Author: Brian Colvert

Roth Conversion Strategies: Build Wealth for Your Family, Not the IRS

Posted on by Brian Colvert

When it comes to building wealth and leaving a financial legacy, most people focus on how much they can accumulate. But what many overlook is how much of that money will actually reach their family, and how much could end up going to the IRS instead.

One of the most powerful yet underutilized strategies in estate and tax planning is Roth conversion strategies. While often discussed in the context of retirement planning, Roth conversions can play a key role in reducing the future tax burden on your heirs and maximizing the impact of the wealth you leave behind.

Today we’ll break down exactly how Roth conversions work, why they’re valuable for estate planning, and how to decide whether this strategy is right for you.

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What Is a Roth Conversion?

A Roth conversion is the process of transferring money from a traditional retirement account (like a traditional IRA or 401k) into a Roth IRA. When you make the conversion, you pay ordinary income tax on the amount you transfer, but after that, the funds grow tax-free, and withdrawals are also tax-free, assuming the account has been open for at least five years and you’re over age 59½.

People often use Roth conversions when they expect to be in a higher tax bracket later or want to maximize tax-free income in retirement. But there’s another layer to this strategy: reducing the tax burden on your heirs.

Why Roth Conversions Matter for Estate Planning

Thanks to recent tax law changes under the SECURE Act and SECURE 2.0, inherited IRAs now come with a strict timeline. If a non-spouse (such as a child) inherits your IRA, they must withdraw all the funds within 10 years, and those withdrawals are taxed as ordinary income.

This is a big shift from the previous “stretch IRA” rule that allowed beneficiaries to spread withdrawals over their lifetime. The new 10-year rule compresses the tax liability into a much shorter period, often hitting heirs during their peak earning years.

For example, let’s say your child earns $120,000 annually and inherits a $500,000 IRA. Instead of spreading withdrawals out over decades, they have to withdraw all the funds within 10 years. That could push their income over $170,000 in a given year, bumping them into a much higher tax bracket and significantly reducing what they ultimately get to keep.

By converting portions of your IRA to a Roth IRA during your lifetime, you pay the taxes now, and your heirs inherit an account that grows tax-free and can be withdrawn tax-free. Even though they still have to empty the account within 10 years, the absence of taxes makes it far more beneficial.

Real-World Example: A Client’s Legacy in Action

We recently worked with a client who brought her adult son to a financial planning meeting. She was a single woman in her 70s, financially secure, and had no need to rely on her IRA for living expenses. Her son, a successful professional, was in a significantly higher tax bracket than she was.

If she left her IRA untouched and passed away, her son would inherit a sizable sum and an equally sizable tax bill. Not only would he need to withdraw hundreds of thousands of dollars within a decade, but each withdrawal would be taxed at his current income rate.

By contrast, if she slowly converted the IRA into a Roth over a period of several years, carefully keeping each conversion within her lower tax bracket, she could shoulder the tax bill at her lower rate, allowing her son to inherit a Roth IRA instead. He would still need to withdraw the funds within 10 years, but he wouldn’t owe a dime in taxes.

The approach of evaluating Roth conversion strategies not only preserved more of the money for her family, but it gave them more flexibility and peace of mind during an emotionally difficult time.

Understanding the Tax Bracket “Fill” Strategy

One of the most practical ways to approach Roth conversions is through “tax bracket filling.” The idea is to make use of your current marginal tax bracket without tipping into the next one.

Here’s how it works:

Let’s say you’re a single filer with $60,000 in taxable income. The 22% federal income tax bracket in 2025 goes up to about $95,375. That means you could convert up to $35,375 of IRA money and still stay within the 22% bracket.

By “filling the bracket” with Roth conversions, you can transfer funds without triggering a jump into a higher tax tier. This is especially effective if you’re in a low-tax phase of life, such as early retirement, before taking Social Security or required minimum distributions (RMDs).

This strategy is repeatable year after year and can gradually shift large portions of your traditional IRA into a Roth IRA while minimizing your total lifetime tax liability.

Why Timing Matters for Roth Conversions

The effectiveness of a Roth conversion strategy often comes down to timing. The most advantageous window tends to be:

  • After retirement but before you begin collecting Social Security

  • Before you are required to take RMDs at age 73 (or 75, depending on your birth year)

  • During years when your income is temporarily lower (job transition, business loss, early retirement, etc.)

In these windows, your marginal tax rate may be much lower than what it will be in future years, or what your heirs will face.

It’s also important to think about where tax policy is heading when considering Roth conversion strategies. Many financial professionals believe federal income taxes are likely to increase in the coming decades due to growing national debt and budget deficits. Paying taxes today, when rates are relatively low, could be a smart long-term decision.

A Closer Look at the 10-Year Inheritance Rule

The SECURE Act’s 10-year rule means that non-spouse beneficiaries must completely drain an inherited IRA within a decade. While there’s no rule that says the withdrawals must be taken evenly each year, they must be completed by the end of year 10.

The downside? If the heir waits too long and takes a large lump sum at the end of the 10 years, it could cause an enormous tax spike.

This rule does not apply to Roth IRAs in the same way. Beneficiaries still have to follow the 10-year withdrawal rule, but distributions are tax-free, as long as the Roth account has been open for at least 5 years.

That means your heirs can:

  • Let the money grow tax-free for up to a decade

  • Withdraw it at a time that suits their financial situation

  • Avoid adding taxable income during their highest-earning years

Who Should Consider Roth Conversions for Estate Planning?

Roth conversion strategies are especially effective for individuals who meet the following criteria:

1. Retired and in a lower tax bracket than their children
If your income has decreased but your children are in their peak earning years, it makes sense for you to pay the taxes now so they don’t get hit with a much larger tax bill later.

2. Financially secure and not dependent on IRA withdrawals
If you don’t need your traditional IRA for day-to-day expenses, you can afford to strategically convert and handle the tax costs over time.

3. Planning to leave a large IRA to heirs
The larger the IRA, the greater the potential tax burden on your beneficiaries. Roth conversions reduce this future liability.

4. Wanting to reduce estate size for tax purposes
While estate tax only affects a small percentage of families, converting to a Roth can reduce your estate’s taxable size while still preserving value for your heirs.

5. Believing tax rates will go up in the future
If you suspect federal income tax rates will increase over the next 10–20 years, locking in today’s lower rates could be a wise move.

When Roth Conversions Might Not Make Sense

Like all financial planning tools, Roth conversions aren’t right for everyone. Situations where it might not be ideal include:

You need the money now
If you rely on your IRA for income, the added tax burden of a conversion might not be worth it.

You’re currently in a high tax bracket
If your current tax rate is higher than what your heirs will face, paying the taxes now may not make sense.

You plan to donate the IRA to charity
Qualified charities don’t pay taxes on IRA distributions. Leaving your IRA to a nonprofit could be more efficient than converting it to a Roth.

You can’t afford the taxes from the conversion
Ideally, taxes on a conversion should be paid from cash savings, not from the IRA itself. If you have to dip into the converted funds to cover the tax bill, the strategy loses a lot of its effectiveness.

Debunking Common Roth Conversion Myths

Let’s address a few common misunderstandings:

Roth conversions are only for young investors
Reality: Roth conversions can be especially effective for retirees and those doing estate planning, especially if their tax bracket is lower than their heirs’.

You’ll lose money by paying taxes now
Reality: Paying taxes now at a lower rate can save money in the long run, especially if future tax rates are higher.

Roth IRAs don’t help with inheritance planning
Reality: Roth IRAs can be a powerful inheritance tool, especially under the 10-year rule — no required taxes means more flexibility and value for your heirs.

How to Execute a Roth Conversion Estate Strategy

If you’re considering this strategy, here are a few key steps to follow:

Step 1: Run Projections
Work with a CFP® or tax professional to analyze your current and future tax brackets, your heirs’ tax situations, and your long-term retirement needs.

Step 2: Start Small and Be Strategic
Don’t convert your entire IRA in one year. Spread conversions over several years to manage your tax bracket and avoid triggering unintended Medicare or Social Security impacts.

Step 3: Use Non-IRA Funds to Pay the Taxes
To get the full value of the conversion, pay the taxes using cash from savings. That keeps the entire converted amount growing tax-free.

Step 4: Communicate Your Plan  
Make sure your heirs understand what you’ve done and why. Update your beneficiaries and document your estate plan accordingly.

Final Thoughts: Taxes Are Inevitable, But Smart Planning Isn’t

At the end of the day, the choice often comes down to this: Would you rather your money go to your family, or to the IRS?

Roth conversion strategies allow you to take control of that decision. When used strategically, they can reduce the long-term tax burden, offer more flexibility to your heirs, and help ensure that the wealth you worked so hard to build actually benefits the people you care about most.

