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Do You Really Need a Will?

Posted by Frank McKinley on
 May 24, 2021

Many people believe they don’t need a will. But how valid are the more common reasons for not preparing a will?

Your estate is too small. Some believe that if their estate won’t be subject to estate taxes (in 2021, your taxable estate must be over $11.7 million before estate taxes would be owed), there is no need for a will. However, a will’s purpose is not to save estate taxes, but to:

Provide for the distribution of your assets.
Without a will or other estate-planning documents, your estate will be distributed in accordance with state law, which may or may not coincide with  your desires.

Name guardians for minor children.
Without a will, the courts decide who will raise minor children when both parents die.

Select an executor for your estate.
The executor assembles and values your assets; files income, estate, and inheritance tax returns; distributes assets; and accounts for all transactions. You will typically be

in a better position, based on family relationships and individual qualifications, to decide who should be named executor of your estate.

All your property is jointly owned.  When one owner dies, jointly owned property passes directly to the joint owner, regardless of provisions in a will. Also, the unlimited marital deduction allows you to leave any amount of your estate to your spouse without paying estate taxes. Thus, many married couples use joint property ownership as their sole estate planning technique. However, individuals with very large estates may save
estate taxes by distributing some assets to other heirs.

A living trust will distribute your assets. Only assets actually conveyed to the living trust are controlled by the trust document. Typically a pour-over will is also needed, which places any asset not held by the trust at your death in the trust.

You expect your estate to grow significantly in the future. Some feel it is premature to plan their estate while it is being built. However, a will can be changed. In fact, you should periodically review your entire estate plan to see if changes in your personal situation, preferences, or tax laws require changes to your plan.

The Financial Aspects of a Death

The emotional trauma of dealing with a loved one’s death can be devastating. If you also have to handle the financial aspects, it can seem  overwhelming. Following is a checklist to consider:

Your most immediate concern will be to notify family and friends of the death and to make
funeral arrangements.

If a surviving spouse and/or minor children are involved, evaluate their means of support and determine whether care for the dependents needs to be obtained.

Locate any safe deposit boxes and follow  necessary procedures to have them opened.

If the deceased was employed, contact his/her employer to start the process of collecting any
outstanding pay, life insurance proceeds, or other benefits.

Locate important documents, including wills, trusts, deeds, investment records, insurance policies, business and partnership arrangements, and other evidence of assets and liabilities.

Meet with an attorney to discuss the deceased’s estate matters.

Financial Thoughts

Individuals in retirement face five risks: outliving their money (longevity risk), investment losses (market risk), unexpected health expenses (health risk), unforeseen needs of family members (family risk), and retirement benefit cuts (policy risk). A recent study found that the greatest risk is longevity risk followed by health risk. However, retirees believed that their greatest risk was market risk. Many discounted longevity risk and health risk because they believed they would not live long enough to outlive their savings or to accumulate a large amount of health costs (Source: Centerfor Retirement Research at Boston College, July 2020).

A recent study found that investors tend to flee volatility and chase stability, but end up with bad timing with respect to stock volatility. This leads to high exposure to stocks when volatility is high and low exposure to stocks when volatility is low, resulting in returns with higher volatility (15% to 20% over 10- year periods and 70% to 75% for 30-year periods) than buy-and-hold-returns (Source: AAII Journal, October 2020).

Categories : Blog, estate planning, Financial Services, Wills
Tags : living trust, living will

Money Personalities and Saving – Which One Are You?

Posted by Frank McKinley on
 May 17, 2021

Everyone approaches their finances differently, but there are common mistakes that certain money personalities make. The following highlights five different money personalities, the mistakes they make, and how they can improve their financial picture.

Entrepreneur

Because they put all their financial resources and energy into their business, entrepreneurs may make mistakes such as cashing out their retirement plans to fund their business, holding too much debt, or even getting behind on self-employment taxes.

Entrepreneurs would be best served by developing a business plan with income and expense projections to ensure they use debt wisely to fund their business. They should also make contributions to a retirement plan annually, even if it’s only a few thousand dollars. And finally, entrepreneurs should work with a tax professional to help reduce their taxes as much as possible,
while making sure quarterly tax payments are made.

The Saver

This is the person who follows all the rules and does it just right. They fully fund their retirement
accounts each year, don’t carry much debt, and have plenty of savings in the bank for any unexpected expenses. While this money personality may get to retire early, they may want to stop and smell the roses once in a while.

The High-Income Earner

Professionals, such as doctors and lawyers, fall into two groups: savers and spenders. Those who
fund a large lifestyle may find they have trouble funding their retirement because they’ve spent too much.

