Four guidelines to consider before you refinance your home

Four guidelines to consider before you refinance your home

The topic of mortgage refinance has been in and out of the news cycle for what seems like a decade or more. It hasn’t been quite that long, but there are definitely some homeowners who are on their fourth or fifth refinance within the last 10 years. Are they making sound financing decisions or simply chasing the momentum and fever pitch of historically low mortgage rates? I spent four years selling real estate and three years writing mortgage loans, and over that time, I saw people make a number of foolish decisions. That said, there are four main criteria that I consider when helping clients make the decision of refinancing their mortgage and none of the criteria are based on how many times they have refinanced or the recency of their last refinance. Let’s walk through each of the four to better understand when the environment is right for you and your financial situation. 

How much will your rate go down?/How much will you save per month? 

I list this first because, in my opinion, it is the most important component to the overall decision. That said, it isn’t the only component. I would caution anyone who only looks at rate to be careful because solely focusing on rate can lead to a bad decision. For example, if someone only has three years left of their mortgage, even a full 1% drop in rate may not justify a refinance. Comparing the terms of your existing mortgage to the proposed refinances and running the numbers is the only way to know for sure that the refi is a sound financial decision. This is typically the first thing that I do when helping a client analyze their mortgage loan options. 

What is the total amount of closing costs for the new loan? 

This one is often overlooked in the craziness of underwriting and gathering the necessary documents. However, it is critically important to determine if the numbers make sense. For example, if your refinance is going to save you $100 per month and the closing costs are $2500, then you will break even in 25 months. We, then, need to consider how long you plan to stay in the house. In this scenario, I would only recommend moving forward on the refinance if you are planning to stay at least four more years. Otherwise, the total savings is just not meaningful enough.

How does the new loan term compare to the remaining term of your existing loan? 

This measurement can be deceiving in how it relates to your monthly saving. Let’s say you have 23 years left on your existing loan and you refinance into a new 30 year mortgage. The lower monthly payment is a result of the lower rate and the loan term adjusting back to 30 years. Therefore, even though your payment will be lower, it doesn’t mean you are actually saving that amount of money. Continually resetting your loan back to a 15- or 30-year term can become a vicious circle which leads to never actually paying off your mortgage. 

What is the balance on your current mortgage?

Simply looking at the mortgage rate comparison will not give you enough information to determine if a refinance makes sound financial sense. If a mortgage balance is $50,000, we would need a sizable drop in the interest rate to justify the cost and effort as opposed to a $300,000 mortgage where a quarter percent drop in rate could absolutely justify a mortgage refinance. 

In the end, it is imperative that a full and proper analysis be done before paying an application fee or locking a rate. Seek out the advice of a well established mortgage loan officer or your financial advisor and fully understand all of the loan options before making a final determination. This will ensure a sound financial decision. 

Nate Condon

What is a Certified Financial Planner®?

What is a Certified Financial Planner®?

Whether you’ve had a financial advisor for years or you manage your own financial plan, you’ve likely seen the acronym CFP® before, even if it’s just been in passing. So, what does it mean and why does it matter? 

What is a CFP®?

CFP® stands for Certified Financial Planner® and is a certification acquired through the Certified Financial Planner Board of Standards, a nonprofit organization that serves the public by establishing and maintaining professional standards in personal financial planning.

Because of the sheer amount of financial professionals – and the fact that anyone can call themselves a financial advisor (and many iterations) – one of the CFP Board’s main priorities is to provide a certification that is the recognized standard of excellence. With thousands of hours of practical experience required, the CFP® certification is by no means easy to achieve. And the work isn’t done once the certification is complete. A CFP® must adhere to a rigorous set of requirements, one of which is committing to the fiduciary duty to act in clients’ best interests.

While there are a number of factors to consider before choosing a financial advisor, the CFP® designation can be a helpful guide in that decision. 

Certified Financial Planner® – Quick Facts

  • 87,784 Certified Financial Planners®
  • 76.8% are male
  • 23.2% are female
  • Wisconsin ranks 19th in the number of Certified Financial Planners® available
  • There are 1,707 CFP® professionals in Wisconsin
  • CFP® certificants must prove themselves in 72 area of expertise and log thousands of hours of practical experience

Walkner Condon Financial Advisors is fortunate to have four CFP® professionals on our team, serving a variety of clients, whether they live in Madison or abroad. Below you will find more background on each CFP® at Walkner Condon and their areas of expertise. 

Walkner Condon’s Certified Financial Planners®

Jonathon Jordan is one of the Partners at Walkner Condon and a Certified Financial Planner®.  He decided early in his career that simply selling investment and insurance products did not offer the full value of what a financial advisor should provide to their clients.  After going through the rigorous coursework and classes, he began using this wealth of knowledge to help the clients he was already working with as well as many others since.  He works primarily with families and businesses on their long-term goals such as retirement planning, college savings, estate planning and other philanthropic goals. He is giving back to the financial advisor community by becoming a CFP® mentor for others that have decided to work towards this esteemed credential. Link to Jonathon’s no-cost, no-obligation initial “fit” meeting.

