Eric Rife, CFP®, CPWA®
@imericrife
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Financial Planner @masoninvests . Helping high income Millennials understand wealth preservation. Tweets are not advice.
Reston, VA
Joined April 2011
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Yesterday I hit 1,000 followers on here. It's really humbling that that many people care about the finance topics I talk about.
However instead of giving a brief introduction of myself, I think it's a better use of my platform to talk about charity.
As advisors, we'll talk
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Generational wealth is highly controversial.
It's also harder to obtain than driving a Toyota into the ground and cutting back on spending.
I spent the last few days meeting with clients whose net worth ranges from $5M to $150M
Here's what generational worth actually is:
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Not understanding the scam part of the 401(k) where my employer has deposited $36k into my account over the last 5 years and I've contributed $0.
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Bro I swear this time it’s going to crash I swear bro trust me. Market is gonna go to zero bro I know it. It can’t go up all the time bro I promise please trust me
The stock market is climbing higher and higher. Suckers actually believe the economy is strong. Don’t be fooled. The Magnificent 7 financed by US government dollars keeps stock market up. Please be careful. Stock and Bond markets about to crash.
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1K
8K
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@Invested_In_You
I've come across a situation like this and it comes down to setting proper guardrails on the money -- sustainable withdrawal rates, investment volatility, proper diversification.
It's akin to creating a second "paycheck" with these funds.
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"If you rent you're just throwing away money because you don't get to build any equity"
Today you take out a 30-year mortgage for $500k at 7.0%.
How many payments have you made over the next five years: $199,600
How much principal have you paid down: $29,350
You've got to
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@bhallcpa
Never stop doing this series, please.
Not only is it great to see you dismantle these dudes, but it’s so incredibly informative to read the tax reasons why.
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The levels of estate planning:
1. Basic Estate Plan; Wills, Trusts, POAs
2. Annual Exclusion Gifts; ILITs
3. Taxable Gifts; Irrevocable Trusts
4. Estate freeze techniques; GRATs, IDGTs
5. Estate minimization techniques; Private Foundations, DAFs, CRTs, CLATs
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Shoutout to all the people out there doing their spouses taxes because you're the "tax person" in the relationship
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You're 55 years old, retired, and with a net worth above $10M.
The last thing you want to do is burden your spouse or kids with any costs of care you would need if you lost your mental or physical facilities.
You've heard about long-term care insurance, but do you need it?
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Here’s the harsh truth:
That dividend portfolio you’re building is costing you.
Price return + dividend reinvestment = Total Return
That should be your metric. Not dividend yield.
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I like Ramit. I’ve watched his show and listen to his podcasts.
But one thing I want to make certain is that there is a strong association with personal finance and an investment portfolio.
And then so on it goes that people believe all that financial advisors do is manage a
Personal finance is one of the rare areas of life where someone earning $35,000 & someone earning $1M have access to the same winning strategies
Pick a low-cost index fund, automate, & move on with life
A lot of people genuinely believe that rich people have some secret
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At $5m the main estate planning mechanism is:
- Wills
- Revocable Trusts
- Powers of Attorney
- Beneficiary Designations on retirement accounts
This is a minimum for everyone (regardless of wealth level).
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In 1962 brothers Sam and Bud Walton opened Wal-Mart Discount City in Rogers, Arkansas.
Their success created a family empire worth $250B.
Sam and Bud may have revolutionized retail, but it's Bud's ex-wife Audrey who made a name for herself in the world of generational
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Been two weeks since my mom unexpectedly passed away.
Grief comes and goes in waves and is entirely unpredictable.
The hardest part right now is finding motivation to work, or do much of anything that requires focus.
One day I’ll get back to writing on here. Just not sure
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There’s two things you can do as an advisor to set yourself apart:
1. Learn to read a tax return
You can learn almost everything you need to know about a client just from a 1040 and its schedules.
Page 1: AGI and everything that got them there
Page 2: Credits and how
If your financial advisor doesn't ask to see last year's federal tax return, they shouldn't be giving you financial/investment advice.
To verify at least the following:
1. All income sources, including investment income
2. Carryover capital losses (Schedule D)
3. Accurate
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What actually is the difference between $5M and $150M?
It comes down to proactive estate planning.
