Kathleen (Kate) Cote, CFP®, RLP Red Clover Financial Planning

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About Kathleen (Kate) Cote, CFP®, RLP

Kate began her financial career in the trenches at Fidelity Investments, the fourth largest mutual fund and financial services group in the world. She quickly advanced into leadership positions, managing an operations team, working in problem resolution and navigating the 2000 and 2008 financial crises.

Although she loved helping people work toward their financial dreams, she realized that just focusing on the investments wasn’t enough. She wanted to provide a service that not only delivered investment results but helped clients with their entire financial picture including; insurance, benefits, debt, taxes, estate planning and retirement planning. To realize her vision and truly help clients, Kate established Red Clover.

Kate begins each client engagement by first learning about what is important to her clients, their values, the essential elements they need to live their best life now and then she works with them to build the financial infrastructure to support that life. After all financial planning should be about you, not your money. She is adept at connecting all the dots for clients and asking the hard-hitting questions so that they fully understand and appreciate all the pieces and parts of their financial wellness equation. In short, Kate helps her clients find a balanced approach to living, spending, saving and investing that is true to them.

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Jump-Start Your Financial Plan for 2022!

January 4, 2022

By Kate Cote, CFP®

2022 already? Wasn’t it just yesterday that we rang in 2021 while holding our breath as we hoped for a fresh start? Time flew by! Sometimes a new year can be overwhelming to think about—especially after the intensity of the last two years and the pandemic, economic shutdown, and slow road back to “normal.” 

But I’ve got good news: there are actionable steps you can implement to regain control of your finances and truly make 2022 a fresh start. Here are four ways to get started today.

1. Set Financial Goals

The first way to jump-start your financial plan is to set financial goals. Do you have a goal for your finances or are you just crossing your fingers and hoping you have enough for the lifestyle you want? 

Specific goals with defined timelines will help to determine the best course of action, including how much risk you can and should take with your money. For instance, if you’re looking for a guaranteed source of income, then you will probably want to stick with investments that will provide long-term security. Conversely, if you are looking for substantial growth, then you might want to take on more risk and invest less conservatively. Every dollar in your portfolio should be working toward a specific goal.

Remember that the best goals will be SMART: 

  • Specific: The more you can identify exactly what you’re saving for, the easier it will be to work toward it. 

  • Measurable: As much as possible, try to identify how much your financial goal will cost. Do the research to figure out what you need to save so that you’re able to see tangible progress along the way. 

  • Attainable: Make sure your goal is realistic and achievable. This might require some self-reflection or reevaluation of your priorities.

  • Relevant: Ask yourself which goals align with your core values. Remember that your finite assets will be split amongst your seemingly infinite list of wants. The more you can scale back your list to what is truly relevant, the quicker you’ll be able to achieve each goal.

  • Timely: Identify the timeline for each goal so that you can prioritize which ones need to be addressed first and how much risk you can afford to take.

2. Build Up Your Savings

If there’s one thing the last two years have taught us, it’s that it’s crucial to prepare for the unpredictable. Whether it be a pandemic, a lost job, or rising rates of inflation, sufficient savings can mean the difference between staying afloat during uncertain times and not having enough when you need it most. 

If you’re not saving already, take steps to start putting a portion of your income away every month. Usually 10-15% of pre-tax income is a good guideline. Ideally, it is recommended that most people should have at least 3-6 months’ worth of non-discretionary expenses saved in a highly liquid, easily accessible emergency fund before saving toward other goals. Either way, consistent savings are the cornerstone of any solid financial plan.

3. Reevaluate the Risk in Your Portfolio

As mentioned in Step 1, risk is fundamental to investing. Even “investing” by hiding cash under your mattress involves risk, since there’s always the chance of a break-in or increased inflation eating away at its value. To jump-start your financial plan in 2022, be sure to reevaluate the amount of risk you are taking in your overall portfolio. 

