Insurance

Time-Tested Tactics to Build Your Wealth

Here is a nice article provided by the Editors of Kiplinger’s Personal Finance:

 

By the Editors of Kiplinger’s Personal Finance | April 2017

 

We have doled out a lot of good advice over the 70 years we’ve been publishing Kiplinger's Personal Finance magazine. So in many ways it was easy to come up with 70 ideas on how to create wealth. But when our editorial staff submitted nearly 300 ideas, the editors had to roll up our collective sleeves and distill the advice into absolute gems.

 

In this post, we offer advice on how to build, protect and enhance your wealth, time-tested strategies to help you keep your eye on the ball, and our top tips for finding value, so your hard-won wealth doesn’t leak out in dribs and drabs. We devote a section to the biggest goal of all -- a secure retirement. And because life isn’t all about making money, we include fulfilling ways to give back. Take a look.

 

Save Early and Often

The sooner you start to save, the easier it will be to amass a comfortable nest egg -- thanks to the power of time and the magic of compounding. A 25-year-old who saves $450 a month in a tax-deferred retirement account and earns an average yearly return of 7% will have about $1.1 million by age 65.

If the same investor waits until age 35 to start saving, she’d have to sock away $950 a month to reach roughly the same balance by age 65. Try to save 15% of your income, including any employer match for your retirement plan. If that’s not doable, put away as much as you can and increase the percentage as your income and budget allow.

“Getting started, even if you’re saving 3% of your income or $10 a week, is the critical goal,” says Molly Balunek, a certified financial planner in Cleveland. “Once you see progress, it becomes easier to save 1% more, or $5 more a week.”

Create an Emergency Fund

If you have a dedicated stash of cash at the ready in case of a job loss or an unexpected bill -- say, for a major car repair or hospital visit -- you won’t have to resort to racking up credit card debt or, say, tapping retirement savings to cover the tab.

Squirrel away at least three to six months’ worth of living expenses in a safe, easy-to-access savings or money market deposit account. (For a more personalized amount to save, use HelloWallet.com’s tool.) Look for an account with no monthly fee, a low (or no) minimum balance requirement and a competitive rate, such as the Synchrony Bank High Yield Savings and the GS Bank Online Savings accounts. Both recently yielded 1.05%.

Make the Most of Employer Incentives

For the slow-and-steady way to get rich, take full advantage of your company’s 401(k). You can contribute up to $18,000 ($24,000 for people 50 and older) in 2017 to this pretax account; your employer may kick in another 4% to 6% of your pay, or even more. Many companies enroll employees automatically, at a contribution rate of, say, 3% of their salary. But aim for 15% of your income, including the company match, from the beginning of your career until the end. If you have to cut back for a few years -- say, to buy a house or pay college bills -- try to kick in at least enough to get the full company match, and boost your contributions later to get back on track.

Teachers typically have access to 403(b) plans, which carry the same terms and benefits as 401(k)s but generally lack the breadth of investment options. Public-sector workers may be offered a 457 plan, which is also similar to a 401(k) plan but has a higher contribution limit for people within three years of normal retirement age, usually defined as the age when they can collect unreduced pension benefits.

Open a Roth

Another surefire wealth builder is a Roth IRA. You fund this account with after-tax dollars, so the pain is up front. The payoff? Withdrawals are tax-free if you’re at least 59½ and have held the account for at least five years (you can always withdraw your contributions tax- and penalty-free). You don’t have to take required minimum distributions from a Roth, as you do with traditional IRAs and 401(k)s, allowing you to withdraw the money strategically or let it grow and leave it to your heirs. And because withdrawals from a Roth aren’t reported to the IRS as income, they won’t increase the taxes on your Social Security benefits or trigger the high-income surcharge on Medicare Part B or Part D.

You can contribute up to $5,500 a year to a Roth ($6,500 if you’re 50 or older) in 2017. The allowed contribution starts to shrink if your modified adjusted gross income is more than $118,000 ($186,000 for married couples filing jointly) and disappears altogether at $133,000 ($196,000 for joint filers).

Earn too much to qualify for a Roth? Your employer may offer a Roth 401(k), which has no income limits and carries the same contribution cap as a regular 401(k).

Roths aren’t just for grown-ups. One of the best ways to help your children or grandchildren build wealth is to get them started early with a Roth IRA. Children of any age who have earned income from a job can contribute up to $5,500 to a Roth IRA (or their earnings for the year, if less), and you can give them the money to get started. Not all brokerages let children open Roths, but several -- including Fidelity, Charles Schwab and TD Ameritrade -- offer custodial Roths with little or no investing minimum and no IRA maintenance fees.

Ask a Pro for Advice

A financial adviser can help you blaze a path to financial success -- especially when you’re starting out or facing a complex financial situation. A certified financial planner (CFP), for example, offers guidance in strategizing retirement savings, allocating or managing investments, creating an estate plan, and performing other tasks.

At napfa.org, you can search for a fee-only adviser, who avoids conflicts of interest by accepting no commissions from selling investments or other products. If you need extra assistance with tax planning, look for a certified public accountant (CPA) with a personal financial specialist (PFS) designation at aicpa.org.

You don’t need deep pockets to get help. At GarrettPlanningNetwork.com, search for planners who charge hourly rates and require no asset or income minimum. Independent outfits, such as Betterment and Wealthfront, as well as full-service firms, such as Charles Schwab and Fidelity, offer online “robo” adviser services, which provide low-cost, computer-generated advice and portfolio management.

Polish Your Credit

Good credit helps you get the lowest interest rates and best terms on a credit card, mortgage or other loan, and your credit history may even affect your job prospects, insurance rates, and ability to get an apartment or cell phone plan. Generally, a credit score of 750 or higher (on a 300-to-850 scale) is considered top tier. The most important credit-building step is to pay all of your bills on time.

Another score booster: Keep the amount that you owe on your credit cards as a percentage of their overall limits (known as your credit utilization ratio) as low as possible. On each card, use no more than 30% of your limit, and keep the ratio to 10% or less on each card if you plan to apply for a loan soon.

Open a Brokerage Account

Once you’ve established a bank account and started to participate in your employer’s retirement savings plan, take your wealth-building program to the next level by opening a brokerage account. That will allow you to invest in individual stocks and exchange-traded funds, which most people can’t do in their 401(k), as well as no-transaction-fee mutual funds. You’ll need $2,500 to open an account at Fidelity, our top-ranked online broker; Charles Schwab requires just $1,000, which is waived if you sign up for automatic monthly deposits of at least $100.

Set Specific Goals

You’re more likely to accrue wealth if you have specific goals and a plan to reach them. That means coming up with short-term goals, such as paying off debt, buying a house, and saving for a rainy day or a vacation, as well as long-term goals, which may include funding your retirement and your children’s college education.

Make your goals specific and realistic. “Instead of saying that you want to save for your child’s education, say you want to have $50,000 saved for your child’s education in 15 years, and you’ll get there by depositing $200 a month into a 529 savings plan,” says Roger Ma, a certified financial planner in New York City.

Live Like the Invisible Rich

Live within -- and ideally below -- your means. By resisting the temptation to buy a big house or expensive cars, you can invest in things that will create long-term wealth, such as stocks and real estate.

Cultivate Your Career

Want to move ahead in your organization or switch to a more lucrative job? Keep your skills sharp and never stop networking, says Mary Eileen Williams, a career counselor and author of Land the Job You Love: 10 Surefire Strategies for Jobseekers Over 50. An updated LinkedIn profile is critical because most employers use the website to vet potential candidates, Williams says. And learning new job skills doesn’t have to cost a lot of money. Khan Academy, a nonprofit website, offers video tutorials on everything from statistics to computer programming.

Your local community college may also offer career-advancement courses. Considering an advanced degree? According to Payscale.com, nurse anesthetists, MBAs in business strategy and chemical engineers earn the highest salaries after graduate school; graduates with master’s degrees in education and human services earn the lowest pay.

Another secret to success: Spend half an hour a day learning about your job, industry or a dream you’re pursuing. More than 95% of self-made millionaires spend at least 30 minutes every day reading materials related to their careers or self-improvement, says Tom Corley, a certified financial planner who spent five years researching the habits of wealthy people for his book Rich Habits.

Buy a Home (When You're Ready)

Owning a home is one of the best ways to build wealth. You can still lock in low mortgage rates, and Uncle Sam offers a helping hand in the form of tax deductions for mortgage interest and property taxes. Ideally, you’ll put down at least 20% of a home’s purchase price, which allows you to avoid private mortgage insurance. The bank may be willing to lend you more than you can comfortably afford.

To avoid feeling house poor, however, figure out how much of your monthly budget you can devote to a mortgage payment and still have enough left over for retirement and college savings, travel, and just plain fun. And note that the maxim “Buy the worst house in the best neighborhood” doesn’t pay off.

In Zillow Talk: Rewriting the Rules of Real Estate, Spencer Rascoff, CEO of Zillow, and Stan Humphries, chief economist, write that the data prove you should “buy a decent house in the right neighborhood.” What’s the right neighborhood? The most expensive one where you can afford a home that is not in the bottom 10% of listings by price. Homes in the bottom 10% don’t appreciate as well as homes in the top 90%.

Save for College as Soon as Your Kids Are Born

Too many parents sacrifice their own wealth by raiding their retirement savings to pay for their kids’ college. Or their children graduate with large student-loan payments to go with their sheepskin. If you set aside money in a 529 college-savings plan every year starting when your children are born, you’ll have a big chunk of the tuition bill saved when they’re 18.

They can use the 529 money tax-free for college costs, and you may get a state income tax deduction for your contributions. Go to SavingForCollege.com for more information about each state’s rules. If your state doesn’t offer a tax break, check out Utah’s plan, which features low-cost Vanguard funds and FDIC-insured accounts.

Fill the Gaps in Home Insurance

Your home may be your biggest asset, so make sure you have enough insurance to protect it from disasters. Review your policy to see if your dwelling coverage is enough to rebuild. (Your insurer may inspect your home, or you can get an estimate for $25 at e2value.com.) Let your insurance company know about any major improvements that affect the value.

Check the amount of coverage for your possessions, and consider buying a rider to cover special items, such as jewelry. Add insurance for sewage back-ups (typically $130 for $10,000 of coverage), and consider flood insurance if you’re concerned about that risk (ask your homeowners insurance agent for a price quote, or go to FloodSmart.gov for additional information).

Shield Yourself From Lawsuits

The most important part of your auto insurance policy is the liability coverage, which protects your assets and future earnings if you are liable for injuries and damage as the result of an accident. State liability coverage requirements are usually inadequate; most people should get coverage to pay at least $250,000 per injured person and $500,000 per accident. Also make sure you have uninsured-motorist coverage (and underinsured-motorist coverage, in states with inadequate liability limits). That can pay for damage to your car, medical expenses and lost wages for you and your passengers if the at-fault driver does not have insurance.

Most families with typical risks should also safeguard their assets and future earnings with an umbrella policy. You can boost your auto and home liability protection by $1 million with an umbrella policy for about $200 to $400 per year. Make sure you have at least as much liability coverage as your net worth.

Get Enough Life Insurance

Life insurance would replace lost income if you or your spouse died early. One rule of thumb calls for buying at least eight to 10 times your gross income, and you can get a refined estimate by using a life insurance calculator (such as the one at LifeHappens.org). A 20- to 30-year term policy, which has no savings component, is best for most families. The policy would likely cover you until your kids are out of college, you pay off your house or you stop working.

You can compare rates for several insurers at AccuQuote.com. If you need insurance longer—for example, if you’re supporting a child with special needs -- consider a permanent insurance policy, such as whole life or universal life, which builds cash value. (Note that premiums for permanent coverage tend to be much higher than for term insurance.)

Buy Disability Insurance

If you become disabled and unable to work, you don’t want to be forced to raid your retirement savings or incur expensive debt. You may have some disability insurance through your employer, but employers’ policies typically cover just 60% of income, with a $5,000 monthly maximum, and don’t take bonuses and commissions into account. Plus, payments from employer disability plans are taxable.

Calculate how much your policy will pay out every month, compare that with your monthly expenses, and consider buying an individual policy to fill the gaps (see Why You Need Disability Coverage). You may be able to cover up to 85% of your income, and payouts from individual disability policies are tax-free.

Make the Most of a Health Savings Account

Instead of using HSA money to cover current medical bills, let the money grow long term and cover medical costs out of pocket. Keep your receipts for eligible medical expenses you incur after you open the account and withdraw the money later -- even in retirement.

