Let's talk about something I refer to as the "RIA premium". Not as a slogan and not as a value judgment, but as a way to explain why working with an independent, fee-only Registered Investment Advisor (RIA) usually costs more than working with an advisor at a broker-dealer, and why that difference exists in the first place. Most people never get this explained to them in English. They see some good marketing, a fee or commission they feel is palatable, they hear words like "fiduciary" | "sales charge" | "fee-only", and then they’re expected to just decide whether it's the right fit for them or not. That’s not a great way to make a decision, especially when the majority of people in the U.S. of A. don't have a financial advisor, so they've never experienced one way vs another. But it's important to understand what these words mean, what they cost, and why - especially, when the dollar amounts get large over time. So, let’s walk through it the way I would with a client who actually wants to understand the tradeoffs, not just hunt for the cheapest option. How Most People Experience Financial Advice When someone tells me they have a financial advisor, more often than not that advisor works at a firm that is under a broker-dealer. That could be a bank, a credit union, or a national brand like Edward Jones. It could also be someone affiliated with a household broker-dealer name like Raymond James, LPL, Fidelity, or Schwab. And I want to be clear here, because this matters... just because I disagree with the broker-dealer way of business, these advisors are not bad at their jobs. In fact, they can be quite good at their jobs because, in my experience, their job is to sell financial products and know enough about different financial matters to not lose clients. For fairness, here are some things I've found they can be good at: They’re good at creating regular market participants Any time we can get more people investing, the better it is for everyone. Too many people are being financially left behind because they're not investing. These advisors can be good at getting people comfortable with on-going, recurring investment plans. They’re good at helping someone start investing when they otherwise wouldn’t The barriers to working with a broker-dealer affiliated advisor are usually pretty minimal so they're good at helping people overcome the fear of rejection for "not having enough money" or "enough complexity." They have the investment and insurance universe available to them Because fee-only RIAs surrender their ability to charge commissions, products like annuities, life and long-term care insurance, and other products are not available. Brokerages, however, are able to provide them. They’re also really good at selling products They can usually sell the hell out of mutual funds, annuities, and life insurance—those products can help in the right situations, but the real benefit often accrues to the advisor, which isn't always bad if the first 2 bullet points are accomplished. There are excellent advisors in both models so I’m critiquing the incentives, not the people. Okay, so we got that out of the way as best I could... I tried to be fair but obviously I'm biased so let's clear our palate once more: That kind of business is not a moral failing. That’s the structure of the broker-dealer world. Brokerage firms exist to manufacture and distribute financial products, and advisors in that system are compensated accordingly. It is what it is, as they say. Where things start to break down is when a client’s situation becomes more complex than simply picking investments. Alright, the Real Limitation Isn’t the Advisor Most people assume that if their brokerage advisor isn’t helping with tax strategy, estate planning decisions, or business planning, it’s because the advisor doesn’t care or isn’t smart enough. That can absolutely be true but it's not just the advisor's fault. The bigger issue is that brokerage advisors are governed by their broker-dealer - LPL, Raymond James, Edward Jones, Fidelity, Schwab, etc. - not just by the firm name on the door. The broker dealer sets strict rules around what advice can be given, how it can be framed, and what topics are considered off-limits. Those rules are not designed around the most experienced, knowledgeable advisor at the firm or the most qualified, complex client's needs. They’re designed around liability management. Broker-dealers create policies with one thing in mind: their risk. They need to know what group of people at their firm are considered the "lowest common denominator," what risk do they pose to the firm, and how does the firm mitigate it. Typically, this is the newest, least experienced advisor on the platform. The one most likely to say the wrong thing, give advice they’re not qualified to give, or expose the firm to a lawsuit. As a result, even a thoughtful, well-intentioned advisor is boxed in. They can only do so much and have only so much incentive to continue their development. Not because they don’t want to help, but because the structure doesn’t allow it so why pursue it? Does it always matter to the advisor? Though not always, I've found it depends on the comp and where they've set the bar for themselves in terms of client impact. If their compensation from investment sales is high enough and they feel they're making an impact in client lives - even marginally - then what need is there to venture out into the scary world of the independent RIA? That’s the tradeoff baked into the brokerage model: You can't do everything you might want but you'll get paid really well and you'll have an endless well of prospect leads. What Changes in the RIA World RIAs operate under a very different structure that isn't governed by an all-mighty broker-dealer. RIAs will use a custodian for holding client assets, reporting, and billing - rather than be confined to the rules of a traditional broker-dealer. RIAs come in all sizes... some manage billions of dollars with large teams and layers of staff, but most are much smaller. They might be one, two, or three advisors that can sometimes be partners or sometimes independent advisors sharing technology and infrastructure. What they all share is independence, typically fee-only structures, and fiduciary service to clients. Independent, fee-only RIAs don't work for a broker-dealer. They are not paid commissions for selling investments and they're not restricted to a broker-dealer’s product menu or sales framework. Within regulatory guidelines set by the state or the SEC, they decide, internally, how they work with clients. That independence matters more than most people realize. It allows RIAs to specialize in the areas they feel they are strongest in and their clients will get the most value from. Examples of specialization can be: Provide specialized investment portfolios Focusing heavily on tax planning Prioritize estate planning coordination Some serve small business owners or executive level management of Fortune 500 companies They might serve agricultural families and focus on the complexities of passing down or exiting a family or professionally managed farms Others might benefit their clients in helping negotiate and manage equity compensation and complex income structures This specialization helps RIAs limit clients while providing the biggest bang-for-their-buck to those clients... also, it allows them to draw clear boundaries on what they do and don't do. Most fee-only RIAs do not: Sell insurance Sell annuities Sell commissioned products at all When those needs arise, they typically refer out. That’s not a weakness or flaw in the design of the RIA. It’s a deliberate choice to avoid conflicts of interest in the advice they provide to their clients. Why Cost Always Comes Up I’ve said this before, and I’ll keep saying it... If all you want is portfolio management, you can probably do it yourself. Not because it’s easy or because it's not worth it to pass it off to someone like me... but because the information is available if you’re willing to spend the time learning how markets, risk, and diversification actually work. But most people don’t want to spend that time, and that’s completely reasonable. I think of it like building a house. Sure, I could learn how to build one if I wanted to. What I don’t want to do is spend the time to learning codes, engineering, and construction details when I’d rather focus on my family, my work, and the parts of life I enjoy. That’s why people hire professionals. But cost still matters, especially when long-term investment performance often ends up looking pretty similar across different approaches. So, let’s talk about an actual example. Path Upfront Cost Ongoing Fee Total Fees Paid Net CAGR ABALX A Share $12,500 0.56% $130,038 ~7.7% Benchmark Advisory $0 1.07% $211,344 ~7.0% A Common Brokerage Cost Example One of the most widely used mutual funds I've seen in the brokerage world is the American Funds American Balanced Fund, Class A (ticker: ABALX). Disclosure: I currently do not own or use this mutual fund in my business. ABALX is designed to sit roughly in, what I consider to be, the middle of the risk spectrum, usually around 60% stocks and 40% bonds. It's a good mutual fund; I have no problems with it. I just wanted to use it as an example because I've seen it so often as a standalone "portfolio." Its net expense ratio is 0.56% per year. That’s not outrageous, but it’s not cheap either. That fee pays the team managing the investments inside the fund and we all pay it, even advisors. This fee is charged on the total dollars you invest within the mutual fund or ETF. There's really no getting away from it. On top of that, Class A mutual funds carry a front-end sales charge. Using a $500,000 investment as an example, the sales charge at American Funds in that level of investment is 2.5%. That’s $12,500 paid immediately, reducing the amount actually invested to $487,500. From there, every year, the fund charges its 0.56% net expense ratio. Over the 20-year period, from the start of 2006 through the end of 2025 and accounting for the actual historical performance - gross of taxes - the total fees paid just to hold that fund would have been roughly $130,000. Those costs exist for a reason. Someone has to decide what goes into the fund, manage risk, and rebalance the portfolio. In the brokerage world, part of that ongoing cost is often shared with the advisor as a trailing commission, which creates an incentive to both place the asset in a more expensive fund and keep it there for the trailing commissions. Year-End ABALX Cumulative Cost Advisory Cumulative Cost 2010 $27,288 $28,926 2015 $49,994 $68,585 2020 $81,698 $126,631 2025 $130,038 $211,344 How the RIA Cost Structure Differs A fee-only RIA does not receive commissions. They don’t care which fund pays more, because none of them pay anything back to the advisor or the RIA, as a company. That gives them a strong incentive to reduce internal investment costs wherever possible. Instead of a higher-cost mutual fund, an RIA might use a portfolio of low-cost index funds - in this case, SPY (60%) and AGG (40%) - with a combined expense ratio closer to 0.07 percent. Disclosure: I currently do not own or use these funds in my business. However, the RIA will typically charge an "assets under management" fee, often around 1.00% per year, charged very clearly on the account balance. Using the same 20-year period and actual market returns - again, gross of taxes - the total advisory cost in that scenario would have been around $211,000. That’s roughly $80,000 more than the brokerage mutual fund example over the 20-year analysis period. This is usually where people stop thinking and decide the RIA is automatically the worse deal and decide the brokerage advisor is the best route to go. Which completely makes sense to come to that conclusion... if the portfolio is the only thing being compared. Where the RIA Premium Shows Up If all you’re getting from an RIA is investment management, you might be overpaying. That’s not controversial, and any honest advisor will tell you that. An exception might be if you're investing heavily into private equity/credit deals that require specialized knowledge and experience in that field. Besides that, the RIA model is not designed to justify its cost through portfolio performance alone. Where the RIA premium shows up and what it really buys you is fewer unforced errors over a lifetime of decisions that compound, quietly and expensively, when they’re handled poorly. Tax and Legal It shows up when investment decisions are made with taxes in mind, not just this year, but across decades, so you’re not sleepwalking into unnecessary capital gains, income recognition at the worst possible time, or portfolios that look fine on paper but are actually crying out for help because of all of the income and capital gains distributions that are happening. It shows up when estate planning isn’t treated as a document you sign once and forget, but as something that’s coordinated between your wealth manager, attorney, CPA, and family on how assets should actually be titled, who owns what, and how money will move when someone dies, because that’s where plans most often break. Gifting and Estate It shows up in gifting and charitable strategies that are intentional instead of reactive, where the question isn’t “how do I give money away,” but “what am I trying to accomplish, who do I want to benefit, and what’s the least destructive way to do it from a tax and control standpoint.” It shows up in trust structures that are designed to function in real life, not just look good in a conference room, and in beneficiary and ownership decisions that don’t quietly contradict each other until it’s too late to fix them. Business Planning It shows up for business owners when valuation, exit planning, and succession aren’t left until the last year of planned operation, when options are limited and leverage is gone, but are thought through early enough that the business actually supports the owner’s life instead of