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Larry Jones

Lake Norman Financial Planner, blue water ocean sailor, dangerous golfer, and PADI scuba instructor (in another life)
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Recent Posts

3 Tax Planning Concepts You Need to Know

Posted by Larry Jones on Dec 8, 2022 9:30:00 AM

We Live in a "Taxing" Environment

My Mom's favorite show to watch on television was "Wheel of Fortune." I'm sure you've seen it. Thousands of dollars in prizes are given away in every episode, and the ecstatic contestants squeal with delight as they are presented with such things as trips to Fiji and new automobiles. Who wouldn't love such a good deal?

But wait a minute....you have a "partner" in this transaction - Uncle Sam. Suddenly your great windfall becomes a burden, especially if you are awarded merchandise instead of cash. For example, let's say you just won a new car worth $29,000. The game show will issue you a Form 1099 that shows you have just earned $29,000 in income. Not only might that bump you into a higher tax bracket, but state taxes may also apply. You could find yourself having to come up with an extra $7-9000 just to pay the taxes on your winnings. You might even have to sell the vehicle to do that.

Your government wants it's money (you didn't think it was yours, did you?) and it will get it. Ask any retiree about Required Minimum Distributions and they'll give you a very good answer on how our tax code affects us all. 

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Case Study - 81 Year Old Widow

Posted by Larry Jones on Dec 6, 2022 9:30:00 AM

Although the person I'll reference in this study is fictional (I'll call her Mary), her circumstances are certainly not. Let's take a look at Mary's financial situation:

Mary is a widow, and her husband Bud passed away five years ago. Her financial situation is still very similar to what it was before Bud died.

She has $350,000 in a brokerage account, which is an IRA, and another $50,000 in bank CD's. She has an accountant who does her taxes, a financial advisor from her bank, and an attorney who has helped her prepare legal documents, such as her will. She has no trusts. Her sources of income are social security, a survivors pension from Bud, and a 4% drawdown each year from her IRA. 

One afternoon Mary has a stroke. She loses the ability to speak and all mobility.

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Topics: Case Studies

4 Great Strategies to Manage Investment Risk

Posted by Larry Jones on Dec 1, 2022 9:30:00 AM

Are you a risk taker?

If you have investments on Wall Street, you are. You might not be a skydiver, scuba diver, or venture capitalist, but you're a risk taker. Your money is at risk of loss. Investors know that the amount of money they are likely to earn on their investment is directly related to the amount of risk they are willing to accept to generate that return.

What continually amazes me, however, is how misinformed most investors have as to the amount of risk they actually have. I'd say that 75% of the folks I interview who tell me they are "very conservative" when it comes to their tolerance for risk, have no idea that their stockbroker has them heavily invested in high to moderate risk funds!

We know that we need to take some risk. What we don't seem to know is this: we should always take the least amount of risk necessary to generate a required return. In other words, if you can earn 8% a year taking a low risk, why on earth would you want to take a moderate risk to get that same 8%?

In a sane world, you wouldn't. Is your broker living in a sane world?

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Topics: Investment Advice

Does Your Financial Person Communicate With You?

Posted by Larry Jones on Nov 29, 2022 9:30:00 AM

Lessons from a "Minnow"

One of my favorite TV shows growing up was a silly tale of seven castaways shipwrecked on a lush tropical island in the Pacific. It was called "Gilligans' Island," and for those of you not old enough to remember great quality entertainment, the show was addictive. One of the more memorable episodes was when the castaways came across a Japanese soldier who had been left behind on the island by the Imperial forces in 1943, and being unaware that the war had been over for more than twenty years, was still fighting as he took all the castaways captive. This poor patriotic fellow was a victim of bad communication. 

When I think of how people impart information to one another, it's really quite amazing at how far we've come. Think about it, when the British forces surrendered to the American revolutionary forces, the folks back home in England didn't even know about it for weeks. How long did it take for Columbus to let his benefactors know that he had, in fact, discovered a New World? How many men died in battle after Grant surrendered to Lee in Appomattox because they didn't know the war was over?

In 1858 the first transatlantic cable was laid between North America and Europe, and for the first time messages could be sent across an ocean in minutes. In 1876 the telephone was invented, making instant communication available to the common man (it was necessary to learn Morse code before the telephone, and messages had to be slowly tapped out by hand. Today, in one of the greatest leaps in technology ever, we have collectively decided that "text messaging" is the way to go! Alexander Graham Bell must be turning over in his grave.), and after that technology began to take off. Today, information is shared instantaneously worldwide, and even communication across galaxies is now possible!

Has your stockbroker communicated with you recently?

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Topics: Communication

Here we go again! How to Survive Medicare Season

Posted by Larry Jones on Nov 24, 2022 9:30:00 AM

Open Season on Seniors

It's that time of year again. I call it "Medicare Season." I apologize to all the hunters out there, but the analogy is quite appropriate. Medicare open enrollment has come around again. The season begins October 15th and runs until December 7th, and the insurance agents will be loaded for bear....uh, actually, loaded for seniors, and out in force.

Every year during this season I begin to get phone calls from alarmed clients asking for advice on their health insurance. Some of them are more than alarmed...some are very near panic.

What's going on?

Here's a typical call: "Mr. Jones, I need to talk to you. I'm afraid that my health insurance is no good (or about to be taken away, or has cancelled, etc.) and I don't know what to do! Can you help me?"

I wish I could say that every insurance agent out there has your best interests in mind, but it's simply not true. Don't get me wrong, there are a lot of fine, principled, insurance agents who have integrity out there. But there are also a lot of desperate, uneducated, bottom-feeders who must meet a company imposed quota or be fired, who will say anything to make the sale.

