When it comes to money and athletes, the questions are endless. Yet there is one question that rises above them all. I would argue that the answer to this question is the culmination of every athlete wealth management question: “Am I good?” or said another way “Can I keep spending what I am spending?” You see professional athletes face a dilemma ~ they have the biggest advantage of all time (time on their side) and the biggest disadvantage of all time (lack of experience). Compound that with an earnings window that is nearly always shorter than an athlete realizes. I think about financial planning for professional athletes on a scale of 0-10. A zero is someone that shows up on ESPN 30 for 30 “Broke”. They spent everything A five is someone who isn’t broke but doesn’t have nearly the money saved they should. They spent too much. A ten is someone who can live the same lifestyle post-playing career. They are good (see our question above). In this blog, I am going to break down the athlete spending problem, the key numbers to know, and how to fix this for professional athletes. Let’s dive in… Professional Athletes - Key Money Numbers Managing money comes down to numbers but not the complicated ones you hear about. No, it comes down to simple numbers that anyone can understand. Consider if you only knew these five numbers: Your current savings rate (as a percentage). Your current spending rate (as a dollar amount). Your future desired spending rate (as a dollar amount). Your projected investment return (as a dollar amount). Your safe withdrawal rate (as a dollar amount). You see every strategy you implement (planning, tax, insurance, estate, and investments) should be helping you get close to the outcome you want to the questions above. Strategies are fuel to reach your outcomes. Yet most professional athletes implement strategies before defining a successful outcome. Consider this analogy ~ You need to buy a new car. Instead of thinking about all of the things you want to be able to do with the car, like: Travel the country Have enough seating Provide good storage space Drive well in harsh conditions You just walk into the car dealership, listen to the salesman pitch, and buy the car that looks cool. That is what I see happen time and time again with financial planning for professional athletes. We act without defining the outcome. We implement with no clear plan for success. We stress because we aren’t sure if those strategies will achieve the outcome. You see the loop this creates? Ok, so instead of doing that let’s consider what happens if we know the five key numbers above. 1) Savings Rate Your savings rate is the backbone of both your current financial picture and certainly your future financial picture. Now consider, traditional financial planning would say you should save 15% of your total income. What I will tell you is if you are a professional athlete and only saving 15% of your gross income you are in trouble. Consider this example: $1,000,000 Salary + 15% Savings Rate Taxes + Agent Fees = $500,000 Savings = $150,000 Spending = $350,000 The average professional athlete's career lasts 3 years. In the above example, you would have saved $450,000 and maintained a lifestyle that costs $350,000. So you have less than 1.5 years of savings to maintain your current lifestyle (yeah not good). Instead, do this ⬇️⬇️⬇️ The best financial decisions start with the end in mind. Said another way ~ you need to be thinking financially about your post-playing career just as your playing career is beginning. The question I want professional athletes to consider is this, “What do I want my future lifestyle to look like?” The more specific the better. Then take that number to your financial team and ask how much money would be needed to live that lifestyle. Only then can you start to understand what your saving percentage should be. ***For most professional athletes their savings percentage should be 50% - 80% of their take-home pay (after taxes and agent fees). You must think about this not just as a dollar amount but as a percentage of your salary. This will help to build the habit of saving more when you are earning more. Example: You decide to save 80% of your take-home pay. Year 1 take home = $1,000,000 Year 1 savings = $800,000 Year 10 take home = $10,000,000 Year 10 savings = $8,000,000 This reinforces a concept that I preach ~ Build your lifestyle slowly. Remember, the goal is to be able to answer the fundamental question, “Am I good?” 2) Spending Rate You see how I put the spending rate after the savings rate? That is intentional. Your spending rate is tied to your savings rate. We want to start with the metric that feeds everything else first. That metric is your savings rate. Nail your savings rate (as a percentage) and you will find yourself with spending guardrails already in place. The next step is determining if your savings rate supports your spending rate (as a dollar amount). I am going to let you in on a little secret ~ nearly no one knows what they are spending. There are two types of athletes when it comes to spending (and planning). Athlete 1: “The Over Spender” They think they are spending $20,000 per month when in reality they are spending $40,000 per month. Athlete 2: “The Over Saver” They are spending $20,000 per month but tell you to plan for $30,000 (just to be safe). Now look, I would rather see you are athlete 2 than athlete 1 but neither of these athletes are optimizing their money. The goal of money is this ~ To use as much as possible while not sacrificing for the things we have and need. Professional athletes, you have to know what you are spending in dollars to live your lifestyle. If you don’t know this number the next three numbers we are going to discuss are meaningless. You are trying to plan to buy a car but have no idea what you need your car to do. *** Pro-tip is to track your expenses through software like Monarch Money It is a great tool I have personally used and recommend. Now onto step ⬇️⬇️⬇️ 3) Desired Future Spending Remember how the average professional athlete's career lasts just three years? Well, the average professional athlete's career starts between the ages of 18-22. I have news for you, your life is going to change a lot from that time to when you are 30,40,50 years old. Yet, the decisions we make today will directly affect the lifestyle we are able to live then. So, we bridge that unknown by giving specific thought to what we want that lifestyle to look like. Yes, it will change....no this is not a perfect formula. Yet what I want you to do is take out a piece of paper and write down everything you think you want. A boat A millionaire dollar house Private school for your kids Yearly vacations for your family Make it specific and give serious thought to this. Remember when it comes to financial planning for professional athletes, the strategies we implement have to tie to the outcomes we are desiring. If we haven’t given proper thought to the outcome desired, how do you know the strategies are the right ones for you? Well…You don’t. So stop now, get your paper, and start mapping out your future life. Then take to your financial team and ask how much it would cost to live that life. Only then we can start talking more strategy ⬇️⬇️⬇️ 4) Projected Investment Return Investments are fuel for the outcomes you desire. Say it with me… “Investments are fuel for the outcomes you desire.” Back to our car buying example: If your desired outcome is to go 0-60 in less than four seconds ~ You don’t need an SUV you need a sports car. If your desired outcome is to tow your boat, haul your family, and drive across the country ~ You don’t need a sports car you need an SUV. Your investments should act the same way. Investing for professional athletes is a complicated topic full of decisions, yet at its core it is simple. Desired Outcome = Investments to Reach That Outcome So the number you need to know is your projected rate of return. Now look, no one has a crystal ball and I always recommend being conservative with your estimates but you still need a number. What you need to understand as an athlete is the more risk you take, the higher your expected rate of return (projected investment return) should be. What you need to decide is how much risk you want to take and combine that with how much risk you need to take. Take this example: Two athletes have a $10,000,000 portfolio. Athlete 1 is spending $200,000 per year Athlete 2 is spending $500,000 per year The investment return needed to reach the outcome desired of athlete one than athlete two. So before you choose any investments, you need to understand what return you need to achieve. After all, investments are simply fuel to reach your desired outcome. Now let’s tie this all together ⬇️⬇️⬇️ 5) Your Safe Withdrawal Rate To recap our journey so far, we know now: Saving Rate (%) Spending Rate ($) Future Spending Rate ($) Projected Investment Return (% & $) Now we have to determine can the amount of money we have saved support the lifestyle we want to live. You see when I say “safe withdrawal rate” all that means is how much can I pull from my investment portfolio and not risk running out of money. The hardest part of building wealth is building the initial snowball. As an athlete, you have an opportunity to do that in your 20s (massive advantage). Now we have to navigate keeping that snowball intact (for decades) while supporting our lifestyle. Traditional retirement planning leans on 4% per year. Example: A $1,000,000 portfolio could support pulling $40,000 per year in retirement. For athletes, this takes more nuance. You need to consider: Longer time frame League retirement benefits Future income opportunities (second career) Compound that with a natural family spending curve that says you will spend more money from ages 30-60 than 60+. Athletes, this is why I can’t stress enough the value of having an expert in athlete wealth management on your team. My goal for our athletes is: Not for them to die with the most amount of money To use their money to support the things that matter to them. Yet we have to balance that goal with decades of future spending, high spending years of 30-60, and income uncertainty. There is no perfect formula for professional athletes to find their safe withdrawal number. It varies by player…heck it varies by year for players. Yet what you should know is what that number is for you. Knowing that number and living a lifestyle that supports that number is the single best thing you can do to reduce anxiety around money. There are countless money moves to consider for professional athletes. Compound that with endless strategies and sales pitches, it can feel darn near overwhelming. Yet at its core, every professional athlete needs to answer one question, “Am I good”? To do that you don’t need a fancy strategy, one-off investment, or another shiny object. You need to know your numbers. You need a financial team that can guide you. You need to be thinking about the end at the beginning. If you do that, I assure you a ten-of-ten outcome is possible. Moment was built with a mission to ensure more athletes achieve a 10 out of 10 outcomes. Yet, to achieve that outcome...you need the right team to help you. If you are a professional athlete looking for help securing your financial future schedule a call with our team. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions received regarding athletes and money: How do you determine how much to spend? For us, this is an ever-changing process that starts with understanding current spending and working off of that as our baseline. What is the biggest mistake you see with sudden wealth? Without a doubt, it is spending before getting educated. The key is building a roadmap before building a lifestyle. What role does budgeting play in avoiding money mistakes? We find this to be critical both in providing guardrails for spending and giving one permission to spend on the things they value. How should professional athletes think about investing? We use the analogy that you have hit the home run and now the key is finding a way to consistently hit singles and doubles with your investments. Our number one goal is protection and staying in the game. What can professional athletes do today to avoid money mistakes in the future? The one number thing to do is build a plan and understand what it costs to be you. If the checks stopped today could you support your current lifestyle? *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

Cash flow is the lifeblood of any business. It's what keeps the lights on, the employees paid, and the operations running smoothly. Yet, for many business owners, managing cash flow can feel like juggling fire one misstep and the whole thing can come crashing down. Whether you're running a small startup or a growing company, understanding how to manage cash flow effectively is critical to your success. Cash flow is one of the key factors in creating a higher valuation for selling your business. Check out our blog on exit planning for business owners if you are considering selling your business. This blog will break down everything you need to know about cash flow management, from understanding its importance to actionable strategies that can improve your financial stability. We'll also answer frequently asked questions about cash flow planning and how to stay on top of it. Cash Flow for Business Owners When diving into cash flow we are going to focus on three key areas. 1) What is Cash Flow? 2) Why is Cash Flow Management Important? 3) How to effectively manage Cash Flow? Keep reading to see the 7 actionable steps you can implement today. key areas. By implementing these strategies it will give you confidence that your business's cash flow is on the right track. What is Cash Flow? Cash flow is best described as money in vs money out. The tricky part about businesses is that this cash flow often doesn’t happen in a linear fashion. Managing cash flow includes protecting yourself from unforeseen situations like a client not paying or changing the terms of when they pay. In the purest form cash flow is broken into two potential positions. Positive Cash Flow: More money is coming in than going out. This means your business can cover expenses, reinvest, and save for the future. Negative Cash Flow: There’s more money going out than coming in. This could indicate financial trouble and prompt you to evaluate your spending or revenue strategies. The success of your business relies on maintaining a positive cash flow, which ensures that you have enough liquidity to meet financial obligations. Why is Cash Flow Management Important? Cash is king. It is the one thing every business needs to continue operating. Managing cash flow is essential for the survival and growth of a business. Poor cash flow management is one of the top reasons businesses fail. Here’s what proper cash flow management enables you to do: Meet Financial Commitments: Pay wages, suppliers, and bills on time without scrambling for extra cash. Plan for the Future: Growth comes at a cost. Planning for that cost in your cash flow improves your odds of success. Weather Uncertainty: A strong cash flow acts as a buffer during unexpected downturns or emergencies. Improve Creditworthiness: Lenders and investors favor businesses with stable cash flow when assessing loans or funding. Cash flow is fundamental to running a business. Whether it is creditworthiness or planning for the future you will need cash flow to accomplish it. Now how to manage your cash flow effectively. How to Effectively Manage Cash Flow Now that you understand its importance, let's explore actionable strategies to manage your cash flow effectively. 