Do you or someone you know have a disability? Achieving a Better Life Experience (ABLE) is an investment account that you can use to pay for disability related expenses. The ABLE Act was bipartisan legislation (crazy, right?!) introduced in 2013 and passed at the end of 2014. The ABLE Act amended Section 529 of the IRS code to create a tax-free savings account for individuals with disabilities. These accounts are funded with after tax dollars; while some states offer state income tax deductions. Ohio for example, allows $4,000 of contributions to be deducted for income tax purposes (with unlimited carry forward). ABLE accounts can grow tax free and purchases are tax free on qualified disability-related expenses (including education, housing, and transportation). The ABLE account may only be used for Qualified Disability Expenses (QDE’s). Here is a list of examples of QDE’s that are enforced by IRS. The Ohio Stable Account sums it up well with their three expense qualifiers: You incurred the expense at a time when you were an Eligible Individual; The expense relates to your disability; and The expense helps you to maintain or improve your health, independence, or quality of life One key attribute that ABLE accounts have that other asset accounts do not (checking, savings, IRA, 529, ESA, taxable investment account and other items of significant value) is that they do not count against any public assistance an individual with a disability may receive; such as: Medicaid Supplemental Security Income (SSI) or Supplemental Nutritional Assistance Program (SNAP) One exception to this is that if you receive SSI, your ABLE account balance must be $100,000 or below to receive the benefit or your benefit will be suspended. Many of these benefits require that you have no more than $2,000 in non-ABLE assets to qualify for these benefits. The legislation states the purpose of an ABLE account is to use private savings to “secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Medicaid, SSI, the beneficiary’s employment and other sources”. The current law states that the individual’s disability must have been onset before the age of 26. However, there is current legislation, The ABLE Age Adjustment Act (S. 651/H.R. 1814), slated to increase the age to 46. If you meet the age criteria and are receiving SSI or SSDI benefits, you are automatically eligible to establish an ABLE account. If you meet the age criteria, but are not currently receiving SSI or SSDI, you may still be eligible if you meet SSA’s definition of disability and receive a letter of certification from a licensed physician. You can be over the age of 26 and still contribute to an ABLE account as long as your disability had an onset of prior to 26. ABLE Account Rules May Vary By State The ABLE accounts are managed by states, but each state has their own set of rules. You may only have one ABLE account per individual and it can be in another states’ plan if it allows outside residents. Ohio, California and North Carolina allow non-residents to enroll; while Texas, Georgia, South Carolina, Florida and Tennessee do not. To look at your own state options, you can use the comparison tool: https://www.ablenrc.org/compare-states/. For Ohio residents the program is called the STABLE Account and an account can be opened through https://www.stableaccount.com/. For a wealth of other information on ABLE Accounts visit the ABLE National Resource Center: https://www.ablenrc.org/. If you have a question on the ABLE account and how it could affect your financial plan, schedule some time to talk to a Whitaker-Myers advisor today.

Jason was the type of manager that any restaurant employee would want to work for. Happy, energetic, funny & always positive. Every morning as he awoke, he realized he could either choose to be positive or choose to be negative. Choosing positivity, is not easy, but it was his choice and people around Jason were drawn to work for him because of it. One morning, he left the backdoor of his restaurant unlocked which is a major No-No in the restaurant industry. Three masked intruders came in and demanded he open the safe with all the restaurant’s cash. As he nervously tried to open the safe, hands shaking, he made a quick move, which scared one of the robbers, who preceded to shoot him. As he was rushed by ambulance into the hospital, he could tell by the faces of his doctors and nurses’ things didn’t look good for him. They rushed him into surgery and before they put him under, they asked if he was allergic to anything. He replied with the small strength he could muster, “YES! BULLETS!” Over the laughter of the doctors and nurses he exclaimed, “I am choosing to live, so operate on me as if I am alive, not dead.” Jason lived because of the masterful skill of his doctors and nurses but also because of his amazing attitude. His story is one that I believe we can use and apply to our finances. One of the greatest books, that has influenced me in business and life has been Norman Vincent Peale’s book, The Power of Positive Thinking. Negativity is addictive, even though positivity is so much nicer to feel. Forcing positive thoughts into your mind, does something to your brain that creates a mindset that allows you to see the world in a different way. People are drawn to positive people. Positive people fill their minds with positive thoughts and material. Scripture & Finances During one Sunday at church (shoutout to Westwood Alliance Church) we were studying Colossians as Pastor Luke took us through Colossians 2:1-3 which says, For I want you to know how great a struggle I have for you and those at Laodicea and for all who have not seen