Thursday
Jul242014

Is Retirement Too Late to Find a Financial Planner?

 Let’s say you are approaching retirement or you have already taken the plunge. Let’s also say you have not worked with a financial planner along the way. Is there a reason to consider forming a relationship at this stage of the game? 

Even at this stage in life, it may help to seek out a financial planner to be a thinking partner leading up to and along your retirement journey. But finding the right fit may not be easy. A successful financial planning engagement starts with you figuring out what is most important.  Details about your money are equally as important when put in context with your envisioned life. 

Here are two steps that will help you pull together your overall financial picture:

1. Create a financial plan: This will be a roadmap to help you see your financial picture in one coordinated view. 

  • This plan is all about you, your priorities and needs.  The goal is to help you feel secure and at ease about your financial future.
  • It will show you how you are currently invested and make suggestions for appropriate changes.
  • Analyze how your investments could be working to supplement your income, either on a regular basis or as needs arise.
  • Make sure that your estate plan is the way you want it. 

2. Consolidate: If your accounts are spread around with many different companies, it may come with a financial and organizational cost.

  • With consolidation you can easily access all of your information in one place.
  • You’ll simplify the ongoing paperwork you receive and streamline information gathering at tax time and when you must take required distributions.
  • It provides more consistent management and ongoing monitoring in a cohesive framework.

Even if you have the individual areas of your finances under control, it is still important to pull all the pieces together.  Perhaps you have multiple IRA’s that too closely mirror each other, investments you have inherited that aren’t worked into your overall strategy, or your life circumstances have changed and your investments have not. 

The right fit might take some trial and error.  You don’t have to settle.  A financial planner that truly understands your financial story will be able to guide you to think about areas of your financial life you may not have considered up to this point. If you’re nearing, at, or past retirement and need help exploring your financial planning options, don’t hesitate to contact me about building a relationship and shaping your plan.

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.


Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. You should compare your current and prospective account features, including any fees and charges, before making consolidation decisions. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. C14-022519

 

Tuesday
Jul222014

How to Pick Between 3 Types of Life Insurance

 For most couples, having life insurance during the wealth-accumulating years can make a lot of sense. Also, some people may consider having a policy even in retirement, if their goal is to leave a financial legacy.  Life Insurance has a lot of potential benefits to consider such as:

  • Replacement for the loss of income of a spouse
  • Paying off liabilities such as a mortgage, auto loans, or credit cards
  • Covering education costs for children
  • Providing a lump sum for the surviving spouse to utilize in retirement
  • Leaving a legacy to family or charitable organizations

When it comes to life insurance, it’s not simply deciding if you want it. It’s also deciding which kind. Here are three main types of life insurance:

Level Term Insurance

 This is the easiest type of insurance to understand because it is similar to other types of insurance you have (auto, home, disability etc.).  With Level Term Insurance you pay a premium each year and, if you die, the insurance carrier will pay a death benefit to your beneficiaries.  Typical term periods are 10, 20, or 30 years.  While you are in the level term period, your premium will remain the same.  Once your policy is outside of the level term period, the premium will begin to increase; oftentimes it will increase substantially. A few reasons where this type of insurance is appropriate:

  1.  Replacing income in the event of an untimely/unexpected death
  2.  Paying off liabilities
  3.  Funding education goals

Universal Life Insurance

This is sometimes referred to as “permanent term insurance”.  This product is usually underwritten to make sure a death benefit remains in place until age 90, 95, or 100.  Sometimes there is a cash value in the earlier years of the policy, but this is usually eaten up by internal costs and expenses as the policy reaches maturity.  This product is often used when someone wants to leave a financial legacy to their kids, church, or charity. Also, it can be used to ensure alimony or other similar court settlement agreements are paid, even in the event of an unexpected death.

Whole Life Insurance

This type of insurance is conservatively underwritten, and because of this, it is often the most expensive type of insurance.  It does have a cash component that takes several years to begin accruing.  A lot of the products I have seen take approximately 10 years to break even from what you have paid in premiums compared to what’s available in cash value.  This is another type of permanent insurance that is frequently used in legacy planning.  When Estate Taxes were an issue for many Americans (back when the exclusion amount was $3.5 Million or less) these policies were purchased to provide liquidity to pay Uncle Sam at death.

What is the right type of insurance for you? 

We typically recommend Level Term Insurance for clients when the primary goal is income replacement during the wealth-accumulation years. It’s the most affordable, and usually isn’t a significant burden on cash flow.  However, if your goal is to leave a financial legacy, and you can afford it, then Universal Life or even a Whole Life policy might make sense.

The best strategy, when making these decisions, is to work with a qualified financial professional that understands all the moving parts of your personal situation and is making a recommendation that is in your best interest.

Matthew Trujillo, CFP®, is a Registered Support Associate at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.


The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning Inc. and not necessarily those of RJFS or Raymond James. Investments mentioned may not be suitable for all investors. These policies have exclusions and/or limitations. The cost and availability of life insurance depend on factors such as age, health and type and amount of insurance purchased. Policies commonly have mortality and expense charges. In addition if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company. C14-019165

Thursday
Jul172014

401(k) After-tax Accounts: Preparing your checklist

 In my last blog, I answered four common questions about an after-tax 401(k). If you’ve decided that this savings options might be right for you, your next step is to sit down with your financial advisor.

Getting ready: A checklist for the meeting

Your financial advisor can help you review your plan documentation to establish whether you have an after-tax contribution option; and, if so, whether it would make sense for you to set aside some of your pay on an after-tax basis. Before you meet with your financial advisor, you may want to gather some important information and documents:

  • The most recent statement from your 401(k) plan
  • Any plan documentation you may have, such as an SPD (your human resource department can provide a copy or you may be able to access it online)
  • The telephone numbers of your current and former employer’s benefits administrators so you and your financial advisor can confirm information
  • Any retirement income planning documents you may have accumulated
  • The contact information for your tax advisor should you have any tax-related questions

First, review your plan documentation with your financial advisor to establish whether you have an after-tax contribution option. Then determine with your tax advisor whether you should make after-tax contributions to your 401(k) plan and/or proceed with a conversion. Be sure to discuss any potential tax and penalty implications, as well as expenses and sales charges that may result from your decisions.

Rolling after-tax savings into a Roth IRA

Explore whether a conversion of all or a portion of your after-tax account to a Roth IRA or designated Roth account would be a strategy that advances your retirement savings and income planning goals.

If you decide to make after-tax contributions and/or execute a conversion of all or a portion of your after-tax account, work with your financial advisor to execute the proper documentation and authorizations. And, as always, we’re here to answer any questions that may crop up as you consider making contributions to an after-tax 401(k) plan.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.


Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. You should discuss any tax or legal matters with the appropriate professional. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Converting a traditional 401(k) into a Roth IRA has tax implications. An investor should carefully consider the source of funds used to pay the taxes owed on a Roth conversion. Penalties and taxes may apply if the investor uses money from the 401(k) as the source for conversion taxes. Consult a tax professional for details. C14-016529

Tuesday
Jul152014

401(k) After-tax Accounts: The forgotten contribution feature

 Roughly half of 401(k) plans today allow participants to make after-tax contributions. These accounts can be a vehicle for both setting aside more assets that have the ability to grow on a tax-deferred basis and as a way to accumulate assets that may be more tax-advantaged when distributed in retirement.

As you discuss after-tax contributions with your financial advisor, you might consider the idea of setting aside a portion of your salary over and above your pre-tax salary deferrals. By making after-tax contributions to your 401(k) plan now, you could build a source of assets for a potentially tax-efficient Roth conversion.

Here are some questions to consider:

Does your plan allow for after-tax contributions?

Not all plans do. If an after-tax contribution option is available, details of the option should be included in the summary plan description (SPD) for your plan. If you don’t have a copy of your plan’s SPD, ask your human resources department for a copy or find it on your company’s benefits website. You can also talk to your financial advisor about other ways to obtain plan information, such as by requesting a copy of the complete plan document.

