Objective information about financial planning, investments, and retirement plans

What I’m Reading – March Madness Edition


It’s a bit of a lazy Sunday here and I am half surfing the web and half watching the NCAA Men’s basketball tournament.  I’m not the college basketball fan that I once was, but I still love March Madness and watch every game that I can.

In 1939, H.V. Porter of the IHSA coined the te...

Here are some financial articles that I’ve read lately that you might find interesting and useful:

The Ultimate Guide to Understanding Your 401(k) A great piece loaded with information for those who might be new to 401(k) investing or who just want to learn a bit more by Harry Campbell on his blog Your Personal Finance Pro.

Five strategies to get the most Social Security another excellent and informative piece by Robert Powell at Market Watch.

And You Thought Just Tuition Was Expensive a nice piece on the Morningstar site that discusses how college expenses other than tuition can really put a strain on parents and students trying to pay for college.

Are You Paying Too Much For Mutual Funds?  Dana Anspach does a good job of addressing this important question at U.S. News.

The IRS Releases Their “Dirty Dozen” Tax Scams for 2014 was featured on Jim Blankenship’s excellent blog Getting Your Financial Ducks in a Row.

Americans and Retirement: 3 Worrying New Findings discusses EBRI’s most recent Retirement Confidence survey on Wall Street Cheat Sheet.

If you are new to The Chicago Financial Planner here are the three most popular posts over the past 30 days:

Your 401(k) is not Free

Life Insurance as a Retirement Savings Vehicle – A Good Idea?

7 Retirement Investing Tips

Well that’s it I hope you enjoy some of these articles and the rest of your Sunday.  I’ve watched a couple of good tournament games so far with hopefully more to follow.  Cool and sunny here today, but none the less good grilling weather, chicken is on the menu for tonight.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss  all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services. 

The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra. Click on the Amazon banner below to go directly to the main site or check out the selections in our Book Store.

Photo credit:  Wikipedia

Enhanced by Zemanta

Six Things Your Divorce Attorney May Not Tell You


This post was written by fee-only financial advisor Michelle Fait.

You may think coming to terms in your settlement puts the work of your divorce behind you.   The good news is, for the most part that’s true.  But before you pay that final invoice to your attorney, make sure you cover the following issues.  Your divorce attorney is trained in family law and the drafting of documents, but may not be as savvy in making sure those paper promises in your settlement are implemented, and that can put a bump in your path to a new life.

Sign advertising legal services: LIVING TRUSTS...

You May Not Be Able to Cancel Your Own Credit Card

If you are the secondary person (your name is listed second) on a joint credit card, the credit card company may not recognize your authority to close the account, even though you would be liable for any charges to it.  Make sure your attorney arranges for your ex-spouse to contact the credit card issuer to close your joint account, and ask for written verification of its closure.

Your Divorce May Not Trigger COBRA Eligibility

If you are expecting to be eligible for COBRA after your divorce, your ex-spouse’s benefits department will have to acknowledge that you are terminated from their plan. Unfortunately, you may not be able to do this directly.  Have your attorney ensure that your ex-spouse terminates you from the employer’s health care plan if you intend to move to COBRA, and coordinate this termination with your new coverage. Otherwise, you may have to appeal to the state authority and could risk losing your eligibility.

The Small Stuff Might Be Big

All those times work interfered with vacations or holidays?  All those business trips?  Your spouse may have a valuable stash of frequent flyer miles and vacation pay that should factor into your financial settlement.  Ask for an accounting of this information from the employer for accumulated vacation pay, and of your spouse for information on any frequent flyer accounts.

Here are Your Assets – Would You Like a Tax Bill With That? 

Especially with a rising stock market, you may be awarded assets that have an unrealized capital gain.  When sold, these assets could trigger a nasty tax bill for which you alone will be responsible. Your attorney might not assess your assets keeping in mind any tax liability that goes with them.  Consult with a CPA or other tax professional to calculate the after-tax value of any non-retirement assets you are splitting with your ex-spouse.

Filing a Joint Tax Return May Save You Tax But Cost You Anyway

Filing a joint return will almost always be more beneficial from a tax standpoint than filing separately.  But first make sure you are comfortable that all information has been disclosed.  You may not have knowledge now of any information that leads to an audit and/or tax bill and penalties later on, but you will be responsible for it nonetheless by signing a joint return.  In addition, be sure to ask for half of any refund or otherwise ask for consideration in exchange for the benefit of filing jointly. 

You May Not Have All the Facts

If you suspect your soon-to-be former spouse has not been forthright in disclosing information, have your attorney demand a credit report to check on any and all accounts that your spouse may have.  Follow-up with a request for statements for any accounts you don’t recognize.

Divorce is a difficult process at best.  But don’t be surprised by what your divorce attorney may not tell you – or know.  Their main responsibility is helping you through the legal maze of divorce.  Tax advice, health care insurance eligibility, and even estate work may not be their purview, but issues in these areas will impact your settlement and you must be vigilant in seeking the right expertise.

Michelle A. Fait, MBA, CFP®, EA founded Satori Financial LLC in 2001.  Michelle is a CERTIFIED FINANCIAL PLANNERTM professional (CFP®) with expertise in investments and tax.  She holds an MBA in Finance from Yale University, a bachelor’s degree in Economics from U.C. Berkeley, and is an IRS Enrolled Agent.  Her experience includes work as an investment banker in New York and Seattle for a major broker-dealer, and work for two start-up companies.   Immediately prior to founding Satori, she served as Treasury Manager for Starbucks Coffee Company, where she was responsible for cash and investment management and financial risk management. 

