When Should I Take Social Security?

In short – it depends. Like many topics in personal finance, when to take Social Security is kind of a loaded question for advisers. Taking Social Security is a personal decision based upon a variety of factors. That’s why your adviser should be honest and tell you that it depends; because it depends on a host of social and financial factors.

For starters, it’s not just about your age and turning 62 for early eligibility or older for your Full Retirement Age (FRA). Your FRA is different depending upon your year of birth. You also need to consider whether you need the money. Another factor is family longevity. Do people in your family live longer than average? Are you in good health or are you in great health for your age? Do you fear you won’t be able to draw your “fair share”? Will taking it help you sleep better at night?

On the financial side, you need to consider if you should delay taking Social Security until you are older to increase your payment. Generally, you get about an 8% raise per year that you delay taking Social Security beyond your FRA.  This can really maximize your lifetime amount if you are prone to living to an advanced age. You also need to consider if it will be too much income and how it may be taxed if you are still working, or if you have other income. Your adviser can run the scenarios for you so you can get a good idea of what to expect.

These factors put the personal in personal finance. No one should give you an instant answer without probing deeper into your personal situation to help determine the best course of action for you – personally. As an independent Certified Financial Planner™, I can help you with figuring out a course of action and putting that plan into action to get ready for retirement.  #talktometuesday #CFPPro #Hireaplanner #retirement #socialsecurity #goals #savings #cash

Fee-only vs. Fee-based: Is There a Difference?

You bet there is; and it could cost you! The financial services industry seems to be laden with jargon and titles that sound similar, but in reality have very different meanings. It can be very confusing for clients. When it comes to your adviser, you need to know the terms fee-only and fee-based because it determines how the adviser is compensated.

Generally speaking, fee-only financial planners may be registered investment advisers, and should act as a fiduciary in the client's best interest. Fee-only advisers do not accept any fees or compensation based on product sales, i.e., no commissions. Fee-only advisers are viewed as having fewer conflicts of interest, and are seen as providing more comprehensive advice.

Conversely, a fee-based adviser may not always disclose how they are compensated to a client. Many fee-based advisers do offer hourly fee service but they also offer commission-based products (insurance, annuities, etc.) to clients. Fee-based advisers may not disclose that they will receive a commission based upon their recommendations. Further, fee-based advisers generally have to work in their firm’s best interest first, and not necessarily the client’s. Conflict of interest, anyone?

Yes, I am biased in favor of the fee-only model. Many fee-only planners have also obtained the Certified Financial Planner™ designation and act as a fiduciary for their client. However, you do not have to be fee-only to be a Certified Financial Planner™.  If you would like to learn more about fee-only planners, you can research the following websites for information and use their Find an Adviser function:  National Association of Personal Financial Advisors (NAPFA), the Garrett Planning Network, or the Certified Financial Planner Board of Standards.

For disclosure, I am not a member of NAPFA or Garrett Planning Network. I am however, a fee-only, independent CERTIFIED FINANCIAL PLANNER™.  I can help you with financial decisions, budget for debt, save or invest for retirement, investment allocation and more. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #feeonly #feebased #commission #fiduciary

I Need to Take a Class on How to Retire

I recently had a client say this to me during our meeting because there is so much to consider. She is in great health, planning to work until at least age 70, if not longer, and not at all interested in slowing down. She is about six years from her goal to stop working. Knowing this, we met to discuss her current retirement plan offerings and the allocations, but we ended up discussing much more than just cash flow, retirement accounts and Social Security projections.

First, I let her know that she is far from alone. As many healthy Americans age, not everyone is eager to leave what he or she does for a living. For some, it’s the security of a monthly paycheck and healthcare coverage. However, for many it’s the fact that they are still vital, active and engaged with their professional lives.

You don't have to figure it out alone.

There are key steps to take several years before you contemplate retirement. If you are working with a financial planner, you should be preparing at least five years before your retirement goal year, if not even further out.  If you are close to retirement, call your financial planner now!

What to consider…

Can you retire? You need to sit down with your financial planner and project what income and expenses you will most likely have in retirement. You need a good understanding of all your income streams from retirement plans, savings, pensions, investment accounts, Social Security, etc. You need to know when and how to tap each source to maximize the benefit so timing and planning are key. For example, my client wants to work until at least age 70 and has no plans to touch her Social Security. She wants to delay taking Social Security to qualify for the maximum benefit amount.

What about health care costs? You need to know when and how to file for Medicare, the costs and whether you will need a supplement plan. If you have other medical insurance coverage, you need to understand how or if the coverage works together. Most importantly, you need to project the costs and account for this expense.

