Protect Against Identity Theft and Fraud

Written by

Did you know that over 33% of adults in the US have already experienced identity theft? It’s a scary thought. When you work diligently to pay your bills and eliminate debt, the last thing you want to do is deal with identity theft.

We’re not trying to scare you by any means, but it’s more important than ever to protect against identity theft on the Internet-connected world that we live in.

Scammers are becoming more sophisticated, but you can still take steps to reduce your risk of theft and fraud. As financial advisors who work on retirement planning on a daily basis, we would like to share with you two stories before we go through our checklist on how to protect against identity theft and fraud.

Story 1: Fraudsters are Nearby

One time, we received an email from one of our clients asking us to transfer money to a particular account. We knew this account, but we called the client before a transfer because that’s an additional step we always take for our clients.

We never transfer money because of an email that we receive.

The client was happy we did call because someone hacked their email and found out their:

  • Mortgage information
  • Retirement information
  • Insurances
  • Etc.

Emails were sent to the numerous contacts in the person’s list trying to steal their identity. The client opened an investigation with authorities, and the culprit was someone living on their street who went through their trash to steal their identity.

Story 2: Duke Energy Call

In our second story, a scammer came close to tricking us, and it began with a phone call. The call came from “Duke Energy,” my energy provider. The provider told me that my electricity would be turned off within an hour.

Being out on vacation at the time, I was almost tricked until asking the person on the other end of the line a question or two.

Auto-pay is set up on my account, and I hung up and called Duke Energy. The scammer hoped that I would provide a credit card to avoid getting my electricity turned off.

Common Mistakes People Make That Increase the Risk of Cyber Threats

Cyber threats are constantly evolving, but the biggest ones that we’re seeing right now are:

Using the Same Password Across All Sites

A basic yet vital way to protect your identity and accounts is to use different passwords. According to security experts, 91% of people know that using the same password on websites is a security risk, yet 59% of people use the same password on all websites.

All it takes is a single security breach to gain access to all of your accounts.

Just think about it. If you use the same password and email for Twitter as you do for all of your other accounts, a single breach could lead to others gaining access to your:

  • Email account
  • Bank accounts
  • Retirement accounts
  • Social media
  • Etc.

You can use password lockers that can help you create and store unique passwords for all sites with high-end encryption, too.

Not Using Two-Factor Authentication

When you log into your account, two-factor authentication can add an additional security measure to your account. For example, when you log into your bank account, you enter your username and password, and then you will have to:

  • Access an email for a code, or
  • Access a text message, or
  • Get the code via phone

If you set up two-factor authentication, if it’s available, this will provide you with an additional layer of security that makes your account safer.

Sharing Your Password with Others

Do you share your password with other people? If so, you’re increasing your risks of fraud drastically. The individual may not be personally responsible for the fraud, but what if their device has malware that steals your account information?

Failing to Update Your Devices and Software

Your device, whether it’s a personal computer, tablet, smartphone or any other device, may be a weak point in your overall security. For example, a security hole on iPhone was recently discovered that could allow hackers to access the phone’s contents.

Updating the operating system fixes the issue, but a lot of people skip these vital updates.

You want to be sure that you update your:

  • Operating system
  • Web browser
  • Anti-virus
  • Etc.

Anti-virus updates are crucial because they work to prevent breaches in real-time.

Opening Unsolicited Emails

Email is one of the most common ways that theft occurs. If you receive an unsolicited email or something doesn’t seem right with an email, delete it. Following a link or downloading an attachment in the mail can lead to you unknowingly giving a scammer access to your computer.

Hackers can spoof an email so that it looks like it’s been sent from Amazon, Facebook, friends or others.

Remain diligent with your email and even texts because scammers routinely send messages with:

  • Tracking links
  • Download links
  • Etc.

If something doesn’t seem right, delete the mail, or call the sender to verify that it’s really them.

Being Too Open on Social Media

People share far too much information on Facebook, Instagram, Twitter and other social media accounts. When you have the following information out there, hackers will use this information to gain access to your accounts, such as your:

  • Email
  • Birthday
  • Name
  • Address

Hackers can use this information to answer security questions on certain accounts to gain access to them. For example, a person posts a picture of their first-grade class and on their bank account, the “Name of Your Elementary School” is your security question.

It’s easy for a hacker to look at the photo, do some digging and find the school’s name.

For your own safety and security, don’t post too much personal information on social media accounts.

Opening Emails from Friends and Family

Friends and family are being used to trick people into downloading files, sending money or following links. Just imagine that a close friend sends an email asking to donate to their fundraiser, and you enter in all of your information to help this friend.

But your friend’s email was hacked, and you only find out months later.

If someone doesn’t email you often or even if they do, there’s no harm in calling them to ensure that the mail is legitimate.

We’re also seeing hackers do this to elderly individuals. The hacker will message them saying that their grandchild needs money or something similar because they found the child’s name on their social media accounts.

In short, don’t send money or follow instructions through email unless you’re 100% positive that the sender is not scamming you.

Not Paying Attention to Breaches or Hacks

Since you use a variety of sites and platforms, one may be hacked. For example, if you have a Chase account and a breach just occurred, you can request that your account be frozen. You should be taking a proactive approach to freeze your accounts and get ahead of potential identity theft.

Not Changing Your Password Periodically

Using the last point, if a breach occurs and someone gains access to your password, you may circumvent the risk due to your password changing habits. Security experts suggest changing passwords every 60 to 90 days.

Following this schedule will help you minimize your risks of someone stealing and using your password.

Common Phone Scams We’re Seeing Right Now

Phone scams are growing in popularity, too. A few of the scams to be cautious of are:

  1. The Social Security Administration will never give you a call. It’s a scam.
  2. The IRS will never give you a call. It’s a scam.
  3. Someone calls you saying that you won money. Probably not. It’s a scam.
  4. Microsoft calls and says that something’s wrong with your computer. It’s a scam.
  5. Credit card companies call and say they’ve detected fraud. Maybe. But hang up and call the number on the back of your card to make sure it’s not a scam.

We just want you to be careful to protect your identity. We’re not trying to scare you. Rather, we want you to be prepared and know how to keep your identity safe.

If you want to grab our free checklist that covers all these points, simply call our office at 919-787-8866 and ask for Laura or Morgan. They’ll send out the checklist for you to follow to ensure you’re taking proactive steps to keep your identity safe.

Want to learn more great information from us? We have a podcast where we discuss great topics, just like this, twice a week.

Click here to sign up for our podcast.

8 Mistakes to Avoid When Choosing an Advisor

Written by

Choosing an advisor is a major decision, and you can make many mistakes along the way when making your choice. Unfortunately, unless you’re involved in the financial world every day, you won’t have the experience to know how to choose the right financial advisor.

We’ve already covered a lot of great advice, from how to change financial advisors to what to do when you break up with your advisor, but today we’re going to cover mistakes you need to avoid when choosing an advisor.

And there are a lot of them.

8 Mistakes to Avoid When Choosing an Advisor

1. Working with an Advisor Without a Written Contract

You should have a written contract with a scope of service that outlines everything you can expect from the service. Your contract doesn’t need to be a legally binding, yearly service contract.

Traditionally, the advisor is bound to the contract, but the client can leave the service at any time.

The contract should include:

  • Scope of service
  • Fees involved
  • Potential conflicts of interest

When you have a written contract, it outlines exactly what you can expect from the service. Both parties can use contracts to understand what to expect from the business relationship.

2. Working with an Advisor That Doesn’t Have a Permanent Office

Working with a financial advisor who doesn’t have a permanent office is a quick way to be a victim of embezzlement. Most embezzlement reports are from advisors who will only go to your house to give advice but don’t have a physical office to go to if you need assistance.

A permanent office is an indication that the advisor is stable and trying to stay in business.

If an advisor uses a co-working space or won’t meet at a permanent location, they may be a fly-by-night scam artist.

3. Working with an Insurance-Only Advisor

An insurance-only advisor is licensed to sell you insurance products. Insurance products only pay a commission, so you must question whether the product is right for you or only recommended because of the advisor’s commission.

Plus, an insurance-only advisor won’t be able to help you with stocks or other investment products.

4. Working with a Stock Market-Only Advisor

Just like we don’t recommend that you work with someone that can only offer insurance products, we also don’t recommend someone that can only help with stocks. A stock market advisor can’t help you create a well-rounded retirement plan.

You may need stocks, insurance and a variety of other retirement options.

Ideally, you’ll work with an advisor that can offer both insurance and stock market advice. Both products work together to provide you with a higher level of retirement security.

5. Working with an Advisor That Tries to Sell You on the First Appointment

Advisors are offering a service, and they need to make a living, but they shouldn’t try and sell you on the first appointment. Instead, an advisor should:

  • Educate
  • Get to know your goals
  • Run simulations for retirement

Once an advisor knows you, then they can begin to make accurate recommendations to you. It takes us multiple appointments to truly learn enough about a client before we recommend anything to them.