I alluded to this recently:
The levels of estate planning:
1. Basic Estate Plan; Wills, Trusts, POAs
2. Annual Exclusion Gifts; ILITs
3. Taxable Gifts; Irrevocable Trusts
4. Estate freeze techniques; GRATs, IDGTs
5. Estate minimization techniques; Private Foundations, DAFs, CRTs, CLATs
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You really want to know one of those wealth building hacks?
The current national average 30-year mortgage rate is 7.03%
The current long-term AFR is 4.45%.
The wealthy can act as the bank for their children and help them purchase a home, bypassing the traditional mortgage
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You can prevent the government from being the final say by building this basic estate plan.
Revocable living trusts will bypass probate.
Wills subject assets to probate.
In many instances your will will be structed as a "pour-over will".
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First of all, there is no one way to obtain this wealth.
Some built a business and sold it, others were corporate executives at a multi-national company.
Their common thread is that they have acquired far more than they need for the rest of their lives
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When you die you have 3 options of how your estate gets distributed
1. Family
2. Charity
3. Government
Dying without a will is "dying intestate". At that point it's the state's determination of how your estate is distributed.
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Now take into consideration that the youngest of these clients is 70.
Most of their estate planning was done when the Federal Estate Exemption was closer to $2M, not $13.61M.
Now levels:
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How I personally view the rent vs buy debate:
My wife works for the REIT that owns our apartment so we get 20% off rent.
My professional advice is to marry the right person.
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Everyone should have a basic estate plan.
It's the very first thing anyone should do before thinking about to let their kids inherit their wealth.
But what is it?
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Over the last 98 years the S&P annualized 10.3%.
Yet only 8 times during that time frame did it ever return between 7%-13%.
The markets are volatile. Going back to 1980 the median intra-year decline was 10%.
By far the biggest problem investors create for themselves is selling
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There are very few "absolutes" in the world of financial planning, but everyone I've ever met who purchased a boat has only ever told me the worst financial stories about owning a boat.
If you want a guaranteed money pit, then I recommend a boat.
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If your investment portfolio hinges on whether or not the government will approve something, you're not investing. You're gambling.
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If you don't protect what you're creating, you can lose it all from a single incident.
Layers of protection:
- Emergency funds (personal and business)
- Disability insurance
- Life insurance
- Key man policies
- Umbrella insurance
- Buy-Sell Agreements
And: a well drafted
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You want an account with no income limitations, no early withdrawal penalties, and the ability to use it for any occasion?
You want a brokerage account.
All of the flexibility , but all of the taxes annually. Let's dive in to the tax implications.
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This section from this morning's
@MorningBrew
is something else. I knew BTS was big but this is bonkers.
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The harsh truth is that dividend portfolio you're building is likely costing you money.
And that full treasury bond portfolio at 5% you have is costing you future return.
Let's rethink your brokerage account:
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Anecdotally, finding a CPA for a client looking for a new one is becoming more and more difficult.
And the ones that are accepting more work are all rapidly raising fees — which is completely warranted.
Your options are:
1. Learn to do it yourself (not recommended)
2. Pay
75% of CPAs hit retirement age 4 years ago.
With fewer and fewer students signing up for accounting degrees every year...
CPAs are going to become an endangered species.
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My firm has recently adopted eMoney. Honestly feels like I was in the dark ages before this.
The advanced planner/decision center is so cool
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Working through a situation with a client.
Base line facts:
- purchased home 10 years ago for $5.8M
- no mortgage
- can sell for $10M-$11M
- has identified second home they will move to
- has an established charitable remainder trust
How do we mitigate tax impact?
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Believe it or not you can get an undergraduate degree in financial planning.
Which is exactly what I did at Virginia Tech.
Even before my career started, I had a professor tell me the best start to an answer for most questions a client will ask is:
“It depends”
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This is a clean up mechanism that simply sweeps any assets not titled in the name of your trust, into the name of your trust at your passing.
Note: this doesn't apply to Beneficiary Designated assets (like IRAs, life insurance, 401(k)s, etc)
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Inflation is really misunderstood.
Whenever you hear "inflation is slowing", like in so many recent headlines
It's always framed as "inflation is down, why aren't prices"
The problem is that what these headlines are referring to is known as "disinflation".
In June of 2022
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Just reviewed a client's tax projection from their CPA and couldn't understand how the tax due they arrived at was $200k higher than our internal projection.
