Another Misleading Piece of Financial Advice from Kiplinger's

Another misleading piece of financial advice from Kiplinger's

A little over a week ago, I saw an article titled “6 Ways to Avoid Outliving Your Retirement Nest Egg,” authored by Kiplinger’s Kathy Kristof. This single statement caught my attention – in a rather negative way – because it highlights what I believe is a very serious problem with many in the financial press: making generic statements that do not accurately reflect what’s out there in the real world. This, in turn, leads unsuspecting readers to draw conclusions and make decisions that are equally wrong, with potentially dire financial consequences, to say the least.

 

Under the sub-header “Buy an Annuity,” the author’s concluding paragraph said this, among other things:

“Be aware that generally if you buy an annuity and are run over by a truck a month later, no residual goes to your heirs. …”

Quite frankly, that is simply nowhere near what “generally” happens when folks buy most annuities. Rather, it’s very far from it.

Indeed, there is a specific kind of immediate annuity contract that works that way; it has a life-only payout and no refund option. However, that is only one specific variation in an entire class of immediate annuity contracts. On the other hand, there is also a slew of immediate annuities with life payout AND refund options that pay you for life, in addition to guaranteeing a specific refund payment to your heirs upon your death.

Besides, it is worth noting that there is a whole other class of annuities called deferred annuities, which make up the vast majority of annuities on the market today, in which case – to borrow Ms. Kristof’s analogy – if you were to be run over by a truck a month later, all of your money would be returned to your heirs.

So even if you inserted the word “immediate,” so that the statement read, “Be aware that generally if you buy an [immediate] annuity and are run over by a truck a month later, no residual goes to your heirs,” it will still be inaccurate. 

The only way I can see that statement serving a useful purpose and properly informing Ms. Kristof’s readers to make educated decisions – which I’d like to imagine a publication such as Kiplinger’s to be all about – would be if it said something like this: 

“Be aware that generally if you buy an [immediate life-only] annuity [without a refund option] and are run over by a truck a month later, no residual goes to your heirs.”

I’d like to state for the record that I’m by no means rooting for or against any particular kind of annuity, or any other product for that matter. Not at all. Here’s what I’ve always rooted for: Putting out the right factual information so that folks can make good decisions. But can you see how easily you can be misinformed by statements like these? So much so that you might take an action that could affect you for an entire lifetime, and even beyond? That’s my whole point!

So, my dear friend, don’t make decisions surrounding your financial future solely based on what you read in the press. Talk with an independent financial advisor with a proven record and a fiduciary obligation to put your best interest ahead of everything else. Then carefully weigh your options so that you can make the best possible choices that specifically work for you.

I wish you the very best.

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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the tough questions to help you make a plan that will get you where you want to go. You’ll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If you’re ready, we’re here to help. 

What Will Your Heirs Do With the Inheritance You Leave Them?

What will your heirs do with the inheritance you leave them?

When it comes to the future and money, the story of life generally goes something like this: you work hard, plan ahead, and make sure to save as much money as you possibly can toward your retirement so that you can have a smooth, financially stress-free life down the road.

Sure. That’s definitely part of the process, but in my humble opinion, it’s only half the story. The other equally important – if not more crucial – aspect of the process involves what will happen to the inheritance you will leave behind. I’m literally referring to the money you will leave behind to your beneficiaries.

So here’s the question: When it’s all said and done and you depart this planet, will your hard-earned money be used in a manner that reflects your values and expectations?

If you expect your inheritance to be used in a more tangible way to further the lifestyle of your loved ones, be sure to articulate those expectations over the course of your life. More importantly, take the time to impart your values, ethics, and core beliefs on your loved ones now, while you’re still here, instead of just writing their names on the beneficiary forms.

In my practice over the years, I’ve come to notice that the overwhelming majority of folks have very specific desires, expectations, and visions they hope to impact with the inheritances they will leave behind to their heirs. Unfortunately, however, many haven't made those expectations clear to their beneficiaries. They’re just hoping that the inheritances will be put to good use.