It’s not a one-size-fits-all solution, but it’s one of the most powerful planning tools available if used at the right time, in the right way.

Need personalized Roth conversion strategies?

At Bonfire Financial, we help clients turn complex tax rules into smart, actionable strategies. We welcome you to schedule a call to see how Roth conversions could fit into your estate plan.

What Is a Fiduciary Financial Advisor? And how a free lunch could cost you.

Posted on by Brian Colvert

If you’re looking for trustworthy financial advice, one term you need to understand is: fiduciary financial advisor. It might sound like industry jargon, but it’s one of the most important distinctions in the financial planning world. Put simply, a fiduciary financial advisor is someone who is legally and ethically required to act in your best interest. Not all advisors are held to this standard, and that difference could cost you.

Today we’ll break down what it really means to work with a fiduciary advisor, how to know if yours is one, and why this matters when it comes to your money, your goals, and your peace of mind.

Listen Now:  iTunes |  Spotify | iHeartRadio | Amazon Music

What Is a Fiduciary Financial Advisor?

A fiduciary financial advisor is a professional who has a legal obligation to act solely in your best interest when providing financial advice or managing your investments.  This means the recommendations they give you must benefit you, not their paycheck. They must avoid conflicts of interest and fully disclose anything that could influence their advice.

That might sound obvious, shouldn’t every financial advisor do that? You’d think so, but unfortunately, many don’t.

Fiduciary in Action: What It Really Looks Like

Imagine you’re working with a financial advisor, and they present you with two investment options:

  • Investment A pays the advisor a higher commission

  • Investment B is nearly identical but pays the advisor much less (or nothing)

Under the fiduciary standard, if Investment B is in your best interest, that’s the one the advisor must recommend, even if it means they earn less. It’s not just about ethics. It’s the law.

That’s a huge deal when you’re talking about life savings, retirement accounts, and generational wealth. But without the fiduciary obligation, nothing stops an advisor from choosing the option that’s more lucrative for them, even if it costs you more.

Why the Fiduciary Standard Exists

The financial services industry hasn’t always had a great reputation. From high-commission sales tactics to conflicts of interest that aren’t always disclosed, the history is… let’s say, complicated. The fiduciary standard was created to protect clients from these conflicts. It’s meant to ensure that when you work with a financial advisor, you’re not just being sold something. You’re being advised, and the advice is in your best interest.

And yet, not everyone is held to this standard.

Wait, Not All Advisors Are Fiduciaries?

Correct. There are three basic types of advisors when it comes to fiduciary duty:

  1. Non-fiduciary brokers – These operate under a “suitability” standard. The investment just has to be suitable, not necessarily the best or most cost effective.

  2. Hybrid advisors – These can switch hats. In some accounts, they act as fiduciaries. In others, they can accept commissions. That dual role can create confusion.

  3. Fee-only fiduciary advisors – These are always fiduciaries. Fee-only advisors typically don’t accept commissions or sales incentives, which helps reduce conflicts of interest.

At Bonfire Financial, we chose to be a fee-only fiduciary firm because we didn’t want to operate in gray areas. We didn’t want to have to switch hats depending on the product or compensation structure. We wanted to build a business grounded in trust, because that’s what our clients deserve.

A Quick (and Real) Story: The Power of a Free Lunch

Let me paint a picture of what it doesn’t look like to act in a client’s best interest.

When I was early in my career at a large wirehouse, there was an informal group I jokingly called “The Lunch Hour Club.” Wholesalers, salespeople for investment products like mutual funds or annuities, would come in and treat advisors to lunch. Think sushi, steak sandwiches, the works!

In exchange? They hoped we’d recommend their products to our clients.

And sometimes, it worked.

Some advisors would literally recommend a mutual fund just because the wholesaler bought them a good meal. They weren’t necessarily bad people. But without a fiduciary standard, there was nothing stopping that kind of behavior.

It drove me nuts.

That experience was a big part of why I left and started my own independent firm. I didn’t want to operate in a system where a sandwich could steer someone’s retirement plan.

Transparency Is Key

Another cornerstone of fiduciary duty is disclosure. If there’s ever a potential conflict of interest, a fiduciary has to tell you. If an advisor owns a stake in a product they’re recommending or will be compensated in any additional way, you have a right to know before making a decision.

That doesn’t mean all commission-based advisors are unethical. Many are great people trying to do the right thing. But even good intentions can be overshadowed by unclear incentives and a lack of transparency.

With a fiduciary, you don’t have to wonder if you’re getting the full story. You are.

Trust Is the Real Currency

At the end of the day, this business is all about trust. When someone comes to us for financial advice, they’re not just asking where to invest. They’re trusting us with their future. Their kids’ college fund. Their retirement. Their legacy.

If you’re going to work with a financial advisor, you need to feel absolutely sure that they’re putting your interests first. That they’ll tell you the truth, even when it’s not convenient. That they’ll say no to a product or strategy that benefits them but doesn’t benefit you.

That’s the kind of relationship that lasts. That’s the kind of advisor you want in your corner.

How to Know If Your Advisor Is a Fiduciary

Here are a few key questions to ask:

  • Are you a fiduciary 100% of the time?

  • How are you compensated?

  • Do you ever earn money from third parties?

  • Are you a CFP®?

  • Will you put that in writing?

If any of the answers feel vague or avoidant, that’s a sign to dig deeper. A true fiduciary will be transparent and direct.

Why We Believe It Shouldn’t Be Optional

The fact that fiduciary duty is optional in parts of the financial industry is baffling. It’s like going to a doctor and not knowing if they’re being paid extra to prescribe a certain medication. You’d want to know, right?

We believe every financial relationship should start with this simple premise: put the client first. Always.

And if that means we make a little less on one decision? So be it. We’re playing the long game. Doing right by our clients has a way of working out.

Bottom Line: Choose Trust Over Hype

There will always be advisors out there chasing commissions, recommending high-fee products, or overpromising results. And there will always be flashy marketing campaigns pushing financial “solutions” that are more sizzle than substance.

But you don’t have to fall for it.

When you choose to work with a fiduciary advisor, you’re choosing clarity. You’re choosing transparency. You’re choosing a partnership built on trust—where your goals, your success, and your future come first.

And that’s how financial advice should work.

Need a fiduciary advisor you can trust?

At Bonfire Financial, we’re 100% fiduciary, 100% of the time. No commissions. No product pushing. Just honest advice built around you. If you want to see what that looks like, we’d love to talk.

Schedule a conversation with us at BonfireFinancial.com

Asymmetric Risk: How to Invest Wisely, Even If You’re Wrong Most of the Time

Posted on by Brian Colvert

Most investors think they understand risk. You win some, you lose some. Right?

Not quite.

Asymmetric risk is a smarter, more nuanced approach to investing that separates sophisticated investors from the crowd. At its core, asymmetric risk means making investments where the potential upside far outweighs the possible downside. You’re risking a small amount of capital for the chance of significant gains, without betting the farm.

Think of it as risk with a safety net. Even if things go south, the damage is minimal. If they go north? You could be looking at life-changing gains.

In our latest podcast, Brian breaks down exactly how asymmetric risk works, how much to allocate, and why it can help you grow wealth even if you’re not always right.

Listen Now:  iTunes |  Spotify | iHeartRadio | Amazon Music

Why Asymmetric Risk Matters for Modern Investors

Most people don’t know this, but the wealthiest investors rarely risk large portions of their portfolios on uncertain outcomes. Instead, they carve out a small slice for asymmetric opportunities, places where a small bet could deliver an outsized return. This strategy allows them to participate in high-reward opportunities without jeopardizing their overall financial stability. Even if several of these bets don’t pay off, a single big winner can more than compensate for the losses, driving significant portfolio growth over time.

Here’s why it works:

  • Small, calculated risks can drive portfolio growth without threatening financial security.

  • Losses are capped, gains are theoretically unlimited.

  • It protects your long-term goals while still allowing for meaningful upside.

The average investor often flips this equation,  risking too much chasing quick wins or being too conservative and missing out entirely. They either over-leverage themselves in hopes of striking it rich overnight or let fear drive their decisions, parking money in low-return assets that can’t outpace inflation. Both approaches ignore the power of asymmetric risk.

Real-World Examples of Asymmetric Risk

Let’s put some real-world context behind the theory:

Investment Type Asymmetric Risk Potential
Crypto (Bitcoin, Ethereum)           Small buy-ins with potential for exponential returns.
Stock Options           Low-cost options can lead to large payoffs.
Private Equity / Startups          Modest stakes in early-stage companies with unicorn potential.
Real Estate Deals          Small investments in properties with big appreciation upside.
Individual Stocks          Early buys in disruptors like Nvidia or Tesla years before they became giants.

Of course, none of these are recommendations, just illustrations of how asymmetric risk plays out in real portfolios.

How Much Should You Allocate to Asymmetric Risk?

There’s no universal number. Your risk tolerance, goals, and time horizon all come into play.

Here’s a general framework Brian shares with clients:

    Investor Profile     Suggested Allocation
Very Conservative 1% to 5%
Balanced 5% to 10%
Aggressive 10% to 20%

Key rule: Never risk more than you’re willing to lose completely.

As your wealth grows, the dollar amounts grow, but the percentage should align with your risk comfort and life stage. What feels like a small, manageable risk at one point in your life might feel too aggressive at another, or vice versa. Younger investors often allocate a higher percentage to asymmetric opportunities, while those approaching or in retirement typically reduce their exposure to preserve capital and minimize volatility. The key is to regularly reassess both your financial situation and your comfort with risk as they evolve.

The 3 Factors That Should Guide Your Asymmetric Risk Strategy

1. Your Goals (The Science)

Know exactly what you’re aiming for. Retirement income? A legacy for your kids? Dream travel? Quantify it. This shapes how much risk you can afford to take.

2. Your Time Horizon (The Math)

The longer you have, the more room there is to weather volatility and let asymmetric bets play out.

3. Your Risk Tolerance (The Art)

This isn’t a number on a quiz. It’s how you actually feel when markets swing or when an investment turns south. Risk tolerance varies wildly even among people with identical finances. Two investors with the same portfolio size and income might react very differently to the same market event, one seeing it as a buying opportunity, the other feeling panic. Personal experiences, past losses or gains, and even personality traits all influence how much risk feels acceptable. That’s why understanding your true tolerance isn’t just about numbers; it’s about knowing your emotional response to uncertainty.

Why Most Risk Tolerance Quizzes Fail

Most online risk assessments fall short because they treat risk as a logical decision, not an emotional experience.

People say they’re fine with volatility until they see a $100,000 loss in black and white. Brian’s clients often express this clearly:

  • “When I gain, I think in percentages.”

  • “When I lose, I feel it in dollars.”

Your emotional reaction to loss is what defines your true risk tolerance, not what you check off in an online quiz.

Why does understanding your risk tolerance matter so much? Because it directly influences how much of your portfolio you can confidently allocate to asymmetric opportunities. As your financial situation evolves, so should your approach to risk.

Investors who grasp their true risk tolerance are better equipped to take advantage of asymmetric risk. They adjust their exposure as their wealth grows without stepping outside their comfort zone or compromising long-term goals.

How Asymmetric Risk Changes As You Grow Wealth

As your assets increase, you can scale up your asymmetric risk investments without increasing your portfolio percentage.

Example:

  • $1 million portfolio → $50,000 (5%) into asymmetric risk.

  • $2 million portfolio → $100,000 (5%) same percentage.

Even though the percentage stays the same, your opportunity to capture major gains grows. A 5% allocation in a larger portfolio means more capital is working for you in asymmetric opportunities, increasing the potential dollar amount of any upside.

This allows your wealth-building strategy to scale without requiring you to take on proportionally more risk. Over time, as winners emerge from these calculated bets. They can meaningfully boost your portfolio’s overall growth, even if only a few outperform while others fall short.

Why Asymmetric Risk Should Shrink (But Not Disappear) Near Retirement

In early and mid-career, it makes sense to allocate more to asymmetric opportunities. You have time to recover from losses and let winners compound.

As you near retirement:

  • Consider dialing back the percentage.

  • Rebalance your portfolio regularly.

  • Still keep a slice dedicated to growth to offset inflation.

However, even retirees shouldn’t avoid asymmetric risk entirely. It can provide a growth engine to help keep up with rising living costs and unexpected expenses. While the proportion allocated to asymmetric opportunities may decrease in retirement, maintaining some exposure allows your portfolio to continue growing beyond conservative income-generating assets like bonds or CDs.

This growth potential becomes especially important in protecting against inflation and ensuring your assets can support a long retirement.

That said, it’s crucial to adjust your asymmetric risk allocation thoughtfully as you approach and move through retirement. Even with the best intentions, investors often stumble when it comes to executing this strategy effectively. That is why it is important to rebalance your portfolio.

Common Mistakes Investors Make With Asymmetric Risk

Successfully incorporating asymmetric risk into a portfolio requires discipline, patience, and an honest understanding of your personal risk tolerance. Unfortunately, even savvy investors can fall into these common traps:

  • Overconcentration
    Going all-in on one “big bet.” Early success can breed overconfidence, tempting investors to allocate too much capital to a single opportunity. While it’s natural to want to increase exposure to a winning strategy, overconcentration defeats the purpose of asymmetric risk, which is to limit downside exposure.
  • Chasing Past Winners
    It’s easy to fall into the habit of adding to investments that have already skyrocketed. But true asymmetric opportunities are usually found early, before widespread adoption or mainstream success. Chasing past winners often leads to buying in at elevated valuations, reducing the potential upside and increasing downside risk.
  • Ignoring Liquidity
    Many asymmetric plays, such as private equity, venture capital, or certain real estate deals, can tie up your funds for years. Failing to consider liquidity needs can create cash flow problems or force you to exit positions prematurely, often at a loss.
  • Neglecting Professional Guidance
    The allure of asymmetric risk can lead some investors to go it alone, especially with the rise of online investing platforms and market forums. However, without a deep understanding of the risks and how these investments fit into your overall financial strategy, DIY approaches can quickly backfire. A CERTIFIED FINANCIAL PLANNER™ can help vet opportunities, manage risk exposure, and ensure that asymmetric bets align with your long-term goals.

How to Identify a Smart Asymmetric Risk Opportunity

Avoiding these common mistakes is just the first step. To make the most of asymmetric risk, you also need to know how to spot the right opportunities and filter out the wrong ones.

Not every opportunity with big potential qualifies as a smart asymmetric risk. Before investing, ask yourself these critical questions:

What’s the maximum I could lose?
Always define the worst-case scenario upfront.

What’s the realistic upside?
Be honest. Is the potential return worth the risk, or are you being overly optimistic?

How does this fit into my overall portfolio?
Asymmetric bets should complement, not dominate, your portfolio.

Will losing this money derail my goals?
If the answer is yes, it’s not the right asymmetric play.

How liquid is the investment?
Can you easily exit if needed, or will your capital be locked up?

What’s the track record of similar investments?
While past performance doesn’t guarantee future results, it can offer valuable context.

Beyond the checklist:
Smart asymmetric investing also means understanding the timing and context of an opportunity. Markets are dynamic. What looked like a great bet six months ago might not hold the same potential today.

Asymmetric Risk vs. Asymmetric Opportunity: Know the Difference

It’s important to distinguish between asymmetric risk and asymmetric opportunity.

  • Asymmetric risk focuses on the structure of a specific investment,  the balance between potential loss and potential gain.

  • Asymmetric opportunity refers to the broader environment, favorable market timing, disruptive trends, regulatory changes, or macroeconomic shifts that can magnify the potential of an investment.

Successful investors look for asymmetric opportunities where asymmetric risk structures already exist. It’s not just about finding a great idea; it’s about finding the right idea at the right time, with the right risk-to-reward balance.

Asymmetric Risk and Behavioral Finance: The Hidden Challenge

Understanding asymmetric risk intellectually is easy. Applying it emotionally is hard.

Why?

Because humans are naturally wired to avoid loss. In fact, studies in behavioral finance have shown that losses feel about twice as painful as equivalent gains feel rewarding, a phenomenon known as loss aversion.

This emotional response can lead even the most rational investors to make poor decisions. When faced with real dollar losses, it becomes difficult to stay objective. Investors might:

  • Pull out of investments too early at the first sign of trouble.

  • Double down on losing positions out of a desire to “get even.”

  • Avoid taking new opportunities entirely after experiencing a loss.

This is where asymmetric risk presents a unique challenge. While the strategy is built to absorb small losses in pursuit of larger wins, emotionally accepting those losses, even when they’re expected and planned for, can be uncomfortable.

That’s why working with a trusted advisor can be a game-changer.

A good advisor (like us *wink*) does more than just recommend investments. They help:

  • Keep your emotions in check during both market highs and lows.

  • Align asymmetric bets with your broader financial plan, so no single setback derails your progress.

  • Provide access to vetted asymmetric opportunities that fit your goals and risk tolerance.

  • Reassess and rebalance as your financial situation evolves.

Ultimately, while asymmetric risk offers a powerful way to pursue growth, the ability to stick with the strategy often determines success more than the strategy itself.

Why Asymmetric Risk Isn’t Just for the Wealthy

While high-net-worth individuals use this strategy often, any investor can apply it at the right scale.

It’s not about chasing moonshots or gambling. It’s about creating a portfolio that can:

  • Absorb small losses.
    By allocating only a small percentage to higher-risk opportunities, even multiple losses won’t significantly impact your overall wealth.

