Monthly Minute Archives - Shepherd Financial - Woodstock, Georgia

Monthly Minute – March 2023

Kyle Ray — Fri, 24 Mar 2023 14:41:54 +0000

SECURE Act 2.0

On December 23, 2022, Congress passed the Securing a Strong Retirement Act of 2022 (Secure 2.0) as part of the Consolidated Appropriations Act of 2023, which President Biden signed into law.

With 92 loosely related sections and various effective starting dates for multiple changes, there’s a lot to digest. Our Monthly Minute for March will focus on critical highlights that may impact a financial plan.

Required Minimum Distribution (RMD) start dates.

If you were born between 1951 and 1959, your RMD begins when you turn 73. If you were born in 1960 or later, your RMD starts when you turn 75.

The bump in age effectively extends the tax planning window for potential Roth conversions, capital gains harvesting, accelerating taxable distributions, etc.

Another way to delay RMDs is to consider putting a portion of your IRA into a qualified longevity annuity contract (QLAC) that would enable you to delay taking RMDs on that portion until age 85. This strategy’s new limit is $200,000 (inflation-adjusted).

Employer matches can now include the Roth option.

Employers can now match in a Roth. Consider if a Roth account at your employer would better suit your tax planning.

SEP or SIMPLE IRAs can now include Roth options.

This change is a nice perk for sole proprietors or gig economy workers interested in a SEP retirement account or a SIMPLE IRA for their business.

Overfunded 529 Plans can now be transferred to a beneficiaries Roth IRA (with limitations).

Further guidance may follow on this particular benefit. Still, as things stand, the account needs to be open for at least 15 years, the beneficiary needs earned income, the rollovers are subject to the Roth IRA limits, and there is a $ 35,000-lifetime limit per beneficiary.

The conditions severely limit the impact, but we like that this alleviates some of the fear of overfunding for college. And it encourages establishing a long runway for your child’s savings to compound. For example, if you open the account when your child is born, and they begin working at age 15, they could realistically roll the $35,000 by age 20. Thus a modest investment could become a million-dollar retirement account by age 65 ($35K at 7.8% for 45 years).

RMDs are no longer required for employer Roth accounts.

This makes them more like Roth IRAs, eliminating the need to roll over employer accounts to avoid the RMD.

More lax penalty-free withdrawals for public safety workers.

This change includes some jobs in the private sector. Those public safety workers over 50 and separating from service may be eligible to access retirement funds penalty-free.

The terminally ill can now access retirement funds early (penalty free).

This access could apply if your doctor expects you to pass away within the next 7 years.

Qualified Charitable Distributions (QCDs) $100K now indexed to inflation.

For those charitably inclined but interested in a charitable gift annuity, a charitable remainder unitrust, or a charitable remainder annuity trust, you can also make up to a one-time $50,000 contribution as a QCD.

Business owners planning to add a retirement plan should consider reviewing all the new changes more thoroughly.

Owners now must consider things such as the new Starter 401K, decreased hour requirements for employee participation, changes to non-elective contributions to SIMPLE plans, etc. Sole proprietors may also be able to set up a plan for the prior tax year.

Catch-up contributions for retirement plans have increased for those 60-63.

You may make increased catch-up contributions to your 401(k) for $10,000 or 150% of the applicable catch-up limit from the prior year (whichever is greater).

If you have a SIMPLE plan, you may make increased catch-up contributions of $5,000 or 150% of the applicable catch-up limit for the current year (whichever is greater).

This is by no means a complete and exhaustive list, but if you’ve stuck with me, you now are aware of some of the major changes that the SECURE Act 2.0 brings for retirement plans. If you have more questions about the details of these changes or any planning topic, contact your financial planner.

Did You Know?

Do you know that the SECURE Act 2.0 is 130 pages long but only a small part of the 4,000+ page Consolidated Appropriations Act of 2022.

Quotable

“The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”

― Will Rogers

Connect with Us

If you like what you’ve read and would like to get more helpful advice in the future, click this link to subscribe to our newsletter.

The post Monthly Minute – March 2023 appeared first on Shepherd Financial - Woodstock, Georgia.

Monthly Minute – February 2023

Lee Hyde — Wed, 22 Feb 2023 04:22:54 +0000

Love and MOney

February is often called “the month of love.” With Valentine’s Day right in the middle of the month, it makes sense.

But what does love have to do with money or financial planning? I’m glad you asked.

I’ll answer with a question. How would you describe your relationship with money?

Do you love it? What does that even mean? Let’s explore.

Love Money?

I think we all know someone or several people we would describe as loving money. You know the type. They will do anything to climb the ladder. Lie, cheat, and/or steal to move up in the world and make more money.

While I think it’s true to say this person loves money, that’s not who I’m thinking about. I want to go deeper, more subtle.

A wise man once said: “Whoever loves money never has enough; whoever loves wealth is never satisfied with their income.”

If someone asked you if you had enough money or you made enough money, what would you say? And an even better question is why did you answer the way you did?

I don’t want to guilt people into feeling bad about where they are or how they think about money. I simply want to start a discussion. To get you to think outside the box.

I’m reading a book right now (for the second time) called “The Ruthless Elimination of Hurry” by John Mark Comer. It is such a great book and I would highly recommend it.

In it, Comer talks about a lot of things, namely how the culture of Western civilization and America especially glamorizes the idea of more, busyness, and accumulation.

So if your initial answer to my question about having enough money was “Heck no, there’s no such thing!” there’s a good chance you’ve been heavily influenced by our standard way of living.

And if that’s working for you, no need to keep reading. You probably won’t like what I’m going to say.

On the other hand, if somewhere deep down in your gut, you know something is off with how we currently live, keep reading.

Unconscious Money Habits

Most of us go about our days, months, and years without giving much thought to how we spend our money, how we save our money, or even how we make money.

It’s so easy to “set it and forget it.” This makes life easier.

Your credit card bill is paid off every month.
A contribution is made to your 401(k) plan every time you get paid.
Your mortgage, utilities, or any number of bills are paid automatically.

All of this and more happen without you having to think about it. For the most part, that’s a good thing.

It prevents the possibility of missing a payment because you got busy. It helps you save money for the future without you having to remember to do it every month.

While there are good things to this, is it possible that completely removing ourselves from most, if not all, of our financial decisions can have some negative consequences?