When should you retire? Whether you hate your job or love it, there comes a time for many of us to call it quits. If you know you want to retire, make sure that you coordinate the retirement age with the benefits available to you. You do not want to retire too early and miss key plan contribution dates for your workplace retirement or pension plans. Nor do you want to work longer than needed.  Review any workplace pension rules, retirement plans, and Social Security dates to be sure you are getting the maximum benefit possible. No matter what you do, timing when to leave the workforce in coordination with your benefits and retirement income is very important. For more, see my blog post How to Pick Your Retirement Date. 

How’s your debt load? If you are close to retirement, debt free should be a goal. There is an argument that having a mortgage in retirement may be a benefit, but this is something you should discuss with a financial planner to make sure it is a benefit for you. Otherwise, you should make sure you are entering retirement without consumer debt.

Historically, people would quit their job and never look back. Today, many retirees find that their knowledge is still valuable. Instead of working as a nurse full-time, you retire and find that you can teach part-time. Perhaps you turn a lifelong hobby into a side-hustle that you love. Maybe you decide to volunteer a few hours per week at the local community garden. Knowing what you want to do, how your benefits will work, and when best to retire can make the transition more enjoyable and profitable.   

As an independent Certified Financial Planner™, I can help you with a retirement strategy tailored to your goal, timeline and resources. Contact me and let’s get started! #talktometuesday #retire #Hireaplanner #socialsecurity #retirement #spend

What’s the Fastest Way to Pay Off Debt?

Avalanche or snowball method? Which is the fastest way to pay off debt and what’s the difference between the two? It all depends on whether time saved or maximum money saved motivates YOU as the debtor.

Do you know how long it will take you to be debt free? Do you have a plan?

Using the snowball approach, you can pay off a small debt and then apply that payment amount toward your next smallest debt. You would add the minimum payment amount from the paid off debt to the next minimum payment amount on the next smallest debt you owe.  This can feel very rewarding eliminating debts. For example, let’s say you have three debts: one is $500 with a minimum payment of $25 per month, the next is $750 with a $30 per month minimum payment and the last debt is $1,000 with a $35 per month payment. You would pay off the $500 debt and then add the $25 payment to the $30 payment and pay $55 per month on your $750 debt. You would continue this approach with all debts paying them off in order of the smallest debt first.

With the avalanche approach, you may in the end, pay less in interest and this can translate to some nice savings. You identify your highest interest rate payment and tackle that debt first with any excess monthly cash you can consistently add to the minimum payment while making only the minimum payment on your other debts. Once paid, you add that minimum payment (plus any excess) to the minimum payment of the debt with the next highest interest rate. You are creating an avalanche of payments on your high interest rate debts.

With either approach, you should consider your personal situation, timing, ability to service the debt, and any refinance options that may be available to you to reduce the amount of interest being paid. Knowing your amount of debt and the rate(s) you are paying is the first step.

As an independent CERTIFIED FINANCIAL PLANNER™, I can help you make financial decisions and budget for your debt strategy. I can also show you which method will help you pay off your debt the fastest, or save the most money. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #debt #debtfree #snowball #avalanche

Congratulations! You’ve Retired…Now What’s Your Spending Strategy?

You have made it to retirement and are ready to tap the myriad investments you have accumulated over your life. Hopefully, you have been diligent and at least saved money in the three buckets classified as taxable, tax-deferred and tax-free. So, which do you tap first? Is there a general rule of thumb? Could the general rule be different for people in different situations? The answers to the last two questions are ‘yes’ and ‘maybe’.

A general rule of thumb is that investors should first draw from their taxable accounts immediately after retirement if they are in a lower tax bracket year. This could help you somewhat avoid the tax bite.  Next, investors should look to their tax-deferred accounts. These accounts likely have minimum distribution requirements at a certain age (think IRA and 401(k) at age 70 1/2).  Lastly, investors should consider drawing from their tax-free accounts (think Roth). Don’t forget that this timing may very well be impacted by whether you are still working to some degree, already taking Social Security or opting to delay Social Security. Working with your adviser is key to knowing the lay of the land ahead and drawing strategically from your investments. You also need to calculate how much to drawdown and THAT can be a real challenge.

Where do I start....I better call Greg at Engage Advising!

Of course, every situation is different and you should consult with an adviser to figure out the advantages of using the rule of thumb approach or executing a more customized drawdown strategy based on your personal situation and funds needed. If you are not sure why this general rule applies or if it might help you, contact me and we can discuss your situation.

As an independent Certified Financial Planner™, I can help you decide how to start enjoying your retirement savings and in what order.  In addition, I can help you make decisions and layout a plan for spending in retirement. Contact me and let’s get started! #talktometuesday  #education  #Hireaplanner#retirement#income#drawdown #IRA #401k

Putting Together a Financial Plan is a lot Like Cooking!

A good financial plan for your life is a lot like a recipe or preparing a tasty dish. It takes some effort, but in the end it is well worth the time and steps involved. Think about how a recipe is a basic guideline that outlines the tools, ingredients, actions and time necessary to achieve a delicious end result. A financial plan is very much the same.

