Category Archives: General Financial Planning

RMD Season is here – Is your DOB between 7-1-47 to 6-30-48 ? You have a decision!

RMD – AKA Required Minimum Distributions – the Governments’ mandate of distribution from our IRA (Pre-Tax) funds in order to finally occur taxes is upon us…..

RMD Season Uncle Sam

In the coming weeks we will begin transferring mandated funds from our IRA/Qualified/Pre-Tax accounts to their directed destinations….

As a reminder this is so the US Government gets to take the taxes due …

IMPORTANT (Neat) Facts –

  1. RMD $$ mandated amounts are determined by the value of applicable accounts on the last day of the prior year
  2. Current year age is a necessary factor included in calculating the RMD – see below next, first time exception – each year of seasoning (getting older) we are forced to take more out of the applicable accounts – hey the IRS has never taxed us on these in many cases – it’s their time!
  3. After tax contributions to a qualified account MUST be accounted for in order to avoid taxes – here are greater details and our taxpayer obligations on this –  don’t overpay – the IRS is not tracking this and will not come to the rescue and lower your taxes
  4. All of an individual’s accounts must be included/totaled/value (certain exceptions are made to those continuing to work) to ascertain the needed distribution
  5. Any one account can be used to satisfy the needed distribution (you do not have to take a little from each account, making it easier from an organization standpoint) BUT you must take at least the minimum distribution
  6. Failure to take the mandated distribution amount COULD result in a 100% tax – Break in – our experience has been the IRS is nice about this, but let’s not test them

Here is a neat three part series from a while back that is worth a review!

70.5 is the key starting age

The mandatory commencement date of RMD’s is the year AFTER you turn 70.5 years young, under current tax law…

If you accept this first year deferral, you will incur two RMD’s in the year you commence your first RMD…

Depending on the situation, it may be advisable to distribute your first year RMD a year early so as not to clump your taxable distribution….

Is your DOB between 7-1-47 to 6-30-48?

Then you turn 70.5 in 2018 and you CAN defer your RMD until 2019, however you will have two RMD’s next year — be careful, large distributions could toss you into an extra tax bracket.

Reach out if you have ANY questions, we have plenty of time, BUT the clock is ticking…

Have a great ‘RMD Efficient Distribution” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

Third Quarter 2018 Cover Letter

The third quarter of 2018 is behind us and the original theme from the first month of the year seems still most appropriate, patience. After rocketing to an unsustainable trajectory in January, the excuse was an over use of a dangerous product, the reality looks to be, we just got too far ahead of ourselves and corrected harshly to a more reasonable trajectory.
It was the Best of Times, it was the Worst of Times
As we look forward, the best part of the year “historically” lies just in our view as we finish the year. Using history as our guide, oddly the first month of the coming quarter has been the most treacherous. Not the time to get to overzealous or glum!
Earnings Eventually Matter
In our Q4 2018 Capital Market Newsletter Article we discuss in detail the correlation of earnings and capital market movement. This obvious connection does not always hold true in the shorter term as aggressive emotions such as greed and fear overshoot constantly in both directions. Eventually the correlation re-connects and more normal heads prevail, making earnings growth and market growth work in tandem.
Interest Rates
The fear of, or at least watching for, an inverted yield curve has grown in popularity. We discussed this item last quarter in great detail. Oddly, when many are looking for an event, it loses it’s predictability. We are not ignoring, and will continue to monitor, but we are concerned at a possible loss of predictively with the crowds of followers swelling. Predictive or not, the FOMC (Federal Open Market Committee) has been slow and open to interest rate increases, so far, and capital markets, the economy and participants are very happy with the increases and have digested them nicely.
Bonds, most effected by interest rates, and one of the safest asset classes tend to feel the headwinds most of higher interest rates. Higher, and increasing rates are initially a headwind, but once the increases stabilize, they become a tailwind, and increased yields push more money into our pockets. This cycle is no different, other than the fact that interest rates we so unprecedented low to begin with, this temporary headwind seems stronger than in other cycles, but it is really not. Look for more details on this subject again in our coming Newsletter.
Have a good start to fall!

John A. Kvale CFA, CFP

Q 4 2018 Newsletter Video Audio Podcast Review By John Kvale

Welcome to our Video and Audio Podcast Review of our Q 4 2018 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.

Click Here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page

BREAK IN – Save the date for the Holiday Party

November 17th – Saturday before Thanksgiving – Dallas Athletic Club from 3-5 pm

DAC

Let’s get going!