To set up an HSA, you need an eligible health insurance policy with a deductible of at least $1,300 for individual coverage or $2,600 for family coverage. You can contribute up to $3,400 to the HSA for individual or $6,750 for family coverage, plus $1,000 if you’re 55 or older. Your contributions are tax-deductible (or pretax if they’re through your employer), and the money grows tax-deferred.

You can’t contribute to an HSA after you’ve enrolled in Medicare, but you can use the money already in the account tax-free to pay premiums for Medicare Part B, Part D and Medicare Advantage, plus a portion of long-term-care premiums based on your age.

Invest in Stocks

The best way to build wealth over the long haul is to invest in stocks. U.S. stocks, as measured by Standard & Poor’s 500-stock index, have returned about 10% per year compounded. Stocks are notoriously fickle and volatile over the short term, and after their long ascent, they are due for a breather or possibly a full-fledged bear market. But with interest rates still in the gutter, stocks will almost certainly outpace bonds and cash-type investments (for instance, savings accounts and money market funds) over the next decade and beyond.

Start investing with low-cost exchange-traded funds, such as iShares Core S&P 500 (symbol IVV), which tracks the S&P 500, or Vanguard Total Stock Market (VTI), which follows a benchmark that includes nearly every U.S. stock. You can rev your engines with a sector ETF, such as Vanguard Information Technology ETF (VGT) or Guggenheim S&P 500 Equal Weight Health Care ETF (RYH). But don’t invest money you’ll need soon.

Monitor Your Credit

You may not know if an ID thief has struck or when a mistake is marring your credit record. To check, go to AnnualCreditReport.com and order your credit reports from the three major credit bureaus (Equifax, Experian and TransUnion). You can get a free report from each bureau once a year. Pore over each one for mistakes, such as variations on your name or accounts you never opened. If you find an error, file disputes with both the lender and the bu­reau(s) that reported the error, preferably by certified mail so you can create a paper trail.

On a more regular basis, monitor your credit score for un­explained dips that could signal something fishy is going on in your credit report. If your bank doesn’t offer a free FICO score, look up services that do.

Thwart ID Thieves

Cleaning up after identity theft can be costly and time-consuming. Worse, ID theft may prevent you from getting credit, at least until you finish the painstaking process of cleaning up your credit files. Rule one: Don’t carry your Social Security card in your wallet or give out your Social Security number unless you’re sure it’s needed, and shred unneeded documents that include the number.

If a thief has already stolen your SSN, he may try to file a tax return in your name and collect a refund. To deter such an attempt, submit your tax return as early as possible. Watch out for calls or e-mails from crooks posing as representatives of your bank, the IRS or other entities in attempts to collect your personal information or money, and never click on a link in an e-mail or text message unless you’re sure of its source. Password-protect your PC and smartphone, and use strong and diverse passwords for your online accounts, too.

Update Your Estate Plan

Pat yourself on the back if you already have a will and other estate-planning documents, including a durable power of attorney (which lets the person you appoint manage your finances and legal affairs) and health care power of attorney (which gives a trusted person the authority to make health care decisions on your behalf if you can’t). Now make sure these documents reflect current circumstances, including the birth of a child, a divorce or a move to a new state (see Estate-Planning for Snowbirds). Also review the beneficiaries of your life insurance, 401(k) and IRA.

Do your family another favor by leaving instructions as to whether you want your body to be buried, cremated or donated to science, and let family members know whether you prefer a funeral service or a memorial service, and where it should be held. Better yet, plan and put aside funds for the whole thing yourself (see How to Plan Your Own Funeral). The median price for a traditional, full-service funeral runs $7,180, not including cemetery costs or extras, such as flowers, according to a 2015 report by the National Funeral Directors Association. Prices vary widely even in the same area, however, so check costs at several funeral homes.

Let Uncle Sam Help Pay for Raising Your Kids

The Department of Agriculture says middle-income parents will spend more than $233,000 to raise a child to age 17, and high-income parents will spend more than $372,000. You’ll feel less of a pinch in the pocketbook if you take advantage of family-friendly tax breaks. Parents who pay for child care are eligible for two breaks: a dependent-care flexible spending account and the child-care credit. You usually have to choose one or the other, and for most families, the flex account is a better deal (assuming your employer offers one).

You can set aside up to $5,000 pretax in a dependent-care FSA. (The maximum contribution is $5,000 per household each year, even if both spouses have access to a dependent-care FSA where they work.) That money avoids not only federal income taxes but also the 7.65% Social Security and Medicare tax, and it may bypass state income taxes as well. The higher your tax bracket, the bigger the benefit. If you have two or more kids, you can max out your dependent-care FSA and still take the child-care credit for up to $1,000 in additional expenses. Don’t forget to count all child-care costs (even the cost of summer day camp) for children younger than 13.

Teach Your Children Well

Raising financially literate and responsible kids should be part of your estate plan. Be up front about the wealth you have and your plans for it, and make sure your legacy is as much about your values as it is about your bank account. Start teaching budgeting skills at an early age. Have teens use allowance to pay some of their own expenses, and steel yourself to let the cell phone go dark if they fall behind on the wireless bill. Seed an investment account for young adults, and perhaps promise to match a portion of the investment returns. The kids are free to withdraw the money, but parents can’t add to the principal. This shows the power of compound growth as well as the opportunity cost of robbing a nest egg.

Shelter Retirement Income

The general post-retirement rule is to draw from taxable accounts first: When you sell investments in a taxable account, you pay tax only on the profit, and if you’ve held the investments for more than a year, the profit is taxed at the long-term capital-gains rate, which tops out at 20%. But you may get an even sweeter break: In 2017, married couples with taxable income up to $75,900 and single people with income up to $37,950 are eligible for a 0% capital-gains rate. (President Trump’s tax reform plan would retain the 0% capital-gains rate; under the House Republican tax reform plan, the lowest hit on capital gains would be 6%.)

With pretax accounts, every dollar you withdraw is taxed at the ordinary income tax rate of up to 39.6%. Generally, it’s best to tap such tax-deferred accounts after your taxable accounts, letting Roth IRAs -- which aren’t subject to required minimum distributions—ride to take advantage of tax-free growth. There are lots of exceptions to these rules of thumb, so consult an adviser if you’re not sure what’s best for you.

Keep an Eye on Recurring Fees

Don’t let recurring charges nibble away at your assets. Households with two cell phones, a landline, and a cable and internet bundle spend a whopping $2,700 a year, on average, on those services, according to a Consumer Federation of America report. Consider sharing a phone plan with family members and dropping your cable plan in favor of using an antenna to get over-the-air channels and signing up for streaming video. You may also find you’re not getting your money’s worth out of, say, your satellite radio or audiobook subscription. And don’t overlook hidden fees, such as hotel resort fees, airline charges and bank fees, which can add up to big bucks. You can look up resort fees at ResortFeeChecker.com and airline fees at Kayak.com. Search for low-fee checking accounts at FindABetterBank.com.

Invest to Beat Inflation

Kiplinger expects inflation for 2017 to be a still-modest 2.4%, up from 2.1% in 2016. That’s nowhere near 1970s-style runaway levels, but it’s enough to merit some inflation protection in your portfolio. One good option: Treasury inflation-protected securities. The principal value of TIPS is adjusted to keep pace with increases in consumer prices. Buy TIPS directly from Uncle Sam at TreasuryDirect.gov. Another inflation fighter is Fidelity Floating Rate High Income (FFRHX), which invests in loans that banks make to borrowers with below-average credit ratings. The interest rates adjust periodically in response to changes in short-term rates, which are likely to rise as inflation accelerates. Commodities should also perform well as inflation heats up. For exposure to commodities, consider Harbor Commodity Real Return Strategy (HACMX). For more on staying ahead of inflation, see Inflation-Proof Your Assets.

Capitalize on a Windfall

About one-fifth of U.S. retirees are expected to have estates that top $390,000, according to the banking and financial services organization HSBC. If you are the beneficiary of parental largesse (or you win the lottery), start by doing nothing. Stash your bounty in a safe place, such as a savings or money market account, for six months to a year. That will give you time to come up with a solid plan to get the most out of your good fortune. It will also give you time to assemble a team of advisers to help you manage your money.

Your team should include a financial planner and a certified public accountant or enrolled agent. Depending on the nature of your windfall, you may also need help from a lawyer and an insurance professional. Resist the temptation to tell your boss to take your job and shove it. Windfall recipients often underestimate how much money it will take to replace their income. Plus, once you quit, you’ll stop earning income that contributes to your Social Security benefits -- which you may need if your investments go sour.

Spread Out Your Investments

Playing it safe with a diversified mix of stocks and bonds can help your portfolio stay afloat during bad times and improve your long-term returns. If you have at least 10 years until retirement, for example, hold 70% of your portfolio in stocks and 30% in high-quality bonds. A mutual fund can work nicely, too. Vanguard Wellington (VWELX), a member of the Kiplinger 25 (the list of our favorite mutual funds), holds about two-thirds of its assets in stocks and the rest in bonds, and it has an annualized 8.2% return over the past 20 years.

Give Emerging Markets a Shot

Before delivering modest gains in 2016, stocks in developing markets, such as China and India, had lost money in four of the previous five years. But emerging-market stocks still deserve a place among your assets. Not only are the stocks relatively cheap, but corporate earnings in emerging-markets firms are expected to expand by more than 13% in 2017—far more than firms in the U.S. For access to these stocks, invest in Baron Emerging Markets (BEXFX), a Kiplinger 25 fund, or in exchange-traded iShares Core MSCI Emerging Markets ETF (IEMG), which tracks an index.

Don't Try to Time the Market

Wondering if it’s time to sell all of your stocks? Don’t. First, what are you going to do with the proceeds? Cash pays almost nothing, and bonds come with their own set of risks. And how will you know when it’s time to get back in the market? Our advice: Set an appropriate allocation, then rebalance.

Take a Flier on Small Stocks

After you’ve stashed money in an emergency fund and maxed out contributions to retirement accounts, consider taking a moonshot on stocks that could turbocharge your returns. Small, fast-growing companies may be a good bet now because small companies should benefit from a focus on the healthy U.S. economy, and they could get a lift from fewer regulations and lower corporate tax rates now being considered in Washington. Two top choices: T. Rowe Price QM U.S. Small-Cap Growth Equity (PRDSX) and T. Rowe Price Small-Cap Value (PRSVX), both members of the Kip 25.

Also on our shopping list these days are companies cashing in on high-tech trends. Chipmaker Broadcom (AVGO), factory robotics firm Cognex (CGNX) and cybersecurity company CyberArk Software (CYBR) all look compelling. We also like biotechnology stocks for their long-term growth prospects. You can buy a bundle of them in an exchange-traded fund such as SPDR S&P Biotech ETF (XBI).

Get a Side Gig

Turning a hobby or activity you love into a part-time enterprise can help you raise money to pay down debt and beef up savings. If you’re well along in your first career, it could also lay the foundation for your next one or turn into a part-time retirement job. Websites such as Etsy and Zazzle provide a way to turn your creative endeavors into cash.

Plan to relocate when you retire? Consider buying a property in your retirement destination now -- which will lock in the price -- and renting it out until you’re ready to move.

Rebalance Regularly

You’ll need to trim your winners periodically and add to your laggards to keep your mix intact. Check your brokerage statements every six months to see if your portfolio has veered off track. If your allotment to a particular category has drifted by more than five percentage points from your target allocation, make the needed trades to bring your allocations back into alignment.

Get on Top of Your Spending

You can’t set long-term goals unless you get a handle on where your money goes. Budgeting apps make the task a lot easier. After you monitor your cash flow for several months, you’ll have the tools to hew to your spending limits. With Mint, for example, you link to credit card, loan, bank and investment accounts to track and categorize balances and transactions automatically and get a snapshot of your net worth. You can also create budgets for each spending category and set savings goals, and Mint sends you alerts when you exceed your limits.

If you’re primarily interested in keeping an eye on cash flow and investment performance, check out Personal Capital, which lets you both watch the big picture and dig in to expenses, income and other areas with easy-to-navigate charts and graphs.

Set It and Forget It

Set up an automatic transfer from your checking account to your savings or brokerage account (or both) each month shortly after payday so that your emergency and retirement funds will fatten up before you have a chance to spend the cash. Alternatively, see if your employer can divvy your paycheck between two accounts. Automating certain payments can also pay dividends: A number of auto insurers, including Allied, Allstate and Geico, offer a small discount or cut you a break on fees if you enroll in auto-pay.