It’s not uncommon for a portfolio to become unbalanced as the market ebbs and flows. What may have started out as a 60/40 allocation between stocks and bonds can easily become a 70/30 or 80/20 allocation, which is a significant difference in risk level. You may also find that you are too heavily concentrated in one type of asset or in one company’s stock. If this is the case for you, rebalancing and diversification should be explored. 

Though risk is fundamental to investing, it’s also crucial that you aren’t overexposed to unnecessary risks. Take steps to evaluate your risk tolerance, based on your unique financial circumstances, stage of life, and personality, and be sure your investments align.

4. Partner With a Financial Professional

No matter where you’re at in the planning process or what goals you have set for your financial life, it’s wise to partner with a financial professional who can help you take control of your finances and get a jump-start on the future.

We at Red Clover Financial Planning are here to support you, guide you, and navigate any financial challenges you may face. With the tools and expertise to help you set financial goals, build up your emergency fund, and reevaluate your risk level, we also offer a personalized, holistic approach to financial health and personal happiness that is accessible—no matter where life takes you. 

If you’re ready to start planning for the new year with a comprehensive, action-oriented road map, reach out to us today by scheduling a free 20-minute phone call online or giving us a call at 703-677-4587. We look forward to connecting with you! 

About Kate

Kathleen Cote is the owner of Red Clover Financial Planning, an independent financial advisory firm that offers its clients a personalized, holistic approach to financial health and personal happiness that is accessible, no matter where life takes them. Kate has over 20 years of experience in the financial service industry and is a CERTIFIED FINANCIAL PLANNER™ and Registered Life Planner® (RLP®) professional. She is committed to delivering financial plans that serve as a comprehensive, action-oriented road map. As a military spouse and after years of experience helping government employees, Kate is well-versed in the benefits and challenges employees in these areas face and desires to help them maximize their opportunities to live their best life now. To learn more about Kate, connect with her on LinkedIn.

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5 Important Financial Actions to Take Before the End of the Year

December 2, 2021

By Kate Cote, CFP®

Most of us entered 2021 with high hopes that the pandemic would end, life would go back to normal, and we could move on from 2020. Instead, we learned that uncertainty doesn’t have an expiration date and each year brings its own set of challenges. Concerns about inflation, potential tax changes, and new COVID variants have many people wondering if next year will be any better. Those are valid concerns. But regarding your personal finances, 2022 does not have to follow in the same footsteps as the last two years. There are many ways to take back control of your finances and set yourself up for a successful future. Make sure all your bases are covered before the new year with these 5 steps.

1. Evaluate Your Tax Situation

One of the most important actions you should take heading into 2022 is to review your taxes and make any necessary changes in light of the potential passage of the Build Back Better Plan. This bill could have far-reaching implications for people in all tax brackets and it’s important to review how your financial plan may be impacted. Some of the potential changes to be aware of include:

  • Increased business taxes

  • New surtax on Americans making more than $10 million per year

  • New cap on state and local tax (SALT) deductions

  • Common tax-advantaged retirement strategies, including Roth conversions and backdoor Roth IRAs, could be eliminated or strictly regulated

If you have significant estate assets, are planning to retire, or you are expecting substantial capital gains in the next few years, be sure to review your plan with a financial professional to ensure you are taking steps to mitigate any potential risk.

2. Review Your Asset Allocation & Invest with Impact

The end of the year is also a great time to review your asset allocation strategy and incorporate ESG and impact investing if desired. Given the dramatic rise of inflation over the last few months, it’s crucial that you evaluate your investments and make sure your portfolio is properly diversified. It should also be tailored to your specific risk tolerance level, ensuring that you are earning enough returns to keep up with inflation, but you are not overexposing yourself to risk. 

If you are interested in using your funds to support environmental, social, or governmental issues (ESG), you can also consider impact investing as a way to earn returns while also promoting change on causes you care about.

3. Consider Charitable Donations

Charitable donations are another option that can be reviewed as the year-end approaches. The holidays are a great time to give money and assets to your favorite non-profits, churches, and organizations. 

