Love Is Looking Together in the Same Direction

Marriage is, for many people, the foundation of a happy life. But modern living puts pressure on us in so many ways, and money is often at the core. Finding a way to build trust and openness can be difficult. We all have complicated relationships with money, which begin in our childhoods and reflect our parents’ attitudes and beliefs. There are often hidden sensitivities and danger spots that neither partner is aware of – until something crops up that creates a problem.

In addition, it can be hard to navigate through all the things that Gen X and Gen Y will potentially face:

  • Multiple careers, multiple 401(k)s
  • Complex equity compensation
  • Blended families
  • Family wealth
  • Moving to a new city or state
  • Leaving the workforce
  • Starting a business

Having a road map that begins with honest, structured conversations and allows each partner to weigh in on decision-making and feel heard can be the best way to build a long-term, respectful relationship.

The resulting document is called a prenuptial or pre-marital agreement. It was originally conceived to protect each partner throughout the marriage and simplify the proceedings in the event of a divorce.

There are still a lot of situations where a prenup is necessary. But even for couples without those factors, the process of being thoughtful about money and respectful of each other is a normal part a relationship. It can be a springboard to allowing each partner to build a professional life that satisfies them while also keeping the family and marital life on track.

The Basics – Situations (and People) Pre-Nups Are Designed to Protect

Blended families: Protecting children from previous relationships is often the first consideration of a prenuptial agreement. It may set aside funds for their future education or other needs, or protect existing financial obligations to children or an ex-spouse.

Protecting Existing and Created Wealth: The traditional view is that the prenup can protect the wealthier spouse – but that only works for existing wealth. Equity is increasingly part of the compensation package, and the potential for this type of compensation to suddenly be worth vast amounts of wealth – years after it was originally granted – has grown. Prenuptial agreements that protect both partners and spell out exactly what is included and what is not are becoming the norm.

One Partner Has More Debt: Debt is one of the most challenging aspects of joining finances. Existing debt can become the other partner’s responsibility, and debt incurred during the marriage may also be fair game for creditors. Prenuptial agreements can help clear the air, spark healthy conversations, and set clear boundaries that will help everyone feel protected.

Business Ownership: If you own your business, whether outright or with a partner, including it in a prenup can preserve the value, protect partners, and keep the business from becoming marital property as it grows in value during the marriage.

When the Choice is for One Partner to Forgo Work: If a couple decides that one partner will be putting a career on hold to undertake family-oriented duties, a prenup can help protect them. This can include annual contributions to an IRA, a life insurance policy, and other financial arrangements that allow the non-working spouse to create wealth on their own terms.

Clarify Non-Marital Assets: Inheritances are non-marital assets. However, they can be unintentionally converted. Putting money in joint accounts and titling real estate in both names can lead to the inheritance becoming a marital asset. A prenup can spell out non-marital property. p

 

The Bottom Line

Careers, families, our dreams and goals, and our desire to create a true partnership with someone else can all be accomplished – with the help of some honest conversation and then creating a prenuptial agreement that speaks to everyone’s best interest. It’s not a contingency plan for divorce – it’s a road map to a long and happy life.

Is a Self-Directed 401(k) Right for You?

Contributing regularly to a 401(k) plan is the foundation of retirement savings for many people. You determine the percentage of each paycheck you want to contribute, and you either select a target-date fund based on your expected year of retirement or pick from a relatively limited selection of mutual funds.

But what if you had more control? Suppose you’re a do-it-yourselfer in other areas of your investment plan. In that case, the limited options in a 401(k) can be very constraining – especially when it is often your most significant investment pool. If you prefer to have someone else manage your investments, you may be able to find an advisor that will make recommendations inside your plan, but again, they will be limited.

If you have multiple plans from different employers or a concentrated stock position, it can be difficult to line your 401(k) investing up with your risk tolerance and overall financial picture.

There is another option for investors whose employers offer the ability to self-direct your 401(k).

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Episode 69: Interest Rates Are Rising....Does That Mean You Should Adjust Your Bond Allocation?

Episode #56: Last Minute Retirement Plan: Tips & Tricks for 2020 Procrastinators

At the end of every year, some business owners face situations where they need to set up a last minute retirement plan due to numerous reasons. We dedicated this episode to reviewing how business owners may overcome this challenge. Over the years, Grant has come up with some strategies and maneuvers that may help you set up retirement plans and make deductible contributions late in the year. Throughout the episode, Grant shares how to implement these strategies in your business.
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401(k) Auto Rollovers: A Convenient Safe Harbor for Small Business Retirement Plans

401(k) Auto Rollovers: A Convenient Safe Harbor for Small Business Retirement Plans

OK – with a new year upon us it’s time to clean up that rusty old 401(k) plan at your small business….right?  Let’s say that you work in or own a small business, and are responsible for operating the company’s 401(k) plan.  To put it lightly, it’s probably a massive nuisance.

401(k) plans can be a wonderful benefit to your employees AND a great opportunity for you to put more money away for retirement in a tax deferred account.  But as you may now, operating a plan can be a real bear.

I’ll be covering the finer points of operating small business retirement plans throughout the year.  Today’s post will focus on what to do with departed employees.  Employees will come and go to and from your business over time (hopefully not too often), and it’s not uncommon for them to leave money they’ve accumulated in your company’s qualified retirement plan.

 

ERISA & Fiduciary Responsibility

As you probably know, departed employees always have the opportunity to pull their money from your plan after they leave, either directly or via a trustee to trustee rollover.  But many employees neglect to do so.  Whether it’s because they don’t know how, don’t care, or are simply lazy, it’s very common for departed employees to “accumulate” in your 401(k) plan, long after leaving the company for greener pastures.

As you also know, as the sponsor of a qualified retirement plan you have certain fiduciary responsibilities when it comes to managing the plan on behalf of your participants.  It’s for this reason – fear of repercussion – that many sponsors feel stuck when it comes to managing assets of employees who long ago left the company.

Fortunately for you, ERISA was not written with the sole intention of making your life hell.  There are six safe harbors written into the law that free you from fiduciary responsibility if you follow a few step by step instructions.  And one of them conveniently covers departed employees.

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