The Do’s and Don’ts of IRA Investing

The Do’s and Don’ts of IRA Investing

An Individual Retirement Account, more commonly known as an IRA, is a standard savings account approved by the IRS that grants significant tax advantages for users. While retirement is the most common way people use IRAs, it’s not the only way IRAs can be used. In this post, we explore the other ways IRAs can be used like for the down payment of a house, to cover college education costs, for medical expenses, as a tax-free gift to beneficiaries, as disability income, or even to purchase investment properties.

Getting Ready to Retire? Consider these 3 Tips to Successfully Transition into Retirement

Getting Ready to Retire? Consider these 3 Tips to Successfully Transition into Retirement

Today, the average American retires between age 62 and 65, with most people leaving the workforce at 63. If you’re nearing your mid-to-late 50’s, you may be starting to seriously consider when to retire and what steps you’ll need to take now to ensure you’re financially prepared when you do retire. Consider these 3 Tips to Successfully Transition into Retirement.

Understanding Your Life Insurance Policy: Term vs Permanent Life Insurance

Life insurance is an important component in a diversified financial portfolio. While it may be a difficult conversation to have with your loved ones, it’s an important and necessary one. We may not like discussing our own death but ensuring our families are taken care of and supported is paramount, especially for families with children. The first step is to understand which type of life insurance policy fits best with your situation. In this post, we explore the various types of life insurance policies including term and permanent options including whole, universal, and variable options.

The Primary Roles in Your Policy

Before diving into the various types of life insurance policies, let’s review the various roles associated with a life insurance policy. There are four primary roles: the insurer, owner, the insured, and the beneficiary. The company that provides the life insurance policy is the insurer. Typically, a plan participant is both the owner of a policy and the insured; however, this is not always the case. For example, a parent might be the owner of a policy, and therefore be responsible for premium payments, while the policy insures a child. The beneficiary is the person or entity who will receive the benefits upon the insured’s death. It’s important to ensure your family has enough life insurance to cover and support them in the event of a death in the family. For example, if you were to die tomorrow, would your current policy provide enough money for your spouse to cover the mortgage and/or pay for childcare in the event he/she will return to work? These considerations play into determining which type of life insurance is appropriate for you.

Understanding the Differences in Life Insurance Policy

What’s the difference?Term Life InsuranceWhole Life InsuranceUniversal Life InsuranceVariable Life Insurance


Coverage is purchased for a set time period; typically 5,10, 15 or 30 years known as “term.”Permanent coverage for life. Also referred to as “cash value life insurance.”Permanent coverage for life. Also referred to as “adjustable life insurance.”Permanent coverage for participant’s life.


Benefits are distributed upon death within the term coverage only. Term coverage is an insurance-only tool.Permanent coverage has an insurance and an investment/savings component.Permanent coverage has an insurance and an investment/savings component.

Offers more flexibility than whole life insurance.

Permanent coverage has an insurance and an investment/savings component. Variable life insurance allows participants to invest cash value on stocks and bonds.


Term life insurance caters to short term goals. It is the easiest and most affordable life insurance to purchase.Whole life insurance caters to long-term goals. Premiums are consistent throughout the policy and guarantee cash value accumulation.Universal life insurance offers the benefits of low-cost term life insurance combined with the savings element of whole life insurance. For participants unable to make whole life insurance premiums this is a good alternative.Variable life insurance is suitable for participants looking for higher growth potential by investing cash value in markets. Therefore, policy participants bear more risk than in other policies.


Pricing is determined based on several factors including health, gender, and age. Generally, women qualify for less expensive coverage plans than men. Participant plans increase in price with age.Premiums are significantly higher than term insurance. It’s advised to purchase whole life insurance at a young age to get lower premium costs.Universal life offers sliding premiums; lower prices during early-to-mid life and higher premiums during later life stages. Accumulated cash value may be used to cover premium payments.Premiums are significantly higher than term insurance. There are fees and charges associated with variable life insurance not associated with other policies.

Conversion Capabilities

Term insurance can be converted into a whole life insurance plan.Conversion may be possible based on plan specifications. Typically, conversions take place from term to a permanent policy not the other way around.Conversion may be possible based on plan specifications. Typically, conversions take place from term to a permanent policy not the other way around.Conversion may be possible based on plan specifications. Typically, conversions take place from term to a permanent policy not the other way around.