Think about making a favorite summer salad. Most likely, you know the basics but still need to check your family’s recipe or look up some measurements. Engaging with your financial life and improving your overall wealth and financial soundness is just like a recipe. You need tools and ingredients to make your plans come to fruition. Think of one ingredient as being a desire to change. Now think of one of the tools as being the knowledge a financial planner can impart.

The action on your part is to get started – hire the planner! Don’t forget the key element of your plan – time. Time is the one aspect of the planning process that cannot be recovered so starting sooner rather than later is crucial.  

Now, for a FREE recipe – Summer Corn Salad!

You need 5 ears of corn (3 ears of Silver Queen, and 2 ears of your favorite yellow corn).  You also need the following:

5 teaspoons of olive oil (divided)

1 tablespoon lime juice

1/4  teaspoon good sea salt

1/4  teaspoon of Crystal Hot Sauce (or Tabasco)

1 1/2  cups of halved cherry tomatoes

1/2  cup of diced cucumber

1/4  cup of diced red onion

1 small bunch of fresh basil

1/4 cup crumbled feta or favorite goat cheese

Make your dressing. Combine 4 teaspoons of olive oil, the salt, lime juice and hot sauce and set aside.

Cook your corn until just tender. Cool, and then remove the corn from the cob. Add the corn, tomatoes, cucumber, red onion, and chop about 2 tablespoons of fresh basil (or to taste).  Drizzle the dressing over the mixture and toss to coat. Taste, and if needed add another teaspoon of olive oil to taste. Just before serving, sprinkle on the feta cheese.

If you need help with this recipe, or more importantly, with your financial life, contact me. As an independent CERTIFIED FINANCIAL PLANNER™, I can help you make your “financial recipe” specific to your situation. Keep in mind that your recipe for financial success, is much like a cooking recipe in that you can adjust for your taste and preferences. Contact me and let’s get cooking! #talktometuesday #GetCooking #Hireaplanner #freerecipe #financialplan #FREE

How to Pick Your Retirement Date

Happy 4th of July! It’s around this time every year that many folks retire. A lot of people like the symmetry of June 30th being their last working day or the July 4th holiday being their personal independence day. Milestones are a great way to mark major life changes, but there are some important points to keep in mind when picking your retirement date.

Retirement Plan – Read your retirement plan document six months to one year prior to when you are considering retirement. You want to be aware of any dates that will work to your favor such as when payouts for matching contributions are made, confirm your vesting schedule, and know until which dates you may need to be actively employed to receive plan contributions or benefits. If your company still has a traditional pension plan, your actual retirement date could be very important. It could add money to your monthly payout by working even a day longer. The point – whether it be a pension plan or a defined contribution plan such as a 401(k) plan, check your plan documents carefully.

Equity Compensation – If you retire today, how will your stock benefits be treated? This is important to know because it would be an unpleasant surprise to learn that you are losing out on equity benefits because you selected a holiday weekend to retire versus the end of the fiscal year, a key quarter in the equity plan or possibly calendar year-end. If you have a lot of equity compensation, confirm the treatment of the awards upon separation of service and make sure your last day at the office works in your favor.  You would not want to lose a large award grant or incur a major tax bill over selecting a retirement date that might be too early.

Social Security – Are you retiring early? Will you wait until full retirement age? It will make a huge difference in your benefit. If you retire early, generally age 62, you are not going to receive a full Social Security benefit. You need to review your Social Security statement and determine your personal full retirement age for receiving your full benefit. If you have additional resources such as savings, investments, and maybe a pension or 401(k) plan, you may be comfortable retiring early and taking a reduced benefit at age 62. You may also decide to wait and draw benefits beyond full retirement age that will increase your monthly check! Timing is important as is having a plan and knowing what you’ll be receiving at each age.  

Vacation Days – Companies handle vacation pay in different ways. Some pay it out, others have “use it or lose it” policies. The important thing is to know how your company handles accrued vacation and what is the best possible way for you to not lose out on any accrued benefit.

Health Care – Have you planned for health care? Retire too early and you may not be eligible for Medicare. Make sure you know what you are going to do regarding health care. In some cases, you may be able to extend your company plan or it may be portable. In other cases, you may need to purchase a private plan in the marketplace. If you are Medicare eligible, make sure not to miss the enrollment period.

Retirement as a concept is changing quickly in our society.  Even so, many people look forward to transitioning from a career whether it is to full retirement, partial retirement, or even into a twilight career. All of these decisions are very personal but can affect your benefits. A little advance planning can help smooth the transition and put you in the best possible position.

As an independent Certified Financial Planner™, I can help you create a plan to move forward. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #retirement #aplanforyou #newcareer #socialsecurity #medicare #independence

Are You Missing Out on Your Share of $24 BILLION* Dollars?