Anna Lautenbach, M.A. (Acct), M.S. (Mgmt), recently joined Walkner Condon as both a Certified Financial Planner® and one of the Founding Partners of Walkner Condon Tax Services. Anna’s practice focuses on comprehensive planning with high net worth individuals with a tax and investing strategy that will maximize their wealth by being cognizant of tax implications on changing portfolios. She assists business owners at all stages in their business, including succession. As a Certified Exit Planning Advisor, she can help you position your business for a successful sale and prepare for the next stage in life. She has an affinity for working with women advisors, helping to empower and guide them to financial success. Link to Anna’s no-cost, no-obligation initial “fit” meeting. 

Mitch DeWitt works with individuals and families looking to devise a plan of attack for their financial goals as well as an execution strategy. Typical clients of Mitch’s include those in technical fields such as engineering, software development and programming, or healthcare, among others. Clients seek Mitch’s advice when they are looking to come up with a charitable gifting strategy, how to approach sizable positions of stock that they have obtained through their employer’s stock plan, or when they want to learn more about sustainable investing strategies. An engineer by background, Mitch enjoys being thorough in all stages of the planning process. Link to Mitch’s no-cost, no-obligation initial “fit” meeting.

Stan Farmer, J.D., is the Director of International Financial Planning for Walkner Condon’s International Group. Stan works with a wide variety of cross-border families, including American expat individuals and couples working, retired, or semi-retired abroad. Many client families have multiple nationalities represented (for example, a U.S. and a non-U.S. spouse with dual national children), while other clients are foreign non-U.S. persons who have financial assets in the United States and, in most cases, other countries as well.  These clients present complex financial planning challenges that Stan endeavors to help them identify and overcome. Traditionally, a CFP® becomes an expert in helping clients navigate the myriad of technical tax and estate planning rules in the United States and in their particular state of residence. For Stan’s clients, these U.S. rules still apply (because the U.S. is unique in its approach to taxing its citizens regardless of where they reside), but there is usually a whole other set of foreign (often very different, sometimes conflicting) rules that apply his clients because they are residents and often domiciles of another country. Stan develops financial plans for clients that consider each client’s unique and overlapping tax exposures and recommends strategies to enable these cross-border clients to achieve their financial planning goals in a globally tax-compliant and tax-efficient manner. Link to Stan’s no-cost, no-obligation initial “fit” meeting.

A Thanksgiving Like No Other

A Thanksgiving Like No Other

Thanksgiving is my favorite time of the year. Each year, our family gets together in a small town in Western Tennessee called Eva, and we rent cabins where we can all spend a few days together catching up on our busy lives. It is a place that my children routinely call their “favorite place in the world,” where many of my fondest memories have been made. But in 2020, it seems that just about everything that involves large gatherings of people has been canceled. Not being able to go down there because of the pandemic has been very hard on my kids and on me. I have decided that this is the best year to sit back and really understand what being thankful is about. It is precisely when things seem the hardest that we should self-reflect and try to find the small (and big) things that are going on around us that we can be thankful for.

The biggest news of the year has been the impact of COVID-19 and how it has impacted every one of us in different ways. I am currently battling the virus, and it has been a challenge so far. I have lost the ability to taste or smell anything. As I am dealing with that, I am more thankful than ever for the smell and taste of a full Thanksgiving spread, complete with turkey, mashed potatoes, stuffing, baked macaroni and cheese, and apple pie! I know there are many people who have not been as fortunate to be recovering from this insidious virus. One of my friends is currently intubated as he fights through the side-effects of his infection. This thing is real and it is REAL nasty! But I don’t have to let it rob me of my joy around this time of year. There is always something to be thankful for, and I am thankful for the health that I have and that my family has so far tested negative for the coronavirus.

It is easy to lose perspective when things are not normal or we are inconvenienced. This year we have all, at one time or another, had to deal with wearing a mask to help stop the spread and flatten the curve of infection. This has made me realize how important it is to put other people ahead of myself when it comes to my day-to-day interactions. It has also shown me how much I enjoy the simple sight of a friend or a stranger smiling at me. We have lost that this year in many of our in-person interactions, and I am going to be happy when this is past us and we can bring happiness to each other with our smiles! I am also going to miss my family at Thanksgiving, but we are able to set up a large Zoom meeting with “virtual cabins” where we can break out and spend some time together catching up. Thankfully, we won’t have to wear masks during this time, and we can see each other and enjoy the time that we do have. It’s not the same, but it is definitely something to be thankful for!