Investment Vehicles

Not applicable for term insurance plans.A portion of each premium payment is placed in a high interest bank account to accumulate value in a tax-deferred basis. Option to receive surplus savings as yearly dividends.Insurance company establishes set interest rate minimum. Excess earnings are applied to the cash value of a policy. The potential to earn more than the minimum crediting interest rate differentiates universal life insurance from whole life.Excess cash value accounts may be invested in mutual funds comprised of stocks and bonds with the goal of earning higher rates of returns. Full risks are comparable to typical market fluctuations.

Borrowing Capabilities

Not applicable for term insurance plans.Participants may borrow against the cash value, accumulated savings, of their permanent life insurance policy. Typically, interest rates are significantly lower and more favorable than current market rates.Participants may borrow against the cash value, accumulated savings, of their permanent life insurance policy. Typically, interest rates are significantly lower and more favorable than current market rates.Participants may borrow against the cash value, accumulated savings, of their permanent life insurance policy. Typically, interest rates are significantly lower and more favorable than current market rates.

Keeping Up with the Fiduciary Ruling

Keeping Up with the Fiduciary Ruling

On February 3rd, President Trump issued an executive memorandum requiring review of the previously instated Department of Labor fiduciary ruling. In the memorandum, President Trump tasked the Department of Labor to fully review the ruling to assess if it would ‘negatively affect’ investors ability to access retirement information, offerings, product structures, or related financial advice.

4 Financial Considerations Before Getting Married

Congratulations, on your upcoming marriage! Along with making wedding plans, there are many considerations to discuss with your soon-to-be spouse; one of the most important is financial planning. In fact, a 2016 study found that 31% of married participants reported arguing over finances at least once a month. The most common points of disagreement: major purchases, decisions about finance and children, a partner’s spending habits, and important investment decisions. Before you walk down the aisle, have an open and honest conversation with your spouse about your joint finances. Discuss current outstanding debt, retirement goals, and financial aspirations. Having these conversations upfront will help your marriage start on a clear path for financial success. To begin the discussion, consider these four financial topics:

1. Existing debts and loans. Take the time to fully understand each other’s current financial state. This includes reviewing common debt issues like student loans, car loans, credit card debt, or mortgage payments. When you get married pre-existing debt will stay in the debt holder’s name but it may significantly affect how both of you allocate your resources. In an ideal world, both people would head into a marriage with as little debt as possible. As couples continue to get married later in life, however, the reality is most newlyweds will enter into their union with pre-existing debt. Discuss the best way to work together to eliminate the debt. Additionally, consider future loans. Do you hope to apply for a mortgage in the next 5 years? If so, both of your credit scores will be used to assess eligibility. Work to pay your debts down and on time to improve your credit rating. Doing so will help you qualify for a mortgage at a competitive interest rate.

2. Budgets and financial planning. Next, discuss budgeting and financial planning. It’s important to lay out spending habits in the beginning to avoid frustrations. Typical problems arise when one person’s personal spending habits are more conservative than the others. One person might strive for frugality while the other is more of a spendthrift. Without discussing these issues upfront, newly weds can find themselves constantly arguing over spending. To start the budget process, sit down and establish spending limits in each category. How much money each month should be spent on groceries? Gas? Rent? Entertainment? Work together to find common ground and a workable budget for both people involved.

3. Retirement goals. Along with budgeting your expenses, you need to budget your savings as well. A general guideline is the 20/50/30 rule. This rule states that 20% of your income should be put towards savings and investments, 50% should be spent on necessities like rent and food, and 30% of your income should go towards discretionary spending. It can be tempting for young newlyweds to put off saving for retirement but the cost of doing so can be significant. The earlier you begin saving for retirement, the more compound interest can work for you. For an in depth example of the power of compound interest, check out our article on How to Save Your First Million. At TrueNorth Wealth we specialize in having the expertise to advise clients on the best tools to maximize wealth and retirement savings. From creating life insurance plans, to utilizing tax break strategies, to investing in bonds and mutual funds, our financial advisors can create a personalized investment strategy for your situation.

