is often the most significant part of your benefits enrollment package. It’s important to assess whether your current plan is still the right fit for your needs. Here are some aspects to consider:

Health Needs: Have your medical needs changed? If you anticipate more healthcare expenses, a plan with higher premiums but lower out-of-pocket costs might be wise.
- We often see this helpful for the year a child is born or a big surgery is planned
- Are you relatively healthy? Consider the benefits of a HDHP for maximizing your long term savings
Network Changes: Confirm that your preferred doctors and healthcare providers are still in-network. It’s also worth comparing costs for any new providers you may need.
HSA and FSA: If you’re on a high-deductible plan, consider opening a Health Savings Account (HSA) for tax-advantaged healthcare savings. If you decide a PPO or HMO fits your needs best, a Flexible Spending Account (FSA) can help with out-of-pocket expenses on a pre-tax basis.
- The maximum contribution allowed to an HSA in 2025 is $8,550 for families / $4,300 for individuals with a $1,000 catch up available to those over age 55. However, if your employer is contributing to your HSA as well, then the total maximum will include that amount
- The maximum contribution allowed to an FSA in 2025 is $3,300 per employee. These contributions must be used within the year or you lose them.

2. Retirement Plans: Make the Most of Matching Contributions

A 401(k) or similar employer-sponsored retirement plan can be one of your most effective long-term investment tools. When reviewing your benefits enrollment summary, pay attention to these points:

Employer Match: If your employer offers matching contributions, aim to contribute enough to capture the full match. It’s essentially “free money” that grows tax-deferred.
Investment Options: Revisit your portfolio choices to ensure they align with your current risk tolerance and retirement goals. Consider rebalancing if your allocations have drifted.
Roth vs. Traditional Contributions: If your plan offers Roth contributions, think about your current tax bracket and anticipated future income. Roth contributions are taxed upfront but grow tax-free, which can be beneficial for future flexibility.
- The employee contribution maximum is $23,000 with a catch-up contribution for those over age 50 of $7,500
After Tax 401(k) Contributions: Many tech companies now offer this benefit. This is a contribution to your 401(k) above and beyond your employee contribution.
- Your contribution to an after-tax 401(k) is limited to the overall 401(k) maximum contribution of $76,500. If your employer contributes to your 401(k) and you max out your employee contribution, you may still have ~$40,000+ you could put towards after-tax 401(k) contributions
- Learn more about whether this strategy – the Mega Backdoor Roth Strategy – is worth it on our blog or check out our YouTube video on Saving for Retirement for Tech Professionals

3. Disability and Life Insurance: Protect Your Income and Loved Ones

Employer-provided disability and life insurance often come at a reduced cost, and they are essential for financial security. Here’s what to keep in mind:

Disability Insurance: This protects your income if you can’t work due to injury or illness. Short-term and long-term options are often available, so choose coverage that aligns with your savings and emergency fund.
- Most Company sponsored long-term disability plans cap out at $10,000/month. For many in tech, this does not cover their ongoing spending needs. Consider an additional individual policy if this is the case.
Life Insurance: Consider your life insurance needs beyond what’s provided by your employer. While group life insurance is beneficial, it may not offer sufficient coverage for families with dependents or substantial financial obligations. Supplemental policies can bridge this gap.
- Company sponsored life insurance plans are also not as flexible as individual life insurance policies. You can take an individual policy with you from company to company and maintain the same premium payment for 10, 20 or 30 years.

4. Mental Health and Wellness Benefits: Make the Most of Available Resources

Companies also offer benefits aimed at supporting mental health and overall wellness. These programs can be valuable for both personal and financial well-being.

Mental Health Support: Check for counseling or therapy services included in your plan. Some employers offer access to platforms that connect you with mental health professionals.
Wellness Incentives: From gym memberships to mindfulness apps, wellness incentives can save you money on tools to help reduce stress, improve focus, and support a healthier lifestyle.
Pet Insurance: There is even coverage for fido! If you have a dog, your company may offer a discount on a national pet insurance plan.
Legal Plan Coverage: For some, this may mean using the plan for peace of mind and setting up an estate plan. For others, this benefit may be able to assist you in case of a dispute with a landlord or in an accident.

Do you have an estate plan in place? If not, your state may be dictating what happens! Check out our YouTube video on estate planning tips for young families to get up to speed.

5. Educational Benefits: Invest in Future Growth

Many employers provide education assistance, whether through tuition reimbursement, certifications, or skill-building courses. This benefit can advance your career while relieving the financial burden. If upskilling or further education is on your radar, explore these opportunities to make the most of what’s available.
Look at what is required to obtain approval for the educational benefit. Some companies do not ask for this to be tied directly to a work outcome – you may be able to count this benefit towards flying lessons or art history classes!

