Management

If I Had A Million Dollars…

mbelcher Management , 10 Comments

[Warning, I’m not a lawyer or accountant. Contact someone in one of both these professions before setting up a trust for anything.]

Over the past few weeks I’ve had a similar conversation with a few different people all floating around the topic of what we would do with a large sum of money. There is usually no a specific dollar amount named; it’s almost always in a vague ” when I get rich” sort of amount. We all have different ideas. Several Texans have said they would open up a Whataburger in Nashville.

I don’t think any of us have any real belief that we will ever get to that undefined “when I get rich” amount, but it got me thinking of how I can get my kids there.

So I’ve come up with a plan: the retirement reimbursement trust.

We are at the point in our society that individuals have to take responsibility for their own retirement. Pension funds are pretty much nonexistent, and even when they are still around, like teachers retirement funds, they are usually underfunded by state partners.

The idea of the trust is to encourage family members to save for retirement by reimbursing them however much they save in their retirement funds every year.

It starts out as seed money to start young people’s retirement funds as soon as possible. The kid works a summer job that qualifies them for an IRA? The parents put that amount in a ROTH IRA for them.

Once they get to be adults and get “real jobs” the trust moves into the reimbursement phase. Whatever the kid puts into their retirement funds, whether it be a 401(k) or 403(b) though work or even a Simple IRA, the trust cuts them a check for that amount after the kid files their income tax forms.*

This really helps the kid in two ways – it encourages them to save for retirement, and lets them live comfortably throughout their life, no matter what they choose to do.

A lot of careers that do good, important work like teaching, the ministry, and non-profits never seem to get paid as much as they should. With a retirement reimbursement trust no one would have to pass on a career because they would never be able to afford a house, or kids, or anything newer than a three year old Camry. The trust lets them use their entire salary to live, while still ensuring their retirement is comfortable.

Brass Tacks

Lets go over some numbers that might help illustrate my point. Even though these numbers change every year, I will use 2015 amounts to keep things simple.

Lets assume C and G are both working the same job, at the same level and get paid the same amount.

C is part of a retirement reimbursement trust, but G is on his own with retirement.

We’re starting with the Metro Nashville Public School starting salary of 42,082.10.**

They have both 401(k) and 403(b) options that top out at $18,000, and workers can contribute to their own IRAs, which top out at $5,500.

401(k)/403(b) 18,000
IRA/ROTH IRA 5,500
Total retirement contributions possible 23,500

If G went by the traditional adage of saving 20% of their income he would put aside $8,416. That’s not an insignificant sum of money, and would be orders of magnitude more than what many people save for retirement. This amount would be enough to max out an IRA or Roth IRA, and probably max out any 401(k) matching offered. G, for the most part, is doing pretty good.

If C went by the same rule of thumb and also saved $8,416, she would be $8,416 better than G, and would now have a nice tidy sum that can help her pay down student loans, put a down payment on a car, or – if she banked it for a couple of years – a down payment on a nice house.
C can also start saving more for retirement without affecting her quality of life. She can slowly, over a few years, add to the retirement percentage until it reaches that $23,500 a year limit. C would be saving half of her annual salary in retirement, potentially letting her retire much, much earlier than G, while still being able to use her entire salary.

Taxes

(remember, only using 2015 numbers)

There’s two that come into play here: annual gift tax exclusion amount and the lifetime gift exemption amount.
Annual gift tax exclusion amount: Each year someone can receive up to $14,000 from an individual.
Lifetime gift exemption amount: Over someone’s lifetime they can receive $5.43 million.
The trust would cut a check for, at most, $23,500 a year.

Retirement $23,500
Annual gift tax exclusion amount: $14,000
Amount over exclusion amount: $9,500

Each year the trust would update the IRS on how much they give over the $14,000, and they would take that off the top off the lifetime exemption amount. There’s no chance of ever reaching that $5.43 million limit this way.

Variations on the Theme

Depending on how much is in the trust, or how many people are pulling from the trust, there may not be enough money for the full $23,500 per person per year. It’s really a mater of sustainability over the long term. This is where an accountant, tax attorney, or financial planner comes in handy.