And by not thinking about how our money is used, is it possible that we’re more likely to be influenced by the barrage of advertising that is directed at us from all directions?

If we’re being influenced by the powerful advertising all around us, do you think it’s possible we will ever get to a place of contentment, where we can say we have enough?

The answer to that is no.

How Much is Enough?

This is a question that I can’t answer for you. Only you can. I don’t think it’s an easy question, but I think it might be the most important question you can ask yourself going into financial planning.

It’s always asked in one way, shape, or form, but normally as a way to convince you to save more and invest more money so your advisor can make more money.

I’m hoping to get the opposite response. It’s a bit counterintuitive from a business perspective, but I’ve had many of these discussions myself and am not looking to build a massive firm with a ton of clients.

My hope is to get people to realize that their time is more valuable than their money. If they will define “enough” in their terms and not based on what their neighbors are doing or what their family expects of them, they will be able to find more time for the things that matter and ultimately live a happier life.

So take some time and think about how you would define enough. Try and block out all the noise telling you what you want or need.

If you want to take this exercise seriously, it means you’ll need to stop comparing what you have with what your neighbors have, tune out all those ads being thrown your way, and get off social media especially.

Once you’ve done this, you’re on your way to living a much more content life.

Did You Know?

Do you know the difference between happiness and contentment? Happiness is an experience, usually hallmarked by positive thinking, joy, pride, and even laughter. Contentment, on the other hand, is a long-lasting feeling accompanied by peacefulness, gratitude, and satisfaction.

Quotable

“Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.”

– Benjamin Franklin

“It is not the man who has too little, but the man who craves more, that is poor.”

– Seneca

Connect with Us

If you like what you’ve read and would like to get more helpful advice in the future, click this link to subscribe to our newsletter.

The post Monthly Minute – February 2023 appeared first on Shepherd Financial - Woodstock, Georgia.

Monthly Minute – December 2022

Lee Hyde — Fri, 16 Dec 2022 17:28:18 +0000

end-of-year Checklist

This month we finish up our quarterly conversation around end-of-year planning.

The end of the year is a great time for reflection. It’s also a good time to review and audit some things in your financial life. We’ve put together a list of things you might want to consider before the end of the year.

Review Your 401(k)

This also includes any other employer-sponsored retirement plan (SEP IRA, SIMPLE IRA, 401b…etc).

Having a good understanding of your plan is important. Some things to look for:

What are you currently contributing?
What is your employer match?
What is the vesting schedule?
Do you have a Roth option?
Does your plan offer after-tax contributions?
Does your plan offer in-service conversions?
Does your plan offer automatic escalation?
What are your investment options?
- What are you invested in?

If you don’t know this information, you can ask your HR person or just request a summary plan description (SPD) of your plan.

While you’re reviewing, you may want to increase your contributions. Ideally, you will be able to max out your plan at some point. The maximum 401(k) contribution amount in 2022 is $20,500 for those under 50 and $27,000 for those 50 and above.

Review Your Cash Flow

The end of the year is also a good time to review your spending.

Many people have the luxury of not having to worry about what they spend each month. While this is, as I mentioned, a luxury, it can also lead to potential trouble in the future.

Most people in the US are not saving enough money. This is largely due to them not prioritizing saving and just saving what’s left over.

By taking time at the end of each year to review your spending, you can make adjustments if needed.

One question we ask our clients is what they love or enjoy spending money on. This may seem silly initially, but it’s useful. When you take the time to review your spending, you can see in black and white where the money is going.

The goal of this review isn’t to make anyone feel bad. It’s to raise awareness and create space for adjustments.

If you enjoy spending money on travel, but you didn’t do any traveling this year, it might be helpful to see if there are any areas you are spending money that don’t provide the joy of travel and look to cut back.

Whether you make changes or not, doing a review of spending at least once a year is helpful.

Move Your Money

Reviewing your emergency fund is another checklist item that we lumped in with this one. We recommend having at least three to six months’ worth of your monthly expenses in an emergency fund.

But where should you hold that cash?

Many people today, still have their cash in a savings account at a big bank. These big banks offer virtually no interest for borrowing your money. In fact, as of today (12/14/22), BoA is paying 0.01% on cash in their savings account.

Contrast that with an online savings account which is where we would recommend holding your emergency fund. The interest rates on cash in an online savings account today (12/14/22) range from 3.00% to 4.03%.

The money being left on the table is mind-blowing!

Do yourself a favor and go to bankrate.com and enter your zip code and how much cash you have. They will tell you the best rates available and give details on each. I’d recommend doing some research into the banks listed.

Ideally, you want one with no account minimums in case you have a major expense and need cash. You don’t want any unnecessary fees. Most also provide enough monthly transactions to make them a great place for emergency savings.

Consider Doing a Roth Conversion

This won’t apply to everyone, but for the right person, this could be valuable.

First of all, a Roth conversion is where you convert (or move) money from your traditional IRA or 401(k) into a Roth IRA or 401(k).

When you do this, the amount you convert becomes taxable income to you in the year you do the conversion.

Some reasons a Roth conversion could be worth considering are:

You recently retired, but haven’t reached the point of required minimum distributions (RMDs).
- This could reduce the amount of money in your traditional IRA, therefore reducing your potential RMDs.
You had less income this year than normal and are in a lower tax bracket.
- You could potentially convert up to the next marginal bracket.
You don’t have a major need for your IRA and plan to leave it to your kids.
- Converting allows you to pay the taxes now versus in the future. You will be able to pass on those assets tax-free.

As a reminder, any amount that you convert will be taxable. You should consult your CPA before doing anything though to see how it will impact your tax situation.

Additional Items

There are many things that you can do at the end of the year to put yourself in a better spot moving forward. We don’t have time to cover them all.

Below are a few more things you might want to do before the year is over as well:

Get a free copy of your credit report.
Check to make sure your beneficiaries are correct on all your accounts and insurance policies.
Check your flexible spending account balance
- If you have a balance left, you most likely will need to use this before the end of the year or you may lose it.
Consider harvesting losses in your taxable account
- This will reset your basis in your account but can be helpful. We recommend consulting your CPA and/or financial planner/advisor.
Review debt and strategies for paying it down.

Consider Hiring a Financial Planner/Advisor

Lastly, I’d not be doing my job well if I didn’t say that if you don’t currently have a financial planner, I would recommend you consider working with one.

