Retirees Face High Stock Prices and Low Bond Yields –

Conventional wisdom usually advises older investors and retirees to balance a portfolio of bonds, stocks and annuities to squeeze the most from their savings during the third stage of life.

But recent events on Wall Street and in Washington, including a booming stock market and Federal Reserve warnings about “tapering” its easy-money policy, suggest those investors may need to junk conventional wisdom and think again.

Stocks may be too expensive, while bonds are likely to fall as the Fed pulls back and interest rates rise.

via Retirees Face High Stock Prices and Low Bond Yields –

Trust as Beneficiary of IRA Is Popular –

My wife and I are both over 65 and are doing some estate planning. Can I transfer funds from a traditional IRA to a trust without immediately being taxed? What would be the tax consequences of making the trust the beneficiary of my IRA?

Ken Hartmann

Omaha, Neb.

The reader’s best bet would be the second strategy — making the trust the beneficiary of his individual retirement account, says Natalie Choate, an estate-planning lawyer at Nutter McClennan & Fish LLP in Boston.

Still, there is a caveat we will get to in a moment.

To take the questions in order: Transferring funds from an IRA to a trust would “invariably cause immediate taxation,” because the transfer would be considered an IRA distribution, Ms. Choate says.

Note: Investors might encounter a technique espoused by some estate-planning experts, which in theory would allow for a transfer without triggering taxes. But the Internal Revenue Service has never specifically “blessed” the technique, Ms. Choate says. So, “most estate-planning lawyers would say you shouldn’t try it without getting a ruling from the IRS, which would be quite expensive.”

via Trust as Beneficiary of IRA Is Popular –

Five MORE things that are more important than rate of return

The most common question I get as a financial planner is “What kind of rate of return can you get for me?”

This question implies that the most important thing to your financial future is the rate of return that you get. A good rate of return is important, but I believe that there are things that are even more important to your financial future than the rate of return you get on your investments.

In yesterday’s blog, I addressed five things that are more important to your financial future than rate of return. Today I will talk about five more things. This is based on a list originally created by Bert Whitehead.

Much is made of the rate of return we receive on our investments. But how important is the rate of return in the context of our overall financial life? Not as important as we might think. Here are my Top Ten Factors Affecting Our Financial Futures, beginning with the most important.

6 – The stability of your relationships. Studies have concluded that there is a correlation between strong interpersonal relationships and financial quality of life.

7 – Making the most of the investment in your house. For most people, their house is one of the most important “investments” they ever make. The tax benefits, the leveraged growth opportunities and the diversification a home provides should be well managed and carefully thought out.

8 – Living within your means. To me, his is one of the most important factors in your future financial success. Everyone should learn to live within their means and take on no “bad” debt. In addition to the financial health benefits of this, there are great mental health and peace-of-mind benefits.

9 – Bad habits and horrible mistakes. Bad investing habits like chasing returns and trying to time the market create poor results for those who practice them. Just remember: if it sounds too good to be true, it probably is.

10 – Protecting yourself from devastating risks. If you are doing everything else right, you can still be devastated by loss of job, significant health issues, untimely death, disabiltiy, liability or legal issues. It is important to protect yourself from these signifcant risks through good insurance programs and having the proper estate planning docuemnts in place.

Five Things More Important to your Retirement than Rate of Return

My friend, Bert Whitehead, author of Why Smart People Do Stupid Things with Money: Overcoming Financial Dysfunction , is one of the best financial planners I know. His experience and perspective help me keep myself and my clients on the things that are really important to achieving their financial goals.

Much is made of the rate of return we receive on our investments. But how important is the rate of return in the context of our overall financial life?

Not as important as we might think. Here are five of Bert’s “Top Ten Factors Affecting Our Financial Futures”, beginning with the most important. I will address the other five tomorrow.

1. How much you earn.  This the single most important factor that determines your financial future. You need to have an income that will support the current life style you want and that will allow you save the amount necessary to live the future life style you desire.

2. Wise shopping and spending. Making good decisions about how much you spend allows you to need less in the future and to save more. These decisions include decisions about what type of car you drive, how frequently you buy a new car, the type of house you live in, where and how often you dine out, etc.