me face to face, that their hearts may be encouraged, being knit together in love, to reach all the riches of full assurance of understanding and the knowledge of God’s mystery, which is Christ, (my emphasis here) in whom are hidden all the treasures of wisdom and knowledge. In addition to this John 15:7 tells us, If you abide in me, and my words abide in you, ask whatever you wish, and it will be done for you. My first thought was, this certainly applies to more than finance, but should we be filling our minds and hearts with scripture to improve our financial acumen and skills? As Dave Ramsey always says, a child that is constantly misbehaving is not going to be given more grace and leeway. Does God want us to have a better and right understanding of money, before he trusts you and I with more of it to manage? Very clearly the answer is yes. Now let me start with this – I am not a theologian or anything close. Additionally, I am not a prosperity gospel guy. Far be it from me to lead people to a false gospel! But as I try to understand what these passages are trying to persuade us to, it is this…. Putting the Word of God in my mind and heart can have the same effect as Norman Vincent Peale was trying to appeal to us in his book. If we are going to be better with money, we need to put in our mind the thoughts and wisdom from the best! Who better than the creator of Heaven & Earth? The Deity that owns the cattle on a thousand hills. You can argue about the reality of God (although the creation argues for our Great God every second of every day) but you can’t argue that the book of Proverbs is a Masters Degree in Finance and Business. So let me encourage you, regardless of your religious beliefs, to put some scripture in your head and your heart because it can prove to be a powerful tool in educating and changing the mindset of the one person that typically messes up your money… YOU! Here are some of my favorite Scriptures: Proverbs 22:7 – The rich rules over the poor, and the borrower is slave to the lender. Proverbs 10:4 – A slick hand causes poverty, but the hand of the diligent makes rich. Proverbs 3:9 – Honor the LORD with your wealth and with the first fruits of all your produce. 1 Timothy 6:17-19 – As for the rich in this present age, charge them not to be haughty, nor to set their hopes on the uncertainty of riches, but on God, who richly provides us with everything to enjoy. They are to do good, to be rich in good works, to be generous and ready to share, thus storing up treasure for themselves as a good foundation for the future, so that they may take hold of that which is truly life. Proverbs 13:22 – A good man leaves an inheritance to his children’s children. Ecclesiastes 11:2 – Give a portion to seven, or even to eight, for you know not what disaster may happen on the earth. Galatians 6:7 – Do not be deceived, God is not mocked, for whatever one sows, that will he also reap.

If you follow Dave Ramsey’s principals, then I’m sure you know how important budgeting is! EveryDollar is Ramsey Solutions’ budgeting tool that can be used on your desktop or via an app on your phone. They have a free version as well as a paid version. The paid version links to your bank account to make it easier to register your transactions. The paid version used to be called EveryDollar Plus but has been updated to Ramsey+ and includes even more features. Ramsey+ Features Ramsey+ is a subscription that gives you access to 3 categories of tools & resources from Dave Ramsey and his team: Learn (Financial Peace) Budget (EveryDollar) Track (Baby Steps) Learn: Financial Peace The “Learn” side of Ramsey+ is Financial Peace, PLUS other courses and videos from Ramsey Solutions. As someone who has coordinated Financial Peace University classes for over 6 years now, I think this is a really nice feature because I know that staying connected to the education and inspiration is key to winning with money. In almost all of my classes, the members were sad when the class ended because they were afraid that they would lose their motivation. My advice has always been to plug into Dave Ramsey (and his team’s) content… whether it is a podcast or YouTube video, it will keep you inspired and motivated. Having these classes in the Ramsey+ subscription will make that even easier! Budget: EveryDollar Dave Ramsey always talks about budgeting “every dollar” before the month even begins. This is the most important step in managing your money because without a budget it is hard to know where your money is going. The other thing that is really important is tracking your spending so that you know whether you are following the budget or not. When I was a Financial Coach, I would always tell my clients that “the budget is just a wish if you make a plan but don’t follow it.” EveryDollar connects to your bank account to allow you to track your transactions easily. It will also give you insight on your spending as well as budgeting advice. Track: Baby Steps The NEW Baby Steps tracker from Ramsey Solutions allows you to track your progress along the baby steps. It asks you what step you are on when you sign up and then helps you track that step and also lets you know what is next. If you are on Baby Step 2, it will also help you discover your estimated Debt-Free date with a debt snowball calculator! Ramsey+ is a yearly subscription that you can cancel at any time. If you were to ever decide to cancel, you can still use the free version of EveryDollar that does not connect to your bank account. If you are interested in checking it out, you can find out more about it on Dave Ramsey’s website and they are offering a 14-Day Free trial.