  • Capitalize on big wins.
    When an asymmetric bet pays off, the gains can be substantial enough to offset many smaller losses — and then some.

  • Build wealth responsibly over time.
    This approach lets you participate in growth without putting your financial security at risk.

Asymmetric risk levels the playing field. Whether you’re investing $5,000 or $500,000, the principle remains the same: focus on opportunities where the reward dramatically outweighs the risk. And as Brian often reminds clients, success in investing isn’t about being right all the time,  it’s about structuring your portfolio so that when you are right, it counts in a big way.

Key Takeaways

  • Asymmetric risk means risking a small, affordable amount for the chance at a large gain.

  • It’s a powerful tool for portfolio growth without jeopardizing financial stability.

  • Your allocation should reflect your goals, time horizon, and personal risk tolerance.

  • Mistakes happen when investors overcommit or fail to rebalance.

  • Professional advice helps navigate the emotional and strategic challenges of asymmetric investing.

Next Steps

If your advisor isn’t talking to you about asymmetric risk, they should be.

At Bonfire Financial, we specialize in helping clients use asymmetric risk intelligently,  not as a get-rich-quick scheme, but as a thoughtful, disciplined growth strategy.

Ready to explore asymmetric risk opportunities tailored to your goals? Schedule a call with us!

Mutual Funds Explained: Because No One Ever Actually Reads the Fine Print

Posted on by Brian Colvert

Mutual Funds Explained

Mutual funds are like your sock drawer. You know it’s full of something useful, but you’re never quite sure exactly what’s in there. Occasionally, you find something surprisingly valuable, kind of like that lost gift card from three Christmases ago.

Recently, at a dinner party, your friend confidently declared, “My Fidelity fund was up 25% last year!” And sure, that sounds impressive. But let’s face it, most of us aren’t entirely sure if that’s amazing or just dumb luck.

In this article, we’ll cut through the confusion, getting mutual funds explained clearly, highlighting mutual fund vs ETF differences, and squashing a few misconceptions along the way. And we’ll try to do it without making your eyes glaze over.

Listen Now:  iTunes |  Spotify | iHeartRadio | Amazon Music

Misconceptions: The Sock Drawer Problem

One of the biggest misunderstandings about mutual funds is that they’re all basically the same. But they come in countless varieties, much like those socks we mentioned earlier. They’re just bundles of stocks, bonds, or other investments, chosen by professionals. (Hopefully professionals who don’t rely on tips from Reddit.)

Here’s a fun-but-scary fact: there are around 8,700 mutual funds registered in the U.S. alone, and almost 135,000 if you toss ETFs into the mix. Compare that to just 6,000 publicly traded companies and you start wondering if everyone and their cat has their own mutual fund.

Clearly, understanding your mutual fund choices is important for smart financial planning.

Mutual Fund vs ETF Differences: Grandma Calls vs. Caffeine Moods

Mutual funds and ETFs might look like identical twins, but they’ve got distinct personalities. Mutual funds trade just once per day, kind of like your grandma calling every evening at exactly 7 pm. Predictable. Stable. Comforting.

ETFs, meanwhile, trade throughout the day, matching the unpredictable energy of someone who’s had three triple-espressos by noon…looking at you Dave. Understanding these differences matters, especially when you’re thinking seriously about optimizing your retirement accounts.

Beyond just trading behavior, mutual funds and ETFs differ in how they’re managed and taxed. Most mutual funds are actively managed, meaning a team of professionals is trying to beat the market by picking winning stocks. That often comes with higher fees, usually baked into something called an “expense ratio.” ETFs tend to be passively managed, simply tracking an index like the S&P 500. That hands-off approach often translates to lower costs and fewer surprise charges hiding in the fine print.

Then there’s how taxes work. ETFs are generally more tax efficient thanks to something called the “in kind redemption” process, which helps them avoid triggering capital gains distributions when investors buy or sell. Mutual funds? Not so much. If someone else in the fund sells a big chunk, you might end up with a tax bill even if you didn’t sell a thing. While grandma’s routine might be comforting, ETFs often give you more control, agility, and fewer tax headaches; we all can deal with less headaches, especially if you just had three triple-espressos.

Your Friend’s Mutual Fund Brag: The Biggest Misconception

Another classic misconception: vague bragging about owning a “Schwab fund.” Saying you own a mutual fund without knowing what’s in it is like proudly announcing, “I drive a vehicle,” without specifying if it’s a Ferrari or a riding mower. Details matter, especially when they involve your money.

Getting clarity about what’s in your fund helps you make smarter financial moves, such as improving your portfolio’s diversification. Plus, it’ll give you something clever to say the next time your friend starts talking finance.

Mutual Funds Explained 

Mutual funds aren’t a one-size-fits-all thing. Some focus on big, steady companies (“large-cap”). Others chase growth in smaller, ambitious ventures (“small-cap”). Then you’ve got funds that specialize in international markets or emerging economies. Some even hold gold, oil, or cows. Literal cows.

Understanding exactly what’s inside clears up confusion and gives you more confidence about where your money is going. And hey, confidence looks great on you.

Another consideration is performance reporting. Mutual funds often compare their results to a benchmark, like the S&P 500, but actively managed funds do not always beat those benchmarks. In fact, many underperform after accounting for fees. That is why it is smart to look past just past performance and ask whether the fund’s strategy, costs, and holdings align with your long-term plan. Because at the end of the day, investing should serve your goals, not just chasing returns, or cows in some instances.

Understanding Mutual Funds Matters

Navigating thousands of mutual funds and ETFs can be overwhelming, no matter how smart you are. That’s why working with a CFP® is a pretty smart move. Think of us like your financial Siri, except funnier, and more helpful.

When you clearly understand your investments, you feel calmer, smarter, and way less stressed. Not a bad trade-off.

Ready for Clarity? Let’s Chat

We’ve covered a lot here, but at the end of the day, your financial goals are unique, and personalized advice is crucial.

So, if you’re ready for tailored financial help (minus the judgment), go ahead and schedule a free introductory call. Because your retirement plan deserves better than vague bragging at dinner parties. 

Donor Advised Funds: A Smarter Way to Give (and Save on Taxes)

Posted on by Brian Colvert

If you’ve ever found yourself writing a hefty check to the IRS and thinking, “There has to be a better way,” you’re not alone. While taxes are a fact of life, the strategies for how much you pay and where that money goes are entirely up to you. Enter donor advised funds: a powerful, flexible, and surprisingly accessible way to give to the causes you care about while lowering your tax bill.

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This guide breaks down what donor advised  funds are, how they work, and how high-net-worth families and everyday donors alike use them to make smarter financial decisions. Whether you’re charitably inclined, tax-curious, or both, this post is here to help you get strategic with your giving.

What is a Donor Advised Fund?

A donor advised fund (DAF) is like a charitable investment account. You contribute money or assets to the fund, receive an immediate tax deduction, and then recommend grants from that fund to your favorite nonprofit organizations over time. The money can also be invested within the fund, allowing it to grow tax-free, which ultimately means more money for the organizations you care about.

Think of it as a “charity checking account” that comes with major tax perks. Once the money is in, it can only go to qualified 501(c)(3) organizations. You can decide when and where to grant the funds, but you can’t use it for personal purposes or send it to family members.

DAFs are popular because they offer flexibility. You can take your time deciding which charities to support while immediately securing the tax deduction.

Why Not Just Donate Directly?

You can absolutely give directly to your favorite charity, and for many people, that’s the simplest route. But here’s the catch: thanks to the high standard deduction, many donors don’t actually get a tax benefit unless their charitable giving (combined with other itemized deductions) exceeds that threshold.

When you give directly without surpassing the standard deduction, you may miss out on a major tax-saving opportunity. Donor advised funds allow you to optimize your tax situation while maintaining the flexibility to support multiple causes over time.

The Problem with the Standard Deduction

As of 2024, the standard deduction is high enough that most Americans don’t itemize their deductions. For individuals, it’s $14,600. For married couples filing jointly, it’s $29,200. That means if your total itemized deductions (including charitable donations) don’t exceed that number, your donation might not reduce your tax bill at all.

So, if you donate $10,000 to charity in a year but don’t itemize, that generous gift doesn’t reduce your taxable income. In short: you’re giving without gaining any tax advantage.

By using a DAF and “bunching” donations, you can create a year where your deductions do exceed the threshold, allowing you to itemize and capture significant tax savings.

Introducing “Bunching”: How to Maximize Deductions

Bunching is a strategy where you group multiple years of charitable contributions into one year to exceed the standard deduction and itemize that year. You then take the standard deduction the following year.

By using a donor-advised fund, you can bunch your donations without giving all your charitable dollars to nonprofits at once. You contribute a lump sum to the DAF, take the tax deduction in that year, and then distribute the money to charities over time according to your schedule and priorities.

