Fiduciary Rule Enforcement Delayed Until February

On Monday October 25th, the Department of Labor delayed implementation of an investment advice rule that was supposed to be set in December, which is now allowing the financial industry additional time before having to implement these new changes into their compliance routines. The new fiduciary rule for retirement accounts that was approved by the Trump administration last year will not be enforced until February 2022.  

This regulation will “impose a fiduciary duty on most rollovers from 401(k) plans to individual retirement accounts.” In regards to the recommendations made, advisers will need to document and disclose costs, benefits, and conflicts of interests. 

In a field assistance bulletin released Monday, the DOL said it would “extend from Dec. 20 until Jan. 31, 2022, a temporary enforcement policy that allows retirement account fiduciaries to receive prohibited transactions — such as commissions or revenue-sharing — as long as they follow impartial conduct standards, which include acting in a client’s best interest, charging a reasonable fee and not making misleading statements.”

Even though this fiduciary rule is set to start on February 1, 2022, the DOL will not enforce documentation and disclosures prior to June 30th. Obviously this change will require some adaptation, so the DOL understands that this implementation might take longer than expected for fiduciaries to respond and make changes. 

Why wait to work with a government mandated fiduciary when you can find one that already is operating in that capacity. Sherman Wealth is a fee only registered investment advisor that always acts in a fiduciary capacity. We will continue to follow any updates on this new fiduciary rule as new updates arise. If you have any questions for us, email us at info@shermanwealth.com. 

 

What Happens If You Try To Spend More Than Your Credit Limit?

When you sign up for a credit card, you are often assigned a credit limit when that account is opened.  These limits typically start at $200 and go up to tens of thousands of dollars.  With so many people out of jobs and finding it hard to make ends meet these days, credit cards have become a necessary resource to pay for things that we might not have the money for right now. However, the more you charge on your cards, the closer you may come to hitting that max limit.  If you do hit that amount, you are likely to get hit with over-the-limit fees. Before you decide to use your credit card to pay for necessities, there are alternatives to going over your max before risking having your credit limit cut or incurring unnecessary fees.  

Can You Go Over Your Credit Limit?

Yes, you can go over your credit limit, but there’s no surefire way to know how much you can spend in excess of your limit. Card issuers may consider a variety of factors, such as your past payment history, when deciding the risk of approving an over-the-limit transaction. Any approved transactions above your credit limit are subject to over-the-limit (or over-limit) fees. This credit card fee is typically up to $35, but it can’t be greater than the amount you spend over your limit. So if you spend $20 over your limit, the fee can’t exceed $20.

Due to the CARD Act of 2009, over-limit fees can’t be charged without your consent. As a result of these regulations, most card issuers have done away with over-limit fees and the default for any transactions over your credit limit may be that the transaction is simply denied.

If you do consent to a one-time over-limit fee, you can change your mind and opt-out at any time. However, in doing so, your card issuer will likely decline any purchases you attempt to make over your limit. Even if you opt-in to over-limit fees, transactions exceeding your credit limit may still be denied.

Should You Go Over Your Credit Limit?

While spending over your credit limit might relieve some short-term problems, it can also cause long-term financial issues, including fees, debt and damage to your credit score. The best practice is to try to maintain a low credit utilization rate – avoid maxing out your card and spending anywhere near your credit limit.  If you do go over your limit, you should sit down and consider why it happened in the first place and review your budget. You should figure out what purchases caused you to spend more and whether you can make any changes to your spending habits.

Alternatives If Your Credit Limit Is Low

For those that may have a low credit limit or if your credit limit recently got cut, there are some options to ensure you don’t max out your spending. If you’ve had a low credit limit for a while and currently have a stable job, you may want to request a credit limit increase. This can be a good idea if you have good credit (scores 670 to 739) or excellent credit (scores 740 and greater) or if you haven’t updated your income in a while and make more money than what’s listed. Your card issuer may pull your credit report for this request, which may cause a small, temporary ding to your credit score.

However, if your credit limit was reduced, you may want to consider other options. Cardholders with good payment history and a stable job should call their card issuer and ask for reconsideration.  You should ask why your credit limit was cut, explain that your account is in good standing and that you have a stable source of income to pay off your bill. This may shed light on why your limit was lowered and potentially result in your credit limit increasing — though there is no guarantee. Rather than asking for a credit limit increase on the card that had a reduction, you may want to consider any other cards you have instead. If you have three credit cards and one got the limit cut, see if you can get an increase on one or both of the other two,

If you have a history of missed payments or maxing out your cards, you are likely not a good candidate for reconsideration and don’t want to draw attention to yourself. Therefore, if you fall into one of these categories, it’s best to not try to request a higher limit.

