Archive for March, 2011

This list is different from your average Top Ten list.

Many people use the very same reasons to not plan to protect themselves with a life and estate plan! I hear these excuses too all too often. The list is from a blog written by financial advisor Bill Losey.

Reason #10: “I’m too busy”

I can’t tell you how often I hear this excuse. So many people want to plan for a better retirement, but they don’t have time. They think they’ll take care of it tomorrow, or the day after that … and before they know it, several years have gone by. The best advice I can give you is to stop procrastinating and start planning today.

Reason #9:   “It’s too soon”

I don’t know how this happened, but many people have adopted the notion that you don’t have to start planning for your retirement until you’re almost there. This is totally incorrect. The truth is, the sooner you start planning, the better chance you stand of having the kind of retirement you want. It’s never too soon. Many people start planning in their early twenties!

Reason #8:   “It’s too late”

If you’re already near or past your retirement eligibility date, you may think that whatever you’ve got is what you’re stuck with and it’s too late to do anything about it. Think again. If you’re unsure of what your options are, speak to a professional. Even if you’ve already retired, it’s important to consider how you’re receiving income and how long it will last. It’s never too late to revise your income distribution strategy.

Reason #7:   “I don’t need to”

I’ve heard this excuse many times and it always baffles me. Many people think that because they’ve been diligent about contributing to a savings account, they’re all set. While saving for retirement is good, you also need a plan for income distribution once you enter retirement. Are you certain that what you’re saving will be enough? Have you considered your distribution plan? What about taxes? What about inflation? And are you sure your money will be properly invested? There may be other, better options for you and it may prove worthwhile to look into them.

Reason #6:   “I don’t have enough money to get started”

This excuse seems marginal at first glance, but there is some truth behind it. You need to have money to save or invest money. However, unless your bills are exactly equal to or greater than your net income, you DO have enough to get started. Starting small is better than not starting at all, and if you plan well, you’ll eventually have more to work with.

Reason #5:   “My finances are a mess”

This is all the more reason to seek out an advisor who can help you sort through and understand your assets. Perhaps you have a 401(k) from a former employer that has not been rolled over, a couple of savings accounts, a trust from a deceased relative, some stocks that your parents bought in your name when you were younger … a circumstance like this can be confusing, but leaving it as it is won’t improve the situation. Consider speaking with an advisor who can look at your complete financial picture, help you to understand it, and help you to develop a plan to make your “financial mess” work for you.

Reason #4:   “The Government will take care of me”

The bottom line is this … there’s a chance Social Security may not be available when you retire, and even presuming it is, it may not be enough to provide your ideal retirement income. If you’re planning to retire on Social Security alone, I would advise you to create a back-up plan at the very least.

Reason #3:   “Between my savings and my 401(k), I’ll be fine”

Saving for retirement without an income distribution plan can be a mistake. How will you use that money once you have it? And while you may think you’ll have everything you’re going to need, have you considered inflation? Taxes? And furthermore, some people are living past 90. Will your assets last that long? If you outlive your income, what then? It’s a good idea to look ahead and plan lifelong income.

Reason #2:   “I don’t want to think about it”

Many people procrastinate simply because the thought of discussing financial matters (or growing old) is unappealing. I can certainly understand that. But consider this … if you bite the bullet now and put a firm plan in motion, you may not have to think about it again for quite some time.

Reason #1:   “I don’t know how”

If you knew everything there was to know about financial planning, you’d probably be a financial advisor yourself. While it is possible to do everything on your own, that generally involves a great deal of research and a huge time commitment. If you’re putting off retirement planning because you don’t know how, consider speaking to a professional who does.

These are just some of the reasons why people don’t plan for retirement … but these are reasons, and not excuses. If you have retirement goals you want to reach and you care about protecting yourself from large downside risks, set up an action plan. The sooner the better.

You can see Bill Losey’s article here Reasons Not To Plan

Considering how busy you probably are when there’s a major change in your life – having a baby, moving to a new home, getting married or divorced or starting a new job or retirement – it’s easy to forget these easy tips for avoiding complications with the IRS.

Here are some important reminders from  U. S. News Money online.

1. Report any name change, along with your new Social Security number. If you changed your name after tying the knot, then you need a new Social Security number, too. Many newlyweds get tripped up when their names don’t match their numbers, which can cause returns to be rejected. Adams suggests visiting socialsecurity.gov to get all your paperwork in order.

2. Report your new address. If you’ve moved, be sure to let the IRS know by submitting Form 8822, which you can download at irs.gov. Also, don’t forget to tell your employer, so your W-2s and other forms get sent to the correct address. Plus, if you crossed state lines, you’ll need to make sure you’re paying the correct state taxes.

3. Check your withholding. After buying a home, getting married, or starting a new sideline business, you should check the tax withholding amount from your paycheck and factor in estimated taxes you may have to pay.

4. Choose the least expensive tax filing status. You get to choose how you want to file your taxes each year. Married people can file jointly – sharing their income, deductions, and credits or they can file separately. Filing jointly is usually is the best option but it’s best to do your taxes both ways to make sure you know which status results in the lowest tax bill, Adams recommends.