Every day, we help clients develop a plan to achieve their financial goals and part of that is making sure they have the right insurance in place to take care of their loved ones if something happens. Life insurance in an important part of your Financial Plan. It doesn’t sound as fun to talk about life insurance as it does to talk about saving money or investing but it is definitely important. How Much Term Life Insurance Should I Have? If you listen to The Ramsey Show, you have likely heard Dave recommend having 10-12 times your income in term life insurance. That is because term insurance is usually fairly inexpensive and you can get 10-12 times your income at a very affordable rate. At that amount of life insurance, if something happens to you, it allows your loved ones to pay off the house, any other debt you may have, and continue to live the lifestyle they are used to. That way, they are not grieving and trying to figure out how to pay the bills at the same time. Is the Life Insurance at my Job Sufficient? If you have life insurance at your job, that is great but we still recommend getting it outside of your employer as well. This is for 2 main reasons…. The amount that is offered at your employer is usually not enough to be fully insured so having additional insurance is a good idea. If something happens and you leave your employer (quit, get laid off, etc) and in the meantime you develop a medical issue that causes you to be un-insurable, then you won’t be able to get life insurance on the market. Where Should You Get Life Insurance? Just as you would shop around for car or home insurance, we think it is a good idea to get quotes from a couple insurance companies in order to find the best rates for your life insurance. Our Whitaker-Myers Benefits Team would be happy to do that for you if you are interested in having it quoted. What Term is Right for Me? When you are trying to decide what term you want for your life insurance, you have to think through when you won’t need life insurance any more. When will the kids be grown and gone? When will your debt be paid off (including your home)? When will you have enough savings that if something happens to one of you, the other one will be okay, financially speaking? Of course, you can always apply for new insurance later on and increase the term that way, but thinking through what you need now is best because life insurance is typically cheaper the younger and healthier you are. Other Things to Note… If you have life insurance (term or whole life or something else) and would like to get a quote for a different policy, it is always best to get the new life insurance in place before cancelling your current life insurance policy. Be sure you are re-evaluating your policies on a regular basis. Did your income increase and now you need to increase your amount of insurance? Is the term still sufficient for you? It is always a good idea to re-evaluate your important documents on a regular basis and this is true for your life insurance policy! Even if one of you stay home with the kids, it is still important to have life insurance on you. This is because the value that you bring to the family is tremendous and all of those tasks would be expensive to replace if something were to happen to you. Life insurance can be complex and there are a lot of questions that come up when you are thinking about how much you need, so if you have questions about your specific situation, please feel free to reach out to your Whitaker-Myers Wealth Managers Advisor and we would be happy to help.

If you are an OPERS employee, you may or may not already know that you have a choice in the type of retirement plan that you participate in. OPERS has 3 choices. Traditional Pension Plan Member-Directed Plan Combined Plan In this article, we will discuss the differences between the Traditional Pension Plan and the Member-Directed Plan. The Combined Plan, as it sounds, is a combination of the Traditional Pension Plan and Member-Directed Plan. If you are well established in your OPERS career and you are already in the Traditional Pension Plan, it is likely that it will be beneficial for you to stay in that plan. If you are early in your OPERS career, it is likely that you would find that the Member-Directed Plan is more beneficial for you. Those are generalizations and there is a lot that goes into determining which is the right plan for you, so please give us a call and we would be happy to discuss the options with you and help you make a decision based on your specific situation. OPERS Traditional Pension Plan Overview The Traditional Pension Plan is a defined benefit plan that provides a fixed monthly income in retirement (pension). At retirement, your pension amount is determined by a formula that rewards you for working longer. The formula uses your final average salary (the average of your highest 3-5 salary years) and your years of service. The benefit that is calculated with this formula is what your pension would be if you chose to only cover your life (single life). Meaning, you would get that amount for your lifetime and then when you pass away, your spouse would not get your pension. Instead, if you decide to do a joint life pension, your monthly benefit will be reduced but your spouse will get your pension when you pass away. Health Care Under the Traditional Pension Plan Retirees will need to sign up for health coverage and they will receive a monthly HRA (Health Reimbursement Arrangement) from OPERS. Signing up for health coverage can be a difficult and confusing task, so if you would like help, the Whitaker-Myers Benefits Team would be happy to help you! Employee & Employer Contributions Under the Traditional Pension Plan Employee Contribution: An employee's contribution rate is the same for all three of the OPERS retirement plans. Currently, OPERS members contribute the following percentage of their salary: 10% for local and state government employees 12% for public safety employees 13% for law enforcement employees Employer Contribution: Currently, employer contribution rates are: 14% for state government employees 14% for local government employees 18.1% for law enforcement or public safety employees For members participating in the Traditional Pension Plan and the Combined Plan, the employer contribution is used to fund the pension trust fund as well as the health care trust fund. If you retire from OPERS and you chose the Traditional Pension Plan, the employer/employee contributions do not impact your final benefit since your pension is calculated based on the formula that was discussed above (using your Final