trapping them in it. And it shows up in cash flow planning that evolves as income changes, kids grow up, businesses mature, and priorities shift, instead of freezing someone into a plan that made sense once and then slowly stopped fitting reality. That’s the difference... it's not in better predictions because we can't predict market movements any better than the next advisor or analyst. RIA and independent advisors strive for better decisions, made earlier, and corrected before they become permanent. Similar Returns, Different Outcomes When you compare long-term performance, gross of taxes and fees, between something like the American Funds Balanced Fund and a simple benchmark built from low-cost index funds, the results tend to be remarkably similar over time. In this case, we're reviewing January 1st, 2006, to the close of 2025; we're assuming $500,000 of initial investment and no additional contributions, reinvested dividends, and we're assuming no tax impact (which can be pretty important). In simple portfolio management, the real difference shows up in tax minimization, cost efficiency, flexibility, and the quality of decisions made outside the portfolio. That’s where the RIA premium earns its keep... lower lifetime taxes, cleaner estate transitions, better business outcomes, and fewer expensive mistakes made under stress. Independent advisors charge more because, most of the time, they can do more. They are not constrained by broker-dealer policies written to protect them from the least experienced advisor's mistakes. They are not incentivized by commissions. They get to choose who they work with and how deeply they engage. That freedom costs money, and it should. You can buy the Black+Decker cordless drill for $65, and it might work for exactly the thing you need... or you can buy the $250 Milwaukee drill that is maybe a little on the higher end of your needs but be delighted with how much better it is. Cost is only important in the absence of value. If you’re paying the RIA premium, the real question isn’t whether your portfolio is doing fine. It’s whether you have an advisor that can help achieve the outcomes you hope for; if they can, are you using your advisor to their potential, or are you just outsourcing investment management you could’ve done yourself? If you want to pressure-test that, I’m happy to have an easy chat about what you’re getting, what you’re not, and how Harvest Horizon Wealth services its clients. Jose Alvarez, CFP ® , MBA Financial Advisor Founder Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Chart data provided by Finomial and Hazel and is for illustrative purposes only. Investment performance and costs are not guaranteed and considered accurate as of the date of the writing. Past performance is not indicative of future performance. This blog should not be interpreted as a full analysis of any particular subject including the subject discussed. Images included in this blog may be created by artificial intelligence. If so, resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

I’ve been seeing this headline float around and I can’t ignore it because it hits right at the intersection of politics, money, and what I’ll loosely call reality. The article comes from MoneyWise, and the headline says exactly what you think it says: Trump says he may cut U.S. income tax 'completely' because tariff revenue will be 'so large'. But does the math actually add up? According to the article, President Trump said: “Over the next couple of years, I think we’ll substantially be cutting and maybe cutting it completely, but we’ll be cutting income tax. Could be almost completely cutting it because the money we’re taking in is going to be so large.” If you stop right there, it sounds incredible. No income tax??? If you're the president and you're trying to get attention, you can easily do it by saying you're going to get rid of one of the highest, if not THE  highest annual household expense. It’s simple (to say) ... It's a bold problem to tackle... It taps directly into something lots and lots and lots of people agree on: Paying taxes sucks But income tax isn’t just some rounding error for the federal government's budget. In fact, as you can probably guess when you look at your paycheck, it’s the largest single source of revenue the federal government has. If you're an employee, they snatch that right out of your check. If you're self-employed, you're forced into the agony of writing that check yourself every few months. But can this really happen? Eh... once you slow this conversation down and actually look at the numbers, the claim starts to unravel pretty quickly. Why Income Tax Matters So Much In 2025, the federal government collected approximately $2.7 TRILLION  in individual income taxes. That represented about 50.7% of total federal receipts, which came in around $5.235 trillion. Said differently... a shit ton of money. For comparison, corporate income tax brought in roughly $452 billion and tariff revenue totaled about $195 billion, according to MoneyWise, while other sources place tariff revenue closer to $250 billion, depending on how you measure it and what’s included. Even if we use the higher number, tariffs are still a fraction of individual income tax revenue. So, when someone - I don't care if it's Donny T, Jerome Powell, or anyone else - floats the idea that tariff revenue could replace income taxes, I'm not buying it. You’re not talking about filling a small gap. You’re talking about replacing more than half of the federal government’s revenue. The Emotional Appeal of Killing Income Tax Let’s be honest... if income tax disappeared tomorrow, that would be awesome. I don't know one person who would complain, and some people have argued for decades that income tax shouldn’t even exist, that taxing labor itself is fundamentally wrong or even illegal. I’m not a lawyer. I'm not here to litigate that argument. What I am  here to do is separate what feels good from what’s actually feasible and it’s worth adding some historical context, because the way people talk about taxes today often ignores where we actually are. In fact, income taxes right now are lower than they’ve ever been in my lifetime. I’m a crisp, youthful, 34 years old, and over every single year I’ve been alive, income tax rates have trended down, not up. People constantly say taxes are going to explode in the future and I'm sure they probably they will at some point... but so far, that simply hasn’t happened. And when you zoom out even further, the highest marginal income tax rate the United States has ever had was close to 90%. As frustrating as today’s system can be, we are nowhere near that environment - again, if income tax was gone, I wouldn't complain. That context matters, because it reminds us that today’s tax system, for all its flaws, is not historically extreme. Politics Makes This Harder Than It Needs to Be Almost any conversation involving President Donald Trump immediately becomes emotionally charged. There’s a subset of people who treat everything he says as the greatest idea any president has ever had and the savior of Democracy and Western ideals. There's another subset who staunchly believe he is a fascist who wants to start a nuclear war and kill everyone for a few pennies.   There’s almost no middle ground for a lot of people. That’s a problem. Because the goal here shouldn’t be to praise or attack a politician. The goal should be to ask a very boring, very unsexy question: In reality, can this work? And yes, I use the word “reality” loosely because reality has been weird lately. A few months ago, most people would’ve laughed if you told them our Delta Force would go into Venezuela and arrest a sitting president. Yet here we are. Even though that shit happened, the math here hasn’t stopped working. What the Revenue Data Actually Shows When you look at federal revenue over time, the pattern is pretty clear. Around the year 2000, federal income tax revenue from households was about $1 trillion. It dipped during the George W. Bush years but climbed again toward the end of that period. From about 2012, when income tax revenue sat near $1.25 trillion, we’ve marched steadily upward to nearly $3 trillion by 2025. (Ignore the huge dips, I obviously missed a digit when I created the graph) That is an enormous amount of money flowing from households to the federal government every single year and this is part of why people get so angry when they hear about all the fraud happening in MN, Ohio, and other areas - "I'm paying tax for this???" - when trillions of dollars are being taken from household incomes, people should expect accountability. When they don’t see it, they get fired up. As they should. At the same time, some of that money does real things. It funds defense, infrastructure, and operations most of us never thought we’d see. There’s good and bad in all of it. Where Tariffs Actually Sit Today The current average effective tariff rate in the United States is about 2.54%. That’s a weighted average across all imported goods by country and value. That’s not nothing. But compared to individual income taxes, it’s relatively steady and relatively small. Tariff revenue has historically cruised along with gradual increases. You do see a spike in 2025, which lines up with the implementation of new tariffs across a broader range of countries. Even with that spike, tariffs remain nowhere close to income tax revenue. What Would It Take to Replace Income Tax? The US ranked 28th in math of 37 member countries in 2022. This is why we need to boost those numbers up. Those are rookie numbers. So, let's take this step by step... Let’s assume, just for a moment, that we want to replace 50%  of individual income tax revenue with tariffs. That would require about $1.2 trillion  in tariff revenue. To do that, the effective average tariff rate would need to rise from 2.54%  to roughly 36.3% . If we wanted to replace 75% , the target jumps to nearly $1.8 trillion, requiring an effective tariff rate of about 54.5% . To replace 100% , roughly $2.4 trillion , the effective tariff rate would need to be around 72.7% . That’s already a massive leap from where we are today. The Static World Assumption Is Fantasy Those numbers assume a static world where other countries don’t change behavior at all. That’s not how trade works. Countries respond to incentives. They'll retaliate to punishment by reducing exports. They'll seek alternative markets. Sometimes they do it for cost reasons but sometimes they'll do it out of spite. So, let’s factor that in. Low Responsiveness If countries modestly reduce exports, replacing 50% of income tax revenue would require an effective tariff rate closer to 43.5%  instead of 36.3%. Replacing 75% would push rates above 70% , and replacing all of it would require tariff rates exceeding 100% . Proportional Response If reductions in imports roughly track increases in tariffs, replacing 50% of income tax revenue would require tariffs around 57.1% . Replacing 75% pushes rates near 120% and replacing 100% approaches 265% . High Responsiveness If countries overreact by 50% proportionate and aggressively reduce imports, even replacing 50% of income tax revenue would require tariff rates north of 100% . Trying to replace 75%+ of the income tax revenue with tariff revenue, we get the "fun" stuff: Trade collapses Prices rise Supply chains fracture Consumers, not foreign governments, absorb the cost Why This Is Political Messaging, Not Policy When I hear claims that tariff revenue could eliminate income taxes, I don’t hear a serious fiscal plan. I hear political messaging meant to energize a base and/or bring in people on the fence by attacking a topic that is hopefully less popular than the politician mentioning it. I don’t think President Trump genuinely believes income tax is going away. I think he understands how energizing that idea is for his base and Republicans know it plays well. That doesn’t make it evil. It's just politics. And this isn’t meant to be a shot at Republicans. I don’t think Trump is governing meaningfully better or worse than other presidents regardless of whether or not I agree with his policies or actions. Same goes for President Biden before him or President Obama before him. I think Trump is funnier but he’s also far more worried about his own image and that's annoying - like adding his name to the Kennedy Center and his face to the National Parks pass. Biden was calmer, but there wasn't much about is administration that carried real credibility. Again, the math is still the math. The Bigger Takeaway Audacious political claims deserve skepticism, regardless of who makes them and eliminating income tax via tariffs isn’t impossible because we lack imagination. It’s impossible because the numbers simply don’t work. That doesn’t mean tariffs don’t matter because they certainly do. It also certainly doesn’t mean I'm a fan of income tax or think it's perfect as it is... because it isn’t. It just means that when politicians promise something that sounds incredible, it’s worth slowing down, grounding the conversation, and asking whether the math actually adds up. In this case, the math doesn't add up, I don't see a scenario where income tax goes away, and... I hope I'm wrong. Jose Alvarez, CFP ® , MBA Financial Advisor Founder Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. This blog should not be interpreted as a full analysis of any particular subject including the subject discussed. Images included in this blog may be created by artificial intelligence. If so, resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! With how long the internet has been around, you'd think all of the finance questions one could ask would have already been asked. While that might be pretty close true, it's always easier to ask and answer again than it is to search through the endless maze of information. Working with business owners is something I really enjoy... because I am one myself. I know how it feels to make the decisions and have the weight of the outcomes