photos by Lisa Buser | story by Kerry Jackson & Kathy Fish
HERE ARE 5 STEPS TO LGBT FINANCIAL FITNESS
by Kerry Jackson, CFP®, CRPS®, CSLP | Fish + Associates Lead Advisor and Director of Client Services
What I love most about financial planning is getting people excited about their future. For many, money is a source of stress or anxiety due to past decisions and/or current situations. As someone who once found it acceptable to wear a chain wallet and owned a shirt with Wear Its At on the chest, I know a little something about mistakes. Although I have a financial planner for a mother and have been in this industry myself for over 10 years, I know what it is to overspend, to break into a sweat before checking your credit card or bank balance and to feel like getting out of debt is nothing more than a pipe dream.
Young people today often already have it financially rougher than our largely baby boomer parents – we earn less, we owe more and our net worth is often proportionately smaller as a result. LGBT young professionals are facing even more of an uphill battle than those identifying as heterosexual. Compared to straight men and women, the LGBT population is earning lower incomes, feels less secure in their financial knowledge, are spending when they’ d rather be saving, and are under-participating in saving and investment strategies.
- Create a Budget and Track it Weekly
The basis of any financial roadmap should be a solid cash flow plan. That means setting reasonable spending goals and sticking to them. Write this plan down – pen and paper, a spreadsheet, an app – whatever works just make sure it’s out of your head and into something tangible that will also allow you to track it no less than weekly. A spending plan is only as good as the follow up – imagine setting up a diet and exercise plan but not doing the work, it’s the same with a cash flow plan. I suggest creating 3 different budgets: one for emergencies (job loss, disability, etc.), one for when things are comfortable (you’re employed, you can afford your lifestyle if you aren’t overdoing it) and one to aspire to (annual trips overseas, no limits at Whole Foods, etc.). Don’t forget to pay yourself first and include a buffer! A buffer is a cash cushion you build in per pay period that you don’t allocate for anything specific so that if you forget a bill or a holiday comes around more quickly than expected you are able to pay for it without dipping into savings or putting it on a credit card. This first step is crucial and its success is critical to the following four. - Pay Yourself First
Include saving and investing as part of your budget. Use cash savings for large surprise expenses (disability that prevents you from working, uninsured damage to property, etc.) or annual bills (car insurance, property taxes, etc.) and include an investment portfolio for longer term growth such as your 401k or a Roth IRA. If you don’t trust yourself not to use your savings account as a backup checking account, consider going the online route so that there is an extra step between you and your money. - Know the Difference between Account Types and Investments
A common question I’m asked is whether a Roth IRA is safer than a 401k or vice versa. It is vital that you understand the difference between an investment account, such as a 401k, a Roth IRA or a 529, and the actual investments they hold like stocks, bonds or cash. The account type merely dictates how it is titled, potential contribution limits and often times the tax treatment of deposits or withdrawals. What the account holds – large US company stocks, emerging market international stocks, foreign bonds, etc. – determines the risk level, potential return, and whether the allocation is appropriately aligned with your goals. - Understand Your Employee Benefits and Maximize Them
When you’re young and haven’t had time to accumulate many assets your income can be your biggest one. Therefore, it’s important to protect it. If your employer offers disability insurance, check into the cost of enrollment and make room for it in the budget. If you have a partner, spouse or children, look into life insurance as well. Those with non-federal student loans, credit card debt, car or house notes, etc. need an insurance analysis to see what amount is appropriate. Anything not offered through work can be obtained individually on your own. - Don’t Skip the Estate Planning
One of the most overlooked parts of a financial plan is often the estate planning. Everyone, regardless of age, income, marital status etc. needs a Power of Attorney – one for Healthcare and one to make Financial decisions. Being married to someone does not entitle you to act on their behalf in the event of incapacity so without these executed documents you could find yourself in court battling for this right against a partner or spouse’s parents, siblings, or friends. Car wrecks and health scares are bad enough without having to involve the court system in your strife. Consult an estate attorney to learn more and to discuss your Advanced Healthcare Directive, Wills vs Trusts and how to plan for underage children.
There’s no denying that there’s a wage gap between straight white males and everyone else or that it even more disproportionally affects those in the LGBT community. However, the first step in moving toward a financial future you can get excited about is to ask yourself “Am I actually living paycheck to paycheck or just bad habit to bad habit?” I think most people will find that there is a lot more in their control than they realize. Start with your cash flow, go down the list I gave you, and start regaining power over your financial life. If I can rise above my days of wearing chain wallets there is truly no limit to the human potential!
