For decades now, I’ve been studying personal finance. It’s gotten to the point that sometimes, I don’t know if I have anything new to add. In fact, one my goals this year is to organize the 2 million words I’ve written… maybe cut it down to a million words that cover all the major points.
(Don’t worry I intend to keep a back-up of my articles around if you are curious about my money thoughts on March 8th, 2007… and I know you are!)
After all of that, that title was surprise, even to me. I think the answer is, “Yes, I do need a Certified Financial Planner.” However, it’s probably not for what most certified financial planners typical do. I have a few advanced questions.
I’ll cover the advanced question that sent me down this rabbit hole in a minute. For now, let’s consider a simple possible conclusion. If I can benefit from a CFP, there’s a strong chance you can too… or maybe not.
Why See a Certified Financial Planner Now?
The simple answer is that my finances were easy. There were a set of relatively basic rules and we had the income to cover them. For example, we maxed out retirement accounts and invested them well. We bought rental properties and built and empire. I’m extremely good at saving money on all sorts of expenses from food to clothes to electricity (solar panels).
It’s all worked out very well, much better than we could have expected…
…and that’s the “problem”
Our finances have gotten fairly complex with the diverse number of income streams we have. It’s made me start to look at things that many people perhaps should not focus on. One of those things is income tax. As our money continues to compound and snowball, we may reach higher tax brackets. I don’t mind paying my fair share, but I don’t want to give them any more than I have to. I’ll play the game that they created to pay less taxes if I can. Also, if the government is going to act like it currently does, well I don’t want any part in funding this absurdity – or any more than I legally have to.
- Donate to charities that I believe in – in the best possible way.
- Leaving behind a financial family legacy
- Maximizing the amount of sunsets, museums, and any other wonderful things I can fit into this short life
Details of the Financial “Problem”
I keep putting “problem” in quotes because it’s a situation at least 99% would love to deal with. The issue is about optimization. If we make some mistakes with our money, we’ll likely still be in tremendous shape. However, we’ll limit those three things of above and have less money for them than we could have.
I’ve already mentioned my biggest concern. It’s taxes.
Many of the personal finance writers who retire early have saved up a lot of money when they were young and are living frugally off of the investments generated by those savings. They earn a low income, but it’s enough through their frugal activities like travel hacking, geographic arbitrage, and owning a home in a low property tax area. This low income can often be so low that they pay very little in taxes.
(Note: Some criticize them for not paying their fair share, but I’m not going to pass judgment. Don’t hate the players, hate the game, right?)
This is a tremendous plan for them, but it’s not likely to work for us.
My wife’s pension alone is substantial already. There’s no tax trick to make it look lower. We have investment properties and the income from those could be substantial as well. We may be able to reinvest that money in upgrades or further real estate, so that income doesn’t get too substantial. However, we’d like to be able to use that money for things like college expenses.
The biggest thing coming down the road is our investments. We’re 43 now and after years of saving for retirement in those accounts, they are doing quite well. We might not touch them for another 30 years, meaning that they’ll be very big when it comes time to take them. Many are in TSPs, SEP-IRAs, and Rollover IRAs (from 401Ks), so we’ll have to pay taxes on them then. We could be in a high tax bracket.
Most people who retire earn less in retirement, so their tax bill on deferred taxes is less. I have a feeling ours could be more. A certified financial planner could give us a second educated view into all this.
One thing that intrigues me is that the taxation of qualified dividends is very low – potentially even zero. It’s quite possible that it’s better to hold stocks (including ETFs) outside of our tax-deferred accounts. It looks like we’d only pay 15% maximum on the income from these dividends vs. the 28% (or more) that we’d have to pay when it comes out of tax-deferred accounts.
All of this goes into main financial question of the year (so far): Is it okay not to save for retirement?
Of course, we’d still be saving, but doing it in a way that potentially allows us to pay fewer taxes in the future.
This all me a case of me overthinking things. (I have a tendency to do that.) In this case, getting a second opinion can only be seen as a positive thing, right?
And that brings me to my original thought, “If I can benefit from a certified financial planner, there’s probably a good chance you can too.”