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Wealth Design Group

August 2018: Be Prepared with Your Money
















Be Prepared with Your Money

California fires continue to rage. Our hearts and prayers are with the families being affected and the brave firefighters dealing with them. No one ever wants to consider situations like this happening to them and their loved ones. But we must. Being prepared helps to ensure it never happens, right?

The biggest issue after making sure you have the right fire insurance is the importance of cash flow and liquidity. It's going to cost more to recover than you think. You can't depend on the check from the insurance company to provide all that you need. You must have easy access to your money.

Some long-term impacts of a catastrophic event like fire, flood or earthquake would be draining your emergency fund. Having to stop contributions to your retirement plan. In addition, what if your job location was affected. Or you are making your income from sales to people who have now lost their business is due to the catastrophic event. It's all about cashflow and having liquidity.

It’s my business to help you take care of you and your family’s money, no matter what could happen. For anyone getting my newsletter or sharing it with a loved one, I’ll spend an hour with you taking you through the options for no charge.

Okay, let’s get on with the 10 money tips for August!


All my best,



My Top 10 Money Tips for August


  1. Are you planning to cash out your retirement account (401K, 403B, etc.) with outstanding loans?  A recent Tax Court ruling said you will be taxed on the net amount of the check plus the loan balance.  As an example, if you borrowed $50,000 and you want to withdraw the remaining $50,000, then you will be taxed on $100,000.  You will also be taxed at the highest marginal tax level at the time of disbursement.


  1. What are Required Minimum Distributions (RMD’s) and how do they work? RMD stands for Required Minimum Distribution. It is an annual minimum amount that must be withdrawn from certain types of retirement accounts after you reach 70 1/2 years of age. These accounts are often referred to as “qualified” accounts. You have options on the frequency of withdrawals and the accounts from which you wish to take the disbursements each year. The key is to make sure you take the minimum amount of money required each year, or you will be subject to significant taxation.  

  1. One of the greatest fears retirees have at retirement time is running out of money!  Do you know the second biggest fear?  According to the report on the National Health Expenditure Projections 2016-2025 produced by the Centers for Medicare and Medicaid Services, national health spending is projected to grow at an average rate of 5.6 percent per year for the foreseeable future. This projected statistic is almost triple the U.S. inflation rate of 1.9 percent from 2012-2016 and close to double the annual projected Social Security cost-of-living adjustment (COLA) of 2.6 percent.  Plan accordingly!


  1. Five important things to know about Social Security Benefits:
  • When to take Social Security is a very important decision. You could lose as much as $250,000 in benefits if not taken at the proper time.
  • Life expectancy is an important consideration when deciding to take Social Security.
  • Social Security employees are not allowed to give you advice on when to take Social Security. They can only tell you what your benefit will be given a specific scenario.
  • Many married couples could receive as much as one million dollars in benefits during their lifetime if they had good income in their working years.
  • Social Security is complicated. It is important to talk with an advisor who understands Social Security and has the resources available to calculate different scenarios.


  1. Life is a series of expected and unexpected events!  We cannot control many of the unexpected or untimely events (death, disability, chronic illness, loss of job, etc.) but we can minimize the economic impact these events have on our lives through good planning. Address avoiding threats and fulfilling obligations with your money before any thought is given on seizing opportunities or investing.


  1. Fire season is underway. Scan important papers into electronic format and store in the cloud or make backup copies and store in a safe place. Make sure to have backup copies. Take pictures or videos of the contents of your home or business premises. A little extra work upfront can make filing any type of catastrophic natural event claim a lot easier.


  1. Thoughts about your house: 
  • Your house is not an investment, it is a lifestyle decision.
  • The market determines the value of your house and the market is always right.  
  • Your house will appreciate or depreciate regardless of whether it is financed 100% or is free and clear.
  • The equity in your house earns 0.0% interest.
  • The best time to place a mortgage or equity line of credit on the house is when you don't need the money. If you do need the money the lending institution probably will not loan it to you.
  • The equity in your house is not guaranteed and can fluctuate due to market conditions.
  1. Are you concerned about an IRS audit?  According to Kiplinger Tax Letter of July 13, 2018, last year’s audit rate of 0.6% for individuals was the lowest in years. “The annual examination rate doesn’t tell the full story. When calculating the figure, IRS counts only in-person exams and correspondence audits done by service centers. Of these two types, correspondence exams by mail make up the bulk of the audits. The audit rate doesn’t count computer-generated CP2000 notices about mismatches between income and deductions reported on tax returns and data on third-party information returns, such as W-2s, 1099s and 1098s. Also not included are math error corrections and other programs that may require taxpayers to send in documents or other information to the Service. If these corrective procedures are factored in, the agency’s coverage rate for last year jumps to close to 6%.”


  1. The government should mandate the stamping of "GU" on all the IRA and 401K statements mailed.  "GU" stands for the "government and you." The statements arrive at home, but there is no footnote or statement stating what the actual money you will receive will be after your tax liability. The government will be getting their share when you start your withdrawals. Uncle Sam has a big stake in your retirement assets because his share grows as your share grows.  He will determine his share when you start taking your share. Your share is determined by the tax rates and your income at the time of withdrawal.


  1. Are you familiar with the Danger Zone?  This is the time when you are making the change from accumulation to distribution… retirement.  It is usually 5 years before and 5 years after retirement.  Listed are seven things you should know if you are in or approaching the Retirement Danger Zone.


  • Money is both a resource and a scarcity. How we handle it determines how much we control it.
  • There is more to be gained by avoiding losses than picking apparent winners.
  • We must first plan for unexpected events and fulfilling obligations before seizing opportunities.
  • Our lives are governed by cash flow.  It is important to retain liquidity, use, and control of our money.
  • Developing strategies is more important than picking the perfect product.
  • You can substantially increase your rate of return on your existing assets by minimizing, correcting, or avoiding wealth transfers.
  • Asset location is as important as asset allocation.



Wishing you and your family all the best!



Gary Pevey, CLU ChFC

Wealth Design Group

3445 American River Drive, Suite B Sacramento, CA 95864

(916) 480-0669




Investment advisory Services offered through Wealth Design Group, a Registered Investment Advisor registered with the State of California.

 Insurance provided through WDG Insurance Services – CA License #0C17920

The information provided by Wealth Design Group is intended for educational purposes only. This information is not intended as tax, legal, investment, or retirement advice or recommendations. You are always encouraged to seek your own advice from other legal and financial professionals.