I know that many of our clients have been dealing with tough things this year, whether health-wise, financially or emotionally. We want you to know that we are here for you to talk about anything that is on your mind. We love the value that we can bring to your life, and most of all we are THANKFUL for the trust that you have put in all of us here at Walkner Condon to help you navigate the choppy waters of 2020 and beyond, as you plan for and work towards your long-term goals and dreams. Without each and every one of you, our firm would not exist. So as you reflect back on this year, and all that it has brought to us collectively, we want to wish you a very Happy Thanksgiving, and we hope that you have a chance this year to realize the special things in your life that you can be thankful for.

Jonathon Jordan, CFP®

What are my 401k options if I get laid off?

What are my 401k options if I get laid off?

By Mitch DeWitt

Dan Corcoran – the newest member of the Walkner Condon team and social media/marketing extraordinaire – and I were having a casual conversation over coffee one morning, and we naturally turned to the topic of sports. Dan has a background in social media and marketing in the semi-professional hockey space, and I have been a lifelong sports fan, primarily rooting for my Michigan Wolverines and the Detroit professional sports teams (it has been a rough time to be a sports fan in Detroit lately). Dan mentioned the recent ESPN layoffs, which I was previously unaware of. It’s safe to say that most sports fans probably grew up watching SportsCenter and have tuned into ESPN to catch our teams’ games at some point. Being the financial advisor that I am, I thought of the financial planning opportunities and the considerations of rolling over a former employer’s retirement plan. Being the marketing guy that Dan is, he told me to write a blog. (By the way, if you’re one of the many folks who have lost a job over the last few months, here’s another helpful blog about working through a job loss). 

So, before we go any further, what is a rollover? The IRS defines a rollover as the following:  “A rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it, within 60 days, to another eligible retirement plan.” Sounds pretty straightforward. But there are many rules about what types of accounts can be rolled over and what types of accounts are acceptable destinations. Furthermore, there are some tax traps that people can fall into. If done correctly, a rollover of tax-deferred assets should not be a taxable event. Unfortunately, I’ve seen “do-it-yourselfers” attempt to roll over their assets from a former employer’s retirement plan and have realized a large and unexpected taxable event. This is where we come in: to help people advise on their options with their retirement plans, make a decision on their best course to align with their retirement goals, and then confidently execute the plan. 

If I got laid off, what are my options with my retirement plan / 401(k)?

Roll it over to another qualified plan or IRA

The IRS publishes a rollover chart to show what they would deem an acceptable rollover. In many cases, we find ourselves interpreting this chart and educating our clients on where they can roll their retirement assets as well as what makes the most sense for their situation. Again, if done correctly, a rollover should not be a taxable event (unless you want it to be in the case of a conversion. More on this in my next point). Many people come to me saying that they want to “consolidate” their accounts or “transfer” their accounts. This presents another education opportunity with clients, since a transfer is treated differently than a rollover. A transfer typically refers to the same type of account moving from one institution to another (e.g. Roth IRA at Fidelity to a Roth IRA at TD Ameritrade), whereas a rollover refers to moving assets from one type of account to another (e.g. 401(k) at Fidelity to a Rollover IRA at TD Ameritrade). Furthermore, there are direct rollovers and indirect rollovers. Direct rollovers are where your assets are sent from one custodian to another (e.g. Fidelity to TD Ameritrade). No taxes are required to be withheld when a direct rollover is performed. An indirect rollover is where you do take possession of your assets during the rollover process. In this case, you are required to withhold taxes from the distribution amount. To avoid paying taxes on an indirect rollover (and ensuring that the amount withheld isn’t included as taxable income), you must deposit your assets into another qualified plan or IRA within a 60-day period. You also must ensure that the amount distributed from the original account (including the withheld amount) is fully deposited into the new account. Generally speaking, direct rollovers are preferred to indirect rollovers because withholding is not required. You will receive a 1099-R for the tax year that you conduct a rollover. Rollovers are reportable to the IRS even though they are not taxable. A 1099-R is issued whether the rollover is direct or indirect. However, in the case of an indirect rollover, it is up to the taxpayer to prove that they properly rolled over their assets to avoid a taxable event (when they file their tax return).

Convert it to Roth

You may be able to convert all or a portion of your tax-deferred assets in your retirement account. Converting your tax-deferred assets to Roth will be a taxable event. Some might wonder why you would want to do that. Let’s say someone might be in a lower tax bracket in the current tax year vs. a higher tax bracket when they take money out of the account in the future. The thought is that if it is going to be taxed at some point, why not tax it at a lower rate? We help many clients analyze their different “buckets” that their assets are in: taxable, tax-deferred, and after-tax (there are technical differences between “after-tax” and Roth, but that is beyond the scope of this blog). Depending on the situation there might be a reason for a client to spread out their assets between the three buckets or it might make sense to heavily favor the Roth bucket, for example. If the client’s circumstances align to make a Roth conversion, it may occur all at once or over a phased approach over several tax years. This is something that should be coordinated between a financial advisor like us and a tax advisor.