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AGING WITH PRIDE
by Kathy Fish, CFP®
Fish + Associates President and Senior Advisor
I have been working in the financial planning world for almost 30 years and have always had a special interest in planning for retirement. This planning can be complex, multifaceted and in most cases involves a major transition from working and earning a paycheck, saving and accumulating investments along the way, to distributing income from same investments to replace the paycheck that needs to last the rest of your life. As I tell my clients, there are two ways to create income: people at work and money at work.
We often take the income we earn for granted because we get a paycheck every two weeks or on some regular basis. When work stops and you have to ensure that your money is now “at work,” it involves a completely different mindset, strategy and plan. Retirement planning involves looking at not only creating income and investing properly to meet your needs but also includes looking at healthcare expenses, planning for and maximizing how and when to take Social Security, understanding Medicare, what it pays for and what it doesn’t. In addition to these concerns, many of us will be responsible for taking care of elderly parents, while taking care of ourselves and our partner or spouse. Today we see more baby boomers enter retirement (voluntarily or involuntarily) still having to put children through college and help launch them into adulthood.
This process can be overwhelming if you try to tackle all of these issues on your own. If you have never created a financial plan, or worked with a certified financial planner, the transition to retirement is an opportune time to engage a professional who can help guide you in making wise and sound financial decisions to help secure your future.
There are approximately 77 million baby boomers in the U.S. with 10,000 turning 65 every day. According to a study done by the University of Washington, by 2030, LBGTQ boomers will make up 5% of the boomer population1. Nearly half of LGBT Boomers and four in 10 Boomers from a comparison group say they do not expect to retire until age 70 or older, likely since few have met or are even “on track” for meeting their financial goals (source Met Life center on LGBT Baby Boomer 2010).
Baby boomer LGBTQ activists advanced the gay rights movement by getting federal legislation passed into law allowing same sex marriage as well as making major headway into changing social attitudes.
Many retirement issues for LGBTQ people are unique from their non-LGBTQ counterparts, especially if they decide to cohabitate without the protection and benefit provided by legal marriage. No judgment on this decision, however one often will need to take additional steps to address social security, legal, health and long-term care concerns as they age. In addition, it is important to know what benefits you will not have access to if you choose not to get married. Knowledge
is power and helps you make better decision.
SOCIAL SECURITY — If you are married, you are entitled to half of your spouse’s social security benefit, or your own, whichever is greater. When one spouse dies, the surviving spouse will receive the higher of the two spouses’ benefit, whichever is greater, and the lower payment drops off. If you are not married, and have a lower monthly benefit, that is all you will ever get. People who wait until they are age 70 to start their social security receive an enhanced benefit. Social security adds 8% to your benefit base for each year you wait after your full retirement age (between 66 and 67) up until age 70. Outside of a legal marriage, at the death of the higher paid recipient, the resulting loss of income to your unmarried partner could result in literally hundreds of thousands of dollars of lost benefits.
HEALTH INSURANCE AND LONG-TERM CARE – Many people mistakenly think that Medicare and their health insurance or supplemental insurance will cover Long Term Care if they need it. The majority of long-term care that is received in the U.S. is considered custodial care, or care with the activities of day living. These include bathing and grooming, dressing, meal preparation and feeding, transferring, continence, and memory care (Alzheimer’s and dementia). The average cost of a nursing home in Tennessee is $82,185 per year (source: 2019 Long Term Care Guide, Manning & Napier). This is something that can be planned for. There is an advantage of not being married when it comes to long-term care because if you are married and one spouse needs long term care, you are expected to spend down most of your assets, as well as your spouse’s before you can qualify for Medicaid. This can be avoided by owning long term care insurance.
LEGAL — Whether you are part of the LGBTQ community or not, everyone needs to have a will. If you are not married and you want to leave everything to your partner, the main way to accomplish this is through a will. Without the protection of a will, if you die in testate (without a will) your assets will pass to family members, and you will by operation of law disinherit your partner. Any assets owned jointly with rights of survivorship, or by beneficiary, will pass to whoever you name.
This is a very brief and broad overview of some of the major issues we see in the LGBTQ population in regards to aging and retirement. For more information, please contact me at Kathy@fishandasssociates. com or 901-767-0668.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS or Kestra AS are not affiliated with Fish & Associates Financial.