I’m not saying you aren’t smart enough to do this on your own. In fact, if you’ve read this far, you probably are. The issue is, do you have enough time to do so, and do you want to?

I think everyone can benefit from working with a good (emphasis on good) financial planner (emphasis on planner). Finding a good one can be a scary or difficult proposition.

Another barrier I hear a lot from people is that they don’t think they can afford to work with a planner or they don’t have enough money to work with one. Both aren’t true.

There are so many different ways to work with a good planner now. Some charge hourly, while others have a monthly/quarterly subscription-type model. Some charge a standard asset under management fee, while others charge a one-time planning fee. Some offer multiple options.

The process below is a good place to start if you’ve never thought about it before.

Do some research
- Figure out what you want/need.
  - Do you want someone who will meet with you in person or would you rather meet digitally?
  - Do you want someone who will be your partner from now to and through retirement?
  - Do you want someone that will take some time to understand your situation, build you out a plan, and then you take it from there?
  - Do you have a pretty good grip on things, but just want an extra set of eyes on what you’re doing?
  - Do you want someone who just gives you investment advice once or twice a year?
- Ask people that you trust if they’re working with someone.
  - Ask them what their experience has been like and if they would refer them.
Pick a couple/few and interview them
- Now that you have an idea of what you’re looking for, go and meet with a few to see if they would be a good fit.
Follow up with any questions that you may have.
Discuss with your spouse or someone with experience you trust.
Trust your gut, make a decision, and move forward.
Engage fully and be open to feedback. Client input and engagement is vital to reap the benefits of using a financial planner.

Did You Know?

60% of Americans plan to rely on Social Security as their main source of income in retirement. As of April 2022, the average monthly SS benefit was $1,666/month.

Quotable

“I believe that the biggest mistake that most people make when it comes to their retirement is they do not plan for it. They take the same route as Alice in the story from “Alice in Wonderland,” in which the cat tells Alice that surely, she will get somewhere as long as she walks long enough. It may not be exactly where you wanted to get to, but you certainly get somewhere.”

― Mark Singer

The post Monthly Minute – December 2022 appeared first on Shepherd Financial - Woodstock, Georgia.

Monthly Minute – November 2022

Kyle Ray — Thu, 10 Nov 2022 18:30:25 +0000

I Bonds

This month we continue our conversation around end of year financial planning by discussing an investment opportunity that has grown in popularity lately, but is still relatively unknown, I Bonds.

Series I Savings Bonds (often called I Bonds) are government savings bonds issued by the US Treasury that offer inflation protection. They are guaranteed to maintain purchasing power for up to 30 years.

Due to the recent spike in inflation, I Bonds provided as much as 9.62% (annualized) over the previous six months. This led to so many people flooding the Treasury Direct website to purchase them last week that the site (antiquated in its design) could not process orders.

What is an I Bond?

Here are a few of the critical features:

They are tax-deferred federally, tax-free locally, and interest is earned for 30 years.
They’re sold in increments of as little as $25 and up to a maximum of $10,000 per person per year when purchased electronically.
- - An additional $5,000 is available only using a tax return and receiving a paper issue.You can then convert these paper bonds to electronic.
They earn a fixed rate and a variable rate (inflation-adjusted).
- - As of November 1st, the fixed component is now 0.4%.
  - The variable rate as of November 1st is 6.89%.
  - This rate resets in May and November every year.
They’re not redeemable in the first year.
There is a penalty of three months of interest if redeemed before year five.
- - Example: If you cash in your bond after two years (24 months), you will only receive the first 21 months worth of interest.
The interest can be tax-free if used for education expenses, pending income limitations.

While the above information is a good overview, we would encourage you to read more from sources linked throughout the writeup.

So, who should buy them?

I Bonds should always be evaluated as an option for the fixed income portion of your portfolio and are a suitable default place to stash emergency funds. However, many folks are herding into them based on a recent inflation adjustment, which may represent a misconception or a short-term mindset. They are an incredible asset, but you can only expect to earn the fixed rate offered (which, before this recent reset, was 0%) in real terms over your holding period.

One crucial difference between I Bonds and Treasury Inflation-Protected Securities (TIPS) is that I Bonds cannot decline in value. TIPS have a floor of getting back our par value, but the previous gains on inflation can decline. Another way to say this is that I Bonds do not take interest rate risk. TIPS may have a higher fixed rate (as of today, the 10-Year TIPS rate is about 1.5%).

When inflation was low and stable for a decade, I Bonds appeared to have been a secret. Part of the blame goes on Advisors, who, unable to earn fees on them, were unaware that they existed. Given the high, virtually ‘risk-free’ nominal yields, they are in the headlines now. Will investors continue to maximize their I Bond purchases if inflation subsides? They probably should if they do not mind navigating the website independently.

In summary, I Bonds can be a useful investment for just about anyone who owns any sort of fixed income position. They may be a little bit more of a hassle to purchase, but can provide some good long-term value to many portfolios.

Did You Know?

The first Series I Savings Bond was issued in 1998. The artwork on the original I Bonds honored people like Helen Keller, MLK Jr., and Albert Einstein to name a few.

Quotable

“If you find yourself stimulated in any way by your portfolio performance, then you are probably doing something very wrong. A superior portfolio strategy should be intrinsically boring”

–William J. Bernstein

Connect with Us:

If you like what you’ve read and would like to get more helpful advice in the future, click this link to subscribe to our newsletter.

The post Monthly Minute – November 2022 appeared first on Shepherd Financial - Woodstock, Georgia.

Monthly Minute – September 2022

Lee Hyde — Wed, 14 Sep 2022 12:36:37 +0000

Timing the Market VS. Time in the Market

This month we wrap up our quarterly discussion by contrasting two very different approaches to investing; timing the market versus time in the market.

Crystal Ball Method

Timing the market is the act of placing bets on what you think the market will do. These bets are placed with the allocation of your money in your investment accounts.

If you think the market is going to do poorly, you will move to cash or “safer” investments. If you think the market is going to do well, you will be more aggressive with your investments. Often taking on more risk than your tolerance or capacity for risk would allow.

Timing the market can be blatant or subtle. In my opinion, based on what I’ve seen, the subtle form is the most common, though it’s often influenced by the blatant form.

Let’s discuss both below.

Blatant Timing

First, let’s acknowledge that there are people out there who blatantly claim they know what the market is going to do. Most of these people are prognosticators and/or pundits on TV or writing articles.

