Confluence Financial Advisors
Judy is a Certified Financial Planner and founding partner of Confluence Financial Advisors, a fee-only financial planning firm in Boulder, Colorado.
Judy transitioned to financial planning after a successful career in high technology where she co-founded two software companies. Highlights from this phase include being profiled by Entrepreneur Magazine’s ’40 Under 40’ recognition and earning a ‘Best of COMDEX’ award for innovation. After a poor experience with a financial advisor, Judy pursued financial planning with a desire to help others learn from her experience. Upon earning her master’s degree in Personal Financial Planning and completing additional training through the Alliance of Comprehensive Planners, Judy opened her own firm in 2007. After almost ten years of serving individuals, families, and entrepreneurs, she and co-founder David Gardner merged their fee-only financial advisory firms to launch Confluence Financial Advisors in 2016.
Judy regularly contributes personal finance articles to the Wall Street Journal, U.S. News and World Report, Consumer Reports, Investment News, and other publications. After a nationwide search, she was selected as one of seven financial coaches on “The Invested Life.” This first-of-its-kind online reality series produced by MSN Money featured real people facing today’s most common money concerns and their journey to take control of their finances. Judy remains active in the Alliance of Comprehensive Planners, the National Association for Personal Financial Advisors, and the Financial Planning Association.
Passionate about preparing the next generation, Judy has presented workshops to college organizations and recent graduates to equip them with the tools necessary for financial success. In 2013, Judy published Coin: The Irreverent Yet Practical Guide to Money Management for Recent College Graduates. This practical and witty guide provides millennials a humorous introduction to fundamental financial information. Additional information on Coin is available at www.CoinInTheBank.com.
Judy is an adjunct professor at the University of Colorado Leeds School of Business and volunteers for several professional and nonprofit organizations including the Leeds School of Business Professional Mentorship Program and the Downtown Aquarium Dive Team. Judy is a PADI scuba instructor and enjoys swimming, skiing, and traveling. Judy has been married to husband Scott for 36 years with whom she has a daughter and twin sons.
Judy resides in Boulder County where she and the Confluence Financial Advisors team continue to build relationships with ongoing clients to help them achieve financial independence and realize personal goals and dreams.
· Certified Financial Planner
· Member of the Alliance of Comprehensive Planners
· NAPFA-Registered Personal Financial Advisor
· Member of the Financial Planning Association
· Author of Coin: The Irreverent Yet Practical Guide to Money Management for Recent College Graduates
BA, Economics & Computer Science, University of Colorado Boulder
MBA, Finance, University of Colorado Boulder Leeds School of Business
MS, Personal Financial Planning, College for Financial Planning
Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
Congratulations! It's great to be able to cash out on the hard work you've put in over the years. Look for a comprehensive fee-only financial advisor to create a plan for your retirement that maximizes your nest egg and minimizes your taxes. As much as possible, use tax-deferred and tax-free retirement savings accounts over the next few years to save money. A fee-only advisor can create a fixed-income ladder that provides you a 'retirement paycheck' once you've finished working. Using fixed-income instruments (Treasuries, CDs) you have steady income from your portfolio to live on while still growing the portfolio. This provides you security and protection from the vagaries of the markets and economies. Unlike expensive annuities, bond ladders are low cost and flexible. If, like other entrepreneurs, an opportunity comes along, you can readjust the portfolio and ladder funds to put them to work as you see fit.
Interview a few advisors to find one you feel comfortable with and has the breadth and depth of expertise needed to help someone in your situation. Don't rush the decision. Good luck!
Roth IRAs are a great way to help your adult children build their own wealth. As long as they have earned income, you can contribute up to $5,500 per year (2017) to a Roth IRA for each of them. If possible, consider motivating them with some matching to instill some good savings habits. You could offer to double whatever they contribute, for example, up to the $5,500 limit. While the Roth IRA is intended to be for retirement, once the accounts have been opened for 5 tax years, money can be withdrawn for a number of different uses without penalty. For example, they can withdraw up to $10,000 to put toward the purchase of their first home. The complete list of exceptions can be found at this link.
So, get the 5 year clock started as soon as possible - you have up until tax day in April to open and fund accounts for the calendar year just ended. Once you open them, the next question is how to invest and low cost index funds for different asset classes of stocks and bonds would be great choices. If they are planning to let the money grow a long time, the Roth IRA is a good choice for going heavier on stocks because that growth is tax free.
Best of Luck,
Judy McNary, CFP
Maximizing your annual contributions in your early 30's is a great achievement. I recommend you consider a 50/50 split between the pre-tax and the post-tax contributions. Hedging this way means you'll still benefit from some of the tax deductions for the pre-tax deferrals, but you'll also have tax-free growth for the post-tax deferrals.
It probably sounds too far away to even imagine, but the post-tax deferrals have the added advantage of no required minimum distributions when you reach age 70 1/2, a benefit you'll appreciate when you get there. Having retirement dollars in both tax-free and tax-deferred accounts will certainly help you optimize your distributions to minimize the taxes you owe once you are retired.
If possible, consider funding a Roth IRA as well. Like the post-tax option for your 403(b), you fund this account with after-tax dollars and it grows tax free. Taking these steps now will pay off in a big way to give you more freedom and flexibility when you retire.
Keep up the nice work,
Max out the Roth IRA first. The tax-free growth and withdrawals are tough to beat. Chances are, over the next 15 years you might end up earning so much you won't be eligible for funding the Roth so, for now, take advantage of it and maximize it. As far as the next step, if your employer offers a 401k, I'd recommend deferring to that. If you are under age 50, you can defer up to $18,000 of earned income each year. For 50 and above, you can defer an additiona $6,000. If it's a pretax deferral this will help reduce taxes each year you fund it.
Beyond that, start a brokerage account, add savings along the way and build a diversified portfolio to help you achieve your long-term goals.
Nice work maximizing the deferrals to your 403(b) and IRAs. As you mentioned in your note, funding a Roth IRA has no immediate tax advantage, but funding the Traditional IRA does, assuming your income is below the deductibility limit. I recommend that you continue to fund the Roth IRAs rather than switch for a couple reasons. First, withdrawals from the Roth IRA down the road are tax-free for both your contributions and the growth of the investments. This provides a tremendous benefit in retirement. Second, the Roth IRAs do not have Required Minimum Distributions (RMDs). Your 403(b) will have RMDs after you turn 70 1/2 and since you mentioned you have been maximizing the deferrals to this, the RMDs could be quite sizable. The RMDs are taxable and, depending on whether or not you have pensions through your employer or through Social Security, you could end up in a higher tax bracket than you anticipate in your retirement. Additionally, if your income goes above a certain level, it can affect your Medicare premiums. Sticking with funding the Roth IRAs avoids these situations so, if you can afford it, I recommend you continue as you've been doing.