4. Tax implications. There are many financial benefits to getting married, one of them is the ability to file your taxes as either married filing jointly (MFJ) or married filing separately (MFS). Typically couples opt to file as MFJ because of the associated tax deductions and credits, like increased standard deductions, available under this filing. This increase can lead to significant savings for married couples with disparate incomes. Married couples are also entitled to give cash and property to one another without paying gift taxes. This can lead to substantial benefits in estate planning. Additionally, married couples who sell a property are granted $500,000 in tax-free profit, as opposed to the $250,000 limit for a single person. Again, this increase can be significant in terms of tax savings. These are just a few of the tax implications for married couples. For more information on tax changes associated with your upcoming marriage, contact your TrueNorth Wealth advisor.

TrueNorth Wealth is a financial and wealth management firm specializing in personalized financial planning to individuals and businesses. For a free financial consultation, contact us today.

Tips for Talking with Your Kids About Finances

Understanding finances and having a healthy relationship with money is vital to being a successful adult. And, yet, often children are not being taught important financial information about money from their parents. In fact, a 2016 T. Rowe Price survey found 71% of parents are reluctant to talk about money with their children. And only 22% of kids say they talk with their parents “frequently” about money. Having an open dialogue with your children about finances is important to prepare them for success in the future. As uncomfortable as it may be to discuss finances with your children, you need to do it. In today’s post we share specific tips for talking with your kids about the importance of saving for their future and utilizing smart investment tools and strategies.

  1. Introduce key concepts early. According to Beth Kobliner, New York Times bestselling author and member of the President’s Advisory Council on Financial Responsibility, children are capable of learning about specific financial topics like saving and spending as early as three years old. By beginning the conversation about money early, your children can form a better understanding about the relationship with money and satisfying needs and wants. It also helps put into context your own financial situation as a family. Perhaps a young family is working to pay off student loans from one of the parents or perhaps the family is choosing to move into a new home. Discussing basic tenants as to why certain decisions are made for the family can help the child begin to understand how money works. Certainly a three-year-old will not understand the intricate workings of a mortgage, but they are capable of understanding the importance of saving. This conversation will help kids understand the importance of delayed gratification and the idea of working hard and saving to purchase something in the future.2. Get them involved in the process. One of the first interactions kids are likely to have with money is in grocery stores or convenience stores. Talk to your children about what you’re purchasing and why those purchases are necessary. For example, you might explain that the grocery trip is specifically to buy food for dinner and that you are not there to buy anything else. You might also let your child help purchase the necessary ingredients. Give them $5 and let them see what the five dollars will buy to help cover dinner expenses. Let them choose between the more expensive name brand item and the generic, which item will they choose to buy? Introducing kids to how money works can help them understand commodities and how quickly money can be spent.
  2. Introduce the power of compound interest. Another great way to help children learn about investments and the power of compound interest is to teach them firsthand. Perhaps your child receives a weekly allowance for doing chores or receive money as a birthday gift. Let your child consider three options to use the money: 1. Save the money 2. Spend the money or 3. Invest the money. If your child decides to save the money, at the end of each month they earn $.01 for every dollar in their save jar. This cent represents the earned monthly interest in their savings account. Encourage them to keep adding to their savings account to cover a specific want or need. If your child decides to invest the money, at the end of each month they earn $.25 for every dollar in the investment jar. However, the investment jar may not be touched for a set period of time. The key here is to teach them how compound interest helps their money grow in investment vehicles. If your child decides to spend the money, the money is used and can’t be added to their accounts. Teaching children how and where money comes from, and how it can grow, will help them understand that there is not a limitless supply. If your children are older, say in their teens, you can apply this same lesson with real savings, checking, and investment accounts.
  3. Teach them about financial pitfalls like credit cards and high-interest borrowing. Older children need to be prepared to fight temptations to use credit cards and/or borrow high-interest loans. The key is to communicate what these financial tools are and explain the benefits and drawbacks of each. Certainly your children will use credit cards at some point in their lives, and credit cards can be very useful, but they should be aware to not overspend and to pay off balances each month. Likewise, discuss high-interest loans and what borrowing might mean for their future. Talk with your kids about their credit score and what this number means. Discuss how your children will pay for higher education costs and how interest rates will affect total repayment numbers. Again, the key is to have an open dialogue where children are taught how to utilize financial tools in a smart way.