When To Apply For A New Credit Card

Cardholders with only one credit card and a low credit limit may want to consider opening a new credit card, but should be aware of any potential risks. For starters, if you were recently laid off or faced a reduction in income, you may not be in the best position to be approved for a new card, and there’s no sense in adding a new credit inquiry to your credit report if your chances are low. Also, if you have a history of maxing out your card, you should be aware that more credit can lead to more debt. An additional credit limit can be helpful for affording your expenses, but it can also be harmful if you overspend.

Before opening a new card, give yourself clear guidelines on how you’ll use the card and stick to keeping a low credit utilization rate. When it comes time to pay your bill, make on-time payments of at least the minimum every month for all of your cards.  If you are able to do so, pay in full so that your credit score will  improve and your debt will be minimized. When applying for a new card, check your credit score first to narrow down your options. Then consider cards based on your credit score. 

In these tough times, we need to be responsible when it comes to spending and not see going over your credit limit as a choice. If you do need to use your credit cards to pay for utilities, groceries and other necessities right now, make sure you are aware of your max and other options you might be able to work out with the credit card companies before going over your limit. When you do receive those credit card statements, make sure to pay at least the minimum amount each month to maintain a positive credit score. And, make sure you are paying the bills on time to ensure you won’t incur any late fees either.  If you have any questions about credit, credit cards or other issues concerning your finances, please contact us.  We are all in this together and we’re here to help! 

Holding Onto Too Much Cash? Here’s Why You Shouldn’t 

Accumulating a large sum of cash in your bank account can be a good feeling and it might bring you a sense of security and safety. Building up your savings accounts knowing that the cash is sitting there risk-free and easily accessible can give you a sense of comfort. However, this isn’t always the smartest option when it comes to your finances. Sitting on too much cash in a savings account can often hinder your ability to build wealth for retirement and other long range financial goals. In addition, you could actually be losing money due to inflation instead of growing your assets, and here’s why. 

At Sherman Wealth, we often talk about diversifying your portfolio and the importance of long-term market investment in order to increase and grow your money over time. In a recent survey by Personal Capital and Kiplinger Personal Finance within retirees and soon-to-be retirees portfolios, 26% was made up of cash, which tends to be on the conservative side of diversifying and investing. It’s okay to be nervous about market volatility and the natural ups and downs in the stock market; however, holding on to too much cash can actually hurt you in the long run. It’s crucial that you find an equilibrium point between your cash and investments that works with your financial situation and risk comfortability.

So how do you know if you are sitting on too much cash? As mentioned in our previous blogs, you should always have an emergency fund that typically has enough liquid cash to sustain your monthly bills for about 3-6 months. If you have any upcoming large purchases, you should have a separate bucket of funds available to pay for those goals as well. When planning your budget, think about your wants versus your needs, while also taking your cash flow into consideration. Once you have fulfilled these liquid cash buckets, you should then determine your risk tolerance and think about allocating your dollars towards diversified investments that will gain long term returns, such as equities, fixed income and real estate. 

We know choosing the right investments and asset allocation for you can be overwhelming, which is why there are professionals to help in this process. So, if you have questions for us or would like to use our risk tolerance software to help determine where your investment risk comfortability stands, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here. 

 

Ep. 58 Launch Financial- Unpacking The Bitcoin ETF Launch & 403(b) Plans For Teachers

Overview: Tune into this week’s episode of Launch Financial as we discuss a news heavy week including the Bitcoin ETF Launch, 403(b) plans for teachers and how they are rated around the DMV, earnings season, supply chain shortages, 2021 Black Friday Deals, and more… 

What You’ll Learn: 

  • The importance of investing and diversifying your portfolio 
  • 403(b) plans and how we can help you
  • Understanding the supply chain shortages 
  • The importance of your credit score 

Show Notes: 

Check out this episode!

What to Know About 2021 RMDs

After being waived for 2020, Required Minimum Distributions (RMDs), which are amounts you must take each year from most retirement accounts once you reach a certain age, are happening again in 2021. Make sure you don’t overlook taking these distributions from your retirement account. 

Last year, the RMD age changed to 72 from 70½ and new IRS life expectancy tables are to go into effect next year. Anyone born July 1, 1949, or after can wait until 72 to take their required distributions. 

In a recent CNBC article, they stated “The amount you must withdraw each year is generally determined by dividing the balance of each qualifying account by a “life expectancy factor” as defined by the IRS. And, if you already were taking RMDs before 2020 (you had already reached age 70½),  you would simply resume those distributions this year, using the current life expectancy tables, your age and your account balance at the end of 2020.”