What does “after-tax” mean?

After-tax means you instruct your employer to take a portion of your pay — without lowering your taxable wages for federal income tax purposes — and deposit the amount to a separate after-tax account within your 401(k) plan. The money then has the ability to grow tax-deferred. This process differs from your pre-tax option in which your employer takes a portion of your pay and reduces your reported federal taxable wages by the amount of your salary deferrals and deposits the funds to your pre-tax deferral account within the plan.

Are there restrictions?

Even if your plan has an after-tax contribution option, there are limits to the amount of your salary that you can set aside on an after-tax basis. Your after-tax contributions combined with your employee salary deferrals and employer contributions for the year, in total, cannot exceed $52,000 (or $57,500 if you are age 50 or over and making catch-up contributions). Your after-tax contributions could be further limited by the plan document and/or to meet certain nondiscrimination testing requirements.

How does a 401(k) after-tax account help me acquire Roth assets?

When you are eligible to withdraw your 401(k) after-tax account — which could even be while you are still employed — you can roll over or “convert” it to a Roth IRA or a qualified Roth account in your plan, if available. A conversion requires you to include any pre-tax assets that you convert in your taxable income for the year. That means if you convert your after-tax account, only the earnings are included as ordinary income for the year. And if you have pre-1987 after-tax contributions, special rules allow you to convert just those contributions without including any of the associated earnings.

If your plan allows for after-tax contributions and you think they may be right for you, it’s time to talk to your financial planner. In my next blog, I’ll walk you through what you need to take to your meeting.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.


Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. You should discuss any tax or legal matters with the appropriate professional. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Converting z traditional 401(k) into a Roth IRA has tax implications. An investor should carefully consider the source of funds used to pay the taxes owed on a Roth conversion. Penalties and taxes may apply if the investor uses money from the 401(k) as the source for conversion taxes. Consult a tax professional for details. C14-016528

Thursday
Jul102014

Elder Care Planning: Housing

 Who will change my light bulbs? How will I get an ice cream cone? Who will I have lunch with? These three questions have been the crux of intense research at the MIT AgeLab. Researchers there believe answers to those questions will provide invaluable insight when addressing issues of housing and quality of life for older adults.  The questions can also serve as great conversation starters to address the all-important question, “Where will I live as I age?” This question is often avoided until a crisis occurs.

I am finding the housing issue is coming up more and more often as I meet with older adult clients and their families.  For most, the decisions are less about the money (although the financial component is an important one) and more about the 4 “C’s”:  Comfort, Convenience, Companionship and Care.  Think about MIT AgeLab’s 3 questions with the 4 “C’s” in mind:

Who will change my light bulbs?

Consider who will do the day-to-day maintenance tasks and make sure that the living environment is safe and comfortable. If the older adult cannot do this on his or her own, bring in help to the home or move somewhere that provides these services.

How will I get an ice cream cone?

More than just ice cream, consider how the older adult will be able to access the big and small things that make them happy.  Answers to these questions may help determine where it might be feasible to live based on transportation challenges/needs, proximity and availability of shopping, worship and entertainment.

Who will I have lunch with?

Many older adults face a decline in the number of friends and relatives in their social network; socialization is vital to happy and healthy aging.  Consider availability and access to other people in the older adult’s social network when reviewing housing options.

The options for housing are many – age in place (may require home modifications), independent living retirement communities, assisted living, and Continuing Care Retirement Communities, and many other variations.  It’s important to fully consider the challenges, preferences and current and future needs when making the decision. And a team of advisors, including your financial planner, can help you consider the options.

In future posts, we will look more closely at each of the most common housing options in more detail.

This blog is part of an ongoing series that addresses Elder Care planning topics.  If you have a specific question or issues you’d like addressed, please contact me at Sandy.Adams@CenterFinPlan.com.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.


Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-020079