Social Security benefits provide the foundation that most Americans will rely on in retirement, and decisions related to the claiming of benefits can have a profound impact on retirement income and overall quality of life. Despite the heavy reliance on Social Security- it provides over 90% of the retirement income for one in three recipients-less than 5% of seniors avail themselves to strategies designed to maximize their benefits. Continue reading
Retirement planning involves a delicate balance between adequately planning for a long retirement and maximizing the enjoyment of the money you’ve worked hard to accumulate. In most cases, a retirement that lasts 35 years will require far more financial resources than will one that lasts 20 or 25 years. What is more, the final years of retirement may be the most expensive, as costs associated with chronic or end-of- life care come due. Advances in medical technology have extended life expectancy for many, but certainly not all, demographics. Longevity is a critical consideration of retirement planning, but so too is recognizing that living to an advanced age demands more retirement savings or a lower lifetime income, and whether this is justified based on your current health, lifestyle and family history. Continue reading
While certainly not a new problem, identity theft is a growing concern and has gained the dubious distinction of being the number one consumer complaint addressed to the Federal Trade Commission.
As our lives become increasingly busy and complex, and more information than ever is stored and transmitted on line, it is more important than ever to protect our personal information. Here are some simple and effective ways for you to do that. Continue reading
The 2004 cult hit movie Mean Girls provides a surprising number of useful and life-affirming lessons. Perhaps the most notable is how NOT to manage credit.
Embroiled in a wide array of truly deplorable and self-destructive behaviors, members of “The Plastics” reach for their credit cards when it’s time to unwind and enjoy the necessary comforts of teen life in suburban Chicago. This most agreeable arrangement works so long as someone else pays the bill; the girls are eventually chastened, disband, and learn a slew of valuable life lessons. What can we learn from The Plastics? Read on to find out!
Well-educated, collaborative, technology savvy and socially conscious are just a few terms that are often associated with Millennials. Their comfort with technology and the incessant pace of change makes them prized employees in many organizations.
Less comforting, however, are the numerous challenges that Millennials face as they become card-carrying adults: crushing student loan debt, the ongoing economic hangover from The Great Recession, and housing prices that are quickly approaching pre-recession levels. Add in an uncertain labor market, and slow economic growth and it’s no wonder many Millennials feel anxious about life and money.
Congratulations to the class of 2016, your hard work and perseverance has paid off. You are newly minted graduates and may be facing a variety of decisions surrounding your life and career that you feel totally unprepared to make. Should I take that crazy job teaching English in Tibet, or the stuffy office gig with a 401 (k)? Mom and dad said I could move back home, but living with my friends in a sixth-floor walk- up apartment just seems like more fun. Do I need to start saving for retirement already, oh, and what about my student loans? Continue reading
It is well over sixty years since Professor Harry Markowitz introduced Modern Portfolio Theory to investors- creating a paradigm for investing that is still widely used today. Despite its flaws, the theory successfully introduced the idea of measuring the risk of an investment, and suggested that a portfolio of investments could be combined to provide a maximum level of return for a specified level of risk. Investors, thus, could create an optimal portfolio based on the level of risk they were willing to accept. This is now seen as orthodox investment management advice, but was truly revolutionary thinking in 1952. Subsequent research and improvements in mathematical modeling and computer technology have made quick work of creating a well-diversified portfolio of investments that should help reduce risk and improve overall return. But is it really so simple? Decades of experience and hindsight have shown that accurately measuring investment risk, and an investor’s reaction to it, is a thorny issue. It is also an area where good advisors can help tilt the odds of capturing long-term portfolio growth in the favor of investors. Continue reading
Apply for financial aid.
“Many people think that they aren’t eligible. However, we urge all of our clients to complete a FAFSA form,” says Jonathan Gassman, a certified financial planner and owner of the Gassman Financial Group in New York City.
He’s referring to the Free Application for Federal Student Aid, which every parent of a college-bound teenager becomes well acquainted with. “Many universities and colleges offer general and special scholarships to students,” he says. “You really have no idea until you apply what you may end up with. Even though we had saved sufficiently for my eldest daughter, Hofstra University returned with a rich scholastic offer if she kept her grades above a 3.0.”
Don’t forget about grants. For instance, with the Federal Pell Grant, a student could be given as much as $5,730 for the 2014-2015 school year. How much they receive depends on factors such as the student’s financial need and the cost of the school.
Put extra money toward college. Someday you’re going to stop buying diapers or paying for day care. That money could go toward your college savings plan, says Mark Kantrowitz, senior vice president at Edvisors.com, a website focused on planning and paying for college, and co-author of “Filing the FAFSA.”
Beg grandparents. No need to grovel or embarrass yourself, but Seaton suggests encouraging grandparents and great-grandparents to give cash gifts for holidays, birthdays and high school graduation, which will be used to increase the college fund.