Big earners need to develop a financial plan so they understand how much money they will need

 to fund their retirement based on the lifestyle they want to live. They should also pay themselves first with a predetermined amount to
saving, before buying nicer cars or bigger houses, as well as considering setting monthly spending limits.

I Need to Save?

This money personality spends their paycheck as soon as it hits their account, and in some cases, live beyond their means. They have no savings if an unexpected emergency comes up, and they are likely carrying too much debt. To be able to retire, this person needs a financial plan with a strict budget to help pay down debt and develop both long- and short-term savings.

Doing Fine and Enjoying Life

This person saves and spends. They want to enjoy life experiences along the way to retirement, such as vacations, maybe a boat or

cabin. While they contribute to their 401(k) plan, they may not have a financial plan that includes short-term financial goals and how much they need to save for retirement.

While it is great that this money personality saves, they need to ensure that their spending isn’t outpacing their savings. By developing a solid financial plan, this money personality can create a more balanced approach to saving and
spending.

What’s Your Money Personality?

You should determine where you fall on the spectrum of money personalities so you can develop a financial plan that suits your personality, but also helps you secure your future.

Please call if you’d like to discuss this topic in more detail.

Calculate your savings goals
Categories : financial planning, Investing, IRA, Savings Goals
Tags : financial services, retirement, savings

How Much Should You Save in Your 401(k) Plan?

Posted by Frank McKinley on
 May 10, 2021

To make sure you’re on track for retirement, you should have an idea of how much you need to set aside to reach your retirement goal.

Know Your Limits — Before you come up with an annual savings target, it’s important to understand how much you’re allowed to contribute to a 401(k) plan. In 2021, workers younger than 50 can save $19,500 in a 401(k), 403(b), or similar plan, while those age 50 and older can save $26,000 annually, an extra $6,500 per year.

Contribution limits usually go up slightly every year; if you’re an aggressive saver, you’ll also want to pay attention to that and adjust accordingly.

At a Minimum, Get Your Match — The first rule of 401(k) plans is to save enough to get your full employer match. You’ve probably heard it before, but not contributing enough to get your employer’s matching contributions
is like leaving free money on the table. Even if you’re not impressed with your company’s 401(k) plan and would prefer to save in some other way, it still makes sense to at least get that free money.

But How Much Do I Really Need? — So you know how much the government will let you save and that you should be contributing enough to get your employer match. But how much should you be setting aside to prepare yourself for a comfortable retirement? That’s the ultimate question.

Unfortunately, there’s no magic number because every individual situation is different. People have different tolerances for risk, market performance varies over time, and everyone has their own idea of an ideal retirement. That’s why it’s best to talk to a financial advisor who can help you determine how much you need. But in the meantime, there are a few rules of thumb that may help you get a sense of where you stand.

One guideline suggests saving a certain percentage of your salary every year for retirement. Between 10% and 15% is usually the recommended number. If you started saving when you were young, your target savings percentage is usually lower, but if you procrastinated, you’re more likely to be looking at having to save 15% or even 20% of your pay to get you on track to a  comfortable retirement. The good news is that your employer match counts in that number, so if your goal is to save 10% and your employer match is 5%, you only need to save 5% of your pay.

what to consider when saving
Categories : Blog, financial planning, Financial Services, IRA, ROTH
Tags : savings goals

Leaving a Meaningful Financial Legacy

Posted by Frank McKinley on
 May 3, 2021

Many of us want to do our part to leave the world a better place. Below are five different ways you can leave a financial legacy.

1. Give gifts in your lifetime.
If you have the financial  freedom to do so, making financial gifts while you are still alive is a great way to leave a legacy. Money you donate to qualified charitable organizations can be  deducted from your taxes, saving you money while also helping you support a good cause. If you want to leave a family legacy, consider giving
gifts to loved ones while you are living, like helping pay for your grandchild’s college education. Just make sure you’re aware of annual limits on what you can give to individuals without triggering gift tax ($15,000 per person in 2021).

2. Make a bequest in a will.
Many people use their will to make philanthropic bequests, leaving funds to their favorite charity, alma mater, or church. For people who have money to give, recognizing an organization in their will is a relatively easy way to leave a legacy. Bequests in a will don’t require any additional
planning and are exempt from estate tax, provided the recipient is a qualified charitable organization. However, if you plan to make a substantial bequest to a charity, you may want to inform them of your plans in advance. This is particularly important if you plan to donate physical property, like real estate or artwork, as not all charities will want or be able to accept such donations, or if you plan to place restrictions on how the gift is used.

3. Create a charitable remainder trust.
If you would like to make a substantial gift to a charity but also want to provide for your heirs
or continue to receive income during your lifetime, a charitable remainder trust (CRT) may be an option. Here’s how it works: You transfer

consider giving gifts to loved ones while you are living

property to the trust (and get a tax deduction at the time of the transfer), and you or your heirs receive income from the trust for a specified period of time. Then, when that period ends, the remaining assets go to the charity of your choice.

