Retirement Planning Differs For Unmarried Couples

You have devoted your life to working hard, providing for the loved ones around you, and saving for your retirement years.  Now as you approach your golden years, you have raised your family, you have built an estate that you are proud of, and you are deeply committed to your relationship with your significant other.  You both are a happily unmarried couple, and you know that you want to spend the rest of your life with this person. With this said, is your retirement plan specifically tailored to your unmarried relationship with this individual?

Unmarried couples must realize that their retirement planning is a completely different animal compared that of married couples.  As an unmarried couple, don’t let your retirement years discriminate against your wishes for you and your significant other.  It’s important to plan  your retirement together now with a financial advisor/ financial planner to uphold your security in the long run.  Therefore, if you are in an unmarried long-term relationship, please consider the following elements when planning for these golden years with your partner:

Living Arrangements

When an unmarried couple initially moves in together, one of the partners may sell or rent his/her home.   That partner might move into the other partner’s residence, or the couple might decide to buy an entirely new house together.  Whatever the scenario might be, the couple might distribute living expenses depending on which partner qualifies for tax deductions.

 

Furthermore, if the couple did indeed buy a new home together, an expert might suggest that the couple purchases life insurance policies on each other to help pay off the mortgage in the unfortunate event that the other partner suddenly dies.  Considerations must also be made about whose name will be on the bills and the how expenses will be shared.  Also, additional considerations must be made regarding estate documents.   For example, if a partner dies, will the surviving partner continue to live in that home until his/her own death, or will the deceased partner’s family members immediately inherit the home?

 

Joint and Individual Accounts

Many unmarried couples prefer to keep both individual accounts and a joint account.  In regards to individual accounts, the couple can separate the assets/debts that each partner individually accumulated and incurred before “couplehood”.  Many couples also open up a joint account primarily funded by both partner’s monthly social security benefits.  This joint account can then be used to pay for expenses together, such as housing expenses, restaurants, vacations, etc.

 

IRA, Pension, and Retirement Assets

Unfortunately, the spousal advantages of retirement accounts and benefits can be nonexistent for an unmarried couple.  These spousal advantages include advantages, such as the spousal rollover IRA option and the spousal pension continuation benefit election.   An unmarried couple must also annually review beneficiary designations (such as IRAs, annuities, and life insurance) in order to uphold each partner’s exact wishes.  Because of the contractual nature, beneficiary designations will always supersede heirs in other estate documents.

 

Separate Tax Returns

Complex consideration must be taken when an unmarried couple files separate tax returns.  The couple has to determine which partner gets to deduct which expense.  Because each partner’s individual contributions can vary, deductions vary as well.  Thus, it’s best for an unmarried couple to seek the services of an accountant especially for tax returns.

 

Estate Planning

As an unmarried couple planning for your enjoyable retirement together, no partner wants to contemplate the possibility of an unexpected sickness, an accident, and even death; however, both partners must be strong and plan for the unexpected as well as the very end.   For this reason, a will, power of attorney, living will, and healthcare directive is essential to have. For instance, an unmarried couple must carefully consider who will make final medical decisions if one partner in the relationship is unexpectedly gravely ill and on life support. Will the other partner or the children of the sick partner ultimately determine when to “pull the plug”?

 

As for estates, many unmarried couples choose to keep estates separate.  Especially in these cases, financial advisors/ financial planners are needed to set up trust agreements, wills, and other estate documents.

The End Game

Compared to married couples, unmarried couples have a multitude of additional considerations to make when planning for their retirement together.  The complexity of an unmarried couple’s retirement plan increases especially with the presence of ex-spouses, children, grandchildren, separate estates, etc.  You and your significant other must navigate through this retirement planning process with the help of a trusted financial advisor/financial planner.  Especially if you are an unmarried couple over the age of 60, you must request the financial, legal, and tax advice of experts in order to protect  your happy retirement, your estate, and your wishes as a couple.  So, don’t navigate these waters alone; seek the help of an expert today.