1. Monitor Cash Flow Regularly The first step to effective cash flow management is understanding where your cash is coming from and where it’s going. Use a Cash Flow Statement: Review your cash flow statement monthly to assess inflows and outflows. This allows you to spot trends and issues. Leverage Accounting Software: Tools like QuickBooks or Xero can provide real-time cash flow tracking and make monitoring effortless. 2. Create a Cash Flow Forecast A cash flow forecast helps you anticipate cash needs and avoid surprises. Project Future Income and Expenses: Include sales revenue, recurring bills, seasonal expenses, and any one-time costs. Scenario Planning: Run “what-if” scenarios to understand how different situations, such as delayed payments or a drop in sales, could impact your cash flow. 3. Optimize Payment Terms How and when you receive or make payments significantly affects your cash flow. Shorten Customer Payment Terms: Ask customers to pay invoices sooner by offering incentives for early payment. Negotiate Supplier Payment Terms: Work with suppliers to extend payment deadlines without incurring penalties. 4. Build a Cash Reserve A cash reserve acts as a safety net, ensuring you’re prepared for unexpected financial challenges. Emergency Fund: Aim to save at least 3-6 months of operating expenses as a reserve. Start small and gradually grow your fund as revenue allows. 5. Control Costs Regularly audit your expenses to identify and eliminate unnecessary costs. Distinguish Between Needs and Wants: Essential expenses should take priority over discretionary spending. Renegotiate Contracts: Look for opportunities to renegotiate supplier contracts at better rates. Cut the Fat: Subscriptions or services that are underutilized should be canceled. 6. Improve Inventory Management For businesses with physical stock, inventory management is directly tied to cash flow. Excess Inventory: Avoid stocking up unnecessarily, as excess inventory ties up cash. Inventory Monitoring: Use inventory management tools to find the sweet spot between meeting demand and minimizing storage. 7. Explore Financing Options Even with the best cash flow plans, unexpected expenses or opportunities can arise. Quick access to funds can make all the difference. Business Credit Lines: These need to be setup in advance to avoid a need. Banks love to provide loans when clients don’t need them. Short-term Loans: Often higher interest options than credit lines and should only be used in absolute emergencies. Invoice Financing: If possible this should be avoided but if needed it can be used as a last resort. These can act as helpful inflow sources when you're in a tight spot, but remember to use them judiciously to avoid debt traps. Managing cash flow in your business will always be the lifeblood of profits. Those profits will roll into meeting your personal financial goals. Connecting your business finances and personal finances can be challenging alone. Business owners turn to Moment Private Wealth when they are looking for a financial advisor who has walked in their shoes. If you are a business owner who is looking to find a financial team that specializes in you, schedule a call, and talk with a Moment founder. Not sure what questions to ask, check out this video on 10 questions you should ask when interviewing a financial advisor. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions I received frequently about this topic. What is the difference between profit and cash flow? Profit is the amount of money left after deducting expenses from revenue, while cash flow measures the money moving in and out of your business during a specific period. A business can be profitable and still experience cash flow problems if it’s struggling to manage inflows and outflows.. How do I calculate cash flow? Use the formula: Cash Flow = Cash inflows – Cash outflows You can gather this data from cash flow statements generated through accounting software or by manually reviewing income and expenses.. What is a good profit margin? A strong cash flow margin is generally above 10%. This means that for every dollar earned in revenue, your business generates at least 10 cents in cash flow. How often should I review my cash flow? The frequency depends on the size and complexity of your business. Most businesses benefit from reviewing cash flow monthly, while high-growth companies might monitor it weekly. What tools can help me with cash flow management? Accounting tools like QuickBooks, FreshBooks, and Wave offer real-time insights and automated cash flow reports. You can also use forecasting tools like Float for more advanced cash flow planning. How can I improve cash flow during a downturn? Focus on accelerating receivables, cutting non-essential expenses, and exploring short-term financing. Flexibility and resilience in financial planning are key. Why is a cash reserve important? A cash reserve provides a cushion for unexpected expenses or emergencies, helping you avoid financial strain or borrowing. Can cash flow issues kill a profitable business? Yes. Even profitable businesses can face insolvency if they don't have enough liquid cash to meet short-term obligations. How do I handle late payments from customers? Send reminders as due dates approach and follow up immediately if payments are overdue. Consider offering discounts for early payments or penalties for late payments. When should I seek financial advice? If you're experiencing persistent cash flow issues, major dips in revenue, or are unsure about your financial strategy, consulting a financial advisor is highly recommended. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

"How can someone blow all of that money?" Be honest, you have said it or thought it after seeing a professional athlete on the front page for poor financial decisions. Well here is how: You can do anything. You can buy anything. You can create the life you want. Yet that life will either be sustainable or could go up in flames when the checks stop. For professional athletes, the first three years will dictate much of the financial success achieved (or not) down the road. You see the athletes that retire in the best financial position are not always the ones that made the most amount of money. In fact, I would argue that the biggest indicator of future financial success can be traced back to the decision an athlete makes in the first three years of their career. Said another way, it is the ones that took wealth management as an athlete seriously. It is at that time when you feel invincible, the checks are coming in, and the end of your career is an afterthought that you need to understand the weight of your financial decisions. In this blog, I am going to walk through five money mistakes to avoid as a professional athlete. Professional Athletes - The Money Mistake We have all heard the stories and seen the stats of professional athletes losing money that they earned. Yet, what those stories don’t show is the initial mistakes many of those athletes made that later pushed them to financial ruin. Consider the analogy of a snowball being pushed up a mountain. Once it reaches the peak of that mountain just a gentle nudge will send it flying down the other side. That snowball can be a cascading effect of good money moves (and collect positive outcomes) or poor money moves (and collect negative outcomes). Seems easy enough right? Well, remember as a professional athlete you are coming into a lifetime worth of wealth at the age of 18-25. A time when money is plentiful but experience is limited. The thing to realize is that snowball is starting to build from day one. 5 Money Traps for Professional Athletes 1) The Yes Man A good agent can make or break your career. A good financial team can make or break your entire life. Sounds dramatic but it is the truth. The number one thing any athlete should consider when hiring their team is who are they hiring. No, I don’t mean their experience or expertise (that matters too), what I mean is who is the person. In the financial services industry you can break every down into two buckets: Those willing to speak the truth, even when it is uncomfortable. Those who are more concerned about losing a client than sharing the reality. Athletes, I urge you not to hire a Yes Man. Hire a team that is willing to speak the truth. You will have enough people telling you how great you are, you don’t need another echo chamber. 2) The Entourage No athlete does it alone. Countless people have been and will be a part of your journey. It is natural to want to bring them along for the ride and at a certain level I think you should. Yet like many things in life, this requires moderation. Paying for a dinner, great. Paying for every dinner, not so great. Paying for a trip, great. Paying for every trip, not so great. See the theme…I want our athletes to support the people that helped them get there. Just remember, it is far more enjoyable to support in a sustainable way (every so often) than an unstainable way (every time). 3) Buying vs Affording Consider the normal financial arc ~ entry-level job, increase income over decades, earn peak income in your 50’s and 60’s. Now consider that as an athlete you are earning a lifetime worth of income in typically less than a decade. The window is shorter. The checks are bigger. The decisions are magnified. You can buy nearly anything (see the big checks)…yet that doesn’t mean you can afford anything. I want you to consider two frameworks: The first is understanding the difference between rewards purchases and lifestyle purchases. One happens one time while the other can happen on an ongoing basis. The second is understand your fixed costs vs your flexible costs. Fixed costs are lifestyle costs that can’t be shut off tomorrow (housing, food, insurance, etc..). Flexible costs can be dialed up or down (travel, reward purchases, etc..). Nearly every athlete that ends up in financial trouble, built an unsustainable lifestyle. Said another way they built a lifestyle full of fixed costs that could not be unwound quickly enough. 4) Back-to-Back Homeruns You know that contract you signed for millions of dollars? That is your home run. The good news is you don’t have to hit another homerun. The bad news is you will be tempted at every turn to try to. The world of athlete investing has turned into a status game. Don’t believe me...just follow the top sports business news for a week and it will be littered with athletes making shiny new investments. Now look, on the surface there is nothing wrong with an athlete making a front page investment. Yet the issue arises when you as an athlete think your investments should look like Lebron James' investments. Lebron has made hundreds of millions on the court and even more than that off the court. His ability to take risks (on shiny investments) is higher than yours. For every athlete, the first goal of your investment portfolio should be to support your lifestyle post-playing career. To do that, you need to invest in a way to hit singles and doubles ~ not home runs. For a deeper dive into how to build these investments, you can read our guide on investing for professional athletes. You see, being on the cover of Forbes should not be the goal of an athlete. No, no, no…I would argue the goal of an athlete is to build an investment portfolio that supports your lifestyle, stacks the odds in your favor, and allows you to sleep at night. Now once you have done that (this requires specific planning for you) only then should you consider taking a swing for the fences. 5) Dunning Kruger Effect The single most common trait among professional athletes is self-confidence. Consider how many people have doubted you or your dreams. Yet time and time again you have provided them wrong. That self-confidence, while a prerequisite for success in the athletic arena, can be a double-edged sword when it comes to your money. In short ~ just because you are good at being an athlete doesn’t mean you are a good investor (at least at the start). The key here is taking a walk before you run approach, remember hitting singles and doubles is a recipe for long-term wealth. So check your ego at the door, put your question hat on, and start educating yourself on how you are positioning your money. My advice to all of our professional athlete clients is to have a laser focus on staying in the game. Consider the value of a dollar…now consider the value of that same dollar with additional decades to grow ~ a bit more valuable. Money doubles like this: Take 72 and divide it by your rate of return, let's use 8%. 72/8 = 9 years. For an athlete, that could mean 5 to 7 doubles for money invested in their 20s. $1M to $2M to $4M to $8M to $16M. Remember that snowball analogy? Well, if you can position that snowball to build (based on good money moves), you can create a life that far surpasses your expectations. Moment was built with a mission to ensure more athletes achieve a financial outcome they are proud of decades after their playing career ends. Yet, to achieve that outcome...the planning starts today. If you are a professional athlete looking for help securing your financial future schedule a call with our team. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions received regarding athletes and money: How do you determine how much to spend? For us, this is an ever-changing process that starts with understanding current spending and working off of that as our baseline. What is the biggest mistake you see with sudden wealth? Without a doubt, it is spending before getting educated. The key is building a roadmap before building a lifestyle. What role does budgeting play in avoiding money mistakes? We find this to be critical both in providing guardrails for spending and giving one permission to spend on the things they value. How should professional athletes think about investing? We use the analogy that you have hit the home run and now the key is finding a way to consistently hit singles and doubles with your investments. Our number one goal is protection and staying in the game. What can professional athletes do today to avoid money mistakes in the future? The one number thing to do is build a plan and understand what it costs to be you. If the checks stopped today could you support your current lifestyle? *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

