Which type of IRA is right for you?

roth_or_traditional_iraAsk a financial planner whether to save for retirement using a Traditional IRA or a Roth IRA and you may receive an unsatisfying answer: it depends. While the Roth IRA is a much-loved planning tool, whether it’s the best option for you will depend on several factors, but math is not one of them. Continue reading

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It Can’t Happen to Me: Why Forgoing Disability Insurance is a Costly Mistake (Part I)

If you had a machine in your basement that printed out $20 bills whenever you wanted, would you buy a warranty for the machine?

We recently had a meeting with a client that we’ve known for a long time.  Despite an annual income of $500K+, we were concerned; his financial plan had a few major shortfalls, which put his family – his wife and two daughters – at risk.

Of note, his financial plan:

  1. Did not have enough liquidity
  2. Had no emergency account
  3. Did not have enough savings for retirement
  4. Had no personal disability insurance

 The first few issues are ones we often encounter with new clients.  These typical financial traps can be safely avoided with a good financial plan that re-allocates income and creates liquidity in savings.

The most worrisome part of this client’s financial plan is that he didn’t have personal long-term disability insurance.

Fifteen years ago, this client had bought life insurance, but declined purchasing long-term disability insurance.   Why?  His excuses are ones we hear far too often:

  1. “My company offers disability insurance” (only for as long as you’re working there)
  2. “It can’t happen to me” (unfortunately, it can’t until it does)
  3. “I don’t want to pay for it” (if you need to use it, the investment in the premium will pay off very quickly)

Fast-forward fifteen years to our meeting last week.  This client, like many people we know, has been diagnosed with a degenerative disease (something similar to multiple sclerosis, or muscular dystrophy, Lou Gehrig’s disease, etc.).  Like many of those diseases, there’s no known cure.  Moreover, the disease will get progressively worse over time.  If/when he becomes disabled, the insurance that he bought through work will not cover him long-term.  If he was to lose his job, not only is he completely vulnerable, but so is his family – there is no coverage in place. 

Think back on the money-printing machine we asked about at the top of the page.  Would you insure it?  Most people answer yes that they would get a warranty for the money-printer; however, most people don’t take the same warranty out on their ability to work, which is their greatest asset and source of future money.