Financial Plans Are Written in Pencil
Why mid-year is when good plans get rewritten more honestly, and the kind of conversations that come with it.
There is a phrase Cole uses in nearly every first meeting. Financial plans are written in pencil, not ink. They are living frameworks designed to guide decisions as life unfolds.
Most people do not hear that the first time. They have grown up with the idea that a financial plan is a document that gets built, signed, filed, and only revisited when something goes wrong. Pencil sounds like a hedge.
It is not a hedge. It is the truth about how families live. Markets change. Tax laws change. The work you wanted to do at thirty looks different at forty-five. The grandchild who was not on the radar is now the entire reason for Sunday dinner. A plan that does not flex with that is a plan that is going to be wrong, eventually, in ways the family cannot afford.
Mid-year is when the eraser comes out.
Before getting into specifics, the question worth asking with your spouse: what would we regret most, looking back from ten years out, if we did not act on it now?
Kurt frames the purpose of money this way. The point is to have as few regrets as possible around any subject that money touched in your life. Which, he points out, is a lot.
Most of the regrets that get named in our offices are not about returns. They are about decisions that did not get made. A beneficiary that was wrong for years. A concentration that grew without anyone watching it. A giving conversation that never happened until someone died.
None of those are dramatic in any single year. All of them compound. Here are some things to consider doing.
Open the beneficiary page for every account
A beneficiary designation is the name on file with your account custodian (Fidelity, Schwab, Vanguard, your employer's 401(k) provider) that says who gets the money if you die. It overrides whatever your will says. If your will leaves everything to your spouse and the 401(k) beneficiary still names your mom from when you started working at twenty-three, the 401(k) goes to your mom. The will does not get a vote.
When was the last time you opened the beneficiary designation page on your retirement plan? For most clients we ask, the answer is: not since enrollment day. Sometimes that’s fine. Sometimes it names a former spouse, a deceased parent, or no one at all.
Add up the company-stock pile
If you have worked at a Houston energy company for more than five years, you may have a bigger company-stock position than you think. The pieces are easy to miss because they are scattered across different accounts and in different shapes. Here is what to add up:
Vested RSUs sitting in your brokerage account. RSU stands for Restricted Stock Unit. It is a promise from your employer to give you shares of company stock on a future date if you are still working there. Once they vest, they are yours.
Unexercised stock options. An option gives you the right to buy company shares at a fixed price. Different from RSUs. Can be valuable even if you have not used them yet.
ESPP shares you have not sold. ESPP stands for Employee Stock Purchase Plan. It is a benefit that lets you buy company stock through payroll deduction, usually at a discount.
Company stock held inside your 401(k). Some plans offer this as an investment option.
Any directly held shares from past purchases or grants.
Add it all up. Divide by your total household net worth, including home equity. The number is the percentage of everything your family owns that depends on one company doing well.
Cal frames the purpose of money as a tool that is supposed to give your family freedom. Concentrated stock is the one thing that quietly trades that freedom for someone else's quarterly earnings report. Worth knowing, in either direction, where you stand.
Look at insurance while there is still time
Hurricane season started June 1. Most insurers stop modifying policies thirty to forty-five days before the season begins, which means major coverage changes are no longer possible. What is still possible:
Confirm your homeowner's coverage matches your current home value, not what you paid for the house several years ago.
Check your umbrella policy limit. Umbrella insurance is liability coverage that sits on top of your auto and home policies. For families with significant assets and teen drivers, $1 million is often not enough.
Make sure you have flood coverage. Standard homeowner's policies do not cover flood damage. Houston families learn this the hard way more often than they should.
Insurance is not a wealth-building tool. It is the thing that keeps a single bad day from undoing twenty years of patient stewardship.
Ask whether this is a Roth conversion year
A Roth conversion means moving money from a traditional retirement account, where withdrawals are taxed in retirement, into a Roth account, where qualified withdrawals are tax-free. The catch: you pay tax now on whatever you convert.
That trade is worth it in years when your tax rate is lower than you expect it to be later. A sabbatical year. A year between jobs. The first few years of retirement before Social Security and required minimum distributions begin (RMDs are mandatory withdrawals the IRS requires from retirement accounts starting at age 73).
If yours is one of those years, June is a good time to model the conversion. The math is too consequential for a December decision under deadline.
Decide on giving before December decides for you
Most families decide their charitable giving in December. The decisions made in December are smaller, faster, and more reactive than the ones made in June. The same families giving the same dollars in June would do it more thoughtfully, more efficiently, and often more generously.
Three structures are worth knowing about, even if you have never used them.
A donor-advised fund (DAF) is essentially a charitable savings account. You contribute appreciated stock or cash, take the tax deduction in the year of contribution, and recommend grants to charities over time.
A qualified charitable distribution (QCD) is available if you are 70 1/2 or older. It lets you transfer money directly from your IRA to a qualifying charity. The distribution counts toward your RMD but does not count as taxable income.
Donating appreciated stock, you have held for more than a year avoids the capital gains tax you would have paid on a sale and gets you a deduction for the full market value.
Each one solves a different problem. The structure conversation is quick once you have decided what you want your giving to look like.
"Money won't bring a family together, but it can assist in helping a family stay close knit. It won't repair a broken relationship, but it can ease stress and tension which damage relationships." Kurt Box, Advocates Wealth Planning
Plans written in pencil only work if someone is willing to pick up the eraser to make changes. Mid-year is a good time to do that. If you are not a client and one of these is sitting unaddressed, let's talk.
Let's Talk: theadvocateswealth.com/lets-talk
FAQs
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Annually at minimum, and after any major life event. That includes marriage, divorce, the birth of a child or grandchild, the death of a beneficiary, a significant change in family relationships, or any move between employers that involves rolling over a 401(k).
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Yes, materially. Mid-year planning gives you time to make decisions thoughtfully and to course-correct if something is not working. Year-end planning is mostly damage control under deadline. The same items handled in June can produce better outcomes than the same items handled in December.
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