Challenges of Aging and Healthcare

This August 15 th, a Wednesday, I’m teaming up with Brian Robertson of Willamette Investment Advisors to discuss the “Challenges of Financial Planning and Investing as You Age”. This free event will be held at the Corvallis Public Library from 10 am to 11 am and is sponsored by Regent Court Memory Care.

Healthcare planning is an integral part of financial planning and is getting some well deserved attention. Many people are unprepared for life’s unexpected events. The emotional stress and the ability to make wise decisions can be difficult. And even when you think you’re prepared, there is always the unexpected that throws you off. Many people find the topic hard to talk about and even more difficult to share with your children, no matter their age. However, it never hurts to get the conversation started. The easiest place to start putting the pieces together is with your financial planner.

Not only is it important to be invested accordingly, you also need to have a plan in place as you age. A plan should never be static and it’s vital to have a thorough review every few years. Tasks such as checking beneficiaries on all contracts (retirement plans, annuities and life insurance), ensuring you have durable powers of attorney for health care, and having proper documentation are just a few of the things to look at. Medicare doesn’t cover custodial care and may not cover everything you need.

These are a few of the items we will discuss, as well as how to be prepared.

Considering an EER or Enhanced Early Retirement Package?

EER or Enhanced Early Retirement is a way to offer those with years of service and age, adding to 65 or more, to retire early from their company plan. Qualifying employees will receive two months base pay, plus half-month’s salary for each year they’ve been with HP. This total amount goes into the employee’s retirement plan and is capped at 14 months of salary. The other advantage of the package is being able to stay on the company health plan for two years after early retirement.

The disadvantages are that you are not eligible for federal re-training programs or unemployment benefits. The flip side is that if someone doesn’t take the early retirement package there may be layoffs later; this will make you eligible for unemployment and federal programs for re-training.

When talking to a financial advisor about these decisions the advisor should be asking you about your goals, plans and other factors that may allow an early retirement. Be aware of advisors that are just looking to do a rollover for you. If they aren’t asking important questions and explaining all the disadvantages and advantages of the plan, then you need to find a different financial planner. Also, seek the advice of a few different people before making a final decision.

Employees have until June 22 to decide whether to take the early retirement package

Read more about the catch and a discussion from Rep. Sara Gelser Wednesday June 13.

What is Your Money Script

Lately the idea of money and how you think about money has become an interesting topic. As a financial planner I know the advantage of investing, diversifying and planning for major life events. When I sit down with a new client we do the usual gathering of information, flush out some goals and go to work figuring out what they need to do to achieve those goals.

The part that catches me off guard later in the relationship is the “money scripts” people have. These are defined in the book “The Financial Wisdom of Ebenezer Scrooge” by Ted Klontz, Rick Kahler and Bard Klontz. These are beliefs about money that you may or may not be aware of. What I found is that by asking someone what their first true memories about money are, it begins to unravel a thought process that could be a barrier to having a healthy relationship with money. We are caught up in beliefs that may or may not be true. By identifying these behaviors and thoughts you can begin to make some changes to your belief system. Money itself is not evil or bad. It is a means of exchange and the choices we make spending and saving often will determine our success.

Take some time and think about what your first memory of money is. How does it affect your decisions now? Are you afraid to spend money because of something that happened to you or your family in the past? Do you believe that investing is only for wealthy people? Do you not make good choices with your money? If you go back and identify what those money thoughts are you may discover a pattern.

Put Your Family First

Do you have a trust? Do you have a POD or TOD on your single or joint accounts? What is a POD or TOD? When was the last time you reviewed your will, or do you even have one? Estate planning is an important tool when you want to make sure your wishes are carried out as you intended. If you’ve ever been through the probate process or had friends talk about the nightmares of improper estate planning, you know how important it is.