Q 4 2018 Newsletter

And here is your review!

Capital Market Talk

Earnings and Markets Eventually Converge

In this hugely in depth article, first we discuss the effect of earnings eventually driving capital markets, but disconnects can occur. It can even be a good thing for Capital Markets to WAY underperform earnings, as they are this year because in brings valuations back in line.

Here is the key graph

7-13-18 EPS Growth and Mkt Growth 10 year avg

Higher Rates, a Short Term Headwind, Eventually a Tailwind

With sustained lower rates over the last decade, memories have faded on the tugging headwinds that higher rates have – IN THE SHORT TERM – on the mandatory safety asset class of bonds.

Higher rates are a great thing as Bonds/Fixed Income Assets have a place for almost all investors due to their safety and liquidity.

Once the headwinds subside our fixed income investments will have ridden the yield curve higher and begin paying more income in the form of yield – into our pockets – Finally!
bond index V Interest Rates

Too High of Rates Can Create Trouble

Too high of rates or an overshoot CAN create trouble … or a recession…

Our friends at JPMorgan – historically show that rate is about 5% – yea FIVE percent –

We disagree and think a lower level may now be this tipping point, due to the decade low interest rate level we have just experienced-

Current at two percent, we have a long way to go before getting too antsy
JPMorgan Rate Level for Slowdown

Inverted Yield Curve Update

So far to good- no inversion yet!
9-28-18 90 day to 10 year Inverted Curve status

Financial Planning

This series of articles came out of no where and in like domino fashion, once one was done the next took form and fell into place-

PLUP graph

App of the Quarter – Hardware

Our editor took the fancy picture out due to copyright fears, but our experience with the Firestick has been exceptional – Here are the highlights of our findings

  • Great Savings compared to just full service in many cases
  • Does not take as much internet speed as we thought
  • Bring your home on the road
  • Multiple devices used at once
  • Cuts back on duplicated services
  • Allows cherry picking services

Enjoy the fall –

See Ya next Year – Wow 2019 here we come!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

September 2018 Podcast Video, Financial Planning and Capital Market Update – By John Kvale

Hello and Welcome to our September 2018 Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format as well as Video too!

Newbies – We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!

This is month two of our upgraded Laptop, which means a new recording system of Audio and Video — while still working the kinks out, we are getting the hang of it – Enjoy!

September 2018 Video

Financial Planning Tip (s) –

The Emergency FundMoney - dollar-941246_1920

In our post here, a shortened version of an article in the coming Newsletter, we review all, about a much needed Emergency Fund, and the levels for certain scenarios.

Reasons to be slightly bigger-

  • Possible Job Change – Need to be higher on emergency funds
  • New Family Member- Higher is better
  • New Home – Expect unforeseen expenses – they always occur (Has anyone ever built or bought a home in less time and for less money than they thought? Nope, it’s in our nature)
  • Salary Fluctuations i.e. Commissions – Error on the higher side of that emergency fund
  • Others dependent on you – Business owner, large family, solo income earners, college or wedding – Higher is better

Reasons for a normal to smaller Emergency fund-

  • Dual Similar Incomes – Lower Emergency fund is ok
  • Very stable Job – Smaller side of the living expenses will
  • Very fixed income stability – Pensions, Social, etc.

High Deductibles – Why to Consider

In this post, we discuss the reasons for considering a Higher Deductible lifestyle –

Break In – There are always situations that a High Deductible will not work, we are just pointing out the advantages, under the correct circumstances!

Auto Insurance: One of the best ideas to consider a high deductible – take a look here at the great examples of why.

Home Owners: Another great coverage to consider a higher deductible.

Health Insurance: Once again a good one, but certain situations can easily negate the advantages of this!

Capital Market Comments – Interest Rates and Bonds

Short Term Headwinds Of Higher Rates on Bonds

This busy chart gives a great picture of the short term effects of interest rates on bond. Coming from such an extended long period of unusually low rates, we are reminding ourselves along with everyone else, this is very normal phenomenon and will correct itself with time by putting extra dollars in our pockets in the form of higher yields.

Have a Great Day – Talk to you at the end of October!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

www.jkfinancialinc.com

street-cents

Why we like High Deductibles!

As we worked on our PLUP – Personal Liability Umbrella Policy Newsletter and Blog Post, we repeatedly ran across reasons to discuss our fondness to the Higher Deductible options on almost everything.

This article has also spawned a related article, about Emergency funds – neat chain of events articles!