Are you one of the many Americans who is not taking full advantage of your 401(k) plan, or worse, not participating at all? On average, Americans leave about $1,336 (per Financial Engines, 2015)* per participant of FREE money with their employer every year. How does this happen?

For starters, you lose out by not taking full advantage of your employer’s matching opportunity via your 401(k) plan. Much worse, those who do not participate at all in their company’s 401(k) plan are missing out on even more free money. Many workers erroneously believe they cannot afford to participate. Not true! You can’t afford not to participate.  Ask your financial planner to show you the post-tax effect on your paycheck versus the annual contribution total.  Let’s take the average amount of $1,336 left on the table by many participants. Just this amount alone contributed annually with an average growth of 5% could be worth $49,930 in 20 years (setting aside inflation). That’s a lot of extra money you could have just for participating in your 401(k) plan at full match.

If you are not sure what the match percentage is and how it works, grab you plan document and give me a call. As an independent Certified Financial Planner™, I can help you. Contact me and we can review your plan document to make sure you are maximizing your benefit in the best possible way.  #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #401k #plan

How You Can Save Money on Travel

The summer travel season is in full swing and it can be a challenge to control your spending. June is a very busy month with festivals, concerts, special events, weddings and many people taking time off while the kids are out of school.  A good summer vacation doesn’t have to break the bank and bust your budget.  Consider the following tips to save money.

Airfare is usually a major component of the summer travel budget. The airlines are masters at raising ticket prices close to departure dates so consider booking your ticket well in advance to take advantage of lower prices. Also, consider not checking bags! I know, I am going to hear it on this one. Most carriers allow one roller bag and one carryon bag. If your children are ticketed passengers, that applies to them as well. You can save money on baggage fees and time by not going to baggage claim. Another option, consider using a combination of miles and money if you are a frequent flyer to reduce the ticket cost.

My nephew, Kendall, catching a ride in a gold mining cart at Bodie State Historic Park in California's Eastern Sierra.

You may not need a hotel. We frequently use a private home rental agency to rent a large condo that sleeps eleven people in Mammoth Lakes, CA. By sharing our rental with other friends, we cut the cost per night per couple to much less than the local hotel rates per night. You don’t have to pack the rental with the maximum it will sleep, just find out how many other friends you need to share the cost and make it more affordable than the hotel rate. As a bonus, you’ll be more comfortable, can cook your own meals, and won’t have to deal with hotel room rates, resort charges, parking fees, etc., and everyone can come and go as they please.

Consider camping! If you’re the outdoorsy adventurous type, book a campsite well in advance. Camping is still very economical when compared to hotels, private residence rentals and even hostels in many cases.

Take vacations during the “shoulder season”. The shoulder season is that time of year between major seasons when many rentals, hotels, and campsites have lower prices due to lack of demand. You may find that you like shoulder season better than the prime travel season.

Hiking with Randy at Lulu City, CO in Rocky Mountain National Park.

Avoid the most popular holiday weekends like 4th of July, Memorial Day and Labor Day. Pick weekends that are lower in popularity and enjoy more space to yourself. Nowadays, you can use Google Analytics to look up and research a destination or property and generally Google will tell you the peak times.

Set a budget and research destination activity costs and meal price averages. By knowing these costs in advance you can set a target fund goal for your vacation. In many cases, if you reserve activities in advance and stick to your schedule you can save on the activity price.

So get creative, rethink your travel dates, and share! Many of these tips can save you money and if you combine the tips you can save a lot of cash and maybe some of your sanity.

As an independent CERTIFIED FINANCIAL PLANNER™, I can help you make financial decisions and budget for your summer getaway. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #summervacation #vacation

Financial Planning Tips for Dad this Father’s Day

We posted about Mother’s Day now here we are at Father’s Day. We often see articles that included tips learned from dad, but what about financial planning tips for dad?  

My father in his sheriff's uniform.

Just as with mom, you should discuss topics with your father such as retirement savings, Social Security plans, insurance needs, retirement activity goals, and even estate planning and end of life decisions. You don’t need to personally understand all of these areas yourself, but have a frank conversation to get a better understanding of where your father stands financially and what he is planning for his golden years. We often assume that being Dad, he may have all the answers and that’s not a good assumption.  It’s better to be upfront and clear and discuss these issues.

My stepfather in his military uniform.

The important documents binder is also a good gift for dad. It can come in handy in emergencies. Let your dad customize this binder and have him put all of his important documents inside such as his Will, insurance contracts, Durable Power of Attorney, Social Security statement, and even a farewell letter to family and friends. It’s his binder so let him personalize it all he wants, but make sure it contains all of his vital documents. You can read more about what to put into his binder at my blog post Do You Have a Special Emergency Binder.