 

Merkel, Steve. “Relationships And Retirement Planning.” Investors Business Daily. 2 November 2012. <http://news.investors.com/investing-personal-finance/110212-631985-relationships-and-retirement-planning.htm>

Image courtesy of: http://www.zuuply.com/article/649/what+is+the+best+retirement+plan+for+you.html

 

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Maximize Your Social Security Benefits

You have worked hard all of your life.  You have raised a beautiful family that you are proud of, and you and your spouse are finally ready to enjoy your golden years together.  And yes, you have also planned and saved for these future retirement years.   Maybe you planned many years ago or maybe you planned just recently; but either way, you probably factored in the boost offered from your future Social Security benefits.  Whatever the boost might be, wouldn’t you rather maximize those benefits if possible?  If the answer is a resounding “YES”, then you want to learn about the various claiming strategies, and fully discuss them with your financial adviser/financial planner.  The proper strategy can amplify your lifetime Social Security benefits significantly.

An example of one strategy is waiting as long as possible to start claiming your Social Security benefits.  The earliest age that a retiree can start claiming these benefits is 62 years old.  However, did you know that once you reach your full retirement age (between 65 -67), your social security benefits increase by 8% each year plus inflation adjustments? Wow, the money claimed increase considerably just by waiting a little longer.

Are there claiming strategies that can optimize your Social Security benefits even if you need to start collecting at an earlier age?  The answer is “Yes”.  Advantageous strategies can be applied to this situation as well when you know how to maneuver through the claiming process… you just need the proper expertise to guide you through the rules.  Once you know these rules and know how to navigate confidently through the claiming process, you can apply a strategy that works in your favor, and maximizes this money.

Some of these claiming strategies involve the idea of spousal benefits.  Here, spousal benefits can be applied to a “Restricted Spousal” strategy as well as a “File and Suspend” strategy.  According to Jim Blankenship, CFP, EA of Forbes Advisor Network, “File and Suspend allows for the lower wage earner to increase his or her benefits by adding the Spousal Benefit, while the higher wage earner continues to delay his or her benefit, adding the delay credits.” On the other hand, the Restricted Application for Spousal Benefits “provides one spouse or the other with the option of collecting a Spousal Benefit, while at the same time delaying his or her own retirement benefit.” All and all, any couple must carefully consider the particular rules pertaining to these strategies in order to determine the appropriate strategy that applies to their specific situation.

Overall, these claiming strategies can cushion your retirement years with thousands of dollars.  If you are thinking about navigating through your Social Security claiming process alone, it might be very unrealistic because the rules behind these strategies can be complex and meticulous.   Even the employees at the national and local Social Security offices cannot give any advice; therefore, it’s best to seek the help of a financial advisor who has an in-depth knowledge of the best Social Security strategies for retirees.  The world today is very different… life expectancy has increased, pensions have dwindled, medical costs have increased, and the economy remains uncertain.  Especially now, maximizing your Social Security benefits is necessary because these are unfavorable conditions.  So, make certain that you fully learn and understand the rules of each strategy before you chose.  You can add thousands of dollars to your retirement funds just by applying the right Social Security claiming strategy for you.

Investment Advisory services provided by Gregory Ricks & Associates

Blankenship, Jim. “Are You Leaving Social Security Money on the Table.” Forbes. 26 November 2012. <http://www.forbes.com/sites/advisor/2012/11/26/are-you-leaving-social-security-money-on-the-table-you-might-be-if-you-dont-understand-and-use-this-one-rule/>

Roberts, Damon. “The Retirement Planning Edge: Maximizing Social Security.” Fox Business. 27 November 2012. <http://www.foxbusiness.com/industries/2012/11/27/retirement-planning-edge-maximizing-social-security/>

Image courtesy of: http://www.bankrate.com/finance/retirement/5-little-known-facts-about-social-security-1.aspx

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How Baby Boomers are Reinventing Retirement

Not only have baby boomers reinvented each stage of life as they passed through it, but they will also reinvent retirement standards as well, changing the retirement landscape for generations to come.  Over 77 million baby boomers will by turning the ripe age of 65 this year, primetime candidates for retirement.  But wait, most boomers will never see themselves in the same crop of retirement ads that their parents were in.  A large percentage of baby boomers are pushing back their retirement and continuing to work.  As boomers age so does the rise in inflation, causing things that were once considered luxuries to be considered more as basic needs.  So, what will boomers actually have to combat differently than their parents?  We’ve put together some of the top ways baby boomers are reinventing retirement:

• Longer life expectancies.  Some seniors will spend more years in retirement than they did in the workforce.  And more years in retirement lead to more years that need to be financed.  More and more employers are ridding themselves of pension and replacing it with 401(k)s instead.  Furthermore, raising the retirement age resulted in lower social security benefits.
• Investment management.  The complex equation of life expectancy plus your savings or retirement plan has shifted from the employer and government to the individual.  Retirees need to decide on their own or with the assistance of a financial adviser how to adjust their portfolio allocations as they progress through their retirement years and how much of their nest egg to spend each year.
• Tax allocation and required minimum distribution.  Taxes will take a big toll on retirees.  If boomers’ retirement money is in tax-deferred accounts, the government will take a large share because all withdrawals are taxed as regular income.  Required minimum distributions are calculated by dividing the balance of your retirement accounts by your life expectancy as determined by the IRS.  Seniors who fail to withdraw the correct amount will be required to pay a 50% penalty and income tax on the amount that should have been withdrawn.  Ouch!
• Part-time employment.  Many Americans will continue to work during the traditional retirement years, and not only because they need the income, but also because they enjoy the mental stimulation and social opportunities a job can provide.  With that said, baby boomers don’t see retirement as a withdrawal from activity but as a new adventure.  Many seniors will travel, volunteer, and remain quite active.
• Squeeze generation.  Most baby boomers will be facing a combination of caring for aging parents, helping their adult children, and tending to their own retirement needs.  This has lead to an increasing number of Americans entering their retirement years with debt.  Carrying debt into retirement means cutting back on discretionary expenses.

And don’t think baby boomers are flocking to seniors-only retirement communities.  Those days are long gone.  Welcome to the age of retirees working part time jobs, staying active and engaged in their community.  One of the biggest recommendations to baby boomers approaching retirement is to contact a retirement or financial planner to aid you in your decisions.  Even if you have a good grip on your retirement, it never hurts to have an educated second pair of eyes contribute to your financial security and protection.

Gregory Ricks & Associates is a registered investment adviser.

Photo courtesy of http://www.infoniac.com

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10 Kinds of Insurance You Don’t Need to Buy, Part II

In Part I of this article, we covered flight insurance, rental care insurance, extended warranties and even life insurance for children, establishing that none of these insurance policies was worth your while. In the final portion of this article, we’ll look at six more types of insurance coverage you can feel confident about skipping.

Mortgage Life Insurances
As the name suggests, this type of policy pays off your mortgage in the event of your death, ostensibly so your loved ones needn’t be burdened by a looming mortgage. The reason not to buy mortgage life insurance is really quite simple: if you spent that money on term life insurance, your life policy will cover much more than just the mortgage, taking care of other bills and expenses to ease your survivors’ financial strain.

Credit Card Insurances
Just about every credit card offer these days comes with a pitch for inexpensive credit card insurance, a policy that would pay off your bill should you be unable to do so. While it may seem like a good idea at first blush, if you have several credit cards, those policy payments can really add up. The better idea is simply to avoid running up  credit cards entirely and to use them carefully and sparingly. Paying off your balance monthly will not only negate the need for credit card insurance, but you’ll also save a boatload on interest payments.

Disease-Specific Insurance
There are innumerable policies available to cover just about every major illness one could ever suffer, including everything from cancer insurance to diabetes coverage to heard disease insurance. Rather than assembling your health coverage piece mail, all you need to do is purchase one good medical coverage policy. Even a bare-bones major medical policy will cover everything an individual policy would—and having coverage for everything is always better than having coverage just for certain things.

Unemployment Insurance
Most experts agree that it’s far better to put aside regular savings for an emergency fund than it is to shell out premiums for unemployment insurance. While it’s easy to see why this might be an appealing option, relying on your own savings is a far better plan. After all, should you lose your job, odds are that in addition to your savings, you’ll be able to draw unemployment while looking for a new employer. Of course, a great deal of people never find themselves in this position, which means wasted money that could have been saved for something more productive.

Flood Insurance
Despite the terrifying commercials, if your home isn’t in a flood plain or located in an area that’s ever experienced excessive flooding, this is a policy you need not own. Do just a bit of research on your area’s history with water, and you’ll know whether you need to shell out the cash for this rarely necessary coverage.

Accidental Death Insurance
The odds of you dying in an accident are extraordinarily low, especially since most major tragedies that could befall you such as a fire or car accident are covered by other policies. Even if you work a hazardous job, you’re absolutely protected while on the job as well. The lack of real necessity coupled with exorbitant waiting periods and fine print make accidental death insurance a policy you can skip and still sleep well at night.