Let me set the stage for you: I had no experience. I had no bank accounts I owned. I had barely enough money to buy Chipotle. And... Overnight I become a millionaire. This was my experience as an 18-year-old after signing my first professional contract. I remember celebrating with my family at a local ice cream shop and going to bed thinking, "Is this real?" Then I woke up the next morning and life (just like the day before) went on. So while on one end much of life felt the same, on the opposite end I felt an incredible sense of responsibility (and anxiety) not to mess this up. That is my experience with sudden wealth and since then I have helped dozens of athletes and entrepreneurs navigate this situation. It is the backbone of financial planning for athletes and entrepreneurs at Moment. In this blog, I am going to talk about how money affects us, things to consider with sudden wealth, and action items athletes and entrepreneurs can take to create positive outcomes. Sudden Wealth - The Problem Society as a whole is obsessed with money. On one hand, it makes sense that much of our world revolves around us trading money for things we need. On the other hand, it makes no sense how we will let relationships wash away, time evaporate, and spend every waking hour chasing the next dollar (even if we don't need it). Consider this ~ John D. Rockefeller whose net worth was once more than 1% of the United States GDP was asked how much money is enough. In which he responded, "Just a little more." Rockefeller died in 1937 but society hasn't changed much since then when it comes to money. Ask someone who makes $50,000 how much they need to earn to be comfortable and they will tell you $100,000. Ask someone who makes $100,000 how much they need to earn to be comfortable and they will tell you $150,000. It is ingrained in our society to think, just a little more. I share this as background to understand why sudden wealth can cause more harm than good. For many of the athletes and entrepreneurs we serve it is like walking into a gunfight with nothing more than a knife. Without education, the proper tools, and an action plan you stand little chance to see a successful outcome. Don't believe me just google "athletes going broke". Sudden Wealth - Education Sudden wealth is just that ~ sudden. For those navigating it, the money is coming in before they have even had a chance to process it. Let's compare two paths and the outcomes that follow: Path 1 - You have a typical earning arc reaching peak earning years between 50-60 years old. Over time you have made countless mistakes but their effect on your long-term financial security is minimal. The big mistakes happened with little money. Path 2 - You find yourself facing a big payout that could make up 90% or more of your lifetime earnings. The opportunity to learn along the way is void. The big mistake could happen with all your money. Every horror story you hear of someone losing it all started with someone thinking, "That will never be". The education on sudden wealth starts with understanding why it happens in the first place ~ No one thinks it will happen to them. I talk a lot about the power of compounding and as powerful a force as that can be in someone's favor it can be equally powerfully going against you. Compound spending and an unstable lifestyle can quickly rage out of control. Here are three tools I recommend for anyone navigating sudden wealth. Sudden Wealth - The Tools While there is seemingly an endless list of tools you could utilize to navigate sudden wealth, I want to give you three that anyone can use. The Everything List Before you spend a dollar one of the most powerful tools you can use is what I call "The Everything List". It only requires a pen and a piece of paper. Take your paper and write down everything that you think you want in the future. The more detailed and specific you can be the better. Example: Cadillac Escalade Summer Beach Vacations $1,000,000 House With a Pool The key here is to map out everything you think you want before ever spending any money. Once you do that take a step back and envision what that life with all those fancy things will look like. Is that what you want? If so, great...If not, look to refine. Then I want you to work with trusted resources (preferably a financial team) to map out how much that lifestyle will cost to buy and then afford. Remember, buying is a one-time cost and affording is an ongoing expense. Now let's take that list and add some checks and balances. The Budget (and accountability) That list you just built needs some numbers behind it. Let's assume you have enough wealth to both buy and afford the things on it. Step two is giving your money direction and permission to be spent on the things that are important to you. Here is the thing, while we hear the horror stories of someone losing sudden wealth, you don't hear about the many that don't maximize it. Money is a tool and the best tool in your garage going unused does no good. A budget done correctly gives you the freedom to spend on important things and avoid making the mistake of compound spending. Remember the old adage, what gets measured gets managed and this is certainly true when it comes to money. Now let's talk about how we take that sudden wealth event and get the snowball rolling. Building Income Streams The biggest advantage of sudden wealth is you get the snowball all at once. The biggest disadvantage of sudden wealth is you get the snowball all at once. Picture this ~ You are at the top of a mountain with the biggest snowball you can imagine. With one push it starts tumbling down the hill and without any other actions, it just keeps building momentum (and size). This is the opportunity anyone coming into sudden wealth has. You see the hardest part of building wealth is building the initial snowball. So our goal is to preserve sudden wealth ~ Said another way how can we keep our snowball while using the little bits of snow it shoots off? In finance, we call these income streams. Those income streams are sustainable as long as the snowball doesn't lose its momentum. So the key to this whole game is to understand how to position your money (the snowball) in a way to build income streams. For a deeper dive into how we think about investing money, check out this blog on investing for professional athletes. Sudden Wealth - An Action Plan Managed correctly sudden wealth is a surefire way to create generational wealth. Yet, the two most common outcomes are spending too much or living a life filled with financial anxiety. The good news is you can take action with the steps listed above to start your journey to a successful financial outcome. Step 1 - Get Clear On Your Goals Step 2 - Map Out The Total Costs Step 3 - Find Ways To Create Income Streams We started Moment to help athletes and entrepreneurs navigate sudden wealth. It is something that I have experienced firsthand and our team has helped countless athletes and entrepreneurs navigate. If you are a professional athlete or entrepreneur looking for help planning around sudden wealth schedule a call with our team. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions received regarding sudden wealth: How do you determine how much to spend? For us, this is an ever-changing process that starts with understanding current spending and working off of that as our baseline. What is the biggest mistake you see with sudden wealth? Without a doubt, it is spending before getting educated. The key is building a roadmap before building a lifestyle. What role does budgeting play in sudden wealth? We find this to be critical both in providing guardrails for spending and giving one permission to spend on the things they value. How should those navigating sudden wealth think about investing? We use the analogy that you have hit the home run and now the key is finding a way to consistently hit singles and doubles with your investments. Our number one goal is protection and staying in the game. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

Imagine you're sitting in a cozy living room, the aroma of freshly brewed coffee filling the air as a group of friends gather for their annual weekend getaway. One friend casually mentions how they saved a significant amount on their taxes this year using the Augusta Rule. Intrigued, you lean in, eager to learn more about this little-known tax strategy that could potentially save you money as a business owner. If you are interested in learning about other tax strategies you can find our tax planning for business owners blog here. In this guide, we'll explore the Augusta Rule. Augusta Rule for Business Owners The Agusta rule is a tax provision that can help business owners like you legally minimize tax liabilities. We will break down in this blog three areas. What is the Augusta Rule How Does the Augusta Rule Work Case Study of the Augusta Rule By the end of this article, you'll have a clear understanding of how to potentially benefit from this rule, making your business save money in taxes. Let's Dive in. What is the Augusta Rule? The Augusta Rule, named after the Masters golf tournament in Augusta, Georgia, is a unique tax provision in the United States Code. Originating from homeowners renting out their properties during the tournament, this rule allows homeowners to rent out their homes for up to 14 days per year without paying income tax on the rental earnings. This provision benefits those who live near major events and can capitalize on short-term rental demand. For business owners, the Augusta Rule offers a legal way to leverage personal real estate assets for business purposes. If you conduct business meetings or corporate retreats at your home, you can rent it to your corporation and deduct the rental expense. All while not having to report the income on your personal taxes. This use of the Augusta Rule can lead to substantial tax savings, making it an appealing option for small business owners and entrepreneurs. In order to fully utilize the Augusta Rule, it's crucial to comply with IRS guidelines. Here are the top three guidelines to follow. Transactions are at fair market value Keep Detailed Records of Activities on the Property Document Business Activities Conduced This ensures transparency and helps in case of any audits or inquiries from the IRS. How Does the Augusta Tax Rule Work? Understanding the mechanics of the Augusta Rule is essential for business owners aiming to capitalize on its benefits. The rule allows you to rent your personal residence to your business for up to 14 days per year at fair market value, excluding the rental income from your taxable income. This approach creates a tax-free income stream while your business can legitimately deduct the rental expenses. Follow these steps to implement this strategy. Step 1 - Determine the fair value of your property. This involves researching comparable rental properties in your area or consulting a professional appraiser. The key is to ensure that the rental amount is consistent with what you would charge an unrelated third party. Step 2 - Schedule business-related events at your residence. During the rental period, make sure to keep records of the business activities conducted on the premises. This includes meeting agendas, attendees, and any relevant business transactions. By maintaining \documentation, you can protect yourself in the event of an IRS audit. Step 3 - Keep your meetings under 14 days total for the year. It's important to note that the Augusta Rule applies only to rentals of 14 days or fewer per year. Exceeding this limit may subject the rental income to taxation. So now you know how the tax rule works let's look at a real-life example. A Case Study for the Augusta Rule. To illustrate the Augusta Rule, let's consider the hypothetical case of Sarah, a small business owner who runs a successful marketing agency. Sarah learns about the Augusta Rule and decides to explore its potential for tax savings. Step 1: Determining Fair Market Value Sarah researches to establish the fair rental value of her property for business use. After consulting local rental listings and seeking advice from a real estate expert, she determined that the fair market rental value for her home is $500 per day. Step 2: Scheduling Business Events Sarah organizes a series of business events at her residence, including client meetings, team brainstorming sessions, and strategic planning workshops. She carefully plans these events to not exceed the 14-day rental limit specified by the Augusta Rule. Step 3: Documenting Business Activities During each business event, Sarah maintains comprehensive records, including meeting agendas, participant lists, and notes on the discussions held. This documentation serves as evidence of the business purpose behind the rental arrangement and helps substantiate her claim for tax deductions. Step 4: Calculating Tax Savings By renting her home to her business for 14 days at $500 per day, Sarah generates $7,000 in rental income. Thanks to the Augusta Rule, she can exclude this rental income from her personal taxable income, and her business can deduct the $7,000 rental expense. Step 5: Realizing Tangible Savings By using the Augusta Rule, Sarah effectively saves approximately $2,100 in taxes, assuming a 30% combined federal and state tax rate. This tax-saving strategy now can be used to further grow her business. The Augusta Rule presents a valuable opportunity for business owners to legally reduce their tax burden while utilizing personal real estate assets for business purposes. By understanding the rule's intricacies, complying with IRS guidelines, and maintaining meticulous records, business owners can unlock significant tax savings. If you're considering implementing the Augusta Rule in your business, consult with a qualified tax professional to ensure compliance and maximize your potential savings. Tax planning will always favor those business owners who take the time to get educated and they combine that knowledge with the right team. If you are concerned about your tax team or want to get better educated about taxes reach out to our team below. If you are a business owner who is looking to find a financial team that specializes in you, schedule a call, and talk with a Moment founder. Not sure what questions to ask, check out this video on 10 questions you should ask when interviewing a financial advisor. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions I received frequently about this topic. What is the Augusta Rule? The Augusta Rule, named after the Masters golf tournament, allows homeowners to rent out their properties for up to 14 days per year without reporting the rental income on their taxes. It originated from homeowners renting their homes during major events and has been extended to benefit business owners. How does the Augusta Rule work for business owners? Business owners can rent their personal residences to their businesses for up to 14 days annually at fair market value, excluding the rental income from their taxable income. This creates a tax-free income stream, allowing the business to deduct rental expenses. What are the key requirements for utilizing the Augusta Rule? To utilize the Augusta Rule, it's crucial to establish a fair rental value for the property, schedule business-related events within the 14-day limit, and maintain detailed records of business activities conducted during the rental period. What are the potential tax savings with the Augusta Rule? By excluding rental income from taxable income and deducting rental expenses, business owners can achieve substantial tax savings. The exact amount saved depends on factors such as rental value, tax rates, and the number of rental days. Is there a limit to the number of rental days allowed under the Augusta Rule? Yes, the Augusta Rule applies only to rentals of up to 14 days per year. Exceeding this limit may subject the rental income to taxation, so careful planning and adherence to the 14-day limit are essential. How can I determine the fair rental value of my property? To determine the fair rental value, research comparable rental properties in your area or consult with a professional appraiser. Ensure that the rental amount aligns with what you would charge an unrelated third party. What documentation should I maintain for Augusta Rule compliance? It's essential to maintain thorough records, including meeting agendas, participant lists, and notes on business activities conducted during the rental period. These documents substantiate the legitimacy of the rental arrangements. Can the Augusta Rule be applied to other types of properties? While the Augusta Rule is typically associated with primary residences, it may apply to other properties, such as vacation homes or investment properties. Consult a tax professional to determine eligibility and compliance. Are there any risks or considerations with using the Augusta Rule? One consideration is ensuring that rental arrangements are at fair market value and meet IRS guidelines. Careful documentation is vital to avoid potential audits or inquiries from the IRS. How can I maximize the benefits of the Augusta Rule for my business? To maximize benefits follow these steps, plan business events strategically, adhere to the 14-day limit, maintain detailed records, and consult with a tax professional. By understanding the rule's intricacies, you can optimize your tax strategy and achieve significant savings. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