6. Charitable Matching: Augmenting your Gifts

Are you charitably inclined? Review the charitable giving policy to make sure you are maximizing the benefits available to you. Many tech companies now match charitable gifts up to a certain amount ($100 to $10,000+)!

Already getting the full match and looking for more tax effective ways to give? Consider a Donor Advised Fund to use company stock, or other highly appreciated stock, to make an outsized impact.

Final Tips for Benefits Enrollment Season

Review Benefits Annually: Life changes quickly, and so do your needs. Regularly reassessing your benefits ensures they’re always working in your favor.
Ask Questions: Don’t hesitate to seek clarity from your HR department or benefits provider if anything is unclear. A little understanding now can lead to better decisions later.
Think Beyond Open Enrollment: Your benefits are part of your long-term financial strategy. Consider how they fit with other financial goals, like retirement savings or estate planning, to ensure you’re covered comprehensively.

This season, take the time to make thoughtful, intentional choices that align with your life’s current chapter. With the right approach, your benefits can be a powerful foundation for both present security and future growth.

The above discussion is for informational purposes only. Recommendations are of a general nature, not based on knowledge of any individual’s specific needs or circumstances, and there is no intent to provide individual investment advisory, supervisory or management services.

What should you do if you are laid off in tech?

Being laid off in the tech industry is not uncommon right now. Every industry goes through ups and downs, and unfortunately that may mean a company shifts focus or needs to downsize. We’ve seen this from Meta, Google, LinkedIn, Twilio, and much smaller companies in the last year. The important thing to remember is that it isn’t because of you. This is not a reflection on who you are as a worker and a person.

Losing a job can feel like you are losing a part of yourself when you’ve put 8+ hours a day into the role for a long period of time. You will go through an emotional process in this and you need time for yourself.

Below are our 8 best tips on preparing for this pause in your professional journey.

1. Take time to process your layoff

Understand the 7 stages of grief and how it can show up when you’ve been laid off.

Breathe and decompress. If you’ve been working long hours, try to get outside and move your body.

Spend time with friends and family to reconnect to yourself. Often, we spend so much time sitting and staring at a screen, we aren’t nourishing ourselves. Reconnect with friends and family. Don’t let your fear or shame keep you inside and from talking to others. This is your time to step away and hit ‘refresh’.

Take long walks and meander while you think about next steps. Research shows our brains are better at processing information while walking.

Don’t make any rash decisions while you process your emotions around this shocking event.

Consider speaking with a counselor to help you through this time. We all need a thinking partner from time to time 🙂

When you feel ready to take on the financial steps, we recommend reviewing the points below.

2. Adjust your budget and review your cash reserve

Once you are in a place where you can focus on money, take stock of your debt and cash balance. This is not the time to default on loans or miss credit card and loan payments. Make sure you have a plan for continuing your obligations and know where you can seek deferment. Federal student loans may allow unemployment deferment.

Review your spending habits and understand what you can delay vs what you need to make life work month to month. If you’ve never budgeted before, now is a great time to start and make it a habit!

If you are starting from scratch, our template HERE can help you gather your expenses for the year. Then, determine which are necessary day-to-day expenses, nice-to-haves, and future payments to be ready for. This will also help you during interview season to know what your base need is.

With the number of layoffs in the market at this point, we are seeing much lower salaries presented to job candidates. Be prepared.

3. Consider your post-layoff adventure

Our clients maintain an emergency fund for times like this. We often encourage clients to use their time between jobs to do something they don’t normally have time for. Travel to South America (where living may be cheaper) for an inexpensive trip or lean into working with your hands. If you’ve always wanted to dabble with ideas or other educational endeavors, this may be the time to do it.

4. Wrap up your ‘work’ when laid off

We recommend taking these steps when laid off with your employer:

Review documentation sent to you for signature. Your severance package will list final payments, confidentiality terms, etc. Review this in detail and make sure you understand what you are signing. Highlight important dates/cut-offs so you aren’t taken by surprise. Consider having an employment attorney review this and your employment contract to see what negotiations can be made
Find out how you will access your final paycheck, download it, and make sure your information is up to date for getting your W-2 after year end
Review your stock plan agreement to understand what your timelines are for exercising any vested options. You may only have 60 to 90 days to exercise them (at a public company) or a separate window of time post-IPO (if they hope to go public eventually)
Make sure you can access your 401(k), HSA, and other benefit websites without your work email address
Write down the good things: a list of accomplishments or portfolio projects will help with case study interviews. It can help you remember what this role gave you during your time at the company, too
Contact colleagues for potential references or letters of recommendation. You will need this for your next round of interviews

In a layoff, several employees are dismissed at once due to a shift in company priorities or a downsizing across the board. This is different from a ‘termination’. A termination (for cause) is due to an employee’s direct actions. Make sure you are reading the correct subclauses when going through your contract. Other thoughts are nicely laid out by BetterUp.