6. Believing the “Too Good to Be True” Stories

If an advisor’s story is too good to be true, it probably is. An excellent example of this would be the stock market advisor saying, “I’ve never lost money.” Market fluctuations occur all the time, and it would be impossible for someone never to have a down day if they’ve been in the market long enough.

Insurance advisors who create illustrations that show 8% – 10% improvements each year, are a red flag. You need to question if the product is too good to be true or if you’re only being shown part of the illustration.

You can certainly make 8% – 10% returns per year, but you also need to know the downside. Often, earning this high of a rate of return simply isn’t feasible.

7. Doing It All Yourself

You can do it all yourself, but you need to know the commitment that you need to accumulate your wealth. When you do everything on your own, you’re going to learn information every day. You’ll need to dedicate an immense amount of time to your investments, while also managing your job and family.

When you hire a professional that works on retirement planning daily, it will help alleviate this burden.

8. Choosing an Advisor Based on Only Their Fee

You’ve heard the statement “you get what you pay for,” right? Unfortunately, the same is true when choosing an advisor. Sure, you can select a ROBO advisor with low fees, but you’re missing out on the personalization and management that can really help you build wealth.

If the market starts to tumble, the ROBO advisor will not engage in active management the same way we would.

Fees will always be a concern when choosing an advisor, but you need to consider what you’re getting for these fees. Sit down and ask each advisor what you’re getting for your money.

Low fees may mean:

  • Higher fees for additional help
  • Higher fees or commissions on certain products
  • No assistance when planning for life insurance, social security and so on

A low fee advisor may not provide active management, which likely led to massive losses in 2008 for their clients. However, the advisor with the higher fee may have actively managed their clients’ portfolios so that they didn’t lose money in 2008.

If you want to secure your retirement, you need to work with an advisor that you can trust. The mistakes above are common mistakes anyone can make, but you should avoid them as best you can.

Want to hear more, great advice from us?

Click here to join our podcast, where we upload two new talks each week.

10 Step Layoff Survival Guide

Written by

Whether you’re nearing retirement or are decades away, one of the scariest situations to be in is being part of a layoff. In March 2020, 8.8% of the workforce was laid off, but this figure was down to less than 4% in August 2021.

If you or someone that you know sees the writing on the wall at their job, we’re going to cover a 10-step survival guide if you are laid off.

Whether the layoff means early retirement for you or having to find a new job, this guide can help you navigate this murky period in your career.

Step 1: Keep Calm and Take It One Step at a Time

It sounds easier than it is, but you need to keep calm and not stress too much. How? It’s difficult. First, just know that you do have options out there. You need to sit down and think about what your options are.

Also, you want to leave your employer on good terms and not ruin future potential employment if/when the employer starts hiring again.

Step 2: Determine Your Living Expenses

What are your actual living expenses? Many people don’t know. Take the time to come up with a spending plan. Look through the following:

  • Income coming in per month
  • Contributions to your retirement planning
  • Expenses going out

Let’s assume that you have $7,000 coming in every month. Work through your expenses, investments and others to calculate the actual expenses you have every month.

Knowing your living expenses will be essential for you during a layoff so that you can learn where your money is really going.

Step 3: Knowing What You Have

What assets do you have to work with now that there’s no money coming in? Assets will include:

  • Bank accounts
  • Savings accounts
  • Brokerage accounts
  • IRA / 401(k)
  • Home equity line of credit
  • Spousal income

These assets can be tapped into to help you survive a layoff. For a 401(k), if you’re 55 or older, you can tap into this asset to continue paying your living expenses.

Step 4: Add in Severance Pay

Some people receive severance pay, and others will not receive any form of payment. If you’re laid off and severance pay is offered, it may be worthwhile to take some this year and the remaining next year.

If you’re accepting severance packages late in the year, it may make sense to ask if you can take most of the package next year.

Why?

Taxes. If you receive a 12-month severance in November, you’re likely going into a new tax bracket and will have to pay more money to the IRS. Never say no to a severance package, but always ask if you can split it up in these scenarios.

If it’s the beginning of the year, you can just take the package upfront without much concern.

Step 5: Understand Unemployment Benefits

Unemployment is likely available to you, so it’s important to understand what level of income is available to you through these benefits. Often, you’ll receive 40% – 45% of your weekly pay from these benefits.

Learn the unemployment benefits, how to apply and how long you’ll receive them.

Step 6: Learn About Your Health Insurance Options

Health insurance is going to be a major concern. Most companies offer COBRA benefits that allow you to keep your plan for a certain amount of time. You may be able to tap into a healthcare savings account to help pay for the COBRA premiums.

When COBRA benefits run out, then you need to go out and shop for health insurance, which can be very expensive.

We have some clients paying $1,000 a month in health insurance for each person. So, it’s important to learn your options early on and take COBRA to lower these costs.

Step 7: Get a New Social Security Estimate

You’ve paid into Social Security, and you can start taking out Social Security as early as 62, although at a lower rate. First, you should go to SSA.gov, create an account and then ask for an estimate on the amount of money you’ll receive.

It’s important to think this decision through because it is really a final choice.

Taking your benefits early means less money overall for the remainder of your retirement. Sit down, review the numbers and even speak to someone specializing in Social Security to work through these numbers with you.

Step 8: Consider a Lump Sum Payment

If you’re privileged enough to have a pension, you may want to consider a lump sum payment. Pensions will require you to wait to a certain age before you can take monthly draws from the account.

However, some pensions will allow you to take a lump-sum payment that can be rolled into your IRA and used and invested as you see fit.

It’s important to really crunch the numbers here to see what money you’ll lose out on if you take an upfront payment. Working with a financial advisor can be very helpful to ensure that you’re not losing out on a significant amount of money by taking a lump sum.

Step 9: Determine If You Want to Go Back to Work

If you’re part of a layoff, you need to consider whether you want to go back to work. People who are close to retirement may find that they have enough money in their accounts to retire comfortably.

You need to do your calculations, determine whether you have enough money, and then decide whether you can retire now.

Work the numbers and see if retirement is an option for you. If you can, it’s up to you to determine whether you want to retire.

Step 10: Seek Professional Guidance

This point may seem self-serving to some of our readers, but it’s not meant to be that way. We always recommend seeking professional guidance during a layoff because financial professionals can help you better understand:

  • Your income
  • Your expenses
  • What decisions you can confidently make

When a financial advisor outlines what you can and cannot do based on your expenses and income, it provides peace of mind when taking your next steps forward.

Working through these ten steps can help you make sense of a layoff and what you need to do next.

Click here to sign up for our 4 Steps to Secure Your Retirement Course.

Chess Griffin – Special Needs Trust – What You Need to Know

Written by

This week, we’re going to be talking to someone who we’ve had the pleasure of having on our podcast multiple times: estate planning attorney Chess Griffin. We’ll be discussing the very important topic of special needs trusts. If you haven’t heard the podcast yet, we encourage you to listen to it yourself.

Click here to listen to our podcast on your favorite platform.

But, as always, we’re going to be covering all the fine details of the podcast in this post so that you have quick access to this information any time that you like.

What are Special Needs Trusts?

A special needs trust, often called a supplemental needs trust, is generally created when a person has a family member who is on an assistance program, such as Social Security Disability or Medicaid. The trust allows you to provide for this family member without disqualifying them from these programs.

Oftentimes, clients want to create a trust when their child has a disability.

How Do Special Needs Trusts Actually Work?

For example, let’s look at a standard situation where a person has adult children who are all mature and doing fine. Often times, a trust would be created for these children that allows them to take money out of the trust at a specific time.

Trusts can be created to allow these children to take money from the trust at age 30, or any age that you desire.

However, when dealing with a child who has special needs, you may not want them to access these funds freely. When a person can draw money from a trust, Medicaid or disability will look at a person’s available assets.

If a trust is an available resource, the person may become ineligible for some of these special need’s programs, such as Medicaid. A special needs trust can be drafted in such a way that it allows the trustee to take money out of the account to fill supplemental needs.

Beneficiaries of a special needs trust cannot draw from these accounts, but the trustee can have broad power to access the funds for the beneficiary’s supplemental needs.

Special Needs Trust for Minors

If a person has special needs as a minor, you can still create a supplemental needs trust to safeguard them in the event that you die prior to your child reaching adulthood. What many people do is create trusts for their children at a very young age.

What you can do, and it’s quite common, is:

  • Create a regular special needs trust for your child
  • Add specific language into the trust in the event the child does become special needs

Your child may be perfectly healthy now, but if they become disabled in the future, the right language in a trust can protect your child’s best interests.

When we use the term “special needs,” it’s also important to understand that this term is usually connected to a person receiving some form of government assistance. However, while many people that are beneficiaries of these trusts are on government programs, it’s not always the reason for creating these types of trusts.