I have been investing money for 15+ years and the first 11 of those years I was a professional athlete. The best way for me to describe my investing over those years ~ A Journey. You see when I first started out investing I knew nothing. Heck, I can remember the first time my portfolio went down (if happened in week one of investing) and the fear I felt. If you fast forward a few years, I was spending time trying to figure out how to optimize each inch of my investment portfolio. Frankly, I was spending a bunch of time on stuff that was not going to move the needle for me. Today, I look at the collection of personal experiences, results, and client situations to better help our athletes invest. You see as I will share when it comes to investing for professional athletes there is no one size fits all. In this blog, I am going to talk about the best frameworks, strategies, and examples of investing for professional athletes. Investing as an Athlete Let me just say there are a million ways to invest money. The longer I invest the more I learn about unique ways athletes have successfully and unsuccessfully invested their money. I have seen everything from real estate to stocks to government contracts to silver eagles. On the surface, it is impossible to say if those investment strategies are good or bad. The reason is, to understand how to invest as a professional athlete you must first understand your situation. Consider this, you are a $10,000,000 per year player with enough set aside in conservative investments to continue living your lifestyle. You come across a high-risk venture that requires a $100,000 investment. That type of opportunity given your situation is worth exploring. Now consider that same situation but you are in the last year of your career with only a few hundred thousand saved. That opportunity, no matter what the upside, should not pass go. Same investment but different circumstances = different decision. Today, I want to show you how these frameworks lead to the types of investments and share how I invest in each of these areas. Athlete Investing - Bucket Approach I want you to think about investing like building a house. You can't start by picking out light fixtures and hardware. You have to start with the foundation. While there are thousands of ways to invest money they can be broken down into one of three foundational buckets: Bucket 1 - War Chest (safest) Bucket 2 - Growth Strategy (riskier) Bucket 3 - Aspirational Strategy (highest risk) You can see below how each bucket correlates to a time period in which we plan to use the money. Our war chest is the money we need in the next 7 years. Our growth strategy is money we don't need for another 7-15 years. Our aspirational strategy is money that we don't need for 15+ years. The quickest and most accurate screen for any investment as an athlete is to determine which bucket a particular investment falls into. Then you can decide if that investment fits your overall circumstances. If the answer is yes to the above, then you can explore how that investment could fit into your overall plan. Only, then after several screens should you do a deep dive into the investment opportunity itself and its viability financially. See how that works...It is a simple way to weed out 95% of investments that you should not be considering in the first place. Now let's talk about five common investment strategies for professional athletes, how I invest in them, and what you need to know about them. Athlete Investing - Strategies to Consider You will hear of countless investment opportunities in the locker, see dozens more in the press, and be presented with hundreds of opportunities as an athlete. Remember, step one is to understand which of the above buckets (war chest, growth strategy, aspiration strategy) they fit into. Yet once we determine that I want to discuss in more detail some specific investment strategies as a professional athlete and how I use them. One thing I want you to remember is investing is simply fuel for your life and your goals. Notice how I said "your" life, that is important. I say this because one common mistake I see among professional athletes is we get caught up in what a teammate is doing and think we should. Remember as we walk through this we need to think about what investing strategies fit your goals. Today's Money This is money that you are going to need this calendar year. You need access to this money and would like to earn a small return with little risk. The Goal ~ To produce some income, take minimal risk, and have access to this money. Strategies to Consider: High Yield Savings Accounts Money Market Positions Treasury Bills Each of these is on the lower-risk side of the investment landscape. Each of these provides its own unique advantages and disadvantages. Each of these three provides income (in the form of a yield) on your money. The nuances to consider with these are the tax consequences, the FDIC coverage, and the risk profile. In my portfolio, the large majority of my "Today Money" sits in a money market position. It provides me immediate access, a low-risk profile, and a sufficient return. Tomorrow's Money This is money that you are going to need in the next 1-7 years but not this year. The Goal - To produce solid income with moderate risk and a belief it will be there when you need it. Strategies to Consider: Corporate Bonds Municipal Bonds Private Credit Each of these provides consistent income. Each of these has a moderate risk profile. Each of these accomplishes the goal. The factors to consider with these are the risk profile (muni bonds are less risk than the others), the tax consequences, and risk/return ratio. In my portfolio, I use municipal bonds for my "Tomorrow Money". This is a type of bond provided by a city/municipality that pays me interest tax-free. I use this due to my tax bracket, risk profile, and overall portfolio. Stock Market This is money that you are not going to need until years down the road. The Goal - To produce increased returns while still being able to stick with the ups and downs of the market. Strategies to Consider: Mutual Funds Individual Stocks Exchange Traded Funds Each of these has a higher risk profile. Each of these can build long-term wealth. Each of these provides good expected rate of return. The factors to consider these is the diversification, your ability/desire to take risks, and how each could help you accomplish your goals. In my portfolio, the majority of my stock market investments are in exchange-traded funds. These provide me with increased diversification, reduced yearly taxes, and a part of a portfolio I can stick with for decades. Real Estate This is money that you are playing the long game with. The Goal - To increase your investment diversification, provide you with a hard asset, and potentially produce tax-advantaged income. Strategies to Consider: REITs Syndications Private/Direct Ownership Each of these can provide current income. Each of these has different amounts of liquidity. Each of these is a long-term asset for a long-term time horizon. The factors to consider with these are your expertise (direct ownership is very different than a REIT), your time frame, and your desired outcome (income vs capital appreciation). In my portfolio, the biggest part of my real estate investing is done through REITs (Real Estate Investment Trusts) as this provides me increased liquidity and added diversification. My direct ownership is minimal outside of my house as this does require time, expertise, and additional attention. Private Deals This is money that you are willing to lose and in return could see an outsized return. The Goal - To produce higher returns with an increased risk profile. Strategies to Consider: Private Equity Venture Capital Buying a Business Each of these provides a significant upside. Each of these takes on significant risk. Each of these could go to zero. The factors to consider here is your interests, your expertise, and your ability to withstand a 100% loss of capital. In my portfolio, I invested to start a business (Moment) and focused the rest of my private investments on small businesses I understand. I only invest in private deals if it is an area that I understand and it is with money that I am ok losing. Athlete Investment Strategies - Things to Know Let me be clear, you do not need to hit a home run with your investments. In fact, I would argue (and the data would support) that the best way to invest money is to stay in the game. Consider this ~ $1,000,000 initial investment doubling every 9 years looks like this: $1,000,000 to $2,000,000 $2,000,000 to $4,000,000 $4,000,000 to $8,000,000 $8,000,000 to $16,000,000 The most important double is always the next one. You want to make sure your portfolio allows you to: Sleep at night (not too much risk) Stay in the game (years of return not yearly return) Reaches the goals specific to you (not someone else's) I see too many athletes build investment portfolios that look cool but don't correlate to their life. So ask yourself, would you rather your portfolio help you reach all your financial goals or be a great locker room story? If you are looking for a deeper dive into how we approach investing for professional athletes make sure you check out our blog on it. If you are a current or former professional athlete looking for help understanding your investment portfolio, schedule a call with our team. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions received regarding investing for professional athletes: How do you determine how much risk an athlete should take? It is a combination of our expertise, our athlete's desire to take risks, and his ability to take risks. How can athletes say no to investment opportunities from family and friends? You need to make sure you have someone on your team that can be the no-man. For us at Moment, we direct our athletes to point all opportunities to us to properly vet them. What is the biggest investing mistake you see athletes make? The biggest mistake I see is when athletes invest in areas they don't fully understand. While an athlete does not have to be the expert on an investment they should understand how it works. What should athletes know about rates of return? I encourage all of our athletes to think about years of return (how many years we are invested) over yearly return as this is something completely inside of our control. What is one thing you wish you knew when you started investing as an athlete? There is no perfect investment portfolio. Often I see players wanting to make changes that will ultimately hurt their long-term performance as opposed to letting time in the game take over. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

One of the most critical pieces to success in professional sports is planning. Yet, the interesting part about that planning is you know that the game certainly won't go according to plan. In fact, a good game plan maps out specific situations based on certain outcomes of the game. Said another way, you want to plan for the inevitable unknown of the outcome. Your team could be leading down the stretch or could need a miracle comeback, your game plan better have the right levels to pull for each scenery. Well if we think about our money in the same mold, this is where estate planning for professional athletes plays a critical role in athlete wealth management. In this blog, I am going to break down the role estate planning plays for professional athletes and five biggest mistakes I see. Estate Planning for Professional Athletes Here is my best pitch as to why you should get estate planning done as a professional athlete ~ you already have a plan in place and you won't like it. You see everyone has a plan in place ~ The Government's One. Turns on that plan is littered with costs, publicity, and total disregard for what you want to happen. To revert back to our gameplan analogy that would be like putting a random fan in charge of your team's next gameplan. You still have a plan but it surely isn't optimal or going to get you where you want to go. So it is your choice, you create the plan or you stick with the government's plan. For today's blog, we are going to focus on five critical mistakes I see professional athletes make. If you want a deeper dive into the nuances of estate planning make sure you check out my estate planning guide for professional athletes. In that guide, we talked about how your estate plan is like a parking garage, where you get to put all of the things you care about. Come a big storm, your things are protected. Then picture if any of those things ever want to leave you have an attendant at the gate with a roadmap of where they should go. Come a time of change, your things have direction. A proper plan provides protection and direction of the things you care about. Yet to build the right plan, we have to avoid the common pitfalls that come with estate planning. Here are five ⬇️⬇️⬇️ Pro Athlete Mistake 1: Failing to Start It is hard to plan for the future much less create a plan for decades in the future. Well, Lord willing that is what you are doing with your estate plan as a professional athlete. You are planning for the day that you either can't make those key decisions or won't be there to make them. It is grim to consider but the number one mistake I see professional athletes make is assuming they should do this later. Well let me reframe your perspective on this ~ consider how hard you have worked to put yourself in the position you are in today. It is typically decades in the making. All of that work and the rewards can be misplaced in a second without proper estate planning. That means getting started today. Pro Athlete Mistake 2: Crack In The Foundation To revert to our house analogy, all houses (and estate plans) are not created equal. In fact of the dozens of estate planning documents I have reviewed, the vast majority need upgrading. This can be anything from: Changing names Adding additional details Updating your wishes and desires Putting in key elements for the next generation Your estate plan is a list of documents filled with names, wishes, and desires for all the things that matter to you. The reality of life is those names, wishes, and desires will change over time. You need to make sure you are working with a qualified financial team that is reviewing those documents. Our goal at Moment is to ensure that those documents continue to match up with a client's goals. Remember, don't build the house and fail to maintain it. Pro Athlete Mistake 3: Building Just One Level My first house was a one-bedroom apartment with my wife. It had all the features and space that we needed. Well, four kids later our house has two levels. Just as my needs progressed with my house, so can your estate planning documents. They can start with things like: Pour Over Will Health Care Directive Revocable Living Trust Financial Power of Attorney These building blocks can quickly turn into more complex structures like irrevocable trusts and generational planning. The key is ensuring your plan, investments, and future goals are relayed into an estate plan that matches those desires. Remember you might need a one-bedroom apartment or a five-bedroom two-story home. Pro Athlete Mistake 4: Set & Forget Forgive me for sounding like a broken record but this is not a set and forget it thing. No, you don't need to be reviewing this every quarter but each year you should be giving thought to any changes that need to be made. Remember done right these documents are your current thoughts on a lifetime's worth of work. To me, that is valuable enough to be reviewed each year. Pro Athlete Mistake 5: The Next Generation If you are anything like me, the single biggest factor in me playing professional sports was my ability to put the work in. Yet, that was innate. It came from seeing how hard my parents worked and the lessons that taught me. Many of our athlete clients, they have or are creating generational wealth. This means we need to be thoughtful about how our estate planning decisions (and the money involved) affect the next generation. For me, it is a balance of passing along wealth carefully while keeping the same values that made you the person you are today. This can be done through proper estate planning and the conversations that follow the document creation. Remember this entire estate planning process isn't about you, it is about everyone that comes after you. Estate planning is one of the most underutilized and misunderstood tools professional athletes have in their wealth management playbook. The key is ensuring you have a financial team that is a specialist in athlete wealth management. You want someone who understands the nuances that come with estate planning for someone 18-30 years old. You want someone who can take a complex legal term and explain it to you in a way that is easy to understand. After all, you have worked your entire life to put yourself in this position. The next step is planning for the inevitable time you pass those resources to the next generation. If you are a future or current professional athlete looking for help with estate planning schedule a call with our team. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions received regarding estate planning for professional athletes: When should professional athletes get an estate plan? We believe every athlete should understand the pros and cons of getting this in place today. What is the cost of core estate planning documents? Document creation costs between $3,000 - $6,000 but Moment also provides clients access to a tech platform at no additional cost to the client. This varies depending on the clients specifics need and complexities. Can you change your estate plan? Yes, the majority of documents (revocable trusts) can be changed at any time. You do not need to create a full set of new documents and instead can just make minor adjustments along the way. Is my information protected if I share it with an attorney? Yes as part of attorney client privilege, everything you share with an estate planning attorney stays between you and the attorney. This is especially important for high-profile public figures like professional athletes. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

I recently sold my business and am moving to the lake for retirement. What are you most excited about in retirement? Half of my income isn't going to go to Uncle Sam. Not so fast...you will still pay taxes in retirement, but we can minimize those taxes. Tax planning for business owners is the foundation for paying less in taxes today and in the future. In this blog, we are going to teach you how to reduce your taxes in retirement. Reduce Your Taxes in Retirement One of the biggest misconceptions is tax planning is over once your income stops. Taxes will continue and tax planning should continue as well. Luckily there are ways to reduce those taxes in retirement. We are going to break this blog into two areas. Taxable income sources in retirement. Strategies to reduce taxes in retirement. In each section, we will look at the income sources you are facing and strategies to consider to reduce your taxes. Let's Dive in. Required Minimum Distributions (RMD) The first income source to be aware of is the most common. These are the RMDs from your retirement accounts. Let's first look at what an RMD is. Over the course of your life, you have likely contributed to accounts that allow you to defer taxes into the future. These accounts include the following: Traditional 401(K) Solo 401(K) Traditional IRA When you made a contribution to these accounts the government allowed you to take a tax deduction in that year. This is a common strategy we use for business owners with high incomes. The downside to these accounts is that eventually, the government wants their pound of flesh. The government will force you to take money out of these accounts at age 72. The amount is determined by two factors. How much money was in the account at age 72? What your age is? You will take the dollar amount in your accounts eligible for RMD and match it with this table. Let's look at an example of someone who is age 72. RMD assets on 12/31 of the previous year = $1,000,000 Age 72 Distribution Period = 27.4 RMD = $1,000,000/27.4 = $36,496.35 This will be the amount you are required to take out of your tax-deferred account in the upcoming year. This will be added to your taxable income for that year. Now before you get upset that you have to pay more taxes let's look at strategies to reduce your RMD. Qualified Charitable Distributions - Strategy 1 The first strategy to consider is a QCD. A QCD is a strategy that involves gifting your RMD to a charity of your choice. This is an excellent strategy to consider and here is why. When you gift a QCD directly to charity this will allow the income to never hit your tax return. In the example, we could give the entire $36,496.35 to charity and it would be as if we had no additional income. Roth Conversions - Strategy 2 The next strategy to consider is a Roth conversion. As a refresher, a Roth IRA and a Rraditional IRA have a couple of key differences. Roth IRA = Tax-Free Growth Traditional IRA = Tax-Deferred Growth Roth IRA = No RMD Traditional IRA = RMD Having more money in your Roth IRA is going to reduce your overall RMD tax liability. Many clients approaching retirement want to consider a Roth conversion strategy. This is the process of moving money from your Traditional IRA into your Roth IRA. When doing this you will pay taxes today on the dollars you move into your Roth, but you will eliminate any future taxes on these dollars. The earlier you consider this strategy the more impactful it will be. So the next time you fear your RMD consider these strategies. Portfolio Income One of the most common types of income in retirement comes from your portfolio. These are taxes owned on the investments within your accounts. Before we look at different strategies to consider it is key to understand how taxes work in these accounts. There are three basic types of accounts you can have in an investment portfolio. Each of these accounts will affect your taxes in retirement. Tax Deferred Accounts: 401(K)'s IRA's Sep IRA's Solo 401(K)'s Taxation: These are accounts that you will pay ordinary income on all money you take out, but by leaving the funds in these accounts you will defer all taxes. Tax-Free Accounts: Roth IRA's Roth 401(K)'s Taxation: These are accounts that grow tax-free and all distributions are tax-free. These are the best accounts to have assets in during retirement. Taxable Accounts: Brokerage Accounts Taxation: These accounts will be taxed along the way. Every decision you make in these accounts has immediate tax consequences. Now that we have an understanding of each type of account you could be drawing from let's look at the different strategies to reduce portfolio taxes in retirement. Asset Location - Strategy 1 The location of your investments is a key strategy for reducing your taxable income. Before we look at the best structure let's look at the taxes owned on investments. Bonds - These assets are part of your defensive strategy. The main benefit of a bond is that it will pay consistent income to you over time. This income will be taxed as ordinary income. Stocks - These assets are part of your offensive strategy. The goal of these assets is to appreciate over time. When you own stocks there are two ways to make money. The first is dividends from those stocks which will be taxed immediately. The second is capital appreciation or the position going up in value. To summarize there are two ways to make money on investments. Income - The money paid through interest or dividends throughout the year. Capital Appreciation - The money you make by an investment going up in value. Typically the most tax-efficient strategy is to place your income-producing assets in your tax-deferred accounts. This will allow that income to be generated on an annual basis to be deferred in the future. While your income-producing assets will be in your tax-deferred accounts your capital appreciation assets will be allocated towards your taxable brokerage and tax-free accounts. Typically this is best because we can control when we pay taxes on these positions. We would need to sell the position to create additional taxable income. Asset location is a strategy all individuals in retirement should discuss with their advisory team to ensure they have the right investments in the right accounts. Tax Efficient Investments - Strategy 2 This strategy will be focused specifically on your taxable brokerage account. After all most business owners in retirement have a significant amount of funds in these types of accounts. These funds may have come from saving money over the years or the sale of a business. In these types of accounts, there will be three forms of income. Interest from Bonds Dividends from Stocks Capital Gains from Stocks In retirement, it is key to have the right investments to minimize taxes. Interest from bonds can be either tax-free or taxable. Depending on your tax bracket will change what type of bond we should own. Taxable bonds will pay a higher return but that is only best depending on the overall tax bracket you are in. Dividends from stocks can be paid in two ways. Qualified dividends and ordinary dividends. Qualified dividends will be taxed at a lower rate than ordinary dividends. Most stocks can get qualified dividend treatment with the proper investment strategy. This could be the difference in paying 0% in tax on your dividends up to 37%. Capital gains from stocks are determined by the difference between your cost basis and your current value. The most important consideration is how long you have held these assets. Capital gains have two different classes. The sale will be treated as a short-term gain or a long-term gain. Short-term gain - Held for under 1 year. Long-term gain - Held for over 1 year. Now the important part. How are they each taxed? Short-term capital gains will get taxed as ordinary income with the highest tax bracket being 37%. Long-term capital gains are a different story. They receive special tax treatment and get preferential rates. When possible always sell assets at long-term capital gains to significantly reduce your taxes. Managing an investment portfolio in retirement is key to paying the minimum amount in taxes. The biggest mistake we see business owners make is ignoring taxes during retirement. There is no perfect strategy to fully reduce taxes, but there are many ways to reduce taxes. If you are a business owner looking to reduce your taxes in retirement we are here to help. Tax planning will always favor those business owners who take the time to get educated and they combine that knowledge with the right team. If you are concerned about your tax team or want to get better educated about taxes in retirement reach out to our team below. If you are a business owner who is looking to find a financial team that specializes in you, schedule a call, and talk with a Moment founder. Not sure what questions to ask, check out this video on 10 questions you should ask when interviewing a financial advisor. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions I received frequently about this topic. Are you a fiduciary? Moment Private Wealth serves clients as a fiduciary 100% of the time. How does Moment Private Wealth make money? We are only paid in one transparent way, by our clients. We receive no kickbacks or participate in any profit-sharing arrangements. Our fees are simple, transparent, and clear for our clients. How are you different than other financial advisors? We are specialists in working with professional athletes and business owners. We limit the number of new clients we take on. This allows us to provide unparalleled value and highly personalized service to professional athletes and business owners. We work as a team to service our clients. We believe in building a team of “A” players. This ensures our clients receive world-class tax, estate, insurance, and investment strategies. We focus on educating first, then executing. Where do you hold my investments and how can I see them? Moment Private Wealth uses Fidelity Investments as a third-party custodian for our client investment accounts. As a third-party custodian, Fidelity safeguards and provides reporting to you and the IRS each year. Clients can also access all financial information via the Moment Private Wealth Client Portal. How do you work with other members of my team? We believe in the power of the team. Our client teams consist of Moment Private Wealth, an accountant, an attorney, a banker, and an insurance specialist. We help our clients build out their team of individuals or work with existing partners clients have. Our goal is to ensure every family has a team of experts to protect their interests. What is the penalty for not taking my required minimum distribution? You will owe a 50% penalty on the amount that was supposed to be distributed from your retirement account. What is a required minimum distribution (RMD)? Required minimum distributions are the amount the government requires you to take out of your retirement accounts at age 72. When you tax these dollars they will be taxed as ordinary income. How to pay less in taxes as a business owner? Taxes are going to be your largest lifetime expense. Our goal is to help you pay the least amount possible and never leave the IRS a tip. Our team of specialists understands this and works to reduce your taxes today and in the future. How do taxes work as a business owner? When you own a business you are going to get taxed in two ways. First, you will be taxed as an employee through the W2 wages you take from the business. Second, you will be taxed on the profits that your business earns. What are the best tax strategies for business owners? The best tax strategies can save you thousands if not millions in taxes. The best strategies will be specific to your needs and goals. Strategies most business owners consider take into account what they expect to make in income this year as well as in future years. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