5. Review your severance package

A typical severance package in tech will depend on a few things: Company size, employment length, etc. We often see 6 weeks to 3 months of severance provided with an additional week per year of employment with the company. However, this may not always be the case. For companies that shut down quickly (like Convoy) there may not be severance provided.

Beyond money benefits, your company may also offer professional help. Look at what is offered for career, financial, and emotional counseling. Every little bit helps.

There may be fine print around paying severance back if you find a new job. Make sure you know your rights in the severance package. This is another area that an employment attorney could help review for any inconsistencies or ‘gotchas’.

6. Consider your health insurance options

Depending on what state you are in, you may find the health exchange or COBRA a better fit for your needs. The trade-offs between these two will be payments vs health coverage.

COBRA is offered through your employer as a continuation of your employee health insurance. The downside is your employer will no longer be contributing to the health premium of that insurance and you will need to bear the full cost.

If the cost of COBRA feels out of reach, a state health exchange may allow you to take on a lower payment for basic coverage. These individual plans may also come with a subsidy if your income is dramatically lower.

Are you married, or have a domestic partner? You may be able to get added to your partner’s health insurance. A lay-off is a change in life that will allow you to update your health insurance coverage outside of an employee benefits enrollment window.

Be wary of moving forward with no insurance. Some states, like California, implemented penalties for non-compliance with maintaining health insurance. The California Individual Shared Responsibility penalty can be steep. You can estimate your penalty HERE. Beyond penalties, this could also leave you open to insurmountable medical costs if an emergency medical event occurs.

7. File for Unemployment

Each state is a bit different here, but generally there is a filing process online at a governmental website. The Department of Labor keeps a comprehensive list of state unemployment office websites.

Generally, there is preparation required to file. You will need identifying information for the tech company you worked with, the last date you worked and the reason you are no longer working there. Then, they will request information for all employers you had over 18 months+ and documents to verify your identity.

8. Start the process of looking for a new job

Each person’s journey is different, but I do like the idea of finding job descriptions that feel like a ‘hell yes!’ to apply to. Use that to drive where your next role may take you. Review job descriptions for a role across many employers to see what keywords you may want to use on a resume. I am not a ‘resume guru’, but there are some wonderful ones out there!

While you are looking for a job, consider freelance and contract work while you search (if this doesn’t put your severance at risk). In our current market, I am hearing it takes longer and longer for laid off tech workers to find the right next fit. Allow this kind of hourly work to help take the pressure off of your day-to-day finances.

Get back to your network. Lean into catching up with past colleagues or others you respect in the industry. Ask for feedback on how you can be competitive in the industry and evaluate if you need any ‘upskilling’. After being buried in work, you may find the job market post lay-off is on a different path than you remember.

In the end, no individual’s journey is the same and you may decide to get out of tech completely. Our goal is to know you can move forward with your most fulfilled life while streamlining finances behind the scenes. I hope this tip list helps prepare you better in this time of need!

If you are laid off and need a financial thinking partner, schedule an introductory meeting for us to give you feedback on your next steps.

Estate Planning Basics for Young Families

What is estate planning for young families?

Estate planning for young families protects your family and sets them up for knowing what will happen in an emergency. It defines who will be their guardian, how and when they will receive their inheritance, and what happens if Mom or Dad can’t make decisions.

What are the steps in estate planning for young families?

The best way to create an estate plan is to start with the end in mind.

Who do you want to take care of your children if you are no longer able to?
How will your kids be supported as a child vs as a young adult?
Who is the best steward of your money while the child is growing up?
How do you want decisions made if you cannot make them for yourself?
Who is best for project managing your estate through the probate process?
Are there any mementos or tangible property to leave to someone specifically?
Who can keep the ship running financially if you mentally cannot while you are living?
What will happen to any pets after you pass?

Then, with these questions answered, you are ready to learn more about the different pieces of an ‘estate plan’.

What should you include in an estate plan for young families?