Consider the High Deductible Option – On Most Everything

Health Insurance, Auto Insurance and Homeowners are the main types of ongoing insurance that allows you more control in your cost via the deductible.

The Auto Insurance Examplecrash-test-1620591__480

One of the easiest examples is the good old automobile insurance. We like high deductibles of near one thousand dollars due to the tremendous longer term premium savings that will occur over time. We certainly acknowledge that changing your coverage deductible to a higher amount today and having an accident tomorrow is bad luck and will throw you into the hole, but over time, if you are not a repeat offender, your saved premiums will more than pay for the higher deductible.

Health Insurance Example

Let’s face it, the insurance industry wants us as consumers to take more control over our medical expenses. Rather than run, embrace this coming inevitable change, and review higher deductible health insurance plans. Similar to the Auto example, if you opt for a higher deductible plan and something happens in the very short term, you will be in the hole on this decision, however time is your friend.  Having your health coverage pay for that visit to the Dr. for a cold is nice, and may make you feel good after you leave the office, however if you dig deeper, it is likely you may be paying dearly for the “free” visit.

Homeowners Insurance Deductible

Yep, there is a higher deductible option for your homeowners policy as well. This option is usually in the form of a percent of the dwelling. Be careful when reviewing these options as our experience has shown premiums and out of pocket costs can vary greatly depending on the geographic area of your dwelling and a higher percentage deductible can get out of hand if you are not careful on a higher priced dwelling. Bottom line, the homeowners policy has more moving parts due to the differences in coverages, geographic area, dwelling itself and your claim history. Take extra time in adjusting this deductible, but once you get clear on all costs, obligations and options, it’s likely you will find savings in this as well.

Have a Great “High Deductible Savings” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

Mother Nature FLEXES her Muscles – High Deductible Pre-View – Friday

With a crew that absolutely loves the outdoors – beach, mountain, desert … heck they might even like a rainforest (never been with the whole gang.) Mother Nature has an influence on our lives.

Mother Nature FlexesHurricane -tropical-cyclone-63124__480

We wish the best for those in the mighty Mother’s path. With the most visible storm making landfall to our friends on the mid eastern coast line, and one of our far west states/islands are also dealing with her muscle flexing….

Safe wishes to all!

High Deductible Preview

Next week we continue our found series (PLUP, Emergency Fund-) with the last depending part, the High Deductible. Thanks for all the responses, we have greatly enjoyed sharing and will have full versions in the coming Q4 Newsletter.

Of course it’s a Tennis weekend, but long time followers will be surprised to know this weekend unusually includes little Brother in a Sunday match while older sister watches and gives important advice…..

Today is a Friday, enjoy your day and the weekend .. be safe and talk to you next week!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

The Emergency Fund – Size, Location, Reason, Need

It is so simple of a concept, but one that is easy to fail. The general rule is to keep 3-6 months living expenses, somewhere available, for safety. Those early in their careers with less dependents and less overhead will find this very manageable. Those of us with a few chips in our armor from big recessions, life’s curve balls, and experience, may want this number to be higher. Whatever level makes “You Sleep Better” within reason of course, is likely a good level.

Reasons for a Higher LevelEmergendy - helicopter-615168__480

  • Possible Job Change – Need to be higher on emergency funds
  • New Family Member- Higher is better
  • New Home – Expect unforeseen expenses – they always occur (Has anyone ever built or bought a home in less time and for less money than they thought? Nope, it’s in our nature)
  • Salary Fluctuations i.e. Commissions – Error on the higher side of that emergency fund
  • Others dependent on you – Business owner, large family, solo income earners, college or wedding – A bit higher is better

Stability Reasons for a Normal/Lower Level

  • Dual Similar Incomes – Lower Emergency fund is ok
  • Very stable Job – Smaller side of the living expenses will work

Where to Invest ? Safety first

A long time friend always commented on the Mason Jar, full of money, buried in his back yard (an old depression era tale) – all kidding aside, your emergency fund should be bullet proof safe. While that has been hard over last decade, not earning much interest, now finally we can get a few percentage points on our Emergency Fund, but that is only to keep it from being lazy, it is not an investment and should not be put at risk by stretching for a return. No risking, it needs to be there when the sky is falling.

Big Benefits

The most obvious benefit to having a health Emergency fund is less stress. Financial issues are well known to be a couples top stresser and frequently relief is felt as the healthy emergency fund is completed, when no pressure was ever felt in the first place.

Have a Great “Healthy Level” Emergency fund day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents