Three Financial Blind Spots That Can Cost You Money

Greetings!

Update on One Wealth Planning

We successfully transitioned 95% of our clients over. Thank you for your continued support and trust. No matter how many times I say it, it isn’t enough.

3 ways I see people leaving money on the table:

1.) Money sitting in a checking or a low yield savings account.

Your checking or savings at your main bank account is likely earning a low rate, if anything at all.

The national average is somewhere around 0.5% on a savings account.

For years, I’ve used CapitalOne performance savings account which is at 4.25% currently.

Recently, I partnered with Flourish High Yield Savings account.

Highlights:

• 5% yield
• Free accounts, no fees
• Unlimited transfers
• $5mil of FDIC for single and $10mil for joint account compared to $250,000 and $500,000 of FDIC at most banks
• Flourish is able to do this as they partner with several banks behind the scenes to get higher FDIC coverage
• Offer business accounts at the same rate of 5% - where CapitalOne is 2.12% for their business savings. This has been a nice selling point for me. It's been incredibly hard to find a good business savings account that earns a high yield.
• 1 downside, Flourish doesn’t allow you to open multiple sub-savings accounts. Where I like CapitalOne is I can have multiple accounts under 1 login and label them such as Emergency Fund account, Tax account, Vacation account, etc for those who like to keep things organized:)
• Flourish did say they have this on their road map for perhaps Summer of 2024
• If you are a current client and would like access to Flourish, please let me know and we can set it
• up for you

2.) Former Employer Retirement Plans

If you have changed jobs over the years, you may have left an old retirement plan at your former employer.

Two things that could go wrong:

The investment allocation you selected at the time you signed up could not be the best allocation for you at this time.

Sometimes your former employer will move your money to a Traditional IRA and rather than keeping the money invested, they move it over as cash. This could mean years go by, possibly decades, with your money just sitting there in cash not earning anything.

3.) Current Employer Retirement Plans

Two things that can go wrong:

Typically, you are automatically enrolled in a target date retirement fund. This target date fund could be fine or could be an entire decade off in terms of when you want to retire.

Not getting your full employer match – this can be obvious in that you are not contributing enough or not so obvious in that you are contributing too much! Let me explain...

Contributing too little: The obvious one is contributing too little. For example, your employer may offer a match of up to 5% and you are only contributing 3%. Contributing too much: For 2024, the maximum amount you can contribute is $23,000 per year or $30,500 if you are over 50.

Income = $320,000 % contributing = 15% By July, you’ll hit the $23,000 limit.

Here is why that can be a problem. Employer match = 3% Your employer may ONLY match during periods that you are contributing to the plan By July if you earn $160,000, they match 3% on the $160,000 then stop because you have maxed out the plan and are no longer contributing! 3% Match on $160,000 = $4,800 match

Instead, spread your contributions over 12 months Income: $320,000 % contributing = 8% - this should spread your contributions from January – December Match = 3% on full income of $320,000 = $9,600

You just doubled your match from $4,800 to $9,600.

Now for the bad/good news.

The bad news is you just read through this and went and worried that you were doing this wrong.

The good news is your employer may have a clause in their retirement plan that addresses this problem. Essentially if you do max your plan out early and lose out on the match, they will do a true-up and make you whole. Now go ask your employer if they do a true up on your plan and then sleep easy if the answer is yes. If no, you need to fix some things.