As the evidence and my experience show, when folks don't have clear conversations with their heirs about prospective inheritances, those heirs tend to spend their bequests frivolously, so to speak. But then again, that shouldn’t be too surprising, should it? 

On the one hand, you could argue that it’s a gift, so your beneficiary should use the inheritance as he/she sees fit. Not to mention that you literally won’t be around to see what happens. If that’s your thought, you’d be absolutely correct. The point I’m trying to get across is just to make sure you’re okay with that – or start talking NOW!

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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the tough questions to help you make a plan that will get you where you want to go. You’ll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If you’re ready, we’re here to help. 

Are You Ready to Pull Back the Curtain on Your Retirement Savings?

Are you ready to pull back the curtain on your retirement savings?

Obviously saving any amount of money for your future is a good thing and definitely a step in the right direction. No question about that.

However, I’m pretty sure you’ll agree with me that just socking money away in your 401(k) or any other sort of retirement savings vehicles doesn’t necessarily mean that you’ll hit your intended target unless you also take other deliberate steps. In this particular instance, it’s the deliberate step of ensuring that you are actually saving enough.

Far too often, I run into folks who have been saving for a lifetime but with such a huge gap between their intended output – in terms of what they expect to get out of their accounts – and their actual contributions. In almost every single instance I can recollect, when I inquire as to how they came up with the amount of their contributions over the years, the answers seem to suggest no deliberate planning of any sort.

Of course, at the end of the day, the situation on the ground as your life evolves will impact what you are able to do – or not do, for that matter. But the point is that we all need to know, depending on our specific circumstances and intended targets, how much it will take to get there. Just so we are clear, I’m not suggesting that you simply save more money. For all you know, based on your situation, you may be doing just fine or even be ahead of target. On the other hand, however, the opposite could be true – you may be way behind and not even know it. Unfortunately, that latter scenario seems to be norm for most folks.

Here’s the thing: not knowing whether or not you are saving enough, or by how much you are off or ahead, isn’t going to make anything better. It can only make things worse. Irrespective of where you are in life, I’d suggest you get to know – through deliberate planning, instead of the rule of thumb or your feelings – what you are facing and what it will take to get there.

My very best to you.

________________ 

Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the tough questions to help you make a plan that will get you where you want to go. You’ll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If you’re ready, we’re here to help. 

Is Your Financial Advisor Watching You Break the Rules of Prudent Investing for Fear of Losing Paychecks?

Is your financial advisor watching you break the rules of prudent investing for fear of losing paychecks?

Do you have the kind of financial advisor who’ll always tell you what’s right and refuse to see you make moves with your portfolio that are imprudent, based on your circumstances? Or is your advisor of the breed – I’d even dare to say it’s where most advisors fall these days – who lets his/her clients make all the decisions regarding their portfolios, even down to specific asset class combinations, when it’s appropriate to rebalance, and everything in between? Personally I think that’s a terrible – and incredibly unfortunate – mistake.

Now, don’t get me wrong. I’m by no means suggesting that you simply go hand over your hard-earned money to some guy or gal in a suit, sitting in an air conditioned office, and completely back off without any input whatsoever. Truth is, I wouldn’t do that with my own money, so why would I expect you to invest that way?

But here’s my point. As an investor, you must have clear and specific input and expectations regarding what you want and do not want, for that matter, when it comes to your portfolio – things like how much volatility you can live with, etc. Even if you’re not that specific, a good financial advisor must and will have a thorough discussion with you in order to understand at the deepest possible level your core vision, desires, concerns, and expectations so that he or she can help you put together the best possible portfolio to get the job done. In the end, you should know exactly why your money is invested in a certain way, what you can expect – both good and bad – and when and how changes are to be made. As a matter of fact, isn't this the exact reason financial advisers are paid in the first place?

Now contrast that with what seems to be the norm today, where the investor tells the advisor specifically what to buy or when they believe they should get in or out of specific investments. Let’s face it, most of this is based purely on emotions whipped up by what’s going on in the media.