Also included in the RMD data is that if you turned  70½ in the first half of 2019 and planned to take advantage of the April 1, 2020, deadline for taking out the RMD — and did not do it — it must be taken by December 31. That being said, if you turn 72 this year, you have until April 1st 2022 to take your 2021 RMD. 

“There are also withdrawal rules to take into account. For inherited IRAs, 401(k) plans or other qualified retirement accounts, the balance must be entirely withdrawn within 10 years if the owner died after 2019, unless the beneficiary is the spouse or other qualifying individual. The 2019 Secure Act eliminated the ability of many beneficiaries to stretch out distributions across their own lifetime if the original account owner died on Jan. 1, 2020, or later,” according to an article by CNBC. 

The specifics of RMDs can seem complicated, so if you have any questions about whether or not you are eligible or other concerns relating to your required retirement withdrawals, send us an email at info@shermanwealth.com and we are happy to further explain it for you. 

Ep. 57 Launch Financial- Are Inflationary Numbers Here to Stay?

Overview: 

Join us this week on Launch Financial for Ashley’s special birthday episode as we discuss whether inflationary numbers are here to stay, southwest cancellations and holiday travel, and market volatility. Not an episode you want to miss! 

Show Notes: 

Ep 56 Launch Financial- Debt Ceiling & Market Volatility

Millennials Top $10 Trillion in Assets for First Time

Are Inflationary Prices Here To Stay?

Check out this episode!

Millennials Top $10 Trillion in Assets for First Time

Despite the pandemic-induced recession of 2020, new data from the Federal Reserve shows that America’s young adults have doubled their assets over the past four years.

According to the Federal Reserve data, this marks the first time the assets millennials have exceeded $10 trillion. 

It is interesting to see the shift in wealth from one generation to the next. The covid-19 pandemic has definitely had a large impact on millennials as there has been a great deal of layoffs amongst this demographic. Overall, “the percentage gains seen by millennials in 2020 far exceed advances by Gen X and the baby boomers, but younger Americans still only hold a small fraction of the wealth of older adults.”

Further, the wealth of many younger Americans could see a rocky future.  A recent survey found that people 40 and younger saw the lowest likelihood of finding a job in the next three months than at any time since 2013. 

While millennials have certainly accomplished a lot when it comes to accumulating assets, there is always room for learning and improvements. Whether you are just starting out and need someone to help you establish a budget or financial plan, or are questioning what to do with any extra cash you may have laying around, book a complimentary 30-minute consultation on our site. 

Are Inflationary Prices Here To Stay?

Have you been feeling the impacts of inflation over the last 6-9 months? As many of us are starting to spend more money again on things we had been accustomed to pre-Covid, you are likely noticing that costs related to dining, travel, gas, and more have been on the rise. Over the last few months, we’ve been talking a great deal about inflation and the impact it is having on us all. 

As you may have been seeing in the headlines of CNBC and The Wall Street Journal, higher prices seem like they are here to stay when it comes to Uber and Lyft, FedEx and UPS, and even the dollar store. Last week we even saw US Crude Oil hitting a record high since 2014, reaching over $80 a barrel. We’re not the only ones talking about it- A CNBC article noted that Treasury Secretary Janet Yellen cautioned that inflationary pressures hitting the US economy could last a while. 

As we focus on this data and the likelihood of a longer term inflationary impact, how are you feeling about it? Some of you may be not panicking over the increased dollar here or there, but others are certainly feeling the impacts. What’s important to remember during a time like this is to not get overwhelmed, but to adjust your financial plan and budget. Revisit your wants versus your needs and decide what is a priority for you and your family. Since it now costs more to fill your tank with gas, maybe you can scale back on some of your take-out meals. In the event your spending habits change as a result of inflation, it’s key to align your budget with your cash flows and monthly expenses. If you have questions about how to realign your budget and spending habits with your financial goals and current economic situation, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here.

Ep 56 Launch Financial- Debt Ceiling & Market Volatility

Overview: Tune into this week’s episode of Launch Financial as we unpack a big news week, including debt ceiling, inflation, market volatility, Facebook’s social media outage, and more. 

What You’ll Learn: 

  • 10 things to discuss with your partner before marriage 
  • Updates on the current debt ceiling
  • Market volatility explained 

Show Notes: 

https://twitter.com/carlquintanilla/status/1446090653688008704?s=12 

10 Important Things To Discuss Before Marriage

The Financial Services Industry Is Evolving

Check out this episode!