For example, a will is a great tool to simply state how you want your assets to be distributed. The probate process is efficient but it is public record and can be contested by anyone that has a stake in your property. Contested wills take time and money and can hurt those that you were trying to protect in the first place.
Trusts are a great way to avoid these problems. They must be drafted by an attorney and you definitely want an estate planning attorney to do them. Discuss what you are trying to achieve with your advisor and see if a trust may be the way to go.

If you don’t have a large estate the POD (Payable on Death for banks) or TOD (Transfer on Death for brokerage accounts) allow your assets with those institutions to pass on directly to the beneficiaries you list quickly and without going through probate. Also, any account with beneficiaries such as IRA’s, Roth IRA’s, annuities, Employer Retirement Plans, and life insurance policies automatically pass to your beneficiaries without going through probate by contract. If this is the only thing in your estate then you may not need a trust.

Make a list of the things important to you and revisit the beneficiaries listed on your accounts. Next look at your net worth and financial plan. What do you want to happen when you are no longer able to control your finances? And although you may not see the value, involve your family in the process.

Tax Time

It’s tax time and that means 14 more days until your deadline for 2011 Traditional IRA and Roth IRA’s contributions are due. The official deadline is Tuesday, April 17th, 2012 so make sure and get your contributions in soon. Any contributions made to a Traditional IRA will affect your taxes and must be included on your tax form.

If you are automatically depositing to your IRA make sure your tax accountant knows what you deposit for 2011. Many automatic deposit plans are set up to code the deposit in the year it is deposited. For example if you make deposits from your bank account each month, the January, February, March and April deposits will be coded for 2012 unless you notify the institution that you want them credited to 2011. If you have a full year of deposits this won’t matter, but if you start or end in the middle of the year, make sure to double check the deposits and what year they are coded for.

If you have a Roth IRA, those contributions are after-tax money and will not affect your taxes this year. The biggest plus to a Roth IRA is there are no mandatory withdrawals when you hit the magic age of 70 and one half, and they have tax-free withdrawals after you are 59 and one half. Your tax refund is a great way to fund Roth IRA‘s. To make a contribution there are some income limits and you must have earned income to contribute. Check to make sure you can contribute.

Another way to start a Roth IRA is converting your current IRA‘s to a Roth. There is no income limitation this year and it’s easy to do. If the market is down it is one of the best times to convert as you move assets with a lower value into an account that has tax free gains. Ask if this is appropriate for you.

Protecting Elder Americans from Financial Abuse

Each year the Financial Planning Association puts together a network of professionals to help with a National Hotline that answers questions about financial and medical fraud or abuse. It’s free for anyone to call in and a member of the Financial Planning Association will answer your questions.
Protecting Elder Americans from Financial Abuse

Pass on the information or go to the link above and print the flyer. The event is happening November 10, 2011.

Are You Saving or Investing?

Every time you turn around the news seems to be worse about our economy, taxes, jobs, etc…. What do you do? If you have a savings account for emergency and/or current needs it should be in a money market or Certificate of Deposit. You’re already ahead of the game. Both are FDIC insured, up to $250,000, and are the most secure place for money you need in the next year or two.

But what about investing for future needs? The easiest way to give yourself options and more control when you do retire is by investing in retirement accounts. Everyone should have a traditional IRA or Roth IRA, you can start one as long as you have wages. If you are self-employed there are options for you. If you are retiring in the next 5 years this may not apply to you, but for those with 5 or more years to retirement you need to look closely at your retirement plan. Too many people wait until the last minute to plan out their retirement income and realize there were things they could have done to make it better. They start looking for investment’s that don’t exist. There is no such thing as no risk, high return investments. Where investors get in trouble is trying to find that one investment that will make up for time lost. Listen to the marketing messages out there. They play on people’s insecurities and fears and end up costing people their hard earned money. Your overall risk is actually lower the younger you are, which gives you more flexibility. If you are reading this and think I’m already old, then make sure you are teaching your kids and grand kids good money management. There is no age limit for clients in my practice. The younger the better.

How many times do you say “If only…..” it’s up to you to seek the information you need to have a powerful and effective plan. I can help you but only you have the power to make it happen.