Charitable donations can be used as part of your overall tax strategy, or as part of a comprehensive estate plan. Both options provide many potential benefits including supporting causes you care about, reducing your taxable income, and reducing your taxable estate.

4. Use Up Your Employee Benefits

While every employee benefit plan has its own rules and regulations, many of them expire or reset at the end of the year. You worked hard for these perks, so be sure to use them before it’s too late!

Medical and Dental Benefits

Now’s the time to take care of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used the full amount and anticipate any treatments, make it a priority to set an appointment before December 31st.

Flexible Spending Account

Like your health insurance benefits, you’ll want to use up as much of your FSA (flexible spending account) dollars as possible by the end of the year since you are only allowed to carry over $500 each year. 

Sick and Vacation Time

Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If it does expire, fit in a last-minute staycation or take some time off to work on projects you’ve been putting off. If you need to make any trips to the doctor, schedule those appointments now to make use of paid-time-off benefits before you lose them.

5. Revisit Your Plans and Policies

Lastly, take another look at your estate plan and insurance coverage. If you took the time and energy to create an estate plan, check it periodically to ensure all the documents are up to date and no major details have changed. 

Your insurance needs may also change as the year goes by, so periodically review your coverages and designated beneficiaries to bring them up to date to reflect your current financial situation. For example, if you paid off debt, you may not need as much life insurance coverage since your family’s liabilities have decreased. You might also want to evaluate your need for other types of insurance, such as long-term care or disability insurance. 

Partner With a Professional

At Red Clover Financial Planning, we can help you take back control of your finances after a rocky couple of years. Together, we can work to achieve your financial New Year’s resolutions in 2022! Reach out to us today by calling our office at 703-677-4587 or scheduling a free 20-minute phone call online

About Kate

Kathleen Cote is the owner of Red Clover Financial Planning, an independent financial advisory firm that offers its clients a personalized, holistic approach to financial health and personal happiness that is accessible, no matter where life takes them. Kate has over 20 years of experience in the financial service industry and is a CERTIFIED FINANCIAL PLANNER™ and Registered Life Planner® (RLP®) professional. She is committed to delivering financial plans that serve as a comprehensive, action-oriented road map. As a military spouse and after years of experience helping government employees, Kate is well-versed in the benefits and challenges employees in these areas face and desires to help them maximize their opportunities to live their best life now. To learn more about Kate, connect with her on LinkedIn.

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Could Financial Planning Reduce Your Tax Bill?

November 1, 2021

By Kate Cote, CFP®

Have you been hit with some hefty tax bills in the past? There’s nothing worse than paying money all year long to the IRS only to find out during tax season that you owe even more than you thought. It’s frustrating. It’s disappointing. And it adds unnecessary strain to your finances.

Have you considered financial planning as a way to reduce the taxes you owe? I have good news for you: there are proven ways to reduce your tax bill. Let’s discuss 4 ways to strategically lower your taxes with a little bit of financial planning.

1. Max Out Your Retirement Accounts

The easiest way to reduce your tax bill is to max out all your retirement accounts. Contributing to these plans lowers your taxable income dollar-for-dollar.

For most employer-sponsored retirement plans—including 401(k)s, 403(b)s, and 457 plans—the annual contribution limit for 2021 is $19,500. If you’re 50 or older, you can contribute up to $26,000. (1)

Once you’ve maxed out those accounts, move on to a traditional IRA. The maximum contribution for 2021 is $6,000 or $7,000 if you’re at least 50. (2)

See this financial planning strategy in action: 

Meet John and Lisa. They’re a married couple in their early 50s. They both work and have a combined annual household income of $140,000. For 2021, they plan on contributing the maximum amounts to their employer-sponsored retirement plans ($26,000 each) and their traditional IRAs ($7,000 each). These contributions reduce their taxable income from $140,000 to $74,000. The best part? Now they’re automatically in the 12% federal income tax bracket instead of the 22% bracket for married filing jointly. 