There are so many policies to chose from, and they all cost money. While a certain amount of insurance coverage is necessary and prudent, you need to choose carefully. In general, broad policies that offer coverage for a multitude of potential events are a better choice than limited-scope policies that focus on specific diseases or potential incidents. Before you buy any policy, read it carefully to make sure that you understand the terms, coverage and costs. Don’t sign on the dotted line until you are comfortable with the coverage and are sure that you need it.

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This Year Resolve to be Realistic in Your Financial Resolutions

Anyone who goes to the gym knows the pain of searching for a spot in the parking lot at the beginning of January.  Yoga classes that are empty the week before Christmas are crammed to capacity as soon as New Year’s Day dawns, and machines that gather dust all summer feature lines three people deep.  Then, around the middle of February, the new faces begin to fade.  Classes that were temporarily packed regain their elbow-room, and the more esoteric machines in the circuit fade back into obscurity.

There is a similar cycle in financial planning.  Between the charging of the Christmas gifts at 18% and the arrival of the bill, many investors resolve to get their financial life under control.  The number crunchers at statisticbrain.com tell us that 45% of Americans usually make New Year’s resolutions.  Of that group of regular resolvers, 35% of the resolutions are about finances.

Just like getting in shape, the shine of planning for retirement often fades a month or so in, and many investors are back to their same old free-spending ways by spring.  In fact, of the people making New Years Resolutions, only about 8% find success.  Often the reason that body shapers, and retirement savers, fail in their efforts is that they set the wrong goals.

Just as a 300lb person shouldn’t resolve to weigh 120lbs in three months, someone barely scraping the rent together can’t reasonably expect a balance of $100,000 in the bank by the next time the big ball drops.  To assist you in resolving responsibly, let’s adapt 6 guidelines for creating effective weight-loss goals (found on Discovery Fit and Health.com) to preparing for retirement.

Good goals are:

Short Term and Specific – Setting a goal to retire at 55 may make sense when you’re 50, or even 45, but at 25 you just don’t have enough information to know if it will be possible.  Set short-term goals that are reachable in a few years, and then scale them up as the wealth building process works for you.

Trackable – Make sure that the goals you set have aspects that are quantifiable, and use your portfolio and the meetings with your financial planner to make sure you are on the right track to reach them.

Positive – Despite what you pessimists may think, the human brain works better in a positive direction.  Resolving not to be broke in 5 years is much less powerful than a resolution to commit 15% of your after tax income to retirement savings.

Personal – Think about why you want what you want and write that into your goals.  A resolution to max out your child’s college savings plan so that they can enjoy the advantage of an education without incurring crushing debt, is personal.  Resolving to have more in your retirement account that your best friend, is not.

Rewarding – Take time out to celebrate the small victories.  Treating yourself to a steak dinner when you max out your IRA, or a weekend away when your child’s college plan is fully funded, can be powerful motivators to keep on saving.

Realistic – Goals are a funny thing, if you use them correctly they can be rungs on the ladder to your dreams, but used incorrectly they can serve as pointing fingers, criticizing you when you fail, and discouraging further efforts.

 

Just as it’s important to work with a doctor and a personal trainer when customizing fitness goals, it’s important to speak with a financial planner when setting up retirement plans.  They can make sure that the goals you set follow the guidelines above, and can also help you modify them in the case of unforeseen financial situations.

Hopefully, these tips can turn you into one of the people whose resolutions turn into habits, and whose goals turn into stepping-stones on the path to a happy retirement.

 

Photo Courtesy of:  http://blog.affinityhealth.org/wp-content/uploads/2012/11/new-years-resolution-apple.jpeg

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Mastering Your Plastic

Purchasing methods are constantly evolving and becoming increasingly convenient over time.  Consumers went from having to walk a herd of cattle to the market for trade, to lugging around a wallet of cash, to now holding all their wealth in a sliver of plastic.  Credit cards have made the world of transactions simpler and easier to navigate for consumers around the world.  Large purchases can be made without the cash up front.  Many card companies offer various reward, cash back, or points promotions for use.  Online shopping has become a breeze.