Average Salary and your service years). OPERS Member-Directed Plan Overview The Member-Directed Plan is a defined contribution plan where you contribute to an account that is similar to a 401(k) and you get to decide how your contributions are invested. In retirement, your benefit is based on the amount you contributed and the growth of the account. Again, this is similar to a 401(k) in the private sector. At retirement, if you decide that you want a monthly benefit, you do have the option of turning the account into an annuity. The calculation formula for members in the member-directed plan who choose to have a monthly benefit is their final account value multiplied by an annuity factor that is determined by OPERS. Employee & Employer Contributions Under the Member-Directed Plan Employee Contribution: An employee's contribution rate is the same for all three of the OPERS retirement plans. Currently, OPERS members contribute the following percentage of their salary: 10% for local and state government employees 12% for public safety employees 13% for law enforcement employees Employer Contribution: Currently, employer contributions for those in the Member-Directed plan is 7.5%. This is deposited into the member's employer contribution account and invested as directed by the member. A percentage of the remaining portion of the employer contribution amount (determined by the OPERS Board of Trustees, based on the OPERS actuary's recommendation) will be credited to a Retiree Medical Account, which is invested as directed by OPERS investment professionals. This is currently 4%. Health Care Under the Member-Directed Plan With the Member-Directed Plan, you do not qualify for health care when you retire but you will have a Retiree Medical Account (RMA) that you can use for health care expenses. This account is funded from contributions from your employer, currently 4% of your salary as previously mentioned above. The Retiree Medical Account investments are managed and directed by OPERS. The interest rate is tied to the performance of the OPERS Stable Value Fund. If the investment return is positive, interest will be applied in the same amount as the return but will not exceed 4 percent. If the investment return is negative, zero interest will be applied. In retirement, the RMA can be used for the payment of health care expenses including insurance premiums, co-pays, medical services, and even transportation to receive medical care. You can also use it to pay for limited amounts of long-term care insurance. If you were hired after July 1, 2015 you are fully vested in the RMA in 15 years. If you were hired prior to that, you are vested in 5 years. Investment Choices Under the Member-Directed Plan Remember that if you participate in the Member-Directed Plan, you choose the investments in your retirement plan account (similar to a 401(k)). You get to select from the funds that OPERS offers which include Index Funds and Target Date Funds. OPERS also offers a mutual fund-only Self-Directed Brokerage Account through Charles Schwab's Personal Choice Retirement Account®. This means that the Advisors at Whitaker-Myers Wealth Managers can be the Advisor on your OPERS Member-Directed Plan account. Once the account reaches $10,000, a Whitaker-Myers Advisor can get you access to the high-quality mutual funds that we recommend within your OPERS account. If you just switched your account over to the Member-Directed Plan and do not have a $10,000 balance yet, your Whitaker-Myers Advisor would be happy to help you in picking the OPERS funds that are available to you. If you are an OPERS member, the retirement plan you choose can have significant impacts on your retirement benefits. We know this was a lot of information, so if you still have questions, please give us a call and we’d be happy to help guide you through the decision. Everyone's situation is unique and that is why you should talk with an Advisor before making a decision on which retirement plan is the best option for you. You can meet our team of Advisors and reach out to one of us here.

Dave Ramsey, Rachel Cruze, and Chris Hogan did a free Livestream last Thursday evening entitled "What Now? COVID-19 And Your Money!" In case you missed it, you can still watch it on their website, here. The Livestream is definitely worth watching but I will do a quick re-cap of their presentations here. "What Now? COVID-19 And Your Money!" Dave Ramsey started off the Livestream sharing that for the first time in 30 years, everyone in their company worked from home. He was nervous. As a business owner he cares for his employees and their families and wanted to make sure everyone was taken care of. He talked about how this pandemic impactedll of us in one way or another and that for many Americans, this should be their "never again" moment. Meaning, if you were not where you wanted to be when this hit the economy (debt-free, emergency fund in place, etc) he recommended that this becomes your never again moment that causes you to make a change. Rachel Cruze talked about the value of doing a budget and talking about money with your spouse, if you are married. She shared that budgeting is not only something you should do while you are paying off debt, but that it's a great tool to help you to continue to win with money. Chris Hogan talked about saving for emergencies and retirement. One thing that he mentioned was that many Americans are afraid to talk to a Financial Planner because they are afraid their finances are too much of a mess. This stuck with me because as one of Dave Ramsey's Smartvestor Pros, we would never want people to be afraid to reach out to us. One of our core values is to "have the heart of a teacher" and that is because we enjoy helping and teaching clients! Dave came back out to wrap up the presentation and talked a little about their new platform, Ramsey+. Ramsey+ has 3 main features: "Learn", "Budget", and "Track". The "Learn" part is Financial Peace University plus other lessons including a budgeting lesson, Smart Money, Smart Kids, and The Legacy Journey. The "Budget" part is Everydollar. And "Track" is a place where you'll be able to track your progress through the baby steps. They are offering a free trial right now as a way to let people try it out since it is new. You can watch the Livestream and learn more about Ramsey+ on their website, here. If you have any questions about investing or retirement, or anything else that is specific to your financial situation please don't hesitate to reach out to one of us. There are 5 Financial Planners on our team and you can meet us and reach out to one of us here.