Will: This document outlines your wishes of who should get your assets, who will be the Guardian of your kids, and who can take this information through the probate process (i.e. Executor)

Financial Power of Attorney: A power of attorney allows you to appoint someone you trust to make financial decisions for you when you cannot (i.e. if you are incapacitated)

Medical Power of Attorney (Healthcare Directive): A healthcare directive allows you to appoint someone you trust to communicate your medical and end-of-life wishes. This person may be the one to say ‘pull the plug’, so make sure they are okay being in charge

Trust: The main reasons we like a trust are for privacy, potential tax advantages, and for a more intentional plan on when your children receive money. If you have over $500,000 in assets, ask yourself: Do I feel comfortable with my child receiving $500,000+ at age 18 with no restrictions? What do I hope they can accomplish with the money? Then, you can structure a trust to best align with your wishes

Beneficiary designations: Not everything goes through a Will. If you have retirement accounts (i.e. 401(k)s and IRAs) then the accounts will go to any listed beneficiaries. Review this to make sure it is inline with your wishes

Emergency letter: The majority of an estate plan are legal documents saying who and what, but an emergency letter is a way of saying how. This can give your family a wonderful head start in contacts for help and the ins and outs of your monthly cash flow now. We recommend putting this in place and keeping it up to date

Communication: Make sure the people involved in your estate plan have the documents they need to start acting in an emergency. If they don’t have access, then it will make the transition harder and not give your family the support you need when something happens

How does an estate plan work?

At the basic level, an estate plan is taken through the probate process. Probate is a fancy word for a public legal process with the county court for validating the will, notifying creditors, settling debts and taxes, and distributing the remainder to beneficiaries. Even if you do not have a will, there will still be a plan – the state’s plan for who should receive your money. Proper estate planning helps minimize these issues and a Trust can help you keep more of the money details private.

Part of the probate process is wrapping up tax returns. The current Federal estate tax exemption is around $11.2 million per person, and that is set to ‘sunset’ in 2025 back to the pre-TCJA Act exemption level. This would be somewhere around $7 million per person in 2025. Your goal for using trusts vs. just a will may differ if you are under or over the exemption level.

Estate planning and state estate taxes

State estate taxes are something many individuals forget about. These can impact how much your beneficiaries may take home. Some states call this an ‘estate tax’ while others may consider it an ‘inheritance tax’. The Tax Foundation offers a wonderful overview of which states are impacted.

You may find more information on the above chart from the Tax Foundation HERE.

In the end, the process may take a while to wrap up. So the more detail we can provide on where things are and our wishes, the better. Don’t leave your family scrambling to understand how to move forward while they are already emotionally drained from losing you.

Estate plans need routine check-ins

Estate planning for young families is about peace of mind. Peace of mind that your wishes are known and being upheld. Peace of mind for your family on how to help unwind everything. We believe clarifying and streamlining this process will help keep you safe and allow your family the best path forward.

Remember, this is not a ‘one and done’ process. Life changes over time and so should your estate plan. As you reach new financial milestones and your family evolves, we recommend reviewing your estate plan to ensure it continues to evolve as you do.

We recommend working with your financial advisor and attorney to make sure your estate plan is kept up to date and brought forward for review when tax regulations change or new policies arise.

Interested in learning more? Sign up for our newsletter

What should I do in a down market?

This summer was the first time in a few years ravaged by COVID that we could finally go out and play as a family again. It also was a time for a down market to hit. Higher gas prices and inflation nipping at our heels wasn’t fun to witness while traveling.

A down market feels risky and unknown. Leading to further questions about: How can I prepare during this time? Where should I be putting my money? Should I be selling my vested company stock / RSUs?

How can I prepare during the down market?

Now is the time to reassess your family burn rate. Those tried and true words of ‘always have an emergency fund’ rear their head again! Are you living within your salaries? Do you require additional funding from your RSUs or stock options? How can you give yourself the most leverage to ‘wait out’ this season of a down market.

Consider tracking your expenses through a budgeting tool like YNAB or mint.com. Even if you don’t follow a budget to the law, this will let you see a good trend line. If you’d like something more manual, you can use this handy spreadsheet to catch some of those non-monthly items that stack up.

Knowing your burn rate gives you the freedom to realize other opportunities.

If your burn shows you have a risk in not having enough cash, this also gives you time to build up your cash reserves. The rule of thumb is if you are a single breadwinner, 6 months of reserves is best. If you are a dual income family, then 3 months may be adequate.

Tax-loss harvesting. The ability to take advantage of tax losses on your tax return is a pretty significant opportunity, especially for folks with large portfolios or equity comp. Tax loss harvesting works by selling assets at a capital loss and using that loss to offset other capital gains. This type of strategy can only be employed during down markets or high volatility in an asset class. During years such as 2022, you may be able to harvest a good amount of losses to help smooth and optimize your tax bill.

This gets into a very technical zone to do yourself. The loss must have substance to be utilized. I love this super nerdy and well outlined discussion from Kitces on who benefits best in this situation (with visuals) and the pitfalls if you are attempting this yourself.

Converting IRA funds to Roth IRA accounts. Depending on your taxable income for the year, there may be an opportunity here. The primary advantage of Roth assets is their current tax-free nature in growth and qualified distributions. This conversion will generate taxable income now, on hopefully ‘lower priced’ assets than if you did the conversion in the future. In essence, you choose to pay a tax bill now rather than in the future. One of the variables you should be mindful of is the Federal & State marginal tax bracket and your effective tax rates. Please consult with your tax advisor before engaging in this strategy.