Credit cards have the ability to make any old consumer a powerful individual investor.  But, with great power comes great responsibility.  The number of people struggling with credit card debt in America is astronomical.  The invincible feeling that people get from swiping that card can often leave them devastated.  That devastation is ubiquitous in their lives, affecting their credit scores, their ability to access loans, and their financial history in general.  Credit cards are necessary and advantageous tools for most people, and, if used properly, can be a huge asset to your spending habits, but it’s important to know the facts about your card.

That shiny piece of plastic poking out of your wallet can be death trap, if you don’t know how to navigate the terrain.  There are a few things that you need to be aware of before you start swiping through the checkout lines.

1)   Interest rates are limitless- When you sign up for a credit card, you agree to a certain interest rate, hopefully a low one.  The scary fact is that in most cases that rate can be raised to whatever the credit card company likes.  There oftentimes are state laws in place limiting how high those rates can be set, but many of the largest, and most popular, credit cards are issued from federally chartered banks that don’t have to follow those state laws.  The CARD Act (the Credit Card Accountability, Responsibility and Disclosure Act) guarantees that rate for the first year of the contract, but after that, the rate is free game for any increase they like.  On the upside, the card company must notify you 45 days in advance of the increase, and the new rate only applies to charges after that change date, and not your current balance.

2)   Only domestically reliable-  Anyone taking a trip out of the country might think that carrying a credit card, as opposed to a fanny pack full of Euros, may seem like a great idea, but many card users could soon find themselves searching for the German translation of the word “denied.”  The magnetic strip found in most credit cards in the U.S. isn’t often used overseas.  EMV cards, on the other hand, are much more functional.  Those EMV cards, which are named after their developers, Europay, Mastercard and Visa, contain a microchip attached to an account instead.  You can ask your provider for an EMV version of your card for your trip that should serve you much better.

3)   Fixed rates aren’t always fixed-  Fixed rates always sound good in theory.  You know what you’re signing up for is something you can depend on continuing.  Well, the fixed rate that is here today could easily be gone tomorrow.  Credit card companies are able to change your interest rate and the calculations that go into determining that rate.  Your fixed rate could easily become variable if the credit companies so desire.  If the rate does becomes variable, the company must again give you 45 days notice before an increase, but if it becomes variable, and the rate stays the same or goes down, they don’t always have to notify you.  And, if they want to decrease your credit limit or close your card entirely they don’t have to tell you until after the deed is done.  If this does happen, the company is required to send you a copy of the credit score that caused the change.

4)   Tardiness is penalized-  This is one of the most obvious but most troublesome aspects of using credit cards.  The due date on your statement is the date that your payment must be received, and if you pass this date, you could be slammed with a fee.  But there are a few rules that protect consumers if they find themselves a little behind schedule.  Your issuing company cannot report your delinquency to the credit bureaus until your bill is late by an entire month.  This means, unless you are 30 days late, your credit score won’t be hindered.  Also, your rate can’t be raised unless you are an entire 60 days past due.  So being a few days late will cost you some money, but not your record or your rate.

Credit cards are the best thing since sliced bread for many consumers, but if you don’t know your way around the rules, you could easily find yourself swiping your life away, almost literally.  Manage your spending habits, read the fine print, and swipe within your means and you should find yourself ruling the plastic world in no time.

Photo Courtesy of: mybudget360.com

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The Supreme Court Keeps Stirring Up The Market

The Supreme Court’s decision on healthcare has been a highly anticipated announcement for nearly every American.  The tension has broken and, as we all know, Obama-Care chalked up a big victory with the majority of the reforms being upheld.  The repercussions of the decision were obvious, allowing the government to penalize, by tax, Americans who choose not to get health insurance.  That mandate was the staple behind the implementation of healthcare reform as a whole.

 
A lot of speculation has been placed on the effect of the ruling, from the healthcare of individuals to the taxing changes, and even the possible repeal after the 2012 elections, but what has been left out of the discussion is the effect that the decision has had for investors.  The financial distribution in the healthcare industry has found itself with a new layout and investors are wise to take notice of the changes.

 
The five to four decision has been noticed in the market in terms of the long term effects that the mandate and reforms will have on different aspects of the medical industry.  In some parts, stock prices jumped, while in others, it dropped, and investors have an explanation for each.