on your shoulders. So, when business owners ask me questions, even if it seems like a basic question... As the saying goes: I've heard this question 100x... but it's the first time you've asked it. The question I found for this topic was simple: A small business owner laid out a few high-level numbers for a home services business that focuses on HVAC and electrical. The business has roughly $2.5 million in revenue, about $600,000 of EBITDA, he pays himself $500,000 of income and he wondered what a business like that might be worth since he's burnt out and ready to sell. There wasn’t a lot of detail, and that’s okay. When I weigh in on these social media questions, I don't do so in a way that's intended to be personalized advice. I do this to express how I think about things and the stuff I look at when I make decisions and recommendations for my clients, not what people I have never even spoken to should do. So, let’s talk about it that way. Start with the Type of Business, Not the Multiple Before I even look at the numbers, I want to understand what kind of business we’re talking about. Industry Ownership Services/Products Sold Niches or Specializations Knowing the type of business that we're working on sets the stage for how we might approach the valuation, the sale, or the transition to the owner's next generation - whatever goal they had in mind. In the case of this person on Reddit, it appears to be a small, service-based business - a home services business that focuses on HVAC and electrical and, likely, is single-owner/operator due to the level of income they say they produce for their take-home pay. Why does that matter? Because service businesses, whether they’re home services, professional services, or specialty trades, tend to derive most of their value from earnings, not physical assets like equipment or machinery. Yes, there may be tools. Yes, there might be vehicles. There could even be some inventory sitting around but for most small service businesses, especially those run by an owner, possibly with a small team, the income statement is where the real value is, not what's shown in the balance sheet (although that can matter, too). Why the EBITDA Number Jumps Out On the surface, $600,000 of EBITDA on $2.5 million of revenue isn’t bad. But, for me, it does raise questions about how the business is being run and the decisions being made. In many service-based businesses, margins can be higher when pricing is tight, labor is efficient, and overhead is controlled. When EBITDA feels compressed, it’s often not because the business is broken... it's usually because the business hasn’t been normalized. That’s an important difference. Let's break down a list of some of the most common items that throw off what might be an expected EBITDA: Owner compensation being way above industry norms - at $500,000 this post explained, I'd say that's pretty well above industry norms by like... $200,000 for this type of business with revenues under $4M. Discretionary expenses that don't fit typical expenses for the size, structure, or specialization of the business Personal spending running through the business instead of being paid the owner So, what might this look like? Let's keep it basic and consider just a multiple of EBITDA. This first table assumes no adjustments. This was a quick sale intended to let the owner move on with their life: Metric Amount Revenue $2,500,000 Reported EBITDA $600,000 Multiple 4x Enterprise Value $2,400,000 For this next table, let's assume the owner did a little bit of cleaning up before the sale so we were able to make some adjustments to the EBITDA. If we assume $200,000 of addbacks for excess owner's compensation, $45,000 for auto/travel expenses, plus a $15,000 one-time legal expense, suddenly we have an $860,000 adjusted EBITDA. Here's what that looks like: Metric Value Revenue $2,500,000 Reported EBITDA $600,000 Addbacks +$260,000 Adjusted EBITDA $860,000 Multiple 4x Enterprise Value $3,440,000 That's a $1 million dollar difference on $260,000 worth of addbacks discovered. As we can see, taking some time to plan this out and really dive into the numbers can have a dramatic impact on the outcome. Sure, this business owner may have wanted a quick sale but, if shown the impact this decision may have on the outcome, would they still make that choice? Maybe... depending on the reason for the exit. Still, these numbers and adjustments carry weight. Not only do these expenses all reduce reported EBITDA, but they may also not be reported correctly for tax purposes. For example, if you buy a vehicle for the business but you use it for personal reasons, the mileage for both must be tracked independently. If you buy a personal vehicle but pay directly from the business, it looks like a deductible business expense rather than a personal vehicle. Buyers expect this to some degree... they'll know that small business owners tend to comingle assets, income, and expenses (the IRS knows it, too), but they don’t ignore it. They require it to be identified, documented, and adjusted. Which leads directly into the first real decision a business owner has to make. Are You Exiting Quickly, or are You Exiting Strategically? This is where most conversations about selling a business go into fairytale-land for small business owners. The best way to sell is both fast and have the absolutely perfect buyer fit... obviously... but I don't live in a unicorn fantasy land where we can rely on that outcome for most people. A quick exit and a strategic exit are two very different paths. A quick exit prioritizes speed and certainty. You accept the business largely as-is, you probably don’t invest much time cleaning things up or making them buyer-ready, and you understand that you may be leaving some value on the table. In these cases, the exit is the most important thing and we're willing to sacrifice some value for the quick and easy transition. Nothing wrong with that... we just have to know what sport we're playing here. A strategic exit is different. It assumes you’re willing to make changes before selling - we're looking to improve the business in a material way that can show potential suitors that we're serious about this business and what to exchange value that goes beyond what the line items in the Financial Statements say. That might mean formalizing processes, cleaning up expenses, tightening documentation, and/or making sure licenses and compliance items are clean and current. It also means being thoughtful about buyers. Not every buyer wants the same thing. Some buyers want the entire operation. Others only want pieces of it. If a buyer’s plan involves cutting out a core function that actually drives earnings, that misalignment can hurt value, even if the headline number looks attractive. Once you know how you want to exit, the next question becomes unavoidable. Are You Doing This by Yourself, or are You Building a Team? For a business likely selling under $5 million, the team doesn’t need to be huge but going about it alone typically isn't the best option. Why? Who knows the business better than the owner? Simple... because the owner knows the business... the CPA knows the tax impact and ideas on how to optimize it pre- and post-sale; the attorney knows how to advise on the best sale method like stock or asset and possibly negotiate on your behalf; and your wealth manager knows how all of these pieces fit together to help keep your money bringing life-long value after the sale. So, at a minimum, this is what I like to see: A strong CPA who works with business owners An M&A attorney A financial planner that understands how to help you maximize your life after you've moved on Selling a business isn’t just about price. It’s about structure, timing, taxes, and what comes next. Valuation is Rarely “2x or 3x EBITDA” One of the most common misconceptions I see is the idea that businesses sell for a flat multiple of earnings. Sometimes they do... but often they don't and if you go this route, likely you're looking for the quick exit we talked about earlier and chances are high you're leaving value on the table. Multiples depend on industry, buyer intent, size, growth trends, customer concentration, owner dependence, seller negotiables, and how transferable the business actually is. They also depend on whether assets materially contribute to earnings or simply support operations. For example, in the RIA world, it's not uncommon for an advisory practice with no formal structures, teams, or growth plans in place that are nearly entirely dependent on the founder to sell for 3x-4x multiples of earnings. But when we account for private equity sales, earn-out clauses, fit with the buying firm, bonuses, etc., those multiples can be 10x-15x. In this situation, if your assumption was 3x-4x so you accepted it when you could have gotten 7x-8x (with some strings attached), you might kick yourself for that later. And then there’s adjusted EBITDA. Cleaning Up Commingled Expenses Can Change the Story Small business owners commingle expenses all the time . Business vehicles used personally... personal vehicles paid through the business... discretionary travel... family members questionably on payroll. None of this is unusual; in fact, it's so commonplace that suitors expect that, to some degree, adjustments will need to be made - keep in mind that it that's doesn't mean it's always okay or on the up-and-up with the IRS. But when it comes to preparing for the sale, it does distort the numbers in a not-in-your-favor kind of way by reducing EBITDA. Even though this may be happening, it should be found, documented, labeled clearly, and then added back in to arrive at Adjusted EBITDA. You may have made some "financially creative" decisions with the business, but the goal isn’t to hide that. The goal is to normalize it so a buyer can see what the business would produce if it were run cleanly. That adjustment alone can materially change perceived value. Historical Financials Need Context, especially post-COVID Buyers often want three to five years of financials for their due diligence prior to making an offer or accepting your valuation. That sounds reasonable until you remember how distorted the last several years have been. COVID suppressed earnings for some businesses and inflated them for others. Government programs might have thrown you way off positively and possibly helped financially weak business continue to survive. Ultimately, 2020 to 2023 may have caused some years to look artificially strong while others look unfairly weak. We need to account for that, and we need to frame the valuation around these facts for a suitor. Caveat, we're coming out of this distortion so weak businesses that were propped up by government programs are running out of time to use that excuse. Understanding those patterns, and explaining them clearly, is critical. Raw numbers without context rarely tell the full story and can, again, work against you. From There, Process Takes Over Once value is understood, the rest becomes procedural. Were you approached by a buyer, or are you going to market intentionally? Are you targeting a specific type of buyer, or opening it up more broadly? Are you prepared for a letter of intent, exclusivity, and negotiation? None of this is mysterious, but it is sequential and can cause some anxiety, impatience, and fear. Skipping steps or rushing decisions usually costs leverage. The Bigger Takeaway Questions like the one I saw on Reddit are good questions. Everyone's exit process is different and asking the question can bring new and different ideas. Valuing a small business isn’t about guessing a multiple. It’s about understanding how earnings are generated, how clean the numbers are, how transferable the operation is, and how intentional the exit plan has been. The owners who get the best outcomes don’t stumble into a sale. They prepare for one. A good rule of thumb is: Along your timeline, consider at what point you're about 5 years or so out from what you might call your "retirement" or, simply, your transition to the next season of life. This time period opens the door to a lot of options for transitioning out, someone transitioning in, and financial strategies that can help the exit be tax efficient, easier, and more easily digestible on the backend. Time buys us confidence. If you’re reading this because you’re thinking about selling your business, expanding it, or even just trying to understand what it’s actually worth, this is usually the point where an outside perspective helps. Not to rush a decision, but to make sure the decisions you are  making line up with where you want to go. These transitions don’t happen overnight, and the earlier you start thinking through the numbers, the structure, and the strategy, the more options you tend to have. If you want to talk through what a sale, an expansion, or even a “not yet, but someday” plan might look like for your business, feel free to reach out. I'd love to have a conversation about you, your business, your family, and your future. Jose Alvarez, CFP ® , MBA Financial Advisor Founder Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. This blog should not be interpreted as a full analysis of any particular subject including the subject discussed. Images included in this blog may be created by artificial intelligence. If so, resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! Alright, here's a question someone brought up: "Why not just buy an annuity?" On the surface, it sounds reasonable. Maybe even smart. This person who asked assumed a couple of things that you've probably heard before: You retire with $1 million If you're invested in "the market," the so-called 4% rule says you can safely pull $40,000 a year Meanwhile, an annuity shows up promising $60,000 a year For life Guaranteed No market risk No stress about running out of money That feels like a no-brainer. Add a life insurance policy to protect your heirs if you die early, and suddenly it sounds like you’ve cracked the retirement code. So why isn’t everyone doing this? Short answer: because the assumptions underneath that logic don’t hold up nearly as well as they sound, and the costs, both financial and personal, are way higher than most people realize. I’ll say this upfront, and I won’t dance around it. I hate annuities for most people. Not because they’re always evil, not because annuities themselves are bad. I can compare them to poison ivy. The plant sitting there by itself isn't doing anything wrong but if you're allergic to it, simply touching it can cause major irritation. In fact, poison ivy can sometimes be used for medicinal purposes to help heal joint pain or certain skin conditions This is how I view annuities. Because they’re usually sold for a nice paycheck to the advisor, not chosen by the client. And they’re sold in ways that prey on fear, complexity, and misunderstanding. The Guarantee Feels Good, but Guarantees Aren’t Free Nobody likes uncertainty, especially when retirement income is on the line. Markets go up, markets go down, headlines scream recession, inflation, crashes, bubbles, and chaos. Then someone shows up with a glowing white aura like they descended from the heavens with an annuity in their pocket and says, "I guarantee you'll never have to worry about this again." As a financial planner that doesn't sell annuities, it's an uphill battle with these people because I don't provide guarantees. Annuities feel safe because they replace uncertainty with certainty. You give the insurance company a pile of money, and they promise to send you a check every month for the rest of your life. No volatility. No decisions. No stress. But what's more lightly covered? How f****ng expensive these things can be, surrender charges, and the impact of an early death on your family. The Compensation Problem These Advisors Avoid Because the folks who sell these things usually don't, let's address the elephant in the room. Annuities are heavily commissioned products. From what I’ve seen over the years, commissions commonly run anywhere from about 5% to 7% of the amount invested. So, if someone rolls $1 million into an annuity, the gross commission might be $55,000 (assuming a 5.5% commission which is not uncommon). Now, the advisor or insurance agent may not personally keep all of that. Their firm takes a cut. A broker-dealer may take a cut. Let’s say they net 40%. That’s $22,000   paid to the person who sold the product, on a single transaction. Do that repeatedly, and annuities become a very lucrative business. What sells the best? Fear and sex. Annuity salesmen might not be able to sell sex, but they'll sell the hell out of market fear which coincidentally lands that annuity they had in their pocket right on the desk. So... this raises an uncomfortable question: Are annuities recommended because they’re the best solution, or because they’re the most profitable solution? In my experience, it’s usually the latter. “Just Buy Life Insurance to Fix the Downside” This sounds good but breaks down fast. The question made a clever point. If the major downside of an annuity is that you die early and the insurance company keeps the remaining value, why not buy life insurance to replace that lost money for your heirs? Sure... on paper. First, the benefit of life insurance doesn’t go to the person funding it. It goes to heirs. That doesn’t help the retiree who might need liquidity, flexibility, or access to their money while they’re alive... because they're alive and absolutely anything can happen. Murphy's Law: anything that can go wrong will go wrong Second, once you annuitize an annuity, you give up control. You can’t unwind it. You can’t change your mind. You can’t tap extra funds if life throws a curveball. You’ve traded autonomy for a paycheck. Third, this strategy assumes people are comfortable planning simultaneously for dying early and living a very long life. That’s one of the hardest psychological hurdles in financial planning. Even with professional guidance, it’s tough. Expecting a DIY investor to nail that balance decades in advance is a fantasy. The 4% Rule is Wildly Misunderstood This is where a lot of the logic behind “annuities pay more” falls apart. Most people hear “4% rule” and assume it means you take exactly 4% forever, end of story. So, $1 million equals $40,000, and that’s all you get... that’s not what the rule was designed to do. The 4% rule was stress-tested against some of the worst financial periods in modern history. It was built to survive disasters, not average markets. By design, it’s more conservative than people actually need in most years. Using historical data, a simple 60% U.S. stock (ticker: SPY) and 40% U.S. bond portfolio (ticker: AGG), rebalanced semi-annually, tells a very different story. Over a 25-year retirement: In a median outcome, the portfolio averaged about 7.75% nominal, roughly 5% real after inflation. Taking 4% annually, the ending balance was about $2.3 million . In a poor outcome, around the 10th percentile, the ending balance was still about $1.14 million . In a strong outcome, the portfolio ended north of $4 million . Market risk isn't a casino, like many people like to think or relate. It's a necessary evil (maybe not evil, but a necessary reality) to growing and preserving wealth over time. Looking at any particular day or particular year, you'll never know what's going to happen. You won't have any guarantees. But, over time, forgoing that necessary evil can actually harm you when you need it most. Even Higher Withdrawals Can Work Let’s push it further. What if instead of 4%, you took 8% annually over the same 25-year period? In median outcomes, the retiree still ended with around $800,000. In poor outcomes, about $394,000. In strong outcomes, over $4.5 million. And the income? It started higher than the annuity payout and stayed competitive throughout the entire 25-year retirement analysis. Which brings us to an uncomfortable truth for annuities: Many portfolios can sustainably generate comparable or higher income without surrendering control, liquidity, or upside. Fees are Where Annuities Quietly Bleed Value Now let’s talk about costs, because this is where shit gets real ugly, real fast. A fee-only advisor charging 1% on a $1 million portfolio costs $10,000 in year one. Over ten years, assuming growth, total fees might land around $120,000 . For this fee, you often get services like: Income & Retirement Planning Investment Management Tax Planning Estate Planning Insurance Planning These are some of the most common services provided by RIAs like Harvest Horizon Wealth (shameless plug, I know). A variable annuity, on the other hand, often layers multiple fees that aren't so easy to find or understand: Mortality and expense fees Administrative fees Living rider fees Death benefit rider fees Sub-account investment fees It’s not uncommon to see total annual costs of 3% to 4% . At 3.8% annual fees (a fee level I recently came across) on a $1 million annuity, that’s $38,000 in year one alone. Over a decade, even accounting for reduced balances resulting from fees, total costs can approach $400,000 . What do you get for this fee? Generally: The annuity Complexity is a Feature, not a Bug Despite how desperately annuity salesmen try to sell these things as simple solutions to a major problem, there’s a reason annuity contracts come with 50-plus pages of descriptions and disclosures. Disclosures that investors usually don't read, the advisor typically doesn't, explain completely, and probably doesn't even understand themselves. There’s a reason you initial and sign over and over again. There’s a reason surrender charges, from my experience, can run as high as 9% if you want out early. These are complex products by design. Complexity discourages scrutiny. Complexity makes comparisons harder. Complexity makes people defer to the salesperson. And once you’re locked in or it's time for your heirs to settle the estate, good luck getting a hold of the person who sold it to you. Are Annuities Ever Appropriate? Sure. Sometimes. It depends on how the rest of the portfolio is structured and individual circumstances. I guess someone could make an argument in some cases, but I find it to be a very seldomly beneficial tool. Most of the annuities I see in the wild aren’t solving nuanced problems. They get sold because it's easy, the people who sell these things are typically under the "suitability" standard instead of the "fiduciary" standard and then financial planners are tasked with unwinding these things over time... good for advisors like me, I guess... job security isn't exactly a bad thing... Why I Don’t Use Annuities Anymore Earlier in my career, I used annuities. I’ve seen them work. I’ve also seen them abused, oversold, and misunderstood. Most commonly, I seen them oversold and sold to people who truly didn't need them and then weren't contacted again for years because it's a "suitability" transaction that doesn't require the advisor to continuously service the client. As a fee-only advisor today, I don’t use them, and I don’t plan to. I believe they’re often the easy way out. A way to outsource critical thinking, reduce advisor liability and service requirements, and get a big paycheck at the same time. I probably will never stop shit talking annuities. And I don't have to. People think that because I'm a fiduciary that I have to provide anything the client wants or ride the pine on my opinions of certain products, topics, or services. That couldn't be further from the truth. I owe a duty to my clients to provide them the products and services that are in their best interest with honesty and integrity. No more, no less. If you can get past the emotional pull of guarantees, if you can accept that uncertainty is the price of growth, and if you build a disciplined, well-structured portfolio, the math overwhelmingly favors maintaining control over your money. Whether you’ve already been pitched an annuity or are currently holding annuities, if you want a second set of eyes on it, that’s a conversation worth having. Reach out, and let’s walk through your situation together so you can make a decision you actually understand and feel confident about. Jose Alvarez, CFP ® , MBA Financial Advisor Founder Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Data provided by Portfolio Visualizer. Assumptions: $1,000,000 portfolio, 4% withdrawal rate of portfolio balance at start of each year, 25-year retirement window, past 25-year performance blended by weight, returns and withdrawals gross of fees and taxes. Fees calculated based on gross portfolio balances from assumed rates of return. Data provided by Portfolio Visualizer is believed to be accurate, but HHWS accepts no liability for any inaccuracies. Past performance is not indicative of future performance. Investing carries risk including total loss of value. Images included in this blog may be created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! The Real Story: Why Cities Leave Money on the Table I’ve sat in at a number of city board meetings. They’re really fascinating if you like the slow, crushing boredom of local politics, formalities, and finance talk. If they get really exciting, they’ll talk roads, water, park, the library might be a hot topic, or maybe talk of gasp! raising taxes or issuing debt to fund a project. Those are some of the sexier municipal topics. Idle asset management? That’s probably on the less sexy side of it. It doesn’t grab the headlines and doing nothing about it won’t get anyone fired. But what can it do? It can quietly bleed community assets and dampen growth for both families and businesses. This is a safe space… we can call it what it is: Inertia… Laziness… that might be a bit harsh Discomfort... Ignorance… But, let’s be honest, there’s a lot of comfort in doing the things we’ve always done. Again, no one gets fired for leaving money in checking, right? But people will get fired for putting municipal – taxpayer – funds in a high-risk asset that loses 40% “suddenly.” So, across small and mid-sized municipalities across our great states, the money just sits… collecting dusk, withering away, emaciated, and starved of purpose while they wait to be distributed for something and, all the while, taxes continue to go up. That’s fine, for a while. But at some point, someone will look up and say, “what the hell are we doing with this money?” after 10 years of it just sitting earning 0.10% in a checking account – meanwhile, inflation has been ripping at 2.5% or 5.5% or even almost 9% in 2022. Suddenly, that “safe” pile of cash doesn’t go as far as you thought even just 5 years ago and, as municipal leaders, we’re back in front of the taxpayers telling them we need to raise their taxes again. Frankly, I think that’s a harder conversation than explaining – or having your asset management partner explain – why the funds were moved, what they’ll be doing and why, and the ultimate benefit to the taxpayer. The Human Side of Change: Council Debate, Community Pushback, and the Grit to Try Anyway   Here’s the secret we all know about change… it doesn’t always feel good, especially not right away. The first time someone suggests putting money to work, they always get “the look.” You know the look I’m talking about. Loaded with skepticism, their careers flashing before their eyes, the flashbacks of Enron or 2008 or whatever financial ghost is still rattling around in the collective memory. It takes a more forward-thinking, open-minded person to ask, “what’s the risk of doing nothing?” That question alone has the power to shift the tone and direction of the conversation in the room because the real risk isn’t in losing all of the city’s money in a pyramid scheme. The real risk is letting your city fall behind year-after-year and then pushing that burden on the taxpayers then patting yourself on the back for “playing it safe.” Here are a few success stories that every municipal leader should be aware of: Quincy, IL This town put their idle funds to work and, since reporting in 2023, was on pace to earn $2 million