Bunching ensures you’re getting full credit for your charitable giving and allows you to maintain a consistent donation pattern to your favorite causes.

Real-World Example: Bunching in Action

Let’s say you normally give $20,000 per year to charity. That alone isn’t enough to exceed the standard deduction.

Instead, you decide to contribute $40,000 to a donor-advised fund this year, covering two years of donations. That bumps your itemized deductions high enough to exceed the standard deduction and gives you a solid tax break. Next year, you give nothing and simply take the standard deduction.

Meanwhile, your favorite charities still receive $20,000 this year and $20,000 next year; you’ve just front-loaded your contribution for tax purposes.

This strategy is even more powerful for high earners who routinely give significant amounts to charity but risk losing the deduction by spreading donations across multiple years.

How a Donor Advised Fund Works Over Time

Once money is in the DAF, you can:

  • Recommend grants to IRS-qualified charities anytime
  • Invest the funds for potential growth
  • Give anonymously, if you prefer
  • Name successors so your family can continue your legacy of giving

There are no required minimum distributions and no deadlines for giving it all away. You can be strategic and thoughtful with your philanthropy.

Funds inside a DAF can be invested in a range of portfolios, allowing you to potentially grow your contributions while deciding where they should eventually go. This additional growth means your charities could ultimately receive more than your original contribution.

Other Benefits of Donor Advised Funds

  • Tax-Free Growth: Investments inside the fund grow tax-free, meaning more money for your cause
  • Immediate Tax Deduction: You get the deduction the year you fund the DAF, not when you distribute to charity
  • Organized Giving: Track all your donations in one place, simplifying record-keeping
  • Flexible Timing: Donate assets now, decide later where to send the money
  • Legacy Building: Involve your kids or grandkids in deciding where to give, instilling a culture of philanthropy
  • Anonymity Options: Support causes privately if you choose

Advanced Strategy: Donating Appreciated Assets

One of the smartest ways to fund a DAF is with appreciated assets, like stocks or mutual funds. If you donate a stock that’s grown significantly, you avoid paying capital gains taxes and still get the full fair market value as a deduction.

For example, if you bought shares of a tech company early and the value has skyrocketed, donating the shares instead of selling them allows you to:

  • Avoid capital gains taxes
  • Take a full charitable deduction for the fair market value
  • Maximize the impact of your gift
  • This strategy can also work for real estate and privately held business interests with the right planning.

When a Donor Advised Fund Makes Sense

  • You want to make a large charitable gift this year but aren’t sure which organizations to support yet
  • You’re close to (but under) the standard deduction and want to bunch your giving
  • You received a windfall, bonus, or sold a business and need a deduction
  • You have highly appreciated assets and want to avoid capital gains taxes
  • You want to build a multi-generational giving plan
  • DAFs give you the flexibility to adapt your giving to your life events and cash flow needs.

Minimum contributions vary but often start around $5,000 to $25,000. Fees are typically between 0.60% to 1.00% annually, depending on the provider and investment options. When selecting a DAF provider, consider factors like investment options, fees, minimum grant sizes, and whether they align with the types of charities you want to support.

Key Considerations Before You Start

  • You can’t take the money back: Once it’s in the DAF, it must be used for charitable giving
  • Qualified Charities Only: No gifts to individuals, political groups, or family foundations unless qualified under IRS rules
  • Tax Timing: You get the deduction when you contribute to the DAF, not when you grant the funds
  • Fees: DAFs do have administrative and investment fees—be sure to review the fee structure

Final Thoughts: Take Control of Your Giving and Taxes

Giving to charity feels good. Doing it in a way that also reduces your taxes? Even better. Donor advised funds are one of the most underutilized tools in strategic financial planning, yet they’re simple to set up, flexible to use, and powerful in impact.

Whether you’re donating $5,000 or $500,000, you deserve to make the most of every dollar. By planning ahead and using tools like a DAF, you can give with more purpose, more power, and more long-term impact.

It’s not just about writing a check, it’s about building a legacy and ensuring your money makes the biggest difference possible.

Ready to Get Started?

If you want help exploring donor-advised funds or building a strategic giving plan, reach out to us. We’ll walk you through the options, set up the right structure, and help you make your money move with purpose, not just for tax season, but for life.

Investing in Private Equity as a Business Owner

Posted on by Brian Colvert

Investing in Private Equity

As a business owner, you’ve likely poured time, energy, and capital into building a company from the ground up. You understand risk, reward, and how to make strategic investments that generate real returns. But as your business matures or you begin to explore new opportunities, one powerful yet often misunderstood strategy enters the conversation: investing in private equity.

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Private equity has long been the playground of institutional investors and ultra-high-net-worth individuals. But today, more business owners are discovering that private equity can be a smart, strategic way to diversify their portfolio, generate long-term returns, and stay connected to the world of entrepreneurship, without the day-to-day operations. Today we’ll break down what private equity is, how it works, the benefits and risks, and how business owners can leverage it effectively.

What Is Private Equity?

At its core, private equity refers to investing in companies that are not publicly traded on stock exchanges. These are privately held businesses, often with strong fundamentals and growth potential, that are looking for capital to expand, restructure, or prepare for a sale or public offering.

Private equity investors typically provide that capital in exchange for ownership stakes, then work to improve the company’s value over time. This can involve operational improvements, financial restructuring, management changes, or even merging with other companies. The ultimate goal? To sell the company at a higher valuation and deliver a return on investment.

There are a few key ways investors can participate in private equity:

  • Direct Ownership: Buying a stake directly in a private company, often as part of an ownership group.
  • Private Equity Funds: Investing in a fund managed by professionals who allocate capital across a portfolio of private companies.
  • Fund of Funds: Investing in a fund that itself invests in multiple private equity funds, offering greater diversification.
  • Private Equity ETFs: While technically public, some ETFs offer exposure to private equity firms, though they may lack the returns and control of direct investment.

Why Business Owners Should Consider Investing in Private Equity

Business owners are uniquely positioned to understand private equity because they already live in the world of private enterprise. You know what it takes to scale a business, manage risk, and create value.

Here are several reasons why investing in private equity makes sense:

1. You Already Understand the Landscape

As a business owner, you likely have insight into operations, sales, marketing, leadership, and finance. This makes you well-suited to evaluate potential private equity investments. You may even have an edge in identifying promising companies in your own industry.

2. Higher Potential Returns

Private equity has historically outperformed public markets over the long term. According to data from Cambridge Associates and other sources, private equity has delivered higher average annual returns than many traditional asset classes.

3. Diversification

Most business owners have a significant portion of their wealth tied up in their own company. Investing in private equity allows you to diversify within a space you understand, reducing concentration risk while still staying aligned with your entrepreneurial mindset.

4. Hands-Off Ownership

Not all private equity investments require active management. By investing in a fund or as a limited partner, you can participate in the growth of private companies without the time and responsibility of running another business.

5. Exit Strategy Alignment

Private equity can also play a role when you sell your business. Many owners roll over part of their equity into the acquiring firm’s private equity structure, giving them continued exposure and upside potential.

Understanding the Risks

Of course, investing in private equity isn’t without risk. Here are a few things to be aware of:

1. Illiquidity

Private equity investments are typically long-term commitments. Your capital may be tied up for 5 to 10 years, and you won’t have the flexibility to sell shares quickly like you would with public stocks.

2. Accredited Investor Requirements

To participate in most private equity funds, you must meet certain income or net worth thresholds to be considered an accredited investor. This ensures that you can absorb potential losses and do not require short-term liquidity.

3. Higher Fees

Private equity funds often charge management fees (usually around 2%) and performance-based fees (commonly 20% of profits over a set threshold). These fees can eat into returns if the fund underperforms.

4. Lack of Transparency

Private companies aren’t subject to the same disclosure requirements as public ones. That means you might not get the same level of financial information or regular reporting.

Evaluating Private Equity Opportunities

When considering an investment in private equity, take the time to evaluate each opportunity just as you would any other major business decision. Key questions to ask include:

  • What is the company’s business model and competitive advantage?
  • Who is on the management team?
  • What is the growth strategy?
  • How is the company currently performing?
  • What is the exit strategy?
  • If you’re investing in a fund:
  • What is the fund’s track record?
  • How much experience does the fund manager have?
  • What industries does the fund specialize in?
  • What are the fees and liquidity terms?

Working with a financial advisor who understands both private equity and your overall financial picture can help ensure the opportunity fits into your broader wealth strategy.

Case Study: The Post-Exit Business Owner

Consider the example of a business owner who recently sold a manufacturing company for $8 million. After taxes, legal fees, and setting aside an emergency reserve, they have $5 million to invest. They’re already maxing out retirement accounts and own income-generating real estate.