Turns out they transposed the nonqualified and qualified dividend amounts.
Everyone is prone to input errors, but that's
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There are 9 INCOME tax-free states.
No state has a 0% tax burden entirely. Between:
- local taxes
- sales taxes
- state level property taxes
- local level property taxes
- gas taxes
- grocery taxes
And including the differing levels of costs between the states for things like
There are 9 tax-free states in America. You don’t pay state tax on your income.
Texas
Alaska
Florida
Nevada
Wyoming
Tennessee
Washington
South Dakota
New Hampshire
What state would you live in?
Texas is at the top of the list for my family and I.
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"Don't give in to lifestyle creep"
Okay yeah but what does that mean?
You start earning more money so you're supposed to keep living like you were when you first left college a decade ago?
It's about inflating the right things to keep yourself grounded.
Here's what I mean:
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Picking the absolute peak of the market to invest in is a scary proposition.
How often do you hear "I don't want to invest right now, it's too overvalued"
It's a fair feeling to have.
But the data doesn't agree with you.
More wealth is destroyed by poorly timing the market,
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"Hey why is my bonus taxed at a higher rate than my salary!?"
A common question I hear but let me assure you your bonus is taxed at the same rate as your salary.
What you're probably seeing is a different withholding rate.
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"Why is my take home pay less this month than it was in December? Nothing changed in my life"
If you make in excess of $168,600 you're hitting the Social Security wage cap. That part of FICA is 6.2% of your income but once you surpass it, it drops off for the rest of the year
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@ankurnagpal
I’ve seen industry data that said the average advisory fee for $5m is about 0.9%.
Wells Fargo is particularly awful for non advisory reasons, much less this excessive fee and their horrible mutual funds.
If their banking scandal proved anything, it is why would you trust them
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Over the last 98 years the S&P annualized 10.3%.
Yet only 8 times during that time frame did it ever return between 7%-13%.
The markets are volatile. Going back to 1980 the median intra-year decline was 10%.
By far the biggest problem investors create for themselves is
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The current national average 30-year mortgage rate is 7.06%
The current long-term AFR is 4.18%.
The wealthy can act as the bank for their children and help them purchase a home, bypassing the traditional mortgage system and saving their children interest payments.
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Beneficiary Designated assets pass by beneficiary.
It's important to ensure the people you have listed as beneficiaries are:
1. The people you want assets to go to (aka no ex-spouses or deceased individuals)
2. Are aware they're the beneficiaries
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The 10 year inherited IRA withdrawal rule has been painful.
There’s really no way around accepting that income.
But one thing we’ve been able to do is have clients increase pre tax retirement contributions to offset that IRA income.
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Instead of wealth preservation, we begin thinking about wealth transfer.
Wealth transfer to charity could be:
- Donor Advised Funds
- Private Foundations
- Charitable Lead Trusts
- Direct Gifts to Charity
- Adjusting beneficiaries on taxable IRAs to be a charity
- Qualified
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@bhallcpa
TikTok loves irrevocable trusts and I don’t understand.
“Hey you know how you can avoid taxes? Put all your assets into an irrevocable trust so all of the income gets taxed at even more punitive rates 😎”
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Wealth transfer to family looks a little different:
1. Intentionally Deficient Grantor Trusts
2. Grantor Retained Annuity Trusts
3. Annual exclusion gifting
4. Intra-family loans
5. Irrevocable Life Insurance Trusts
6. Roth conversions
7. Qualified Personal Residence Trusts
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Above this $5M level everyone has built off of this estate planning base.
At $150M we're well above any Federal Estate Exemption. So how do we plan for it?
The answer is: well before you get to $150M in assets
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My thoughts are:
1. Firms offering risible intro pay
2. Firms with no defined career track
3. Firms built a client base that aged with the advisors working there and 22 year olds don’t want to run Medicare analyses all day
4. No desire to attempt to attract younger clients so
Because most of them are still being hired into sales jobs where 75%+ attrition in the first 3 years. We don't have a shortage of NextGen talent. Parts of our industry actively churn it. 😓
"Everyone wants NextGen advisors. Why can’t they find any?"