This pandemic has had an impact on all of us in one way or another and for some people, it may mean that they find themselves changing careers. If this is you, maybe it is a blessing in disguise. While it is not ideal to lose your job, the job loss may be what will push you towards pursing a career and passion that you have always wanted to pursue. Whether it is due to COVID-19 or another reason, if you find yourself in-between careers right now, here are some books and podcasts that will help equip you to make the most of this change. 7 Podcasts and Books For Career Changes The Proximity Principal by Ramsey Personality, Ken Coleman. - Ken says that 70% of Americans are unhappy with their jobs. In his book, Ken talks about the people and places you need to be connected to in order to get a job you love. You can read more about the book on Dave Ramsey's website, here. The Ken Coleman Show – on his show, Ken applies the principals he teaches in The Proximity Principle to people’s every day life and questions. He answers caller's questions and gives advice on how to find a job you truly enjoy. You can listen to his show and learn more on Ken's website, here. EntreLeadership - The EntreLeadership book is Dave Ramsey’s step-by-step guide for leading your business to success. The EntreLeadership podcast is a great listen for business owners and/or those that are looking to move up in their career. You will hear from leaders and teachers in many different areas of business. It will help you learn how to be a better business owner, leader, and employee. You can learn more about both the EntreLeadership book and podcast on their website, here. The 21 Irrefutable Laws of Leadership by John Maxwell – John Maxwell is a wonderful writer and teacher, especially when it comes to business and leadership. This book will be beneficial whether you are looking to be a leader or looking to grow as an employee. The Christy Wright Show – Christy is one of the Ramsey Personalities and she has a passion for business. On her show, she discusses all kinds of personal development topics. Her book and conference, The Business Boutique, are designed to help encourage women to make money doing what they love. You can learn more about her show, book, and conference on her website, here. Smart Passive Income with Pat Flynn – This is a great podcast for entrepreneurs. Whether you are starting a side hustle or a full-time business, this podcast will equip you with advice and strategies. The Side Hustle Show – This is another great podcast for entrepreneurs. The advice and interviews you hear will help equip you to start and/or grow a business. If you are changing jobs and you had a 401(k) with your previous employer, you are eligible to roll that over into an IRA. This can give you more flexibility and control over your money. We have an article that outlines your options for your old 401(k) and you can read that here. We are always happy to discuss your situation to see if it makes sense for you to roll over your previous employer's 401(k). You can meet our team of advisors and reach out to one of us here.