More Questions People Ask Me about Being Independent

How we are compensated? Financial planning fees have 2 components. The negotiable hourly fee is up to $150/hour and is paid after the consultations.
Written financial plan fees range from $150 to $2,500, depending on the complexity of your financial situation. Half the negotiable fee is due in advance, the rest upon presentation of the plan, which will always be well within 6 months of our engagement. If you cancel, any prepaid fees will be refunded on a pro-rated basis.
Managed money fees also have 2 components. If we manage your money the annual negotiable fee for doing so ranges from ½ of 1% to 2%, depending on the size and complexity of your account. The fee is paid quarterly, at the end of each quarter. If we help you select other money managers and we monitor them for you, the other money managers (registered or notice filed in Oregon) pay us a portion of the fees generated by you. You do not directly pay for this service.

Are we registered representatives of a securities broker/dealer? No one at Clarity is or will ever be a securities broker/dealer or a securities registered representative.

Do we invest in securities we recommend to you? On occasion, we may buy or sell securities we recommend to you. We have found over the years that clients like to invest in the same investments we do. That makes sense. If we like it for ourselves, why shouldn’t our clients like it too? The type of security always depends on the client’s investment goals, objectives and time frames. When we recommend investments we hold ourselves, we’ll always disclose to you what we own and how much we own. (As an aside, we’ve seen that some salespeople tell clients that they own the same thing they are recommending, but it’s often a minimal amount. We find that to be very deceptive.) We feel that there is just a tiny conflict of interest in owning the same securities as we recommend to you because the securities we recommend are widely held and publicly traded and we are too small advisors/investors to affect the market in widely held and publicly traded securities.

Defining Your Goals

One of the biggest hurdles for financial planners is to get your clients to really relax and tell you what they want to achieve. Everyone would like to retire and have enough money to do so, but what does retirement mean? Setting goals is not something to put off. You may need to adjust the goal as you go, but you won’t know what you can do until you have a better picture of where you are now. So many people have convinced themselves that they can’t achieve their goals so they just stop thinking about it. Unfortunately, it may be within reach you just don’t have a plan to accomplish it. One client of mine was so worried that she couldn’t retire that she wasn’t sleeping well. She is older and didn’t save until later in life, but looking at her true expenses and agreeing to watch her spending she will be able to retire this summer. We set up a budget to help guide her, a plan to withdraw from accounts in the most tax efficient manner and set up a travel savings account for her to do the traveling she wants to do.

Want to start simple? Download this file and fill it out, it’s a great start. Then meet with me to see if I can help guide you to accomplish those dream goals. It may not be what you started with, but at least it’s a step in the right direction.

Where the name Clarity Wealth Development came from

Trying to name your business is a difficult thing to do. With so many financial advisors naming themselves as either a financial group or a wealth management something I wanted a different name. Advisors manage money in one way or another, and development sounded more appealing than wealth management.

As for Clarity, that also developed the more I thought about it. People are sometimes intimidated by advisors. They worry about not having enough money or feeling pressured. My philosophy is to educate first, then let people have ownership in their decisions. You are more involved when you understand and have clarity about what you are trying to achieve. My Dad is also a part of this decision. He was a large influence in my desire to own a business. He built a successful farming operation from modest beginnings. His Mother operated a small farm in Coburg but Dad started with his own 10 acres and built it into a 1500 acre farm in Corvallis. In 2003 he sold the farm and did well enough to retire, unfortunately Alzheimer’s disease has taken his memory from him and is shutting down his body also. He has trouble communicating and there is occasionally a clear sentence that he can say, although the thought is gone as soon as it’s spoken. He always had a goal and clear headed thinking that made him successful and that’s what I want clients to understand. I want you to feel like you have clarity so you can make the right decision.

That’s how Clarity Wealth Development came to be.

Dad passed away December 16, 2010. I will forever be grateful for his support and guidance. Thanks Dad.