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Thursday, April 03, 2014

The Right Beneficiary: Make sure the correct person inherits your IRA or 401(k)

Here’s a simple financial question:  who is the beneficiary of your IRA, 401(k), life insurance policy or annuity?  You may be able to answer quickly and easily, or you might say, “You know…I’m not sure.”  Whatever your answer, it’s a good idea to review your beneficiary designations every few years.

Your choices may need to change with the times.  While your beneficiary choices may seem obvious when you initially make them, time has a way of altering things.   In a stretch of five or ten years, some major changes can occur in your life that may warrant changes in your beneficiary decisions.  You may even want to review them annually and here’s why.  Companies frequently change custodians when it comes to retirement plans and insurance policies and beneficiary designations can get lost in the paper shuffle.  If you don’t have a designated beneficiary on your 401(k), the assets may go to the “default” beneficiary when you pass away, which might throw a wrench into your estate planning.

Naming a beneficiary also helps to keep your assets out of probate when you pass away. Beneficiary designations commonly take priority over bequests made in a will or living trust.  If you named a son or daughter who is now estranged from you as the beneficiary of your life insurance policy, he or she is in line to receive the death benefit when you die, regardless of what your will states.  Beneficiary designations allow life insurance proceeds to transfer automatically to heirs and do not have to go through probate.

Are your beneficiary designations up to date?  Don’t assume and don’t guess.  Make sure your assets are set to transfer to the people or institutions you prefer.  


Posted by: Patrick Carroll at 2:51 PM
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Thursday, April 03, 2014

Guarding Against Identity Theft: Take steps so criminals can't take vital information from you

At the current time, one in 14 Americans aged 16 or older have been a victim of identity theft in the past 12 months.  That equates to more than 16.6 million people – a sobering statistic.  While 86% of victims cleared up the resulting credit and financial problems in less than one day, 10% of victims had to struggle with the issues for a month or more.

Tax time is a prime time for identity thieves.  They would love to get their hands on your return and to claim a phony refund using your personal information.  E-filing of tax returns is becoming increasingly popular – just make sure you use a secure Internet connection.  When you e-file, you aren’t putting your Social Security number, address and income information through the mail.  If you can’t bring yourself to e-file, then consider sending your returns via Certified Mail.  And, make sure to put the rough drafts of your returns through a shredder.

The IRS does not use unsolicited emails to request information from taxpayers.  If you get an email claiming to be from the IRS asking for your personal or financial information, report it to your email provider as spam.

Another precaution to take is to be very careful using Wi-Fi networks. Don’t risk disclosing financial information over a public Wi-Fi network. A favorite hacker trick is to sit at a coffee house, library or airport and set up a Wi-Fi hotspot with a name similar to the legitimate one.  Inevitably, people will fall for the ruse and log on and get hacked.

Look for the “https” when you visit a website.  When you see the “s” at the start of the website address, you know the site has active SSL encryption.    A padlock icon in the address bar confirms an active SSL connection.  You can also opt for a virtual private network (VPN) service which encrypts 100% of your browsing traffic but it could cost you around $10 a month.

Make sure you check your credit report on a regular basis.  You are entitled to one free credit report per year from each of the big three agencies.  Another tip is to choose passwords that are really esoteric and preferably with number as well as letters to make them tougher to hack.

A final bit of information is to be careful talking to strangers.  If you get a call or email from someone you don’t recognize telling you you’ve won a prize, and claiming to be from the county clerk’s office, a pension fund or a public utility – be skeptical.  You could be doing yourself a big favor!


Posted by: David Shober at 2:50 PM
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Thursday, April 03, 2014

What to look for in a Financial Advisor: Select a financial consultant whose service offerings corresponds to your goals

As the profession has evolved over the past 40 years, different types of advisors have emerged with different practice emphasis or specialties.  Different compensation methods have also emerged making it important to look for an advisor with an understanding of the differences.

Are you saving for retirement?  If so, look for a Certified Financial Planner™ or other financial advisor who offers comprehensive financial planning.  Comprehensive financial planning is not merely about the return, it is also about tax and risk management and helping you create the future you want.  Your advisor can help you with long-range planning designed to help you build and preserve your savings.

If you are mostly interested in a strategy that anticipates market changes and pro-actively adjusts your portfolio, you may want an advisor who offers active money management featuring tactical asset allocations.  Tactical asset allocation seeks to continually fine-tune portfolios in light of valuation and economic factors.  The goal with active portfolio management is to take advantage of the better-performing arts of the market.

Are you just seeking a basic financial strategy?  If you are just looking for a one-time financial plan, consider a Certified Financial Planner™ who can offer a “blueprint” along with a hand in implementing and carrying out the plan over time.

If you are looking for a “quarterback” to help you manage your financial life, a wealth management firm may be what you are looking for. Typically, this type of firm unites several specialists in investment management, retirement planning, estate planning and insurance, along with a network of other professionals they can refer to as needed.  In a team effort, they draw on their collective knowledge and abilities to design personalized, long-range strategies for each client.

Today, many financial advisors have fee-based practices and some only charge fees.  In working for fees only, a financial advisor is telling you that his or her business is built on advice and objectivity, not product sales.  Some advisors are still largely paid by commission and others through a mix of fees and commissions.  Keep in mind that if you want an advisor who can offer you insurance products, commissions will be part of the relationship.

Finally, take your time as you search for the right advisor.  Many people hire the first financial advisor they meet.  Shop around until you find an advisor who makes you feel comfortable that your finances are in their hands. 


Posted by: Patrick Carroll at 2:50 PM
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Thursday, April 03, 2014

The Retirement We Imagine, the Retirement We Live: Examining the potential differences between assumption and reality

Financially, how might retirement differ from your expectations?  As you approach or enter retirement, you may find that your spending and your exit from your career don’t quite match your expectations as few retirees find their financial futures playing out as precisely as they assumed.

Realistically, few retirees actually outlive their money.  The vast majority of retirees are wise about their savings and income: they don’t spend recklessly and if they need to live on less, at a certain point, they live on less. Health crises can and do impoverish retirees and leave them dependent on Medicaid, but that tends to occur toward the very end of retirement rather than the start.

The common guideline for new retirees is that you will need to retire on 70 to 80% of your end salary.  According to some analysts, you may not need to withdraw that much for long.  In the initial phase of retirement, you will probably want to travel and explore new pursuits and hobbies – all the things you have been putting off.  So in the first few years away from work, you may spend as much as you did before you retired.  After that, you might spend less.  In the big picture, households run by those 75 and older typically spend about half as much per year as households headed by people in their late forties.

In short, the retirement you live may be slightly different than the retirement you have imagined.  Fortunately, retirement planning and retirement income strategies may be revised in response.


Posted by: David Shober at 2:49 PM
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