Chess has drafted numerous special needs trusts where the individual may never apply for Social Security disability or Medicaid. These trusts are often drafted “just in case.” The beneficiary may never qualify for these programs, but their parents create a trust just in case they do qualify at some point in the future.

A child’s condition can progress, but if the child can live independently and may never qualify for benefits, the trustee can then distribute the money to them in the future.

Special needs trusts cover the what ifs of:

  • What if the child’s condition progresses and they become eligible for these programs?
  • What if the condition never progresses?

Since these trusts are for special needs, they’re often created with the idea that the parents are deceased when the funds are distributed. A third-party often becomes a trustee of the account. When the trust is created, you can create an outline of the things to keep in mind if something happens to the parent.

The trustee almost becomes a guardian to the individual, and these directions and guidance can help the trustee act in the best interests of the beneficiary (whether they’re 10 or 60).

How are Special Needs Trusts Funded?

Special needs trusts can be funded with cash, but can they be funded with life insurance? Yes. A lot of these funds are funded with money from life insurance. The one asset that is never a good idea to help fund a special needs trust is a retirement account.

Due to the required minimum distributions of retirement accounts, the special needs trust can be very complex.

Is the Trustee Responsible for the Trust’s Investment?

Yes. The trustee has a fiduciary duty to manage the trust’s assets. Trustees can seek out professionals to help them with the investment side of the trust so that the trust can continue to grow.

Where are Checks and Balances for a Special Needs Trust?

A beneficiary may not be mentally able to know what checks and balances are for their trust. The trustee has a lot of power, and it’s possible to abuse this power. Estate agencies are often in charge of these assets, and they have a legal right to act in the best interest of the beneficiary.

However, the reality is that there’s little oversight of the trustee.

There are certainly times when the trustee uses the funds inappropriately. When drafting the trust, it’s so important to choose the trustee properly so that you reduce the risk of the fund’s misuse.

Can a Person Create Their Own Special Needs Trust?

A third-party trust, when it’s created for someone else, is very common. But what happens if you have a condition and are concerned that you may be mentally or physically unable to manage your own money and assets?

Can you create a special needs trust for yourself?

Yes, but it’s very complex and complicated. Complexity occurs when a first-party trust is created because it’s a very murky area of law. Medicaid looks at an applicant’s assets and transfers.

Medicaid will look at transfers, and the lookback period is often five years.

So, the issue exists when you’ve created a trust for yourself in the last five years, transferred your assets into the trust and applied for one of these programs. Medicaid, for example, doesn’t want recipients to hide their money to leverage the system.

An expert would be needed to draft one of these first-person accounts because it can be difficult to meet eligibility requirements of special needs programs.

Special needs trusts are an important part of estate planning, and it’s important for you to think about creating trusts for family members who may need supplemental help in the future. These trusts can protect assets while ensuring that the beneficiary can still leverage important programs with strict eligibility requirements.

Click here to listen to our podcast on your favorite platform.

Fees, Commissions, and Being a Fiduciary

Written by

When shifting from one financial advisor to another, there are many questions that you should be asking. However, there are two main questions, which we’ll be covering today in great detail:

  1. What are your fees and commissions?
  2. Are you a fiduciary?

Fees and commissions are going to be tied into the advisor’s offering in some way, so you must know how your advisor is being paid. Choosing the right financial advisor is a process, and you need to really have a firm understanding of fees, commissions and being a fiduciary to safeguard your retirement.

What are Your Fees and Commissions?

Fees have been a central focus point of big brokerage companies like Charles Schwab and TD Ameritrade. The entire industry has been in a “fee” war where they’ve tried to compete in the fee department with each other, and fees fell.

For you, lower fees are always a good thing.

Transaction costs have also practically disappeared due to the increased focus on lowering fees and costs for investors.

When working with a financial advisor, you want to know many things, but today, we’re focusing on fees. You need to understand how your advisor is being paid. Many people come into our office and explain that they don’t know all of the fees and commissions that their advisor uses.

It’s essential to:

  • Ask your advisor about their fee structure and commission
  • Dive deeper into the advisor’s fees and commission if your questions make them uncomfortable or they seem to want to dodge your questions

Since you’re hiring an advisor to work on your retirement plan, it’s your right to know how they’re being paid. We would advise against working with an advisor who doesn’t want to divulge their fee structure and commission.

There are a few ways that your advisor can be paid:

Commissions

Commissions are a form of payment that has been around for probably the longest. Commissions are made when products are sold and also in the investment world. Originally, brokers needed to be contacted to make trades and would earn commission on these trades. 

You can buy stocks without commissions in today’s investment world. 

Mutual funds often have fees and commissions on the front-end or back-end, meaning your broker makes a commission at the start or end of the investment. 

You have every right to ask your advisor whether they’re receiving a commission on your investments in any way.

Fees

Advisors can charge fees in a variety of ways:

  • Hourly: An hourly fee may be applied when the advisor works on your portfolio or completes certain tasks.
  • Flat-fee: A flat fee may be assessed for things such as helping transfer your accounts or setting up your investment portfolio.
  • Percentage of assets under management: Finally, a percentage fee may be assessed based on your portfolio’s value. For example, a 1% fee may be charged on your $100,000 investment account, or $1,000.

Advisors may also charge a combination of the fees above. 

For the most part, advisors that charge fees will not make a commission. However, if insurance products are included, a commission may be assessed.

As someone looking from the outside, it’s common to think that the lowest fees are the best. But that’s not always the case. You need to look at the services that are wrapped into the fees to really understand the value in a service.

You might pay a 1% commission for a very hands-off advisor or 1.25% for an advisor who also assists with tax planning and other aspects of financial planning. It’s vital that you ask your advisor what their fees are and what’s included in their fees to know exactly which services you’re receiving.

Are You a Fiduciary?

A fiduciary is very important to understand when working with any financial advisor. You should be asking if the advisor is a fiduciary, but before you do that, it’s important to know what being a fiduciary really means.

What is a Fiduciary?

A fiduciary has to make decisions that are in your best interest. Therefore, certified financial planners must uphold a fiduciary standard. For example, let’s assume that the advisor makes a 10% commission on a specific type of insurance and a 5% commission on the other.

Someone who does not abide by a fiduciary standard would enrich themselves by recommending the product that gives them the most commission, even if that’s not the best product for you.

However, when an advisor is a fiduciary, they need to consider your best interests, even if that means lower commissions for them.

We run as a fiduciary, and our business is founded on:

  • Learning about a client
  • Understanding the client’s goals
  • Recommending the best options for the client to reach their goals

Not only does a fiduciary have to work in your best interest, but they need to be able to prove this in the future. If a client questions why we recommended a specific financial product, we must explain why and show proof that this product was the best based on our knowledge and their goals.

Legal vs. Assumed Fiduciary

Some advisors work on legal and assumed fiduciary duties. Suitability is one way that the advisor may work, and this means that they need to offer a suitable recommendation. In the world of suitability, the advisor can recommend a higher commission product if it suits your needs.

Assumed fiduciary is also an option, and this means that the advisor will do their best to work in your interests, but they’re not legally bound to do so.

Finally, there are legally bound fiduciaries, which we believe offers the best option. There are two times when a financial advisor must be a fiduciary:

  • Certified financial planners are obligated to be a legal fiduciary to hold their CFP designation.
  • Licensing is another time when an advisor may be a legal fiduciary. For example, if an advisor is Series 65 licensed, under FINRA, they’re bound by law to hold a fiduciary standard.

You should be asking your financial advisor about their fiduciary standards and whether they uphold them. You should also ask about licensing so that you have peace of mind that if they’re Series 65 licensed, they’ll work in your best interest.

Fiduciaries Must Disclose Things That May Be a Conflict of Interest

For example, let’s assume that I have a partnership with an attorney where I make money or some form of compensation from the attorney. A fiduciary must disclose this information and allow you to decide on your own.

We’re seeing many clients who are moving to independent financial advisors because of the fiduciary standards they uphold. So, let’s assume that you work with someone at Nationwide. The agent will recommend products that the company offers.

Independent financial advisors aren’t required to recommend specific products.

The Nationwide representative would recommend their own products, even if it’s not necessarily the best option available. Independent financial advisors, like ourselves, can recommend a wealth of products, whether that means the product is from Nationwide or someone else.

Did you enjoy this article? Then, we recommend signing up for our podcast, where we discuss topics just like this twice a week.

Click here to sign up for our podcast today.

What Should You Consider If Your Spouse Passes Away?

Written by

No one wants to think about what would happen if their spouse passed away. Death is a difficult topic to discuss, but it is an inevitable reality for all couples. It’s important that you and your spouse have peace of mind that if either of you dies, the other has a plan in place that allows them to live the best life possible.

We’re going to help you think through the ideas and questions that will be helpful if your spouse dies.

