Category: Kevin Canterbury

In most families, the needs and interests of family members overlap. Even if your money is separate, planning needs to happen for all.

It is normal, when working with your financial advisor, to focus on the needs of your immediate family. If you are a baby boomer, for example, you are probably looking at retirement planning, when to take Social Security, how to invest your retirement assets, and so on. Other financial planning issues such as college and home buying are behind you, while long-term care and estate planning will be coming up. But there are some very good reasons why your financial planning activities and discussions should span the generations: why you might want to look into college planning, and why your children should know something about long-term care.

In most families, the needs and interests of family members overlap. Grandparents are interested in their grandchildren’s college plans, and grandchildren may someday be involved in the care of their elders. Healthy families talk about these things. When families love and care about each other, there’s a certain interdependence that acknowledges the needs of each generation and the ability of the other generations to help. Even if the generations keep their money separate, there are often conversations where family members share ideas and opinions about each other’s lives and financial decisions. They get into each other’s business, so to speak, because one generation’s decisions often impact the lives of the others’.

Financial fitness for all

Once a year or so, when you meet with your financial advisor, bring up issues related to your family. Is a grandchild getting ready for college? Is a child or grandchild trying to buy a home for the first time? Do your parents need a caregiving plan? Your advisor may be able to provide insight and resources.

Ask your advisor if he has a financial fitness checklist that can facilitate financial planning for the generations. It may help jog your thinking.

Your Family. Start with a general conversation about your family. Do you expect any changes in relationship status such as marriage, cohabitation, or divorce? Do you expect any changes in family composition, such as a birth or adoption? Has an adult child moved back home? How are your parents doing? Talking freely about your family may uncover financial planning needs that you had not thought about.

Your goals. In addition to your own financial goals, think about your family members and what they hope to achieve. College? A home? Start a business? Remodel the house? A special vacation? Even if you and your family members keep your money separate, you probably talk about it. Your financial advisor may be able to help family members work on their goals too.

Your business. If you own a business and hope to keep it in the family, start talking to your financial advisor early about your succession plans. Ask your advisor what you and your family need to think about in preparation for the eventual transfer of control and ownership of the business.

Your work. If you’re still working, you’ve probably given a lot of thought to when you might stop. When doing generational planning, you might also want to consider the stop-work decision in the context of your family. If money is tight anywhere in the family, continued work on your part may be considered a resource to the family. Also talk about the work and career goals of younger family members.

Your health. Does anyone in the family have health issues that could create a financial burden? Talk to your advisor about your insurance options, including Medicare, employer insurance, individual insurance, or perhaps even Medicaid planning to pay for long-term care. There are so many health insurance options today it’s hard to analyze them all.

Your money. All of these life goals and issues have a financial component, but here you’ll be talking directly about your money: investments, taxes, cash flow, debt, etc. We recommend that both spouses participate equally in the discussion. The last thing you want is for one spouse to become widowed and have no idea how to carry on. And what about your children, grandchildren, and parents? Do they have money issues that your financial advisor could help with?

Your estate. Generational planning is estate planning with a focus on the whole family, as opposed to the one-way transfer of the wealth holder’s assets. Once you’ve gotten your affairs in order (or have a plan for doing so, talk to your financial advisor about the rest of your family and what might be expected to happen after you pass. Will the surviving spouse be prepared to go it alone? Will beneficiaries be prepared to handle their inheritance? Is there anything you can do now to make your passing easier on your children? By extending your thinking beyond the grave you can create a true legacy that will live on through the generations.

Your retirement. You touched on this in the work discussion, but here you’ll be zeroing in on retirement plans: Are there any retirement accounts held by former employers? If you own a business can you benefit taxwise by establishing a new retirement plan or contributing more to the plans you do have? Do any family members need help understanding required minimum distributions as they relate to their own or an inherited IRA? Does anyone in the family need a second opinion on how retirement assets are invested?

Your future. Anything that hasn’t been covered under the previous topics may be addressed here. Again, expand it to include family members. Does anyone need help getting financially organized? Could everyone get by for six months without dipping into retirement or other long-term accounts? Does anyone anticipate any significant life changes in the next five years? Generational planning is a relatively new concept in financial planning. It recognizes that the financial and life decisions made by one generation often have an impact on the others’. So while you are doing your own financial planning, give some thought to the rest of your family and how you and your financial advisor may be able to help them achieve their financial goals.

Kevin Canterbury, through his work as a wealth management advisor, realizes that many clients have questions regarding their retirement accounts. Whether it be through an IRA or a 401(k), people want to be sure that their assets are protected and can properly facilitate their transition into retirement. Kevin recognizes that, despite the many similarities between IRA and 401(k) accounts, there are key differences that separate the two. Depending on certain factors, these differences may play a role in which type of account is preferable for your needs either prior or leading into retirement. Here, Kevin Canterbury of Arizona explores some key features of an IRA that are different than 401(k) accounts.