You can also slice 0.25 percentage point off your federal student loans by signing up for automatic debit. Even AT&T, Sprint, T-Mobile and Cricket Wireless trim the monthly charges for some plans if you sign up for auto-pay. For the rest of your bills, use automatic bill payments through your bank. Your payment will arrive before the due date, you’ll avoid late fees, and you won’t have to buy stamps and envelopes, either.

Target Your Investing

Target-date funds, which are widely available in 401(k) plans, are designed to be set-it-and-forget-it investments. They are best for investors who aren’t sure how to invest or don’t want to bother figuring out how much of their portfolio should be in stocks or bonds or when to rebalance.

In a target-date fund, the pros do the work for you, shifting the stock-bond mix to a more conservative allocation as you get older and even after you retire. Choose the fund with the year in its name that matches when you plan to retire. Our favorite target-date series are Vanguard Target Retirement, which holds index funds, and T. Rowe Price Retirement, which holds mostly actively managed funds. If you’re 18 years from retirement, for example, go for Vanguard Target Retirement 2035 (VTTHX).

Maximize Your Credit Card Rewards

By playing your (credit) cards right, you’ll earn hundreds of dollars annually in cash back or free flights and hotel stays. For travel, choose a card that offers a hefty sign-up bonus. The Chase Sapphire Preferred ($95 annual fee) ponies up 50,000 bonus points after you spend $4,000 in the first three months, as well as double miles on travel and dining purchases.

For cash back, the no-fee Citi Double Cash card can’t be beat for its flat return of 2% on every purchase. You might also want a card with a return of 3% to 5% in cate­gories you spend the most on, such as groceries or gas. You can also save money with the perks that many credit cards offer: extended warranties, price matching, coverage for damage and theft of recent purchases, rental car insurance, and travel insurance.

Get All the Insurance Discounts You Deserve

Ask your auto and home insurers for a list of potential discounts. You may get an automatic break (typically 10% to 20%) by bundling your home and auto policies with the same company or keeping a clean driving record, but you may need to let your insurer know if you qualify for other discounts. Most insurers offer a good-student discount (usually worth up to 25% if your student maintains a B average or better).

Some offer a break of 10% to 15% for certain jobs, and a 15% discount if you’re 55 or older and sign up for a defensive-driving course. You may get a bigger break -- as much as 50% -- by signing up for a data-tracking service, such as Progressive’s Snapshot or State Farm’s Drive Safe & Save, if you have low annual mileage and practice sedate driving habits. You could get home insurance discounts for many home improvements, such as adding storm-proof shutters (up to 44%, depending on the state) or an alarm system (up to 15%).

Tap the Sharing Economy

The sharing economy isn’t always about sharing. It’s often simply about saving money. For example, you can rent a house, apartment or private room (or a castle, houseboat or yurt) through sites such as Airbnb and HomeAway. The nightly rate may be lower than a hotel, especially when you’re splitting the cost among a group. To avoid paying for accommodations at all, swap your home with another traveler through a service such as HomeLink or Intervac.

If you live in an area with a car-sharing service, you could skip the high cost of buying, insuring and maintaining a car or two. Car2Go charges $15 per hour or 41 cents per minute, and Zipcar typically charges $70 per year or $7 per month plus hourly or daily rates. Need home services? At TaskRabbit or Handy, you can find gardeners, painters and plumbers, among a plethora of other helpers, who often charge surprisingly low rates.

Reshop Your Car Insurance Every Year

Rates can vary a lot by insurer, and by shopping around, you may be able to trim your premiums and put hundreds of dollars a year back in your pocket. Compare premiums at InsuranceQuotes.com or Insurance.com, or look for an independent agent at TrustedChoice.com. You can find sample prices for all insurers licensed in your state at most state insurance departments’ websites (find links for each state at naic.org, and search for the auto insurance shoppers’ guide).

Contact the companies with the best rates for the situation most like yours and compare premiums for the same amount of coverage you have now. If one offers a better rate, let your current insurer know before switching; it may offer to match the lower rate if you’re a longtime customer.

Never Pay Retail (Part 1)

A new car starts to depreciate as soon as you drive it off the dealer’s lot. After three years, it has typically lost half its original value. Those numbers bolster the argument for buying used, which can save tens of thousands of dollars over the years. The growth of factory-inspected, certified preowned vehicles, which are the cream of the used-vehicle crop and come with a warranty, has injected transparency into what you might charitably call the opacity of the used-car industry.

What if you are stubbornly in the new-car camp? Negotiate hard. Shop for an identically equipped model at several dealers, then use your best price to squeeze concessions from the other dealers. (Or use a service that does this for you, such as CarBargains.org.) If you lean toward the luxury side of the market, consider leasing. Carmakers often offer subsidies that hold down monthly payments.

Never Pay Retail (Part 2)

You can get money back from your online shopping sprees if you route your purchases through a cash-back site such as BeFrugal, CouponCabin, Ebates or Splender. The process is easy: Register at the site, search for your retailer, and click the site’s link to make your purchase (browser cookies must be turned on). You’ll typically earn back less than 10% of your purchase price, but rebates can go as high as 35% to 40%. Once your cash stash reaches a certain level, you can collect it via check, PayPal or gift card. Compare offerings for retailers across various sites through CashbackHolic.com or CashbackMonitor.com.

Negotiate for Practically Everything

You know it pays to haggle hard over cars and homes. A lot of other purchases are ripe for negotiation, too. Avoid naming your top price right away. If the seller has a lower figure in mind than you do, you won’t save as much as you could have. Instead, ask the seller how much he could come down in price.

Keep Investing Costs Low

All else being equal, the less you pay, the more you get to keep for yourself. Start by opening an account with an online broker, such as Fidelity or Charles Schwab. You’ll be able to buy and sell stocks for roughly $7 per trade. In addition, many of the top discounters let you trade select ETFs without sales fees. Fund investors should focus on mutual funds and ETFs with low expense ratios. You can buy index funds, such those that track the S&P 500, with annual fees of roughly 0.05%. Top low-cost actively managed funds include Dodge & Cox Stock (DODGX) and Mairs & Power Growth (MPGFX), both Kip 25 members.

If you work with a money manager, you’ll probably pay about 1% a year. Try to negotiate a lower fee. Or consider signing up with a “robo” adviser, which uses technology to manage your port­folio. Betterment charges just 0.25% of assets under management annually. Wealthfront levies no management fee for balances under $10,000 and charges 0.25% a year for any amount above that.

Trim Your Wireless Costs

Families with children spent an average of $1,526 on cell phone service in 2015, or about $127 per month, according to the U.S. Bureau of Labor Statistics. That number may be a lot higher if you have, say, a couple of data-hungry teens. Take stock of your typical monthly usage and shop for a plan that fits your needs at the lowest price. If you use data to stream several hours of music or video monthly, for example, switching to an unlimited data plan may make sense.

Consider smaller carriers, which often piggyback on the networks of larger ones and offer plans at lower rates. Use the tool at WireFly.com to search for suitable plans based on your typical usage. With the demise of subsidized phones, look beyond the latest iPhone or Samsung phones for more-affordable options. Or, rather than getting the latest model, consider buying a previous-generation phone (say, an iPhone 6s rather than an iPhone 7), which could save you $100. Or buy a preowned phone that has been refurbished and inspected by the carrier or manufacturer.

Find the Best Airfare

Scope out the cheapest dates to fly to your destination—or find a destination that fits your price range—using the flexible search features on Kayak and Google Flights. Register for airfare alerts from Airfarewatchdog.com and flight deals from ScottsCheapFlights.com, and skim Twitter for flash sales using the hashtag #airfare. Online travel agencies (OTAs), such as Expedia and Priceline, can piece together cheaper itineraries for international flights using multiple airlines on complex routes. To compare OTA fares with the airlines’ fares or with other OTAs, run your itinerary through Kayak or Momondo. Don’t forget budget airlines, such as Wow Air and Norwegian Air.

Vow to Be Debt-Free

High-interest-rate debt is an obstacle in your path to wealth. One way to attack the problem is to pay down the highest-interest-rate debt first. For example, if you’re carrying a balance on a credit card with a hefty rate, consider transferring the balance to a card such as Chase Slate, which charges a 0% rate for the first 15 months and no transfer fee if you move the balance within 60 days of opening the card. Just be sure to pay it off before interest starts to accrue. Auto and student loans are also candidates for accelerated payoff.

Foster Your Philanthropic Side

Money can’t buy happiness, but studies show that charitable giving can make you happier. Better yet, philanthropy can lower your tax bill. Your donations to a charity or, say, a school are tax-deductible if you itemize, and you’ll get an extra tax break if you give stock, funds or other investments that have appreciated in value. If you bought the investments more than a year ago, you’ll get a tax write-off for the current value of the donation, and you won’t owe capital-gains taxes on the increase in value since purchase.

Use Home Equity Strategically

Thanks to rising home values since the Great Recession, you may be well positioned to borrow against the equity in your home, which can help finance renovations or consolidate other, higher-rate debts. Recently, a home-equity line of credit (HELOC) with a $30,000 limit carried an average 5.1% rate, according to Bankrate.com. HELOCs often come with variable rates, so your payments will increase as interest rates rise. Some lenders allow you to lock in a fixed rate on all or a portion of your HELOC balance, which may be wise if you expect to spend a few years or more paying off the debt. A fixed-rate loan may be a good option if you have a one-time expense.

Give to Charity From Your IRA

Uncle Sam offers an extra incentive to be charitable when it’s time to take required minimum distributions from your IRAs. If you’re 70½ or older, you can transfer up to $100,000 each year tax-free from your IRAs directly to one or more charities. You can make the transfer anytime during the year. And your donation benefits you as well as the charity: The money counts as your RMD but isn’t included in your adjusted gross income. Lower AGI may push you below the threshold for the Medicare high-income surcharge or help make less of your Social Security benefits subject to taxes.

Open a Donor-Advised Fund

If you contribute to a donor-advised fund, you can take a charitable tax deduction for the full amount now but take as much time as you want to decide which charities to support. By making giving a family affair, you can build a charitable fund that lasts for generations and share your philanthropic values with your children and grandchildren. Mutual fund companies, brokerage firms and community foundations offer donor-advised funds. You can open an account at Fidelity or Schwab with $5,000 or at Vanguard with $25,000. You can donate cash, stock or mutual funds, and some donor-advised funds, such as Fidelity’s, even let you contribute real estate or shares of privately held companies.

Pay Off Your Mortgage

If you’re free of other debt and your savings are on track, put extra cash toward your mortgage or refinance into a 15-year mortgage to free up your finances by the time you retire. Patrick Lach, a certified financial planner in Louisville, Ky., offers this example: Say you want to refinance a $200,000 mortgage. With a 30-year loan at a 4.06% fixed rate, your monthly payment would be about $962. With a 15-year mortgage at a 3.2% fixed rate, your payment would be $1,400, but you would save more than $94,000 in interest.

Take Stock of Where You Stand

Estimate the future value of your current savings and see how much more you’ll need to save to hit your retirement goal. You could work with a financial adviser to make a plan, but in the meantime crunch the numbers with an online cal­culator, such as Kiplinger's Retirement Calculator. Our tool lets you factor in such variables as home equity and potential windfalls, such as an inheritance.

Write Down a Retirement Plan

Create a retirement budget, devoting one column to essential costs, such as housing and food, and another to discretionary expenses, including travel and hobbies. Factor in inflation for overall expenses, expected to be 2.4% over the next 20 years, according to the Congressional Budget Office. Consider making a separate calculation for health care costs, which are likely to have a much higher rate of inflation; HealthView Services, which analyzes health costs, projects a 5.1% inflation rate over the next 20 years.

Match expenses to guaranteed income, including any pensions and Social Security payments, plus the annual amount you plan to draw from savings. If there’s a gap, reconcile yourself to spending less—or working longer. Staying in the workforce for a few extra years gives you more time to contribute to your retirement accounts. Plus, you have fewer years to finance once you do retire.

Maximize Social Security

Postponing retirement also helps you delay taking Social Security. For every year after full retirement age (66 or 67, depending on when you were born) that you postpone claiming until you reach age 70, the benefit goes up by 8%. For help deciding when and how to claim benefits, bone up on your options with Kiplinger’s Boomer’s Guide to Social Security, $10. Then consult a financial planner with training in Social Security strategies. Or subscribe to software such as Maximize My Social Security, starting at $40, or Social Security Solutions, starting at $20. These programs run scenarios based on your circumstances and show how different filing strategies affect the total payout.

Tweak Your Investments as You Age

As you approach retirement, aim for a portfolio that generates enough growth to combat inflation but ratchets down risk. A mix of 55% stocks, 40% bonds and 5% cash accomplishes that goal. For more growth, adjust the mix to 60% stocks and 40% bonds and cash; for less risk, go with 60% bonds and cash and 40% stocks.