If or when your spouse dies, your mind will be in a million places at once. Grief, fear and anxiety will overwhelm you. Having a general idea or checklist that can help you through this challenging time can really make it easier for you to overcome a spouse’s death.

You can’t be 100% prepared for death no matter how hard you try, but a checklist and guidelines can certainly help make the impact a little less intense.

A few of the things to consider are:

6 Things to Consider If Your Spouse Passes Away

1. Cash Flow: From Two Incomes to One

Income is a primary concern for most people, even if you’re both retired. We see many cases where one person is still working and passes away, and even times when both spouses are retired and one dies.

The main issue is cash flow because:

  • Maybe the deceased was collecting a pension with no survivorship attached.
  • Perhaps one spouse was still working and generating income and passes away.
  • You’ll lose one source of Social Security income if you’re both collecting. Instead, an adjustment is made where you’ll receive the higher person’s benefits.

Your standard of living can drastically change if your spouse dies and you lose some of these sources of income.

2. Expenses: The Key to Life Without a Spouse

When couples think of retirement planning, they think of retiring together. Most people will plan for:

  • Two sources of income
  • Two sources of expenses

However, even if you’re losing one or more sources of income, expenses will also be less. It’s vital for you to fully understand your expenses when retirement planning as a married individual and a couple.

For example, when your spouse passes on, you may no longer need to pay for:

  • Country club fees
  • Two vehicle payments/insurance
  • Certain medical bills
  • Etc.

Once you know your cash flow and expenses, it will be a lot easier to breathe if the worst happens.

It’s crucial for you to also know where all of the bills are coming from. You have to continue living, and it’s vital to keep these bills current.

3. Estate Settlement Issues

You’ll need to do a few things to your estate if your spouse dies. One thing that comes to mind is an IRA in your spouse’s name. The IRA will need to be retitled when your spouse passes. You may be able to:

  • Become an inherited IRA
  • Be taken over if you’re a spouse

When you take over a spouse’s IRA, you’re effectively rolling your spouse’s IRA into your own. You have to go through the steps to:

  • Change joint accounts to single accounts
  • Take certain accounts and change them to your name

Many accounts may need to be properly transferred to a surviving spouse.

In terms of estate tax, there are fewer issues today than in the past, but with larger estates, it can be challenging to keep track of all property. You might need to:

  • Look through credit card statements
  • Identify certain accounts
  • Locate assets

Because your spouse passed away, you’ll also need to look through your estate plan. Perhaps you wanted certain assets to pass to your spouse, but now that they’re gone, you’ll need to consider what happens to these assets.

4. Insurance Accounts and Benefits

Insurance is a major concern because your spouse and you can have a variety of accounts. You need to be able to:

  • Name accounts
  • Know where accounts are
  • Know how much is in these accounts
  • Etc.

You need to identify and know where all of these accounts are when your spouse passes. It’s essential to keep a running list of these accounts and how to access them. Ideally, when your spouse is alive, you should begin making a list of these accounts so that the surviving spouse can access them.

Insurance and death benefits may come from:

  • Employers that offer group life insurance if they’re a larger company.
  • Veteran benefits for death and burial.
  • Pension survival benefits with certain clauses.
  • If you have a dependent or child under the age of 18 at the time of your spouse’s death, Social Security may have certain benefits available to them.
  • Life insurance policies that may be open.

Insurance is a significant asset when retirement planning because it allows you to have an influx of cash that your spouse will need upon your demise.

5. Taxes

The IRS wants their money no matter the circumstances that you’re personally facing. You may have filed your taxes a certain way when your spouse was alive, but this can abruptly change when they die.

Your house may generate a gain if you sell it.

Provisions need to be thought through thoroughly. This is a major consideration, and we recommend going to a CPA. A CPA will cost a few hundred dollars, but they’ll help you understand your tax obligations and how your tax situation might have changed.

6. Assets and Investments

When you secure your retirement, you’ll notice that you’ve acquired a lot of assets and made numerous investments throughout your marriage. These investments need to transition to you as a survivor.

There may be tax concerns with these assets being transferred to you, so a CPA can help here, too.

A few of the accounts and investments that people may have questions about are:

  • IRAs: If they’re set up properly, the IRA can often be transferred to the surviving spouse without an issue.
  • Stocks: A step up in basis may be leveraged to save you money in taxes.
  • Businesses: Will you continue the business, or is there a succession plan in place? How about the sale of the company and the tax implications that follow?

You may have annuities and other investments that need to be considered. We recommend speaking to a financial adviser or planner to discuss your risk tolerance without your spouse.

Often, your retirement plan will have more risk with two spouses, but now that one spouse is gone, it may be time to reduce these risks.

Thinking of life without your spouse is something no one wants to do, and we’ve made a checklist to help you walk through these things to consider.

The checklist is completely free, but we need to know how to send it to you.

We can send the list either through email or regular mail – it’s up to you.

Call us today to request your own checklist to help you understand what to do when your spouse dies.

4 Costly Misconceptions About Retirement Planning

Written by

We work with many clients who come to us for their retirement planning, and many of them have misconceptions about the process and how it works. So, we’re going to outline a few of the most common misconceptions that many people – maybe yourself – have about retirement planning.

4 Retirement Planning Misconceptions That Need to be Put to Rest

1. “Financial Planners” or “Financial Advisors” Must Be Qualified

Many people have the words “financial planner” or “advisor” next to their name, but that doesn’t mean that these individuals are particularly qualified to do their job. 

Why?

Anyone can say that they’re a financial planner or advisor, and even though they’re not “supposed to,” that doesn’t mean that they don’t lure in clients this way. For example, insurance agents can call themselves:

  • Financial advisors
  • Financial planners
  • Retirement planners

But all that these individuals have access to are insurance products. Insurance products are a good option to secure your retirement, but they’re not enough for a well-rounded retirement portfolio.

Yes, these individuals can call themselves financial advisors, but they won’t provide the intensive products you need to retire comfortably. Retirement demands a robust portfolio that includes insurance products, stocks, bonds and so much more.

2. The Lowest Fees are the Best Solution

Are you focusing only on the lowest fees? If so, this may be a mistake. There are many justifiable fees and cutting these fees down may do you more harm than good. For example, the lowest fees may lead to:

  • Less hands-on recommendations
  • Autopilot portfolios with no active management
  • Etc.

Robo advisors, for example, are low-cost opportunities to invest, but you miss out on the true portfolio customization and altering that a human advisor offers.

Low-cost advisors may not:

  • Help you grow your money
  • Have the expertise for retirement planning

In the insurance world, fees are often not seen, so they’re promoted as having “no fees.” However, the fees are really built into these products, and the advisor is being paid a commission on these products.

When we work on your portfolio, we have a risk management portfolio in place that fights back against market fluctuations. For example, we didn’t see our clients lose 38% in 2008 when the market crashed.

We actively update portfolios to mitigate these potential losses.

Would you rather pay a fee to reach your goals, or have no fees and sacrifice risk mitigation? It’s something to think about.

A good option is to:

  • Learn what your goals are
  • Discuss your goals with a potential advisor
  • Then decide if the fees are worth it or not

If you go directly to the lowest fee option, you’re likely putting your retirement more at risk for small savings.

3. All Credentials or Certifications are the Same

Advisors like to list their credentials and certifications next to their names. These credentials help boost their authenticity and stand out when talking to prospective clients. The issue is that unless you’re familiar with the credentials or certifications, you may not know the value behind them.

For example, you won’t know whether the certification requires just a fee and open book quiz, or if it took a lot of time to receive a credential.

One credential that we believe is very valuable is a certified financial planner. You cannot claim to be certified if you’re not. This certification (and for full disclosure, we do hold this credential ourselves) is very valuable.

For someone to be considered a certified financial planner, they must:

  • Take courses at a college for about two years
  • Pass an extensive six-hour exam (50% pass)
  • Three years of full-time experience in financial planning in some way

Once certified, you must also live by the code of ethics and go to continuous education annually to maintain the certification.

We believe the certified financial planner certification is the gold standard for financial planners.

4. An Advisor Works at a Big Firm, So They Must Be Good

Working under a big brand-named company, such as Morgan Stanley, is often the only credential potential clients consider when choosing an advisor. The client assumes that since the expert is working at a major company, they must be the best of the best.

This isn’t necessarily true.

In the investment banking world, these companies have a lot of brand recognition. But working for one of these companies doesn’t mean that the individual is qualified. These companies often have training programs, and the person you initially work with is still learning the ropes.

A lot of younger advisors will go to these big companies out of college, leverage their training and go on to open their own financial planning business.

Independent financial planners are free to:

  • Offer you the best products or services
  • Not force products on a client

For example, if they work for Morgan Stanley, they’ll push the company’s products. This isn’t to say that all these advisors are bad. You can definitely find a great advisor at one of these firms, but consider that independent financial planners are in the fastest-growing advisor category.