Again, you don’t have to understand all of these areas but you do need to understand your dad’s goals and plans. Discussing these points should be done open and honestly. Topics that you and your dad do not understand should be noted and both of you should make a plan to get answers and follow through. As an independent Certified Financial Planner™, I can help you with the unfamiliar areas, set a timeline and put that plan into action to help dad get ready for retirement and beyond.

 #talktometuesday #CFPPro #Hireaplanner #retirement #socialsecurity #goals #savings #cash #fathersday #dad #binder

Have You Had Financial Regrets? A Recent Study Says, Yes.

Let’s face it, we have all had financial regrets. But don’t let that stop you from re-engaging with your financial life and reaching your financial goals. I don’t know about you, but the phrase, “I wish I knew then what I know now” definitely applies to me. I chased shiny baubles in my twenties and early thirties but finally got real about retirement savings and investing in my late thirties. Are you still chasing baubles that have no real value?

A recent study indicated that Americans have three top financial regrets: not saving early enough for retirement, not saving enough for an emergency fund, and taking on too much credit card and student loan debt. You can read more about these regrets here.

Consider this, if you start saving $300 a month at age 25, with a hypothetical 5% return, you will have about $450,000 saved by age 65 and you will only have contributed $144,000 into your retirement account. If you wait until age 35 to save the same amount each month, you will contribute $108,000 toward your retirement but only accumulate about $250,000 by age 65. The difference is time and the magic of compounding. Add an employer provided retirement plan to the mix and you can see how your golden years could be truly golden. If you have any of these regrets, put a stop to it now and get started on a new plan.

As an independent Certified Financial Planner™, I can help you establish and maintain better financial habits and help you create a plan to move forward. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #retirement #aplanforyou

Have You Considered a 529 Plan for Education?

We all want the best for the little ones in our life. Why not start early with a 529 plan for college? Investing a few hundred dollars a year for 18 years is a lot easier than waiting until your child is in high school to figure out how to pay for higher education. 

For example, if you start at birth with a $1,000 opening balance, and contribute $100 per month for 18 years, and earn a conservative 5% annual return, you should accumulate $37,853 vs. $34,944 in a taxable savings account. Of course, a higher return, or adding money from friends and family over the years will greatly add to the amount. Get the grandparents on-board for another $100 per month and you could accumulate $73,300 vs. $67,773 in a taxable savings account. This won’t exactly pay for college, but it is an example that shows you can target a needed amount and save for that amount in a strategic manner

Working with a Certified Financial Planner™ you can target a specific college or university and determine a customized savings plan for your child. Your planner can also clear-up misinformation about 529 plans such as the erroneous belief that beneficiaries receive the funds in the account at age of consent. Or, that a 529 plan is a “use it or lose it” investment vehicle. Not true.

As an independent Certified Financial Planner™, I can help you decide how much to set aside for your child’s education.  In addition, I can help you make investment decisions and help you layout a plan for how to pay for higher education.  Contact me and let’s get started! #talktometuesday  #education #Hireaplanner #529plan #savings

A Financial Letter to My Twenty-something Self

Dear Greg,

You are only in your early twenties, the perfect time to receive this letter from your future self. As with most twenty-somethings, you are being pulled in every direction and receiving advice that is difficult to assess and apply at that age because you don’t know the changes that lay ahead for you, and the dramatic turns your life will take. I’ll leave those out of this letter for you to discover on your own. I will however, try to make your life better from a financial standpoint. I hope that this letter across time can save you some financial headaches.

The first thing I want to say is congrats on knowing from an early age that you should participate in whatever retirement plan your employer offers. That will be one of your smart moves! That said, you should tighten the belt at a younger age and save more. By doing so, you will make your mid-life career change easier and more secure.

Your other smart move was paying for your college as you could afford it. Yes, it delayed you from earning your degree along with your peer group, but it freed you from the burden of student debt. Taking your time allowed you the luxury to fully appreciate the sense of accomplishment and pride when you earned first your Associate of Arts degree and later your Bachelor of Arts.

Now, a few warnings to make your financial life better.  Just because you can qualify for a lot of credit cards, doesn’t mean you need to qualify for a lot of credit cards. This is a lesson that you will learn the hard way but it will be invaluable. It seems fun buying all those baubles at first, but really, the newness fades and you’re left struggling to repay. This steals two resources from your future self – time and money.  Buying on credit because you can is just not worth it. Also, when every person, newspaper, magazine, and other media outlet is hyping the glories of real estate – wait! Don’t buy the hype and you’ll be much happier. You’ll learn the meaning of the term ‘bubble’ on a very personal and stressful level.