Almost all of the time these prognosticators are wrong, but because life moves fast and our attention spans have gotten small, we often don’t care to go back and point it out or it just doesn’t matter anymore because the next person has predicted something else that they are “100% locked” in on.

I will admit that oftentimes what they say is compelling. They seem so confident. They may have even been right in predicting a big event in the past. This makes what I’m going to say next even harder.

Whether you’re reading an article or watching something on tv or (even worse) on TikTok, please take a second to try and think about what their goal is. Is it really to give you, some random person, good advice? Or could it be to get clicks, views, or subscribers to create revenue for themselves?

This is pure speculation on my part, but I’d guess that less than half, maybe less than 25% of the people screaming market prognostications from the rooftops take their own advice. At least not with any significant amount of their net worth.

The blatant concept of timing the market is dangerous in my opinion because the advice given influences the subtle form of timing.

Subtle Market Timing

This happens on the consumer side. This is you and me. This form of timing actually leads to changes in how people invest their money.

The reasons given for making changes vary from political to “my friend said.”

Below are some paraphrased reasons I’ve been given over my career by potential or actual clients for making or wanting to make changes to their investments:

“Biden and the Democrats are going to run the country into the ground.” – Reason for moving to cash.
“Trump and the Republicans are going to ruin the country.” – Reason for moving to cash.
“My friend said to buy XYZ stock and he’s rich” – Reason for buying a stock
“My friend is in the ABC industry and he said we are headed for a recession” – Reason for selling and moving to cash.
“We still haven’t seen the bottom, we’ve got further to go before I get back in.” – Reason for staying in cash.
“The market is going to crash” – I have heard this every year since 2015.

I don’t want to minimize anyone’s fears or feelings. Our emotions and convictions should be weighed heavily when coming up with an allocation (mix of stock and bonds). They should not however drive decisions in the heat of the moment.

Dangers of Market Timing

Is it possible you could be right when you decide to go to cash or take on more risk? Yes, of course it is.

The trouble is, you have to be right twice. You have to know when it’s going to go in the direction you predicted AND you have to know when it’s going to move back in the other direction.

The likelihood of being right twice in a profitable manner is not very high in my opinion and experience.

So what happens when you’re wrong? Well, to put it simply, you lose money. Actual money or money you would’ve had if you hadn’t stayed in cash.

Dalbar Inc does an annual analysis of investor behavior they call their QAIB (qualitative analysis of investor behavior). This illuminates the dangers of trying to time the market.

For example, in their recent study, they compared the performance of the average equity fund investor and the S&P 500 over the last 30 years (1992-2021).

The average equity fund investor earned 7.13%, and the S&P 500 earned 10.65%. So how much money did the average investor miss out on?

If both started with $100,000 and did not invest anything else, the average investor would have $789,465 after 30 years invested. The $100,000 in the S&P 500 would have grown to $2,082,296 over that same period.

That’s a difference of $1,292,831.

It goes without saying, but we always have to say it, past performance doesn’t guarantee future results. I do believe the market is pretty efficient though and it’s tough to beat consistently.

Time in the Market

Time in the market is pretty self-explanatory, but it’s not always the easiest thing to do.

When things start to get choppy or volatile, our natural reaction is to do something. That’s okay. Our brains are fascinating and fight or flight has protected us for a long time.

Thankfully we’ve come a long way and while that part of our brain is still useful, it’s not as needed when it comes to most of our daily lives now. That is especially true when it comes to investing.

The premise behind “time in the market” is that by not making any rash decisions and letting your money ride the natural ups and downs of the market, you will do better long term.

The above is with the assumption that you have a long-term strategy and an investment policy statement (IPS) either between you and your planner/advisor or for yourself if you self-manage to guide your decisions.

Where’s the Proof?

There have been many studies done on market performance. These studies are vast and vary in their focal points.

One that I find very interesting and sheds some light on the market timing vs. time in the market discussion is the performance of a portfolio based on missing the best and worst days over a particular time period.

It’s pretty amazing to see what missing just a few days over twenty years can do to your returns.

One study showed the S&P 500 returns over the past 3 years (as of Feb 2022). If you stayed in the market the whole time, your 3-year average return would’ve been 17.1%.

If you missed just the 10 best trading days over that same period, your average return would’ve been -2.38%. Miss the best 20 days and your return would’ve been -10.97%.

If you had $100,000 invested and stayed invested, you’d have $160,572 at the end of the 3 years.

If you missed the best 10 days, you’d have $93,028 after 3 years.

Lastly, if you missed the best 20 days, you’d have $70,568.

While this isn’t a perfect study (nor is the Dalbar study), both show that staying invested, even when it’s hard, is beneficial in the long run.

In Conclusion

Nobody can prevent you from making decisions on your investments. Only you have that power.

I feel strongly that trying to time the market is a form of gambling. It’s betting on something you have no control over nor is predictable.

So if you can’t realistically time the market, what should you do?

I would recommend the following:

Start with a financial plan. This should drive all of the financial decisions you make. Not just your investing decisions.
Have an investment policy statement (IPS) that guides your investment decisions.
Be wary of where you get the information that leads you to making decisions.
Don’t make any rash decisions that are emotionally driven (easier said than done).
Put some guardrails in place to prevent potential emotional decisions (as I said above, easier said than done).

Lastly, I would recommend you find someone who understands what those investments are for (this is typically a “who” not a “what”) and who will (with your permission) hold you accountable to what you’ve shared is most important and always point you back to that.

Did You Know?

The 10 best trading days of the last 20 years all happened in March/April of 2020 or during a 5-month period from the end of 2008 to early 2009.

All of them happened during a time when most investors would be fleeing to “safety” if they were trying to time the market.

Quotable

Ask yourself this question: ‘Will this matter a year from now?’

–Richard Carlson

Connect with Us:

If you like what you’ve read and would like to get more helpful advice in the future, click this link to subscribe to our newsletter.

The post Monthly Minute – September 2022 appeared first on Shepherd Financial - Woodstock, Georgia.

Monthly Minute – August 2022

Lee Hyde — Tue, 09 Aug 2022 13:03:53 +0000

How are Your Investments Taxed?

Ever wonder what role taxes play in your investing? Do you know how the accounts you’re investing in are taxed?

You’ve probably heard the terms “pre-tax” and “tax-free” used at some point in your life. You’ve probably also heard the terms 401(k), IRA, and Roth IRA.