Supersize Your Retirement Contributions

If you’re 50 or older, you can make catch-up contributions to your IRA and 401(k). In 2017, you can add $6,000 to your 401(k) above the $18,000 annual contribution limit, for a total of $24,000 for the year. You can stash an extra $1,000 in a traditional or Roth IRA beyond the $5,500 annual contribution limit, for a total of $6,500 for the year. If you invest $24,000 in a 401(k) every year starting at age 50, you’ll boost your retirement savings by more than $580,000 by the time you’re 65, assuming your investments return 6% per year. If you invest $6,500 in your IRA during those years, you could amass more than $157,000 in your IRA in 15 years.

If you’re self-employed, you can also step up savings. In 2017, you can contribute up to 20% of your net self-employment income (business income minus half of your self-employment tax) to a SEP-IRA, up to a maximum of $54,000. In a solo 401(k) plan, you can put aside even more money because you can contribute as both an employer and an employee. In 2017, the maximum contribution is $54,000, or $60,000 if you’re 50 or older.

Retire to a Place That’s Healthy, Fun and Tax-Friendly

If you plan to relocate in retirement, scope out a city that boasts an array of opportunities for outdoor activities, restaurants that pique the palate and enough cultural amenities to keep the brain limber. All of our picks have those qualities as well as excellent health care, and they’re located in states with tax policies that are kind to retirees.

Austin, Texas, has outdoorsy options including Zilker Park, a 351-acre green space; Barton Springs Pool, a spring-fed swimming hole; and Lady Bird Lake, where you can go canoeing and kayaking. Downtown, you’ll find a bustling mix of shops, restaurants, taco trucks, barbecue joints, music and film festivals.

Naples, Fla., offers a sophisticated mix of cafés, art galleries and boutiques, as well as beaches and gracious homes in walkable neighborhoods.

Nashville’s music scene lately has competed with the thrum of the city’s construction boom, but you can also find quiet old neighborhoods bordered by parks and greenways. The city is home to Vanderbilt University.

Philadelphia boasts world-class museums such as the Philadelphia Museum of Art and the Barnes Foundation. You can sample meats, cheese and produce at the Ninth Street Italian Market. The Manayunk Canal Towpath connects with 60 miles of trails along the Schuylkill River.

Seattle locals have easy access to the bounty of the Pacific Northwest as well as such urban attractions as the Pike Place Market and the Seattle Opera. Rain happens in Rain City, but mild temperatures let residents enjoy the outdoors year-round.

Create Savings Buckets in Retirement

Talk about a wealth killer: If you’re forced to sell your investments in a bear market, especially at the beginning of retirement, your carefully laid plans for making your savings last the rest of your life could be in jeopardy. To avoid that scenario, create three “buckets” for your savings. The first should hold enough cash, CDs and other short-term investments to cover one to three years of living expenses, after factoring in guaranteed income, such as Social Security. Create a second bucket with slightly riskier investments, such as intermediate-term bond funds and a few diversified stock funds. The third bucket is for long-term growth; fill it with diversified stock and bond funds. As you draw down the first bucket, you eventually refill it with profits from the second bucket, and the second bucket gets refilled with gains from the third.

Cover Long-Term Care

At a median cost of $92,000 a year, a stay in a nursing home can quickly deplete your retirement nest egg. Long-term-care insurance can help preserve your wealth. But the cost of long-term-care insurance has skyrocketed, so most people need to find an affordable way to set up their safety net. First, look up the cost of care in your area (see genworth.com/costofcare) and estimate how much of, say, a three-year stay you could cover with income and savings. Then shop for a policy to cover the gap. You can save money on premiums by lowering the inflation adjustment from 5% to 3%; shortening the benefit period or pooling it with your spouse to use between the two of you; or extending the waiting period from, for

 

10 Timeless Tips From Knight Kiplinger

Some lessons from our 70 years of giving readers practical advice on how to save, manage, invest and spend their money.

1. Wealth creation isn’t a matter of what you earn. It’s how much of it you save.

2. Your biggest barrier to becoming rich is living like you’re rich before you are.

3. Pay yourself first. Arrange to have your retirement and other savings deducted from your paycheck before the money hits your bank account. If there isn’t enough left over for your bills, cut your spending.

4. No one ever got into trouble by borrowing too little.

5. Conspicuous consumption will make you inconspicuously poor.

6. The key to stock market success isn’t your timing of the market. It’s your time in the market—the longer, the better.

7. Diversify, because every asset has its day in the sun—and its day in the doghouse.

8. Keep a cool head when others are losing theirs. When others are selling investments, it’s usually a good time to buy. The foundations of great fortunes are laid in bear markets, not bull markets.

9. Money can’t buy happiness, but it can make unhappiness easier to bear.

10. Sharing your wealth with others is more fun than spending it on yourself.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail  info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Job-Changer’s Financial Checklist

As you look forward to starting a new job, it's important to consider how you will manage your finances while making the transition from one employer to the next.

The checklist to use before starting a new job:

Proactively manage your health insurance to avoid a lapse in coverage.

Discuss dates with your old and new employers to assure continuous coverage.

Check on the status of any pending claims under your old coverage.

Arrange any needed transfers of records from your old insurer to your new insurer.

Provide forwarding and contact information to the trustee of any health savings accounts (HSAs). If you expect to enroll in a high-deductible health plan at your new job, you can generally have any remaining balance in your HSA transferred, so you should determine what procedures you may need to follow. If you do not plan to enroll in a new high-ded uctible health plan, you can generally leave any HSA assets in your current plan and draw them down as needed for eligible future expenses.

If you have a flexible spending account (FSA) with your current employer, it's important to pay attention to the details of the plan before you change jobs.

A flexible spending account (FSA) lets you set aside a pretax portion of your paycheck to cover qualified medical expenses that would have otherwise come out of your pocket. Be sure to file all eligible expenses because, under current rules, you may only carry over up to $500 in unused funds to the next year.

Prepare for your job change by submitting all eligible expenses for reimbursement under your old programs before you leave your current job, and check with your company's HR department to find out whether or not you have a grace period for submission.

Determine whether any future child care or commuting expense s may qualify for reimbursement from your old accounts.

Address important decisions about your future financial security by managing your retirement accounts.

Evaluate all of the post-employment options for assets in your current plan -- leave the assets in place, roll them over to an IRA, or roll them over to your new employer.

Determine whether your old plan will require you to arrange a transfer within 60 days or get automatically cashed out, keeping in mind that cash-outs carry immediate tax consequences.

Provide any necessary change-of-address information.

Keep up your retirement savings efforts at your new employer.

Manage your employer-sponsored life and disability coverage.

Determine the extent to which your new employer's coverage might be a complete replacement for your existing coverage.

Evaluate conversion options for existing coverage.

Consider the need for individual disability insurance.

Keep records and receipts of any moving and transfer expenses for potential tax adjustments and reimbursements.

 

The checklist to use when you don't have a job lined up:


Manage your health insurance.

Determine the date for termination of coverage and look into extension and conversion options to avoid a lapse in coverage.

Find out what kind of private individual and government-sponsored health insurance might be available in your area and evaluate your options.

Check on the status of any pending claims.

Track down copies of your insurance records.

Provide forwarding and contact information to the trustee of any HSAs. Keep in mind that any remaining HSA balance should remain available to you for future eligible medical expenses, so you should determine what your plan procedures would be.

Manage your FSAs.

Submit all eligible expenses for reimbursement before your departure, or confirm that you will have a grace period for submission.

Manage your retirement accounts.

Evaluate the post-employment options for assets in your current plan -- leaving the assets in place or rolling them over to an IRA.

Determine whether your plan will require you to arrange a transfer within 60 days or get automatically cashed out, keeping in mind that cash-outs carry immediate tax consequences.

Provide any necessary change-of-address information.

Manage your employer-sponsored life and disability coverage.

Evaluate all conversion and replacement options for existing coverage.

 

Source:

You have choices for what to do with your employer-sponsored retirement plan accounts. Depending on your f inancial circumstances, needs, and goals, you may choose to roll over your eligible savings to an IRA or convert to a Roth IRA, roll over an employer-sponsored plan from a prior employer to an employer-sponsored plan at your new employer, take a distribution, or leave the account where it is. Each choice may offer different investment options and services, fees and expenses, withdrawal options, required minimum distributions, tax treatment, and may provide different protection from creditors and legal judgments. These are complex choices and should be considered with care.

Required Attribution

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2017 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exempt ion or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

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Starting Out: Begin Funding for Your Financial Security

Congratulations! You’ve graduated from school and landed a job. Your salary, however, is limited, and you don't have much money (if any) left at the end of the month. So where can you find money to save? And, once you find it, where should this cash go?

Here are some ways to help free up the money you need for current expenses, financial protection, and future investments -- all without pushing the panic button.

Get Out From Under

For most young adults, paying down debt is the first step toward freeing up cash for the financial protection they need. If you’re spending more than you make, think about areas where you can cut back. Don't rule out getting a less expensive apartment, roommates, or trading in a more expensive car for a secondhand model. Other expenses that could be trimmed include dining out, entertainment, and vacations.

If you owe balances on high-rate credit cards, look into obtaini ng a low-interest credit card or bank loan and transferring your existing balances. Then plan to pay as much as you can each month to reduce the total balance, and try to avoid adding new charges.

If you have student loans, there's also help to make paying them back easier. You may be eligible to reduce these payments if you qualify for the Federal Direct Consolidation Loan program. Though the program would lengthen the payment time somewhat, it could also free up extra cash each month to apply to your higher-interest consumer debt. The program can be reached at 800-557-7392.

What You Really Should Buy

How would you pay the bills if your paychecks suddenly stopped? That's when you turn to insurance and personal savings -- two items you should “buy” before considering future big-ticket purchases.

Health insurance is your first priority. Health care insurance is now also mandatory under the Affordable Care Act. If you're not covered under an employer plan, look into the new state or national health insurance exchanges, which offer a variety of coverage options and providers to choose from. You may also qualify for a subsidy if your taxable income is under 400% of the federal poverty level.

Life insurance is the next logical step, but may only be a concern if you have dependents.

Disability insurance should be another consideration. In fact, government statistics estimate that just over 25% of today's 20-year-olds will become disabled before they retire. 1  Disability insurance will replace a portion of your income if you can't work for an extended period due to illness or injury. If you can't get this through your employer, call individual insurance companies to compare rates.

Build a Cash Reserve

If you should ever become disabled or lose your job, you'll also need savings to fall back on until p aychecks start up again. Try to save at least three months' worth of living expenses in an easy-to- access "liquid" account, which includes a checking or savings account. Saving up emergency cash is easier if your financial institution has an automatic payroll savings plan. These plans automatically transfer a designated amount of your salary each pay period -- before you see your paycheck -- directly into your account.

To get the best rate on your liquid savings, look into putting part of this nest egg into money market funds. Money market funds invest in Treasury bills, short-term corporate loans, and other low-risk instruments that typically pay higher returns than savings accounts. These funds strive to maintain a stable $1 per share value, but unlike FDIC-insured bank accounts, can't guarantee they won't lose money. 2

Some money market funds may require a minimum initial investment of $1,000 or more. If so, you'll need to build some savings first. Once you do, you can get an idea of what the top-earning money market funds are paying by referring to iMoneyNet, which publishes current yields. Many newspapers also publish yields on a regular basis.

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Build Your Financial Future

Some long-term financial opportunities are too good to put off, even if you are still building a cache for current living expenses.

One of the best deals is an employer-sponsored retirement plan such as a 401(k) plan, if available. These tax-advantaged plans allow you to make pretax contributions, and taxes aren't owed on any earnings until they're withdrawn. What's more, new Roth-style plans allow for a fter-tax contributions and tax-free withdrawals in retirement, provided certain eligibility requirements are met. Another big plus is direct contributions from each paycheck so you won't miss the money as well as possible employer matches on a portion of your contributions.

Don't underestimate the potential power of tax savings. If you invested $100 per month into one of these accounts and it earned an 8% return compounded annually, you would have $146,815 in 30 years -- nearly $50,000 more than if the money were taxed annually at 25%. 3 Bear in mind, however, that you will have to pay taxes on the retirement plan savings when you take withdrawals. If you took a lump-sum withdrawal and paid a 25% tax rate, you'd have $110,111, which is still more than the balance you'd have in a taxable account.

If you're already participating, think about either increasing contributions now or with each raise and promotion.

