Hi, How Can We Help You?

Blog Posts

Three Social Security Traps

What you don’t know about Social Security benefits can hurt you and your spouse for the rest of your lives. Here are three traps to avoid when taking your benefits.

The Key Takeaways

  • The longer you can postpone taking your Social Security benefits, the larger the amount you and your spouse will receive over your lifetimes.
  • Continuing to work after you start receiving benefits early can temporarily reduce the amount of your benefits.
  • It is important to seek the advice of a retirement specialist who can help you navigate the rules of Social Security to your best benefit.

Three Traps to Avoid

  1. Taking Money Too Early. It can be tempting to start taking your benefits as soon as you become eligible at age 62. But the longer you can wait, the higher your monthly benefit will be—and the more you will receive over your lifetime. Also, cost of living adjustments (COLA) are calculated on the amount of your monthly benefit, so if you take benefits at age 62, your COLA adjustments will be calculated on a lower amount.
  1. Working Income. If you elect to take benefits early and you keep working, the amount of your benefit can be reduced. This reduction will continue until the year you reach full retirement age (66). In 2014, Social Security reduces benefits by $1 for every $2 of earned income above $15,480. For example, say you start benefits at 62 and you have earned income of $30,000. You are $14,520 over the annual limit, so you will receive $7,260 less in benefits (50% of the difference). However, the benefit reductions are not lost; they are deferred and credited to your benefits record when you reach full retirement age.
  1. Spousal Benefits. Your decision when to start taking your benefit affects your spouse too. After you die, your spouse is eligible to receive your monthly benefit if his/her own benefit is less than yours. If you elect to receive your benefit earlier rather than later, your spouse’s benefit will also be lower. If you wait until you reach full retirement age (66), you can claim your Social Security benefits but delay taking them. This lets your spouse draw spousal benefits immediately, while you continue working and increasing the value of your future benefits.

What You Need to Know

Ideally, you will want to evaluate when to take your benefits based on your retirement savings and other sources of retirement income, your and your spouse’s health, your family’s history of longevity, and if you plan to continue working. While most people would benefit from waiting until a later age to start their retirement benefits, some may risk running out of money and will need to take their benefits as soon as they are eligible. A retirement planning specialist can help you decide what is best for you.

Actions to Consider

  • If you are concerned about the future of Social Security, you could take your benefits at 62 and invest them. By the time you need to start taking the money, you may be able to make up any loss you incur by taking them early. But, of course, this is dependent on your portfolio allocation and market performance.
  • If you keep working beyond age 62, your Social Security benefit will increase each year up to age 70.
  • While you are eligible for Social Security at age 62, you are not eligible for Medicare until age 65. If you stop working, you will have to pay for private insurance with your own money.
  • If you wait until your full retirement age (66), another spousal benefit option is available. If you both want to retire at the same time and your spouse will receive a lower benefit, you can claim spousal benefits now from your spouse, let your benefits continue to grow and then switch to your (higher) benefit later.

Read More

Five Tips to Remove Financial Hassle from Your Life

Everyone faces hassles in life. We can’t escape them completely, but if we can minimize them, our quality of life improves. There are hassles in managing your finances and wealth, too. Here are five tips that will help you get financial aggravation under control.

The Key Takeaways

  • Minimizing hassles helps reduce stress and improves the quality of your life.
  • Managing your finances and wealth in a simpler way can alleviate unnecessary annoyance.

The Five Tips

  1. Consolidate banking, debt, investment and insurance providers. The fewer people and institutions you have to deal with, the more productive you will be.
  1. Instead of working with individual professionals, work with a group that operates as a team. Individual professionals have to make recommendations without knowing what others are advising you to do, so you are likely to have either inadequate or overlapping planning. A team approach—where members bring their own areas of expertise and resources and work together on the “big picture”—is more efficient (fewer meetings, reports and explanations), saves time and money, and provides more complete solutions.
  1. Organize your financial documents in a logical way, especially your life-planning documents. Think about the information your family will need if something happens to you. Obvious documents include your will or trust, health care power of attorney, health and long-term care insurance policies, life insurance policies, bank and investment accounts, loan documents, titles and safe deposit box. Organizing this information, and showing your family where to find it, will greatly reduce their hassle when the time comes to implement the plan.
  1. Evaluate new investment opportunities once each quarter. This is often enough to stay current without getting distracted. If you read or hear about something that interests you, make a note to discuss it with your investment advisor at the next quarterly meeting.
  1. Use just one or two research sources. Find a couple you like that are reputable and stick with them. You do not want to waste hours researching sources that may be contradictory and, worse, are not reliable.