Rather than putting the full $5 million into public markets, they decide to allocate $1.5 million into a private equity fund that specializes in mid-market logistics firms—a space they know well. By doing so, they:

  • Stay connected to a familiar industry
  • Benefit from professional fund management
  • Avoid operational stress
  • Have the potential to earn strong long-term returns

The remainder of their portfolio is split between municipal bonds, a diversified ETF portfolio, and some philanthropic giving. This approach creates balance while allowing their capital to continue working in the business world.

The Future of Private Equity for Business Owners

Private equity isn’t just for the big players anymore. More platforms are making it accessible to qualified investors with lower minimums, better transparency, and tailored strategies. As a business owner, you can leverage your knowledge and experience to identify quality investments, assess risk, and make educated decisions that align with your goals.

Whether you’re preparing for a future exit, looking to put surplus cash to work, or simply diversifying away from your primary business, investing in private equity offers a compelling path forward.

Final Thoughts

Investing in private equity gives business owners the chance to continue doing what they do best: evaluating opportunities, understanding risk, and building value. It can be an effective tool for diversification, long-term growth, and staying engaged in the entrepreneurial world without the daily grind.

Next Steps

If you’re curious about how private equity could fit into your wealth and retirement strategy, we’d love to help. Book a call with us to explore how investing in private equity could support your long-term goals. With the right approach, private equity might be more than just a good investment; it might be your next big move.

How Diversification Can Save You From a Retirement Meltdown

Posted on by Brian Colvert

If you ask most people what the secret to a successful retirement is, you might hear answers like “save early,” “invest in the right stocks,” or “work with a good financial advisor.” All great advice. But there’s one strategy that often gets overlooked because it’s not flashy, it’s not new, and it won’t land you on the cover of Forbes. That strategy? Diversification.

Let’s be honest: Diversification isn’t exciting. It doesn’t come with big headlines or viral TikToks. But if you’re heading into retirement (or already there), diversification could be the very thing that helps you sleep at night when the markets get bumpy. And that’s worth talking about.

Today we’re going to break down why diversification is more than just a buzzword, it’s a lifeline. We’ll look at how it works, why it matters more in retirement than during your growth years, and how to use it strategically to protect your hard-earned assets.

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What Is Diversification, Really?

At its core, diversification means not putting all your eggs in one basket. In investment terms, it means spreading your money across different asset classes, sectors, industries, and geographies. The goal? To reduce your exposure to any single risk.

It doesn’t mean you won’t ever lose money. It does mean that when one area of the market is down, another might be up—helping to smooth out the ride.

Why Diversification Matters More in Retirement

When you’re in your 30s, 40s, or even early 50s, you’re in growth mode. You have income coming in, time on your side, and the ability to take on more risk. You might go all in on tech stocks, try your hand at crypto, or take a flyer on a promising startup. And when those bets pay off, it feels great.

But retirement changes the game.

You’re no longer building your nest egg, you’re relying on it. Your paycheck is gone. Your expenses? Still very much alive and well. And the fear of running out of money? Real.

This is where diversification becomes critical.

A highly concentrated portfolio might have served you well in your accumulation phase. But in retirement, big swings in value become dangerous. A 50% drop in a single stock might not have phased you before, but it hits differently when you’re drawing from your portfolio to cover everyday expenses.

Growth vs. Protection: The Shift in Strategy

Think of it like this: In your career, being specialized often leads to higher pay. A cardiac surgeon earns more than a general practitioner. A software engineer specializing in AI might command a bigger paycheck than a generalist developer.

The same logic applies in investing. Specializing—or concentrating—can yield big results. But it comes with more volatility.

As you near retirement, your strategy needs to shift from growing your wealth to protecting it. You don’t need 40% returns. You need reliable, steady performance and the confidence that your money will be there when you need it.

What Diversification Looks Like in Retirement

So what does a diversified portfolio actually look like for someone in or near retirement? Here are the main components:

  1. Equities Across Sectors and Sizes: Investing in a broad mix of stocks, including large-cap, mid-cap, and small-cap companies across different sectors (technology, healthcare, consumer goods, etc.) helps avoid overexposure to one area of the market.
  2. ETFs and Mutual Funds: Exchange-traded funds (ETFs) and mutual funds offer built-in diversification. One fund can give you exposure to hundreds or even thousands of companies.
  3. Fixed Income (Bonds, CDs, Treasuries): Bonds are a staple of retirement portfolios. From Treasury bonds backed by the U.S. government to corporate bonds and municipal offerings, they provide income and stability. CDs and short-term Treasuries offer ultra-safe options for near-term needs.
  4. Real Estate: Whether through REITs or directly owned property, real estate can provide a stable income stream. It also adds a layer of diversification that doesn’t always move in lockstep with the stock market.
  5. Alternative Investments: Private credit, private equity, or commodities like gold can offer additional diversification. Alternative investments often behave differently than stocks and bonds.
  6. Cash Reserves: Don’t underestimate the power of having some cash on hand. In market downturns, cash gives you flexibility to avoid selling assets at a loss.

It’s Not Just About What You Own, It’s About When You Use It

Diversification isn’t only about what you invest in. It’s also about how and when you draw on those assets. If the stock market drops 20%, you don’t want to be forced to sell equities to fund your living expenses. Instead, you might pull from your bond ladder, real estate income, or cash reserves. This approach gives your equities time to recover, and your overall portfolio a better chance of staying intact.

Strategic diversification gives you flexibility. It gives you options. And options are everything in retirement. Diversification helps cushion against isolated market dips, but portfolios drift if left unattended. Don’t forget, rebalancing brings them back into alignment.

Common Misconceptions About Diversification

Let’s clear up a few myths:

  • Myth 1: “I already own five stocks, so I’m diversified.”Not quite. True diversification spans sectors, asset classes, and risk profiles. Five tech stocks? That’s not diversification—it’s concentration.
  • Myth 2: “Diversification means I won’t make as much money.”Possibly true, but also missing the point. You don’t need outsized gains in retirement—you need consistency. Remember: doubling your money won’t change your life as much as losing half of it.
  • Myth 3: “All diversification is equal.”Nope. Diversifying across mutual funds that all hold the same top 10 stocks isn’t true diversification. Look under the hood of your investments.

How to Tell If You’re Truly Diversified

A few good questions to ask yourself :

  • How much of my portfolio is in one sector or company?
  • Am I exposed to different types of investments (stocks, bonds, real estate, etc.)?
  • Do I have income sources that don’t rely on the stock market?
  • If the market dropped 30% tomorrow, would I be forced to sell something at a loss?
  • Is my risk level aligned with my retirement goals?

If you’re unsure, it’s time for a checkup.

The Real Goal: Peace of Mind

At the end of the day, diversification isn’t about being fancy. It’s about creating a plan that gives you confidence.

You don’t want to be the retiree glued to CNBC, wondering if your favorite stock is about to tank. You want to be the retiree sipping coffee, knowing your portfolio is built to weather the storm.

Because here’s the thing: the market will dip. There will be recessions. Headlines will get scary. But a well-diversified portfolio doesn’t panic, it pivots.

Final Thoughts: Diversify Like Your Retirement Depends on It (Because It Does)

If you’re still chasing big returns with concentrated bets as you near retirement, it’s time to reconsider. There’s nothing wrong with going big during your accumulation years. But once you’re approaching or entering retirement, the name of the game is preservation.

And that’s where diversification shines.

It may not be exciting. It may not be trendy. But it works. And when it comes to your retirement, that’s exactly what you want.

Next Steps

Need help creating a diversified retirement plan that actually fits your life? Let’s talk. At Bonfire Financial, we help clients build smart, stable portfolios that are designed to go the distance. Schedule a call with us today! 

Why the Dollar-Cost Averaging Investment Strategy Wins in Down Markets

Posted on by Brian Colvert

When the market drops, the headlines scream, the talking heads debate, and investors everywhere feel their stomachs drop. It’s natural. Nobody enjoys seeing their portfolio shrink. But instead of letting fear dictate your next move, what if you could approach down markets with a calm, calculated strategy? Enter: the Dollar-Cost Averaging (DCA) investment strategy. DCA isn’t flashy. It’s not some hot stock tip or a wild market-timing maneuver. In fact, it’s often dismissed because of its simplicity. But as Brian explains in this episode of The Field Guide, sometimes boring is brilliant.

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Understanding Dollar-Cost Averaging

Dollar-cost averaging is the strategy of investing a fixed amount of money at regular intervals, regardless of what the market is doing. Whether stocks are up, down, or sideways, the same amount goes in on schedule. This means that when prices are high, you buy fewer shares. When prices are low, you buy more.
You might already be doing it without realizing it. Most 401(k) plans are built around this principle. Every two weeks, a portion of your paycheck gets invested, buying into the market consistently over time.

