Wealth Clarity Blog

This is a great time of year for family, recharging batteries after twelve months of busyness, and looking ahead to next year. 

As I mention in this video, it’s also an opportune time to remember how richly we are blessed, with so many choices and opportunities, and with abundance to impact our world.

May you experience peace and joy this wonderful holiday season!

It’s not often that wealth creators and high-income earners get a break when it comes to taxes, but it appears we’ll have one of those rare opportunities in January 2010.

There was a relatively little-publicized provision in a 2005 federal tax law that eliminates the income restrictions on the conversion of IRAs to Roth IRAs, and it goes into effect January 1.

Our friends over at Kovarik and Kim, CPAs have done a good job summarizing the benefits of Roth conversion and which financial scenarios might make the most sense.

Roth IRA Rollover

In short, the key points to be aware of are:

1. Roth IRAs are considered to be a better savings vehicle (versus their IRA brethren) because of the tax free growth, tax-free withdrawals, and no required minimum distributions at age 70 1/2, among other things.
2. The previous income limits are eliminated starting in 2010.  Typically, if your adjusted gross income (AGI) exceeded $100,000 for a married couple filing joint, you weren’t able to take advantage of the conversion.
3. If you income is low in 2010, you could potentially convert all or a portion of these assets at a low incremental federal tax impact.  Even if your income isn’t low, and depending on your circumstances, there could be strong incentive for converting now.
4. You can effectively unwind the transaction if done before the filing of your 2010 tax return, in the case where the financial markets declined after conversion.  In addition, you can defer the tax on the conversion over a two-year period.

As always, make sure to consult your CPA before taking any action of this kind to confirm that you understand all of the implications and costs.

Early in the morning I take time for personal reading and reflection.  Today, I came across a quote that resonated strongly with me:

If you can just observe what you are and move with it, then you will find it is possible to go infinitely far.   –J. Krishnamurti

This statement suggests the following concept:

We don’t have to work at being what we already are.

Honestly, there are many times that I work harder than I need to.  I’m not saying that I want to take the easy road; rather it’s that I lose sight (clarity) of who I am and what is important to me.  It’s when I’m being influenced by external issues more than internal truths. 

Some examples from my life are when I’m chasing business growth decisions for ego gratification, accepting leadership roles that don’t feel comfortable, or pretending to have more energy and drive than really exists.  In many instances they’re actions or statements that begin with the word “should.”

We all do it, and it’s easy to slip into this trap.

I was reminded of how easy it is to lose clear focus of ourselves when I was talking with a friend yesterday.  He has been struggling to find a company to acquire and run, after having been a key part of a small team that successfully built and sold a company a few years ago.  He felt like he wanted, and needed, to “do it again,” and that he had the confidence and Midas touch to be a CEO. 

Please hear that I am not trying to minimize the gumption and drive it takes to achieve goals in life. But, it was clear to me he was doing it for the wrong reasons—and in the process making it harder than it needed to be. 

How was he making it harder?

In my friend’s case, pride and ego were creeping in and clouding his decision-making, and he was working hard at maintaining a façade that didn’t align with who he really was.  The facts were that his energy level was slipping; he didn’t have the drive to “lead” a company (he would rather be a key impact player on a small team), and most importantly, his priority at this stage in his life was to be a good father and husband.

Here are three ways to better align key decisions with your life: 

1. Take some quiet time to inventory your priorities and passions.   (the Ideal Outcomes worksheet in the Learning Center can be a helpful aid)
2. Accept “who you are”, and let it act as the compass and direct your path.
3. Remember that being who you are doesn’t require work.  So, don’t swim against the current, instead flow with it.  

Are there areas in your life where you need to stop trying so hard and just let the current take you?

This time of year many people of means are preparing their end-of-year charitable donations. Most people I know have favored charities or regular giving plans.

But a new service I came across in the Wall Street Journal’s Wealth Report blog by Robert Frank presents an intriguing new idea for people of means to increase the impact of their giving:  The Social Impact Exchange.

The basic idea is that by helping people find charities that match their values, and in some cases pooling resources, the Exchange can help large donors deliver more social good for their money.

Here’s how the Exchange describes itself on its website:

“The Exchange serves as both an online and in-person gathering place for those who are interested in learning about, implementing and funding large-scale expansions of high-impact nonprofit initiatives, including programs, products, services, organizations, social movements and more. Members can:

• Build field infrastructure that enables more efficient and effective scaling of social program and solutions
• Find the knowledge you need to implement high impact scaling initiatives
• Collaboratively fund programs going to scale through the Investment Fair and Investment Clearinghouse”

I’m not endorsing the Exchange, but I have to admit the idea is intriguing. [It also has some legitimate backing, including Duke University and the Robert Wood Johnson Foundation, so it's not a fly-by-night operation.]

Just as most of us want to maximize the value of our investment dollars, why not try to get maximum value from our charity dollars?

It’s worth giving some thought as the holidays approach, especially in a time when so many people are in need.