 
The decision caused a drop in the stocks of medical devices because of the tax riding on them.  This tax is enough to cause investors to find a new home for their money.  As could have been expected, the stocks of the insurance companies took a hit as well, but the decision made by the courts wasn’t completely black and white.  A ruling to repeal the individual mandate to buy insurance while not allowing insurers to refuse those with pre-existing conditions would have been an even big hit to the insurance sector.  The repeal of the Medicaid portion of the healthcare reform caused the shares of those Medicaid providers to rise, assuming they would see a rise in customers.

 
Hospital stocks, on the other hand, hit a sharp rise.  This movement was the result of a few different things.  First, the individual mandate requiring health insurance will save the hospitals from providing free care to those who cannot afford it.  That will save them a lot of money and is expected to make investors a lot as well.  Also, with more people having insurance, they will be less hesitant to go to the hospital for treatment.  As morbid as it may seem, a hospital is, at its basic form, as business and, as with any business, the more paying customers you have coming through your doors, the better.
The biggest effect on investors from the Supreme Court’s decision: certainty.  Despite all of the forecasting and planning, many investors were still somewhat hanging in the balance trying to determine what would happen following the decision.  Even though they have been hit with a slew of changes, at least now they can move forward knowing what’s in front of them.

 
Along with that certainty comes the question of whether the landscape will change again following the 2012 election.  Mitt Romney has vowed that, if elected in November, he would work to repeal Obama-Care, almost in its entirety.  If Obama is to win a second term, it’s safe to assume he will work to solidify the laws and reforms in his trademark healthcare plan.

 
So overall, where does that leave us?  For now, hospital and Medicaid stocks are up.  Insurance and medical device stocks are down.  Investors can walk on a firm ground they have been waiting for since the beginning of the Supreme Court case, but that ground will get shaky again as November approaches.  Of course, any changes at this point wouldn’t just show in the stock market, but also on your taxes and with your insurance costs.  At this point, it’s wise to just hold on to your hats, and plan for your inability to plan.

 

Photo courtesy of: http://www.cricpa.com

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How to Plan Your Estate as a Cohabitating Couple

Estate planning can seem like a long, uphill battle to a land that is optimistically distant.  No one likes to think about what happens after they’re gone, but this thought process can be the difference between recovery and devastation for your loved ones.  It’s critical to ensure that you have taken the proper steps to put your affairs in order so that your spouse and children will be taken care of.  This task can be even more critical for the growing number of couples choosing cohabitation over marriage.  These couples lack many of the legal rights that aid married couples in their estate planning.  The growing numbers of the adults choosing to cohabitate rather than marry, either heterosexual or same-sex, need to take extra care in planning their estate to ensure that all of the I’s are dotted and T’s are crossed.

The main concern in estate planning for all couples, either married or unmarried, is to ensure that the right people are getting the right things.  This means creating a will that outlines where and how your assets will be distributed after your death.  Those wills need to be written early and evaluated often, and can be changed at any point by either party if they so choose.  When it comes to these wills there are a few extra things that unmarried couples need to take into consideration to ensure that they are legally protected and organized in a way that gives them the rights that married couples have.

1.       Inability to “Take Against the Will”–  Ensuring that both of the individuals involved in an unmarried partnership are on the same page in terms of the asset distribution in the wills is increasingly critical because they don’t have the ability to “take against the will” that married couples have.  This right gives the surviving spouse the ability to take a portion of the deceased spouse’s property instead of the amount that they would receive through the will.  This amount is usually anywhere between one-third to one-half of the total estate and if it is taken, its considered “taking against the will.”  Since unmarried couples aren’t given this right, it’s important that the amount given to the surviving partner is suitable to both involved.

2.       Lack of Intestacy Rights– The law of intestacy, also called the law of descent and distribution, acts as something of a failsafe against the lack of an official will.  This law dictates who is entitled to the property from the estate of the deceased if it hasn’t been outlined in a will by the individual.  Normally the assets are distributed to the spouse, followed by children and grandchildren.  This law is aimed at settling problems that arise when a will isn’t present, but it can cause problems for unmarried couples, as the surviving partner can find themselves left with nothing.  This is why it’s incredibly important for these couples to a) create a will and b)keep it in a safe place that both people are privy to.  If these wills are lost or misplaced, the partner has no legal claim to estate.

