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Archive for financial planning

Six Ways to Get Your Financial House in Order During the Virus

Posted by Frank McKinley on
 February 9, 2021
  · No Comments

Many families think they have a sound “financial plan” because they own investments or have established a saving strategy for retirement.  This is a good start but it’s incomplete. There are many components to ensuring your financial future and getting your “house in order” is the first step. What do I mean by that? I’d like to share 6 ways you can accomplish this. Let me explain…

Do you know what the three leading causes of death are in the United States? Many people correctly guess cancer and heart disease as numbers one and two. What is number 3? Accidents? Alzheimer’s? Strokes? You may be surprised to learn that the third leading cause of death in America is medical malpractice! The doctor’s fault? Nope- our fault. We go to the hospital totally unprepared. The average American over the age of 65 will take 11 different prescription drugs this year. You’re in an accident and brought to the hospital, the hospital administers a pain reliever and the combination of what you are taking and what they have given you- kills you. Have you ever had a heart attack? Do you carry nitroglycerine with you? Have you been warned that the combination of Cialis and Nitro will kill you? Is this a risk you are willing to take? Or maybe when they ask you what prescriptions you are taking you mispronounce Omicor when you meant Amicar. Yes, medical malpractice is third leading cause in America. We don’t want this to happen to you, so it is time to get your house in order!

Resolution number 1.  Don’t go to the hospital unprepared!

Do you remember the story about Terri Schiavo? At 26, Terri had a massive coronary, was resuscitated but experienced irreversible brain damage that left her in a coma. Fifteen years later, the Supreme Court made the final decision to remove the feeding tube. This long-term ordeal would not have happened if a simple healthcare directive and a living will had been in place. A misconception we frequently encounter is that healthcare directives are only for older adults. We’ve seen clients experience unexpected, lifechanging circumstances at all ages and believe that health care directives should be a priority for everyone. Please don’t let this happen to you or a loved one; get your house in order!

Resolution number 2.  Sign a healthcare directive and living Will.

What do Steve McNair, Abraham Lincoln, Pablo Picasso and the musician Prince have in common? They all died without a Will. Steve McNair’s mother was removed from the house he had given her because there was no Will to prove he had given it to her- I’m pretty sure that was not his intent. Having this document is essential to ensuring your wishes are carried out but it is one of the most frequently postponed documents to be put in writing. Your Will protects you and ensures that your future wishes for your estate are carried out. According to the Virtual Attorney, 32% of Americans would rather do their taxes, get a root canal, or give up sex for a month than create or update their Will! Even though I am not an attorney, I can help you facilitate this- let me help you get your house in order!

Resolution number 3.  Create or update your Will.

In 2005, Anne Friedman, a former school principal, died suddenly of a massive heart attack. She had accumulated over $900,000 in her Teachers’ Retirement Fund but never named anyone as her designated beneficiary. By law, her surviving spouse would have been entitled to the money. However, in 1978, in a previous job, before she was married, she had filled out a designated beneficiary form naming her mother, her uncle and her sister as her designated beneficiaries. Her mother and uncle had since passed away, but her sister was still living. By law, the sister was entitled to the money, which she received, and didn’t share a dime with the now destitute husband. We see this every day. Proceeds from Life Insurance, 401(k) plans, and IRAs are being left to the wrong beneficiaries because the owners never thought to update them.  Your financial documents must be regularly reviewed and evaluated as your life evolves, particularly when it comes to your beneficiaries. Marriages, divorces, births, deaths and other major life events can all warrant changes. These documents are too important to leave unattended. Let me review these for you.

Resolution number 4.  Review and update beneficiary designations with life changes.

How many of you own a business?  How about those of you that have a real estate investment?  Better yet, how many of you have children driving a car? Do you have proper insurance?  Have you fully limited your liability? Are your investments titled properly to limit liability? If you have trust documents, titling of property, insurance coverage(s) and other liability documents, also need to be regularly reviewed. I can help you do this.

Resolution Number 5.  Regularly review legal/liability documents.

Frederick Vanderbilt, J.D Rockefeller, JP Morgan, Franklin Roosevelt, and Elvis Presley all died without an estate plan. Please re-read that list. Some of the most successful, intelligent, and powerful people in America did so much for so many- they failed, however, to protect all the wealth they had created. Although we can’t predict the future, it’s important to have a comprehensive plan in place for how your money and other assets should be distributed when needed.  Your life stage will determine the needs of your estate plan. If you’re young and single, your plan may only include a few items, such as a Will, beneficiary designations and medical and financial powers of attorney. If you have substantial wealth, you may need one or more trusts to control how your assets are taxed, managed and distributed.

Resolution Number 6.  Establish an Estate Plan.

It’s critical to remember that financial planning is not solely based on investment planning or picking the right insurance coverage. While this must be done properly, there are many other vital areas that get overlooked or forgotten. Keep your financial house in order by regularly reviewing your plan and ensuring that you have the fundamentals in place. By this time next year, you’ll be glad you did.

If you would like more information or to discuss your financial concerns
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Categories : Blog, estate planning, financial planning, Financial Services

Long-Term Portfolio Management

Posted by Frank McKinley on
 January 25, 2021
  · No Comments

If you’re in the markets for the long haul and look to capture the benefits of long-term trends, you should focus on the tools that maximize your long-term rate of return while managing the risks you take:

Asset allocation. A long-term asset allocation strategy aims at determining an optimal mix of stocks, bonds, and cash equivalents in your portfolio to suit how much risk you’re willing to take. The benefit of investing in all three asset classes is diversification — spreading investments among assets that have different cycles of return.

Portfolio rebalancing. This may be the most overlooked technique for potentially boosting returns and control-ling risk. Yet the technique is relatively simple: once a year (or some other pre-determined time period), compare the percentage of your assets in each class to your strategy. Then sell some assets from the categories that are larger than your strategy calls for and use the pro-ceeds to buy more of the assets that decreased in value. The principle is that rebalancing forces you to sell high and buy low.

Dollar-cost averaging. This technique actually puts market downturns to work in your favor. The

method is to invest a set amount of money on a recur-ring basis in each asset class. By continuing to make purchases when prices decline, you buy more shares than you do when prices are high. Keep in mind that dollar-cost averaging neither guarantees a profit nor protects against loss in a prolonged declining market. Because dollar-cost averaging involves continuous investment regardless of fluctuating price levels, investors should carefully consider their financial ability to continue investment through periods of low prices.

Between the strategies of trading actively and managing your portfolio strictly for the long term is a technique called tactical asset allocation. This involves moving significant chunks of your portfolio from one asset class to another, depending upon your reading of the changing prospects for risk and reward.

Trading involves market timing, which in turn depends on reading market and economic indicators with precision. Is watching the indicators for the right moment to move in a new direction the right approach for you?

To determine the approach right for you, please call me at 973-515-5184.

Borrow Wisely

Use debt only for items that have the potential to increase in value, such as a home, college education, or home remodeling.

Consider a shorter term when applying for loans.

Make as large a down pay-ment as you can afford. If you can make prepayments without incurring a penalty, this can also significantly reduce the interest paid.

Consolidate high interest-rate debts with lower-rate options. It is typically fairly easy to transfer balances from higher-rate to lower-rate credit cards.

Compare loan terms with sev-eral lenders, since interest rates can vary significantly. Negotiate with the lender. Although most lenders have official rates for each type of loan, you can often convince them to give you a lower rate if you are a current customer or have an outstanding credit score. Review all your debt periodically, including mortgage, home equity, auto, and credit card debt, to see if less expensive options are available.

Review your credit report before applying for a loan. You then have an opportunity to correct any errors that might be on the report.

Financial Thoughts

Based on data from the Survey of Consumer Finances, older adults with more outstanding debt commonly respond to liquidity constraints by working longer, delaying retirement, and postponing claiming Social Security benefits. The researchers found that more household debt translates to an expectation of about an extra 2.5 months of full-time work and an additional year of overall work. Individuals with a negative net worth (or more debt than financial assets) work for an additional two years. The study deter-mined that mortgage debt remains the most significant and common source of debt among older households, representing 69% of total debt in 2016. Older adults with a mortgage are 4.8% less likely to be retired and 3.1% less likely to receive Social Security benefits (Source: AAIIJournal, June 2020).