For more information on financial strategies for your family contact our experienced financial advisors at TrueNorth Wealth.

Is it Time to Rethink Retirement?

Is the concept of retirement outdated? You know — the idea of working hard for 40+ years to retire to a life filled with tee time appointments and relaxation. While this idea may seem dream-worthy to some, to others this notion of what retirement should look like doesn’t align with how they want to spend their golden years. In today’s issue, we explore the idea of what retirement means to you and steps you can take to create the type of life you want to live during retirement.

The challenge of retirement. The current notion of retirement is to spend your early and mid-career years working extremely hard so that you can relax in your later years. Doing so means the majority of your working years are spent saving aggressively to maximize spendable income during retirement. This notion works well for some. For others, current retirement ideals equate to being chained to work seeking a light at the end of the retirement tunnel. Another concern is that a significant portion of the workforce aligns their self-identity with their work roles. For retirees, once that work title is no longer there, it can be a challenge to distinguish one’s place in society. In fact, the New York Times challenged the current idea of retirement in a recent article; finding traditional retirement paths can lead to increases in clinical depression and physical illness by 40-60% respectively.

Work towards the work you want to do.  Instead of giving up work completely during retirement, perhaps this time should be spent pursuing work you find meaningful and impactful. That might mean spending time working on passion projects or volunteering with nonprofit organizations or pursuing entrepreneurial pursuits you’ve wanted to pursue for a while now. An article from the Wall Street Journal explores how retirees can find their purpose after leaving the workforce saying, “It isn’t enough to just lounge in your hammock reading books when you retire. You’ve got to throw in some activities that make you feel good about yourself—the way your job did. The trick is to figure out what those are when your employer isn’t telling you what to do anymore.”

Alternately, instead of staying in a job you hate and simply enduring until retirement rescues you, the same New York Times article referenced above suggests pursuing work you find enjoyable — even if that means taking a pay cut. The beauty of creating sound financial planning from a young age means you have the freedom to take risks during your later career and retirement. While taking a lower paying job might mean you aren’t able to contribute as much to your retirement plans as before, perhaps you’ll stay longer in that position and delay pulling from retirement accounts. As the article says, “Don’t underestimate the effect of another decade of compound interest at that point in your life. It’s a huge deal.”

What does ‘retirement’ look like for you? The revolutionary idea here is that retirement can be what you want it to be. Like everything else in life, there is not one correct path for retirees to take; whether you want to spend retirement never working again or whether you want to spend it doing work you find meaningful. From a financial standpoint, the goal of retirement is simple: to ensure you have enough money to maintain the lifestyle you want to live during retirement. At TrueNorth Wealth our investment team ensures you’re taking the necessary steps to accomplish this goal. Our financial plans revolve around effectively managing investments in retirement saving vehicles like 401(k)s and IRA plans, efficient estate management, tools to lower taxable income, and more. Whether your goal in retirement is to spend your days doing meaningful work for causes you care about or spending your golden years on the golf course, we’re here to help you achieve your retirement dreams.

TrueNorth Wealth is a financial and wealth management firm specializing in personalized financial guidance to individuals and businesses. For a free financial consultation, contact TrueNorth Wealth.

The Difference Between 529 College Savings Plans and UGMA/UTMA Custodial Accounts

As parents we want to give our kids the best possible head start financially. For many of us that means turning to investment vehicles designed specifically with minors in mind; two of the most popular are the 529 Education Savings plan, most commonly referred to simply as the 529 plan, and the saving account provided by the Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA). Both of these options offer ways for parents to begin saving for their children and for the accounts to eventually transfer ownership to the designee. In today’s post we explore the pros, cons, and specific functions of these two popular accounts to help you choose the right one for your child.

How does the 529 College Savings Plan work?

