What Are I-Bonds And Should You Buy Them?

In a rising interest rate environment, many of you may be thinking what vehicles you should be utilizing moving forward to invest your money. Given four-decade high inflation numbers, I-bonds are becoming an attractive way to invest your money while also protecting against inflation. So, for those wondering what I-bonds actually are, let’s take a look. 

I-bonds are bonds issued by the U.S. Treasury designed to protect investors’ savings from inflation risk and loss of purchasing power. These bonds are purchased directly from the US government, hold lower risk, provide more safety and are estimated to deliver a 9.62% annualized return starting next month. Given the current climate with inflation through the roof, if you have cash sitting around that is currently earning 0%, now might be a great time to consider purchasing some I-bonds for next few years.  

However, there are a few important details to note when considering I-bonds. There is currently a $10,000 per person limit on the amount you can invest each year into I-bonds. Your I-bonds will have a maturity of 30-years and cannot be redeemed for one full year. However, if you redeem your I-bonds before five years, you will inflict a withdrawal penalty of 3-month’s interest. So, keep in the mind that if you are considering investing in I-bonds, you should do so with the intention of keeping them invested for 5 years. Additionally, you can buy an extra $5,000 in I-bonds within your tax refund if applicable or eligible. 

If you have a long-term view about your investments and might have some cash you don’t need access to for a while, you should definitely check out I-bonds to protect the purchasing power of your cash. If you have any questions about your specific financial situation and how I-bonds may fit within your portfolio, email us at info@shermanwealth.com or schedule a complimentary intro-meeting here and we are happy to help.  

Estate Planning in Uncertain Times

estate planning 2

Although planning for your future is always a necessity, many people tend to wait until they are older to put their legal documents in order in the event something should happen to them. However, the rapid spread of the coronavirus has led to a skyrocketing demand for wills, even for those who aren’t middle aged or older. What once appeared to be a scourge that was primarily affecting the elderly and those with underlying health issues has now been revealed to hospitalize and kill those who are younger, seemingly at an alarming rate. The search term “getting a will” has risen sharply since March 8 and there have been tweets from doctors and nurses in recent days about wanting to get advanced health-care directives—living wills, power of attorney for health-care decisions and do-not-resuscitate orders—because they know their work might expose them to the virus.  Whether or not you are on the front lines of the fight against COVID-19, it is a good idea to make sure you have the following information completed and updated for you and your family should the need arise.

Wills & Beneficiaries

Now is a good time to check your existing beneficiary designations for each of your retirement accounts, annuities, and life insurance policies to make sure they are current and you do not have any lapses. In cases where family situations have changed, possibly because of divorce or birth of children or grandchildren, these designations aren’t often up to date. In the event you do not have a named beneficiary who survives you, your estate will be the beneficiary, which is rarely a good result. With a Will, you can generally leave any type of property to whomever you wish, with some exceptions. Wills can be contested in probate court, but beneficiary designations are legally binding.

Many people haven’t had an opportunity to change or update their beneficiaries since the SECURE Act was implemented.  See (https://www.investopedia.com/what-is-secure-act-how-affect-retirement-4692743) to review how your retirement may be impacted by the SECURE Act).

Durable Power of Attorney

A durable power of attorney is a written document where you designate another person (agent) to act on your behalf. In the event you become physically or mentally incapacitated, it enables your agent to handle your affairs. A person’s ability to name a power of attorney normally terminates upon their incapacity. With an immediate durable power of attorney, you grant your agent the authority effective immediately.

Health Care Proxy

Also called a durable power of attorney for health care, this document appoints a representative to make medical decisions on your behalf. You decide what your representative will have control over  (i.e., selection of health care providers, approval of tests and procedures, etc.). It is important to have an active health care proxy in place in the event you become incapacitated.

If you have adult children, you might want to make sure they also have health care proxies in place. In addition to having a health care proxy, a living will allows you to approve or decline certain types of medical care, such as life support, even if you will die as a result.


If you have previously established a living or irrevocable trust, now is a good time to confirm that your trustees and successor trustees are still alive, willing to serve, and that you still want them to serve should the need arise. You should also confirm that all the assets you want to pass through your trust are correctly titled.

While the above topics are often difficult to think about, this also might be a good time to take a look at your financial plan as well. Depending on your circumstances, it might be beneficial to gift highly appreciated assets out of your estate at deep discounts. If you are in a low tax bracket, converting part or all of your Individual Retirement Account (IRA) to a Roth IRA could be an asset to your long-term retirement plans.  

Should you need any referrals for an estate lawyer, we are happy to put you in touch with someone.  If you have any financial questions, please contact us anytime.  We hope you are staying safe and healthy – we are all in this together!