For many Americans, a large part of your retirement net worth is contained within your company 401(k) plan. Employer’s encourage this type of saving by not only giving you an easy payroll deduction option, so your savings is automatic, but they also provide you with a match, up to a certain percentage and occasionally will even make profit sharing contributions to that plan. Additionally, they have the fiduciary responsibility to select the investment options available to you within their plan. Many times those options are basic index funds or other mutual funds that have passed a screening process that they and their investment counsel have selected. This works well for the many participants but as investment knowledge, in general, has increased and the demand for customization has become more popular, plan sponsors have started to roll out something called a self-directed brokerage option within their plan. What is a 401(k) Self-directed Brokerage Option? For the right investor or those that have the professional help of an advisor, this could lead to improved results and increased customizations for a participant within their retirement plan. A typical 401(k) might include 20 different mutual funds and a suite of target date funds (e.g. mutual funds with a year on the end of their name – designed to do it for you based on your estimated date of retirement). With a self-directed option, the investment universe, with perhaps some employer restrictions still incorporated, will now become vastly larger. Take for example, an employer within our local community; Goodyear. Their plan has a few index fund options along with a target date suite and so for the novice investor this more than likely works out well. However, they also have a self-directed option through Charles Schwab. This means any mutual fund that is open and available through Charles Schwab, the Goodyear employee would have access to invest in, while still “inside” of the Goodyear 401(k) plan. This allows those employees to now pursue investment options, that perhaps can be more customized to their individual needs and preferences. So, if a 401(k) participant were to invest in the Small Cap Growth Index option through their plan using the Vanguard Small Cap Growth ETF (ticker symbol VBK) as our proxy, they would have experienced a return of 12.75% over the last ten years (as of 5/31/2020), before any plan fees. However if the participant would have pursued the self-directed option, utilizing Whitaker-Myers Wealth Managers, as their investment advisor, our small cap growth fund option is typically Brown Capital Management Small Company Fund (ticker symbol BCSIX) which has returned 17.28% over that same ten year time period. Of course, when utilizing an investment advisor, you would need to account for the cost of the advisor and we always note that past performance, while helpful in understanding a fund manager’s ability to find value in the market through their stock selection, is no guarantee of future performance. How to know if Whitaker-Myers Wealth Managers can help with your 401(k) self-directed brokerage option... If the self-directed plan is held through Charles Schwab (many are either held through Schwab, Fidelity or TD Ameritrade), Whitaker-Myers Wealth Managers can not only select the investment options for your plan but we can also rebalance, monitor, make changes, and give customized reporting on the balances in their plan. For the right investor, this may be very appealing. Should you be interested in determining if your plan has a self-directed option, please reach out to your Whitaker-Myers Wealth Managers financial advisor or call your plan Recordkeeper (whomever sends your statements) and ask if they provide you with a self-directed option. If so, should the plan custody those assets at Charles Schwab, we can start providing investment management on your plan by completing basic Schwab paperwork. Should your company provide the self-directed option, through TD Ameritrade, it is likely that Whitaker-Myers Wealth Managers, will be able to provide investment management on those accounts around the end of 2020, when Schwab’s acquisition of TD is complete. If you have questions, you can reach out to one of the Whitaker-Myers Wealth Managers Advisors, HERE!

If you are wanting to save money for your kids, the next question is always “what type of account should I open for them?” The answer depends on the goal for the money. If you want them to be able to use it for anything that they need/want (ie: house, car, etc) then you will likely want to open an UTMA for them. Here is an article that outlines all the details of an UTMA account. If the answer is that you want to help them pay for college, then you will want to look at an account that is specifically designed for that, such as an Education Savings Account (ESA). The Basics of an Education Savings Account (ESA) An ESA is an account that is specifically designed to save money in order to pay for education expenses. The money you contribute to an ESA is after-tax. It grows tax-deferred meaning that as long as the withdrawals are used for qualified education expenses, you do not pay federal taxes on the money. Qualified expenses include tuition, books, supplies, uniforms, room & board, computer equipment, and internet service Tax-free withdrawals also apply for elementary and secondary education expenses as well. So, essentially you can use the ESA to pay for kindergarten through college. The ESA account is opened for a child (beneficiary) that is under 18 and there is a custodian (typically a parent or legal guardian) that manages the account until the child needs to use the money for education expenses. Investment Options for ESA There is a wide range of investment options in an ESA. The money can be invested in any type of stocks, bonds, mutual funds, etc. What this means is if you have an ESA for your child, you can have that money invested in the same funds you use in your retirement accounts. Having the flexibility to pick the investment options is definitely a perk of the ESA. Contribution limits of ESA The contribution limit for the ESA is $2,000 per year per child. You can contribute to the account until the child is 18. Income limits of ESA There are income limits in order to be eligible for an ESA which means that the contribution into the ESA can only be deposited by individuals whose modified adjusted gross income (MAGI) is below a certain amount. This is subject to change but currently contributions start phasing out at $95,000 for those that file single, head-of-household, or married filing separately and they start phasing out at $190,000 for those that file married filing jointly. What if my child doesn’t use the money in the ESA? The money in the ESA has to be used by the time the beneficiary turns 30. If it isn’t, the money will be distributed and the earnings portion of the account will be taxed as income plus subject to a 10% penalty tax. If the beneficiary of the account does not plan to use any more of the money in the account for education expenses before they turn 30, you can transfer the account to another qualifying beneficiary. Qualifying beneficiaries include the beneficiary’s child, sister, brother, first cousin and others. Key Take-Aways The ESA is an account specifically designed to save money in order to pay for qualified education expenses. The annual contribution limit is $2,000 per year per child. There are a wide range of investment options for the money in the ESA. There are income limits in order to be eligible for an ESA. The money being saved into the account is after-tax but the withdrawals are tax-free as long as they are used for qualified education expenses. The money has to be used by the time the beneficiary is 30 and/or needs to be transferred to a qualifying beneficiary. Questions? We have 5 Financial Planners on our team that would be more than happy to discuss the specifics of saving for your child(ren)’s future. You can meet our team and reach out to one of us here!