Do you know what they mean?

Many of you reading this will feel pretty confident, while others will have no clue.

That’s the thing about the financial world though. There are so many terms and acronyms that it’s hard to know it all or even most of them.

My goal in writing this is to share the three most common ways people save/invest their money and how it is taxed. I’ll also share some pros and cons of each.

Pre-Tax: Traditional 401(k) or IRA

The term pre-tax means that the money you save will be invested, as it says, pre-tax. That amount will be deducted from your taxable income dollar for dollar.

You will not have to pay any taxes on what you’ve invested until you start taking distributions in the future.

Example: If you make $100,000 and you save $10,000 pre-tax into your 401(k), you will reduce your taxable income by $10,000. It will be as if you made $90,000 in the eyes of the IRS.

If you do this for 30 years and get a return of 6%, you will have over $830,000 (compound interest is pretty awesome) in your 401(k). You will not have paid any tax on the gain over that 30-year period.

You will have to pay ordinary income tax on every dollar you take out.

Pros:

Reduce current income dollar for dollar.
Pay no taxes on dividends, interest, or capital gains while the money is invested.
Typically offered with employer match for 401(k)s.

Cons:

Pay ordinary income rates on distributions for retirement.
10% penalty if you need to take money out before age 59.5 (with some exceptions).
There are limits on how much you can contribute.
- Pre-tax 401(k) for 2022 – $20,500 if you’re under 50. $27,000 if you’re older.
- Pre-tax IRA for 2022 – $6,000 if you’re under 50. $7,000 if you’re older.
There are limitations on who can contribute based on your income and whether or not you have access to a workplace retirement plan.

Things to consider:

What is your current marginal tax rate (tax rate on the next dollar earned)?
Does your employer offer a 401(k)?
- If so, is there a match?
If you’re close to retirement, what do you expect your expenses to be?
- Do you have other sources of income when you retire? How will they be taxed?
Will you need to spend the money from this account in retirement?
- If not, how will this impact your beneficiary’s tax situation in the future?

Post-tax: Roth 401(k) or IRA

The money saved in a post-tax account is the opposite of pre-tax. You get no current year deduction for money saved. After that though, you will never pay taxes on the money in that account again.

Example: If you make $100,000 and you save $10,000 post-tax into your Roth 401(k), you will still be taxed on the full $100,000 of income.

Like the previous example, if you do this for 30 years and get an average annual return of 6%, you will have over $830,000 in your Roth 401(k). You still will not have paid any tax on the gain over that 30-year period.

Any money that you pull out in the future will be tax-free.

Pros:

The money you take in retirement will be tax-free.
Pay no taxes on dividends, interest, or capital gains while the money is invested.
Sometimes offered as an option with employer 401(k)s.

Cons:

No deduction for contributions.
10% penalty if you need to take money out before age 59.5 (with some exceptions).
There are limits on how much you can contribute.
- Roth 401(k) for 2022 – $20,500 if you’re under 50. $27,000 if you’re older.
- Roth IRA for 2022 – $6,000 if you’re under 50. $7,000 if you’re older.
There are limitations on who can contribute based on your income.

Things to consider:

What is your current marginal tax rate (tax rate on the next dollar earned)?
Can you contribute directly to a Roth IRA (income based)?
If you’re close to retirement, what do you expect your expenses to be?
- Do you have other sources of income when you retire? How will they be taxed?
Will you need to spend the money from this account in retirement?
- If not, how will this impact your beneficiary’s tax situation in the future?

Taxable: Individual or Jointly Held

The money saved into a taxable account goes in post-tax. In other words, you receive no deduction. While the money is invested, you will pay tax on any interest, dividends, or capital gains you receive.

Lastly, when you pull the money out, you will have to pay taxes again depending on how long you’ve held the investment.

If you’ve held the investment for more than 1 year, you will pay long-term capital gains rates. See below.

If you’ve held the investment for less than a year, it will be considered a short-term capital gain and taxed as ordinary income.

Pros:

Liquidity. There are no penalties for taking money out of your taxable account before age 59.5.
- You can usually have the funds you need in as little as two days (the amount of time it typically takes for a trade to clear and cash to be available).
No limits on contributions
- You can save as much as you want into a taxable account. This is a great place to save a lot of money.
Only taxed on the gain and some of that gain can be tax-free (see “Did You Know” below).
When a taxable account is passed on to your children they get a step-up in basis.
- This means any gain in the account will not have any tax owed on it and the new basis will be reset to the value at the date of death (or alternative date of death).

Cons:

Often the least tax-efficient place to save of the three options.
- No deductions or tax deferrals from the government.
Can add unwanted additional income during pre-retirement years.
- This is especially true if mismanaged or a lot of the money is invested in active funds or traded frequently.

Things to consider:

Have you maxed out your pre and post-tax accounts?
How long are you planning on the money being invested?
Do you have any short to mid-term need for the money being invested?
Will you be passing some of this money on to your heirs?

Did You Know?

There is a 0% long-term capital gains rate? In 2022, a married person filing jointly will pay no tax on their LT capital gains if their income is below $83,350. That number is $41,675 for a single filer.

Quotable

“Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.”

— Johann Wolfgang von Goethe

Connect with Us:

If you like what you’ve read and would like to get more helpful advice in the future, click this link to subscribe to our newsletter.

The post Monthly Minute – August 2022 appeared first on Shepherd Financial - Woodstock, Georgia.

Monthly Minute – June 2022

Lee Hyde — Tue, 07 Jun 2022 21:46:23 +0000

Give, Serve, and Be Happy

This month we continue our discussion around money, time, and happiness. Is there a way to spend your money and time that will bring you more happiness or joy?

The short answer is yes. At least temporarily. Keep reading below as we dive into the how.

Give it Away

A wise man once said, ‘It’s better to give than to receive.” On the surface, this seems counterintuitive. How could giving be better than getting?

If you watch kids opening presents on their birthdays or around Christmas, you’ll think this statement is crazy. That is if you only focus on the kids opening their presents.

If you zoom out though, you’ll see what He meant in saying “it’s better to give than receive.” Look at the faces of the people who have given the gifts.

The grandparents who spent weeks thinking about what to get their grandbabies. Then they grabbed something extra they saw while shopping that they knew little Johnny or Suzy would love.

Or watch the mom or dad watch as their child opens the gift they’ve been waiting to give since they first heard them mention it. Or the trip to Disney they’ve been saving for, for over a year.