Just Google your name, what comes up? Well for most people, it might be a career accomplishment or their LinkedIn profile. For professional athletes, you will be able to find exactly how much money they made, what team they played for, and probably guess how much they paid in taxes. Those tax bills are high and everyone wants their piece of those big contracts. So, let's play this out, you are a state where MLB, NFL, NBA, and NHL teams visit frequently. You would be crazy to not want your share of that revenue. After all, we aren't talking about pennies here, we are talking about millions of dollars in potential tax revenue. This concept led to what we now know as the jock tax. Simply put the jock tax is a tax levied against professional athletes who spend time playing (and earning money) in cities and states where games are held. Understanding the jock tax is one of the single best nuances to know when it comes to tax planning for professional athletes. In this blog, I am going to cover how the jock tax started, what it means for professional athletes, and the key factors to consider. Jock Tax The jock tax has been around for decades but didn't come to the forefront until 1991. You see in 1991, a little-known basketball player named Micheal Jordan was in the prime of his career. His Chicago Bulls had just beaten the Los Angeles Lakers in the NBA finals. While the city of LA was grieving its loss, tax officials were busy letting Michael Jordan's CPA know that he was going to owe taxes in California for the games played there. Thus the jock tax, as we know it today become a hot-button issue for professional athletes. Today the jock tax applies to nearly every state that imposes a state income tax and many cities that host major sports teams. In practice, it requires athletes to calculate duty days (how many days they are present in each state), formulate tax strategies, and ensure proper filings in multiple states every year. It is a game of tax chess that without proper knowledge and implementation can cost athletes hundreds of thousands if not millions of dollars in taxes. Let's dive in... Jock Tax Explained For Professional Athletes On the surface, the jock tax is pretty simple, if you play there you pay there. The reality of how this works as a professional athlete is a bit more complicated. Consider how many states you might play in during a season: NFL players are looking at 8+ states. NBA players are looking at 15+ states. MLB players are looking at 20+ states. You can thank the jock tax for having to file in more than all those states. In a traditional job, where you work in one state and even if you travel to your company's second location you are not subject to taxes in that state. For professional athletes, it works in reverse. Each state that an athlete plays in must be reported on their tax return. That means athletes must be tracking where they are playing and how many days they are spending there. Let's use an example: You play 100 games throughout the season and five of those games are played in Missouri. Missouri state income tax is 4.95% 5% of a $1,000,000 salary = $50,000 $50,000 (MO state portion) X 4.95% (MO state tax) = $2,475 in Missouri state taxes ***Many cities will also charge city tax for the games a professional athlete plays there. To fully understand how this works let's continue with our example: If you are an athlete with Florida residency (0% state income tax) you would pay no additional state taxes beyond the Missouri portion for those games. If you are an athlete with California residency (13.3% top state income tax) you would pay an additional 8.35% at the end of the year to California. This is the difference between California state income tax (13.3%) and Missouri state income tax (4.95%). The thing to remember as a professional athlete is if you play there, you will pay there. Jock Tax Strategies for Professional Athletes Look there is no way around paying taxes as a professional athlete. Taxes will be your largest lifetime expense. The good news is you can and should plan around it. When it comes to jock taxes, we have seen athletes overpay states by hundreds of thousands of dollars without proper planning. Here are two tax planning moves athletes should focus on: Hire A Specialized Team Ok, let's be real you are in the .000000001% of people to ever play the sport you are playing. You need to consider your choice of financial team to be just as specialized as you are. You want to ensure your financial advisor and CPA work in unison and have deep expertise in multi-state taxation for athletes. The two biggest mistakes I see athletes make are hiring generalists when they need specialists and not having a team working alongside each other. Consider this: You are an athlete preparing for your upcoming season when your CPA calls letting you know your duty day calculation might be incorrect. You are scrambling to find the right documents, make the necessary phone calls, and still prepare for the season. When instead if you were working with an integrated team like how we operate at Moment, your advisor and CPA would be proactively tracking down this documentation throughout the year to ensure correct calculations. Now this is assuming your CPA and advisor understand duty day calculations in the first place. Forgive me for sounding blunt but this is too important to ignore. This is not the time, place, or team where you should be hiring friends. You need to hire experts who have experience or you just might be tipping the IRS. Track Duty Days The best way to ensure your financial team provides you with the best tax estimates is to give them the best information. This includes where you were during the playing season. Now there are some easy hacks to track this that I used throughout my career, the easiest of them all being using your credit card for all purchases. Do this and you can easily go back and trace where you were over a certain week or month. In addition, teams do their best to provide the correct withholding for states when the team is playing there. Just remember this is a starting point, not the final word when it comes to your tax bill. An example: If you spend time on the injured list throughout the season, the team is not tracking your location. If you are spending time rehabbing an injury and are away from the team this could affect your state tax calculation. It is critical to ensure your advisor is aware of these moves during the year. This might sound significant in the grand scheme but I am telling you right now it isn't. We have saved clients hundreds of thousands of dollars on previous mistakes with duty day calculations. The checks are too big and the opportunity cost is too great not to be planning around this. Jock Tax Considerations You will hear plenty of wild stories in the clubhouse, many of them around taxes. They usually start with a legitimate strategy an athlete's financial team proposes but by the time the third player hears about it ~ we are in the telephone game. I say this because theory is often different than reality when it comes to tax planning for professional athletes. In theory, establish residency in a zero-income tax state, sign with a team in that state, and play your entire career there. In reality, life changes a lot from draft day, rarely do you have a choice of who you play for, and the chances of you spending your entire career in one place are slim to none. The key is not trying to predict the future but rather being educated on your options, tax considerations, and tracking key information. Jock tax is one of the most misunderstood concepts in professional sports locker rooms. It is also one of the biggest levers to pull in tax planning for professional athletes. You want to make sure that your financial team is a specialist in athlete wealth management. This means they understand terms like: Duty Days Multi-State Taxation Jock Tax Strategies We have worked hand in hand with professional athletes saving them hundreds of thousands of dollars when these calculations were done incorrectly. Remember taxes are your largest lifetime expense and proper tax planning is critical to maximizing your earnings as a professional athlete. If you are a future or current professional athlete looking for help understanding the jock tax and the role it plays for you schedule a call with our team. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions received regarding MLB service time: What is the jock tax for professional athletes? It is a tax imposed on professional athletes for the time spent playing in certain states and cities. How is the jock tax calculated? The jock tax is calculated based on duty days. Duty days are the days a player has during a professional season. If a player has 100 duty days during his season and spends 10 days in a certain state or city, thus 10% of his income earned during that season would be allocated to that state. Can professional athletes plan around the jock tax? Yes, players and their financial teams must understand how the jock tax works. The biggest step here is tracking your days in each state that you either played or were present during your playing season. Players should not solely rely on the team to ensure this number is correct. What if my previous financial team missed my duty day calculation? You can go back and file an amended tax return reflecting the correct duty day calculation within a certain time period. What if a state withheld too much in taxes for my days spent there? You can file to have those taxes returned to you but you will need to show that state proof of your duty day calculation and supporting evidence. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

Burned out and ready for the next big thing. You may be in your 40s looking to take chips off the table or in your 60s ready to spend more time at the lake. Retirement planning for entrepreneurs will give you the peace of mind that the move you are making is the right one for you. A solid retirement plan is key to an overall wealth management plan for business owners. In this blog, we are going to show you how to build and maintain a retirement plan. Retirement Planning for Business Owners Business owners don't love talking about retirement. Why? They never really retire and always have their hands in something. Does this sound like you? We are going to show you how we plan for people just like you. We are going to break this blog into two areas. Creating a retirement plan. Maintaining a retirement plan. Let's Dive in. Create a retirement plan So you want to retire but you don't know where to start. Look no further. We are going to follow these three steps to create your retirement plan. Goal Setting Lifestyle Cost How Much Money Do I Need to Retire Goal Setting Without goals, it is impossible to build a plan. Walking through a goal-setting discussion can help provide you clarity on several important topics. Time Goals The number one topic for business owners is how to spend their time. After all, you have spent decades building organization...and now you are suddenly going to STOP. For some, this works but for most, it doesn't. Set goals for how you will use your time. Make up for lost time with family Volunteer your time with young entrepreneurs Serve on the board of other companies you can help We find the best time goals are the ones that are the most fulfilling. When you set your time goals understand that money is important but time is often more valuable. Money goals Money makes the world go round. You have probably heard this line before. Although there is truth to this line there is also danger. I encourage business owners to think of money in two buckets. Needs Wants What are the things that I need in my life vs want in my life? These conversations often stem from personal experiences. For example, if an owner grows up with little money they often are more concerned about their needs than wants. Setting money goals should start with your needs and then progress to your wants. These money goals are a great transition into the next part of building a retirement plan. Lifestyle Cost Knowing what it costs to live your ideal lifestyle is key to a stress-free retirement. We break these costs into two categories Fixed Costs Variable Costs It is important to think about these costs in these two buckets as it allows you to determine where we can pull back if we need to. More to come on this later. Fixed costs are ongoing costs that you can't quickly adjust up or down. Mortgage Payments Debt Service Health Care Costs Think about these as payments that you have to make every month no matter what. Variable costs are ongoing costs that we could adjust at a moment's notice. Eating Our for Dinner Private School Tuition Country Club Membership All things that are nice to have but aren't necessary for daily living. Sitting down and taking a good look at these expenses must be completed in order to have a successful retirement plan. Without these numbers, it would be the same as running your company without an operating budget. How much money do I need to retire: This is where the rubber meets the road. How much you need will be swayed by your lifestyle costs and long-term goals. The first step is to break your finances into two buckets. Income Streams Investable Assets Income Streams in retirement could include the following. Social Security Pension Income Portfolio Income Real Estate Income Required Minimum Distributions We will add these income streams together and compare this number against your lifestyle costs. Planning often becomes simple when your passive income matches your lifestyle costs. Rarely is this the case which is where your portfolio comes into play. When analyzing your investment portfolio we often see the range you can distribute off the portfolio being between 2%-6%. This is a wide range because it is heavily affected by your current income streams and capital needs. For those who aren't positive about their goals, it makes it difficult to be on the top end of the range (6%). So how does this play out in reality? Check out this video where I break down an example Maintaining a retirement plan Creating a retirement plan is one thing but maintaining it is a different animal. Unfortunately, many people fall into the trap of creating a plan only to stuff it in a drawer and forget about it. The reality is that life changes and when it does your financial plan should be updated. We are going to walk through how we use guardrails-based planning to help you maximize your retirement. There are three primary levers we monitor: 1) Annual Spending 2) Upper and Lower Guardrails 3) Spending vs Available Income Guardrails-based planning as illustrated above can help you spend more money during your retirement. Here is how is plays out. First, we need to set the available income. The income we believe can comfortably be spend off of the portfolio while still maintaining the principal. In this example we have the distribution rate set at 4%. Note that this distribution is largely effected by the following factors. Time Horizon - The younger you are the lower the distribution rate. Capital Needs - The more likely you are to need a large chunk of money the lower the rate. Risk Tolerance - The higher your risk tolerance the higher the distribution rate. Now that we have our available income setup we move to the guardrails. The guardrails are a unique planning tool to help you meet your goals in good times and bad times. The easiest way to think about guardrails is that we will be able to spend more money when the portfolio is increasing in value and less money when the market decreases. This provides a substantially different result than traditional planning. In traditional financial planning, an advisor sets an inflation adjustment on your spending and assumes you will continue to increase your spending regardless of what the portfolio is doing. We have found this strategy to be unrealistic. Guardrails-based planning allows us to set an upper and lower bound that we adjust as the portfolio adjusts. Here is how it works. If the portfolio is up 20% your available income increases by 10%. If the portfolio is down 20% your available income decreases by 10%. Having guardrails allows us to accomplish these objectives. Maximize the amount of money we can spend off the portfolio. Use a strategy that protects your portfolio in down markets. Avoid leaving too much money in your legacy bucket. When maintaining a retirement plan this is hands down the best way I have seen to keep your plan on track. Remember not to put your financial plan in a drawer. This is not a set-it-and-forget-it strategy. This needs to be constantly monitored to ensure that you keep your retirement plan on track. Building a retirement plan for a business owner often is not easy, but if done currently it will give you peace of mind. When in doubt keep it simple. Set your goals with simple clear guidelines. Use your guardrails to stay on track. If you are a business owner looking to retire we are here to help. Retirement planning should not be avoided. The sooner you plan the better off your retirement will be. If you are a business owner who is looking to find a financial team that specializes in you, schedule a call, and talk with a Moment founder. Not sure what questions to ask, check out this video on 10 questions you should ask when interviewing a financial advisor. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions I received frequently about this topic. Are you a fiduciary? Moment Private Wealth serves clients as a fiduciary 100% of the time. How does Moment Private Wealth make money? We are only paid in one transparent way, by our clients. We receive no kickbacks or participate in any profit-sharing arrangements. Our fees are simple, transparent, and clear for our clients. How are you different than other financial advisors? We are specialists in working with professional athletes and business owners. We limit the number of new clients we take on. This allows us to provide unparalleled value and highly personalized service to professional athletes and business owners. We work as a team to service our clients. We believe in building a team of “A” players. This ensures our clients receive world-class tax, estate, insurance, and investment strategies. We focus on educating first, then executing. Where do you hold my investments and how can I see them? Moment Private Wealth uses Fidelity Investments as a third-party custodian for our client investment accounts. As a third-party custodian, Fidelity safeguards and provides reporting to you and the IRS each year. Clients can also access all financial information via the Moment Private Wealth Client Portal. How do you work with other members of my team? We believe in the power of the team. Our client teams consist of Moment Private Wealth, an accountant, an attorney, a banker, and an insurance specialist. We help our clients build out their team of individuals or work with existing partners clients have. Our goal is to ensure every family has a team of experts to protect their interests. How much money can I spend in retirement? Retirement spending starts with your goals. Once you have established your goals we recommend deciding a safe withdrawal rate to meet your goals. Using guardrails-based planning will allow you to increase your retirement spending over time. What is guardrails-based planning? Guardrails-based planning allows families to spend more in their retirement years. It is a strategy that allows your income from your portfolio to increase in good times and decrease during market downturns. What is a Monte Carlo analysis? This type of analysis takes into account your financial variables and runs a number of different scenarios. You then will receive a probability of success. This probability represents your ability to meet all of the financial goals plugged into your analysis. How do taxes work as a business owner? When you own a business you are going to get taxed in two ways. First, you will be taxed as an employee through the W2 wages you take from the business. Second, you will be taxed on the profits that your business earns. What are the best retirement strategies for business owners? Retirement planning as a business owner can seem challenging, but the best strategies are the ones with clear goals and guidelines. At Moment we start with your goals in mind and use financial planning strategies that help you spend the most money during your retirement. All while ensuring you have peace of mind. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

I owe how much in taxes? I could feel the horror on the other end of the phone after they learned they owned hundreds of thousands more in taxes. The only way to avoid these situations is with proactive tax planning. Proactive tax planning is the actions we take over the course of the year to avoid any surprises when implementing tax planning strategies for business owners. In this blog, we are going to give you a roadmap for proactive tax planning. Proactive Tax Planning I love surprises, but I don't like tax surprises. I have yet to meet a business owner who wants any surprises when it comes to taxes. In this blog, we are going to show you how to be proactive. We will be looking at three key areas. What work should be done on a quarterly basis? What work should be done on an annual basis? Let's Dive in. Quarterly Basis They say consistency is key. This couldn't be any more true when it comes to tax planning Here are two things you should do each quarter to avoid surprises. Review of Business Financials: You will want to get into your books each quarter to review how things have been going. I regularly see business owners make the mistake of not looking at the books regularly and this gets them in trouble. If you don't know how you are doing it makes it difficult to know what decisions to make. Looking at your books regularly will help you make better business decisions later on in the year. A common issue I see with business owners is waiting until the end of the year and then deciding to buy anything they can for their business to reduce their taxes. Although this is a viable strategy it is reactive and not proactive. The way you plan for this in advance is by reviewing your books on a quarterly basis. Quarterly Estimates: After you review your financials in the business it is time to review your quarterly estimates. Before we dive into what you need to pay let's first look at what is a quarterly estimate. There are two ways you typically pay your taxes for the year. The first is through your salary with normal withholding. The second is through estimates. This is where you pay the amount of tax you expect to owe based on the profits for each quarter. This is important for two key reasons. To avoid penalties and interest on taxes owed. To avoid a big surprise at the end of the year The big mistake to avoid is simply paying your quarterly estimates based on last year's profit. You can avoid this by reviewing your books each quarter. That way you don't end up paying too much in estimates or too little in estimates. So when should you pay these estimates? Each quarter there is a due date for the estimates. April 15th June 15th September 15th January 15th One of the biggest questions we get is how to avoid penalties and interest. The key here is knowing how the IRS treats each type of withholding. Quarterly estimates are treated as paid only at the time in the year the estimate is made while normal withholding is spread throughout the course of the year. The trick here is to make sure you are paying estimates when you earn the income or withholding extra funds through payroll at the end of the year. Annual Basis Proactive planning happens at different times during the course of the year. Now that we have reviewed the quarterly proactive planning we will look at the annual planning. Annual planning covers the topics that need to be completed at one point during the year. Here are the top three planning moves to stay proactive with your tax situation. Annual contributions to retirement accounts. Providing tax forms to your CPA firm Annual Review of your tax return Let's dive into our first area. Annual contributions to retirement accounts: Every year there will be deadlines for different retirement accounts. The first step is knowing which accounts to contribute to, but in this blog, we are going to look at the key dates for each of these retirement accounts. There are three key dates for retirement accounts that must be known to be proactive. April 15th At the tax deadline, there will be multiple accounts that you must finalize your contributions. These accounts include the following Roth Individual Retirement Accounts Traditional Retirement Accounts Solo 401(K) Retirement Accounts Health Savings Accounts October 15th When you file an extension for your taxes you have until the 15th to finalize your return. There is also one accounts that allows you to make a retirement account contribution for the previous year prior to the October 15th deadline. Self-Employed Pension Retirement Account This account is specific for those with self-employment income. December 31st The last day of the year is when you can finalize contributions for the following accounts. Traditional 401(K) Retirement Accounts Roth 401(K) Retirement Accounts Opening a Solo 401(K) Retirement Account Note that for those looking to make a solo 401(K) contribution, this account must be opened prior to the end of the year you plan to make the contribution. Providing Tax forms to CPA Firm Being proactive requires you to be looking ahead. If you are lucky enough to have a tax planner and not a tax preparer you will find this section to be easier to implement. Once a year for clients it is required to gather all tax documents and provide them to your CPA. This can be tricky when you are making tax moves during the year. Our goal with the annual tax letter is to outline to your tax team what moves were made during the course of the year and what tax forms to expect. Tax Moves Outlining the tax moves is key to ensuring your CPA is critically thinking about your tax return. Often clients get in trouble when they blindly provide information to their CPA without context. Context is key to communicating tax moves to your CPA. Tax Letter Annually in the 1st quarter of everywhere we need to provide a tax letter to your CPA. In this tax letter, we will outline all the forms they should expect to receive from us along with any form we know of that we don’t have access to. Outside checking accounts Outside investment accounts This tax letter is a key part of helping give context to your CPA team. Once your CPA gets this information is it enough to assume everything is done accurately? No. CPA's are humans and humans make mistakes. It is our job to provide a second set of eyes to the expert work completed by your tax team. Annual Review of Tax Return On an annual basis, we need to review your previous year's tax return. This review will give you a second set of eyes to ensure all your information was reported properly. Here is an example of the output we provide to each of our clients when reviewing their tax returns on an annual basis. These are the key considerations we are looking for when completing a review of a client's tax return. Accurate Information You would be amazed at how many returns we have reviewed that have incorrect information. The most common issues we see are inaccurate cost basis for sales of securities and children missing off of tax returns. Both of these could cost a client thousands in taxes if done incorrectly. Retirement Account Contributions Another issue we commonly see is inaccurate information surrounding a client's retirement account contributions. It is not uncommon to see a 401(K) contribution missed or other deduction. Review of Quarterly Estimates Typically on your tax return your CPA will provide quarterly estimates for the current year. Although these can be accurate they often need to be adjusted. During the course of our review, we will look to see what we recommend and take this into consideration when we work to complete the quarterly estimates for your family. Tax considerations are an ever-changing target for business owners. It is a never-ending chase to minimize taxes both today and in the future. Your financial advisor should work hand in hand with your tax team to ensure you are minimizing these taxes. When was the last time your advisor asked to review your tax return? Can you even remember or maybe it is never? If this is the case for you reach out to our moment team to get a free review of your tax return at no cost. If you are a business owner who is looking to find a financial team that specializes in you, schedule a call, and talk with a Moment founder. Not sure what questions to ask, check out this video on 10 questions you should ask when interviewing a financial advisor. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions I received frequently about this topic. Are you a fiduciary? Moment Private Wealth serves clients as a fiduciary 100% of the time. How does Moment Private Wealth make money? We are only paid in one transparent way, by our clients. We receive no kickbacks or participate in any profit-sharing arrangements. Our fees are simple, transparent, and clear for our clients. How are you different than other financial advisors? We are specialists in working with professional athletes and business owners. We limit the number of new clients we take on. This allows us to provide unparalleled value and highly personalized service to professional athletes and business owners. We work as a team to service our clients. We believe in building a team of “A” players. This ensures our clients receive world-class tax, estate, insurance, and investment strategies. We focus on educating first, then executing. Where do you hold my investments and how can I see them? Moment Private Wealth uses Fidelity Investments as a third-party custodian for our client investment accounts. As a third-party custodian, Fidelity safeguards and provides reporting to you and the IRS each year. Clients can also access all financial information via the Moment Private Wealth Client Portal. How do you work with other members of my team? We believe in the power of the team. Our client teams consist of Moment Private Wealth, an accountant, an attorney, a banker, and an insurance specialist. We help our clients build out their team of individuals or work with existing partners clients have. Our goal is to ensure every family has a team of experts to protect their interests. What is a tax deduction? A tax deduction is your ability to reduce your total income by the amount of your deduction. For every dollar of deductions, you will reduce your taxable income by a dollar. How to avoid a big tax bill? To avoid a tax bill you need to be proactive with your tax planning strategies. This will require your team to work on your taxes throughout the year. You should be looking at taxes on a quarterly and annual basis. How to pay less in taxes as a business owner? Taxes are going to be your largest lifetime expense. Our goal is to help you pay the least amount possible and never leave the IRS a tip. Our team of specialists understands this and works to reduce your taxes today and in the future. How do taxes work as a business owner? When you own a business you are going to get taxed in two ways. First, you will be taxed as an employee through the W2 wages you take from the business. Second, you will be taxed on the profits that your business earns. What are the best tax strategies for business owners? The best tax strategies can save you thousands if not millions in taxes. The best strategies will be specific to your needs and goals. Strategies most business owners consider take into account what they expect to make in income this year as well as in future years. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.