Do you have a savings account for your child at the bank? If so, did you know that you could have that money invested and potentially earning much more than the interest rate that the bank offers? You can! Since savings interest rates at banks are typically pretty low, it is definitely beneficial to have the money invested instead. How to Invest for Kids The Uniform Transfers to Minor Act (UTMA) allows minors to receive gifts (i.e. money) and with the UTMA account there is an adult custodian, typically the parent or legal guardian, that manages the account until the minor is of legal age, usually 18, 21, or 25, depending on the state. This is likely similar to what you have at the bank; you opened an account for your child and you are the custodian, which means you are managing the funds until they are of legal age. The main difference between opening this account at the bank versus having it invested in a brokerage account is the performance. At the bank, you earn the interest based on the interest rate the bank is offering at the time. When it’s invested in a brokerage account you get to capitalize on the earning potential of the stock market by investing the money in mutual funds. How the UTMA Account Works In an UTMA Account, the money that is deposited into the account is an irrevocable gift to the minor, which means that the money has to be used for the child’s benefit. One difference between the UTMA and a college savings account such as a 529 or ESA is that the UTMA can be used for college but it doesn’t have to be. The money in the UTMA account can be used for anything that is for the child’s benefit. For example, this money could be used to purchase their first car or for a down payment on their first home. You do have to pay taxes on the growth of the UTMA Account, or the “unearned income” that comes from the interest and/or performance from the investments. However, that doesn’t happen right away because the taxes are applied on a sliding scale: The first $1,050 of unearned income in the UTMA is tax-free. The next $1,050 of unearned income in the UTMA is taxed at the child’s tax rate. Any unearned income above that $2,100 is taxed at the custodian’s tax rate. There are no withdrawal penalties. Once the minor reaches the legal age, they are granted full access to the money in their UTMA account. If a child applies for college financial aid, the money in the UTMA account does need to be listed as an asset on the FAFSA. Key Take-Aways To recap, here are the key take-aways of the UTMA Account: The money in an UTMA Account CAN be used to pay for college but it doesn’t have to be. It can be used for anything for the child’s benefit. Brokerage UTMA Account = the money can be invested. UTMA Account at the bank = savings interest rate. There are no withdrawal penalties. There is an adult custodian that manages the account until the minor is of legal age. Sliding scale for how unearned income is taxed. Questions? If you have questions about how to open an UTMA Account and/or want to discuss this more, we would be happy to talk with you. You can meet our team of Financial Planners and reach out to one of us HERE.

The COVID-19 pandemic has impacted everyone in one way or another. Unfortunately, one-way that some people are being impacted is by scams that have increased because the scammers know that people are more vulnerable right now. Here are some scams that are happening as well as some ways to avoid them. Stimulus Check As you know, the government has issued stimulus checks to many Americans. There has been a lot of confusion around this and scammers are taking advantage of that by trying to get people to hand over their bank account information. They may call pretending to be the IRS and/or your bank asking you to verify your bank account information so that your check can be deposited. Don’t fall for this! The IRS will use information from your 2018 or 2019 tax filing in order to deposit your check into your account. If you don’t have an account on file with them, they will mail the check to the last known address they have. The IRS will never call, email, or mail asking you to confirm your account numbers. If you have not received your check and think you should have, you can visit the IRS website. Phone Providers As some people are struggling to pay bills, scammers are using this as an opportunity to scare people. You may get a phone call saying your phone line will be shut off if you don’t follow the prompts. This is likely a scam so don't follow the prompts! Some people that have gotten a call like this are current on their phone bill. If you are concerned about your phone line, call the number you know is a legitimate number for them, which can be found on your monthly statements. Debt Reduction Scams As mentioned above, people are struggling to pay their bills right now and that opens up yet another avenue for scammers. If you get a phone call promising debt reduction techniques that sound too good to be true, it’s because they probably are! They will charge for their services and then you will likely not hear from them again. If you are struggling to pay your bills, many companies are offering hardship assistance so reach out to the credit card company, bank, or other lender individually. Dave Ramsey has a wonderful program, Financial Peace University, that has changed lives and helped millions of people save money and pay off debt. They are offering a free 14 day trial right now (for a limited time) and you can read more about that on DaveRamsey.com. Emails We know that we should never click links in emails if we are not sure who sent us the email. That has been true for a long time now. But recently, spam emails and links have been popping up more often. There are even scammers accessing people’s email accounts and sending out bad links. So, if you get an email from someone you don’t know, don’t open the link. If it is from someone you know but the message seems off, don’t click the link until you call them to see if they actually sent it to you. I received a couple emails from people I knew that said “I should have sent this to you sooner” and there was a link. I didn’t click it because I knew that was not actually from them. Coronavirus Test Kits and/or Updates There are at-home test kits being advertised that are not approved by the FDA. Be weary of emails or texts that are offering to sell test kits and/or giving coronavirus updates. Go to the trusted websites to get the updates. In Ohio, you can go to https://coronavirus.ohio.gov/wps/portal/gov/covid-19/home for updates. Donations Unfortunately, some scammers are even claiming to be a charity that is giving back in response to COVID-19. If you are giving to a new cause, be sure to do your research to make sure you are giving to a legitimate charity. And of course, never give donations in the form of cash, gift cards, or by wire.