3. How much you save in permanent savings not “in and out” savings. The amount of money you are able to put away for retirement each month will determine if you are able to retire when you want to.

4. Your tax burden. There are things that you can do to reduce your overall tax load. Good tax management can usually save you significant money – that will allow you a better life and a higher savings rate.

5. The diversity of your investment portfolio across asset classes. Proper diversification of you investment portfolio allows you the appropriate return for minimal risk for your investments.


The Long-Term Care Family Fire Drill « Life & Health Advisor Life & Health Advisor

As individuals are growing older and living longer, many are realizing they may need some type of assistance in later years to live with independence and dignity, preferably in their own home. For individuals that have taken action by purchasing long-term care insurance, they have placed a great deal of control into their own hands. Long-term care needs in later years becomes a family issue – physically, financially and emotionally – not to mention complex.

We know that long-term care insurance can help relieve the burden on family members and give clients options in their care, but the subject overall is a difficult conversation that many family members chose not to address with each other. Starting to prepare today by talking with members of the family allows for proper planning, expectations of roles and intentions, and positive decisions to take place. Even if you never need this type of care in later years, you can at least have the comfort of knowing that you took action if a claims situation were to ever arise.

via The Long-Term Care Family Fire Drill « Life & Health Advisor Life & Health Advisor.

5 Questions To Ask A Potential Financial Advisor

When you are searching for a financial advisor, what you are looking for is a Chief Financial Officer to help you run your family’s financial affairs. You’ll want to interview several potential candidates, and make sure you find the right person for the job.

You can ask about credentials and experience, but since you are hiring someone that has expertise that you don’t have, it can be difficult to determine if they are just a good talker, or if they truly have the right qualities for the job.

To help you see through the “sales talk”, I’ve compiled a list of five practical interview questions. The questions are designed so that you can use the answers to determine qualities like integrity and communication skills; qualities every good financial advisor should have.

Below are the five questions I think people should ask every prospective financial advisor.

via 5 Questions To Ask A Potential Financial Advisor.

Five Questions To Start a Retirement Planning Discussion

by John Grogan

Absent guidance from financial professionals who can focus on the bigger picture, many well-intentioned people get caught up in the treadmill of daily living and put off any serious long-term financial planning until it is too late. A recent study by my company shows that half of Americans don’t have a financial plan in place and 63 percent say their financial planning needs improvement. The lack of a financial safety net is worrisome, but it is also an opportunity for advisors to make a real difference.

How can advisors help? Our 2013 Planning & Progress Study found that Americans largely recognize that time is eating away at their money, and half admit to being less financially secure than they’d hoped at this point in their lives. Only 43 percent feel financially secure. Advisors need to initiate a dialogue with their clients about planning for long-term goals, and it has to focus equally on growth and protection.

We believe there are six key retirement risks to address – unplanned market losses, living longer than you planned, inflation and taxes, healthcare costs, long-term care risks and leaving a legacy. Each of these have to be factored into a long-term plan, alongside one’s financial goals, risk appetite and time horizons.

To initiate the dialogue, here are five good questions to discuss with clients:

1.  What are your biggest concerns about retirement and longevity? What excites you about retirement?

They may seem like obvious questions, but too few financial advisors take the time to really listen for the answers. The best way to help clients is to actually listen to them. By listening, you’ll determine whether your clients have thought much about retirement, if their expectations are in line with their assets, and if they have financial worries keeping them up at night. For couples, you’ll learn whether they share the same retirement vision, or if they’ve talked to each other about retirement at all. In most cases, the constant juggle of day-to-day demands has sidetracked them from any serious discussion, and the questions will be a welcome opportunity to focus.

Whatever the initial response, advisors shouldn’t rush into problem-solving or quick fixes. Instead, advisors should continue asking probing questions to better understand the clients’ end game first, and then offer needs-based, long-term solutions that can weather the zigs and zags of market cycles.

via Five Questions To Start a Retirement Planning Discussion « Life & Health Advisor Life & Health Advisor.