Arguably the biggest misconception athletes have is the difference between what their contract says and what hits their bank account. We (me included) all first think that our contract number is a good measure of what we will get when in reality it is often 30 - 50% less than that. The role taxes play for professional athletes cannot be understated. They will be your largest lifetime expense and it isn't even close. That is the bad news. The good news? We can and should be planning for them. After all, consider if you had any other large expenses, you would want to do your research to make sure you are not overpaying. I want you to think about taxes the same way. They are an expense that can be reduced. The key is understanding how tax planning for professional athletes can be optimized. In this blog, I am going to break down 10 tax planning strategies for professional athletes. Taxes for Professional Athletes Individual tax returns were due on April 15th of this year. For most athletes the first time they started thinking about this was a few weeks before that. That inherently is the problem. There is almost nothing left to plan for other than what you will owe by then. If you read nothing else in this article, read this: tax planning and tax preparation are two different things. Tax Planning : Looking out in the future to find ways to lower your lifetime tax bill. Tax Preparation : Reporting on everything you did in your tax planning and letting the IRS know. One is proactive and saves you money, the other is reactive and is only doing what is required. One of the biggest mistakes professional athletes can make in choosing a financial team is choosing a team that cannot provide guidance on taxes. Here is a little secret ~ the vast majority of financial firms (think big banks) cannot provide tax planning to clients. Remember how we said taxes are your biggest lifetime expense? Now consider that the most integral part of your financial team, your advisor, might not be able to give you planning or guidance on taxes. That is a recipe for overpaying on your taxes, something you can and should avoid. So let's dive in and discuss ten tax strategies for professional athletes. 1. State Residency Income is taxed at two levels, the federal level and the state level. While the federal level applies to all US citizens, the state level varies depending on your state of residence. This ranges from 13.3% for California residents down to states with zero income tax such as Florida and Texas. Consider that is a $130,000 difference for every $1,000,000 earned between California and Florida. Establishing residency in a low or zero-income tax state can save athletes hundreds of thousands to millions of dollars in lifetime taxes. So, how can you establish state residency in a low-income tax state (the right way)? State residency is determined by a series of facts and circumstances. The following is a good starting point for athletes considering a change in state residency: Establish a full-time residence Obtain a state driver's license Register your vehicle with the state Obtain insurance coverage in the state Change your mailing address for all bills Register To Vote Live There State residency is not a black-and-white issue. It is instead about stacking undeniable proof that this new state is your primary residence. Professional athletes should look to execute this with a qualified financial team that has experience handling multi-state taxation and residency. 2. Retirement Accounts Retirement accounts are all about optimizing for your lifetime tax bill. Current Year Benefits  - This provides a tax deduction in the current year and you will owe taxes in the future. Current-year benefit accounts are traditional retirement accounts. Future Year Benefits  - This provides no tax benefit in the current year but future year tax benefits in the form of tax-free growth/distributions. Future-year benefit accounts are those with the Roth prefix. Example : If you are in the 37% federal income tax bracket today but projected to be in the 22% federal income tax bracket in the future your focus should be on current-year benefits.  Lower tax brackets today focus on future-year tax benefits Higher tax brackets today focus on current-year tax benefits    Most Common Types of Retirement Accounts Solo 401(k ) – Restricted to businesses with no employees or if your spouse is the only other employee. This is a great option for NIL athletes or those earning off-the-field endorsement income. 401(k) – The most common retirement account and is provided by your team. 401(k) access and opportunities vary by league. For a deeper dive into league benefits for Major League Baseball and The National Football League check out our player's benefits articles. IRA – This is easy to set up and comes in three forms: Traditional, SEP, and Roth accounts. Each provides unique benefits, limitations, and opportunities.   3. Investment Strategies The two best times to pay taxes are never or later. As an athlete, you will have 40+ years of compounding for your investment portfolio. Our goal is to grow that money while at the same time paying as little in tax as possible. The thing that matters far more than your rate of return is your after-tax rate of return. Said more simply, what you keep matters more than what you make. As an athlete builds an investment portfolio, the focus should be on after-tax return. We do this for athletes by focusing on the following investments: Exchange Traded Funds Municipal Bonds Direct Indexing Combine that with strategic rebalancing and you set yourself to make taxes a priority not an afterthought in your investment portfolio. 4. Donating Money One way to give back and reduce your tax bill is through strategic gifting. The key term here is “strategic”. An athlete’s earning lifecycle is condensed into roughly one decade or less. This means we want to take advantage of high-income years today (through gifting) but give ourselves optionality to give money away long after our playing career ends. The single best tool to do that is a Donor Advised Fund (DAF). Here is how it works: A Donor Advised Fund is an account that allows you to donate money, take a current-year tax deduction, keep the money invested, and give it out over future years. Example : You are earning $5,000,000 yearly and want to give away $10,000 yearling over the next twenty years. To maximize his tax benefits, we might recommend giving $100,000 or more in the current year to a Donor Advised Fund. This allows us to get a large tax deduction in year one but provide grants to our favorite charities over time. I am yet to meet any athlete who wants to give more money to the IRS and less to their favorite charity. A Donor Advised Fund is a great way to accomplish that. 5. Types of Income To understand taxes, you need to understand the types of income. Professional athletes earn two types of income, W2 and 1099 . One is a result of work you do on the field (W2) and the other is the result of work you do off the field (1099). The type of income will drive the rules, strategies, and placement of income as it comes in for an athlete. Once you understand the type of income you are earning you then can determine which strategies to focus on. 6. Deferring Income It doesn’t matter what you get paid, it matters what hits your bank account. This couldn’t be truer when we think about planning around income. Accelerating income (taking in more in one year) or deferring income (pushing some out) can significantly impact your tax bill. This is especially relevant for professional athletes closing in on the “next” income tax bracket.  Example : You are earning $350,000 in taxable income for the year.  You just landed an endorsement deal that will provide you with an additional $100,000 of income.  The 32% federal income tax bracket starts at $364,201 (married filing jointly in 2024).  This means the first $14,201 will be taxed at 24% but the other $85,799 will be taxed at 32% This is a net cost of an additional $6,863 in taxes. If you pushed that money into a future year it could provide additional tax savings.  7. Roth Conversations The two best times to pay taxes are later or never. My estate planning attorney once told me that and while generally true there are exceptions.  The biggest one is Roth conversions. Remember the goal is not to pay the lowest amount of tax in a single year but rather to pay the lowest amount of tax over your lifetime. A Roth conversion is the process of taking money in an individual retirement account (IRA) and moving it (converting) to a Roth IRA. Where this comes into play for professional athletes is the years of lesser income. Consider for a second that the average professional career is less than five years and you c an start to see the opportunity: High Income High Income High Income High Income Lower Income (Roth Conversion) Example : You convert $100,000 while in the 22% tax bracket at the age of 30. This results in a current year tax bill of $22,000 ($100,000 X 22%) but provides you tax-free growth for decades. This can result in hundreds of thousands in lifetime tax savings when executed correctly. 8. Tax-Loss Harvesting Tax loss harvesting is when you sell a position (one at a loss) and buy an “equivalent” position (similar but not the same position).  This allows you to do two things:  Capture the loss for taxes (more on that later) Continue staying invested in the market to capture the upside Example : You bought $1,000,000 of a growth fund that is now down 10% or $100,000. You can sell that fund, immediately rebuy a similar fund (another growth fund), and capture the $100,000 loss. This provides you a tax asset of $100,000 for future years in which you might sell an investment and take a gain. Those losses can be used up to $3,000 per year to offset ordinary income. Additional losses can be used to offset capital gains income in the future.  ***Unused losses can be carried forward into all future years. 9. Quarterly Estimates It pays to be up to date on your projected tax bill. While the team will withhold taxes from your salary, this does not mean it is the correct amount. In addition, off-field income is generally the athlete’s responsibility to report to the IRS. This is where quarterly estimates come into play. A quarterly estimate is a payment of projected taxes each quarter. This is something that your financial team (Financial Advisor & CPA) should be working together on each quarter. To ensure a penalty-free year you must reach the Safe Harbor Rule. For professional athletes, this means paying: 90% of Current Year Income Tax Liability or 110% of the Previous Year’s Income Tax Liability This is where a qualified team of advisors can save athletes thousands of dollars in penalties and fees. 10. Estate Planning Estate planning is for old people and athletes are young, right? Wrong. Estate planning is simply deciding where your assets go when they go there, and how they get there. It is a financial roadmap for when you are no longer able to articulate the plan. Estate planning is even more critical for high-earning athletes due to something referred to as a Death Tax. Here is how it works: If your estate (everything you own added up including life insurance) is more than 13.61 million in 2024 you are subject to it. That tax is a staggering 40%. The good news? You can plan now to avoid it in the future. A properly executed estate plan can help to mitigate, reduce, or fully eliminate an estate tax liability. The best time for tax planning as a professional athlete is today. You set yourself up for future flexibility and a lowered lifetime tax bill. If you are a future, current, or former professional athlete looking for tax planning schedule a call   with a founder. Look, we get it, taxes can be frustrating, confusing, and downright overwhelming. At Moment, our mission has stayed the same since day one. To build a firm focused on helping the people we know best, athletes and entrepreneurs. Get in Touch With An Advisor Frequently Asked Questions Here are some answers to questions I received frequently about this topic. How does Moment Private Wealth help athletes with tax planning? At Moment we provide quarterly projections, tax strategies, and work in coordination with our client's CPA to ensure every client is paying the lowest amount of tax possible. When should professional athletes be planning for their tax bill? We believe that good tax planning is year-round. How do you work with CPAs? We believe in the power of the team and our job is to make sure your entire tax team is aligned. The best strategies mean nothing without proper implementation and execution. What is the biggest tax strategy professional athletes should consider? I will give you the best worst answer, it depends. It depends on what you are trying to accomplish and the details of your situation. *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.