Emerging research on cognitive aging found declines in financial capability and concurrent lower investment performance among older individuals. Investors older than 75 on aver-age experience investment returns that are 3% lower than those of middle-age investors. The return disparity rises to 5% among older investors with greater wealth (Source: AAIIJournal, July 2020).

If you would like more information or to discuss your financial concerns

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Categories : financial planning, Financial Services, Investing, Investments

Get Your 401(k) Plan on Track

Posted by Frank McKinley on
 December 18, 2020
  · No Comments

For many people, their 401(k) plan represents their most significant retirement savings vehicle. Thus, to make sure you have sufficient funds for retirement, you need to get  your 401(k) plan on track. To do so, consider these tips:

Increase your contribution rate. Strive for total contributions from you and your employer of approximately 10% to 15% of your salary. If you’re not able to save that much right away, save what you can now and increase your  contribution rate every six months until you reach that level. One way to accomplish that is to put all pay increases immediately into your 401(k) plan. At a  minimum, make sure you’re contributing enough to take advantage of all employer-matching contributions.

Rebalance your investments. Don’t select your investments once and then ignore your plan. Review your allocation annually to make sure it is close to your original allocation. If not, adjust your holdings to get your allocation back in line. Selling  investments within your 401(k) plan does not generate tax liabilities, so you can make these changes without tax  ramifications.

Use this annual review to make sure
you are still satisfied with your investment
choices. Avoid common mistakes made when investing 401(k) assets, such as allocating too much to conservative investments, not diversifying among several investments, and investing too much in your employer’s stock.

Don’t raid your 401(k) balance.
Your 401(k) plan should only be used for your retirement. Don’t even think about borrowing from the plan for any other purpose. Sure, that money might come in handy to use as a down payment on a home or to pay off some debts. But you don’t want to get in the habit of using those funds for anything other than retirement. Similarly, if you change jobs, don’t withdraw money from your 401(k) plan. Keep the money with your old employer or roll it over to your new 401(k) plan or an individual retirement
account.

Seek guidance. It is important to
manage your 401(k) plan carefully
to help maximize your future retirement income. If you’re concerned about the long-term future, call for a review of your 401(k) plan.

Pay Yourself First

To force yourself to save regularly, treat those savings as a bill to yourself and pay that bill first. Consider these tips:

Reduce spending, diverting those reductions to savings. One way to accomplish this is to cut back on your spending, perhaps reducing your expenditures for dining out, traveling, clothing, or entertainment. Another alternative is to find ways to spend less for the same items. For instance, get quotes for
your car and home insurance from several companies, placing any premium reductions in savings.

Save all unexpected income. Immediately save any money from tax refunds, bonuses, cash gifts, and inheritances. Before you get used to any salary increases, put that raise into savings.

Make saving automatic. Resolve to immediately set up an investment account that automatically deducts money from your bank account every month. Another good alternative is to sign up for your company’s 401(k) plan. (Keep in mind that any automatic investing plan, such as dollar cost averaging, does not assure a profit or protect against loss in declining markets. Because such a strategy involves periodic investment, consider your financial ability and  willingness to continue purchases through periods of low price levels.)

Financial Thoughts

Baby boomers are expected to transfer $68.4 trillion in wealth to heirs over the next 25 years (Source: Journal of Financial Planning, May 2020).

In a recent survey of those who do not expect to retire, 60% do not believe they will be able to afford retirement. The other 40% preferred not to retire in order to continue socializing with coworkers and maintain the mental stimulation of working. Only 25% of workers who are delaying their retirement are doing so because they want to maintain their medical insurance until they qualify for Medicare. Approximately 79% of workers are interested in  the possibility of a phased retirement program (Source: MetLife, 2020).

Approximately 60% of U.S. adults do not have a will. And approximately 1/3 are missing a healthcare directive in their estate planning (Source: Journal of Financial Planning, April 2020).

About 55% of inheritances are less than $50,000 (Source: Federal Reserve, 2020).

Approximately 26% of of people who stop working entirely will return to work (Source: Journal of Financial Planning, November 2019).

If you would like more information or to discuss your financial concerns

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Categories : Blog, financial planning, Financial Services, Retirement

Take Time to Reassess Your Comfort Level

Posted by Frank McKinley on
 December 4, 2020
  · No Comments

Periodically, you should reassess your portfolio, finding ways to increase your comfort level with your stock investments. Consider the following
tips:

Develop a stock investment philosophy.  Approach investing with a formal plan so you can make informed decisions with confidence, knowing you have carefully  considered your options before investing.