in investment income. That’s not just a line on spreadsheet. It’s real impact to the community by way of reduced taxes, better roads, and breathing room in the budget. Dieterich, IL A tiny town that had the vision of growing. And it did. It doubled its size by being able to build housing and community amenities that attracted new families and new businesses. Sauk Rapids, MN This Minnesota town of 13,000 residents reinvented it’s downtown, increased property values, AND kept taxes stable in the face of a significant threat from reconstruction. Town of Lee, NY Incredible, this town has been able to turn its finances around by appropriately investing and allocating funds in ways that has resulted in residents not having to pay town taxes SINCE 1981. These towns all took the leap and started taking their finances seriously and in new ways so they could plow those returns back into their communities. They watched people move back, new homes go up, and new energy pumped into dying communities. No disrespect to those who try but you simply can’t do that with grant money or bake sales. It’s not just about numbers. It’s about the message you send to your residents, voters, taxpayers. It’s about telling them that you’re putting every damn dollar you take from them to work. What Stewardship Looks Like: Policy, Oversight, and the Art of Not Screwing Up I don’t want anyone in municipal leadership to be confused by what I’m saying. I’m not telling anyone to hand over the taxpayer wallet to Wall Street. What I’m saying is that you should have a plan. Have a Fully Developed Investment Policy Statement I’ve met with a number of municipalities who either don’t have an IPS or have only a shell because they’ve never needed it given that their funds are primarily sitting in checking. But the meat of these is this: Safety, liquidity, yield. In that order. Always. Hire a Fiduciary Asset Manager Not all financial advisors and companies are built the same. RIAs – registered investment advisors – are advisory companies that can be either registered with their state or federally registered with the SEC. These companies are fiduciary-only and fee-only. This means they don’t sell investments for a commission (sales charges). They charge on-going asset management and advisory fee that isn’t tied to the specific investments provided because they don’t sell investments. They provide them as a result of the clients’ need. While some broker-dealer affiliated companies will have a fiduciary component, they are not fiduciary- and fee-only, as is required for RIAs. Hire an Asset Manager That Knows Municipal Needs There’s a lot of reading, understanding, conversation, and experience required for an advisor to service municipal clients. Many financial advisors don’t want to do that. They don’t want to take on the burden of understanding the State’s requirements to service municipal tax dollars. Just because all advisors can provide investments, it doesn’t mean all advisors should  – this is especially important when it comes to municipalities. Again, not all advisors and companies are built the same. Most importantly, don’t get cute with it. If it sounds too good or feels too good to be true, it likely is. If you stick with what your state allows and if your advisor understands what your state allows and can explain it in plain English, then you can have more confidence in the process. Ultimately, you don’t need to chase every basis point of yield you can possibly get. You just need to make sure your city isn’t getting left behind while others are moving forward all because the checking account was the safest. Bottom Line: Don’t Let Fear or Habit Run the Show Markets will wobble. Some monthly statements will be up, and some will be down. Somebody will question your decision. Headlines might make you question your own decision. That’s life and leadership – especially change leadership. Municipal investing isn’t about being a hero, rather, it’s about being responsible, being a steward, being a caretaker. This means being willing to act on answer, even if it’s uncomfortable or a little scary. So, next time someone says, “that’s just the way we’ve always done it,” for the love of your city, don’t let that be the end of the conversation. Your city might actually thank you for it… instead of just yelling at you at townhall meetings for proposing another tax increase. That’s how you move a city forward. Jose Alvarez, CFP ® , MBA Financial Advisor Founder Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! The First Quiet That Makes Space for Better Choices When an inheritance lands, it never feels like a win. It feels complicated, heavy, and personal. I’ve sat with a lot of people in that moment, and the same two forces show up every time. Grief wants time. Responsibility wants decisions. Those two don’t line up on their own. The best way I’ve seen to start is simple: create a little quiet. Move the money to a safe, boring place. Gather the paperwork. Let the house breathe again. You don’t need a perfect plan inside a week. You need room to think without feeling like you’re going to break something. This is what I would consider:  I’d park the funds in a clearly labeled high-yield savings account while the estate details settle and emotions cool. Not as a strategy, just as a holding pattern that keeps options open. Someone else may prefer a different landing spot or a different timeline, which is completely reasonable. One Sentence Before Any Spreadsheets Have a purpose before making a plan. A lot of times this starts with writing down a simple statement to set the intentionality. It doesn't have to be fancy. It just says what the gift is for in your life. Short enough to read out loud. Honest enough to hold up when headlines get loud or nerves flare. When that sentence exists, choices get easier. You can stack decisions against it and tell whether they belong. This is what I would consider:  I’d write one sentence with my spouse, read it out loud, and put it somewhere we’ll see it. If it feels off after a week, I’d rewrite it. The goal isn’t poetry. It’s alignment. Define “Waste” so Drift Doesn’t Decide for You Everyone says the same thing: “I don’t want to waste it.” Fair. The problem is that waste usually isn’t one big splashy purchase. Waste is drift . It’s the quiet creep of subscriptions, upgrades, and impulse choices that don’t match your purpose, but keep charging your card anyway. So, I'd write down a matched pair: what counts as waste for this house and what counts as value. Waste might be stress-creating recurring costs, scattered projects that don’t make life better, or confusion that makes you avoid looking at accounts. Value might be a calmer month, fewer moving parts, long-term options that keep doors open, or a couple of intentional experiences you’ll still talk about later. With those definitions on paper, you’re not guessing afterward. You’re deciding beforehand. This is what I would consider:  I’d keep two short lists for the first year, “What counts as waste to us,” and “What counts as value to us,” and I’d revisit them each quarter. Your lists might look different. That’s the point. Buckets Beat Micromanaging When Life is Full I don’t start with a line-by-line budget when someone’s grieving. I like to start with buckets. Four of them. Buckets show tradeoffs without demanding precision you don’t have yet. Safety Cash that keeps the household steady when the furnace dies, the car needs work, or a job changes. Simplicity Moves that lower mental load, cut clutter, and make the month predictable. Long-term growth Money set aside for future goals, invested in ways that fit your temperament and account options. Life and legacy Purchases or experiences that honor the person you lost and actually improve daily life. I’m not putting percentages on anyone. I’m giving a way to sort choices, so the conversation calms down. If your purpose is your compass, these buckets can be your map. This is what I would consider:  I’d sketch rough ranges for the buckets, live with them, then adjust. Someone else may want tighter ranges, different buckets, or a different order. The framework should serve you, not trap you. Form Isn’t Purpose and That Distinction Helps A pattern I see a lot: people want to keep the money in the exact form their parent used. If Dad loved cash, cash feels sacred. If Mom held certain securities, those tickers feel untouchable. I respect the feeling. I just separate form from purpose. What value did your parent care about. Safety. Independence. Opportunity. Generosity. Once you name that value, you can honor it without treating the specific asset like a museum piece. Purpose endures. Form can change. This is what I would consider:  I’d write a single line that names the value I believe my loved one cared about, and I’d judge future moves by that value rather than by the asset’s original shape. Your read may be different, and that’s okay. Wisconsin’s Backdrop: Titling, Commingling, and Clean Records It might not be the sexy side of money but the legal backdrop matters. Wisconsin is a marital property state. A lot of what’s acquired during marriage is shared but there are meaningful exceptions that many people aren't aware of: Inheritances Gifts Insurance Proceeds These may be treated as individual property when they aren’t commingled. Titling, recordkeeping, and beneficiary designations do a lot of work in the background, especially during stressful moments when clarity is priceless. Couples sometimes turn this into a trust test. It doesn’t have to be that. Clean lines can honor the decedent’s intent, reduce confusion later, and lower resentment. Documentation is part of stewardship, not a judgment on the marriage. This is what I would consider:  I’d keep inherited funds in an individually titled account while we’re making decisions, keep clean records of where money came from and where it went, and confirm beneficiaries on all relevant accounts. I’d also talk with a Wisconsin attorney to understand how the marital property rules, titling, and any agreements fit our facts. Account Types, Taxes, and the Power of a Simple Folder Not every inheritance is plain cash. Sometimes it’s a retirement account with distribution rules and sometimes assets were sold in the estate and basis was reset - those details matter later. The calendar matters too. A little organization early saves a lot of stress later. I’m not asking anyone to live in spreadsheets. I’m saying a simple setup pays for itself. One page that lists institutions, account types, and key contacts. A folder with statements and letters you might need at tax time. A couple of reminders on the calendar to follow through. This is what I would consider:  I’d build a one-pager, keep copies of core documents, and schedule a short meeting with a tax professional to confirm what’s taxable and when. You might already have this dialed in. Great. The goal is clarity. Simplicity Gives Your Attention Back to Your Life Over the last few years, I’ve doubled down on this: Simplicity isn’t about being trendy or minimal. It’s about attention. The more accounts, statements, and small decisions in your month, the less attention you have for work, health, and relationships. When the money side is simpler and more predictable, you get that attention back. You’ll feel it in little ways that will carry fewer surprises and open you day - and your life - more. Shorter bill-pay sessions. Less doom-scrolling your balances when markets wobble. The financial side of your life stops shouting for daily reassurance. This is what I would consider:  I’d mark any account, subscription, or balance that doesn’t earn its keep in clarity or value, then decide whether to keep it or consolidate. Your tolerance for moving parts may be higher. That’s fine. The test is attention, not aesthetics. Investment Structure Without Product Picks or Heroics People ask for the “best” portfolio after an inheritance. I get why people ask the question but, frankly, it's meaningless. The honest answer is everyone's favorite answer of... it depends! It depends on your goals, timelines, taxes, and temperament. Some folks prefer broad, low-cost diversification because it’s easy to live with when life is full. Others prefer more active or values-based approaches because that fits how they see the world. Either way, the trait that matters most is staying power. If the design doesn’t match your nerves, it won’t hold and it won't matter. This is what I would consider:  I’d pick an allocation that fits temperament, automate contributions where possible, and set one standing annual review to rebalance and reflect. Someone else may take a very different path and be well served by it. Consistency is the common thread. What the first Year Can Feel Like When It Works By the end of the first year, the healthiest stories share the same feel. Accounts are cleanly labeled, life feels calmer, and your purpose still fits. The inheritance has turned into cushions, habits, and a couple of planned memories you’ll actually smile about later. The money didn’t vanish into drift, and it didn’t get stuck in amber. It started serving your life. You don’t “win” this by being clever but, rather, you "win" it by being steady, being resilient, and being committed. The hard part is early, when everything feels fragile. Once your purpose and buckets exist, the whole thing quiets down. The gift starts working for you, not running you. This is what I would consider:  I’d set one recurring “Money Day” each year. Read your purpose. Check beneficiaries. Rebalance if needed. Decide whether the buckets still match the life we’re actually living. Someone else may prefer quarterly touchpoints. Pick the rhythm you’ll keep. The Big Idea, Kept Simple An inheritance is part love letter, part responsibility. It doesn’t demand speed, and it doesn’t reward bravado. It rewards attention, clarity, and consistency. A short mission, a few simple buckets, and a pace that fits your temperament can turn a hard season into a sturdier future. That’s not a