What You Need to Know

Simplifying your financial life may take some time and concentrated effort. Every six months, take the time to assess how you’re doing in making your financial life more efficient and consider areas that could be improved. For example, if you are working with different professionals, schedule the various update meetings close together so your attention will be focused for a known amount of time. If you are working with a coordinated team, set your update meetings ahead of time so you can know the schedule and not worry about finding dates at the last minute.

Other Actions to Consider

  • When organizing information for your family, remember to provide access to computer files and online accounts. Clean off your computer desktop and make it easy for someone you trust to find your accounting files and other important records.
  • Make a list of your professional advisors, friends and associates who should be contacted in the event of your illness, injury or death. A list of your doctors and any medications you take can also be helpful.

Read More

Taking Care of a Valuable Asset (You)

The combination of your talents, experience and skills represents an asset. Like any asset, it should be managed and protected. This includes keeping yourself healthy, having sufficient insurance protection, planning for both the near term and the future, investing in yourself, and having contingency plans if a sudden turn occurs.

The Key Takeaways

  • You—your talents, experience and skills—are your most valuable asset.
  • Properly managing and protecting this asset can make you more valuable and prepare you for future changes and opportunities.

Caring for Yourself as an Asset

Too often, we let ourselves slip to the bottom of the priority list. But when you start to think of yourself as your most valuable asset and begin to nourish and protect this asset, you will perform at your best and increase your value. For example:

  • Keep yourself healthy. You can’t perform at your best if you don’t take care of yourself. Start with the simple things you already know you should do: eat the right foods, drink water, exercise regularly, get enough restful sleep, etc. See your doctor and take care of small issues before they become big problems.
  • Have sufficient insurance to manage risk. Coverage usually includes health insurance; long-term care insurance; life insurance; property and casualty insurance; liability insurance; and professional insurance.
  • Invest in yourself to stay valuable, both for the short term and long term. Work on ways to be consistently productive in your work. Learn new skills or take training that will help in your current job/career or that will prepare you for a future one. Consider additional education or an advanced degree to help expand your abilities and potential.
  • Have contingency plans. Plan for the unexpected. Start paying off debts and building an emergency fund. Keep your resumé updated. Expand your professional contacts in your current industry or one you would like to pursue by attending networking functions and using social media like LinkedIn.

What You Need to Know

When you take care of yourself, protect yourself and invest in yourself, you will perform better, become more valuable, and will be more prepared if your future takes an unexpected turn or a golden opportunity comes your way.

Other Actions to Consider

  • Stress can affect you physically, mentally and emotionally. Having a comprehensive plan, and a team of professionals looking after its execution, brings far greater value in financial benefits, peace of mind, and confidence in the future than the upfront costs.
  • Don’t expect to make all the changes at one time. Take small but consistent steps. Set some goals and start working toward them.
  • Everyone has different talents and abilities. Consider what you do well and work on being as good as you can be in those areas. At the same time, be conscious of things you could do better and work on some improvement in those areas.

Read More

What’s On Your Worry List?

A comprehensive financial plan that is effectively executed delivers dollar savings in improved investment returns, lower taxes, lower fees, more efficient wealth and more stable income. However, an important outcome of this process addresses what may be on your worry list: running out of money, family strife, unexpected losses and making financial mistakes.

The Key Takeaways

  • Financial stress can negatively affect the health and emotional well-being of you and other family members.
  • Working with a financial planning professional can help you handle your financial situation, alleviate worry and, in general, help you feel more in control of your life.

Financial Worry is Common

If money worries keep you awake at night, you’re not alone. People are living longer and health care costs, especially for long-term care, continue to rise. As a result, retirement savings must last longer and stretch farther than most anticipated. Even those who thought they were prepared for retirement may now be afraid of running out of money, especially for the surviving spouse. Many families are still recovering from losses in the stock market and job market. Credit card debt is at an all-time high, as is the cost of a college education. Many families find themselves in the middle of the sandwich: taking care of elderly parents and raising their own children.

What You Need to Know

Worry about financial matters can negatively affect your health. It can lead to unhealthy coping behaviors like drinking, smoking and overeating. Cutting back on health care in an effort to save money allows small health problems to escalate into larger ones. If you have trouble sleeping, your mood, immune system and cognitive functions can be affected. All of these inevitably lead to more stress and can cause friction within the family.

Actions to Consider

  • Planning is an essential activity. A comprehensive plan incorporates budgeting, income planning, tax planning, retirement analysis, insurance and trusts.
  • A plan that isn’t executed lacks value. Expect to work with specialists to bring your plan to fruition: an advisor for planning and investments; a trust and estate attorney to draft the trust and estate documents; a CPA to implement tax strategies; an insurance agent to institute insurance products. If your resources are insufficient or uncertain, be open to changes that will alleviate financial stress and help you meet your financial priorities. For example, you may need to move to a less expensive neighborhood (or state). Your children may need to go to community college or state school instead of a four-year private university. A parent may need to live with you.
  • The sooner you take action, the sooner you can stop worrying.