If a 401(k) isn't available to you, shop aroun d for individual retirement accounts (IRAs), both traditional and Roth, at banks or mutual fund firms. In 2016, you can contribute up to $5,500 to traditional IRAs or Roth IRAs. Generally, contributions to and income earned on traditional IRAs are tax deferred until retirement; Roth IRA contributions are made after taxes, but earnings thereon can be withdrawn tax free upon retirement. Note that certain eligibility requirements apply and nonqualified taxable withdrawals made before age 59½ are subject to a 10% additional federal tax.

Stop Waiting for the Next Paycheck

Beginning your working life with good financial decisions doesn't call for complex moves. It does require discipline and a long-term outlook. This commitment can help get you out of debt and keep you from a paycheck-to- paycheck lifestyle.

Source(s):

1.  Social Security Administration, Fact Sheet, March 2014.

2.  An investment i n a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

3.  This hypothetical example is for illustrative purposes only. It does not represent the performance of any actual investment.

Required Attribution

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2017 DST Systems, Inc. Reproduction in w hole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Avoid These Financial Traps -- They May Be Hazardous to Your Wealth

Money. It's hard to get and easy to lose. It doesn't take long for the wealth you've accumulated to disappear if you don't manage your money well or have a plan to protect your assets from sudden calamity.

Snares like the ones mentioned below could easily threaten your financial security. Planning ahead can protect you and your loved ones from getting caught.

Undisciplined Spending

The more you have, the more you spend -- or so the saying goes. But not paying close attention to your cash flow may prevent you from saving enough money for your future. Manage your income by creating a spending plan that includes saving and investing a portion of your pay. Your financial professional can help identify planning strategies that will maximize your savings and minimize your taxes.

High Debt

With the easy availability of credit, it isn't hard to understand how many people rack up high credit card balances and other debt. Short-term debt will become long-term debt if you're paying only the minimum amount toward your balances. If you can't pay off your credit card debt all at once, consider transferring the balances to a card with a lower interest rate.

Unprotected Assets

Your life, your property, and your ability to work should all be protected. Life insurance can provide income for your family if you die. Homeowners and automobile insurance can help protect you if your home or car is damaged or destroyed and provide liability coverage if someone is injured. Disability insurance can protect your income if you're unable to work.

Unmanaged Inheritance

A financial windfall is great, but it also can be dangerous. Without solid advice on managing and investing the money, you could find that your inheritance is gone in a much shorter time than you would have thought possible. Your financial professional can help you come up with a plan for managing your wealth. Setting aside a portion of the money to spend on a trip or other luxury while investing the rest may be one way to reward yourself and still preserve the bulk of your assets.

Neglected Investments

Reviewing your investments to make sure they're performing as you expected -- and making changes in your portfolio if they're not -- is essential. But it's also essential to periodically review your investment strategy. You may find that your tolerance for risk has changed over time. You'll also want to assess the tax implications of any changes you plan to make to help minimize their impact.

Retirement Shortfall

If you're not contributing the maximum amount to your employer's retirement savings plan, you're giving up the benefits of pretax contributions and potential tax-deferred growth. Maximizing your plan contributions can start you on your way to a comfortable retirement -- hopefully with no traps along the route.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.
 


The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.
 

Buying Life Insurance: What Kind and How Much?

You are likely to need life insurance if others depend on you for financial support, if you provide your family with such services as child care, if you need to consider protecting a surviving spouse or if you have accumulated substantial assets. There are several types of life insurance that you may want to consider.

Types of Insurance

•  Term insurance is the most basic, and generally least expensive, form of life insurance for people under age 50. A term policy is written for a specific period of time, typically between one and 10 years, and may be renewable at the end of each term. Premiums increase at the end of each term and can become prohibitively expensive for older individuals. A level term policy locks in the annual premium for periods up to 30 years.

•  Whole life combines payment protection with a savings component. As long as you continue to pay the premiums, you are able to lock in coverage at a level premium rate. Part of that premium accrues as cash value. As the policy gains value, you may be able to borrow up to 90% of your policy's cash value tax-free.

•  Universal life is similar to whole life with the added benefit of potentially higher earnings on the savings component. Universal life policies are also highly flexible in regard to premiums and face value. Premiums can be increased, decreased or deferred, and cash values can be withdrawn. You may also have the option to change face values. Universal life policies typically offer a guaranteed return on cash value, usually at least 4%. You'll receive an annual statement that details cash value, total protection, earnings, and fees. Drawbacks include higher fees and interest rate sensitivity -- your premiums may increase when interest rates rise.

•  Variable life generally offers fixed premiums and c ontrol over your policy's cash value, which is invested in your choice of stocks, bond, or mutual fund options. Cash values and death benefits can rise and fall based on the performance of your investment choices. Although death benefits usually have a floor, there is no guarantee on cash values. Fees for these policies may be higher than for universal life, and investment options can be volatile. On the plus side, capital gains and other investment earnings accrue tax deferred as long as the funds remain invested in the insurance contract.

How Much Insurance Do I Need?

A popular approach to buying insurance is based on income replacement. In this approach, a formula of between five and 10 times your annual salary is often used to calculate how much coverage you need. Another approach is to purchase insurance based on your individual needs and preferences. In this instance, the first step is to determine how much income you need to replace.
 
Start by determining your net earnings after taxes (insurance benefits are generally income tax free). Then add up your personal expenses (food, clothing, transportation, etc.) This will provide an idea of the annual income that your insurance will need to replace. You'll want a death benefit which, when invested, will provide income annually to cover this amount. Remember to add amounts needed to fund one-time expenses such as college tuition or paying down your mortgage.
 
Purchasing the right type of insurance in an amount that is suitable for your family's needs is an important element in financial planning. You may want to consult an advisor who can help you implement the details.

 
Source:

© 2008 Standard & Poor's Financial Communications. All rights reserved.

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary lic ensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc . cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Understanding Medicare: Parts A, B, C, and D

Medicare contains many rules that beneficiaries and their caregivers are required to learn. Perhaps the best way to grasp the program's details is to review the major components of the Medicare program: Parts A, B, C, and D.

 

Medicare Part A: Hospital Insurance

 

This insurance is designed to help cover the following:

 

•  Inpatient care in hospitals, including rehabilitation facilities

 

•  Care provided in a skilled nursing facility or hospice for a limited period

 

•  Home health care

 

For inpatient hospital care, Medicare typically covers a semi-private room, meals, general nursing, drugs, and other hospital services and supplies. Medicare typically does not cover long-term care or custodial care in a skilled nursing facility, although under limited circumstances, it may cover a maximum of 100 days during a benefit period if a doctor certifies that a patient needs daily skilled care.

 

Medicare Part B: Medical Insurance

 

Part B helps to cover physician services, outpatient care, preventive services, durable medical equipment, and certain home health care. Although the scope of Part B is extensive, there are many services -- such as dental care, routine eye exams, hearing aids, and others -- that are not covered as part of this program.

 

Medicare Part C: Offered by Private Insurers

 

Also known as Medicare Advantage plans, Part C consists of insurance plans provided by private carriers. For beneficiaries with Part C, Medicare pays a fixed amount every month to a private insurer for their care. Many Medicare Advantage plans include Medicare drug coverage, and all cover emergency and urgent care. In addition, certain plans may cover services that are not covered by Medicare, which may result in lower out-of-pocket fees for beneficiaries.

 

You can sign up for Medicare Part C when you first become eligible for Medicare. You can also sign up between January 1 and March 31 or between October 15 and December 7 each year. If you sign up at the beginning of the year, you can't join or switch to a plan with prescription drug coverage unless you already had Medicare Part D. If you sign up toward the end of the year, your coverage will begin January 1 of the following year.

 

Medicare Part D: Prescription Drugs

 

There are generally two ways to obtain Medicare prescription drug coverage. If you have Original Medicare (Part A plus Part B), you can add drug coverage by obtaining it from an insurer approved by Medicare through Part D. Or if you have a Medicare Advantage plan, find out whether your plan includes prescription coverage as part of its program. Even if you don't take many prescriptions, you may want to consider signing up for Part D as soon as you become eligible. If you wait and try to sign up during a subsequent enrollment period, you may be charged a late enrollment penalty and be forced to pay higher premiums.

 

You can join Medicare Part D when you initially become eligible for Medicare or between October 15 and December 7 of each calendar year.

 

Infographic: Out of Pocket

 

Medical coverage from Medicare is far from a freebie. The following are costs that you may encounter.

 

 Part A: No premium if you or your spouse paid Medicare taxes while you were working. For 2015, there is a deductible of $1,260 before coverage begins. You may expect to pay a portion of the cost for a hospital stay of more than 60 days during a benefit period.

 

•  Part B: A deductible of $147 for 2015 plus 20% of Medicare-approved amounts for medical services. The amount of additional monthly premiums depends on whether you are enrolled in Original Medicare or in Part C. With Original Medicare, the standard 2015 premium is $104.90 per month. Single beneficiaries with incomes above $85,000 and couples earning more than $170,000 pay higher premiums.

 

•  Part C: Costs and levels of coverage vary according to the plan. Contact plans that interest you to learn the details and to compare the costs and levels of coverage with Medicare Part A and Part B.

 

•  Part D: Pricing for prescription drug coverage is complex. For those who add Part D to Original Medicare, there is a monthly premium, an annual deductible, and copayments. There is a "coverage gap" that works as follows: After a beneficiary and the insurer pay $2,860 for prescription drugs during a benefit period, the beneficiary will pay 47.5% of the plan's covered brand-name perscription drugs until out-of-pocket expenses total $4,700, at which point catastrophic coverage takes effect. Effective the following calendar year, a new benefit period begins with applicable premiums, copayments, and other costs.

 

Medicare's rules can be confusing for many people. The Medicare website can be a valuable resource. Every year, Medicare also mails Medicare & You to beneficiaries and makes this fact-filled publication available online. You may want to review it to make sure you have an cost structure accurate understanding of the Medicare program.

 

Points to Remember

 

1.  Medicare consists of four components: Parts A, B, C, and D.

 

2.  Part A is hospital insurance designed to help cover care in a hospital or rehabilitation center. In addition, Part A may cover a limited amount of care in a skilled nursing facility or hospice.

 

3.  Part B is medical insurance that helps to cover physician services, outpatient care, preventive services, durable medical equipment, and certain home health care.

 

4.  Part C, also known as Medicare Advantage, consists of insurance plans provided by private carriers. For beneficiaries with Part C, Medicare pays a fixed amount every month to a private insurer for their care.

 

5.  Part D, which is prescription drug coverage, may be available as part of a Medicare Advantage plan or may be purchased in addition to Part A and Part B (also known as "Original Medicare").

 

Required Attribution

 

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2016 Wealth Management Systems Inc. All rights reserved.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

Services We Offer- Investment Management (Asset Management) vs Wealth Management

In our most recent blog post, we covered the definition of Investment Management and Wealth Management.  Wealth Management, which entails Investment Consulting (IM), Advanced Planning (AP) and Relationship Management (RM) is what Diversified Asset Management, Inc. offers to our clients.

 

In part two of the post, we wrote about the different definitions and explanations of the services that were mentioned to help give you a better understanding of what our firm handles under the umbrella of “Wealth Management”. 

 

In this post we would like to introduce you to the different service packages that we offer to our various clients.  It is our hope once you’ve read three articles, you will have a better understanding of exactly what we deliver in Wealth Management and if we are right for you. 

 

Types of Service Packages: 

 

Clients Preparing for Retirement & In Retirement

 

• Create a Financial Plan – This is used to determine the client’s retirement needs and if retirement is feasible.  

 

• Consolidating 401K Accounts. 

 

• Determine a Plan to Withdraw Assets - In conjunction with your accountant, we will determine the most tax efficient manner for creating the your “retirement paycheck” withdrawals.

 

• Maximize Social Security – We will determine the best method for maximizing the amount of social security received over your lifetime(s) .

 

• Required Minimum Distribution – We will calculate the amount required, handle the paperwork, transfer the money, and handle tax payment, if desired. 

 

Small Business Owners with 1 to 25 employees:

 

• Setup Retirement Plans.

 

• Defined Benefit Plans. 

 

• Help With Buy | Sell agreements.

 

• Determine Disability Insurance - We’ll determine the amount and a refer you to an Insurance professional.

 

• Life Insurance – We will determine if life insurance is needed and then a referral to an insurance professional.

 

• Business Overhead Insurance – We will determine if business overhead insurance is needed and then a refer you to an insurance professional.

 

• Retirement Plans for Large companies 3 - 25+ employees - Full scale 401k services.