So, now that we’ve cleared up a few misconceptions, it will be easier to find an advisor to help you meet your financial goals.

This is part 2 of how to choose the right financial advisor for you. If you missed the first part of this series, we encourage you to click here to read part 1: Avoid 4 Retirement Investment and Planning Rip-Offs.

College Planning Using a 529 Plan

Written by

Are you trying to save money for your child’s or grandchild’s college education? College is expensive and offering any type of help to your loved one will be appreciated. We’re going to be covering college planning using a 529 plan.

What is a College 529 Plan?

A 529 college savings account is a savings account that can be used for a child’s college education and supplies. The plan can be used as early as elementary school if you want the child to go to a private school and pay for it.

Why would you want to invest in a 529 plan?

The account’s earnings will grow tax-free with one caveat: funds in the account must go towards qualified expenses. Qualified expenses cover (for the most part):

  • Room
  • Board
  • Tuition
  • College 
  • Education-oriented expenses

You can withdraw funds out of the 529 plan, pay tuition, and enjoy significant tax-free benefits as a result.

Let’s assume that you want to save for a child being born today. You put $1,000 into the account, and by the time the child is eligible for college, this money is likely to double twice.

For example:

  • You deposit $1,000
  • The money doubles to $2,000
  • The money doubles to $4,000

Every 10 years, these accounts will double – in most cases. The growth in this account is tax-free. Plug in another figure, such as $10,000, and you’ll see that the account grows to $40,000 on its own in 20 years, even if you don’t add another penny into it.

The $30,000 growth is tax-free.

Of course, markets fluctuate, so you can earn more or less, depending on the market.

What Impact Does a 529 College Savings Account Have on Financial Aid Eligibility?

In terms of account ownership, the account is owned by the person who opened the 529 account, usually a parent or grandparent. It is the account opener’s money because they’re in complete control of the distributions from the account.

Children do not have control of the account, so they can’t spend the money on random expenses.

In terms of financial aid, a 529 account will have a minimal effect on the aid. The effect is:

  • Any amount past $10,000 (or close to it) lowers student aid packages
  • 5.64% of the asset value above $10,000 is reduced from an aid package

So, let’s assume that you had $100,000 in the account. In this case, $5,640 would be reduced from the financial aid package.

With the high, tax-free growth rate that some of these accounts achieve, it’s a worthwhile method to save for a person’s college tuition.

Which Investment Options Does a 529 Offer?

The person setting up the account, often a relative, will oversee the account’s investments. You can pick the investments yourself or opt into a lifecycle fund, which is a hands-off method where someone else invests for you.

Owners of the account are in total control of the account and any investments made on the account.

Common Myths and Questions Surrounding 529 College Savings Accounts

If I Don’t Use the Money, I Lose the Money

Many people are under the impression that if the funds in the account aren’t depleted due to the child’s education, they’ll lose that money. That’s not the case. You don’t lose the money. Instead, you’ll have to pay tax on the money earned.

Money isn’t put into the account tax-free – you already paid taxes on it.

However, you will pay a 10% non-education penalty if the funds are withdrawn for purposes not relating to education. You may be able to avoid this penalty, too.

You may open an account with a beneficiary and use the money for another child. As a grandparent, you can name several beneficiaries for whom the funds can be used, even if they were born after the account was opened.

I Can Only Use the Money in the State That the Plan is Sponsored In

Plans are state-sponsored and run with regulations surrounding them. Since they’re sponsored, the fees are very low. 

One common misconception is that if you open a plan, for example, in North Carolina, you must use the account for a child going to school in the state of North Carolina. This simply isn’t the case. The funds in the account can be used for any education-related expenses nationwide.

Accounts can be opened anywhere, so you can live in one state and open a 529 in another state.

For the most part, you can open an account anywhere and go to school anywhere. One advantage that some accounts have is that a few states allow accounts to be opened in their state to deduct the contributions from state taxes.

529 Accounts Will Eventually Disappear

Maybe. We really don’t know the future, but we do know that the Pension Protection Act of 2006 states that these plans will be in place indefinitely. Of course, the government can change this at any time, but the forecast doesn’t seem to indicate that they will remove these accounts in the future.

There is a lot of talk about the burden of high student loan payments and college costs that make it unlikely that a 529 plan would disappear in the near future.

You Can’t Change Plans

You aren’t locked into a plan, so you can change plans if you want to in the future.

How to Setup a 529 Plan

Plans are very easy to set up. It’s just a matter of looking for your state plans and filling in information online. Of course, you’ll need the beneficiary’s information, too. Once you’re done, you can start funding the account.

Major brokers have added 529 plans to their accounts, which makes it easy to get started.

When it comes time to take money out of the account, you’ll need to fill out a form explaining what the funds are used for, and that’s it.

While a 529 plan may not be the right choice for everyone, it’s a smart saving tool for a child’s college expenses. The cost of a college education is ever-increasing, and these plans can help make higher education just a little more affordable.

Are you looking for more great advice on retirement? We’ll walk you through how we’ve helped people, just like you, reach their retirement goals.

Read our new book: Secure Your Retirement Achieving Peace of Mind for Your Financial Future.

Avoid 4 Retirement Investment and Planning Rip-Offs

Written by

Retirement planning is one of the topics that should be on everyone’s mind. When you’re trying to secure your retirement, it’s important to consider rip-offs. There are retirement investment and planning rip-offs that everyone should know about.

4 Retirement Investment and Planning Rip-Offs

1. Fees

Some financial advisors say that they have “no fees,” but the reality is that there are always some types of fees. There are, typically, two types of fees that you’ll deal with, which are:

  1. Flat fee: Often a percentage of the assets being managed.
  2. Commission: Fees aren’t visible to you, but the advisor receives a commission from you investing in certain products.

If the advisor states that there are no fees for their services, it should be a red flag for you. The advisor is in the business of making money, so there has to be fees or commissions being paid.

2. Bait and Switch

A bait-and-switch occurs when someone states that they can help you achieve a certain rate of return that’s higher than the average. For example, let’s assume CDs are offering 0.6% returns, but the advisor or banker states that they’re able to secure a 6% return for you.

How?

You must ask questions. If a rate seems too good to be true, something is off. It’s vital to ask how the interest rate being offered is achieved. There are some offers that are “teaser rates,” and what this means is that during the first year, your rates may be 6%.

After year one, the rate falls back down to a normal rate.

If the advisor states that the financial vehicle offers a 6% or 7% guaranteed return for, say, 10 years, you’re likely being put into a fixed annuity with a rider. The growth rate is based on the interest for the income stream.

What does this mean?

Your income stream from the annuity has a 6% or 7% return, but it’s not something that you can decide to take out all at once.

When rates sound too good to be true, ask more questions. The annuity above is a good product, but if you don’t know that the rate is just for income, you might feel duped. Knowing and understanding the following can help:

  • The overall rate
  • How long the rate will last

Oftentimes, these high rates of return are just introductory rates and won’t be in place forever. Think of credit card offers that aim to have people sign up. Lenders are willing to offer 0% interest for six months or a year to get you to apply. It’s a similar concept here with bait and switch.

3. Outrageous Claims

Rates of return are important if you want to reach your dream of retirement. You need steady, consistent returns to retire. When you’re looking at investment vehicles, there is something called “illustrations.”

These illustrations are claims and may say you can earn 6% – 8% returns.

A fixed annuity may offer these returns on occasion, but that doesn’t mean that you’ll achieve these rates. Illustrations often claim that you can earn rates “up to,” or that others have earned “as much as,” but these are often unique cases.

Chances are, these high rates of returns were very specific cases and aren’t repeatable every time.

Even if an advisor states that they’ve had 10% returns for their clients last year or five years ago, it doesn’t mean that they’ll be able to replicate these returns in today’s market.

Instead, we recommend:

  • Asking for historical return data
  • Really reading the fine print

Outrageous claims are a great way to lure you into a contract or financial vehicle, so be on the lookout for claims that just sound too good to be true.

4. Outdated Beliefs

A long time ago, in the 1900s, there were no regulations in the banking system. When markets fell, customers would go to the bank and start withdrawing their money. The government created the FDIC to support the banking system.

The FDIC is a protection offered to you by the federal government that if the bank goes under, you’ll have protection for your money.

Imagine today, if everyone had the belief of the 1900s, and decided to ignore the FDIC. Some advisors fall into these old beliefs. Just 20 years ago, a lot of people didn’t like annuities and were very much against them.

Today, there are still some advisors stuck in their outdated beliefs that savings in retirement products are bad. 

Holding onto old, outdated belief systems is never a good idea.

Why? 

Offerings change, and the market changes, too. An advisor should look into all financial vehicles and the current state of a financial vehicle today. In the past 20 to 25 years, things have changed and at a rapid pace.