Remind yourself why you are investing in stocks. Write down your reasons for investing in each individual stock, indicating the long-term returns and short-term losses you expect. When market volatility makes you nervous, review your written reasons for investing as you did. That reminder should help keep you focused on the long term.

Monitor your stock investments so you  understand the fundamentals of those stocks. If you believe you have invested in a company with good long-term prospects, you are more likely to hold the stock during volatile periods.

Review your current asset allocation. Revisit your asset allocation strategy, comparing your current allocation to your desired allocation. Now may be a good time to rebalance your portfolio, reallocating some of those stock investments to  alternatives.

Determine how risky your stocks are compared to the overall market. You can do this by reviewing betas for your individual stocks and calculating a beta for your entire stock portfolio. Beta, which can be found in a number of published services, is a statistical
measure of how stock market movements have historically impacted a stock’s price.

By comparing the movements of the Standard & Poor’s 500 (S&P 500) to the movements of a particular stock, a pattern develops that gauges the stock’s exposure to stock market risk.

Calculating a beta for your entire portfolio will give you a rough idea of how your stocks are likely to perform in a market decline or rally. If your stock is riskier than you realized, you can take steps to reduce that risk by reallocating.

Keep the tax aspects of selling in mind. While you may be tempted to lock in some of your gains, you may have to pay taxes on them if the stocks aren’t held in tax-advantaged accounts. You’ll have to pay at least 15% capital gains taxes (0% if your income is under certain limits) on any stocks held over one year. If your gains are substantial, it may take longer to overcome the tax bill than to overcome a downturn in the market.

Consider selling stocks if you have short-term cash needs. If you are  counting on your stock investments for short-term cash needs, look for an appropriate

time to sell some stock. With short-term needs, you may not have time to wait for your stocks to rebound from a market decline.

Don’t time the market. During periods of market volatility, investors can get nervous and consider timing the market, which typically translates into exiting the market in fear of losses. Remember that most people, including professionals, have difficulty timing the market with any degree of accuracy. Significant market gains can occur in a matter of days, making it risky to be out of the market for any length of time.

Remember you are investing for the long term. Even though short-term setbacks can give even the most experienced investors anxiety, remember that staying in the market for the long term, through different market cycles, can help manage the effects of market fluctuations.

Please call if you’d like help implementing strategies that may make you more comfortable with your stock holdings.

Frankly Speaking

“Democracy is the process by which people choose the man who’ll get the blame.” -Bertrand Russell

“Everyone is a damn fool for at least five minutes a day; wisdom consists in not exceeding that limit.” -Elbert Hubbard

By now the election has hopefully been resolved, (like it or not). Democracy is attributed to Greece but didn’t really work, and we’ve spent 244 years proving them right. Or have we? The U.S. is a Democratic Republic, a democracy first and foremost, which is a government by the people; a republic second, having a division between the federal government and the states. If you didn’t vote you have no right or reason to complain. If you did but ‘your party’ didn’t get in, you have 4 years to help change things.

For an element of perspective, please call or email me. Remember, my job is to be here for you when things are bad!

If you would like more information or to discuss your financial concerns

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Categories : Blog, financial planning, Financial Services, Stocks
Tags : , ,

Asset Allocation – Cut Financial Clutter

Posted by Frank McKinley on
 November 17, 2020
  · No Comments

Below are six tips to help you cut financial clutter.

1. Prepare an inventory. First, make a list of all your financial accounts. Then gather all your financial paperwork in one place and organize it into three piles: One to keep hard copies of, one to keep digital copies of, and another to get rid of completely.

2. Shred, shred, shred. Much of the paperwork you’ve been hanging on to for years can be thrown away. Tax returns can usually be disposed of after three years, though in some cases (like if you’re
self-employed) you’ll want to keep them for a longer period. Credit card statements can typically be shredded once you’ve confirmed there are no erroneous charges. Loan documents can be shredded once you’ve paid off the debt.

3. Get a scanner. Invest in an affordable scanner and make digital copies of records you want to retain but don’t need originals of, like health records, old tax returns, and Social Security
statements.