The beauty of this approach? It takes emotion out of investing. And emotion, as history has shown, is often the enemy of smart financial decision-making.

What’s Happening in the Market Right Now

As of the recording, markets are down roughly 10–12%. That’s enough to make even seasoned investors sweat a little. And if you look at various indicators—forward P/E ratios, the Buffett Indicator, the Case-Shiller Index—there’s an argument to be made that stocks are still overvalued. That means we could see more downward momentum before things turn around. Add in the geopolitical uncertainty, government policy shifts, and general economic anxiety, and it becomes even more tempting to retreat, pull your money out, and wait on the sidelines.

But here’s the thing: that’s rarely a winning move.

The Opportunity Hidden in the Downturn

Brian emphasizes a simple truth that many forget in moments like this: markets don’t move in straight lines. They ebb and flow. They breathe in and out. And history shows that downturns are followed by recoveries. Often strong ones.

Just look at 2008. The Great Recession was brutal. But what followed was one of the longest bull runs in history. The same happened after the dot-com bubble, and again after the COVID-19 crash. Over time, the market has always rebounded.

So why not take advantage of the downturn instead of fearing it?

Dollar-Cost Averaging  in Down Markets in Action:

A simple, effective game plan when markets are down, is dollar-cost averaging which allows you to buy more shares for the same amount of money. If you were investing $2,000 per month before the drop, you’re now getting more bang for your buck. That means when the market does recover—and it likely will—those extra shares will have a higher value.

It’s like buying quality stocks on sale.

Brian points out that this is the perfect time for high-income earners to lean into their plans. If you’re already maxing out your 401(k) and Roth IRA, you can consider adding more to a taxable account. Even small adjustments—like contributing a little extra when the market hits specific downturn thresholds—can significantly boost long-term returns.

For example:
Market down 10%? Add an extra $500.
Down 15%? Add another $500.
Down 20%? Add even more if cash flow allows.

This isn’t market timing. It’s staying consistent while being opportunistic within a well-thought-out plan.

Why This Works: The Psychology of Automation

One of the greatest strengths of DCA is that it removes decision-making from the process. When emotions run high, logic tends to take a backseat. By setting up automated contributions, you protect yourself from reacting to fear or greed.

Think of it like autopilot for your finances. The money comes out of your account. It gets invested according to your plan. And you don’t have to think about it.
Instead of checking your portfolio every day and stressing about red numbers, you can rest knowing your strategy is working for you behind the scenes.

The Power of Long-Term Thinking

If you’re five to ten years out from retirement, this might be one of the best opportunities you’ll have to accumulate more wealth. When you’re contributing consistently, especially during down markets, you’re setting yourself up for potential growth when the market eventually rebounds.

It’s important to remember that investing isn’t about hitting a home run on every pitch. It’s about building wealth slowly and steadily over time. DCA helps you do exactly that.

But What If This Time Is Different?

Every time there’s a downturn, you’ll hear someone say, “This time is different.” But as Brian wisely notes, those four words are usually wrong. In almost every major downturn in modern history, the market has come back stronger. Betting that “this time is different” is risky business.

A better bet? Stick with what works. Stick with the plan. Trust the process.

Start With a Plan

None of this works without a plan. Whether you’re investing $500 a month or $5,000, having a clear strategy is crucial. Decide how much you’re going to contribute, how frequently, and how you’ll adjust (if at all) when the market shifts.

Make your plan based on your goals, not the headlines.

If you have extra cash flow right now, put it to work. If not, just stay consistent. The key is to avoid pulling out or pausing your contributions out of fear.

The Takeaway

The dollar-cost-averaging in down markets isn’t glamorous. It doesn’t make headlines or get featured in hot stock newsletters. But it works. Especially in volatile markets like the one we’re in now.

It’s a strategy that rewards discipline, consistency, and long-term thinking. And it’s accessible to everyone, whether you’re just starting out or deep into your career. So the next time you see the market in the red, take a deep breath. Remember the plan. Keep investing.

Because when it comes to building wealth, boring often wins.

Next Steps

Want help building your investment strategy or creating a plan that works in any market? Reach out to us,  we’re here to guide you every step of the way.

The Hidden Risks, and Realities, of Insurance for High-Net-Worth Individuals

Posted on by Brian Colvert

Insurance for high net worth individuals

For high-net-worth individuals, wealth offers a sense of freedom, security, and choice. But with greater assets comes greater risk. While insurance is often seen as a check-the-box necessity, the truth is that many affluent individuals are unknowingly underinsured. This leaves them exposed to potential financial disaster in the event of a major claim.

Today we’re breaking down the hidden risks and how high-net-worth individuals can better protect their homes, vehicles, and lifestyles with the right insurance strategies. Drawing from a recent conversation with Jacob Morgan, a top 1% Farmers Insurance agent and President’s Council member, we’ll uncover the current trends, common mistakes, and smarter moves you should be making today.

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Why Standard Insurance Isn’t Built for the Affluent

Most people begin their insurance journey by shopping for the cheapest premium. It makes sense when you’re starting out. But as your assets grow, that approach quickly becomes dangerous.

Standard policies often have coverage caps that don’t align with the true value of luxury homes, exotic cars, or high-end personal items. Additionally, claims service, deductibles, and replacement cost policies may not be designed for unique needs.

Jacob Morgan puts it plainly: “If you’re worth $10 million and living in a fire-prone area with a custom-built home, you’re in a totally different risk category. You’re not just another house on the block. You’re a one-of-a-kind risk.”

The Reinsurance Crisis: Why Premiums Are Skyrocketing

One of the key drivers of rising insurance premiums in recent years is the cost of   . Reinsurance is essentially insurance for insurance companies. When disasters like hurricanes, wildfires, and massive hailstorms happen, the losses get passed up the chain—and ultimately, back down to consumers.

In 2023 alone, the insurance industry lost $43 billion. By mid-2024, the industry had already hit that figure again. Reinsurance markets are tightening, especially in high-risk zones like:

  • California (wildfires, earthquakes)
  • Florida (hurricanes)
  • Colorado (hail, wildfires)
  • Texas (wind, flood)

These macro pressures are pushing premiums higher, and in some cases, making coverage harder to find altogether. For high-net-worth individuals, this means more scrutiny and significantly higher costs to insure homes in these areas.

Why Wealthy Individuals Are Hit Harder

Affluent clients often find themselves on the losing end of insurance pricing, but not by accident. The very things that make luxury living so desirable—beautiful locations, expansive properties, custom features—also make them high-risk to insure. Insurers are increasingly scrutinizing these properties and passing along higher costs to cover the growing risks and potential losses. Here’s why:

  1. Aggregation of Risk: Insuring a $20 million mansion is not the same as insuring ten $500,000 homes. A single loss can devastate a carrier’s bottom line.
  2. Location, Location, Risk: Luxury homes tend to be in scenic, exclusive areas—on the coast, in the mountains, or in rural getaways. These spots also happen to be more vulnerable to disasters and far from emergency services.
  3. Luxury = Higher Replacement Costs: A tile roof on a million-dollar home isn’t just more expensive—it can be exponentially more expensive. Add in custom cabinetry, imported finishes, and high-end tech, and you’re looking at rebuild costs far beyond what standard policies account for.

Common Insurance Mistakes High-Net-Worth Individuals

Despite having the means to afford proper protection, many wealthy individuals unknowingly fall into common insurance traps. These oversights often stem from a set-it-and-forget-it mentality, or from applying the same logic they used in their early financial lives. Let’s explore the most frequent mistakes and how to avoid them.

  1. Staying with the Same Policy for Too Long: Jacob shares that before he opened his agency, he had the same policy for 12 years without ever reviewing it. He later discovered major gaps in coverage. Your lifestyle evolves—your insurance should too.
  2. Chasing the Lowest Premium: While it might be tempting to price-shop insurance the same way you do flights or hotel rooms, this can lead to inadequate coverage. Insurance companies don’t create all policies equally—especially when it comes to endorsements and exclusions.
  3. Low Deductibles on High-Value Assets: Affluent individuals often keep deductibles low out of habit, but this can cost you thousands in premiums. Raising deductibles on high-value items like homes and luxury vehicles can significantly reduce your annual costs while making sense for your cash flow.
  4. Overinsuring Market Value Instead of Rebuild Cost: Many homeowners assume they should insure their home for its market value. In reality, insurance covers rebuild costs, not what Zillow says your home is worth.
  5. Skipping Liability and Umbrella Coverage: As wealth grows, so does visibility and the likelihood of being targeted in a lawsuit. Umbrella policies can be an inexpensive safeguard—often as little as $500 per year for millions in added protection.