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@NFinTX
In 30 years you will still have property tax, homeowners insurance, water heaters to replace, roofs to repair and fix, windows that need to be upgraded, appliances that suddenly break, a lawn to maintain, etc.
Alternatively you just have: rent.
Today the numbers don’t favor
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Custodian: “hey the post office is returning this mail, can you confirm this is the client’s address”
Me: “yeah that’s the right address”
Custodian: “okay we’ll re deliver it”
….
Custodian: “hey the post office is returning this mail, can you confirm this is the clients
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Remember:
Marginal Tax Rate: The tax rate applied to the next dollar of earned income, up until the next bracket is reached
Effective Tax Rate: Your total tax paid divided by your total income.
In almost all instances your effective rate is less than your marginal rate.
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After our wedding my wife and I consolidated our investment accounts but kept our bank accounts separate.
We do share one credit card to maximize points but we also have our own individual ones.
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Social media creates unrealistic expectations for people income, lifestyles, progress, etc.
You may never be 30 and driving a lambo with 3 side hustles and that’s okay.
As long as you’re being smart with your own money to build a life you want, then you’re doing great.
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It's not uncommon for a new client to approach me after receiving a large inheritance.
These are people who have worked their whole lives, but now find themselves with high 7 figures in assets.
So how do we approach it?
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You ever get really into a hobby, build a little following around it and think "I should try to turn this into a business"
So you start formalizing the process, start treating it as a business and start deducting some expenses on a Schedule C?
But the profit never comes and all
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Here's the thing.
I rent an apartment and would love to buy a home, but around DC the prices just don't make sense.
There is not a chance in the world that I would ever househack as a 31 year old married man and there's no way you can convince me it's not a term created by 22
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"Hey is it too late to open a Roth IRA and put money it for 2023?"
The answer is no, and you should really consider making a contribution if you're eligible.
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It does not matter how many times I check and recheck my bag; but the second I enter the airport I will always get the feeling of:
“Am I forgetting something?”
I can’t be the only one right?
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There are two real types of Private Foundations:
1. Operating Foundations -- those that seeks to undergo charitable efforts on their own (like the Bill & Melinda Gates Foundation)
2. Non-operating Foundations -- those that are primarily grant making foundations
The 2nd is the
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"I don't want to make more money, because I'll be in a higher bracket and pay more in taxes"
Right but for the wrong reasons.
Your marginal bracket only determines how the next dollar is taxed. Not how every dollar is taxed.
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Yesterday David Calhoun, CEO of Boeing was grilled in front of Congress for a myriad of reasons.
One particular point was related to his compensation package that was just approved.
$32,800,000.
That's not interesting to me. What's interesting is how it's structured.
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Private Foundations get a lot of scrutiny -- not just from the public at large but from the IRS.
So what are they?
They're independent legal entities established solely for charitable purposes. As such, they're registered 501(c)(3) organizations.
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@Soaps27
You’ve gotta run the numbers. You can’t just go deep into a monthly payment and hope “well in 10 years I can sell my house for $300,000 more than I bought it for!”
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I've had an account here since 2011 but back then I was tweeting about punk bands and other things.
But now it's 2024 and I still want to be posting about punk bands but instead I post about finance because people care more about that.
I really appreciate when people take the
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The stories about Nvidia employees now becoming millionaires because of stock options are cool and all.
But I want to know about Jen-Hsun Huang.
What's it like to be paid as CEO of the hottest company of the last couple years?
We turn to the 2024 Proxy
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Forget about a 20 year old Toyota, here's the car you should be driving to build generational wealth:
Whichever one fits your needs and doesn't cost you too much in upkeep.
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There is a lot to be said about "making the right tax election" when someone starts their small business.
But in all reality, if you're asset light, wait until your consultant business is off the ground and running for a couple years before making a decision on a S Corp.
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How long do you hold on to a losing position?
Maybe helps to know what return you need to breakeven after a decline:
-5% --> 5.26%
-10% --> 11.11%
-20% --> 25.00%
-30% --> 42.86%
-50% --> 100.00%
-75% --> 300.00%
-95% --> 1900.00%
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“How many dividends did I earn last month?”
Is a question I’ve never been asked because it doesn’t matter.
If you’re young, it shouldn’t matter to you either.
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Here is exactly how you should be structuring your accounts once you get married:
However you want.
No amount of confident tweets will teach you what is right or wrong.