Where should I put my money in a down market?

Once you know your burn rate and cash on hand, any remaining cash can go towards future growth.

If you have a big purchase to make in a few years, you may wish to take less risk in your investments and go for a well diversified stocks and bonds portfolio.

If you have cash on hand that you believe you won’t need for many years, this may be a time to look at exercising lower valued stock options.

Exercising incentive stock options (ISOs) in a down market

One of our favorite opportunities to explore during down markets is the exercise of Incentive stock options (ISOs). This strategy is a concentrated risk that requires a strong understanding of how much cash you are willing to lose. Once you know how much cash you are willing to ‘lose’ towards such a risk, you can consider the options below.

Private companies: If your company is private and they take a “down round”, employees with Incentive stock options (ISOs) may have an opportunity to get a bigger bang for their buck. ISOs may be subject to AMT tax at exercise on the value between the share value price and the exercise price. During a down round, the employee may be able to exercise more options before hitting the AMT tax threshold. Please be mindful that sometimes there are exercise lock out periods and other restrictions.
Public Companies: Very similar to private companies; however, their valuation fluctuates minute by minute on the public exchanges. During these decreases in stock price, stock option holders may want to exercise shares when they feel the price will be “low & optimal”. Again, this is always a risk since you are going off of a feeling in one particular stock. If you are sure you can take the risk, this may be an opportunity for you. Generally, public company tech employees can exercise their options outside of a trade window. If you see your stock price is falling a decent amount, you may want to consider exercising options.

What if you already exercised early this year? Keep in mind that the AMT is an annual aggregate calculation. All ISO exercise value goes into the AMT calculation. One strategy is to sell previously exercised shares from the current year (which makes this a disqualified disposition treated as ordinary income and remove them from the AMT calculation). This may allow you to exercise a greater amount of ISOs at the same level of cash outlay if you are above the AMT tax thresholds. We recommend working with your tax advisor to complete this strategy.

Should I exercise non-qualified stock options (NQSOs) in a down market?

The philosophy behind this exercise is similar to the ISOs, but with the added complexity of taxes due at exercise. Remember, NQSOs will generate income once they are exercised and will be subject to required withholding taxes. Then, at your tax return time, you may owe additional taxes if your effective tax rate is higher than the taxes withheld at exercise.

It may make sense to exercise a small amount of NQSOs if you do not have ISOs, but be ready for the taxes due at exercise. If you have ISOs, you may be able to achieve more shares held through focusing on exercising ISOs instead.

Should I be selling my vested company stock / RSUs?

If the vest just happened, then yes, you should deeply consider it. This should be part of your strategy to diversify out of your company shares and into a well maintained portfolio that can do more work for you longer term.

For older shares, I would ask you at what price you are willing to part with it? If the stock was that price after vest, then why didn’t you sell it then? We often feel we know our company much better as an ‘insider’ and that the stock price will definitely reach $X or in three years will get to $Y. The number of times I’ve heard this, and it never got to that point, is very high. We don’t always know what the stock market will do in a shorter term because large players are pricing in their expectations as well. Leading to short term noise and erratic behavior. This down market has certainly shown that volatility time and time again 🙂

We believe in dollar cost-averaging out of company stock over time by selling RSUs at vesting. So at the least, consider selling pieces over time so you are not left wishing you had taken some off the table and less risk with your nest egg.

How can you help your parents in an emergency?

Preparing for a Parent Emergency

Each year, our financial advisors launch an ‘Annual Renewal’ with clients. We discuss, what does money allow you to do? What should we focus on for this year? Are there any changes with children, parents, etc that you need help thinking through?

A big theme we saw this year was parents reaching their 70s and the implications of what could happen to them. What would happen if they have an emergency? Where would we even start?

Your parents may have an estate plan (wills, trusts, etc) but do you know anything about it? Who has it? Who is the executor/in charge? What part do you play in it?

An estate plan isn’t fool proof. Beneficiaries still need to be listed. Accounts still may have auto-pays coming from them. There is certainly more to a life than 50+ pages of legalese.

So how do you give your parents – or your partner – a leg up in an emergency?

This is a great question our Paraplanner, Alex Smith, is pondering for our clients and himself. There are so many blogs or kits out there on ‘Legacy Binder’ or ‘Death Letter’ and boil down to similar components:

What you want for your family

Not everything is in an estate plan. Start with your hopes and dreams for your family. Did you create a tangible asset list for your will? If not, consider sharing who you’d like certain items to go to.