Smarter Insurance Strategies for High-Net-Worth Individuals

If you’re building or preserving significant wealth, your insurance strategy needs to be just as sophisticated. It’s not only about coverage amounts. It’s about who manages your coverage, how often it’s reviewed, and what protections are in place when the unexpected happens. Here are some high-impact strategies that can dramatically improve your risk management approach.

  1. Work with an Agent Who Specializes in Affluent Clients: A knowledgeable agent can tailor policies based on your asset mix, lifestyle, and risk exposure. For example, a home in Vail, a yacht in Miami, and a classic car collection all require different layers of coverage and carriers that understand the nuances.
  2. Bundle Strategically: While bundling home and auto can provide discounts, sometimes splitting carriers is the better choice—especially if you have properties in multiple states.
  3. Review Policies Annually or After Major Life Changes: If you renovate your home, buy a new vehicle, acquire art, or add a vacation home, it’s time to review your policies. Even if nothing major changes, plan on an annual review to ensure you’re not overpaying or undercovered.
  4. Customize Coverage With Endorsements: High-value personal property often needs specialized endorsements. Think: collectibles, watches, wine collections, sports memorabilia, home offices, or smart-home systems. Avoid assuming that a standard policy fully covers these items.
  5. Embrace Higher Deductibles Where It Makes Sense: As Jacob suggests, if you can easily afford a $2,500 or $5,000 deductible on your home or car, consider increasing it. Use the savings to enhance your liability limits or invest in umbrella coverage.
  6. Invest in an Umbrella Policy: Liability claims can come from car accidents, injuries on your property, or even social media defamation. Umbrella insurance picks up where your primary coverage stops, providing extra peace of mind.

Jacob noted that in his book of business, only two umbrella claims have been made. Both were worth more than the premiums collected from hundreds of policies—and they saved the clients from serious financial harm.

Final Takeaway: Don’t Set It and Forget It

Insurance for high-net-worth individuals is not just a formality, it’s a strategic pillar of wealth protection. Unfortunately, too many people spend decades building wealth—only to risk it all on outdated or inadequate insurance coverage.

Here’s what to do next:

  • Review your current policies with a trusted agent
  • Assess your liability exposure, especially if you have multiple properties or vehicles
  • Ask about umbrella policies, higher deductibles, and tailored endorsements
  • Re-shop or review annually, especially if you live in a high-risk area

As Jacob Morgan put it, “Why would you go your whole life building wealth, only to lose it over a $500 insurance decision?”  Well said.

Ready to Protect What You’ve Built?

When it comes to high-net-worth insurance, working with the right expert makes all the difference. Jacob Morgan and his team specialize in protecting complex, high-value portfolios—from luxury homes and vehicles to vacation properties and beyond. Whether you’re reassessing your current coverage or building a more strategic risk management plan, Jacob can help ensure your insurance is aligned with your wealth.

Already working with us on your financial plan? Perfect. We’ll collaborate directly with Jacob to create a seamless, coordinated strategy that protects both your assets and your future.

📞 Contact Jacob Morgan at (719) 576-2638
📧 Email: [email protected]

Just mention this blog/podcast so he knows we sent you!

Roth Conversion: Turning Market Lows Into Tax-Free Growth

Posted on by Brian Colvert

Market downturns can be nerve-wracking. When stocks dip, it’s easy to feel like you should hit pause on any big financial moves. But what if a downturn was actually an opportunity? If you’ve been considering a Roth conversion, now might be the best time to act.

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A Roth conversion allows you to move money from a tax-deferred retirement account (like a traditional IRA) into a Roth IRA. The trade-off? You’ll pay taxes now on the converted amount, but in return, your money grows tax-free and can be withdrawn tax-free in retirement. And when markets are down, this strategy becomes even more attractive.

In this post, we’ll break down why a downturn is an ideal time for a Roth conversion, how it works, and what you need to consider before making your move.

What Is a Roth Conversion?

A Roth conversion is the process of moving pre-tax retirement funds from a traditional IRA or 401(k) into a Roth IRA. Normally, traditional retirement accounts are tax-deferred, meaning you don’t pay taxes when you contribute, but you will when you withdraw in retirement.

With a Roth IRA, the opposite is true—you pay taxes upfront but enjoy tax-free withdrawals later. By converting funds now, you lock in today’s tax rates and eliminate the uncertainty of potentially higher tax rates in the future.

Why a Market Downturn Is a Smart Time for a Roth Conversion

A downturn in the stock market may seem like a time to retreat, but for savvy investors, it can be the perfect moment to make strategic financial moves. Here’s why:

1. You Get More Shares for Your Money

When stock prices drop, the value of your traditional IRA also declines. If you convert those assets to a Roth IRA during a downturn, you’re moving shares at a lower valuation, meaning you pay taxes on a lower dollar amount.

For example:

  • If your traditional IRA held $100,000 before a downturn and its value drops to $80,000, a Roth conversion would only trigger taxes on the $80,000 instead of $100,000.
  • When the market recovers, those assets will grow tax-free within your Roth IRA.

By converting at a discount, you position yourself for greater tax-free growth when the market rebounds.

2. You Can Pay Less in Taxes

Since the IRS taxes Roth conversions as ordinary income, the lower your conversion amount, the less you’ll owe in taxes. If a downturn reduces your taxable income (for example, if you have lower capital gains or fewer bonuses this year), you may land in a lower tax bracket—making a Roth conversion even more attractive.

3. No Required Minimum Distributions 

Unlike traditional IRAs, Roth IRAs don’t require minimum distributions (RMDs) when you hit age 73. That means you can keep your money invested longer, allowing it to grow tax-free for as long as you want.

4. More Flexibility in Retirement

A Roth conversion now can provide greater flexibility later. By having both traditional and Roth funds, you can better control your taxable income in retirement, pulling from different accounts depending on your tax situation each year.

Breaking It Down: A Simple Roth Conversion Example

Let’s say you’re planning to convert $8,000 into a Roth IRA. Here’s how the numbers might play out in different market conditions:

  • When the market is high: The stock you want to buy is $100 per share. Your $8,000 buys 80 shares.
  • When the market is low: The same stock is now $80 per share. Your $8,000 buys 100 shares.

If the stock eventually rebounds to $100 per share, the account value in each scenario would be:

  • Market High Conversion: 80 shares × $100 = $8,000
  • Market Low Conversion: 100 shares × $100 = $10,000

That’s a 25% gain in your tax-free Roth account simply because you converted during a downturn.

How to Decide If a Roth Conversion Is Right for You

While a Roth conversion can be a smart move, it’s not a one-size-fits-all strategy. Consider these factors before moving forward:

1. Your Current vs. Future Tax Bracket

  • If you expect your tax rate to be higher in retirement, a Roth conversion now at a lower tax rate makes sense.
  • If you’re currently in a high tax bracket but expect it to drop later, waiting might be a better choice.

2. Your Ability to Pay the Taxes

  • Taxes on the conversion should ideally be paid from a non-retirement account.
  • Using IRA funds to pay taxes means you’ll be left with a smaller balance growing tax-free.

3. Your Retirement Timeline

  • If you plan to retire soon and need the money within five years, a Roth conversion might not be ideal. Withdrawals from converted funds within five years of conversion trigger a penalty.

4. Your Estate Planning Goals

  • If you want to pass on wealth tax-free to heirs, a Roth conversion is a great tool.
  • Unlike traditional IRAs, Roth IRAs don’t require heirs to pay taxes on withdrawals.

How to Execute a Roth Conversion in a Downturn

If you decide a Roth conversion makes sense, here’s how to get started:

  1. Evaluate Your Portfolio – Identify which assets are best suited for conversion.
  2. Estimate Taxes Owed – Work with a fiduciary financial advisor or CPA to calculate tax liability.
  3. Choose a Conversion Amount – Decide how much you can afford to convert while staying in your tax bracket.
  4. Initiate the Conversion – Work with your brokerage to move funds from your traditional IRA to a Roth IRA.
  5. Pay the Taxes – Ensure you have cash on hand to cover the tax bill without tapping into retirement savings.

Common Roth Conversion Mistakes to Avoid

Before you jump in, avoid these pitfalls:

  • Converting Too Much at Once – Large conversions can push you into a higher tax bracket. Consider a multi-year conversion strategy.
  • Not Planning for the Tax Bill – Don’t forget you’ll owe taxes on the converted amount in the year of conversion.
  • Overlooking the Five-Year Rule – If you convert funds, you must wait five years before withdrawing them without penalty.

Final Thoughts: Should You Convert to a Roth During a Downturn?

A Roth conversion is one of the smartest moves you can make during a market downturn. By converting assets when their value is temporarily lower, you reduce your tax burden and set yourself up for greater tax-free growth in the future.

However, this strategy isn’t right for everyone. If you’re unsure whether a Roth conversion fits your financial plan, contact us today to discuss whether a Roth conversion is the right move for you.

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