recommendation. That’s what I’ve seen work, and that’s what I’d consider if it were my call to make. Jose Alvarez, CFP ® , MBA Financial Advisor Founder Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! What Should You Do with an IRA You Do Not Need? You worked hard, you saved faithfully, and now your pension and Social Security cover your lifestyle. The IRA sits there, rising and falling with the market, but not really providing any real value to your life. Is doing nothing the best move? Sometimes it can be fine but, often, it's not the most purposeful choice. What I would consider is simple: give that account a role that reflects your values, your family priorities, and your goals for the years you care most about. Why This Feels Hard for Smart Savers Most retirees spent decades cutting away parts of their income and devoting it to saving and investing. Shifting to a season of drawing from savings and investments can feel wrong. It can feel like a violation of what you've accumulated over your lifetime... it can even feel like failure. That's bullshit... I don't see it that way. The point of saving was always freedom, options, and impact. Letting an account sit untouched forever can be a choice, but it can also be inertia in disguise. What I would consider is replacing the fear of spending down with a plan for using well. Using well is not waste, in fact, planning for intentionally using well is called alignment. Begin With Some Grounding Questions Before tactics, I think we all need to consider three basic questions: What would make the next five to ten years meaningfully better for you and your family What do you want the money to accomplish after you are gone What would bring your life more meaning - using it with alignment or letting it continue to accumulate? Real answers, not perfect answers, will sort your IRA into buckets of purpose. Some of that purpose may be enjoyment, some may be family support, some may be generosity, or some may be legacy design. Once those buckets exist, the account is no longer just a number on a page. Instead, it becomes an engine that funds a life you'll recognize when looking at pictures, a life you'll be proud of, and create family memories that no one can ever take away. Joy Today, On Purpose If travel lights you up, focus on the parts that change the experience. A seat that lets you arrive rested. A room that gives you quiet and a view you will still talk about next year. One dinner, one show, or one excursion that turns a good trip into a favorite memory. If the outdoors is your lane, choose gear that gets used. A road bike that fits your body. A kayak that tracks well and keeps you on the water. Garden tools that make time outside feel like therapy, not work. The goal is not to buy toys that gather dust but, rather, to fund memories and energy. Start small so you can measure how it feels to spend that money. If a small upgrade added real value, repeat it with confidence. If it felt like fluff, skip it and redirect the dollars to a different purpose. Spending money can be a trial-and-error process that can lead to immeasurable value later. A Living Inheritance You Can See Many parents and grandparents prefer to help while they can witness the impact. I would consider small, steady gifts tied to real needs. Clearing a lingering high interest balance your adult child cannot seem to kill gives them oxygen and momentum Seeding a 529 for a grandchild and making the contribution part of a birthday tradition builds a story that the child will remember Covering a critical home repair reduces stress without undermining responsibility Funding a certification or licensure that boosts a career can change a decade The dollar amounts can be modest. The relief can be huge. The point is not to rescue capable adults from every hard thing. The point is to turn money into momentum and to do it in a way that respects work and accountability. If you pursue this path, document gifts cleanly, keep the pattern consistent, and set expectations early. Boundaries and generosity can live together. Charitable Impact That Is Simple to Run If generosity is central to your values, build a habit instead of writing a once in a decade check. Choose a short list of organizations that match your convictions. Set a yearly target and automate support so the habit does the heavy lifting. Share the "why" with your family and invite them into the story. Decide in advance what success looks like. You might want to see a certain number of local students attend a camp each summer, or a food pantry that never has to turn a family away, or a sanctuary that expands its work by one more acre each year. When you can see outcomes, you stay engaged, and the giving feels less like paperwork and more like purpose. If you like to roll up your sleeves, add a volunteer day each quarter. Money plus time is a powerful mix that builds meaning beyond the transfer itself. Future Flexibility and Clean Estate Design If you truly do not need the IRA for lifestyle, consider moves that simplify tomorrow. Review primary and contingent beneficiaries so the right people and charities inherit the right accounts. If you hold multiple accounts, decide which ones are best suited for heirs with different needs. Some heirs may need structure. Some may need flexibility. You can plan for both. In years when your income is lower, consider measured conversions to a Roth account. The goal is not to chase a perfect tax win. The goal is to reduce future tax friction, diversify your tax buckets, and give heirs cleaner options. Keep the steps moderate and matched to your broader plan, not one-off stunts that create surprise bills. Future you will appreciate the simplicity. Your executor will, too. Guardrails That Make This Comfortable A plan beats vibes. Create simple guardrails that keep the approach comfortable and repeatable. Set a legacy target for heirs or charities that feels right for your values and your balance sheet. Set a yearly budget for joy and giving that will be funded by the IRA. Make the budget real rather than aspirational so you can stick to it during quiet markets and noisy markets. Automate monthly or quarterly transfers from the IRA into a separate spending account that exists for these purposes only. Automation eliminates second guessing and reduces the chance that good ideas die in the inbox. Review once a year to confirm that spending stayed inside the lines, that gifts landed well, and that the legacy target still fits. Adjust for markets, health, and priorities. With guardrails in place, you can enjoy the money without guilt, and you will also know when to tap the brakes because the plan will tell you. Keeping Taxes Human Without Letting Taxes Be the Boss I have never seen a family regret matching withdrawals to goals. I have seen families regret letting the calendar dictate every decision. Coordinate gifts, charitable giving, and any conversions with your tax bracket and Medicare thresholds. Align timing so support arrives when it helps most. Stage family gifts so they build habits, not dependency. Fit any conversion into a year when the impact is manageable. Keep an eye on brackets and state rules, but do not let the tax tail wag the dog. The aim is fewer surprises and more control, not a gold star for squeezing every last dollar from the code. Clean execution with clear intent usually beats a complex maneuver that nobody wants to repeat. Required Minimums Still Matter Even if you do not need the cash flow now, required distributions will begin in your early seventies. Plan ahead so those dollars do not show up as an afterthought. Tie them to your purpose buckets in advance. Use them to fund the joy and giving budget. Use them to support a living inheritance rhythm. Use them to meet charitable goals in a way that feels clean and consistent. When distributions are part of the script, they stop feeling like a nuisance and start feeling like another tool that pushes your plan forward. If You Still Feel Stuck, Try a Pilot Some clients still feel a mental block even with buckets and guardrails. In that case, run a pilot. Move a modest amount from the IRA into checking this quarter and give the dollars a single job. Book a better flight that lets you arrive without back pain. Host a weekend with the grandkids and cover the fun. Make a donation that buys something tangible your favorite nonprofit can point to with pride. Afterward, ask a simple question. Did that feel like waste, or did that feel like life. Your honest answer will point the way. If it felt like life, keep the pilot running for another quarter and then formalize it in next year’s plan. If it felt flat, redirect to a different bucket and test again until you find the mix that fits who you are. When Leaving It Alone Is the True Goal Some readers decide that they truly want the account untouched for life. That is a valid choice. If that is your goal, still be intentional. Confirm beneficiaries and contingents Keep records tidy and stored in a place a trusted person can access Make sure someone knows where the accounts are and how to reach your advisor Consider a short letter of wishes that gives heirs context for the gift, along with encouragement and any practical guidance you want to pass along. When you choose purposefully to preserve, you remove the quiet doubt that can creep in later. Common Traps to Avoid Do not turn every decision into a tax contest that drains your energy. Wise planning matters, but perfectionism creates stress and often backfires. Avoid one time splurges that do not match who you are the rest of the year. It is fine to do one grand trip if it fits your story. It is better when that trip reflects what you value most. Do not rely on silent gifting that later creates resentment among family members who discover it after the fact. If fairness matters, define fairness in your family, write it down, and follow it. Do not let the market alone determine your mood. Balance matters, but purpose matters more, and purpose is under your control. Bottom Line IRAs are not trophies. They are tools. If your account is just sitting there, I would consider giving it a clear role that serves your values. Spend with intent where it adds real life. Support the people you love in ways that build momentum. Strengthen the causes you believe in with habits, not one offs. Simplify the future so heirs inherit with fewer surprises. Start small, automate where you can, review yearly, and let the plan evolve as your life evolves. The win is not a perfect spreadsheet. The win is a life that looks like you, funded by the savings you worked hard to build. Jose Alvarez, CFP ® , MBA Founding Advisor Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! This is the first post to launch something I’ve been building toward for a long time. I’m Jose Alvarez, owner of Harvest Horizon Wealth Strategies in Amery, Wisconsin. If you’ve found your way here, thank you for taking the time to learn about me, my firm, and what makes us different from the other wealth management firms in the area. My Background: From the Army to Advisory I didn’t start my career in finance. For the first ten years of my professional life, I served in the U.S. Army as a paratrooper and infantryman. I led reconnaissance operations across the world. That experience shaped who I am, but it didn’t directly translate into financial planning. After leaving the military, I pursued my MBA and entered banking in 2018. From there, I built a path into financial advising and ultimately became a CERTIFIED FINANCIAL PLANNER® professional. Over the years, I’ve seen the good and the bad in our industry. Those lessons led me to start my own firm. Why I Started Harvest Horizon Wealth I began in credit unions and banks, where the focus was often on selling mutual funds and annuities for commissions. Financial planning was rarely mentioned in my early career. Profitability tended to overshadow client outcomes. I knew I wanted something different—something client-centered, not sales-driven. Though I loved the company I worked for, it changed hands, and I had to find my own path. That’s why in March 2025, I launched Harvest Horizon Wealth Strategies as a Registered Investment Advisor (RIA) . Unlike brokerages or hybrids, we are fee-only . That means no sales charges (commissions), no product sales, and no hidden incentives. Our work is built entirely on the fiduciary standard—always acting in your best interest, without exception. What We Do (and Don’t Do) At Harvest Horizon Wealth, our work goes beyond investment management. We focus on comprehensive wealth management , which includes: Investment strategy Tax planning Estate planning Business transition strategies Family governance and wealth transfer planning What we don’t do is just as important. We don’t sell insurance or annuities. While we help you think about those needs, we don’t take commissions. Our advice remains independent and as close to conflict-free as we can get. Why This Matters Plenty of advisors use the word “ fiduciary ,” but not all are fiduciaries all the time. In many brokerage or hybrid models, fiduciary duty only applies to certain accounts or situations. With us, it’s the standard for every client relationship. Every time we make a recommendation, regardless of the situation, we adhere to this standard. That means when you work with me, conversations aren’t limited by corporate risk controls or sales quotas. We talk about taxes, estate planning, family preparedness, and business succession. Your financial life is bigger than the market’s daily performance. Who We Serve For high-net-worth families, the focus is often on tax strategy, estate design, succession, and preparing heirs. For families still building wealth, the conversations may center on automating savings, protecting income with the right insurance, and ensuring estate planning is in place to protect children. The situations differ, but the principle is the same: aligning your wealth with the life you want for yourself, your family, and your future. Looking