 

Read More

Wealth Protection: Avoiding Losses

You can’t create wealth until you preserve it first. Each dollar lost unnecessarily isn’t just a single dollar lost, but a compounded dollar lost. A dollar not lost allows wealth to compound from a higher floor. Losses can occur from many places beyond investments: property, income, taxes and fees. It is well worth paying for the expertise of professional advisors who are able to prevent or reduce losses in all of these areas.

The Key Takeaways

  • Protecting your wealth from losses allows you to build more wealth, as compounding growth is able to build on a larger base.
  • Losses can occur from many sources you may not have considered.
  • Experts can help you identify where these risks are hiding and provide solutions to protect you.

Prevent/Reduce Losses to Grow Wealth

Any time you can prevent or reduce a loss, you preserve wealth. Here are five areas in which losses may occur.

  1. Investments: Choose your investment manager carefully. Ask how losses can be avoided. Look at past performance history of each investment, but be aware that one with the highest returns may also have the highest losses and a volatile historical record. Take the time to review your asset allocations, investment manager’s performance, and level of risk, and make changes when necessary.
  2. Property: If you have a loss on property that is not insured for its full replacement value, you will pay for the uninsured part of that loss out of your own wealth. Periodically review the full replacement values of your property and maintain adequate insurance.
  3. Income: You may lose income due to a layoff, illness or injury. Having adequate health insurance, disability income insurance and an emergency fund that will cover at least six months of lost income will help to preserve the rest of your wealth until you recover or find other income.
  4. Taxes: Most people think about income taxes when considering tax management.  However, other taxes are also important to manage, like capital gains taxes or matching gains and losses when selling investments or property. An experienced estate planner can help you with estate tax planning and income tax planning for wealth transfers during your lifetime and after death, including the sale or transfer of a business.     Fees: Many fees, such as investment product fees, trading expenses, and insurance product surrender charges, can be avoided or lessened with a comprehensive financial plan.
  5. Fees: Many fees, such as investment product fees, trading expenses, and insurance product surrender charges, can be avoided or lessened with a comprehensive financial plan.

What You Need to Know

An experienced estate planning attorney can also help you shield your family and your assets from probate court interference at incapacity and death, unintended heirs, unnecessary legal fees and taxes, and lawsuits.

 

Additional Actions to Consider

  • If you need an advisor who specializes in a certain area, ask for referrals from other advisors, your banker, friends and business acquaintances. If you start hearing the same name several times, you’re probably on the right track.
  • Take the time to research and understand any strategies that are being recommended to you. An educated consumer is a smart consumer.

Read More

Aligning Insurance Products within a Planning Structure

Aligning Insurance Products within a Planning Structure

We use a variety of insurance products to manage risk in different areas of our lives in order to protect our wealth from losses that can come from property damage, businesses we own, disability, retirement and death. Instead of considering these products as separate items, make them part of an integrated, overall risk management plan.

The Key Takeaways

  • A variety of insurance products are used to help manage risk and protect wealth.
  • The best results occur when separate insurance products are part of an integrated plan.

Different Kinds of Insurance for Different Risks

Most insurance can be grouped in these general categories.

Property: This would include insurance on automobiles and other vehicles; home, furnishings, jewelry and artwork, and personal liability insurance.

Business: Business owners need insurance on a building they own, office equipment and computers, as well as liability, worker compensation, errors and omissions insurance, and so on.

Health and Disability: Disability income insurance replaces part of your income for a certain length of time if you should become ill or injured and unable to work. Health insurance helps to pay for medical services received. Long-term care insurance helps to pay for extended care that is not covered by most health insurance or Medicare.

Retirement: Annuities and other insurance products can help replace income after retirement.

Estate Planning: Life insurance is often used to replace an earner’s income; to pay funeral expenses, debts and taxes; to fund family and charitable trusts; to fund a business buyout and compensate the surviving owner’s family; and to provide an inheritance to family members who do not work in a family business.

What You Need to Know

Remember, insurance is for risk management—to protect your wealth from potential areas of loss. If a risk is no longer there (the exposure ends or you are able to self-insure and cover the risk yourself), then the insurance coverage for that risk can be eliminated.

Actions to Consider

  • Trying to coordinate your insurance and manage your risk yourself is a daunting task. Instead, work with a team of advisors who have the knowledge and experience to help you make sure your risks are covered at the appropriate levels, without duplication and unnecessary costs.
  • An advisory team will usually include your financial investment advisor, estate planning attorney, and life, health and property/casualty insurance agent(s). Other members may be added to this team as needed. You will probably find that your advisors will welcome the opportunity to work on your team, because they want to provide you and your family with the best possible service and solutions.

Read More