We do recommend maintaining a diverse portfolio of products and would never suggest putting all of your investments into one vehicle. However, there is a time and place for most financial vehicles in a person’s investment portfolio.

Wrapping Up

If there is one take away from the points above, it’s that you really need to take control of your retirement planning. Educate yourself on investment options and don’t be afraid to question how a certain financial product is able to offer substantially higher returns than average.

It’s your money, and you have every right to ask questions to safeguard your retirement.

Do you want more expert advice on how to secure your retirement? 

Listen to our podcast where we discuss retirement planning twice a week, every week.

Social Security Strategies

Written by

Some of the most common questions we receive are related to social security strategies. A lot of people rely on social security to help secure their retirement because it is a source of income that can help you pay for your day-to-day expenses.

But it’s still a confusing topic when beginning with retirement planning because you’ll find a lot of different opinions.

If you’re wondering when you should take your retirement, grab a cup of coffee and continue reading.

When Should You Retire and Take Social Security?

One of the first questions we receive from clients is when to take social security. A lot of people try waiting until they’re 70 to retire so that they can receive the maximum benefits social security has to offer.

The problem is that this advice is based purely on the financial aspects of retirement and not your current situation.

You have a lot to consider, especially if you have a spouse, such as:

  • Age disparity between spouses
  • Health
  • Ability to work
  • Sources of income

For a lot of people, over 50% of their income in retirement is going to be social security, so it may make more sense to retire at 70 to maximize those benefits. The problem is that it’s not always that simple.

If one spouse is a lot younger and is still working and plans to continue working, retiring early may be the best option.

What to Think About If You Take Social Security Before Full Retirement

If you’re planning on taking social security before your full retirement, there is quite a bit to think about. You should be thinking about the following:

Is someone still working? 

If the person is still working, there is a limit to how much they can earn while on social security. For example, in 2021, if you make more than $18,960 during the year, the amount over the limit will result in 50% of the overage being deducted from social security.

This can be confusing to understand, but what it’s essentially saying is that:

  • You earn $28,960 ($10,000 over the limit),
  • $5,000 (50% of the overage) will be withheld

When trying to plan for income, it can be difficult because the withheld amount may mean a three-month gap between benefits being paid.

Spouse earnings will not impact you in this situation.

Is there an issue with permanent reduction?

Your benefits will be reduced permanently once you opt into social security early. It’s important to realize that when you hit full retirement age or 70, your benefits will not go up. Your choice to take social security is final.

Taxes

If a spouse is working and you’re taking social security, it’s important to consider taxation. You must plan for taxes because they will be a financial burden that is difficult to overcome. 

Restricted Application and the Potential Benefit It Offers

If you were born before January 1, 1954, you are eligible to use a restricted application. This is a strategy that allows you to file for spousal benefits first and restrict the application to the spousal benefits only.

What this means is that the person isn’t choosing to use their own social security benefits at this time, so they can effectively wait until they are 70 to maximize their benefits.

If you plan to wait until age 70 and meet the birth requirements, this can really be a beneficial option for you. It’s important to note that your spouse will need to already be on social security or plan to retire before your restricted application is filed.

Let’s take a look at an example:

  • One spouse is on social security that is $2,000 a month.
  • You file a restricted application and receive 50% of your spouse’s benefits, or $1,000.

You can continue taking the $1,000 while your own social security will continue to grow. And you can also, in some cases, claim six months of retroactive benefits.

How Spousal Benefits Work

While spousal benefits are 50%, it’s based on the primary person’s insurance amount. Let’s assume that the person is earning $3,000 on social security, this doesn’t mean that the spousal benefit will be $1,500.

The insurance amount may be $2,400, and the spouse would then receive $1,200.

If the dependent spouse, or the one taking spousal benefits, will also factor into how much the person receives. Why? The dependent spouse’s filing age will be the deciding factor in whether they receive the $1,200 or not.

For example, if the dependent filed at 60, the $1,200 may be reduced by 30%.

Reductions can be as high as 35%.

It’s very challenging when trying to secure your retirement because the social security office will not help you. Why? They’re prohibited from providing advice to you. You will need to work with someone who can help you navigate social security.

Note: You need to be married for 10+ years to receive these benefits.

What Happens If the Higher Earning Spouse Passes Away?

When one spouse passes on, the remaining spouse will receive 100% of the highest benefit amount between both spouses. You won’t be able to receive your benefits and survivor benefits.

Instead, let’s assume, using the scenario above, that the one spouse passes away and leaves the dependent spouse behind.

In this scenario, the dependent spouse can claim the $3,000 in benefits. 

But as with everything related to social security, the age at which you start collecting benefits will matter, too.

You will also receive the delayed retirement credits from the deceased spouse.

Note: You can also collect 50% of an ex-spousal benefit if you were to divorce rather than the one spouse passing on. If you remarry, the benefits will stop. But if the person dies and you don’t remarry until 60 or older, you can still take survivor benefits.

When to File for Social Security If You Know What Age You Want to File

You know what age you want to start taking your social security benefits, but now you need to know when to actually file. Filing should be done 3 to 4 months before you want to receive your first benefit check.

The easiest way to do filings is to use the online portal to apply.

When filing online, be sure to reiterate your plan in the remarks section to ensure that errors do not occur. This is especially important when filing for a restricted application to avoid any processing errors on the side of the Social Security Administration.

There’s a lot to think about figuring out social security strategies for your situation. Sit down with someone and really discuss your options because you may be missing out on key benefits that you can claim.Have you heard our latest podcasts? If not, we encourage you to join our podcast today for access to more than 90+ financial and retirement-related talks.

What Happens to My Money if Something Happens to My Advisor?

Written by

Financial advisors can help you invest and manage your money. An advisor helps clients reach their long-term financial goals and often play an integral part in the retirement planning process. 

But there’s one question many clients have: what happens to my money if something happens to my advisor?

Your advisor opens your accounts, sends you reports and provides a hands-off way to secure your retirement. If these individuals die or become incapacitated, your money will still be safe and will still be your money.

What Happens to My Money if My Advisor Retires, Gets Sick or Dies?

As an advisor, 90% of our clients ask us this very question. It’s an excellent question to ask, and it’s one that we want to clear up for you. No matter who you’re working with, the logic and answers will be the same across the board.

But before we get too far ahead of ourselves, it’s crucial to have a firm understanding of where your money is held.

Understanding Where Your Money is Held

When you work with us or any independent financial advisor, your money never enters our bank account. In fact, our name is never on the checks that you write. Instead, you assign us as an advisor on your account.

A third-party custodian will be where your money is held.

These custodians are massive financial institutions, such as Wells Fargo or Charles Schwab. The custodian will house your money, ensure everything is compliant and facilitate the trades.

As independent advisors, we:

  • Act on your behalf when dealing with a custodian
  • Never actually hold your money

If something happens to your advisor or us, your money will still be sitting in the custodian’s accounts that we created for you.

What Happens When Working with Big Financial Firms?

If you work with a big financial firm, you may assume that if your advisor is no longer working with the firm, you’ll be working with another internal advisor. And you will be working with another advisor, but it’s essential to understand that these firms operate in what’s called “teams.”

Teams have multiple advisors, so if something happens to the leading advisor, you’ll work with someone else in the company.

In fact, you’ll receive a call from your new advisor and will need to decide whether or not to work with the team without the advisor you had. Your money remains in place, and if you choose to leave the team, you can just transfer your money to another advisor.

So, in short: you won’t lose your money and can decide on what to do next with your portfolio.

Common Scenario Questions People Ask

Your money is important to you, and it’s essential to know the answers to common questions regarding your advisor:

What Happens if Your Main Advisor Dies?

First, you’ll get a new advisor. But the process will go something like this. You’ll receive a phone call and the new advisor:

  • Will explain that they have been assigned to your account
  • Likely have you come into the office to learn about him/her

You should ask to meet the advisor and go through the initial decision stages again, just like you did when choosing your original advisor. What this means is that you’ll want to:

  • Talk to the advisor and see whether your personalities match
  • Understand the advisor’s investment philosophy
  • Decide if the philosophy is good for you

If you’re working with teams in the same office, you can be relatively confident that their philosophies will match. You won’t even need to worry about the investment strategy if working with an advisor from the same team.

This is the best-case scenario.

When working within the same team, your biggest concern will be whether the new financial advisor is a good fit for you. If the advisor isn’t a good fit, you can switch to another member within the same team.

What Happens If Your Financial Advisor Retires?

Retirement scenarios are a little different than if someone quits, gets sick or even dies. If an advisor is retiring, they’ll let their clients know well ahead of time. There is a lot of planning that goes into the retirement process, so you have many options as a client.

Your advisor can also choose to retire and:

  • Sell their practice, in which case, you can begin working with the new team.
  • Let the current in-house team take over the account. The long-term advisor leaves, but you continue working with the team that you’ve known for years.