 

• Planning For Capital Needs - setting up a larger than normal emergency fund or investment account in the event of capital needs. Recommend lines of credit where appropriate.

 

• Assist with Sale of Business - For a transition or sale of the business we will coordinate with your accountant for the best way to sell the business. 

 

• Coordination with your accountant regarding all tax issues.

 

Corporate Executives

 

• Recommendations for investment options for the company 401k plan.

 

• Recommendations for investment options for the company deferred compensation plan.

 

• Guidance managing & liquidating non-qualified stock options, incentive stock options, restricted stock, company stock.

 

• Tax Planning – maximizing retirement plan contributions and the sale of company stock options to reduce the tax impact.

 

• Cost basis tracking for company stock.

 

• Stock Option Planning - We provide advice on how and when to exercise stock options. We coordinate with the client’s accountant about the tax implications of the exercise of options.

 

• Employee stock purchase planning - We discuss implications for purchase and sale of employee stock, including employee stock purchase programs and restricted stock units. We coordinate with the client’s accountant about the tax implications purchase and sale of company stock.

 

• Non-Qualified Deferred Compensation - We discuss the implications of deferring compensation and we give recommendations for the allocation of funds within a deferred compensation plan.

 

Estate Administration 

 

• Help clients with Estate Administration for a relative or a loved one.

 

• Help with transferring of accounts and splitting of accounts, if necessary.

 

• Cost basis tracking for inherited positions.

 

Estate Planning & Wealth Transfer

 

• Estate Planning – We will coordinate with your attorney to make sure your Will is updated, implement account and trust recommendations, update beneficiaries, changing account titles, help with charitable giving and wealth transfers. 

 

Real Estate Planning 

 

• Real Estate Analysis – We can advise you with buying and selling a home, refinancing and rental property.  We can also coordinate the transaction(s) with your Real Estate Professional.

 

Education Planning

 

• College Planning - We set up 529 college savings plan when a new child or grandchild is born or for a current child and coordinate a withdraw strategy with your accountant.

 

Charitable Planning

 

We can coordinate with your Tax professional and attorney for the best strategy to help you maximize the impact of charitable gifts, pay less tax and leave more money to your heirs in various ways:

 

• Philanthropy – We can setup required minimum distribution (RMD) directly to the church or another charity, if possible.

 

• CLAT – Charitable Lead Annuity Trust - Determine the client’s charitable intent and set up a charitable lead annuity trust if applicable. Help client determine which assets are appropriate to transfer into the CLAT and then rebalance the CLAT on a periodic basis and create the cash flow need for the money to flow into a Donor Advised Fund. Coordinate with the client’s accountant and attorney for this process.

 

• CRAT – Charitable Remainder Annuity Trusts - Determine the client’s charitable intent and set up a charitable remainder annuity trust if applicable. Help determine which assets are appropriate to transfer into the CRAT and then rebalance the CRAT on a periodic basis and create the cash flow need for the money to flow into a Donor Advised Fund. Coordinate with the client’s accountant and attorney for this process.

 

• DAF – Donor Advised Funds – Set up Donor Advised Funds as needed. This vehicle can be used in conjunction with the CLAT & CRAT or alone. The assets flow out of the CLAT or CRAT on a predetermined basis and then can flow to the client’s charity of choice or the assets can be invested for longer time frames. We can involve the family in the determination of where the assets should be distributed if desired by the client. 

 

• Set Up a Donor Advised funds independent of a CLAT or CRAT. 

 

Wealth Protection

 

• Property Protection – Determine if the client needs to consolidate their property ownership into an LLC.

 

• Insurance – Coordinate and determine if client needs Life, Disability, Umbrella and Long Term Care Insurance. Will make recommendations for insurance agents and help with completing paperwork and follow-up until the process has been completed.

 

• Small Business Owners - Business Overhead Expense Insurance - Determine if the client has a need for Business Overhead Insurance and coordinate with the client and the agent for the proper amount.

 

• Small Business Owners - Key Man Insurance for small business owners - Determine if the client has a need for Key Man Insurance and coordinate with the client and the agent for the proper amount.

 

• Protecting Your Confidential Information - Making sure your digital assets are protected. We give you a checklist system to protect your digital assets.

 

• Protecting Your Property – Assist and coordinate the purchase of an alarm system for your home, business and rental properties. 

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Investment Management vs Wealth Management, There is a Difference!

The majority of the consumers probably view Investment Management and Wealth Management as one in the same or very similar.  However, that couldn’t be farther from the truth.  If you believe they are the same or similar, allow me a moment to share their differences. 

 

Investment Management

Investment Management primarily involves advising and managing client investments based on reaching their financial goals.  Services include client meetings and communications, making recommendations and implementing investment decisions, trading, rebalancing and preparing and processing all the paperwork for the client.   

 

Wealth Management

Wealth Management takes things a step further, encompassing all parts of a client’s financial life.  This includes: Investment Management, Advanced Planning and Relationship Management

Advanced Planning includes guidance and implementation for Tax, Insurance, Education, Real Estate, Retirement, Charitable giving, Legal and Estate planning. 

Relationship Management involves coordinating and managing your expert team of professionals such as your Attorney, Accountant and Insurance professional.  

Handling all these areas on your own can be pretty overwhelming, that’s why consulting with a Wealth Management Advisor who will assist, advise, coordinate and manage it all for you can take much of the burden away so you can enjoy your wealth and know that your wishes and your families future will be well taken care of. 

As you can see there is a vast difference between an advisor that handles Investment Management only and an advisor who offers Wealth Management, encompassing  a wider variety of services.  Hopefully, this explanation will help you decide with service is right for you.

Please contact us if you have questions about your portfolio's risk or complete our free portfolio risk analysis. If you would like a second opinion on your portfolio, please contact us to schedule a meeting or click here.   

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Business Succession Issues: Understanding Buy-Sell Agreements

Running into financial troubles isn't the only reason that some closely held businesses fail to succeed. Their untimely demise may result from the lack of a formal plan providing for the orderly succession of management and ownership of the business. Such a plan frequently incorporates a buy-sell agreement as the tool for ensuring that the business will continue even after the departure, death, or disability of an owner.

To head off future problems, it pays to understand the uses and structures of these agreements. Although they can be adopted at any time, it is best to decide whether to put a buy-sell agreement in place as early as possible in the life of a business.

 

Legal Blueprint

A buy-sell agreement is a legal document allowing the remaining owner(s) to acquire the interest of a withdrawing shareholder or partner due to a specified event. The agreement usually restricts an owner's ability to transfer his or her interest and sets out the terms under which another owner or the business entity may acquire the departing owner's interest.

A buy-sell agreement can anticipate situations that could imperil the business or be harmful to owners and key employees. For example, it can be used to prevent unwanted outsiders or heirs from obtaining an ownership interest. It can prevent the continued involvement of retired or inactive shareholders or partners. It can ensure the legal continuation of the entity should an owner become bankrupt or lose a required professional license.

Among its benefits, a buy-sell agreement creates a marketplace for the shares of a closely held business, helps ensure that departing owners will receive adequate compensation, and provides cash to pay estate taxes and settlement costs for surviving heirs, if applicable. In fact, fixing the value of a business or establishing a procedure for valuing it in the future addresses one of the most important issues facing a closely held business. An agreement can also help increase job stability for minority owners and non-owner employees critical to the success of the business.

A buy-sell arrangement can be triggered by a variety of events. In addition to the death, disability, or retirement of an owner, other possible triggers may include an attempt to dissolve the entity, an irresolvable conflict among owners, or an owner's desire to sell his interest.

 

Possible Structures and Funding

There are generally two basic types of buy-sell agreements:

 

Cross purchase. Each owner enters into an agreement with every other owner. This approach becomes cumbersome if more than three or four individuals are involved. For example, 64 separate agreements would be required for eight owners.

Entity purchase. The business itself enters into an agreement with each owner and is obligated to buy the shares of a departing owner.

A third type, or so-called Hybrid plan, is essentially a combination of the cross purchase and entity purchase. This approach allows the entity and its owners to delay a purchase decision until a triggering event occurs. The entity typically has the first right of refusal for purchasing the shares of a departing owner.

Life insurance is the most popular funding mechanism for buy-sell agreements. Life insurance is unique in that it creates immediate funding in the event of death, while allowing tax-deferred cash to build up over time. In a cross purchase plan, each owner buys and maintains a policy on every other owner in an amount sufficient to cover the beneficiary's ownership interest. In an entity arrangement, the business purchases the insurance policy on each owner and the business is the beneficiary.

Besides life insurance, other less popular but potentially effective funding mechanisms include cash flow, asset sales, loans, sinking funds, and reserves.

 

Making Sense of Buy-Sell Agreements

business succession.png

Like all business succession matters, buy-sell agreements are complex and require the assistance of qualified legal, tax, and insurance professionals to ensure proper execution and funding.

 

Tax and Estate Planning Considerations

Tax consequences are an essential consideration in determining whether to utilize a buy-sell agreement and how to structure one. This process involves evaluating the benefits and drawbacks of each type of arrangement in relation to the specific situation. For example, a cross purchase agreement offers shareholders a stepped-up basis on stock acquired in a buyout, and there are no alternative minimum tax (AMT) consequences if the business has C corporation status.

On the other hand, the cash value of any life insurance owned by the decedent that insures the life of another owner under a buy-sell agreement is includable in the decedent's estate, which may affect estate taxes. Secondly, federal law precludes using a buy-sell agreement as a discounted giving technique.

Moreover, buy-sell agreements may be problematic for individuals looking to pass their business on to other family members if the agreement sets a price that is less than the fair market value of a deceased owner's stock. If that were the case, then the entire amount of stock passed on to the surviving spouse would not qualify for the marital deduction. In addition, a child named in a buy-sell agreement who elects not to purchase a deceased parent's shares may subject the surviving parent to gift taxes for the shares the child did not purchase.

An entity purchase plan has tax ramifications for the business itself. While death benefits are received tax free, life insurance cash values and death proceeds may result in corporate AMT. Also, insurance premiums are not a deductible business expense.

As this overview suggests, buy-sell agreements have many potential advantages. Among others, they can reduce conflicts, create a marketplace for shareholdings, and assure customers, suppliers, and employees that the business will continue. However, their complexities must be assessed, and agreements must be carefully crafted to address needs of the business, its owners, and their heirs. Input from qualified insurance, legal, and tax professionals is essential before entering into a buy-sell agreement.

 

Points to Remember

1.  A buy-sell agreement spells out what will be done with -- and funds the transfer of -- the ownership interest in a closely held business in the event of the death, disability, or withdrawal of an owner or partner.

2.  A buy-sell agreement can reduce disputes among those involved in a closely held business, as well as ensure the continuity of the business, by providing a fair process that protects departing owners, remaining owners, and the business itself.

3.  A buy-sell agreement may be structured as a cross purchase, entity purchase, or hybrid purchase plan. The choice of structure depends on the number of owners involved, as well as tax, estate planning, and other concerns specific to each situation.

4.  Life insurance is the most popular mechanism for funding a buy-sell agreement. The structure of the agreement determines whether individual owners or the business entity purchase the policies and receive their proceeds.

5.  Legal, tax, estate planning, and insurance professionals familiar with buy-sell agreements need to be consulted before deciding whether to employ an agreement and which structure it should use.

 

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

© 2015 Wealth Management Systems Inc. All rights reserved.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

How Much Health Insurance Do I Need?

The answer is simple: enough to ensure that if you (or a covered family member) get sick or injured, you're not footing the entire medical bill on your own.

 

If you receive health insurance through your employer, your choices are limited. Some employers will offer plans from multiple health insurance providers, but most limit their offerings to one provider. Additionally, most employers offer one or more of the following: an HMO, a PPO or a traditional plan. 

 

•An HMO (or health maintenance organization) is usually the lowest-cost alternative. As a result, enrollees are limited to doctors and treatment facilities within a limited "network." These plans usually have no deductibles. Enrollees are required to make copayments when seeing a physician.

 

•A PPO (or preferred provider organization) allows enrollees greater flexibility. Enrollees can see doctors in or out of the PPO's established network of providers. Deductibles usually apply and co-payments are required. A visit to an out-of-network doctor will trigger an additional charge.

 

•A traditional indemnity plan is usually the most expensive, as it typically gives enrollees the greatest number of choices in choosing doctors and facilities. But the deductibles can be high and the insurance company may cap the amount of money it will spend on the enrollee's behalf over his/her lifetime.

 

If you are self-employed, you can comparison shop among the insurance providers licensed to do business in your state. It is a good idea to get as many estimates as you can because coverage and premiums vary significantly. Be sure you are comparing apples to apples: You want cost breakdowns for coverage with similar deductibles, copayments, prescription benefits, and physician access.