2. Open a Health Savings Account (HSA)

HSAs may sound boring, but they’re jam-packed with tax benefits. For example, did you know that HSAs are 100% tax-free? That’s right. You make contributions with pre-tax dollars, your money grows tax-free, and you make tax-free withdrawals for qualified medical expenses. 

But that’s not all! Once you turn 65, you can use the money for literally anything. It’s true. You can use it for everyday living expenses, that overseas vacation you’ve been dreaming about, or anything else your heart desires. 

If you have a high-deductible healthcare plan, for 2021 you can contribute up to $3,600 for single plans and $7,200 for family plans. (For 2022, those amounts will increase to $3,650 and $7,300, respectively.) If you’re at least 55, you can save an additional $1,000 on top of those limits. (3)

See this financial planning strategy in action: 

Going back to our example above, John and Lisa have successfully lowered their taxable income from $140,000 to $74,000 just by maxing out their retirement plans. They also have a high-deductible healthcare plan through John’s work. It’s a family plan, so they contribute the maximum amount ($7,200). This lowers their taxable income even more, from $74,000 to $66,800.  

3. Make a Charitable Contribution

Donating to charity helps the greater good and helps you lower your tax bill; it’s a win-win. But there is a catch. You must itemize your taxes to receive the benefits that come with charitable contributions. If you take the standard deduction, charitable giving has no impact on your taxes.

That’s why we recommend lumping charitable donations into one year, so you can receive the full tax benefit up front. For example, many of our clients use donor-advised funds (DAFs) to help them qualify for an itemized deduction. With this strategy, you transfer one large sum of money to the DAF at once, claim the contribution on your taxes, then slowly give out the money to charities over time.

Depending on how much charitable giving you wish to do, you could make these large lump-sum contributions every other year or every few years to ensure you get the full tax benefit.

The law now says you can contribute up to 100% of your adjusted gross income to charity, although there may be some exceptions to this rule. (4) For John and Lisa, this means they could donate up to $66,800 to charity.

4. Get Help From a Financial Professional

There are countless ways to use financial planning to reduce your tax bill. And because it can be a challenge for anyone other than financial professionals to know what steps will maximize your savings, we recommend working with a trusted financial advisor. 

At Red Clover Financial Planning, we’d love to review your unique financial situation and help you strategize the best ways to reduce your taxes for 2021 and beyond. Schedule a free 20-minute phone call online or give us a call at 703-677-4587 to get started.

About Kate

Kathleen Cote is the owner of Red Clover Financial Planning, an independent financial advisory firm that offers its clients a personalized, holistic approach to financial health and personal happiness that is accessible, no matter where life takes them. Kate has over 20 years of experience in the financial service industry and is a Certified Financial Planner (CFP®) and Registered Life Planner (RLP®). She is committed to delivering financial plans that serve as a comprehensive, action-oriented road map. As a military spouse and after years of experience helping government employees, Kate is well-versed in the benefits and challenges employees in these areas face and desires to help them maximize their opportunities to live their best life now. To learn more about Kate, connect with her on LinkedIn.

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(1) https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits#:~:text=Deferral%20limits%20for%20401(k,to%20cost%2Dof%2Dliving%20adjustments

(2) https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits#:~:text=For%202021%2C%202020%20and%202019,taxable%20compensation%20for%20the%20year

(3) https://www.forbes.com/sites/ashleaebeling/2021/05/11/irs-announces-2022-health-savings-account-limits-while-hsa-assets-soar/?sh=406122dd585d

(4) https://www.irs.gov/newsroom/expanded-tax-benefits-help-individuals-and-businesses-give-to-charity-during-2021-deductions-up-to-600-available-for-cash-donations-by-non-itemizers#:~:text=The%20law%20now%20permits%20electing,cash%20to%20qualifying%20charitable%20organizations.

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