Where to go for help

Contact info for lawyer / advisors
Contact info for current employer HR department
What custodians / banks you have accounts with
Lastpass or 1Password account(s)

What needs to be paid

Monthly bills to expect
A list of what is on auto-pay
Loan agreements / statements
Where deposits come from (Pension, Annuity, etc)

The legal jargon aka financial documents

Car title(s)
House deed(s)
Estate plan documents
Powers of attorney
Insurance policies
Copies of keys to any tangible safe drawers/safe deposit boxes

Do you feel like you can start this conversation with your parents? It can be hard, especially if parents do not wish to be a burden on you or are afraid of judgment based on where they are in their life.

How can you make a baby step in the right direction?

Alex recommends reading Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents About Their Finances by Cameron Huddleston

If your parents do not have an estate plan or an advisor, consider gifting them some time with a financial advisor. There are so many great firms available now that can do hourly planning work or project based work. XY Planning Network has a great Find an Advisor portals to review for the right fit.

We are all on a journey. Step by step.

7 Rookie Mistakes Even Your Boss Makes at Benefits Enrollment Time…

Benefits Enrollment season… that lovely time of year where you have less than a month to get your life together (what changed from prior year?) and still meet all your big year end work deadlines.

Side note: This is one of the things I feel like Amazon did right by having a non-year end enrollment period 🙂

There are probably 1000s of blog posts on benefits enrollment topics, but sifting through them means you might miss something big. So instead of restating details on what each benefit means, I’m giving you the short twitter headline and a link to a great blog explaining the topic.

HSAs

Do you have positive cash flow? Maxing out your 401(k)? Contribute to an HSA.

Have an HSA? Not using it much? Look at investing part of it to make the most of the tax deferral!

https://youngandtheinvested.com/what-is-hsa/

Dependent Care FSAs

Are your kids no longer at daycare? What about after school care or summer camps? Might be eligible for this pre-tax benefit.

https://www.fsafeds.com/explore/dcfsa

ESPPs

A forced savings mechanism and a ‘guaranteed’ discount means automatic after-tax value in your pocket.

https://blog.wealthfront.com/good-espp-no-brainer/

Exec Deferred Comp

Okay, I lied, this one is going to be longer than a Twitter headline…

Most of our executives have a ridiculous amount of stock vesting each year through RSUs and NQSOs. Many are uncomfortable with the tax hit they would take for diversifying their risk. Most deferred compensation plans come with more investment options. Therefore, some executives can use this to defer 75% of their salary and bonus, then use NQSO exercises/sales to fund their annual expenses. Thus getting out of a concentrated position and into a more diversified investment strategy.

Using your deferred stock plan might be a great way to diversify out of your NQSO concentrated position. However, it isn’t a fool proof decision. Unless you work at a mega employer that has made commitments to keep these funds as legally safe for you as possible, it may end up not so great.

https://www.nytimes.com/2017/06/30/your-money/should-you-take-advantage-of-a-deferred-compensation-plan.html

Supplemental Life Insurance

Do you need life insurance to cover debts and family needs? If you are young and fit, there may be a better alternative. Check the pitfalls and benefits.

https://20somethingfinance.com/should-you-buy-supplemental-life-insurance-through-your-employer/

Critical Illness Insurance

Are you approaching your 50s and not in the best of shape? If heart problems or cancer runs in the family, this may be a great deal for you.

https://www.thebalance.com/what-is-critical-illness-insurance-4588339

Pet Insurance

This is the time I really wish my dogs could talk. X-rays, blood tests, oh my! We love our pets but hate the vet bills.

https://www.usnews.com/insurance/pet-insurance/what-is-pet-insurance

May the odds be forever in your favor…

Did you enjoy this post? Sign Up for our newsletter so you won’t miss another article.

Here’s How to Easily Create a Budget

Budgets and the New Year go hand in hand. If you already budget, you may review how well you did and decide what to do different for 2018. If you don’t budget, this may be the time to look at your income and figure out where to start.

I am a believer in simplicity to get the job done right. There are two ways to look at it: top-down or bottom-up. If you prefer to start with expenses and where you spend money, check out 3 Steps for Long-Term Budgeting Success. If you are interested in starting with total income, keep reading!

Step 1: Determine estimate of net cash inflow

What are you expecting for total compensation this year?

Salary + expected cash bonuses + RSU sales = estimated income

Estimated income – 401(k) contribution + vesting RSUs = est. taxable income

Once you know your expected income, then it’s time to make an estimate of how much you will need to pay in taxes. A nice tax bracket chart for 2024/2025 is HERE. I don’t make it too complicated and only deduct my expected 401(k) contribution.

Est. income – estimated taxes due = net cash inflow

Step 2: Determine what you want to save this year.