Better yet, watch the little kid, who even though they asked for 20 toys themselves while shopping, is so proud of the toy they picked out for their friend. Look in their eyes as they watch with great anticipation their friend open their gift.

When it’s present time at every little kid’s party I’ve been to (and that’s quite a bit with an 8 and 4 year old), you will hear the kids say almost in unison “open mine first!”

There has to be something to the thought of it being better to give than to receive.

Is There Any Proof?

There have been numerous studies on generosity and happiness. All that I’ve found seem to have the same consensus, that giving is better than receiving.

In one study, professors Tobler and Fehr from the University of Zurich split participants into two groups. Both groups were given an equal amount of money every week for four weeks.

One group was asked to make a public pledge to be generous with their money and the other group was told to spend it on themselves.

A lot was tested, but the biggest takeaway for me was that ALL of the participants who performed an act of generosity viewed themselves as happier at the end of the experiment.

So it seems that the giving of our money does make us happier. What about our time?

Serving, Volunteering, and Happiness

Let me start this section with a couple of requests.

First, think of the last time you had nothing to do. What did you do? Sleep, read a book, binge watch a Netflix show, play golf…etc.

Next, think of the last time you went out of your way to volunteer to help someone or a group of people. Maybe you passed out meals at a homeless shelter, helped out the foster community, taught underprivileged kids a skill…etc.

Now try to remember how you felt after each of those experiences? Which one left you feeling happier? My guess is the time you spent helping someone else left you feeling better than the time you spent on yourself.

Please don’t take this as me saying we should never do anything for ourselves. I just want to illuminate the fact that when we spend our time on others, it’s not just the others that benefit.

My guess is you’ve either said or heard someone say something like this: “I got more out of that than they did.”

I know I’ve said that. In fact, one of the best things I got to do when I played professional baseball was visiting children’s hospitals. It was heartbreaking seeing those little kids sick, but it was also such a joy to have the opportunity to brighten their day. I left every single time though saying “I got more out of it than they did.”

Seeing how much it meant to them, meeting their parents, and hearing their stories was so inspiring to me. I can’t think of anything I’ve done for myself that can replicate how I felt leaving those hospitals.

More Proof?

Just like with money, there have been many studies done on volunteering and its benefits. The findings span from confirming that volunteering makes people happier to volunteering extends your life.

One study found that volunteering does make one happier. The Journal of Happiness Studies examined data from almost 70,000 people from the UK over nearly 20 years. The participants were asked questions about their volunteering habits as well as about their mental health.

People who did volunteer were more satisfied with their lives and in better overall health. This study also found that those who volunteered frequently experienced greater benefits.

This also found that happier people tend to spend more time volunteering, but that you don’t need to be happy to benefit from volunteering.

The study put a dollar amount on the value of volunteering. They found that for a person earning an average middle-class salary, volunteering would be like getting an additional $1,100 per year.

Another study found that elderly people who volunteer had a 44% less mortality over 5 years than those who didn’t. This study also found that those who volunteered at two or more organizations had a 63% lower mortality than those who did not volunteer at all.

The study factored in many things such as health, age, health habits…etc.

What Now?

As I mentioned earlier, I’m not trying to convince you that you can’t spend any of your time or money on yourself. My goal is to get you to just think about how you spend both.

If you fast forward 20 years and look back, would you say you spent them both well? Or would you say that you wish you’d spent them better? Spent them more wisely?

None of us are going to be perfect and we all have things we probably spend too much money on. Mine are golf and food.

I do think it’s a good practice to step back occasionally and take inventory of where we’re spending both our time and money. I’d encourage you to do that.

If you’d like someone to guide you through that process, please connect with me. These conversations are the most fun for me.

Lastly, the acts of giving and serving will add happiness to your life, but as I mentioned above, it’s only temporary. I believe there’s only one way to remove the temporal lid on joy and happiness and His name is Jesus. I’d also be happy to talk to you about this as well.

Did You Know?

People making between $100,000 and $500,000 are the least charitable in terms of the percentage they give. That group on average gives 2.9% of their income. In contrast, the group making less than $50,000 gives on average 8.4% of their income.

Quotable:

“There are many people who can do big things, but there are very few people who will do the small things”

– Mother Teresa

Connect with Us:

If you like what you’ve read and would like to get more helpful advice in the future, click this link to subscribe to our newsletter.

The post Monthly Minute – June 2022 appeared first on Shepherd Financial - Woodstock, Georgia.

Monthly Minute – May 2022

Lee Hyde — Tue, 17 May 2022 14:00:00 +0000

Valuing Time and Money

Which is more valuable? I don’t think there is a simple answer to this question.

If you ask a person in their 90s who is comfortably retired, they will most likely tell you that time is more valuable.

If you ask a teenager or someone in their early 20s, they will most likely say that money is.

If we polled all Americans aged 25-65, my guess is most people would ultimately say time is more valuable than money if really pressed on it.

If my guess is correct, why don’t we live like it?

What Is Time Worth?

This is a great question and a difficult one to answer. The difficulty in answering this question makes answering the first question so hard.

Ashley Whillans book, Time Smart has some good thoughts on the matter. If any of this interests you, I’d recommend taking the time (pun intended) to read it.

In her book, she poses a dilemma to get us thinking about how we value money and time. In this dilemma, she sets up two scenarios that are the same in all ways but one.

In scenario 1, you do five hours of work to help a colleague and they give you tickets to see your favorite band. You also do fifteen hours of work for another colleague and they give you tickets to see another band that is pretty good. Both concerts are on the same night at the same time and you can only see one.

In this scenario, which concert would you go see?

In scenario 2, you paid $40 for tickets to go see your favorite band. You also paid $200 to see a pretty good band on the same night.

Which concert are you going to in this scenario?

It was found that most people would go to see their favorite band in the first scenario, but the other band in the second scenario. But, why?

It’s easier to quantify the loss of money versus the loss of time. Also, “we are more sensitive to small losses of money than small losses of time.” pg. 51 – Time Smart.

What Else?

One thing that applies to almost everyone is that we are overoptimistic about our future time. This applies in both the short-term and long-term.

In the short term, we agree to things in the future (say next week) believing that we will have time to accomplish or do them. This tends to be exaggerated when we are currently busy. We believe (wrongly, most times) that we will have more time in the future.

