Echo Blog

Echo Blog

Congratulations to Tyler Lodahl!!!

By Echo Huang, CPA, CFP®, CFA

We are excited to announce that our newest employee Tyler Lodahl has successfully passed the rigorous CFP® certification exam in November!  Tyler has been with Echo Wealth Management since July 2016, working as Associate Wealth Manager by fostering collaborative relationships with our private and corporate clients.  He assists Echo in delivering personal financial planning service using Echo Dashboard and office operations.  Starting in December, he will increasingly aid in a larger role directly serving clients, taking on similar responsibilities as his colleague Steve Drost. 

Tyler earned a BS degree in Personal Finance and Spanish from the University of Wisconsin- Madison, 2016, Graduated with Highest Distinction.  He completed the CFP® education requirements in college.  With the successful completion of the CFP® exam, Tyler will be able to bear the CFP® marks in August 2018, upon satisfying the final requirement of two years of Apprenticeship experience that meets additional requirements. 

Why Would I Want to Defer Compensation?

By Steve Drost and Echo Huang, CPA, CFP® and CFA

An old proverb states “A bird in the hand is worth two in the bush” suggesting one should be content with what they have (or will have shortly) rather than roll the dice on the unknown.  One who wholeheartedly believes in this proverb may react swiftly and decline to enroll in their employer-offered deferred compensation plan.  This could be perceived as a rational decision; why would you want to receive a portion of your salary or bonus in 5+ years when you can receive it now?   What benefits could there be to electing to give up your bird, or compensation, and “roll the dice” on the unknown?

Currently regulated by Section 409(A) of the Internal Revenue Code (IRC), nonqualified deferred compensation (NQDC) plans allow employees to move earned income from one year to future years, thus allowing for income tax and cash flow planning opportunities.  This is different from deferred compensation in the form of elective deferrals to qualified plans (such as a 401(k) plan) or to a 403(b) or 457(b) plan.  By moving earned income to future years, you can reduce the current year’s taxable earnings which can be extremely beneficial during high earning years.  In the example below, assume a single person expects to earn a salary of $200,000 and receive a bonus of $100,000 in 2017 and then retire in 2018.  Let’s assume he has expected portfolio interest income of $50,000 (starting in 2017 and continuing) and will receive $20,000 per year from social security during retirement.  Lastly, to make the comparison simple, assume all figures below are in “taxable income” before applying the tax rates by ignoring the deductions and personal exemptions. In Figure 1 you will find this individual’s total income, total taxes due, effective tax rate, and then the amount of money taxed at their marginal tax bracket for 2017. Column 2 displays the outputs assuming he did not elect to defer any compensation.  Note that his effective tax rate is over 28% and that $158,349 (which is mainly comprised of his bonus) is taxed at 33%.  Now suppose he defers his bonus to 2022; he elects not to receive the funds in 2017 but rather receive the payment in 2022.  Notice the significant drops in both the individual’s effective tax rate and the portion of income taxed at his highest bracket, the 33%.

Health Savings Accounts (HSAs)

By Echo Huang, CPA, CFP, CFA

The deadline for 2017 benefits enrollment is approaching quickly for many employees.  More and more employers have started to offer high-deductible health insurance plans in addition to the traditional HMO or PPO plans.  You can set up health savings accounts (HSAs) only if you choose one of the high-deductible health insurance plans instead of the traditional HMO or PPO health insurance plans with co-pays.  What do you need to know about HSAs in order to make a wise decision for yourself and your family?

Saving for College

By Tyler Lodahl and Echo Huang, CPA, CFP and CFA

As the former President of South Africa and Nobel Peace Prize recipient, Nelson Mandela, once said: "Education is the most powerful weapon which you can use to change the world." And even while obtaining an education is integral to our world, planning for a child’s education can be an exciting, yet daunting task. Thankfully there are some tax-advantaged strategies you can consider:

1.       Qualified Tuition Programs/529 plans

2.      Coverdell ESA (Education Savings Account)

3.      Roth IRA

4.      American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit

What is a 529 plan and what are the benefits of utilizing one?

 A 529 plan is a tax-advantaged savings plan designed to encourage savings for future college or other post-secondary education expenses.  529 plans, legally known as “qualified tuition plans”, are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. A major benefit of 529 plans is that anyone is able to make contributions regardless of their annual earnings.