A word of caution: CRTs are irrevocable, which means once you’ve made this decision, you can’t reverse it.

4. Set up a donor-advised fund.

Know that you want to leave money to a charity, but not ready to hand it over just yet? Consider setting up a donor-advised fund. A donoradvised
fund allows you to make contributions to a fund that is earmarked for charity and claim the associated tax deduction in the year you contribute the funds. You continue to make more contributions to the fund, which are invested and grow free of tax. Then, when you are ready, you can choose a charity to receive all or some of the accumulated assets. It’s a great way to earmark funds for charity now while also accumulating a more substantial amount of money to leave as a legacy.

5. Fund a scholarship.
Endowing a scholarship is a great way to make a difference in the life of a talented student. Here’s how it typically works: You give a certain amount of money to the school of your choice,

which earmarks it to fund scholarships, often for certain types of students (e.g., female math majors, former foster children, or people suffering from a certain disease). Other scholarships are established through community foundations. A seed gift of $25,000 or $50,000 may be enough to get started. Be aware, however, that while you may be able to have a say in selection criteria for the scholarship, there’s a good chance you won’t be able to select the recipient yourself. If you want to do that, you’ll need to distribute the money in another way, perhaps by setting up your own nonprofit organization.

6. Start a foundation.
Starting a family foundation is appealing to
many, especially those who like the idea of having greater control over how their money is used as well as the prestige that comes with running a foundation. Well-managed private foundations can also endure for many generations after you’re gone. But you’ll need substantial assets to make setting up a foundation worth it. Plus, foundations are complicated and expensive to set up and
administer. But, if you are committed to the idea of giving back, and especially if you want to keep the entire family involved in giving (a concern for many wealthy families), a private foundation could be the way to go.

Curious about steps you can take to leave a meaningful legacy? Please call to discuss this topic in more detail.

Frankly Speaking

“You don’t buy life insurance because you are going to die, but because those you love are going to live.” – Anonymous

Since mid-February, the average retail investor has underperformed the S&P 500 by 11%.- Investopedia Sunday, March 26, 2021

“We could say that the government spends money like drunken sailors, but that would be unfair to drunken sailors.” -Ronald Reagan

OK, nobody wants to talk about Life Insurance or Estate Planning BUT…what will happen to your family when you’re gone? And we will ALL go someday. Yet there is no reason they should be left in a lurch, unable to stay in their home or finish the kid’s education. This last year should have made you seriously realize Life Insurance is for THEIR sake as are a Will and related documents. Still need help? PLEASE ask me about additional coverage and for guidance on Estate Planning FREE OF CHARGE! What have you got to lose besides sleepless nights worrying?

If you would like more information or to discuss your financial concerns

Click Here
Categories : Contributions, financial planning, Financial Services
Tags : charitable gifts, financial legacy

Tips to Teach Children to Save

Posted by Frank McKinley on
 April 23, 2021

Think of all the lessons parents teach their children, but what about learning to save? Short- and long-term savings are important life lessons that should start early and remain an ongoing conversation. Here are some tips you can use:

Wants versus Needs: To a child, most everything is a need. A toy, a new bike, and a video game are all needs to them, so the first important lesson of
saving is helping them understand the difference between wants and needs. You’ll want to explain that needs are the basics, such as food, housing, and clothing, and that anything beyond the
basics are wants. You could use your own budget to help illustrate that wants are secondary to needs.

Their Own Money: To help your child become a saver, they need to have their own money. Giving your child an allowance in exchange for chores will be a step in helping them learn to save as well as understanding the value of work.

Set Goals: Setting savings goals is a way for your child to understand the value of saving and what a savings rate is. For example, let’s say one goal is a
$40 video game, and they get a weekly allowance

of $10. You can help them understand how long it will take to reach that goal based on how much of their weekly allowance they put toward the goal.

A Place to Save: Kids need a place to save their money, so take your child to a bank or credit union to open a savings account. This will allow them to
see how their savings grows over time, as well as the progress they are making toward their savings goals.

Track Spending: Knowing where your money goes is a big part of being a better saver. Have your child write down their purchases and then at the
end of the month add them all up. Just like adults, this can be an eye-opener. Help your child understand that if they change their spending habits, they will be able to more quickly reach their savings goals.

Mistakes Are a Good Lesson:  A parent’s natural reaction is to step in to prevent mistakes, but part of learning to control money is letting your child learn from their mistakes. A bad purchase
decision can be a great lesson to understanding
that a savings goal will now take much longer than they thought based on decisions they made.