The long-term is even more prevalent in my opinion though. Let me explain by asking if you’ve said or heard someone say any (or all) of the following statements.

I’ll travel more when I retire.
I’ll spend more time with my kids/family when I make partner.
I’ll go on a date with my spouse again once the kids are out of the house.
I’ll start saving/giving when I’m making more money.
I’ll be happy once we get our new house, car, boat…etc.
I’ll pay off my credit cards when I get my bonus.

There are so many scenarios where we over assume not only how much time we will have in the future, but also the decisions we will make.

I make this mistake often when I say “I’ll start my diet on Monday.” If you’re wondering, I’m still waiting for next Monday…haha.

What’s The Point?

I’m hoping to get across a couple of things.

The first is that we aren’t promised tomorrow. I’m not saying to quit your job and move across the globe, but just to be more mindful of how you spend your time.

To use some of the examples above, why do you have to wait until you’re retired to travel? Why not do it now? You may not be able to do a month-long trek across Europe, but there are beaches, mountains, rivers, and lakes all within roughly 4 hours of home (metro Atlanta).

Take a shorter, less expensive trip. It’s been proven that spending money on experiences brings much more happiness than spending money on things. It doesn’t have to be a lot of money either. So start planning that trip.

Why do you have to start saving and/or giving once you’ve got or are making a lot of money? This is one myth I really wish I could break in the financial planning world. Too many people feel like they have to be rich to work with a financial planner or be making a ton of money to give or save.

Pick a percentage and just start doing it. As your income grows, so will the amount that you give and save.

The last example I will use from above is the most enticing one. It’s the biggest lie we let ourselves believe. “I will be happy when I have (enter a thing or position).”

I heard Ron Blue say once, “If you aren’t happy with what you have, you won’t be happy with what you want” and it’s stuck with me ever since.

This is so true and we all know it deep down. We’ve all experienced wanting something so badly that we could hardly take it. Even if it was as a kid. Maybe it was a toy or video game console as a kid. Or maybe as you got older, it was a new relationship or job.

We dreamt about it, thought about it all the time, and may have even prayed for it. Then we got it. And it was great! For a little while, then it wasn’t new anymore. A newer toy or video game came out. Maybe that relationship or job wasn’t as great as you thought it was going to be.

Whatever the reason, the initial happiness faded. Now we were looking to the next thing to bring us happiness.

Why Do We Believe The Lie?

I’m not a psychologist, but I’m going to take a stab at it.

The first reason, in my opinion, is because we remember the initial happiness we experienced when we got the last thing we wanted. We all know what it’s like to get something new and exciting.

That new car smell, the butterflies from starting a new relationship, and the satisfaction of earning that new position are all great things. Why wouldn’t we want them?

The second reason, in my opinion, is that we live in a time where we essentially have access to anything we want whenever we want. We have the internet in our hands at all times.

With that comes ads everywhere we look. They aren’t just on billboards, magazines, and newspapers now. Companies spend millions of dollars paying for access to data so they can target you and me specifically based on our interests.

That’s scary for multiple reasons, but I’ll leave it at that. The point is, every time we look at something on our phone, we are being convinced that we need that new thing. Whatever it may be.

The third reason, and I’ll stop with this one though I know there are more, is comparison or “keeping up with the Joneses.” Another way to say it that we might not like to hear is jealousy.

That same phone we carry everywhere with us also holds all our social media accounts. We all know that social media is nothing but a highlight reel of someone’s life that doesn’t accurately portray reality, yet we all fall victim to being enamored by it.

“The Joneses are off on another tropical vacation again. Look how clear that water is. I wish we traveled like they do.”
“Their family seems so happy, why can’t we be happy?”
“Look at their brand new pool they added to their already gorgeous home. I wish we had a house like that.”
“Their kids are always so well behaved. My kids won’t ever listen to me. I’m such a bad parent…”

These are the thoughts and lies that go through our heads as we scroll on Instagram or Facebook. These lies lead to discontentment with what we have and make us desire something we may not even really want to try and fill a void that wouldn’t be there if we didn’t worry so much about what other people had.

I could say a lot more about this, but I’ll save that for another time. Who knows, maybe I’ll write a book about it.

So Which Is It, Time Or Money?

I’m sure you’ve been able to pick up that I tend to lean towards time being more valuable. For me, I’m willing to trade time spent working (which would lead to more money) for time with family, lunches with friends, serving somewhere, and yes, the occasional round of golf too.

I do believe that money is important as well. Most people need a certain amount of money to be able to truly enjoy the value of their time. Once you reach that level the decision gets more difficult.

In the end, it’s a decision we all have to make for ourselves. I do think it’s a question worth asking though. Which do you value more?

Let me know which you value more and why in the comments.

Did You Know?

The average American spends 5.4 hours on their phone daily. 13% of millennials spend over 12 hours on their phone daily!

Quotable:

“Most men think they are simply here on earth to kill time and it’s killing them!” – John Eldredge – Wild at Heart

Connect with Us:

If you like what you’ve read and would like to get more helpful advice in the future, click this link to subscribe to our newsletter.

The post Monthly Minute – May 2022 appeared first on Shepherd Financial - Woodstock, Georgia.

Monthly Minute – March 2022

Lee Hyde — Wed, 09 Mar 2022 14:58:59 +0000

Maximize 2021 Contributions

As we are approaching Tax Day (April 18th), many people find themselves scrambling to get everything ready for their CPA.

Some have had their taxes done for a month now. Some choose to file their own taxes. And still others already know they’re planning on filing an extension and will worry about it come October.

As you get ready for tax time, you may be wondering if there is anything you can still do to reduce your tax burden.

You’re in luck, there is!

Traditional IRA

A traditional IRA (individual retirement account) is a retirement savings account that is set up at a financial institution that allows you to make tax deductible contributions that grow on a tax-deferred basis.

You can still make a 2021 IRA contribution up until you file your taxes for 2021.

For individuals under 50, you can put up to $6,000 in either a traditional (pre-tax) or Roth (post-tax) IRA. If you’re 50 or older, that number is $7,000.

If you’re married, you can potentially put away $12,000 (under 50) to $14,000 (50+) in an IRA.

How Does This Help My Taxes?

Every dollar that you put into a pre-tax IRA reduces your taxable income by that same amount.

For example: Let’s say you’re married, under 50, self-employed, and your AGI (adjusted gross income) is going to be $150,000.