Here are some things to help you survive the annual open enrollment dog-and-pony show.

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Tax Free Retirement Income? (part 2)

Posted by Larry Jones on Nov 22, 2022 9:30:00 AM

In the last post

I spoke about the use of cash-value life insurance to grow wealth with very little risk to principal, a very competitive rate of long-term growth, and tax-free withdrawals through the use of policy loans. What's not to like?

How is this accomplished? Through the overfunding of your policy. Let's say your monthly premium is $100. What if you contributed $1000? Universal life policies are designed to allow excess contributions. Now...a word of caution here: a few years ago the IRS caught on to this concept of insurance policy overfunding, for the purposes of avoiding taxes, and set some rules (mainly the 7-pay rule, which I won't go into here) to prevent the abuse of these tax rules. Basically, if a policy violates the 7-pay rule, it is then designated a Modified Endowment Contract by the IRS, and the tax advantages largely disappear. However, the 7-pay rule is very generous, and overfunding of policies can still be done to a high level without creating a MEC. This is why you want the help of an advisor to avoid making a tax mistake that can bite you when you begin to take distributions.

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Topics: Retirement Income

Tax-Free Retirement Income?

Posted by Larry Jones on Nov 17, 2022 9:30:00 AM

In the last post I spent

some time describing the benefits of supplementing your retirement income with cash value life insurance. My favorite is Equity Indexed Universal Life. I believe that, for a young person, these products deliver the most growth over time with the least risk. But there's another aspect of these solutions that I'd like to talk about- the tax benefits.

I heard a story about an insurance agent who was up against a stockbroker in trying to win the business of a client. This person had a certain amount of money to invest, and he had approached both of these fellows to prepare illustrations of future results. Of course, the stockbroker used an average rate of return north of 9% to calculate his, while the insurance agent was more conservative, using a 6% rate. As the two fellows presented their results to the client, the stockbroker was beaming. His future values were nearly 20% more over the time period. It was clearly, to the broker, no contest. Until the insurance agent interjected to the client, "Oh, I'm sorry. I didn't know that we were supposed to have to pay taxes on this money." 

The agent got the account.

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Topics: Retirement Income

Self-Funding Long-Term Care

Posted by Larry Jones on Nov 15, 2022 9:30:00 AM

An Offensive Proposition!

A number of years ago I was working with a gentleman in setting up a plan for his long-term care. The plan included a comprehensive LTC policy that would cover his expenses no matter where the care was received, either at home or in an institution. One of my suggestions is to always talk this over with your family before making such a purchase, if for no other reason than to let the kids know that you have the coverage.

Well, in this particular case, when the Dad told his son what he was doing, the young man threw a fit. The client contacted me and said that he needed to cancel the coverage. His words to me were, "my son was really upset that I had gotten that policy. He told me to get rid of it.....that HE would take care of me!" In they eyes of this fellow, the purchase of insurance implied that he wasn't willing to take care of his Dad. Of course that's ridiculous. LTC insurance isn't meant to replace the family as caregivers, it's to help them do a better job of caregiving, and for a longer period of time.

Being a full-time caregiver is very demanding, and you may not be healthy enough yourself to do it. When that happens, outside caregivers will have to be acquired, which can be very expensive. As I mentioned in a previous post ( see LTC Funding Options )  when it comes to paying for palliative care there are basically three options:

1. Long-term care insurance

2. Self funding

3. Government assistance (Medicaid)

In this post we'll look at number two: self funding.

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Topics: Long Term Care

Some Good Long-term Care Funding Alternatives

Posted by Larry Jones on Nov 10, 2022 9:30:00 AM

Are you ready?

Ready for what? Ready to live a long life.

"Well, yes, Larry. I am."

Everyone dreams of living a long and productive life. The good news is that, today you most likely will. Advances in healthcare have drastically extended the number of years the average human can expect to live.

A diagnosis of cancer was once a death sentence. Not anymore. With the use of extensive chemotherapy, radiation, and other treatments, many patients continue living for years after a cancer diagnosis. It's the same with strokes. 

These episodes may be quite expensive, however. The average bill for nursing home expenses may exceed $80,000 a year. How would your financial plan withstand such a drawdown? Could you endure a 3-5 year stretch of paying such expenses, which is a typical timeframe?

Does your plan take into account the possibility of an extended long-term care event?

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How will your family handle a long term care situation?

Posted by Larry Jones on Nov 8, 2022 9:30:00 AM

Are you a reasonable person?

What a question, huh? Of course you are!

Why would I even ask such a question of a reader? "After all, isn't the fact that I faithfully read this blog, and am nearly physically ill when I miss one, proof enough that I'm a reasonable person?", you might say. Point taken.

Well then, this blog is for you! The subject is your family....or more specifically, your family and how your need for long term care might affect them, and their lifestyle. Is that important to you?

If so, read on.

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Topics: Long Term Care

What you don't know can hurt you!

As a fiduciary I am required to always act in your best interests, and as a professional planner, it's my job to be familiar with all types of possible solutions and financial vehicles. In short, I have no interest in selling any particular product or any affiliation with a particular company. I work for my clients.

Are you:

  • concerned that your tax bill is too high?
  • tired of watching your nest egg decline by significant amounts every 5-7 years?
  • wishing you could find more free time?
  • looking for ways to help protect yourself against litigation that could destroy all you have worked for?
  • worried that Uncle Sam is going to enjoy your retirement more than you are?

If any of the above describes you and you'd like to get a question answered then just click the button below and we'll be in touch.

Let's Meet!

p.s. we have the ability to meet virtually regardless of your location! Give us a shout!

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