Keep it where it’s at

Many plans will allow you to keep the assets in your 401(k) (or similar retirement plan). Although they are able to force you to move the balance out of the plan, usually if there is a less than a $5,000 balance in your account. You might want to do this if you like the investment options, the fee structure, or simply the convenience of not having to take any action.

Cash it out

Yes, this is an option, but in most cases it’s not recommended because of a potentially large tax bill. Additionally, it may be detrimental to your financial plan and ability to obtain retirement goals. Usually, the only time this makes sense is when someone finds themselves in an unexpected and dire financial situation. 

It is worth having a conversation with us if you find yourself in a situation where you have been laid off or even if you have several outstanding 401(k) accounts spattered across different retirement plans and financial institutions. We would love the opportunity to educate, offer some guidance, and eventually help execute your plan. You can reach out directly to us here, so we can get the conversation rolling (pun intended, I couldn’t help it).

Challenges, Additions and Optimism: Where Walkner Condon is Going

Challenges, Additions and Optimism: Where Walkner Condon is Going

The story of 2020 is yet to be over, but it will be a year that will never be forgotten. We have faced some of the greatest challenges as a company, namely the battle that the co-founder of our namesake, Nate Condon, has undertaken. As his winding road towards recovery has taken its twists and turns, we are happy to report that he has improved from a rather grave position just a short six weeks ago to improving metrics and hopefulness that a serious but necessary surgery will finally be the answer to long-term health. There is one major surgery in Nate’s future that is expected to ultimately get him better, and we anticipate a full recovery.

We will have answers in the next couple of months on how long this journey will take, but his strength and resolve have been awe-inspiring. And speaking of awe-inspiring, the way Sylina, Nate’s wife, has taken on the role of full-time caregiver during this process has been the most incredible example of true, selfless love and devotion. Nothing reveals the core of a person or a relationship like these types of sudden, life-changing events, and the whole Condon family has proven to be solid as a rock. The Walkner Condon team is certainly happy to have our rock back, as Nate’s strength and nutrition has improved, and he has been able to become involved again in our weekly meetings. 

Despite these unforeseen challenges, we still have a job to do. Jon, Mitch, and Keith have thrived under the virtual meeting environment, and we have collectively worked to enhance the client experience through technology. Each day as clients become more adjusted to the nuances of working together online, the process gets easier to navigate and more personal. We have recently purchased software that will further assist us in gathering and sharing personalized data with secure document sharing. This will also help us conduct our strategy meetings through a more efficient way by getting updated client information prior to our appointment. 

In late August, we had another unforeseen development when Stan Farmer and Syl Michelin began discussions about joining us as financial advisors. It was a natural fit with Keith previously working with these two talented individuals. And, at the two months+ mark of tenure, we can report that they are indeed excellent at what they do, as well as great fits for the “comfortably unique” office culture we all enjoy so much. And we would be remiss to not mention Hannah’s contributions during this time, as she has been instrumental in Stan and Syl’s success in onboarding. Her positive attitude and ability to offer a trusted perspective on many topics is invaluable. 

The interesting thing about change is that it is unyielding and unrepentant, but it is your choice whether to embrace it or allow it to become a barrier to true progress. Even “good” change can be a painfully uneven experience, but regardless of what iteration of change you face, it forces you to look inward and accept your own limitations. For me, it is the understanding that I cannot be all things to all people, and that I will simply never be good at all things. Even things I enjoy doing, I realize that a true specialist is far better suited for than someone that dabbles. 

Resultantly, two new employees have recently joined us and we will be embarking on a new venture with the goal of expanding our service level to our clients. Dan Corcoran, marketing and social media specialist, was added to our team with the goal of telling our story and increasing our engagement and communication. We believe that being “comfortably unique” is our secret sauce, and adding staff that can help us get this message out is incredibly valuable.

Next, Anna Lautenbach is a highly credentialed financial advisor that will also be assisting us with compliance responsibilities. She also will be partnering with us to establish tax services as a new entity. We believe that we can offer the same customized, friendly experience on the tax consulting and preparation side to compliment our investment management and financial planning services to both Wisconsin-based and U.S. expat clients. We intend on carrying forward our prompt response time and ease of doing business, and offering clear and concise advice from Walkner Condon Financial Advisors to Walkner Condon Tax Services.

On behalf of the partners, Nate and Jon, we look forward with optimistic eyes and hearts. We are humbled by our clients’ genuine care for us as a group. We exist because of all of you, and we will tirelessly strive to make your experience with comprehensive wealth management an exemplary one.

The future is bright.

Clint Walkner