Do you want to save a percentage of your net cash or do you have specific goal amounts? If you aren’t sure where to start in saving, check out how to change your life with your bonus for some great ideas.

Net Cash Inflow – 401(k) Contribution – Savings Goal = Annual expenses

Step 3: Break down expenses and think about increasing savings.

Expenses fall into two categories – fixed and variable.

Fixed expenses in budgeting include: housing, transportation, utilities, and groceries. These are your ‘must haves’.

Variable expenses are miscellaneous items like travel and lifestyle choices that vary from month to month. Lifestyle choices may include hobbies, eating out, Kindle books, Audible, etc.

Monthly fixed expenses x twelve months = Annual fixed expenses

Annual expenses – Annual fixed expenses = Miscellaneous expenses + Savings Opportunity

Once you determine your ‘must haves’ it is time to see what is left over. Do you have more in your budget for miscellaneous expenses than you need? This is a great opportunity to add more savings to your year. See the compounding effects of saving more now versus later!

Were you surprised by how many expenses you have to fit into your budget? It may be time to reassess what you are spending money on and to take a deeper look.

Want a helping hand to keep you accountable with your new goals? Schedule a free consultation to see how we can help.

Did you enjoy this post? Sign Up for my newsletter so you won’t miss another article.

What should I know (and ask) before hiring a financial advisor?

In lieu of my usual weekly post, I thought it would be helpful to share some content from The National Association of Personal Financial Advisors (‘NAPFA’).

The financial advising world is full of different ways of making money from clients, with some ways more transparent than others. Some advisors use commissions from investment sales to primarily pay themselves (sometimes up to 8%!) and others use a percentage of assets (AUM) only.

NAPFA is kind enough to offer resources to the public detailing great questions to ask potential advisors, how to obtain a full picture of your advisors compensation, and what is important about having a fiduciary in your life.

If you are considering a financial advisor, take advantage of these resources HERE.

Did you enjoy this post? Sign Up for my newsletter so you won’t miss another article.

The above discussion is for informational purposes only. Recommendations are of a general nature, not based on knowledge of any individual’s specific needs or circumstances, and there is no intent to provide individual investment advisory, supervisory or management services.

If you live in a state with it’s own form of state AMT, this further complicates the matter. AMT calculations can be difficult and you may need professional help, such as that of an accountant, tax attorney, or someone experienced in complex tax returns.

Minimizing Risks in Your Home

My daughter is closing in on crawling/walking and grabbing anything new and different. Inevitably, this means anchoring shelves, TVs, and other climbable items to the wall. Taking a fresh look at my home makes me think about the other potential risks we just don’t think about often.

The potential accident risks that exist inside and outside your home may go unnoticed in your day to day. Here are some simple steps to help convert your home sanctuary into a safer environment for family members and house guests to enjoy:

· Make sure your smoke alarms are tested regularly and ensure batteries are working.

· Check rooms, hallways, and stairs and remove any clutter, objects, cables, or loose rugs that someone could trip over. Remember to put non-slip rubber mats or self-adhesive strips on your bathroom tub or shower floors to help avoid slips and falls.

· Use brighter light bulbs to illuminate staircases and foyers. Install night lights that turn on automatically after dark. Also, keep the exterior of your home well lit, particularly during the fall and winter months with fewer daylight hours.

· Children or pets should never be left unattended in a room with a burning candle. Keep matches and lighters out of reach at all times. Place candles away from papers, curtains, and rugs or any other combustible items.

· Put socket covers on all electrical outlets in your house to prevent electrical burn or shock. Teach your children to switch off and unplug appliances when not in use, and not to touch electric appliances with wet hands or when near water.

· When entering or backing out of your driveway or garage, always look out for children and pets that may be difficult to see under or near your vehicle.

Remember, being consistent with safety behaviors is key to helping maintain an accident-proof home environment for your family, friends, and pets. Minimize risks where you can.

Another item to consider is costly risks above your homeowner’s coverage. As children grow up and have friends over, or you rent out a room for a few months on AirBnB, people who do not live in the home may encounter costly accidents. For example, a friend may fall down the stairs or slip on the drive way. If you have a trampoline, pool, etc then your liability risks only increase from there!

An umbrella insurance policy may prove helpful to minimize risks of a costly accident. Generally, $1 million coverage can cost only $180 a year! Talk with your insurance agent or financial advisor to find out if this works well for you.

Did you enjoy this post? Sign Up for my newsletter so you won’t miss another article.

Corporate to Start-up: Benefit Package Differences

Originally posted on GeekWire.com.

Seattle is quickly advancing as a tech hub. Large satellite offices and tons of startup options invigorate many employees to make the jump to smaller tech companies. I think the flow of talent is wonderful when it ignites a passion to fulfill your dreams. Feel the fear and do it anyways!