 

As you can see, even the best plan probably won't provide 100% coverage for you or your family. If your employer allows, you can also fund a flexible spending account (FSA) or health savings account (HSA). An FSA, which is an employee benefit typically funded through payroll deduction, allows you to set aside pre-tax dollars to use toward copayments, out-of-network coverage, or other medical expenses. The drawbacks of an FSA: The maximum you can contribute is low and any funds not used during a calendar year are forfeited. An HSA, available to those enrolled in a high-deductible plan, has a higher annual contribution limit and no "use-it-or-lose-it" rules.

 

If you feel you need more coverage and can afford it, you can also buy supplemental health insurance. The three most common types are disease specific, accidental death or dismemberment, and hospital indemnity. Again, be sure to comparison shop before purchasing.

 

Required Attribution

 

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2014 Wealth Management Systems Inc. All rights reserved.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

I'm Self-Employed. How Can I Get Health Insurance?

Self-employment is an important career choice for many people, and it is an option elected by many seniors and baby boomers. But with this choice comes the need to provide your own health insurance, which can be a formidable expense. And, thanks to the Affordable Care Act, a necessary one starting in 2014. If you are self employed and are seeking health care coverage, here are your major options.

 

If you have a spouse or partner who is or can be enrolled in an employer-sponsored plan, joining this plan is usually the simplest and least expensive way to maintain coverage. Nearly all employer-based plans offer coverage to spouses and children, and many provide coverage to domestic partners as well.

 

If you formerly were employed by an organization that employed 20 or more people and made a group health plan available to employees, you may be able to obtain medical coverage through the federal Consolidated Omnibus Budget Reconciliation Act, known as COBRA. COBRA requires employers to make available to departing employees the option of continuing membership in an employer-sponsored group medical plan at the employee's expense. You can continue your health insurance under COBRA for yourself and your dependents for 18 months, during which time you can search for the best option as a self-employed person.

 

High-deductible plans (HDPs), as their name suggests, involve a high deductible or threshold below which you must pay all costs.  For 2014, minimum deductibles are $1,250 for an individual and $2,500 for a family. In essence, a high-deductible policy provides coverage for catastrophic situations but does not generally provide for regular doctor visits and routine care. Such plans can involve complex cost-sharing arrangements in which certain procedures or visits are covered only in part. When considering this option, factor in not only monthly premiums but also the costs of partial out-of-pocket payment for different procedures.

 

Combining an HDP with a tax-free health savings account (HSA) can also save you in taxes. You deposit pre-tax dollars into your HSA, and use that money to pay medical expenses that aren't reimbursed by your health insurance.

 

You may be able to save money by enrolling in a group plan sponsored by a professional organization. Check with any affiliations you may have (for example, the American Medical Association or a state bar association for attorneys) to see if they offer group rates for members. As with any plan, you'll need to look at not only costs but also deductibles, co-pays, and how well the coverage meets your needs.

 

Many states now have health insurance marketplaces. The federal marketplace has an up-to-date list and provides insurance referrals to consumers whose states do not have their own websites.

 

For many self-employed individuals, their best option will be to enroll directly in a health maintenance organization (HMO) or preferred provider organization (PPO). In general, HMOs tend to be more expensive than PPOs, but plan costs vary considerably with coverage options, so shop around. Also keep in mind that individual enrollment in a plan is likely to be expensive, often $500 or more per month for individual coverage, and that costs are generally not tax deductible.

 

When shopping for the right plan, make sure to do your homework. Compare premiums, coverage, deductibles, and copays. Also keep in mind that after you turn 65, you may be eligible for Medicare benefits, even if you remain self employed.

 

For More Information check out the Web resources listed below.

 

eHealth

Small Business Service Bureau

AARP

U.S. Treasury's health savings account resource center

 

Required Attribution

 

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2014 Wealth Management Systems Inc. All rights reserved.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

What Is the Difference Between Disability Insurance and Long-Term Care Insurance?

Disability insurance addresses lost wages that stem from an inability to work. Long-term care insurance, in contrast, addresses expenses associated with medical care provided to you in your home, a nursing home, a rehabilitation center, or an assisted living facility.

 

Disability insurance policies may address either short-term or long-term needs for income. Short-term disability policies provide coverage on a temporary basis, usually up to several months, while you recover from an accident or illness. Long-term disability insurance provides benefits when a disability is of a more permanent nature. Most long-term disability policies will cover you throughout your working years, usually until you reach age 65. Policies vary considerably in terms of the cost of premiums, the percentage of your prior salary paid out as a benefit and the definition of what constitutes a disability.

 

Long-term care insurance is designed to help cover costs of health care services provided to you in your home, a nursing home, a rehabilitation center, or an assisted living facility. Many long-term care insurance policies provide benefits when you require assistance with activities of daily living such as bathing, dressing, and feeding yourself. Loss of wages typically is not an issue with this type of coverage.

 

Long-term care insurance can be purchased at any time in your life. However, premiums tend to rise considerably with age and applicants can be turned down due to preexisting medical conditions. Although individuals of any age may receive benefits from a long-term care insurance policy, these policies typically are intended to help finance the medical costs of the aged.

 

Why do many financial experts recommend their clients purchase both disability and long-term care insurance?

 

•According to the Social Security Administration, a 20-something worker today has a 30% chance of becoming seriously disabled before reaching retirement. 1

•The average daily charge for a semi-private room at a nursing home is $207. The average monthly charge for care in an assisted living facility is $3,450. 2

 

For more information on disability and long-term care insurance, visit the Insurance Information Institute or talk to your financial or insurance professional.

 

Source(s):

 

1.  Social Security Administration.

 

2.  Genworth, 2013 Cost of Care Survey, March 2013.

 

Required Attribution

 

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2014 Wealth Management Systems Inc. All rights reserved.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

 

 

 

 

How Much Is That “Free” Financial Advice Really Costing You?

Today’s investor is faced with so much fear caused by political uncertainty, media hype and the quagmire of the financial world.  This tends to lead many potential investors to inaction and/or attempting to manage their finances themselves with the intent of saving money and protecting their assets from the Bernie Madoff’s of the world.  

 

If you were to ask, “how much is your financial advice costing you?” the answer would most likely be, “Nothing!”. When in fact, many do-it-yourselfers or those that do nothing, are paying in missed or misdirected opportunities.  This is not to say that there aren’t a few people capable of making informed decisions and successfully navigating the complexities of the financial and legal industries, however, most just do not have the time, resources or knowledge to manage their money or estate for “free”.

 

Let’s look at 5 major concerns that investors have and how doing it yourself can cost you money:

 

Major Investor Concerns:

 

1.  Am I making the smartest decisions about my money?

 

2.  Is what I am doing causing me to pay more taxes then I should? 

 

3.  How much of my charitable dollars directly help a cause and is it the best for my personal   finances?

 

4.  Are my assets protected and can they be unjustly taken?

 

5.  Do I have things in place that will take care of my loved ones after I am gone?

 

How You Could Be “Paying” By Doing It Yourself.

 

1.  Dalbar  (the nation's leading financial services market research firm) conducts an annual study of the average investor return verses the market return.  They have determined that the typical gap from investor to the stock market over a 20 year period is about half.  Say if the market return for that period is 8%, the investors return is about 4%. It is usually the same or worse for bond funds. The reason for the big gap is due to market timing – buying high and selling low. If you don’t know what you are doing there is a huge opportunity cost.

 

2.  We regularly hear that there is no fee for investing in mutual funds. The fact is, every mutual fund charges an annual fee. The annual fees range from about 0.10% to 3+% annually. In addition, higher expense funds tend to underperform the overall market and because higher annual expenses are usually related to more trading inside the fund, there are more capital gains distributed each year. This means that taxes are realized sooner than they otherwise would have if the investor had an institutional low turnover tax efficient mutual fund.

 

3.  If you are trading in and out of funds, then you have to keep track of your cost basis. This can be a very cumbersome if you don’t keep good records. In addition, you have to take more time to do your taxes or pay your accountant more to keep track of all the transactions. There is an opportunity cost here.  If you reinvest dividends it makes things even more complicated especially if you are reinvesting dividends in an individual stock. In addition, assets tend to be scattered in various different accounts. This causes confusion and lack of a clear plan as to where things are headed.

 

4.  Rebalancing is another lost opportunity. The results in the Dalbar study suggest investors do a lot of trading but it is not clear if there is any type of structured portfolio that is rebalanced on a quarterly or annual basis. By rebalancing you can add significant value to your overall returns if you follow a disciplined approach.

 

5.  Proper Estate planning and updating your will, if done properly, will save time and money. It will cost money now to get things in place but the potential tax savings, logistical time savings and emotional savings for your loved ones will be large. There are so many choices to make and it is one of the hardest things for individuals and families to do. This is definitely not a do it yourself project with some type of online program or software. In the end, it could cost twice as much for the attorney to fix it after the fact.

 

6.  Life insurance and disability insurance are often neglected because it is hard to calculate how much you actually need and how much your needs change over time. Not having the proper insurance can be an emotional and financial burden on your family if you haven’t properly planned for different situations.

 

7.  Protecting your assets thru the proper insurance is usually neglected as well. Your house and your car need adequate insurance and you most likely need umbrella insurance. How your business is structured is important too. If you are a small business owner, you should think of a buy-sell agreement with your partner. These strategies are often overlooked but if properly planned for, can protect your assets from being unjustly taken.

 

8.  Many investors and families are very passionate about charities. There are many different ways to give to charities. The tax savings impact for the individual and the family can vary widely depending on the method chosen. If you don’t know what you are doing it could cost you and your charity a lot of money. 

 

As you can see, the maze of options and all the paperwork involved in managing your estate and investments can be overwhelming and may lead to inaction for many individuals and families. The ultimate cost may be quantified and it certainly isn’t free.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice. 

 

 

Medicare and Social Security: A Good News, Bad News Story

The good news for Medicare is that the program's outlook has improved considerably in the past year. According to the trustees, Medicare's Hospital Insurance Trust Fund is in good shape until 2030 -- that's four years longer than the trustees projected last year -- and 13 years longer than they anticipated the year before the passage of the Affordable Care Act (ACA). 1

 

Officials pointed to the ACA's legislated cutbacks in payments to health care providers as one of the key drivers of the slowdown in Medicare spending. Additionally, they indicated that the post-recession drop in wage and price growth had also contributed to the Medicare spending decline.

 

In the short term, the good news for Medicare recipients is that the premiums charged for Medicare Part B -- the portion of Medicare that pays for doctor visits and outpatient care -- will likely remain at its current monthly rate of $104.90 for a third year in a row. 2

 

Longer term, however, serious fiscal issues loom in the decades ahead as the nation's population ages. Today 54 million Americans receive Medicare benefits. By 2030, when the trustees indicate Medicare will start having financial difficulties, the ranks of Medicare enrollees will hit 81 million and the numbers will keep growing. 3

 

The nation's other major social insurance program, Social Security, is in a financial holding pattern for the time being. The 2014 Trustees' Report continued to indicate that assets in the Social Security Trust Fund were slated to be exhausted in 2033.

 

The slow increase in costs is being driven by well-documented demographic trends: fewer workers to fund the system and more retirees tapping into the system. To a lesser extent, Social Security is being weakened by the Disability Insurance portion of the program, which is now projected to run out of money in just two years -- 2016 -- unless Congress acts to remedy the problem.

 

The Social Security Trust Fund has experienced rapid changes in the past few years. According to The Center for Retirement Research at Boston College, until 2009 Social Security was running cash surpluses that were expected to last for years. But the Great Recession brought with it a decline in payroll taxes coupled with an increase in benefit claims. In 2010, these factors resulted in Social Security outflows exceeding its income -- a pattern that experts say will continue indefinitely. 4

 

The shift from surplus to deficit means that Social Security is currently chipping away at the interest earned on the Trust Fund to cover benefits. By 2020, it is predicted that workers' payroll taxes combined with Trust Fund interest will not be enough to cover annual benefit payments, and by 2033, Trust Fund assets are projected to be depleted.4

 

That's not to say that Social Security will become extinct. Being a pay-as-you-go system, researchers at Boston College predict that payroll taxes will continue to cover 75% of benefits for the period indicated.4 Yet with just 75% of benefits covered, "something will have to give" -- for example, Social Security benefits may decline for future retirees, payroll taxes may increase for workers, or some other yet-to-be-determined solution will be needed to restore the system to long-term solvency.