Use rebate programs. Upromise.com is one example. You shop with your debit or credit cards, which need to be registered at the site, and a tiny percentage of what you pay for various products and services will collect in a noninterest-bearing Upromise account. As the money accumulates, you can transfer it to a 529 plan or savings account.
Ask your kids to contribute. Even if your kids sometimes want to spend their birthday money, other times they should put it into the college fund. “They need some skin in the game,” Seaton says. Your child may be more willing to help than you realize. In late May, the College Savings Foundation released an online survey of over 500 high school students and found that 82 percent felt it’s their duty to help pay for college. Last year, 74 percent felt that way.
Negotiate. “I believe most schools are willing to negotiate because of the student’s unique ability and what they will bring to the table,” Gassman says. This is assuming the student has a lot to bring to the table in terms of grades and accomplishments. If you believe you have a case, it’s worth trying to negotiate with the financial aid office.
Get creative. If you have permanent life insurance policy, you could consider borrowing against it. “They may offer a discounted rate of interest,” Gassman says. Other options include tapping your 401(k) for a loan and taking out a home equity line of credit. But Gassman only recommends creative borrowing if your finances are secure and interest rates are low. “Remember, your home is on the hook,” he says of the home equity line of credit. Because while it’s great to help your kids go off to college, it’s also nice to have a home for them to come back to.
Choosing an advisor – or a team of advisors – is an important first step on your way to financial health. Just as with choosing any long-term partner, communication is key. Here are 5 questions to ask when meeting with potential financial advisors to get a better understanding of whether s/he is the right fit.
1. What is your philosophy?
It is crucial to understand a financial advisor’s philosophy, values, and code of conduct – and to make sure that it aligns with your worldview.
Some advisors are most interested in starting with investing your money; the Gassman Financial Group philosophy, on the other hand, is a “protection first philosophy.” We begin with protecting the assets that you currently have.
There is no right or wrong philosophy – what matters is that you find one that is right for your goals.
2. How have you worked with people like me?
There are many great financial advisors out there – but you don’t want someone who is simply great: you want someone who is great at solving your specific problems. Asking for examples of who his target clients are and how he has solved their problems will elucidate whether this is the right match.
3. What services do you provide? When do you refer to other advisors?
You will want to know upfront what your advisor does – and does not do – in house.
For example, some financial advisors see themselves as the architect of your financial plans: they will draw up the plans and then hand them over to you to find general contracters and subcontractors to execute.
Some financial advisors will be able to manage your money, but aren’t insurance specialists or cannot give you tax advice. Therefore, it may be helpful to ask about the licenses and certifications that your advisor and his team have.
Look for an advisor that has a CFP (certified financial planner designation), which requires two years and a board exam to get credentialed (unlike the Chartered Financial Consultant (ChFC) designation). Small business owners should look for for advisors who are CPAs (certified public accountants) and can help with tax advisory. CPAs who also have the PFS (Personal Financial Specialist) designation can help with advanced financial planning, including estate, retirement, investments and insurance.
It is important to ask your advisors when they refer to other advisors because it will give you insight into what they are not able to do inside the firm.
To get an idea of what’s out there, here are the services that we offer.
4. How are your services priced? What conflicts of interest may arise?
There are several types of pricing for financial planning services: some financial advisors charge based on a percentage of your assets that they manage, some charge a fixed fee, some receive a commission based on products that they sell to you, and some have hybrid fees. Service pricing should be transparent and the incentives for your advisor should be aligned with your best interest. Always ask about conflicts of interest to ensure that your advisor is always choosing what is best for your financial health.
5a. How much contact do you have with your clients?
Ask your advisor what his process is for putting together a plan and communicating with clients on an ongoing basis. The more clients and advisor has, the more challenging it is to personally reach out to you. You will want to find out how the advisor plans to communicate with you (is it via email? Newsletters? Personalized check-ins? If so, how often?). Find out how proactive vs. reactive the advisor plans to be?
5b. Will I be working only with you or with a team?
As a follow up from “how much contact will I have with you,” for financial advisors are part of a bigger team, you will want to know, from the start, how that relationship will work. Ask about who the point of communication is, ask about access to other members of the team with expertise that you may need, ask about access to senior advisors vs. working with more junior people. The last thing you want is a bait-and-switch or to expect one thing and get another – asking up-front can help make the most of a team with a multitude of expertise.
It’s shocking that the calendar somehow says June. Wasn’t it just January? You made all those resolutions, likely including some about your finances. Mid-year though, where do you stand?
It’s time for a financial checkup.
A lot can happen in six months. Has there been a birth, a death, wedding, divorce, job loss, new job, illness? Any such event can call for a course adjustment or correction. Maybe you did a budget at the beginning of the year, but given such life changes it’s no longer realistic.
Review your current expenses and spending and see where you need to tweak your budget. Maybe you’ve gotten promoted and you can put more money toward retirement savings, or pay down debt more aggressively. On the other hand, if you’ve lost your job, you will need to get tough on cutting expenses.