Ahead This blog—alongside the companion YouTube channel, The Vault & Forge —is where I’ll share insights on the markets, the economy, the Fed, and even some policy developments that affect investors. Some readers will prefer to watch, others to read, but the goal is the same: keeping you informed and equipped to make better financial decisions. This is just the beginning, and I look forward to the conversations we’ll build from here. Jose Alvarez, CFP ® , MBA Founding Advisor Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! Let’s start with a familiar name: Robert Kiyosaki. Recently, Kiyosaki made another bold claim, saying a "civil war has begun" and urging Americans to put their cash into gold, silver, and Bitcoin. The problem with these “doomsday callers” is that they live on repeat. They make a dramatic call once, it gets attention, and then they spend the rest of their careers chasing that same lightning strike. The thing is... if you keep screaming about a storm coming, eventually you’ll be right. Markets are cyclical they'll ebb and flow. Good days come and are followed by bad days. But most of the time, these claims are wrong. We know that because markets, historically, have gone up about 75% of the time. At some point that won't be the case... fine... but I don't know that it'll happen any time soon. But if you ask people like this, they'll tell you it's right around the corner and I can’t help but wonder how they don’t get tired of being wrong. Five-Year and Ten-Year Performance I pulled up five-year charts for Bitcoin, Gold, Silver, and the S&P 500. Why five years? Because it was the easiest click. No cherry picking here... just good ol' fashioned laziness. Bitcoin:  up nearly 1,000% Gold:  up 75% Silver:  up 44% S&P 500:  up 82% Looking back over ten years, annualized returns stack up like this: Bitcoin:  84.5% S&P 500:  14.5% Gold:  11% Silver:  10% Those are strong numbers all around. Historically, the S&P 500 has averaged 9–10% annually over the last 60–70 years, so seeing the past decade hit 14.5% should be encouraging to investors in itself - regardless of its comparison to Bitcoin. The Missing Piece: Risk Returns only tell half the story. What really matters is the risk you take to get them. Ten-year annualized volatility: Bitcoin:  67% S&P 500:  18% Gold:  14.5% Silver:  26% For most people, it’s not realistic to master both your own profession and the nuances of investment risk analysis. It's too complicated. It's too convoluted. Frankly, it's boring a.f. to someone who might just be doing this to play around. If you're a nurse, teacher, engineer, construction worker, parent , etc... you have enough on your plate. You don't need to try to be an investment analyst, too. But for those of you who DIY investments, volatility (called standard deviation) is one of those concepts that’s critical but often overlooked. Standard Deviation in Plain English If you think back to high school statistics, you might remember the bell curve. One standard deviation (the dark blue middle of the curve) captures about 68% of outcomes. Two standard deviations (the light blue section) cover about 95% of outcomes. For the S&P 500 over the last decade (14.5% average return ± 17.7% standard deviation): One standard deviation range:  –3.2% to +32.2% Two standard deviation range:  –21% to +50% For Bitcoin (84.6% average return ± 67.1% standard deviation): One standard deviation range:  –17.5% to +151.7% Two standard deviation range:  –50% to +219% Many of the client I work with would have a hard time stomaching the volatility that comes from simply owning the S&P 500. Imagine having an investment make up the majority of your investment and carries a volatility window that is 5x that of the S&P 500... that’s a massive window. When you invest, you have to remember: It’s not just about potential upside. It’s about whether or not you can stomach the downside. Why I Don’t Own Bitcoin Here’s where I stand: I don’t own Bitcoin, and I don’t plan to. People assume non-owners fall into three camps: They’re bitter against it and everyone who's benefitted from it because they didn't invest and “missed the boat." It’s a generational divide (younger investors own it, older ones don’t) - I can agree with this stance. They don’t want to look foolish buying at $100k in 2025 when it used to be like $30k in 2019. I’m mid-30s, and I still don’t buy it. For me, the issue is intrinsic value. Bitcoin absolutely has a price , which is north of $100,000 per coin today. But price and value aren’t the same thing. I don’t believe the intrinsic value supports the price. When Bitcoin first came out, the fairytale was that it would replace global currencies. As far as I'm concerned, that was never realistic. It wasn't in 2009 and it's still not in 2025. I don't see a scenario where countries give up a major part of their sovereign strength and pride by giving up their currency for Bitcoin. Bitcoin itself doesn't have anything special. It's just the brand name of crypto. Blockchain, which Bitcoin operates on, is an immediate settlement system with very high levels of security and anonymity. Useful, sure, but not revolutionary enough to justify its current valuation. To me, at its core, Bitcoin is nothing more than a highly sophisticated payments processor. Because I believe this, I ran an exercise: if Bitcoin’s growth had mirrored other payment processors like Visa, MasterCard, PayPal, and Venmo (with a premium for sophistication), what would it be worth today? I asked ChatGPT to run the simulation and give me the potential outcomes. According to ChatGPT's simulations and given the inputs I gave it, Bitcoin should be worth about $2,400 per coin today . That’s a far cry from $100,000+ and only further solidifies why I don't own it. I don't care that people really want it... I don't believe it has the value reflected in the price. I don't feel a need to follow the herd - even if it costs me money. Final Thoughts Bitcoin has been an incredible performer in terms of returns, volatility, and even risk-adjusted measures like the Sharpe ratio. But I don’t own it because I view it as speculation, not investment. For me, the fundamentals don’t support the story. Could I be wrong? Maybe. But even if Bitcoin hits $10 million per coin, I’ll still sleep at night knowing I made my decision based on risk, value, and discipline. I don't lose sleep over not winning the Powerball drawing and I won't lose sleep over not holding Bitcoin. Jose Alvarez, CFP ® , MBA Founding Advisor Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! What Just Happened and Why It Matters A bipartisan group of 18 state attorneys general is asking a federal judge to reject Capital One’s proposed $425 million class-action settlement over allegedly shortchanging its customers. The states say existing 360 Savings customers were left at about 0.30% while new 360 Performance Savings customers saw 4%+, and that the deal would let the bank keep the unfair playbook. The settlement is structured as $300 million to class members plus $125 million in “additional interest” credits; Capital One denies wrongdoing. The AGs estimate the average loss was about $717, with typical payouts around $54, and argue the bank could retain $2.5+ billion in avoided interest. Reuters My opinion: this just reinforces - kind of publicly - what many of us already feel a lot of times... that it's profitable for mega-corporations to take advantage of customers because all they ever get is a slap on the wrist. They know the profit they'll make will outweigh the punishment the government will hand down when caught. Again... Capital One denies wrongdoing. Don’t Be Shocked... Here’s Why “Old vs New” Pricing Happens Speaking as someone who’s been on the inside: banks segment customers. Legacy products get sunset, new products launch with teaser economics, and marketing budgets flow to acquisition. Not to mention that when a bank set up these "specials," they often require you make them your primary bank - set up direct deposit, auto-pay, debit cards...etc. Is it fair? Some disagree. Is it common? Yes. And crucially, banks and credit unions are not fiduciaries to your idle cash ; they’re custodians of deposits and they optimize for their own spread - not yours. That’s not moral judgment, it’s business reality. What Savings Accounts Are (and Aren’t) Savings accounts exist to hold money safely and keep it liquid. They are not a growth engine. As of mid-September 2025, the FDIC national average savings rate is ~0.40% - a number of large banks can anchor to - while “high-yield” offers are materially higher for new money and new customers. FDIC So yes, you can earn more, if you’re willing to move. But constantly rate-chasing is a part-time job. The better fix is a cash policy. Cash Policy Example - Simple, Rules-Based Define the number. Target 3-9 months of fixed expenses - maybe more for someone within a year of retirement - plus any known lump costs due in the next year (taxes, tuition, a roof). That is your cash line. Automate the refill. Monthly or quarterly, drop cash back to target using interest, dividends, and small trims from appreciated positions. Above the line, cash is excess. Give excess a job. Stability (1–5 years): Short/intermediate, high-quality bonds, T-bills, or a ladder that matches upcoming needs. Growth (5+ years): Broad, low-cost equities and other long-horizon assets. Accept volatility, hedge with time. Use rules, not vibes. Rebalance on a schedule or with bands (for example, ±20% of target weights). Fund withdrawals from cash and Stability during equity drawdowns. Insurance > Teaser APYs When you keep meaningful balances, know which backstop you’re relying on: FDIC (banks): $250,000 per depositor, per bank, per ownership category. Joint accounts allow each co-owner a separate $250,000. IRAs are a separate category. FDIC+1 NCUA (credit unions): Mirrored limits - $250,000 per member-owner, per ownership category; joint and certain trust structures can increase coverage. NCUA+1 SIPC (brokerage): Protection if a broker fails, up to $500,000, including $250,000 cash - not protection against market losses. Many custodians carry excess SIPC on top that can cover up to hundreds of millions. SIPC Takeaway: Spread large balances thoughtfully across institutions and ownership types, and don’t confuse FDIC/NCUA with market guarantees - or SIPC with FDIC. Banks vs. Credit Unions: No Halos Credit unions market themselves as “member-owned,” and many offer great service. But in practice both banks and credit unions run the same product playbook when rates move: attractive new money offers, legacy tiers lagging. Neither structure makes an institution a fiduciary. What matters is your selection and your process. About That “Savings Rates Used to Be 11% in the 80s” Point True. Headline savings yields were double-digit in parts of the early 1980s. But so were mortgages and auto loans. Rate regimes are an ecosystem, not a gift. Comparing your 2025 savings APY to a 1981 outlier without the rest of the system (inflation, borrowing costs) misses the forest for the trees. What matters is your after-tax, after-inflation outcome across cash, bonds, and equities - organized by time horizon. Practical Workflow Example Inventory cash across banks and credit unions Map FDIC/NCUA categories and identify uninsured balances. Set the cash line Automate refills and move surplus to a T-bill ladder or high-quality bond sleeve inside the right account for taxes. Consolidate “high yield” accounts Reduce busywork while keeping rates competitive. Document a withdrawal order (taxable → tax-deferred → Roth, or a tailored version) Coordinate with required withdrawals and Social Security timing. Keep the Growth sleeve broad, low-cost, and globally diversified Rebalance on rules. Focus on being rational, not emotional Corrections and Clarifications from the Early Headlines Average loss vs. payout: The states peg the average consumer loss at ~$717, not $117. Typical payouts modeled around $54 are why they’re urging rejection. Reuters Settlement composition: The proposed $425M is $300M in cash plus $125M in additional interest credits; Capital One denies wrongdoing. Reuters Why this keeps happening: Product segmentation and acquisition economics - not a special “bank vs. credit union” moral divide - drive legacy-vs-new rate gaps. Rate backdrop today: The FDIC national average is about 0.40%, while competitive accounts still show ~4%+ despite a recent Fed cut. FDIC+1 Bottom line Don’t let outrage drive the plan. Define your cash number, place surplus with intention, protect it with the right insurance framework, and invest the rest according to time horizon. Banks and credit unions will keep optimizing for their P&L. You should optimize for your balance sheet. Jose Alvarez, CFP ® , MBA Founding Advisor Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! Why This Question Comes Up So Often I hear versions of this question all the time from folks who are working hard, building careers, and trying to make smart money decisions in real life, not in a textbook. Recently I came across a social media post were the author said they make about 78,000 dollars a year in base pay, up to 85,000 dollars with bonuses. They contribute 8 percent to their 401(k), and someone advised them to go to 10 percent. Their company matches up to 7 percent. They wondered if the extra dollars might be “better” in other investments. I get it. I have wrestled with the same trade-offs in my own life. I have set my own contributions to auto-increase over time, and I have intentionally split my savings between retirement accounts and a taxable brokerage account. I want my future to be funded, and I also want money that I can deploy for opportunities and experiences while I am still young enough to enjoy them. If you've asked yourself a similar question, you are not alone. The real issue is not 401(k) versus “other stuff.” The real issue is sequence and purpose. First, you lock in the free returns. Second, you push your savings rate higher in