 

While it remains to be seen if and when a bitterly divided Washington will act to "fix" Medicare and Social Security, finding a solution is critical for the future of the country and for each American who hopes to rely on these important programs for financial support in their later years.

 

Source(s):

 

1.  Kaiser Health News, "Good News for Boomers: Medicare's Hospital Trust Fund Appears Flush Until 2030," July 28, 2014.

 

2.  The New York Times, "Gains Seen for Medicare, but Social Security Holds Steady," July 28, 2014.

 

3.  The New York Times, "Good News and Gloom for Medicare, Wrapped in a Mystery," July 28, 2014.

 

4.  The Center for Retirement Research at Boston College, "Social Security's Financial Outlook: The 2014 Update in Perspective," August 2014.

 

Required Attribution

 

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2014 Wealth Management Systems Inc. All rights reserved.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice. 

 

Young Adults and the New Health Care Landscape

A survey conducted by the nation's first private online health exchange, eHealth, Inc., explored the attitudes of young adults aged 18 to 25 regarding the new health care landscape and the influence that the Affordable Care Act is having on health care costs.

 

Among the 220 survey respondents, all of which had purchased their health care plan through eHealth, 62% said their monthly premiums were more expensive than they could afford, and nearly three-quarters (73%) said that their annual deductibles were too expensive as well.

 

According to eHealth's records, young adults who purchased health coverage through the private exchange were paying average monthly premiums of $146 and had an annual deductible of $4,955. When asked what they thought would be an affordable rate for them to pay, nearly two-thirds said a monthly premium of $100 or less and an annual deductible of less than $1,000.

 

What motivated this group to purchase health insurance? The respondents were evenly divided among the three potential answers: a third were concerned about the tax penalty they would incur for not being insured; a third felt they needed health insurance, and a third indicated the fear of being uninsured caused them to purchase coverage.

 

The respondent group was similarly divided when asked why they chose to buy insurance through a private exchange versus a government-sponsored one. A third said the private exchange offered them more coverage options; 28% said they didn't qualify for the government subsidy; and 27% said that the government exchange wasn't working properly.

 

Respondents generally had negative impressions of the Affordable Care Act and the impact it has had on the cost of health insurance. For instance, 63% said that the ACA had caused their monthly insurance premiums to increase and about half said the same about annual deductibles. About a third said they had to change doctors as a result of the new health care law.

 

Nearly two-thirds of respondents reported that they were currently in college or that they had graduated within the past two years. About half reported having full-time jobs, while 18% work part time and another 25% are still in school. Just 5% reported being unemployed.

 

 

Source:  Life & Health Advisor, "Many Young Adults and College Grads Burdened by Cost of Health Insurance," July 19, 2014.

 

Required Attribution

 

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2014 Wealth Management Systems Inc. All rights reserved. 

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

  

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Do I Need Travel Insurance?

Whether you need travel insurance is likely to depend on your level of coverage from existing homeowner's, medical, automobile, and life insurance policies. In many instances, travel insurance may duplicate coverage that you already have.

 

Travel insurance is likely to include coverage for trip cancellation, lost or stolen baggage or personal items, emergency medical assistance, and death while you are on vacation. Trip cancellation provides coverage if a cruise line or tour operator goes out of business or if you need to cancel because of illness or a death in the family. Costs for trip cancellation coverage typically range between 5% and 7% of the cost of the vacation.1

 

Before purchasing coverage for baggage or personal effects, determine how much coverage an airline or other travel provider offers. Airlines may limit their liability for lost baggage. Also review your health insurance to determine your liability for medical expenses, especially emergency care, out of state or out of the country, if applicable. If you already have life insurance, you may not need additional coverage for vacation.

 

If you determine that your existing coverage will not be adequate for your personal liability during a vacation, you may want to purchase coverage through a third-party insurance company rather than from a tour operator or cruise line. In the event of bankruptcy, a policy originating from a tour operator or cruise line may not provide coverage.

 

1.  Insurance Information Institute.

 

Required Attribution

 

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2014 Wealth Management Systems Inc. All rights reserved.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

  

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

What Are Health Savings Accounts?

As health care costs continue to rise, consumers must find ways to ensure that they have the funds to pay for medical expenses not covered through their insurance. One way to save specifically for health care costs is to fund a health savings account, or HSA.

 

HSAs are tax-advantaged savings accounts set up in conjunction with high-deductible health insurance policies. Enrollees or their employers make tax-free contributions to an HSA and typically use the funds to pay for qualified medical care until they reach their policy's deductible.

 

HSAs are not for everyone, and it is important to understand how they work before considering them to help fund health care costs.

 

You are eligible for an HSA if you meet all four of the following qualifying criteria:

 

1.  You are enrolled in a qualified high-deductible health insurance plan (known as a "HDHP").

 

2.  You are not covered by any additional health plan.

 

3.  You are not eligible for Medicare benefits.

 

4.  You are not a dependent of another person for tax purposes.

 

HSAs are generally available through insurance companies that offer HDHPs. Many employer-sponsored health care plans also offer HSA options. Although most major insurance companies and large employers now offer an HSA option under their health plan, it's important to remember that most health insurance policies are not considered HSA-qualified HDHPs, so you should check with your insurance company or employer to see how an HSA plan might differ from your current plan.

 

There are maximum contribution limits that are adjusted annually. Contributions are made on a before-tax basis, meaning they reduce your taxable income. Note that unlike IRAs and certain other tax-deferred investment vehicles, no income limits apply to HSAs.

 

HSAs offer investment options that differ from plan to plan, depending upon the provider, and allow users to carry account balances over from year to year. Earnings on HSAs are not subject to income taxes.

 

Any medical, dental, or ordinary health care expense that would qualify as a tax-deductible item under IRS rules can be covered by an HSA. A doctor's bill, dental procedure, and most prescriptions are examples of covered items. See IRS Publication 502 for a definitive guide of covered costs. If funds are withdrawn for any purposes other than qualifying health care expenses, you will be required to pay ordinary income taxes on amounts withdrawn plus a 10% additional federal tax.

 

Here are some pros and cons of this product.

 

Pros

 

•HSAs offer a significant annual tax deduction, making them particularly appealing to individuals in higher tax brackets.

 

•Withdrawals for qualifying health care costs (including long-term care insurance) are tax free.

 

•Investment income in HSAs is also tax free.

 

Cons

 

•Since HSAs must be tied to HDHPs, their ultimate savings must be weighed against how such plans stack up against more traditional plans, which may offer significantly better coverage.

 

•HSAs may not offer the flexibility and transportability that today's mobile American family requires, especially given that health plan offerings differ significantly from employer to employer and many smaller institutions have yet to offer an HSA option.

 

•For more information on HSAs, see the U.S. Treasury's Health Savings Account resource page.

 

Required Attribution

 

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2014 Wealth Management Systems Inc. All rights reserved.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Protect Your Wealth & Your Family!

Too often, life gets in the way of our best intentions – especially for busy corporate executives or small business owners. Time constraints of work and family and the distractions of the great outdoors of Colorado can let some important tasks fall through the cracks. Small business owners often find themselves overwhelmed with day to day operations of their business, performing tasks such as marketing, client meetings, product development, managing employees, paperwork, benefit decisions, and much more. Corporate executives are busy managing their teams, meeting revenue targets, cultivating new business acquisitions and sometimes-endless travel, among other things. With all these tasks at hand, protecting earning power and making sure their estate plan is in order are two of the most important wealth management topics that should be addressed, but are often overlooked.

 

The thought of estate planning is a daunting task to most people – but particularly for those whose days’ are consumed with so many other important tasks and decisions. There are many steps that become overwhelming during the process of estate planning and creating your will. First, you have to find a qualified attorney. And the hard work doesn’t end there – next you have to fill out a long multi-page questionnaire. This is often where the momentum ends because the last thing a busy corporate executive or small business owner wants to do is fill out more forms. If you utilize the services of a wealth manager who is already familiar with your assets and total picture, they can be of great assistance when completing the initial questionnaire for the attorney. After answering questions about your financial and personal situation, you then have to make some tough decisions – you have to determine an executor for your estate, a guardian for your children, trusts for y our children and where and how assets should ultimately be divided up. You also have to make decisions about your healthcare wishes. All of these decisions and appointments are not so straightforward.

 

Once you finally have your will and estate plan created, you then have the long process and checklist of things to do such as changing your beneficiaries, changing account titles, changing asset titles and possibly funding trusts. This list should be shared with your wealth manager so they can assist with as many things as possible. As a wealth manager, we have found that changing your beneficiaries is the commonly overlooked.

 

Protect your wealth and your family to avoid ever being in the situation of not having a will and estate plan. If you don’t have a will, the state effectively has a will for you. In other words, the state has a method for how your assets will be distributed and their method might not have been what you wanted or intended. Depending on your situation, your spouse may not get all of your assets, or your children might benefit in ways you had not desired.

 

Another issue that often goes unresolved is protecting your earning power. This is extremely important, especially if you are the sole income provider for your family. Unless you have accumulated enough assets to make work optional, you need to obtain life insurance. If you are a single wage earner, you need enough insurance to replace your salary minus the assets you have already accumulated. For example, if your salary is $200,000 and you are saving 25% of salary and you have accumulated $1,000,000 in assets (Incidentally this is very close to the correct saving rate for this level of income) your assets would provide approximately $40,000 per year, increased for inflation for the next 30 years (The 4% withdrawal rule). Given your pre-retirement spending was $150,000 ($200,000-25% savings), your portfolio would leave you needing to replace $110,000 of earning power. To arrive at the amount of insurance that would provide $110,000 of income, divide $110,000 by .04 to get approximately $2.75 million of life insurance.  The amount of insurance needed could be further reduced by social security and the earning potential of a spouse.  The amount of insurance you need decreases every year as you get closer to retirement. There are term policies that will allow you to reduce the amount of insurance you need each year and thus your annual cost of insurance.

 

If you are a busy corporate executive or small business owner, you need to make time to protect your wealth and your family and commit to making work optional by saving more.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

  

What should you do from a financial standpoint before becoming self-employed?

Are you tossing the idea around of starting a new business in the New Year? While you are still employed full-time, there are many financial issues you should address prior to becoming self-employed and stating a new venture.

 

Here are some of our top suggestions of things to do before you become and entrepreneur:

 

  1. Set up a budget so you know exactly how much you are going to need during the first year of business.
  2. Make a business plan to estimate your business related expenses and estimate your revenues. A business plan is critical because it identifies goals to shoot for and hopefully exceed.
  3. Hire an expert wealth advisor, to help you determine how much you should save, where to save your money and in which investments you should invest. One of the main reasons businesses fail is due to the fact that they are under funded and do not have enough in cash reserves and investments. If you have money in a taxable account or a money market you can easily access the money. If your money is tied up in your 401k or IRA there is usually a penalty to access it prior to age 59.5, except if you take a loan from your 401k, but that is not recommended. It will be satisfying to know someone is taking care of your finances.
  4. Review your insurance to make sure your life and heath insurance is the best for your situation.Get disability insurance before you leave your job. Understand that it might take some time to get group insurance under your new business. You will be able to get insurance, just not group rate insurance for your business.
  5. Talk to an attorney and an accountant to find out the best structure for your business. It is important to speak with an accountant or attorney so you can set up your business with a structure that is most advantageous for the type of business you will be getting into.
  6. Think about refinancing your house to lower your monthly payments, if the interest rates make sense. Another option maybe to reduce your payments by going from a 15 year mortgage (if you have one) to a 30 year mortgage. Banks and mortgage companies will typically loan you more money if you have a steady income than if you don’t. Once your money is in your house, it is usually hard to access it if you have little or no income.
  7. Get a home equity line of credit set up while you are employed full time. You don’t have to access right away, but you can use it if you run into trouble down the road.
  8. Remember it is all marketing, marketing and more marketing! You can be the best at what you do but if no one knows who you are then it will be hard to survive. Understand the difference between pull marketing and push marketing.
  9. Read books about running a business such as Michael Gerber’s E-Myth. It is important to think about the long term vision of your business right from the start.

 

These are just are some important ideas to think about before becoming self employed. It will be tough, but in the long run, working for yourself can be very rewarding.

 

Once you have been established in your own business for a few years and are able to save some money, you should seriously consider setting up your own retirement plan. There are many different types of retirement plans for self employed persons. Depending on your age and income you can save a significant amount of money per year in tax deferred accounts. Also, depending on your income, you may also be eligible to contribute to a Roth IRA (tax free account).

 

There are lots of things to consider when planning a business, starting a business, and running a business. Make sure you surround yourself with the right team of experts.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.