That’s about it. I want to leave everything else for you to discover along the way. You’ll be amazed at the talents you develop in language, culture, travel and eventually, finance! Yes, you!!!  These early financial faux pas will actually set you on your chosen career path. So remember, save more – lots more, like at minimum 15% (more if you can) of your income from EVERY job you ever have from the time you start working. Avoid credit for credit’s sake and remember to use consumer credit sparingly. Relax when it comes to your education, as you’ll discover that education is lifelong and you’ll be happy that you achieve your goals without all the student loan debt. Skip the real estate bubble; you’ll be wealthier in the long run and have much less stress.  Oh, and you’ll realize being married is the best decision you ever made!

Cheers.

What would your financial letter from your future self to your younger self contain? We may not be able to turn back time, but we can make wiser decisions every day. As an independent Certified Financial Planner™, I can help you create a new plan, work on a course correction and set a timeline and put that plan into action. #talktometuesday #budget #Hireaplanner #spendingmap #savings #cash #debt #retirement #invest

Why You Should Hire a Financial Planner

Face it, we live in DIY world.  Whether for home repairs or financial planning most folks these days feel they can go it alone. When it comes to your finances and planning your future is that really the best choice? Sure, you can search the Internet and find a few retirement calculators and even articles on saving, investing and “Top 5” lists, but is that information relevant to your personal situation? How do you know if what you found fits into your financial life plan? What if you make a move only to learn later that your decision cannot be undone without costly consequences?

Hire a Certified Financial Planner™ and save yourself frustration! 

Hiring a financial planner can help you reap more than just potentially better returns. Planners can help you with a myriad of financial decisions and life changes such as retirement, debt management, marriage, divorce and the birth of a child. The help, guidance and advice of a financial planner is well worth their fees charged and studies by Vanguard and by Russell Investments support this position. Vanguard claims working with a financial planner can add “about 3%” over time to your returns and that behavioral coaching is the most valuable benefit an investor receives. Russell Investments claims working with an adviser can help increase returns by “about 3.75%”.  However, these studies point out that a financial planner brings more to the relationship after fees than just a potentially better return. The studies reveal that in addition to a potentially better return, financial planners help clients with difficult decisions, free up clients’ time, can explain complex transactions and provide guidance and an on-going relationship.

When you do have a life change or follow-up question, a call to your planner can be a lot more comforting than going it alone. As an independent Certified Financial Planner™, I can help you create a financial plan, set a timeline and put that plan into action. I can also be there to talk you through market gyrations and remind you of your goals and timeline. Let’s start planning today.

LINKS BREAK. FOR LOCATING THE STUDIES PLEASE SEARCH THE FOLLOWING IN YOUR SEARCH ENGINE:

Vanguard – The Added Value of Financial Advisors

Russell Investments – 2016 Value of a financial advisor update: More than 3.75%

 #talktometuesday #CFPPro #Hireaplanner #retirement #socialsecurity #goals #savings #cash  

Should You Always Rollover Your 401(k) Account to an IRA When You Leave an Employer?

As with most things finance, the answer is that it depends. Mostly, it depends on your age, why you are leaving, and what you plan to do or may need to do with your 401(k) account. Generally speaking, a rollover 401(k) account can be a good option. However, there are times you should seriously consider not rolling over your 401(k) account.

Let’s look at a few times it makes sense to do a rollover of your 401(k) account to an IRA and what those benefits may be for the account holder.

First, rollovers are generally free! Most IRA providers do not charge you a fee to do a direct, trustee-to-trustee rollover from your employer 401(k) to an IRA account. This doesn’t mean that there might not be other fees to consider such as fees for advice, or with mutual funds you may have expense ratios, management fees such as 12b-1 fees, or possible sales charges referred to as “loads”.

A rollover to an IRA could provide you with greater investment options. Frequently, employer 401(k) plans are limited to employer stock (which you likely should not rollover to an IRA, but more on that later) or a selection of funds from which to choose.  With an IRA, you will likely have a vast array of mutual funds to choose from and may be able to include ETFs and individual stocks. This variety provides greater planning opportunities for diversification.

Rolling over your 401(k) to an IRA also gives you consistent rules outlined by the IRS.  Many 401(k) plans have different rules adopted by the employer, but with an IRA the rules are consistent from provider to provider.

Now let’s look at a few times it makes sense not to do a rollover of your 401(k) account to an IRA.

As noted above, if you have company stock in a 401(k) account you likely will not want to rollover the stock to an IRA. If you do, you will lose a tax planning advantage known as NUA (net unrealized appreciation). Basically, you want to move the company stock to a taxable account so that you do not pay ordinary income tax on the stock’s net unrealized appreciation. The goal generally is to pay ordinary income tax on the value of the company stock at the time it was added to your 401(k) account.  How the NUA amount on the stock is taxed at sell depends on when you sell the stock. You may sell immediately and capture the lower capital gains rate, or you can decide to hold the stock. If you decide to hold the stock, you have a new clock ticking and need to wait at least a year on the new gains before selling and taking advantage of the lower capital gains rate. Timing and planning are critical to your goal so consult with your adviser prior to executing any move.