If you want a joint account and that works for the two of you, then great!
More important than combining
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Had a prospect meeting yesterday with a couple who is currently working with another advisor.
The reason they're now searching for a new advisor is that this guy gave them a 5% allocation to Silicon Valley Bank in late 2022.
This is why I don't like individual stocks for
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Spending the week with my wife and her family in Vermont. Happy 4th week everyone!
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Watching Virginia Tech football is enjoyable and a good use of my time
!⃝ 𝗧𝗵𝗶𝘀 𝗰𝗹𝗮𝗶𝗺 𝗶𝘀 𝗱𝗶𝘀𝗽𝘂𝘁𝗲𝗱
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@Rawk_FI
My friendly advice is to hire someone. Unless you really know how to handle everything with the rental, there are so many ways it can go wrong.
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@markcecchini
Hey man, didn’t see you in case class last Tuesday. Lytton was asking us if you had worked on the project. Lmk!
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Had the pleasure of chatting with
@Matthew_Garasic
for almost an hour yesterday afternoon.
Just an absolutely solid guy and one hell of a planner.
Incredibly grateful for the tips and stories he shared about his marketing journey.
If you already don't, go and follow him.
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None of this is legal advice.
All of these techniques were implemented with hand-in-hand coordination of their estate attorney.
But undergoing these advanced trusts has prevented hundreds upon millions of assets from being subject to Federal estate taxation.
They're powerful
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Over the last 98 years the S&P annualized 10.3%.
Yet only 8 times during that time frame did it ever return between 7%-13%.
The markets are volatile. Going back to 1980 the median intra-year decline was 10%.
By far the biggest problem investors create for themselves is
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I think "invest in what you know" does more harm than good.
Quite honestly, it doesn't mater how much you think you know about any company -- including the one you work for.
4 out of 5 stocks don't outperform the average.
What are the odds your company is above average?
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When you die you have 3 options of how your estate gets distributed:
1. Family
2. Charity
3. Government
You can prevent the government from being the final say by building a basic estate plan.
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It may seem unintuitive, but if you and your spouse are worth more than ~$26M, finding ways to increase your income taxes during your lifetime may actually provide for more wealth rather than minimizing as much as you can while living and paying estate tax.
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The “what if” is the entire reason I love this career so much.
It’s what the “advisors are worthless, just buy VOO” crowd doesn’t understand.
VOO doesn’t run your cash flow and tax projections when you’re trying to determine the best time to exercise your stock options
VOO
So here’s the thing.
For most people, making money is the easiest part.
All of my clients acquired skills in one or more areas that led to their talents being in very high demand.
They work, or have worked, at companies that were willing to pay them a lot of money (Cash +
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How I look at clients after I give them a list of recommendations and they immediately implement all of them
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If you don't protect what you're creating, you can lose it all from a single incident.
Layers of protection:
- Emergency funds (personal and business)
- Disability insurance
- Life insurance
- Key man policies
- Umbrella insurance
- Buy-Sell Agreements
And: a well
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Financial planning is sending emails back and forth to the custodian to confirm that
- yeah that’s the clients signature on this $30 check
- yeah that’s the clients address
- yeah they want to send this wire to the same place they’ve been sending it every month for the last
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Did you miss it? Two days ago there was a deadline.
The Q2 federal estimated tax payment deadline.
By missing it are you going to end up paying a penalty in April 2025?
Are you aware that a penalty even exists?
Let's fix it
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Your paystub gives a ton of info:
I know your salary and bonus, if you've exercised options or had RSUs vest
What benefits your company provides and their costs. And also if your company is paying for life insurance on you
Most importantly, I can see what you're withholding
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Top financial planning items to consider when adopting a pet:
Ok I’m not actually going to create a list.
Purchase an animal you can afford.
Understand the daily food needs, potential vet costs, etc.
All to say, this weekend my wife and I adopted a cat from a rescue.
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Financial independence is knowing that you to do whatever you want with your money, knowing it won’t set you back decades.
A great financial plan will tell you exactly where on that independence journey you are.
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There’s a real cost to failing to act on improving your situation.
It’s called the laziness tax
Putting off investing. Putting off saving. Putting off making a plan to sell your company equity.
Not returning things from Amazon bc you don’t want to pay for shipping.
The
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