If you’re concerned about your advisor leaving, it’s important to ask about their continuity plan for your team. You can ask your current advisor this question and ask this question when looking for an advisor.

Most advisors will have a plan in place to help you transition if they get hit by a bus tomorrow.

And a lot of people will shop for a new advisor when they know that their name advisor is going to retire.

We’ve had potential future clients come into our office, vet us thoroughly and explain that they plan to stick with their current advisor until that individual retires. You can follow this same concept because, at the end of the day, it’s your money that a new advisor will need to handle.

You’re not restricted to working with just the team that your old advisor built either.

Final Note

You’ll work closely with an advisor, build trust and hopefully make a lot of money together. Then, if your advisor is hit by a bus or decides to quit tomorrow, there will be someone that can confidently fill their shoes.

Often, you’ll have the option of working with the advisor’s team that they were a member of to make the transition as fluid as possible. And in all cases, you’ll still have all the money you invested accessible to you.

Want to learn how you can secure your retirement? We have two great resources that we just know that you’re going to love and benefit from.Click here for our 4 Steps to Secure Your Retirement Course or listen to our Secure Your Retirement Podcast.

Tax Strategies for Non-IRA Brokerage Accounts

Written by

Tax strategies come into play a lot in retirement planning. Retirees, or future retirees, want to keep as much money in their pockets as possible, and strong tax planning can do just that. When dealing with non-IRA accounts, such as a brokerage account, you’ll even receive a 1099, which takes a lot of people by surprise.

We’re going to walk you through a strategy that will outline taxes on brokerage accounts.

Taxes on Brokerage Accounts or Non-IRA Accounts

An IRA is the ideal way to not have to pay taxes, but these accounts are limited. Most people will have a brokerage account of some form created to leverage other financial investments. Understanding how a brokerage account is taxed is the first step in really understanding how these taxes work.

How Taxes on a Brokerage Account Work

When you have a brokerage account, whether it be Charles Schwab, TD Ameritrade or others, taxes always work the same. Brokerage accounts are often opened when you have money in the bank that really isn’t working for you.

You want to make this money grow, so you open a brokerage account and start investing in stocks, mutual funds and other financial vehicles.

As the money grows, you’ll have gains.

With brokerage accounts, or a non-qualified account, you’ll be paying taxes on the gains in the account. Let’s assume that you put $100,000 into the account and now you have $200,000 in the account, or $100,000 in gains.

There are a few things that can happen here in terms of taxes:

  1. If dividends are paid and then reinvested, you’ll still receive a 1099, which means you’ll have to pay taxes on these dividends even if you simply kept investing the money you were paid out.
  2. If you own stock and then sell it, you’ll generate a taxable gain on the sale of the stock. There are two main ways that these gains will be taxed:
    1. Short-term: If you hold the stock for less than a year, you’ll pay a short-term capital gains tax, which is in your income category.
    2. Long-term: If you hold your stock for a year and a day, or longer, you fall into the long-term capital gains category. This is favorable, right now, because you’ll pay a lower tax rate. You can view the tax rate on the IRS’ website, but as of right now, you would be taxed at a rate of 15%[1] if your taxable income was $100,000.

We have a lot of clients who are trying to secure their retirement, and they may not want to sell off a stock that they held for a long time due to the tax bracket that they would fall into. This is where it can get tricky for a lot of people when trying to figure out the best time to sell.

There are pros and cons to investment management.

Positives and Negatives with Investment Management

Investment management will often turn into managing risks or taxes. For example, let’s assume that you don’t want to pay taxes on your Tesla holdings, and the stock is booming. You hold on to the stock for years, and natural market fluctuations occur.

Your stock holdings may have been worth 30% more three years ago, but you wanted to avoid paying taxes, so you didn’t sell.

In this case, you managed your taxes rather than your investment and the risk is that the stock went down. You’ll still have to pay taxes if and when you sell your holdings, and you lost significant value in the process.

It’s not an easy conversation to have because no one wants to pay taxes, but there’s no way to avoid them completely.

You need to decide:

  • Do you want to protect your investments?
  • Do you want to shelter against taxes?

We deal with this scenario a lot, and it “sounds” like it actually goes against what we’ve said in the past. But you have to keep reading because this is a strategy that works well if you’re stuck debating on what to do with your brokerage account taxes.

What’s the strategy? A variable annuity.

Yes, we did an entire episode on variable annuities, and we don’t like them personally. Why? You’ll be paying fees of 3% to 5% per year, but then you have to pay additional fees on top of this.

We still wouldn’t put IRA money into an annuity because it doesn’t make sense.

Wait! Is There Really an Option in the Variable Annuity World?

Yes, even though we’ve given you a bunch of negatives to think about with these variable annuities, this is one of the rare circumstances where they may have some benefit. We’ve found a positive in variable annuities when you don’t want to pay capital gains taxes.

Why?

Your goal is to save on taxes and not have to pay taxes on the brokerage account. We want to be able to alleviate the tax gain while protecting it, too. The simple plan is to put your money into a tax-sheltered product like an annuity.

In this case, you can:

  • Avoid surrender charges
  • Avoid having to pay commission
  • Liquidate the fund immediately

The only thing that you will have to pay is a $20 monthly fee. You only need to think about taxes when you make a withdrawal, which can be 10, 15 or even 20 years from now. You can do everything that you can with a brokerage account with this variable annuity.

For a small $240 fee a year with this particular annuity, you can avoid having to pay short-term capital gains or when you need to make withdrawals.

The account can even have beneficiaries that you leave the account to if you die.

If you’re interested in this type of account, please contact us to find out whether it’s a good option for you. Again, not all annuity accounts work in the way that we described above, so this is a special option that we’re using with our clients.

Not sure how to begin to secure your retirement? Click here to access our 4 Steps to Secure Your Retirement Course.

Resources

  1. https://www.irs.gov/taxtopics/tc409 

How to Change Financial Advisors

Written by

If you’ve broken up with your advisor (episode 90 of our podcast), you may be wondering what steps to take to move to another advisor. A retirement financial plan changes and evolves over time, and there are times when moving to another advisor is in your best interest.

There are a lot of reasons to make a switch, and there’s always going to be a move where you transition to your new advisor.

It’s difficult to leave an advisor, but the transition process is rather straightforward.

How to Move from One Advisor to Another

A major question our clients have is what the process looks like when moving from one advisor to another. There are a few ways to make the transition, and don’t worry: your money won’t be lost in transit.

There are a few scenarios that can play out here.

Your New Advisor is at the Same Place

If your old advisor is at the same place as your new advisor, the process is simple. By “place,” we mean a major institution like Fidelity, Charles Schwab or any other major institute. In this scenario, everything stays the same.

You don’t have to worry about account numbers or information changing.

Instead, you’ll sign a few papers that authorize the new advisor to take the place of your old advisor.

This is a rare scenario, but it is the best to be in.

Your New Advisor is at a Different Place

A more common scenario that we deal with is that a client’s former advisor is at Fidelity and their new advisor is at Charles Schwab. In this case, all of your money needs to move in the process, which is still an easy process.

Not much changes, even the way that you look at your account. For example:

  • Your IRAs will still be IRAs
  • Joint accounts stay joint accounts
  • Etc.

For the most part, things will remain very similar when changing advisors.

Even if you have stocks that you want to hold onto, you can transfer them “in kind.” You don’t have to sell and then rebuy these stocks during the move.

Paperwork Process Required

The custodian (in this case, Charles Schwab) will require paperwork to understand who you are. An application is required, which includes all of your basic information, such as your name, address and so on.

  • If you’re transferring an IRA, you’ll need to list your beneficiaries.
  • Brokerage accounts will need to be set up, and we recommend adding in a TOD, or transfer on death.

Your advisor will walk you through all of these steps and explain what’s taking place. You’re there to sign off on what’s happening and to finalize the transfer.

  • Transfer document. A transfer document will need to be signed, which gives permission to move assets from one custodian to another. For example, if your assets are in Fidelity and you’re moving to an advisor that uses Charles Schwab, you’ll sign this document to allow the assets to transfer. You’ll need to attach a current statement to the document, too.
  • Advisor agreement. Your advisor will want you to sign documents that outline the services that they’ll render. 
  • Risk tolerance document. You’ll likely have to sign off on paperwork involving risk tolerance so that both you and the advisor know what level of risk you’re willing to take.

Note: In 99% of cases, your accounts will transfer over to an identical account with little more changing than the name of the custodian on your account statements.

It’s important to note that your former advisor doesn’t have to sign off on any of these documents. Since you’re changing advisors, not requiring a signature makes the entire process much easier on you.

The advisor will receive a notification of your money moving and that you’re moving to another advisor.

Process After Document Signing

After you’ve signed all of the paperwork, there’s a small waiting period where your accounts open quickly and sit at $0. The transfer process often takes 7 to 10 business days, so during this time, your assets will begin their transfer.