a way you barely notice. Third, you decide how much flexibility you need in your life and aim part of your savings at that goal. Start With the Highest-Return, Lowest-Risk Move: The Match The employer match is part of your compensation. Treat it that way, and do not leave it on the table. If your plan matches up to 7 percent, step one is to contribute at least 7 percent. I know that sounds basic, but many people miss pieces of the match because they change jobs, forget to set a percentage on day one, or let a raise come and go without adjusting their deferrals. The match is as close to a guaranteed return as you will find in personal finance. Capture every penny, every paycheck, every year. If you are already contributing 8 percent, and the match is 7 percent, you're clearing the first hurdle. Nice work. The Automation Trick That Quietly Raises Your Savings Rate Behavior beats tactics. If you automate good behavior, you'll win by default. I am a big fan of auto-escalation. At one of my past employers, the plan auto-increased contributions by 1% each year until you hit 10%. You could also set it to continue climbing beyond 105. It was incredibly effective, because a 1% change is barely noticeable in take-home pay, yet over time it adds up in a meaningful way. If you are at 8 percent today, setting your plan to increase by 1% per year could lead to some pretty dramatic benefits over time. In a few years you will be at 12%, and you will not have felt much pain getting there. I have used this approach personally, and I still use it with clients, because it respects human nature. Nobody wakes up excited to manually update payroll deferrals. Automation does it for you, quietly and consistently. What 401(k) Menus Usually Look Like, and Why That Matters Simpler menus are common. Participation and oversight drive those decisions more than anything else. Most 401(k) menus are short. You will see a handful of target date funds, a broad U.S. equity fund, an international fund, a bond fund, and a cash or money market option. Plans keep menus tight for several practical reasons. Simpler menus can lead to higher participation, lower confusion, and a cleaner fiduciary process for the plan sponsor. If too many employees disengage or fail discrimination tests, the plan risks top-heavy problems, which is a headache for the employer and, indirectly, for you. Target date funds are like one-size-fits-all shirt. They start aggressive when you are young, then they gradually get more conservative as you approach retirement. Will they work? Sure. Will they make you look good? Tough call. If a target date fund gets you invested and keeps you invested, I am okay with that. If you want more control, you can build with the core funds but as a DIY-er, it might be beneficial to keep it simple or under the advisement of your advisor. Where “Better” Might Be True: Outside Accounts and Customization Once the match is secured, extra dollars can flow to places that offer either better tax positioning or more flexibility for your life. Traditional IRA and Roth IRA If you want more investment choice than your 401(k) offers, an IRA gives you a much wider universe. You can build a low-cost, diversified portfolio with broad market funds, factor funds, sector funds, or individual stocks if you want to. The big choice here is tax treatment. Traditional IRA contributions, if deductible for you, lower your taxable income now and grow tax deferred. Roth IRA contributions are after-tax, but they grow tax free, and you do not owe tax on qualified withdrawals in retirement. Eligibility rules apply, so you need to make sure you qualify or consider legal routes like the backdoor Roth if appropriate. I like the Roth for younger savers who expect higher income later and value tax-free growth. I also like the simplicity. What you see is what you own. No future tax surprise if rates change. That said, every situation is unique, and a traditional IRA can still make sense for certain taxpayers who benefit from the deduction today. Taxable Brokerage Account If you hear me talk long enough, you will hear me say this. I love the flexibility of a taxable brokerage account. There is no early withdrawal penalty. You can invest in almost anything that fits your plan. You can harvest losses in bad markets to offset gains or income elsewhere, then reinvest and keep compounding. You do not get the clean tax treatment of a Roth, and you do have to plan around capital gains, interest, and dividends. Still, the liquidity and optionality are huge. This is the account that lets you do real life. Want to take your spouse and kids to Greece for two weeks next summer and pay cash without guilt? That can come from the brokerage account. Want seed money to start a business when the right opportunity shows up? That can come from the brokerage account. Want to help a child with a first car or an education expense without dealing with 529 restrictions? Again, brokerage. It gives you choices, and choices have value. A Simple Sequence I Like to Follow There is no perfect formula for everyone, but there is a sensible order of operations that works in most cases. Capture the full 401(k) match.  That is the floor. I don't lose free pay. Auto-escalate my 401(k) savings rate by 1 percent a year  until I've reached my long-term target - often 12 to 15 percent of gross income, including the match. Decide how much flexibility I want in my life over the next 3 to 10 years.  If the answer is “a lot,” I'll channel extra dollars into a taxable brokerage account. If I'm more focused on retirement tax planning, push extra to a Roth IRA or, if available and appropriate, a Roth 401(k) source inside my plan. If my plan offers a good Roth 401(k) and I'm in a relatively low tax bracket right now,  defer to the Roth. Once I have the retirement and brokerage pillars in place,  add in purpose-built accounts as needed - like 529 plans for education, HSA if available for triple tax advantages, or a UTMA for a minor. This is not about choosing a single best account. It is about assembling the right mix for real life, taxes, and goals. What I Do Personally I practice what I preach, and I adjust as my life changes. I run my own contributions on autopilot. For a long stretch, I had 12 percent flowing to my 401(k) from every paycheck. On top of that, a fixed monthly dollar amount went to a taxable brokerage account. My wife’s retirement account received a set contribution, and my son’s UTMA received another. When you add it all up, our household savings rate sits around 25 percent of income. The exact mix has changed over time, but the rule is the same: automate the future, then live the present with less guilt, less friction, and more intention. I like knowing the boring stuff is handled so our mortgage, car, normal bills, retirement savings, and our kid’s bucket all happen on schedule. That frees me up to spend without second guessing every coffee or lunch. I have already taken care of later, so I can enjoy now. A Word on Guilt and Spending If you automate a serious savings plan, you earn the right to spend without shame. Too many people feel bad about normal life because money advice on the internet can be loud and rigid. I am not interested in shaming anyone. If you hit your savings targets, keep your plan in balance, and avoid debt traps, go have some experiences. Take your spouse on a trip. Play golf with a friend. Bring your kids to a game. Your memories are part of your return on investment, even if a spreadsheet cannot measure them. This is where the brokerage account shines. It is the pressure valve that lets you participate in life without beating yourself up. It is not a tax shelter, but it is a freedom tool. I would rather see a client saving at a strong rate and enjoying their life than deferring everything to an unknown retirement that might not look the way they imagine. When “Other Investments” Actually Make Sense Sometimes the best move is outside the 401(k), not because the 401(k) is bad, but because your goals require flexibility or specialization. Here are a few cases where I often direct extra dollars away from the 401(k), after the match and basic targets are handled. Entrepreneurial runway.  If someone plans to start a business in the next few years, they'll likely need accessible capital. Build the brokerage balance first. Big-ticket goals inside 5 years.  House down payment, adoption costs, a sabbatical, or extended travel. The timeline is too short for retirement accounts to be useful. Specialized investment approach.  If someone wants to own individual stocks, factor tilts, or niche funds that their 401(k) does not offer, an IRA or brokerage account is the right tool. Tax bracket management.  If someone's in a lower bracket today than they expect in the future, Roth contributions can be powerful. If they sit in a high bracket right now and benefit from deductions, a traditional 401(k) or IRA may help. The point is to use the right tool for the current season of life. None of this requires turning your back on the 401(k). It requires a plan that respects both today and tomorrow. Portfolio Simplicity Beats Constant Tweaks Most of the win comes from your savings rate, your time in the market, and your fees, not from chasing the perfect mix every quarter. Inside the 401(k), a target date fund or a simple three-fund mix can help get started. In an IRA or brokerage account, you can add personalization, goals and needs-based investing, nuance if you enjoy it. I care about costs, taxes, and behavior. Costs and taxes are math. Behavior is where most plans fail. Automate the behavior, and the math has a chance to work. The Age Access Rules, Without the Jargon Penalties are real, and they can be avoided with planning. Retirement accounts are designed for retirement. In general, withdrawals before age 59.5 trigger a 10% penalty, plus taxes if the money is pre-tax. There are exceptions, especially inside 401(k)s for certain circumstances, but those are exceptions, not a plan. This is one reason I highlight the brokerage account so often. If you know there is a strong chance you will need money before age 59.5, I'd think twice before locking every dollar inside retirement accounts. Final Thoughts: “Better” Is Personal The 401(k) is not your enemy. It is a reliable workhorse. The question is how to fit it into a larger life plan. I have seen people thrive with a very straightforward approach - capture the match, automate the climb to a double-digit savings rate, then split the extra between retirement and a taxable brokerage account in a way that matches their life. When you do that, you buy two things at once. You buy future freedom, and you buy present quality of life. I care about both - for my family and my clients. If you want help dialing this in for your exact situation, that is what I do every day. We look at your income, benefits, household goals, and tax picture, then build a plan that you can stick to. The right plan is the one that you will follow, and the best time to start is now. Jose Alvarez, CFP ® , MBA Founding Advisor Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.

Follow The Vault & Forge  on Spotify for a weekly markets, economy, and life podcast! The Feel of the Fourth Quarter Every fall the rhythm changes. The federal fiscal year resets on October 1, holiday plans start swallowing weekends, and companies button up budgets. Money moves with a little more purpose. If you have watched markets for a few seasons, you can feel it before you see it. What The Tape Has Shown Since 1928, the average quarter for the S&P 500 has landed a bit above 2%, while Q4 comes in closer to 3%. Zooming in on monthly data since 1950, September is the only month with a negative average, February, June, and August are typically sleepy, and November - with December close behind - does much of the year’s heavy lifting. When We Enter Q4 Already Up There is a quirk that surprises newer investors. If the index is up 10% or more by the September 30 close, the average Q4 since 1950 has been a bit above 5%. Without that head start, the long‑run Q4 sits nearer 3%. No signal light flashes green because of this, but the wind tends to shift in your favor. Averages Hide Weather History is lumpy. The best Q4 on record, 1954, added more than 11% but the worst, 1987, took more than -23%. Those outliers live inside every long‑term average so planning only for calm seas is not a plan, it's a surefire way to be surprised every time the market dips. How I Use Seasonality (Without Trading the Calendar) I treat it as posture, not prediction. If Q4 tends to help, I want clients positioned to benefit without needing to guess the week-to-week. That means staying invested, keeping contributions on schedule, and letting written rebalance rules do the boring work when allocations drift. Taxes get the same attention - loss harvesting, charitable gifts from appreciated stock, and measured Roth conversions build quiet value that does not depend on a year‑end rally. Liquidity matters too. Adequate cash and short‑term reserves keep life from forcing sales just because headlines spike. Reality Check Averages are not outcomes. Calendar patterns can fail for long stretches. The odds of seeing  a down market rise the longer you are invested because you live through more seasons; the odds of finishing  ahead rise with time because compounding gets more swings at the ball. Both statements can be true, and both inform a patient process. Where This Leaves Us Yes, Q4 often helps. The data supports a cautiously optimistic posture, especially if the year is already positive heading into October. But the driver is still discipline - your savings rate, your mix of assets, your willingness to rebalance when it feels inconvenient, and the choice to hold enough cash so markets do not dictate your life. If you want to pressure‑test that mix before year‑end, I am here for that work. Jose Alvarez, CFP ® , MBA Founding Advisor Harvest Horizon Wealth Strategies The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.