5. Deduct moving expenses.

This is a deduction that is often overlooked. If you move at least 50 miles away to take a new job or start a business, you can deduct reasonable moving expenses, such as the cost of transportation and lodging for you and your family while traveling to your new home. However, you can’t deduct any moving expenses that are reimbursed by your employer.

The IRS Publication 521 has details about taking this tax deduction.

To read the US News article online, go to Tax Tips After A Major Life Change

Today’s post is from the Elder Care Matters website at www.eldercarematters.com.

There are better ways to leave your legacy than crossing your fingers and hoping for the best.

The stories about “windfall money” and bad endings are numerous. Those who keep these kinds of statistics tell us that the average windfall, whether lottery winning or inheritance, is completely exhausted within 17 months. And that’s an average. Some people abuse their good fortune even faster than 17 months, and only a precious few hold on to it for the long term.

William “Bud” Post won $16.2 million on the Pennsylvania Lottery in 1988. Within five years of his windfall, he cursed the day it happened. According to the Washington Post, “his problems included a brother who tried to hire a contract murderer to kill him and his sixth wife; a landlady who forced him to give her one-third of the jackpot; and a conviction on an assault charge,” after he had fired a shotgun at a bill collector who came to call at his deteriorating dream home. By the time he died in 2006, Mr. Post had gone from scooping up annual lottery payments of $497,953.47 to scraping by on $450 per month in disability compensation.

Jack Whitaker took only four years to blow through $113,386,407.77 (after taxes) in 2002 West Virginia Lottery winnings. By his own estimate, he gave away $14 million to his church and other charitable causes, but he went from being a well-dressed, successful businessman to being a slovenly strip club patron.

His impact on the lives of his loved ones was even more tragic. He started out with the best of intentions but saw the apple of his eye, his granddaughter Brandi, go down the road to drug addiction with several hangers-on in tow, and end up dead under circumstances that pointed to murder.

So what will your loved ones do with what you leave behind for them? You may not have a large fortune to leave behind but the studies about windfall money show that it doesn’t have to be a large amount – small amounts are squandered just as fast.

Fortunately, dumping boxes of cash on your beneficiaries is not your only option. Rather than give your loved ones direct access to what you leave behind, you can give them their inheritance in trusts, administered by people or institutions who will provide good judgment and wise guidance.

You can even add a variety of conditions to your gifts. We have had clients who conditioned distributions from trusts upon such things as the beneficiary’s passing a drug test, holding a steady job, or staying out of jail. You can also impose positive conditions, such as directing your trustees to make larger ongoing distributions to beneficiaries who are maintaining a certain grade point average in college or meeting other standards of achievement.

Read the entire article at Easy Come Easy Go

One of the most difficult conversations a couple can have is not about love or commitment. It is about money — how it is saved and invested and what it means for their lifestyle.

According to a recent survey conducted by PNC Wealth Management, men and women are not any closer in their views about their investments than they were before the recession wreaked havoc on their portfolios.

A recent article in the New York Times examined the implications of this study and described the effects of this gap on couples’ money relationships Remedies For The Pain In Money Talks

There is a significant difference in how men and women responded when they were asked whether they were planning their portfolios more carefully. When asked how they viewed their portfolio strategy, 51 percent of the  men said “nothing has changed,” while only 38 percent of women felt the same way.

It turns out that the recession has not increased this gap between men and women.

“There was not as much change with the way people think about their money through the recession as we thought,” said R. Bruce Bickel, senior vice president at PNC Wealth Management. “I think that is because there is better communication and they are getting more of their family involved in their finances. It is just a small percentage increase but it was positive.”

He said women had changed their views on risk, becoming more comfortable with it since the previous survey in 2006.

“Women are taking more responsibility and getting involved in the family financial matters, which is healthy,” he said. “Communication is imperative.”

So, should people have a money talk? The consensus among those who write and counsel about gender and money is that couples need to discuss their finances, even if they do not want to or fear it is going to be painful.

“Very often they’re afraid to take that first step,” said Karen Caplan Altfest, principal adviser and executive vice president for client relations at Altfest Personal Wealth Management. “You’d be surprised by how many people don’t know how much their spouse is making.”

The divide over investing money and managing risk is pervasive, but the bigger problem is who is actually in charge of the process.

The PNC survey found that 73 percent of women thought they shared responsibility for financial decisions equally, while only 45 percent of men said that task was divided. (About 53 percent of men said they were the sole deciders, while only 17 percent of women said that.)

The disconnect, in fact, has gotten worse since 2006, when 68 percent of women thought decisions were made equally and 48 percent of men agreed.

In fact, the only real area of consensus was on the financial prospects of their children: 57 percent of mothers and 55 percent of fathers said the recession had changed how their children would manage their money.

“What I saw during the 2008 crisis was if I could show women that they were hurt but that they were still going to be able to maintain a lifestyle of their choice, they were O.K.,” said Susan Hirshman, a consultant focused on financial literacy for women.

However with men, even if they were going to be O.K., they couldn’t deal with the fact that the number was less. That still applies very much today.”

Bridging that gap is the point of the money talk.  One relatively painless way to enter the conversation is not to make it overtly about money. Pick a goal instead.

It has to be an issue that is important to both spouses. The articles discusses some practical ideas for making the discussion concrete and focused on a goal such as  “I really want to visit our daughter who moved to the West Coast. Can we afford to stay three days or for a week?”