3.       Medical Care Rights-  Many times, in a medical situation many difficult decisions that cannot be made by the individual, if they are incapacitated for example, are determined by the spouse.  In the case of an unmarried couple, the partner has absolutely no say in any of these decisions.  In some cases the partner could actually be barred from the room because they don’t have any legal family ties to the individual.  Because of situations like these, it’s important to not only plan for what happens after death, but also to plan for events that occur during their lives.  The designation of a medical care representative can give unmarried partners rights relating to the medical care of each other.  This appointment can be made through power of attorney as well. No matter how it is done, it’s important for these couples to establish the necessary rights that they lack because of their unmarried status.

4.       Common Law and Civil Unions-  In the case that partners either engage in a civil union or present themselves as a married couple and can be considered as a common law marriage, some of the laws and rights surrounding inheritance and medical decisions can change.  These partnerships depend on the laws of each individual state.  There are only eleven states, including D.C., that recognize common law marriages, and the rights of those partnerships have an incredible amount of variation between them.  It’s important for couples to understand the legal climate of the state in which they live and how they need to plan in order to protect their rights and their assets.

Estate planning is a critical step in everyone’s lives, no matter their marital status, but there is nothing more disheartening that thinking of leaving your loved ones with nothing.  As society shifts and the number of unmarried, long-term cohabitating couples continues to rise, the laws regarding the rights of those couples may eventually follow suit, but until then it’s important to make sure they cover all of the bases.

 

Photo courtesy of http://timesofindia.indiatimes.com

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Emergency Funds Are Like Spare Tires…

Emergency funds are like spare tires: you never think about them until you need one.  This is an unfortunate truth for many people who don’t have a rainy day fund saved up for themselves.  Some people fail to see the advantage in creating a fund, while others want to create one, but don’t know how.  Creating an emergency fund is more important, and more simple, than many people believe.

The first thing to cover is why you need an emergency fund.  This question can be answered easily by anyone who has ever needed one.  Life is unpredictable.  The situations that could arise causing a need for extra money are almost endless:  divorce, healthcare, car troubles, emergency travel, or, as many people in recent years have encountered, job loss.  Things come up, things that you can’t see coming, and it’s much easier to roll with these punches if you have prepared for them in advance

The amount needed in this fund varies according to your situation and lifestyle.  Contingency plans are most successful when you plan for the worst case scenario, which in this case, is job loss.  You need to create a monthly budget of your expenses in that case that you suddenly find yourself with no income.  This means your rent, food, utilities, insurance, debt payments, prescription medications, cellphone bill and so on.  The bare minimum amount in your emergency fund should be equal to three months-worth of these expenses.  The overall goal is to have six months of your expenses available to you in the fund.  This may seem intimidating at first, but every little bit helps, so put in what you can over time, and aim for that target number.

Many people think that these emergency funds are best located in a box buried in the back yard or stuffed between their mattresses, but, believe it or not, there are better options.  The main requirement of the fund or account is that is must be easily accessible.  Most emergencies don’t allow for the months or years needed to access money in some investment accounts.  You should be able to access your funds within one business day.  This is the case with traditional savings accounts or money market accounts.  The drawback of these is the lack of growth in those accounts.  There are other accounts that allow moderately quick access, less than 30 days, while still allowing you to earn money from the investments.

One of these options is a bond mutual fund with either a short or immediate duration.  These don’t offer the protection of other accounts, but can bring about modest growth without locking your money away.  Investors must understand that their funds are vulnerable and can expect the value to fluctuate a bit.  Many mutual funds also offer more flexible payouts directly to checking accounts, as well.

Another suggestion in creating an emergency account is to cut into your long term investment contributions.  401(k)’s and IRA’s are critical to your future, in the long term, but if you are walking around with a great long term, and nothing for the short term, you could find yourself in some trouble.  This doesn’t mean you need to take thousands from your retirement contributions, but forty to fifty bucks a month until you have yourself protected isn’t going to drastically affect your plans 30 years from now, but it could be lifesaving in just a few.

One of the easiest ways to protect yourself in an emergency such as a job loss is to take care of what expenses you can eliminate ahead of time.  This means paying off debt.  The debt on high interest credit cards can get a lot more painful if you don’t have an income.  This not only cuts down on your expenses, but if you’re paid up to date, you allow yourself some room if you need to use those credit cards as a source of financing in an emergency.

The two most important aspects of creating an emergency fund is having the foresight to know you might need one and having the discipline to be able to create one.  If you have those two things, the rest is easy.  Just account for your monthly expenses, plan an account to funnel money into, and budget your income to allow that account to grow.