Echo and Steve Passed the CFA Level III Exam

By Echo Huang on August 30, 2016

When I founded Echo Wealth Management in early 2015, I had a vision in mind for my new company: take complexity out of wealth management while helping clients gain the confidence to follow their dreams.  And over the past 18 months, through investing in cutting edge technology, and bringing Steve Drost and Tyler Lodahl aboard as associate wealth managers, I am thrilled by what we have achieved together: over $59 million in assets under management and 50 clients.  In addition, I continue to invest in education and technology to enhance the services to clients.

The big news this month:  Both Steve and I passed Level III of the CFA (Chartered Financial Analyst) exam!  I am in the process of submitting the professional references to the CFA Institute in order to be awarded the charter.  Steve passed all three levels of the exam in his first attempts and will apply for the CFA charter in June of 2017 when he meets the required four years of qualified work experience. 

New Team Member at Echo Wealth Management

By Echo Huang on August 23, 2016

I am excited to announce the addition of Tyler Lodahl to the team at Echo Wealth Management.  Tyler works closely with me and Steve Drost in creating and maintaining the Echo Dashboard, the customized client homepage for each client.  In addition, he is responsible for managing efficient business operations by leveraging new technologies in serving our clients. 

What You Need to Know About Long-Term Care Insurance

By Echo Huang on July 29, 2016

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  1. You should not rely on Medicare to pay for your long term care expenses.  Many people believe they can rely on Medicare to pay for any long-term care services they will need. However, Medicare only pays for long-term care if you require skilled services or recuperative care for a short period of time. Medicare does not pay for what comprises the majority of long-term care services - nonskilled assistance with Activities of Daily Living.
  2. Many of you cannot count on Medicaid. Medicaid is the joint federal and state program that pays for the largest share of long-term care services, but only if you meet financial and functional criteria. Other federal programs such as the Older Americans Act and Veterans Affairs pay for some long-term care services, but only for specific populations and in specific circumstances.  On an aggregate basis, the biggest share of long-term care, 49 percent, is paid for by Medicaid. On an individual basis, however, "who pays for long-term care" can look very different. This is because people with their own personal financial resources do not qualify for Medicaid unless they use up their resources first paying for care, so-called "spending down." If you have reasonable income and assets, most likely you will be paying for care on your own.

To Rollover or Not Rollover Your 401(k) - It Depends

One of the biggest decisions many of our clients face is what to do with their 401(k) plan when they leave their employer. There is no clear cut answer as to whether you should roll over your 401(k) plan to an IRA, another employer’s 401(k) plan, or simply to leave it where it is, because it involves several different factors, including long term investment costs and the availability of investment options within the plans. Both can impact the long term performance of your retirement plan. However, the most critical factor that can have a big impact, both short and long term, are the tax implications of a rollover.  Understanding these implications is essential before making any decision regarding your 401(k) plan.

Here are some of the more common tax complications that arise from a rollover:

What Are Your Portfolio Performance Expectations?

In the story of Alice in Wonderland, Alice arrives at a fork in the road and wonders aloud which road to take. A smiling Cheshire Cat appears and asks her what her destination is, to which she replies, “I don’t know.” The toothy cat then proffers the only possible response, “Well, then it doesn’t matter.”

While it’s not the type of exchange that might actually occur in our lives, it should, especially as we consider our financial future. For many people, who have yet to clearly define their financial destination, it probably doesn’t matter to them which path they choose, if they choose a path at all. That may be one way to explain why many Americans are not on track to meeting their retirement goals, or worse, why most couldn’t tell you where they stand today in relation to their goals.

Now hiring an Associate Wealth Manager starting in summer 2016

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About the Company

Echo Wealth Management is an independent, focused wealth management firm located in Plymouth, Minnesota that takes the complexity out of wealth management.  We offer integrated, comprehensive strategies that address every facet of our clients’ financial lives.  We do this by building the highest levels of trust, integrity and respect while always collaborating using a team approach.  Our clients range from corporate executives planning a secure retirement, to families looking to preserve their assets for future generations, to businesses seeking expert investment advice.    Echo Wealth Management was formed in February 2015 as a Registered Investment Advisor (RIA) and is looking for an Associate Wealth Manager to join a growing firm and support the founder of this firm who has over 20 years of experience. 

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