Are you age 55 or older when you separate from service? In this case, the 10% penalty for early withdrawal will not apply to withdrawals from your 401(k). Depending on your individual circumstance, this may be an advantage to not rolling over your 401(k) account to an IRA. Separation from service includes being fired, laid-off, or quitting your job. Keep in mind that it is the separation from service at age 55 or older that is important. The IRS says distributions, “made to a participant after separation from service if the separation occurred during or after the calendar year in which the participant reached age 55,” are not subject to the 10% early withdrawal penalty.  This treatment does not apply to an IRA so if you rollover your 401(k) account you lose this planning option.

Another reason not to rollover your 401(k) account is greater legal protection. 401(k) accounts have stronger federal law protections from creditor liens and judgments than do IRAs which fall under state law protections which vary. This protection does not include IRS tax liens and possibly spousal or child support, so keep that in mind. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, does protect up to around $1.2 million (inflation-adjusted) in traditional or Roth IRA assets against bankruptcy but other types of liens and judgments vary by state. So, depending upon your situation, leaving your 401(k) account intact with your former employer could provide greater safety.

Deciding whether to rollover your 401(k) account to an IRA is a big decision. If you are not sure what to do, spend some time discussing your goals and intent with a financial planner. As an independent Certified Financial Planner™, I can help you decide how to move forward based on your personal situation and goals. Contact me and let’s get started!

 #401k #rollover #talktometuesday  #Hireaplanner  #income  #cash

FREE Resources for Financial Literacy Month

As Financial Literacy Month wraps up, I hope you have decided to engage more with your financial life. If you have, this post is for you! Here are a few FREE resources that you can use to learn more about personal financial planning. I recommend no source more over any other so explore and find the content that you like. These links are provided solely for educational purposes. If the link is broken, please search by name in your browser. If that doesn’t work, contact me and let’s talk. 

For financial terms and concepts, I find Investopedia (http://www.investopedia.com/) to be a great source. You can search terms, concepts, get articles and sign-up for email customized to your area of interest.

Expecting a new baby? Want to find out how much it will cost you? Try BabyCenter.com (https://www.babycenter.com/) for all things baby. Specifically, the site offers a First-Year Baby Costs Calculator that will help you budget for your new baby. You can calculate the cost of items from breastfeeding for free, to childcare, to disposable diapers vs. disposable diaper service vs. cloth diapers you wash yourself! Cloth is the cheapest and can be the greenest way to go, but will you have the time?

Do you suspect elder abuse? If so, the Administration on Ageing (https://aoa.acl.gov/Index.aspx) has lots of information for you and it’s also free. There is a locator that you can use if you suspect elder abuse. If you do, please use the locator to find out who to notify.

What about saving for college? Check out SavingForCollege.com (http://www.savingforcollege.com/). The site is geared specifically to 529 plans, but it has lots of tools, articles, and support if you want to learn about college costs, 529 plans, and other college funding issues.

The above sources are just a light sampling of personal financial sites on the Internet that you can use to boost your financial literacy. For every financial aspect of your life, there are dozens of websites that provide information. As expected, some sites are better than others and most will provide only general information and may not answer your specific question.  When you need more in-depth information and personal service, reach out to me. As an independent Certified Financial Planner™, I can help you establish and maintain better financial habits. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #FinancialLiteracyMonth

Three Financial Literacy Tips for Women

We are in the midst of Financial Literacy Month (FLM). I’ve been writing about it all month, so by now you should have some familiarity with what FLM is and how to get started.  If not, please take a look at my prior two blog posts.

This week, I want to offer three critical tips for women. Usually, most folks view investing, finance and money management as the domain of men. Nothing could be further from the truth! Women make up roughly half the population so it is vital they build their financial literacy.

The first tip – take care of yourself. Many women are mothers, wives, and caretakers who are often responsible for the care of others. Therefore, women should prioritize their own health and wellbeing first. Health and wealth have generally been linked and studies show that if you are healthier, you tend to be wealthier, and vice versa. If you are a woman and you are the major or sole breadwinner for your family, your health is of vital importance so you can continue in this role.  Consider how becoming ill and losing your income would affect you and those for whom you provide. You need to take care of yourself first, from both a health perspective and a financial perspective. Do not skip regular doctor visits; monitor your health and know what’s going on. Find an exercise activity that is just for you such as walking, running, yoga, hiking, etc., and participate regularly.  Meditate, get adequate sleep, and work at lowering stress. It’s good for your physical health and your emotional health. Financially, save and invest for yourself first! Stop underwriting the lives of others until you have provided for yourself.