 

Photo courtesy of: http://www.financialpage.com

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The ABC’s of Mutual Fund Costs

The ABC’s of Mutual Fund Costs

Financial Advisor Gregory Ricks breaks down the ABC’s of mutual fund costs.

Metairie, LA – It’s always good to know what you are paying for and when it comes to mutual fund cost analysis that is easier said then done. Gregory Ricks advises about how to determine how much you are paying to have your money managed for you.  In an age of high tech gadgets, you’d assume tracking this would be easier but it’s not.

So here’s a quick tutorial on how mutual fund costs add up and how you can do some homework for yourself.

In the link below, you’ll see three versions of the same mutual fund: the Alliance Bernstein 2030 Retirement fund.  You’ll see there are three different purchase options.

 

A,B,C Choices 

 

Let’s take a look at the costs associated with owning the Alliance Bernstein 2030 A share version.

There is an initial load of 4.25% which means if you buy this fund there is a built in cost of $425 per $10,000 purchased – so on a twenty thousand dollar fund purchase you’d pay a commission of $850 – so, your initial $20,000 on day one would put $19,150 to work for you.  Larger investments often get “discounted” through breakpoint discounts; so the larger the investment the smaller percentage fee.  There is also an on-going cost in the .65% management fee and the .30% 12b-1 marketing fee – so when you add it up, it’s a little less than 1% on-going (actually, .95%).

So, is B better?  Well, you’ll see there is still a sales charge. It is just deferred, and if you wait long enough it’ll go away – so, in B share funds the fee is more of an early redemption fee or a “back-out” fee.  These are often marketed as no-load funds but that is an inappropriate description plus you’ll see the on-going management fee is significantly higher at 1.72% which is a .77% higher annual cost.  After the deferred sales charge period the B share converts into an A share and the costs reduce to the A share management fee schedule.

So, is C the right choice?  Again, you’ll see the higher expense ratio and a redemption fee of 1%.  These are often marketed as “advisors shares” as the advisor typically has a “trail” commission coming from the fund for acting as the advisor.  C shares were designed for a shorter duration investment.

How to choose the right fund?  “Well there’s more to it than share class – a lot more,” said Gregory Ricks, Founder and CEO of Gregory Ricks & Associates. “Mutual funds struggle with the strain of forced diversification and the drain of redemption both of which makes tax management difficult.  A fund manager’s decision to sell for diversification purposes or to get money together for investors cashing out affects your tax bill – in 2000, the tax bill to American Investors during the “hot market” was $19.8 BILLION Dollars” (http://www.sec.gov/news/speech/spch491.htm.).

The decision to invest and where to invest is a difficult one, and, all too often, retirees and those seeking retirement make purchases for all the wrong reasons – like: past performance, a “hot” tip or advice from an unreliable source (like the internet).

An ideal situation is when you find an advisor you can trust; who’ll tell you straight what a reasonable expectation is, and, who speaks enough about safety that you are comfortable not just with the return on your money but the actual future return of your money. Slow and steady seems a logical way to win the race to a secure retirement.

For more information on how Gregory Ricks can help, please visit www.gregoryricks.com. 

For media inquiries only, please contact Jenn Horner at Jennifer@dnagency.com.

About Gregory Ricks:

Gregory Ricks is the Founder and CEO of Gregory Ricks & Associates, Inc. and is the Radio Talk Show Host of “Winning at Life with Gregory Ricks,” on Rush Radio 99.5 WRNO on Saturday mornings.  He is Louisiana’s 401k and Retirement Authority and author of the upcoming book, Winning at Life in Retirement, in which the emphasis is to avoid losing money to Wall Street, to avoid losing money to Uncle Sam and to protect assets from runaway health care costs late in life. He is a nationally sought after Wealth Manager, Tax Reduction Strategist and an Ed Slott Elite IRA Advisor who has been educating, advising and guiding clients for 28 years.  He has a unique vision and ability to look forward and help retirees see the financial road ahead so they know with certainty where they are, where they’re headed and where they’ll end up at any given point in time up to 10, 15 or 20 years out including changes in direction.  He does the math to ensure their monies are using the right tools and doing the right jobs for the right period of time so they win at life in retirement by enjoying the lifestyle they’re accustomed to without fear of running out of money.

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