The COVID-19 virus has changed our lives, at least for the short run, in impactful ways. As financial advisors, none more pressing than the changes it has created in regards to retirement planning and rules around retirement accounts. At least for now, these changes create unique opportunities in the year 2020 and we’ll certainly keep you up to date, if Congress decides to make anything permanent. During our last newsletter we talked about the fact that Required Minimum Distributions have been eliminated in the year 2020. That is important if you are someone over the age of 72. However, some of the other provisions could impact you regardless of age. Let’s take a look… Retirement Account Distributions Typically one needs to be age 59 ½ or older to be able to pull money from a retirement account (IRA or company sponsored retirement plan) however for the rest of this year (and retroactively for anyone that may have taken a distribution in 2020) you can a avoid the 10% early withdrawal penalty, on up to $100,000, if you meet one of the following two qualifications: You, your spouse, or your dependent is diagnosed with COVID-19. You have suffered financial hardships or consequences as a result of the pandemic. This would typically be someone who has lost or had their income reduced, not been able to work because of lack of childcare or a myriad of other reasons why someone could have had a negative financial impact. Realistically there are probably very few people that haven’t been financially impacted, even if minimally, by COVID-19. 401(k) Loans Participants in company sponsored retirement plans now have the ability to borrow at a much higher amount that historically has been allowed. Normally a plan will allow you to borrow up to 50% of your balance or $50,000, whichever is lower. However the CARES Act has increased that amount to $100,000 or 100% of your balance, which is lower. What Should I do? Dave Ramsey, America’s Voice on Money, always says, retirement plan distributions should only be used in the event that someone is trying to fend off foreclosure or bankruptcy and we tend to agree. Why is this? When you take a distribution from your retirement account you are satisfying a need today at the expense of your future. A $100 distribution today, at an 8% return, over 20 years means you actually took $466.10 from your future self. If you didn’t contribute again for another 5 years it would take a $146.93 deposit to make up for the unplugged $100 over the last five years. Many times, a retirement plan distribution can seem like an easy way to satisfy a current need when you can often satisfy that need another way. If you’re using it to make a payment on a loan – call the lender. Right now, many lenders are willing to waive a payment or two if you have lost your income. They learned in 2008, it’s better to work with a borrower than face the wrath of an angry government and public because you foreclosed, evicted or repossessed from too many clients. If you need income to survive – right now on OhioMeansJobs.com, which is a site hosted by Monster Jobs there are 116,135 jobs open in the State of Ohio. Many are probably not glamorous but if it’s the difference from pulling out your future retirement savings or rolling up your sleeves for a bit and doing something you may not enjoy, to keep your Retire Inspired Dream alive – I know what I’d be doing. I recently met with a young man, who works all day and spends his evening delivering pizzas for Pizza Hut. The classic gazelle intense Ramsey follower. When COVID-19 hit the fan he was furloughed but guess what, Pizza Hut was ready and willing to give him more shifts and he still has income to protect the four walls and we haven’t had to touch any of his retirement accounts. 401(k) Loans – When taking from a 401(k) you are paying yourself the interest back into your 401(k) account but you have unplugged an investment that, in many cases, has performed at a higher rate of return than the very low interest rate you are paying yourself. Not only that but you are unplugging the investment (for the purpose of the loan) at the very worst time because of point number 4. Depressed Values – Any distribution right now is more than likely being taken at a level that is far from the highs. As we saw during the last few weeks the stock market can jump back up just as quickly as it went down. An old investor adage is to buy low and sell high. Right now, for many people, they are most likely selling low to take a distribution, so in most cases it would be advisable to try and avoid the distribution or loan. BOTTOM LINE While changes are coming to the retirement landscape, our advice is to stay the course. Keep focused on your Baby Step and only use the CARES ACT changes should you be in a situation where a retirement distribution is unavoidable. Should you need to talk through your specific situation please contact your Whitaker-Myers Wealth Managers Smartvestor Pro today!