Of course, I get it. The money belongs to the investor and he or she may decide to invest it as he or she pleases. But think about it. Would you prefer a doctor who lets you, as the patient, decide the exact prescription and dosage you should be taking?

Could it be that these so-called financial advisors who are leaving every decision completely up to the client are so concerned about maintaining their paychecks that they will do whatever makes the client feels good and happy? Are they so worried that the client might go somewhere else that they’d let them do whatever makes them happy in the moment, even if it could end up destroying the very wealth they’re trying to grow in the long run? Or it is that these advisors do not want to be held accountable for the very thing they’re paid to do, guiding clients to invest prudently, according to their specific circumstances?

Then again, if you skip the initial step I mentioned earlier and invest without having a clear-cut understanding of where you are headed and what you can expect, isn’t this the natural progression?

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Visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation with a financial professional who has your best interest at heart and who is willing to ask the tough questions to help you get where you want to go. You’ll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If you're ready, we’re here to help. 

The Life Insurance Debate: Forget Everyone Else and Go with Your Guts

The Life Insurance Debate: Forget Everyone Else and Go with Your Guts

It’s my tradition during September, Life Insurance Awareness Month, to dedicate one of my columns to that subject. So let's talk about it from the standpoint of asking, “Is it really necessary for you to purchase life insurance?” and also address some of the reasons that folks who should purchase life insurance give for not doing so.

First, do you even need it? I know that there are several consumer schools of thought out there on this very issue, but throughout my years as an advisor in professional practice, I have arrived at what I like to refer to as the common-sense approach to money management.

In this particular instance, here’s how I’d put it: Life insurance simply pays money, upon your death, to someone you designate. Period. So, do you have someone or several folks who will still need the financial support you are presently providing, in case the unthinkable were to happen to you?

Yeah, yeah, yeah. Am I telling you to go spend money on some life insurance which, in all likelihood, you might never end up using? Of course, you're probably going to live a good long life, but it's not as simple as that, is it? Personally, I think we should see life insurance premiums as not being about us, but as a representation of our commitment and responsibility to take care of our dependents financially. Just so we are crystal clear, I am not advocating running out to buy life insurance. Not at all. Instead, I want you to do what you feel in your gut is right for your family.

Now here's the thing I like to point out. Unfortunately, just as with many other things in life, there are some unscrupulous life insurance agents who are more focused on selling only whatever they have to offer so they can get paid, without regard for whether it's really appropriate to your specific need. However, the good news is there are also some decent, honest agents out there who can help you get exactly what you need to take care of your responsibility to your loved ones, so don't let the unscrupulous ones hold you back.

I wish you the very best of luck and a healthy long life with your family.

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If you'd like help to be sure your portfolio is properly diversified,  visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation. You'll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If you're ready, we're here to help. 

The Stock Market Probably Isn’t Going to Destroy Your Wealth – But This Certainly Will

The Stock Market Probably Isn’t Going to Destroy Your Wealth – But This Certainly Will

Let me admit right off the bat, the headline may sound a little out of the norm from what you may have heard, read about, and probably even come to accept about the stock market, especially in recent days. But take a deep breath and consider these fundamental truths.

First of all, it’s important for those of us who choose to invest in the stock market to remind ourselves of the reason that we made that decision, instead of investing in, say, a CD at our local bank or some sort of fixed annuity or any other alternative investment. At the very core of that decision must be the fact that the stock market is, by far, the greatest known wealth creation tool in the history of mankind, bar none. Nothing else legitimate even comes close.

But that is not all. We also know, without any shadow of a doubt, that the stock market – since its inception – has never moved in a vertical straight line. Things would be pretty nice and much, much easier if that were how it worked, wouldn’t you say? However, that’s not how it works. In fact, did you know that your financial advisor would face regulatory penalties if he/she were to give you the impression that your stock market portfolio could only go up? The simple reason for that being that such a suggestion would be misleading and set unrealistic expectations.