Beneficiary Designations Override Wills

W hen was the last time you looked at your
beneficiaries on your retirement accounts, insurance policies, annuities, and bank accounts? Many people forget to update their beneficiaries, especially if they’ve held the accounts for a
long time. If you marry, divorce, or have other changes to your family situation, you need to update your beneficiaries.

Some people think their will or trust is all they need to ensure their assets go to the desired recipients. A beneficiary designation is a legally
binding document that supersedes a will or trust. That means that regardless of your current family
status or what your will or trust says, the assets will go to the beneficiary you named when you
last updated it. And if you don’t have anyone named as your beneficiary on these types of
accounts, state laws will determine who receives the benefit.

It is also a good idea to get into the habit of reviewing them on an annual basis to ensure your assets will be distributed based on your
wishes.

Financial Thoughts

Companies with a lot of passive fund ownership are more likely to repurchase shares in order to boost their short-term stock price, subsequently harming performance over the long term. Higher passive ownership was shown to negatively impact the relationship between buybacks and future capital expenditures, employment, cash flow, and return on assets and equity (Source: Centre for Economic Policy Research, April 2020).

A study found that although retirement plays a role in alleviating some of the stress the body undergoes while working a manual labor job, when those workers retire they can accumulate health deficits faster than individuals whose jobs do not require manual work. The health of men working in manual labor was more positively affected after retirement than women. Individuals with low education, in blue collar jobs, and in physically or psychosocially demanding occupations develop new health deficits faster than white collar workers. People who perform manual labor jobs display
on average almost 30% more health deficits than their counterparts who do not (Source: AAII Journal, September 2020).

If you would like more information or to discuss your financial concerns

Click Here
Categories : Blog, Financial Services, Savings, Savings Goals
Tags : beneficiary, chiuld, savings goals, spending, wills

Review and Reevaluate Your Portfolio

Posted by Frank McKinley on
 April 16, 2021

Periodically, you should thoroughly review your portfolio to ensure it is still helping you work toward your investment goals. Follow these steps:

Review your current portfolio mix. List the current value of all your investments.  Determine what percentage of your portfolio is held in stocks, bonds, cash, and other investments. Take a closer look at where the stock portion of your portfolio is invested.

Break out your stock investments by market capitalization (small-, mid-, and large-cap), by style (growth and value), by area (domestic and  international), and by sector (technology, financial, utilities, energy, etc.).

Analyze each investment. Determine whether it still makes sense to own each investment. Don’t let emotions get in the way. Review why you purchased each investment and whether those reasons are still valid.

Emotionally, it is difficult to sell an investment at a loss, but holding on until you get back to breakeven
may not be the best strategy. It may never get back to that price or may take an excessively long time to do so. You may want to sell the investment and reinvest in another with better prospects. Instead of worrying about what you paid for the investment, decide whether you would buy it today at its current
price.

Determine if changes are needed to your current allocation. If we’ve learned anything over the past few years, it’s that your portfolio should not be highly concentrated in one area or sector. Instead, look to broadly diversify your portfolio.

Some points to consider include:

Decide how much to allocate to stocks and bonds. Your stock and bond mix is a major factor in determining your expected portfolio return and how much your portfolio will fluctuate with market movements. However, be careful not to let recent events cause you to allocate too much to bonds just to avoid stock market fluctuations. Make this decision based on your financial goals, risk tolerance, and time horizon for investing. If you are investing for the long term — say, 10 years or more — you probably still want a major portion of your investments allocated to stocks.

Reassess your stock allocation. Is your stock portfolio too heavily weighted in technology stocks or blue chip stocks? Have you selected only growth stocks, ignoring value stocks? Do you prefer large-cap stocks, ignoring smaller stocks? The stock market moves in cycles, with different sectors outperforming other sectors at different times. Since no one can predict when one sector will outperform, it is typically best to broadly diversify your stocks over all areas.

Move your allocation closer to your desired allocation. When making changes, first consider the tax ramifications of the transactions. If you can make changes without incurring tax liabilities, you may want to make the changes immediately.

If substantial tax liabilities will be incurred, look for other ways to get your portfolio closer to your desired allocation. For instance, any new investments should be made in under-weighted areas of your portfolio. Or you may be able to reallocate in your tax-deferred
accounts, such as individual retirement
accounts and 401(k) plans, where you typically won’t incur tax liabilities.

However, if you can’t get your allocation in line within a year using these approaches, you might want to sell some of the poor performers and reinvest the proceeds.

If you’d like help reevaluating your portfolio, please call.

Analyze your investments and reasses your stock allocations

If you would like more information or to discuss your financial concerns

Click Here
Categories : Blog, financial planning, Financial Services, Investments, Retirement
Tags : investing, investments
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