Everyone should be able to follow their dreams with as few obstacles as possible. One major difference between big tech company life and the start-up world is employee benefits.

Figuring out what’s best can take time and effort.

What are my health plan options? Should I sign up for a HSA?
Do I need additional insurance beyond what my employer provided?
What should I do with my RSUs as they vest?
What are my 401(k) options and how much should I save?
Am I going to owe the IRS taxes at year end?

I started working with a client who moved from Microsoft to a start-up. We found there were quite a few differences in what was available under each plan. Microsoft offered disability and life insurance, a 401(k) with diversified stock choices at low expense ratios, and professional assistance perks. At the new start-up, he encountered implications with the benefits package: minimal health plan, no life and disability insurance, no 401(k), and limited perks beyond snacks at work. Having the right advisor help you determine what to do next can make a huge difference.

Minimizing personal risks

Do you have an emergency fund? Small start-ups are less stable and have a higher chance of failure. Reassess your emergency savings and determine whether you need additional funds. Depending on your situation, this may include six months’ worth of expenses, or more. If you’re in a larger start-up, consider additional savings in case you believe it makes financial sense to buy out your vested stock options.

3,000 Americans become disabled every hour (1). Do not underestimate the crippling effect this can have on your family. If your employer provides disability insurance, generally this amounts to around 60% of your salary up to a cap (commissions not included). When your employer provides this group benefit and pays the premium, the benefit is taxable to you. Can your family survive on the provided benefit? Are there parameters that could change your ability to use it? Not all benefits are the same, and the applicable coverage varies widely. Individual disability insurance can fill the gap between your employer’s plan and what you need to survive financially.

Employer plans may include life insurance. Generally I’ve seen this range from $50,000 to a multiple of your salary. The premium cost of the first $50,000 of life insurance provided through your employer plan generally is considered tax free for you. Beyond that, the premiums paid on your behalf may or may not be taxable to you under the plan.

Consult with your advisor and/or insurance broker to understand whether you need additional coverage to ensure your family’s ability to maintain financial stability if something happens to you.

Maximizing tax-deferral strategies

Effectively manage your retirement options. Does your employer offer a Roth 401(k) component? A Roth is not always the winning choice and depends on assumptions you believe now and hope will prove true over time. You must preemptively decide: Will your tax rate during withdrawal years be higher? How much money will you need for annual expenses in retirement? Do you need the additional tax-deferral now? How large will your estate be when you pass? This will be an estimate your advisor can assist you with. Carefully weigh your options and check back in periodically since the best strategy will most likely shift over time.

Sock away money in employer provided accounts beyond retirement. Most start-ups are focused on high-deductible health plans (HDHPs) with health savings account (HSA) options. All HSA contributions, up to the permitted max, are tax-deductible, and earnings accumulate tax free. If your current salary and bonuses allow you to budget savings and maximize your retirement options, consider setting up your HSA account and pay for medical expenses with your after-tax cash on hand. Your investment philosophy will help you determine what is best.

Some companies provide further benefits for families through dependent care flexible savings accounts. These accounts allow a max pre-tax contribution annually for current year use. Covered expenses include qualified care for children, parents, or other dependents. Although unused contributions are lost at year end, this can be a great benefit for those in a higher tax bracket with known needs.

Accumulating wealth

Negotiating your compensation package may provide a huge head start in accumulating long-term wealth at the right company. Have you negotiated for the right parameters in your agreement? Were you offered stock options but negotiated for restricted stock?
Stock compensation planning goes beyond the tax implications (but make sure you have an idea of what to expect). Also consider planned selling and how to hold the stock. If you have highly appreciated stock, there are multiple ways to gift this with a lower tax impact. Alternatively, what if you want to sell early? Know the secondary market available for your stock.
Minimize the golden handcuffs by ensuring you understand the long-term compensation structure. The initial compensation agreement sets the tone, but understanding how bonuses, stock grants, and salary work longer term will help you know where you want to be and evaluate where you are now.

Life gets tricky as you move from one company to another and you can no longer expect the same protections and benefits. Start-ups offer great personal perks, but may require you to think more about what you are doing on the financial side.

Did you enjoy this post? Sign Up for my newsletter so you won’t miss another article.

The above discussion is for informational purposes only. Recommendations are of a general nature, not based on knowledge of any individual’s specific needs or circumstances, and there is no intent to provide individual investment advisory, supervisory or management services.

If you live in a state with it’s own form of state AMT, this further complicates the matter. AMT calculations can be difficult and you may need professional help, such as that of an accountant, tax attorney, or someone experienced in complex tax returns.

¹Disability Divide: The Council for Disability Awareness, March 2010.