Here’s the normal thing about the stock market: sometimes it goes up and sometimes it dips. The other crucial thing to understand is that no financial advisor – or anyone you’ll see in the media, or anywhere on this planet, for that matter – can tell you exactly what the market is going to do next. Yes, no one knows!

The problem, in my humble opinion, is that most investors do not have prudent stock portfolios. They just buy something that sounds, looks, or feels good, without really making sure that it’s properly diversified to help them weather the storms that may come along. Although no one on the face of this planet can predict the future movements of the stock market, there is such a thing as an efficiently diversified portfolio that is custom-built to your investment temperament so to speak.

Here’re some recommendations to think about. If you don’t think you’re up to all these ups and downs, you should probably not be investing in the stock market at all. And I’m not trying to be sarcastic or anything here. If, on the other hand, you believe that over the long haul you’d be better off investing some of your money in the market, please make sure you talk with a financial professional who can help you to build an efficiently diversified portfolio with a standard deviation (amount of volatility) you can live with, and don't be surprised when the down moments come, because more likely than not they will.

And the most crucial thing of all is to make sure your advisor is someone who’ll keep you on your toes to stay the course with discipline. What does that mean? When the market tumbles, as it did in recent days, and panic sets in, does your advisor cave and do whatever you want done? Or does he/she remind you about the basics and see it as an opportunity to re-balance your portfolio?

Finally, whatever you decide to do, I hope you don't take your investing advice from Jim Cramer.

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If you'd like help to be sure your portfolio is properly diversified,  visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation. You'll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If you're ready, we're here to help. 

The ONE Inherited 401(k)/IRA Mistake that Could Be Your Worst IRS Nightmare

The One Inherited 401(k)/IRA Mistake that Could Be Your Worst IRS Nightmare

As the proverbial saying goes, “life happens.” And as part of the natural progression of life, sooner or later, we are all bound to lose someone near and dear  – and that person may have listed us as a non-spouse beneficiary of his/her 401(k), traditional IRA, or another kind of qualified plan.

 No, I’m not trying to suggest what you should do with your inheritance. That will be totally up to you. However, if you intend to roll over money left to you in a qualified plan by someone other than your spouse, you must tread cautiously. And that’s because the manner in which you go about it could land you in some very hot waters with the IRS.

Let me use this recent case involving one of our clients to illustrate my point. She recently lost her mom, of whose IRA she was the beneficiary. The custodian of the IRA sent her a check made out in her (the client’s) name and explained to her that insofar as she deposited it in an IRA within 60 days, she would avoid having to pay taxes on the entire check, come tax time.

While that may sound like a pretty standard thing, it’s completely wrong, untrue, and inapplicable in this situation. The so-called “60-day-indirect-rollover” rule does not apply if you are a non-spouse beneficiary. What’s more, there’s no exception under the Tax Code – Section 408(d)(3)(c) – for non-spousal beneficiaries who accept checks made out in their names, even if you turn around and deposited it into an inherited IRA the very next moment.

So, but for the fact that my client has a pretty sharp advisor who knows what he’s talking about – hey, its OK for yours truly to take some credit every now and then – she would have been set up for a very nasty surprise come next April 15th when the IRS came knocking: that she would have to pay tax on her entire inheritance check. 

It was pretty obvious to me that whoever gave her the erroneous information was unfamiliar with the IRS rules, so I got on the phone with the custodian to get the situation sorted out and have a new check issued directly to the new custodian.

In a nutshell, here’s what you should keep in mind. If someone other than your spouse leaves you money in a qualified plan and you intend to spread the tax burden over the longest possible time allowed by the IRS, your ONLY option is a direct-custodian-to-custodian rollover. And by the way, you should probably get yourself a pretty darn knowledgeable financial advisor, too!

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If you are ready to have a real conversation about how to start planning for your future – even if you haven't saved a penny yet – visit LaserFG.com or call 877.656.9111 right now to book your complimentary, confidential consultation. You'll be paired with an experienced financial professional who can help you plan for a secure future, regardless of your current financial situation. Retirement planning means planning for ALL aspects of your life after retirement. If you're ready, we're here to help.