The second tip – ask questions! Women tend to delegate money management. STOP DELEGATING and engage with your financial life. Women have very different investment needs than men. For one thing, women in general tend to be more realistic and conservative when it comes to investing and planning for the long-term. They have to be, women on average live longer than men. If you are a woman in a same-sex relationship, you are likely planning for two longer lives in retirement. No matter your level of financial literacy, do not be shy about asking questions of your adviser or even your partner if you have delegated the task of money management to them. If you have delegated this task, stop delegating and start engaging with your finances. You don’t have to understand everything, but start by asking more questions more frequently until you are familiar with your financial situation and take back control of your finances.

The third tip – know thy self. Now that you are taking care of yourself, and that you are NO LONGER DELEGATING your financial decisions, you need to know thy self. You may know who you are as a woman; but do you know who you are financially as a woman? If not, you need to know. Hire a financial planner and find out where you stand financially. Your adviser should be able to give you all the basics such as a cashflow snapshot, liquidity analysis, insurance, investment and estate planning overview. Find out where you are now, where you want to be (think, goals), and how to get there. Work with your planner and implement your plan. Remember, your plan should be flexible and grow with you over time as your goals change and your needs shift. As a plus, your financial planner is all yours and you can ask all the questions you need to (see second tip above).

When it comes to investment and financial planning, these three tips just scratch the surface. Women do face very different challenges than men when it comes to planning and investing. Financial Literacy Month is a great time acknowledge these differences and for women to take back control over their financial lives. Take that first step.

As an independent Certified Financial Planner™, I can help you with a new approach to your finances, set a timeline and put that plan into action. I can also be there to answer questions and help you set goals and establish a timeline for implementation. #talktometuesday #budget #Hireaplanner #spendingmap #savings #cash #debt #womenfirst #women

How to Establish Healthy Financial Habits

Last week, I let you know that April is Financial Literacy Month. If you missed that blog post, you can read that here. Now that you know what Financial Literacy Month is, you can get started establishing and maintaining healthy financial habits for yourself. If you are afraid of anything financial and not sure where to start, here are some easy ideas.

Pick one article or short video per week (or month) that deals with a topic area you want to learn more about. It could be anything from basic budgeting, to savings tips to reach a goal, retirement, Social Security, real estate, charitable giving, personal taxation… you name it. It’s your choice!

Read the article or watch the video and if you don’t understand everything the first time through, no problem! It’s not about grasping all the details the first time, it’s about making the effort to learn more. You can always re-read, look up terms you don’t know, or ask a professional. 

Another idea is to pick a favorite finance app, social media site or blog (like mine), website, magazine or even look for broadcasts on your cable package dealing with personal finance. Find what resonates with you, in a format that you like, with content that is manageable and that you enjoy. Approach the content in small doses so you don’t get overwhelmed.

To recap: make it personal, take it slow and start with a topic of interest to you; commit to learning one new concept at a time and don’t overload yourself; pick an area that is interesting and applicable to you; use technology if that helps, or go old-school and find a magazine, book or newspaper. Put the personal back in personal finance and make it enjoyable.  Once you do, you’ll be on the road to establishing and maintaining better financial habits.

Now that you know what to do, and how to get started, make it a weekly or monthly habit. You can apply this new skill beyond Financial Literacy Month and make it a year round activity. This will really help you build your financial literacy knowledge and put you on the path to establishing and maintaining healthy financial habits.

Remember, you can always reach out and ask a professional. As an independent Certified Financial Planner™, I can help you establish and maintain better financial habits. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #FinancialLiteracyMonth

It’s Financial Literacy Month!

Did you know April is Financial Literacy Month? If you are not quite sure what that is, you are not alone. Financial Literacy Month launched in 2004 as National Financial Literacy Month. According to Wikipedia, the US Senate passed Resolution 316 to officially recognize April as National Financial Literacy Month with the goal of teaching Americans to establish and maintain healthy financial habits.  It all dates back to 2000 and The National Endowment for Financial Education which originally envisioned a youth financial literacy day. That idea grew and by 2004, April became known as Financial Literacy Month in the US. Our neighbor to the north, Canada, also recognizes Financial Literacy Month in November.

Mention anything finance related and most peoples’ eyes glaze over! Finance is a wide-ranging topic area with many specialties and at times can require a focus on rather dry, intense details.  For personal finance, it doesn’t need to be painful or boring. We all have a particular area that we need to learn more about when it comes to personal finance, and we all have our strong areas as well. Maybe you are an expert investor, but not so good at budgeting. Financial Literacy Month is the perfect time to challenge yourself to learn a new topic area.

Over this month, I’ll post more about Financial Literacy Month and personal finance topics. For now, you can read more about Financial Literacy Month at this Wikipedia link.  For additional information and tools to help you get started, check out the nonprofit work at FinancialLiteracyMonth.com and get started.  

You can also ask a professional. As an independent Certified Financial Planner™, I can help you establish and maintain better financial habits. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #FinancialLiteracyMonth