So here hare some ideas:

  • Max out the reimbursement of 20% of the salary.
  • Cover IRA/Roth IRA contributions
  • Cover up to $14,000, or the max tax-free gift allowed


* For simplicity sake this plan doesn’t cover 401(k) matches, company stock plans, etc. For the sake of this plan all those are simply considered bonuses.

** Side note: this salary, for a certified teacher with a bachelors degree, is the same for those with zero years of experience, to those with EIGHT years of experience. What other industry does fresh-from-college worker get paid the same as someone with eight years of experience?)

On On-Boarding New Hires

mbelcher Leadership, Management , , 1 Comment

Every company has a system to help new hires integrate into the company and team. Our current on-boarding process involves the new hire sitting down for one-on-ones with every new teammate. It teaches the new hire what everyone does, and how that work pertains what the new hire will be doing. It’s a community effort to get the new hire up to speed and ready for their job, but there’s a problem with this system:
We haven’t done their job before.

Read more

michaelbelcher Management , ,

Hi, I’m Michael Belcher and I do a lot of stuff.

For the past few years I seem to have made a habit of finding jobs that have centered around helping companies redesign their websites into responsive, mobile friendly sites. Before that I lived in Dublin, Ireland for a while working as a freelance writer and finishing up a masters degree in mass communications.

I currently work in a front-end developer role with an in-house marketing group, using analytics and solid UX/UI design to increase lead generation and sales for a multi-billion dollar, multi-national company. I’m also the project manager for the larger marketing undertakings including company rebrands, site redesigns, and implementing new CRM systems. Since we’re a small department everyone does a little bit of everything from copy editing and writing, to social media management, to graphic design and video and audio production.

Advice, and bad advice at that.

michaelbelcher Leadership, Management , , , 0 Comment

In the Dale Carnegie [and Associates, Inc. (natch)] book The Leader in You they tell the story of Julius Caesar, during his campaign in Gaul, landing on the south coast of England and then burning his ships; ensuring his troops will not have a means of retreat. It’s in the chapter 14: Creating a Positive Mental Attitude.

“One of a leader’s most important jobs, then is to set a positive, self confident tone, showing others that failure isn’t even a possibility.”

It makes for a good visual, doesn’t it? This great conqueror, who has already marched over much of continental Gaul has set his sights on England, like so many conquerors before and since. The story talks about the legions on the white cliffs of Dover looking down at their ships being set ablaze. Caesar, so sure of his legions that he cut off their link with Europe so they must conquer, and win, or perish.

“What else could they do but advance? What else could they do but conquer? What else could they do but fight with every ounce of strength that was buried in their souls? That is precisely what they did.”

Only, they didn’t.

On Caesar’s first invasion attempt many of his ships were damaged by the strong tides and storms, but the Romans eventually repaired as many ships as possible and retreated back to the continent until the next year. His second attempt fared much better, with him marching to the Thames, but his ships were still damaged by the extreme Atlantic and Channel tides. There is no account of him purposefully burning any of his ships.

Other conquerors have burned, or sunk, their boats behind them to create a “point of no return”, including Hernan Cortez, the conquistador, in 1519.

But this story is supposed to be an illustration on LEADERSHIP, not a history lesson, so how does the accompanying advice measure up? Just like the history lesson, it’s also BS.

Telling people their job is “showing others that failure isn’t even a possibility” is horrible advice. Failure is always close by, and will happen. Hell, Caesar had to retreat after the first invasion failed.

Better advice, that would fit the actual historic account of Caesar’s invasions of England, would be:
“One of a leader’s most important jobs, then, is to set a positive, self confident tone, showing others that failure in most cases doesn’t lead to instant death and dismemberment can be learned from, and that success can follow after a failure.”

There: a much more accurate portrayal of how failure works, and a much more accurate portrayal of Julius Caesar.Plastics-the-graduate

Sadly, a lot of managers reading this book (it’s pushed as a “must read!” to those moving up in the ranks at my company) may actually take advice like this to heart. Please don’t.

Instead think – consciously sit down and examine – all the advice you get. Whether from a book or mentor, whether about managing people or your 401K. Not every piece of advice is applicable to you. Some are downright silly. Others require you to first analyze yourself before you can judge the advice. But none should be taken on whole-heartedly without first understanding what the advice is really suggesting.