How Rising Interest Rates Will Impact Your Portfolio

As we’ve been discussing inflation and how to adjust your new budget accordingly, you might also be wondering how the continual rise in interest rates from the Federal Reserve will impact your wallet and investment portfolio. Let’s take a look. First, let’s start by digesting where interest rates come into play as they relate to your finances. Whether you have a savings account that earns interest, a mortgage or two, student or car loans, credit card debt and more, interest rates play a large role in each of these.

With rates being historically low for many years, many were taking the opportunity to refinance many of their loans and take advantage of a lower interest repayment. However, with the rise in rates from the Federal Reserve in order to slow down the economy and combat inflation, you might begin to think differently about your interest rates as a whole.

Now that rates are rising, loans, such as your mortgage, will be more expensive. So, if you are in the process of buying a home or refinancing, make sure you connect with your lender to see how the rise in rates will impact your situation. Furthermore, those of you with credit card debt will be seeing an even greater interest rate increase, so make sure you grab those zero percent interest rate credit cards or balance transfer options while they are still out there. 

As for student loans, if your student loans are at a fixed rate, which most are, this rise will not impact you. However, the Biden Administration just extended the federal student loan pause until September which will provide you with more time to prepare your budget for this additional payment. 

While rising rates will make some of your loans more expensive since you’ll be paying more in interest, they will have a positive impact on your savings account, accruing additional interest. If your emergency fund is in a traditional savings account, take this opportunity to open up a high-yield savings account to earn more interest on your savings fund. For more information on the perks of a high-yields savings account, check out our recent blog on why you should open one. For those curious about their investment accounts, especially given the recent market volatility we’ve seen over the last few years, the importance of a long-term oriented diversified portfolio is key. If you have further questions on how rising interest rates will impact your wallet, email us at info@shermanwealth.com or schedule a complimentary intro call here. 

Why Reducing Your Tax Refund is a Good Thing

With tax day fast approaching, many people are counting on receiving a big check back from the Government. While you’re probably looking forward to this windfall, there are reasons why you may wish to minimize your end-of-year refund.

Why Big Refunds are Bad

Taxes are refunded to you when the Government takes too much of your pay each pay period. By overpaying each paycheck, only to get the money returned to you once a year, you are essentially lending the Government money at zero percent interest.

This is money that could have been budgeted for and spent, or invested, throughout the year. Even if you had put the money in a savings account over the year, you still would be better off.

How to Minimize Your Refund

In order to adjust the amount that is withheld for the IRS each pay period you need to fill out/change your W-4 form.

The W-4 allows you to specify allowances or exemptions that you are eligible for.

These can include:

  • Donations to charitable organizations
  • Interest on a home mortgage
  • Interest on student loan debt
  • Contributions to traditional IRAs

The W-4 form estimates the amount that you would receive from a tax refund. This amount is then distributed over the number of weeks remaining in the tax year, lowering the amount withheld from your paycheck each pay period.

You should also look into filling out a new W-4 every time you have experienced a major change in your life. Examples of this include:

  • Switching jobs
  • Marriage
  • Having a child
  • Losing a dependent (They either file their own tax return, or you can no longer claim them)

While trying to lower the amount that is withheld in taxes each pay period generally makes sense, it may be prudent to not list all of the exemptions you are eligible for on your W-4.

Why You May Not Want to Claim all Your Allowances

While having too much in taxes withheld can be compared to lending the Government money at a rate of zero percent interest, the reverse is also true.

If you underpay in taxes each paycheck, you end up owing money to the Government. In theory this is great. You could put the money in a savings account, and then at the end of the year pay back the Government while pocketing the interest that you collected.

In practice however this is not a prudent strategy for most people.

Individuals have a tendency to spend money that they have, and forget about longer-term consequences of their actions. Additionally while receiving a refund at the end of the year is exciting, the opposite is also true.

This is why it may make sense for you to leave a few deductions you are eligible for unlisted on your W-4. This ensures that you receive a tax refund, albeit a smaller one, rather than owing money.

What to Do When You Do Receive a Refund

While this advice can be helpful for next year, chances are this year’s tax season will provide you with a large refund.

If you do receive a large refund there are a series of things you can consider to maximize its value. Here are a few ideas to get you started:

  • Invest in yourself – Sometimes the best investment you can make is in yourself. Consider buying a book or taking a class to help improve your performance in work or at life.
  • Get your will done – this can often cost less than a $1,000 in total but can save your beneficiary’s significantly more both in terms of money as well as headache
  • Put money into a college savings plan
  • Pay down your mortgage
  • Invest in a non-tax-exempt account – if you have already maxed out your IRA
  • Save for a rainy day
  • Open/add to an IRA
  • Pay off student loan debt
  • Pay off credit card debt – if you have any credit card debt, this should be an immediate priority
  • Save the money and increase your 401(k) contributions – put your money in a safe place such as a savings account, and bump up your 401(k) contributions to reflect the fact that you have this money sitting on the side.