Once everything is transferred, your advisor will then begin looking through all of your assets and start working on making any changes you’ve discussed to reach your retirement goals.

Common Questions When Moving or Starting Work with an Advisor

What if you want to move from one account type to another?

What if you’re not moving from another advisor but you’re moving from a 401(k) to a traditional IRA? In this case, the process often involves a simple phone call and won’t have any tax ramifications involved.

In this case, the 401(k) will send you a check in the benefit of you to the custodian.

So, the check with all of the funds from the 401(k) is sent to you and written out to your custodian. You pass this check to your advisor, and it will now be rolled over to a traditional IRA account.

What if you handled all of your own investments but now want to work with an advisor?

If you have handled all of your own investments, it’s as simple as creating a new account with a custodian and following a similar path as outlined in the “Your New Advisor is at a Different Place” section above.

Moving to a new advisor may be required to secure your retirement. The process itself is easy, and most advisors will walk you through the process step-by-step to get started.

Want to secure your retirement?

Click here to access our 4 Steps to Secure Your Retirement video course.

How to Choose a Financial Advisor After a “Breakup

Written by

You put a lot of time and effort into choosing a financial advisor. An advisor learns all about your financial situation and your future goals. And when it’s time to move on to a new advisor, it can be really difficult.

We’ve had a lot of clients come to us over the years that want to move on to use our services.

But they have an emotional attachment with their current advisor.

It’s difficult to move on to a new advisor when you know the person’s family members or have relied on them for years, but you also know that it’s the right time to move on. For a lot of people, choosing a new financial advisor is almost like breaking up with someone because of that deep, emotional bond that has formed.

Why Break Up with a Current Financial Advisor?

Retirement planning is a very important part of your life. Once you’ve reached retirement age, you’ve either planned properly or you didn’t. You can’t go back and correct past mistakes when you’ve reached 65, 67, 70 – whenever you choose to retire.

For a lot of people, they often feel that leaving a current advisor requires a deep reasoning.

It doesn’t. 

Your advisor is helping you manage your money. If you’re not satisfied with the person’s services or just want to try another avenue, you have every right to do so. You’re always in control of your financial advisor choice.

The most common reasons why people breakup with their financial advisors are:

  • Communication has broken down, or you really never hear from your advisor.
  • You’re simply not happy with the performance or experience you’re having with your advisor.
  • Life changes that occur, and your objectives and goals change.
  • You need an advisor that offers more services or is setup to handle more of your concerns.
  • Advisors change their overall philosophy, and the change isn’t the right choice for you.
  • Your advisor is retiring soon, so you begin looking for a new financial advisor.
  • Your advisor’s team is changing and you’re no longer working with the advisor that you want.

The truth is that you are investing your money into retirement. Your life goals and objectives are either being met or not met with your advisor, and it’s your right to leave an advisor if you want to.

How to Choose a Financial Advisor

When working with clients who want to secure their retirement, we’ve found that communication is the main factor in them no longer working with an advisor. Because communication is key, it’s often best to start here when choosing a financial advisor.

Ask the advisor about:

  • Types of communication
  • Frequency of communication
  • Types of reports or statements provided to you
  • Etc.

If the advisor shrugs off these questions or seems annoyed by them, you know that they don’t take communication as seriously as you need them to.

But there is a lot more to look for in an advisor than just communication.

You also want to consider the following:

  • Are you nearing retirement? If so, working with a specialist who focuses on near-retirement planning is often in your best interest. These advisors will be able to fill in gaps that past advisors may have missed, and they’ll be able to provide guidance that can solidify your retirement.
  • Do they match your personality? Your personality should mesh with the advisor’s personality. When both personalities mesh well, you’ll have a much better experience working with them. An advisor shouldn’t force you or try pushing you into using their services or to convince you that they’re right.
  • Will your advisor help you with goal alignment? You have goals, and the advisor should help you with goal alignment. If you want to keep your risk low and the advisor is trying to push you into a potentially high-risk investment, such as cryptocurrency, you may want to look elsewhere. The advisor should discuss your options and maybe recommend other strategies, but they shouldn’t try pushing you in one direction or another if you’re uncomfortable with their recommendations.
  • Does the advisor take a holistic approach to retirement planning? A holistic approach, for us, means that we look at the entire plan. There’s more to retirement than investing. Holistic approaches consider taxes, Medicare, long-term care, Social Security, estate planning and your goals. 

How to Break Up with Your Advisor

Breaking up with an advisor can be done in a lot of different ways. A lot of people make this a pressure-filled time with anxiety and stress, but breaking up with an advisor doesn’t need to be this complicated.

Instead, you can send an email, call the person or go see them in person.

We recommend that you keep it simple no matter which method of communication you use to break up with your advisor. If you make it complicated or explain why you’re leaving, it can lead to justification and make the entire process more difficult than it needs to be.

Simply say that you’ve chosen to go in a different direction, thank them for their services and explain that your decision is the best choice for your family.

Technically, you don’t even have to do that. You can also opt to move to another advisor with no explanation needed. Your new advisor should be able to access all of your accounts and help you with the entire moving process.

Click here to access our 3 Keys to Secure Your Retirement Master Class for FREE.

Retirement Financial Plan

Written by

Retirement planning has a lot of moving parts, and if you’ve been reading our blog or listen to our podcast (listen here), you know that we’re big on creating a holistic retirement financial plan.

We believe that you should have a retirement plan that is well-put-together and really hits on all of your goals.

How can you create this plan?

With a team.

We’re going to help you start to secure your retirement with a quick overview of what your retirement financial plan team should look like.

Retirement is a Lot Different than Most People Realize

A lot of people think about their retirement briefly while they put money into their 401(k) plans, and a lot of people know when they want to retire and take social security. But when you sit down and get closer to retirement, you’ll realize that there are a lot of moving parts to consider.

Retirement is more than just putting money away, although money plays a big role in retirement.

And when you begin doing your research, you’ll find a lot of advisors to choose from, which can make your head spin. We’re going to discuss the key people that should be involved in your life and can help you retire the way that you want.

Advisors to Hire and Work with to Secure Your Retirement

Advisors help you go well beyond just a 401(k) and saving money. These professionals will assist you with investing your money in many cases. For example, you may have an advisor that works with your employer and will:

  • Assist with asset allocation
  • Invest for you
  • Offer a quarterly report
  • Provide yearly statements

These advisors work with money management, but they fail to look at the whole of your retirement.

We take a holistic approach to retirement. For example, you’ve received a paycheck from an employer, and now that you’ve saved money to retire, it’s time to pay yourself. You have access to this money at any time, but if you’re spending way beyond your means, your retirement buckets can quickly dry up.

An advisor that works to invest your money only isn’t considering how you’ll pay yourself.

You’ve saved and grew your money, and that’s where a lot of advisors stop. They don’t consider how you’ll manage your money after retirement, nor will they continue checking up to understand your goals. As your goals change, your asset allocation should also change.

Money managers grow and build money; not plan for when you want to retire.

Your money manager won’t consider:

Holistic advisors tend to look at your retirement plan as a whole. There’s a lot to consider, so these individuals will discuss your retirement desires with you and help make retirement possible.

Types of Advisors to Work With

You may work with a variety of advisors, including:

  • Money manager or financial adviser. These professionals will be focused on investing and growing your money.
  • Tax advisor. A tax advisor is key because they’ll help you find innovative ways to shelter a lot of the money that you save for retirement so that you don’t have to pay it in taxes. Imagine needing $1 million to retire and not realizing that you owe $250,000 in taxes.
  • Estate planner. An estate planner will help you with ensuring that all of your documents are in order so that if you become incapacitated or want to leave assets to children or family members, you can.
  • Social security specialists. These individuals will help you determine the best time to apply for social security. They’ll also assist you with maximizing your payments by retiring later. 
  • Insurance experts. An insurance expert can help you obtain the best life insurance or health insurance just in case you or a spouse pass on.

No one is a master of all aspects of retirement, but with the right team, it’s possible to bring the collective knowledge of these professionals together in one place.

Working With a Holistic Team

A holistic team, like us, will help with all aspects of your retirement. We always start with your retirement plan, which is an extensive plan that looks at your retirement goals, needs, and the “what ifs” that pop up before and during retirement.

Comprehensive plans can and should be updated annually, and they’re a clear roadmap to your retirement.

Once we have this plan in place, you can sleep better at night. You’ll know what it takes to retire and can follow a roadmap to success.

And since we’re a holistic advisor, we bring in:

  • Tax advisors
  • Social security specialists
  • Other advisors

Your team must look at your goals, and how they change, so that you can confidently enter retirement. Working on just investing your money isn’t enough to retire. Bringing together the right team that offers a holistic approach will look beyond your investment portfolio and really bring everything together, from social security, to tax considerations and so much more.

Click here to sign up for our 3 Keys To Secure Your Retirement complimentary training.