Perhaps the more well-known of the plans discussed here, the 529 college savings plan is a savings account designed by the IRS specifically to help parents begin saving for their child’s college costs. Used in all fifty states, the 529 plan is a tax-advantaged plan sponsored by state agencies and educational institutions. There are generally two types of variants to the 529: (1) prepaid tuition plans that allow plan sponsors to lock in the current cost of tuition at a participating University in their state and (2) a more general college savings plan that allows users to use funds to pay for tuition at any university or college in the country, not just participating state institutions. The first option, a prepaid tuition plan, is typically backed by the participating University. Plan sponsors purchase units or credits at the University in advance for the student. The second, more general option allows the student to choose an out-of-state higher education institution. This option however is riskier than purchasing prepaid tuition units as the fund is comprised of investments like mutual funds, bonds, and money market accounts. Like similar savings plans, this variant in the 529 is not backed by state agencies or educational institutions, and is subject to market fluctuations.

What about a savings plan through UGMA/UTMA?

UGMA/UTMA accounts, often called ‘custodial-accounts’, are quite different from 529 savings plans, despite both serving as savings vehicles for minors. The UGMA/UTMA is a vehicle used to create a general savings plan for an underage person with the funds available for withdrawal upon the minor reaching a certain age. Funds can be withdrawn for a variety of reasons, i.e. the money is not limited to covering college tuition. These funds can be used to cover the costs of expensive benchmarks young people face like the cost of buying a car, a down payment for a house or to cover wedding costs. It’s important to note that once the minor turns 18 or 21, the specific age is determined by state, the minor will have full access to the funds and can do whatever he or she pleases with the money. The minor could just as easily squander the funds as use it for a responsible need. As is common with custodial accounts, money invested goes through the “kiddie tax”. This means invested funds are not taxed at the parent’s income level. Instead a portion of the funds – up to $1050 as of 2016 – is not taxed at all, subsequent funds are taxed at a relatively low ‘kid tax rate’. Parents can often use this investment vehicle to lower their taxable income.

So what are the differences?

What’s the difference?529 College Savings PlanUGMA/UTMA
Custodial Account

Who can set the account up?Anyone can contribute to a child’s 529 college savings plan, including parents, grandparents, aunts, uncles, friends, etc.Any adult can set up a custodial account for any child under age 18.

How can the funds be used?There are two variants to the 529 plan: a prepaid tuition plan and a general college savings plan. The first allows the parent to ‘pre-purchase’ credits or units of tuition at current market prices from local participating state universities and colleges. The latter allows parents to more generally save funds that can be used for any college or university in the U.S. Unlike custodial plans, 529 college plans are controlled solely by the parent in entirety.The fund can be used to cover any costs associated with the child. Once the child turns 18 or 21, depending on state law, the child gains full access and control of the account.

How is the plan invested?Prepaid tuition plans are not invested. Rather, they purchase predetermined tuition units from an arrangement made by the State and local participating universities and colleges.
General college savings plans are comprised of mutual funds, stocks, and bonds. Often the risk ratio is adjusted the closer the child gets to college-age.Primarily through stocks, bonds, mutual funds. Due to their custodial and protective nature, these plans are not permitted ownership of higher risk investments like stock options or buying on margin.

How is the plan taxed?Contributions made from residents in the state the plan originated may be eligible for state tax deductions. This is not the case for people no longer living in the same state as the plan origination. Some states even offer matching for contributions, similar to how 401(k)’s work. Additionally, there is no income tax upon withdrawal as long as the funds are used for qualified educational expenses.As of 2016, up to $1050 of the account earnings are tax free. The next $1050 will be taxed at the ‘kid rate’ of 10% federal tax. Any further earnings will be taxed at the parent or guardians tax rate.

How does each plan affect financial aid qualification?Funds are considered part of the parents assets and not the students. This means financial aid qualification is more likely than in custodial accounts.Custodial accounts are considered an asset of the child they are set up for. Therefore, they are counted heavily against financial aid. Approximately 20% of these assets will be expected to be used toward funding a student’s education in any given year.

Treatment of unused fundsIf your student decides not to attend college or receives a scholarship, the fund can be transferred to another beneficiary for higher education purposes like to a younger sibling or for a parent to finish schooling.Once the participant reaches age 18 or 21, depending on statutes by state, the child will have full access to use the funds however he or she wants

Have additional questions on what savings plan is best suited to you and your family? Our experienced financial advisors at TrueNorth Wealth are more than happy to help you create a personalized financial plan for your family.