Regardless of what you do with your tax refund, it is important that you come up with a plan. A trusted financial planner can help you in the process of creating one.

With over a decade’s worth of experience in the financial services industry Brad Sherman is committed to helping individual investors plan and prepare for retirement.


The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Sherman Wealth unless a client service agreement is in place.

If you have any questions regarding this Blog Post, please Contact Us.

How To Adjust Your Budget For Inflation

Has inflation had a noticeable impact on your life over the last few months? Are you feeling the weight of increased gas and food prices and pretty much everything else you purchase on a day to day basis? So are we! The US Department of Labor reported earlier this week that the Computer Price Index (“CPI”) jumped 7.9% in February from 12 months prior. Inflation is rising so fast that the Federal Reserve is even rapidly raising interest rates to try to combat it, as discussed in a previous blog. 

So with increased prices and, in turn, higher interest rates, a CNBC+ Acorns Invest in You survey found that ¾ of Americans surveyed are quite worried about these higher price tags and think they will have to “rethink their financial choices in the coming months.” According to this survey, inflation will result in an extra $296 in spending per month per household. A combination of the coronavirus pandemic, inflation and the war has many Americans feeling quite uneasy about the future of their finances, making it an especially good time to create a new financial plan or alter and refresh an older one. So, as households and individuals start to think about how to adjust for this increase in their budget, let’s discuss some ways in which they can do so. 

First and foremost, when thinking about adjusting your financial decisions for inflation, your first thought should be how you can reassess your budget. If you haven’t already, take a good look at your budget to account for higher costs, for example, your monthly gas and grocery spend. By using the “bucket strategy,” you can separate your spending and savings into different categories to help you differentiate your wants versus your needs. Think about using an app or financial software to help you track your spending each month along the way.  While adjusting your budget and doing some spring cleaning, go back and make sure you aren’t paying for any unused subscriptions or other fees where you might be spending money unnecessarily. 

While these are only a few things you can do to adjust your finances for inflation, getting a handle on your financial “big picture” will ease your stress and tensions as you adjust to this more expensive cost of living. If you are feeling lost and need a “spring cleaning financial plan” to help sort out some of these topics, email us at info@shermanwealth.com or schedule a complimentary intro call here.

Have You Had Regrets About Your Financial Decisions In The Last Year? You’re Not Alone

The COVID-19 pandemic has certainly had a large impact on the financial decisions of many individuals across the globe. The uncertainty of the pandemic along with continued times of extreme market volatility caused many to pull out of the market temporarily, or at least until things “returned to normal”. At Sherman Wealth, we are firm believers in “time in the market” over “timing the market”. Despite great market volatility and being spooked by unprecedented times in the world, sticking to your long-term financial plan is proven to give you the best output at the end of the rainbow. 

So let’s take a look at some of the financial regrets young Americans have about their investing decisions over the last year. According to Fidelity Investments’ 2022 State of Retirement Planning Study, more than half of young adult investors halted saving for their retirements during the pandemic and nearly half said there is no point in saving until things return to normal.” While many of these individuals believed in pulling out of the market at the time, they now are wishing that they instead invested more instead. 

A recent study from MagnifyMoney found that “Some 57% of Gen Z investors and 50% of millennials regret how they invested in the last 12 months,” with many wishing they invested more money into the stock market, others wishing they didn’t sell assets when they did, and some wishing they had saved more as a whole. Those who didn’t save sufficiently during the pandemic or pulled assets out of the market during a crash are also now feeling unsure about whether they can handle another unexpected expense or event. As you can see from the data stated above, those who didn’t see the original March 2020 COVID-19 crash as an opportunity to stick to their long term plan or potentially even invest more, are now regretting those decisions. 

We know it’s easy to get spooked by the market, especially given the unprecedented events of the last few years. Now that it is financial literacy month, we wanted to take this opportunity to make sure to educate yourself on the benefits of long-term investing and recognizing behavioral biases that may be getting in the way of your financial decisions. We recently wrote a blog discussing how to identify behavioral biases and the “do’s and don’ts” during a market correction, so check that out if you find yourself having trouble sleeping at night because you are worried about your investments. Life is complicated, but your finances don’t have to be. If you start with the right foundation, such as creating a customized financial plan and stick to it, you’ll find yourself in a much better financial position in the long term. If you have questions about building your financial foundation or financial roadmap, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here