You Can Make a Qualified Charitable Distribution

One large difference between an IRA and a 401(k) is that IRA owners and IRA beneficiaries 70 ½ or older can send up to $100,000 from their IRA account to charity without needing to include any of the amount in their income through qualified charitable donations. You will not get a charitable deduction if you make a qualified charitable distribution; however, by never adding that income to your tax return, the results are often still lower in a tax bill than if you had taken a normal IRA distribution and made a regular charitable contribution. A QCD can also offset either a portion or all of your required minimum distribution. You would not be able to make a qualified QCD from any other employer-sponsored plan such as a 401(k) or 403(b), meaning that an IRA could be a stronger option if you plan to use retirement funds for charitable purposes.

You Can Avoid Withholding

Paying your taxes is a requirement, but it many do not know that it is possible to have a low tax bill after all of your exemptions, deductions, and credits are applied. It is also possible that you have withholding from other sources. In these instances, there is no need to have further amounts withheld from your retirement account districutions0- as it would essentially be giving the government a tax-free loan. Kevin Canterbury of Arizona notes that, with an IRA, you can avoid this because you can opt-out entirely of withholding. With a 401(k), distributions eligible for rollover are subject to a 20% mandatory withholding- with no option to opt-out.

You Can Take a Penalty-Free Distribution for Higher Education Expenses

Distributions that are taken from a retirement account before the person is 59 ½ are subject to both income tax and a 10% early distribution penalty. Kevin Canterbury of Arizona acknowledges that there are exceptions, however. For example, if you or certain family members need money from your IRA for higher education expenses such as tuition, books, supplies, etc., you can. For individuals that want to go back to school or have family that are looking to further their education, an IRA can allow them to take a distribution penalty-free. This is not the case with a 401(k), where you will be subjected to a major tax bill.

You Can Take a Distribution When You Want

If something happens that necessitates pulling from your 401(k) prior to retirement, you are at the mercy of both your plan’s rules and the Tax Code when attempting to access your money. If you are under the age of 59 ½, you may only have limited options for accessing- whereupon you may be able to take a loan from your 401(k) or take a hardship distribution. Kevin Canterbury acknowledges that this is not that case with an IRA, where you can usually take a distribution whenever you need it. It is important to remember that, despite their being no restrictions, you will still need to pay income tax and a penalty- but if you have no other choice, the option exists to access your funds.

Every year, over two million elderly people are subjected to elder fraud. Kevin Canterbury acknowledges that, in Arizona and other states with high elderly populations, elderly individuals can be extremely vulnerable to such fraud attempts. Reasonings for this include that elderly people are more likely to be trusting, may have decreased cognition, and often have retirement accounts, pensions, and money to spare. Kevin Canterbury realizes that the easiest way to prevent elder scams and the damages that they can cause to a family is to ensure that people have an idea of how these fraud attempts work. Here, Kevin Canterbury discusses some of the most common elder scams seen in Arizona.

Medicare and Social Security

In elder scam attempts that involve Medicare, the scammer poses as a Medicare representative to gain access to the individual’s personal information such as Medicare identification number or social security number. From there, the scammer can use the information to bill Medicare for fraudulent services and pocket the money from the transaction. Scammers may also use the opportunity to access bank account information directly and take money from the account. One of the easiest ways to thwart these scam attempts is by knowing certain pieces of information about Medicare and Social Security. For example, neither entity will ever call an individual attempting to sell them on a service. Also, neither entity will call you directly unless you have already contacted them first. When in doubt, always hang up and call the service directly.

Catfishing (Grandparenting and Sweetheart Scams)

In a catfishing scam, someone steals money from a person that they have “met” online while pretending to be someone else. Seniors often turn to online services and social media for connections and may lack the savviness to determine if these people are truly their friends or have ulterior motives. In a sweetheart scam, the scammer poses as a love interest to form a relationship with the victim. After some correspondence, these scammers will eventually ask for money. Grandparent scams are similar in that the scammer fakes a connection with an elderly person for money, instead by posing as a grandchild or younger relative. Catfishing scams are particularly dangerous because they can cost an elderly person thousands of dollars. Kevin Canterbury of Arizona acknowledges that, on top of that, it can be difficult to get the money back even if it is eventually determined that the person is fake. To prevent these scams, never send money to people online. It can also be helpful to vet your online relationship and know some of the common signs of fake online profiles.

Telemarketing and Phishing

In both telemarketing and phishing scams, scammers attempt to gain access to personal information that they can later use for financial gain. This includes information such as one’s address, name, birthdate, and accounting information. In telemarketing scams, calls are used to being the fraud, which can be identity theft, lottery scams, or credit card fraud. In some instances of elder fraud using telemarketing, scammers sell seniors goods or services that either never arrive or are obviously not worth what the person paid. Phishing scams are when the scam uses fake emails, calls, or texts to steal personal information. For example, a common phishing scam involves sending an elderly person an email that claims to be from a person’s bank or investment account saying that they need to update their information. In reality, this is a scheme to get the person to send the information needed to the scammer to initiate identity theft. Telemarketing and phishing scams notably increased in popularity during the pandemic, when many of us were called by agencies for vaccines and polling research. To thwart these attempts, Kevin Canterbury of Arizona recommends avoiding sharing personal information with individuals that are not verified professionals. If you are ever in doubt, hang up and call the organization directly.