If you’re looking for guidelines, Elle Kaplan, CEO and founding partner of Lexion Capital is a fan of the 50-30-20 plan. “Fifty percent of each paycheck goes to needs like housing, utilities and medical expenses, 30% is spendable income for ‘wants’ and 20% goes to your financial priorities – saving, investing and meeting your financial goals.”
Life changes may also precipitate the need to review your beneficiary designations on your will, trusts, and life insurance policies, for example.
Get a jump on year-end expenses. If you haven’t been saving already, start stashing whatever amount works for you, toward holiday costs like gifts, travel, decorations, and entertaining and festivities that might require additions to your wardrobe. “Setting aside money now can save you from getting derailed later,” says Kaplan.
Take on taxes
Perhaps in the serenity of summer taxes seem less taxing. Now is great opportunity to review your tax withholdings and make any estimated take payments, says Jon Gassman, CPA and CEO of The Gassman Financial Group.
Take a look at last year’s tax return and your most recent pay stub (or, if self-employed or have fluctuating income, look at year-to-date revenues and expenses). Review that in light of this year’s finances, along with the IRS withholding calculator to determine how much you might owe in taxes this year and update your withholdings as needed, suggests Andrew Housser, CEO of Freedom Financial Network.
Make some charitable donations now so you don’t have to bunch them at year-end, says Michael David Schulman of Blue Flamingo Wealth Management.
For many it was a long, hard winter, that numbed the brain and now there’s the distraction of summer fun. But there’s plenty to pay attention to. “This winter changed the game for the rest of the year and can seriously impact your portfolio all the way down to your asset allocation strategy if you’re not paying attention,” says Nick Ventura, CEO and president of Ventura Wealth Management.
The market went form a general risk-on trading attitude to a risk-off trading attitude, he says, meaning simpler, more reliable stocks are in vogue. Others, based on the bull phase, sense trouble, since they came down a lot in value and people feel unwilling to commit to long-term risk, he adds.
Consider the higher geopolitical risk. “The atmosphere and tensions in Russia exemplify this point. Geopolitical situations may seem small, but they often pose some type of threats to investments. Russia’s situation alone impacts investments – the country supplies about 40% of natural gas in Europe. When reviewing your asset allocation in your portfolio, make sure you review the current market situations too,” says Ventura.
Are you managing your debt?
You undoubtedly vowed to get out of debt. Measure your progress by confirming that your holiday spending is paid off. “If your credit card debt still exceeds what it did on November 1, 2013, get busy. Set that as your new goal. Stop charging and power pay each card until you are at lest back to your pre-holiday debt level,” says Gail Cunningham, a spokesperson for the National Foundation for Credit Counseling.
Check your credit report. Each of the three major credit reporting agencies offers a single free credit report each year. You can get one at annualcreditreport.com. Review it for errors and take action if you find any. Repeat the review at the end of the year.
Assess whether you’re being astute with your credit cards. CreditCards.com has list of questions you should ask yourself during a mid-year financial review, including — Does my current card still fit my lifestyle? Are there any loyalty programs that I’m not taking full advantage of? Can my score afford a new card?
“People tend to place far less emphasis on managing their debt than they do on their investment strategy. In doing so, they may be missing an important opportunity to improve their financial lives,” points out John Inhouse, III, a managing director at Merrill Lynch.
Most everyone wanted to save more this year. How are you doing? Make sure that your emergency savings fund is on track. While setting aside three months worth of household income is suggested by some, realistically you should aim for six-nine months, says Gassman.
Check in on your savings goals, such as your children’s education, retirement, family vacation and home improvements. If you’re falling short, see where you can make spending adjustments, or assess whether you want to take on a part-time job, or otherwise find ways to generate more income to bridge the gap.
Invest in yourself
The best asset you have in life is yourself. Your financial success is generally tied to the long-term success of your career. “Consider your current position, compensation, and your long-term upward career mobility. What were your accomplishments during the first half of the year? What value can you add in the second half, should you consider other careers?” asks Anthony Criscuolo, a certified financial planner with Palisades Hudson Financial Group.
While he’s not saying jump ship, think about ways to improve your skills and enhance value to your company. “A more successful career can pay huge financial dividends through higher salary, better job security, and ideally higher job satisfaction.”
Maybe you’ll find that you’re right where you hoped to be financially, or maybe you’re not even close. Instead of beating yourself up over goals not set or met, give yourself a do-over says Cunningham.
She says to start now with six goals you can accomplish by year-end. For example, “consider doable goals such as socking away money for holiday spending so that you can have a debt-free Christmas this year or getting financially organized so that you can stop paying bills late and incurring late fees and dinging your credit.”
Says Kevan Melchiorre, a private wealth advisor with Busey Wealth Management, “It’s never too late to right the ship.”