4. When possible, consolidate accounts. Having numerous financial accounts is a major source of clutter. Do you really need multiple savings accounts at different institutions? Do you

have several different 401(k)s from old employers? Do you own half a dozen credit cards but only use one or two? When possible,  streamline and consolidate.  Not only will this  make things easier to manage, but you’ll reduce the risk of forgetting accounts and eliminate
extra fees.

5. Automate your finances. Reduce the amount of clutter coming in by signing up for online bank account and investment statements. However, because some banks may only allow you to access the past several months of statements,
you may want to download the records and save them elsewhere. When possible, automate bill payment and paycheck deposits.

6. Get an online vault and home safe. Personal computers can be compromised or stolen, so you may want to add an extra layer of protection by storing your financial information in a secure online vault. A fireproof home safe is a good place to store items you need to maintain original copies of. Marriage and death certificates, deeds to your home, car titles, Social Security cards, and copies of your will are all items commonly stored in home safes.

Factors Impacting Your
Asset Allocation

While you probably won’t make frequent changes to your asset allocation strategy, changes in your
personal situation may necessitate periodic alterations:

Risk tolerance — Your risk tolerance is likely to change, either as you become more familiar with
investing or as you age. Familiarity with investing typically makes you more risk tolerant, while aging may make you more or less risk averse. Adjust your asset allocation when your risk tolerance shifts, so you don’t become uncomfortable with
the risk in your portfolio.

Return needs — Your need to emphasize income or growth is likely to change over your life. Young
investors typically want to emphasize growth, while retirees may want to emphasize income.

Investment time horizon — With a short time horizon, your liquidity needs may require avoiding
more volatile investments. With a longer time horizon, you can wait out any fluctuations in volatile investments. Typically, young investors have longer time horizons than older investors, so they can invest more aggressively.

If you would like more information or to discuss your financial concerns

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Financial Thoughts

Approximately 57% of investable assets are controlled by investors age 60 and older (Source: Journal of Financial Planning, May 2020).

A study of 2.8 million trading accounts over the period from 2010 to 2014 found that individual investors tend to trade as contrarians around company news announcements. Investors sold stocks on large positive earnings surprises and bought stocks following negative large earnings surprises. During the trading period, individual investors strongly decreased their holdings of individual stocks (Source: AAII Journal, May 2020).

A recent study found that value investing strategies have suffered over the last decade due to a lower relevance of stock fundamentals to returns. Fundamentals matter to stock returns, but there are periods where stock prices become tenuously linked to fundamental data (Source: AAII Journal, May 2020).

A study found that riskier companies that hire retirement-age CEOs are more likely to increase their performance when those CEOs are hired in  distressed times. These CEOs tend to take on less risky projects and cut spending to help the company (Source: AAII Journal, May 2020).

Copyright © 2020. Some articles in this newsletter were prepared by Integrated Concepts, a separate, non-affiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed but should not be regarded as a complete analysis of these subjects. Professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.
Categories : Blog, financial planning, Financial Services
Tags : ,

2020 Year-end Financial Ideas

Posted by Frank McKinley on
 November 15, 2020
  · No Comments

Convert Traditional to ROTH IRA money for TAX-FREE distribution in retirement AND to avoid RMDs – must be done by Dec. 31, NOT April 15 of next year. (May be subject to Federal, State and/or Local income tax.)

Fully fund ALL retirement accounts: 401Ks, 403bs, 457 plans, IRAs, SEPs and SIMPLES – Do you know the limits? If not PLEASE call me!

Are all your beneficiary designations in order? AND

Are all your Estate Plan documents in order? Call me for FREE templates.

Did you turn any of these ages in 2020?

AGEEligiblity
50You may be eligible to make ‘catch-up’ contributions to an IRA or employer plan.
55You may be eligible to take a distribution from your 401K without being subject to the 10% early distribution penalty.
59 1/2You may be eligible to take a penalty-free distribution from your IRA and company plan.
59 1/2And you may be able to take tax-free distributions from your ROTH assuming it has been open at least 5 years.
62You may apply for Social Security.
65You may apply for Medicare.
72Must begin taking RMDs from IRAs and company plans but not ROTHs

If you would like more information or to discuss your financial concerns

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Categories : financial planning, Financial Services
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