If you and your spouse both max out a traditional IRA, you will reduce your AGI amount by $12,000. Now your AGI would be $138,000.

Based on 2021 tax rates, this would save you $2,640 in taxes with the added benefit of knowing you just saved $12,000 for your future.

Health Savings Account (HSA)

Another way to accomplish the same goal (reducing previous year taxes) is to fund your HSA for 2021.

As we’ve covered before, not everyone has access to an HSA, but if you do, this is a great option.

For 2021, the maximum amount an individual under 55 can contribute to their HSA is $3,600 with the family cap being $7,200.

For those 55 and older, the individual max amount is $4,600 with the family cap being $8,200.

All money contributed to an HSA is treated the same as the traditional IRA above. You receive a reduction in income for every dollar you contribute.

For more information on HSAs, click here.

What about Roth?

You can still contribute to a Roth IRA for 2021 up until you file your taxes as well. The contribution limits are the same as the pre-tax IRA.

The major difference is that you will not get a tax deduction on your 2021 return. The Roth IRA is a post-tax savings.

The benefit to the Roth IRA is that you will get tax-deferred growth and won’t have to pay taxes later when you take the money out (after 59.5).

There is no concrete rule on which is the better place to save, but it is often said that the lower your tax bracket now, the more beneficial a Roth is. The opposite is that the higher your tax bracket now, the more beneficial a traditional IRA is.

You can also save into both a Roth and traditional IRA. The $6,000 limit is still the same between the two accounts combined.

Did You Know?

There are limitations on who can contribute directly to a Roth IRA and who can make deductible contributions to a traditional IRA. They are generally based on your income and access to an employer sponsored retirement plan.

Consult your financial planner, CPA, or do some research before making any decisions for yourself.

Quotable:

“Dear IRS, I am writing to you to cancel my subscription. Please remove my name from your mailing list.”

– Snoopy

Connect with Us:

If you like what you’ve read and would like to get more helpful advice in the future, click this link to subscribe to our newsletter.

The post Monthly Minute – March 2022 appeared first on Shepherd Financial - Woodstock, Georgia.

Monthly Minute – February 2022

Lee Hyde — Wed, 16 Feb 2022 18:01:48 +0000

Investment Assessment

Successful investing, in our opinion, is done with a long-term focus.

We know there are many ways people choose to invest their money. This write-up isn’t here to tell you which is good or bad (though we may share our thoughts on the topic another time).

This month, we want to share some things we believe will give everyone a better chance at success. Having a process on how you review your investment accounts is the best place to start.

Where To Start?

Carl Richards recently said: “portfolio design only matters to the degree that it influences your behavior.”

The first place to start is having a good understanding of your tolerance for risk and selecting a portfolio to match. Hopefully, you’ve done this step before, but if not, you should start here.

Many places have what are commonly called risk tolerance questionnaires. All financial planners will have you fill one out before investing your money.

That’s just part of the equation though in our opinion. Below are some additional things to consider that we believe will help you determine your ideal allocation (investment mix of stock vs bonds).

How did you respond to previous market corrections (March of 2020 or 2008)?
What is your time horizon (how long until you need the invested assets)?
How often do you check your portfolio?
How often do you check the market or watch market-related news?

The answers to these questions along with your risk tolerance score from an assessment will go a long way in helping determine how much risk you’re willing to take.

As mentioned above, hopefully you’ve already done the initial step in the past. Even if you have, it’s always good to make sure nothing has changed.

Then What?

Once you have a clear understanding of your tolerance for risk, the next step is to make sure your investments line up with that.

You should have been given or guided to a specific asset allocation for your risk before investing in the first place.

An asset allocation is simply the amount of stock/equity/company ownership you own in your portfolio versus how much bond/fixed income/debt instruments you own.

The best way to track your overall allocation is to make sure you aggregate all of your accounts together. Having the investment holdings in your 401(k), Roth and traditional IRA’s, and your taxable account all in one place allows you to see the full picture of how your money is invested.

The easiest way to aggregate your accounts is with software. We use RightCapital, but there are many programs and other options out there that will allow you to do this.

Once you’ve done this, you can tell if your overall allocation is off or within a preset boundary you’ve set for it.

Make Adjustments

Now that you’ve aggregated your accounts and determined whether or not your investments match your desired allocation, you’ve either discovered that you need to make some changes or confirmed you’re in line.

If you’re within your preset boundaries for your allocation, your best bet is most likely to do nothing. There are some reasons why you may want to do some things (tax loss harvest, harvest gains in a down income year…etc), but that’s another conversation for another day.

If it’s been a while since you’ve done this, or you’ve never done this, there’s a good chance you will need to make some changes. In that case, we would recommend considering some of the questions below as you prepare to make adjustments:

How far off is my overall allocation?
Do I have any new cash I plan on investing?
Can I make changes without creating any additional tax for myself?
If not, how can I limit additional tax by making adjustments?

The goal is to get as close as possible to your ideal allocation. Using new cash is a great way to do this along with making changes to your tax-deferred accounts.

None of the changes you make in tax-deferred (401k and IRAs) create any taxable income. This means you can sell out of holdings in those accounts without having to worry about capital gains or think about taxes.

If you can’t get to your desired allocation with those strategies and you have access to a 401(k), another option could be to change how new money is invested into your account each pay period. This may take longer to get to your desired investment mix, but it’s a strategy.

In Conclusion

The goal of this exercise is to confirm your investments are aligned with who you are as an investor and your goals. We recommend doing this once per year, but no more than quarterly.

What this is not, is an opportunity to go make wholesale changes to your investments. Once you have a good plan and set allocation, the best thing you can do is leave it alone.

Check it periodically to make sure your allocation is still good and continue saving. You’ll be happy when you look back 20-30 years from now.

Did You Know?

The more frequently you look at your investments, the riskier investing will seem. This is called myopic loss aversion and can lead to making changes based on short-term results. This ultimately leads to worse overall returns over your lifetime.

Quotable

“Bonds are the underwear in your portfolio – unexciting and not much thought about, but select the wrong pair and you’ll be surprised at just how uncomfortable you are.”

– Dr. William Bernstein

Connect with Us:

If you like what you’ve read and would like to get more helpful advice in the future, click this link to subscribe to our newsletter.

The post Monthly Minute – February 2022 appeared first on Shepherd Financial - Woodstock, Georgia.