Satori Financial LLC is a boutique fee-only financial advisory firm that works with clients who want a partner to help them organize, simplify, and manage their financial lives in today’s chaotic world. Satori focuses its work on the planning needs of clients who are single, whether by choice or by chance, particularly those beginning again after divorce, and working professionals who want to outsource help with their financial lives.  Michelle is happily divorced and living in San Francisco.  You can reach Michelle at (206) 320-9263 and michelle@satorifin.com. You can follow Satori on FaceBook, its blog Eyes Wide Open, and Michelle’s crazy single life (along with the occasional tax tidbit) on Twitter: @michellefait

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your financial planning and investing questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services. 

Photo credit:  Flickr

Enhanced by Zemanta



The end of the year is a time to celebrate the holidays with family and friends.  Sadly it is often the time of year when many employers look to reduce employee headcount.  My thanks to Chicago attorney Daniel N. Janich for contributing this guest post with his thoughts and suggestions on what you should do if you find yourself being let go by your employer now or at some point in the future. 

Okay. So you have just been notified that your employment has been terminated. Perhaps you just came back from a meeting with the boss, or you received an email or other written notice from the HR department simply informing you to clean out your desk.

Lady Justice


Overcoming the initial shock

After overcoming the initial shock of this news, you soon realize that you were handed some papers from your employer to sign. Among them is a proposed separation agreement with the terms of your severance package.  Upon your brief initial review of the agreement you learn that you will receive your severance only if you agree to sign a release.

What are the issues that you should watch out for before putting pen to paper? Should you sign the severance agreement “as is” or do you believe you have any leverage to negotiate for a better deal and perhaps modify some of its terms?  What should you do before signing a separation agreement?

First, before doing anything else, thoroughly read through the entire separation agreement.  Make notes if necessary of provisions which may be of concern or which you do not understand or you think you might want to modify or even delete. You should also review any other employment or compensation related agreements that you may have signed with your former employer in the past as well as your Employee Handbook. The purpose of this review is to ensure that all the terms in your separation agreement are consistent with those in other documents. If they are not, your separation agreement will most likely expressly provide that its terms supersede those of any earlier agreement or understanding, thus effectively nullifying these earlier agreements if and when you sign the separation agreement.  In such case you need to be keenly aware of exactly just what it is that you are giving up by signing the separation agreement.

If you are at all uncomfortable with any of the provisions in the separation agreement, and there is a big enough severance amount involved in your deal, you will likely benefit by hiring an experienced attorney to review the agreement for you and provide you with an analysis and recommendations. You may also want the attorney to negotiate with your former employer on your behalf. The fees involved may be money well spent because you will be made aware of potential problems with the agreement that you did not spot on your own, and you will be provided with practical solutions that will not only preserve your severance benefits but might also provide you with more favorable terms for your agreement. Additionally, the attorney may also uncover claims against your former employer you may not even been aware you had.

Review the agreement

Second, regardless of whether you hire an attorney, determine if the agreement presents issues that either need to be resolved or clarified before you are ready to sign it. Here is a list in no particular order of importance—and by no means exhaustive—of the typical provisions in a separation agreement which might cause problems for employees, and therefore, which you should review very carefully:

  • Termination date.  Your termination will end your participation in the company’s benefit plans.  When will you be required to transition your health coverage under COBRA?   Under COBRA the entire cost of your health insurance premiums under the company’s group coverage will generally be paid out of your own pocket. (See COBRA discussion below).
  •  Severance amount.  Is your severance consistent with the company’s severance policy and practice? Are you being downsized and perhaps entitled to participate in a company sponsored severance plan?  Is the severance amount that is being offered sufficient to justify you signing a release?
  • Method and manner severance is to be paid.  For how long will you be receiving severance payments?  Does the structure of your severance payouts comply with Internal Revenue Code Section 409A’s deferred compensation rules? (Ask the company’s HR department or your lawyer about this issue as the penalties for non-compliance could be great.) When will severance payments begin and under what circumstances might they end before you receive the entire amount?
  • Scope and duration of the noncompete. A noncompete provision in your separation agreement means that you might be prevented from seeking other viable job opportunities in your field within your former employer’s industry for a certain period of time and within a designated geographic area after signing the separation agreement. What is the duration of your noncompete? How big is the geographic area?  You should ascertain whether you could obtain a waiver of these restrictions if necessary.
  • Nondisparagement.  Will you be prevented from saying anything negative, even if it is truthful, to anyone either orally, in writing or through social media regarding your former employer or the products and services provided by your former employer?  Is this provision mutual, which would prevent your former employer from saying negative things to others about your character or job performance? Should you negotiate receiving a letter of recommendation from your former employer or a positive recommendation if a prospective employer should contact your former one?
  • COBRA coverage.  When will your COBRA coverage begin? Have you received your COBRA notice and election form? When is your election form due?  When is your first premium payment due? You might be able to negotiate that a portion of your COBRA premiums be subsidized by your former employer.  Are there any circumstances that might extend your COBRA coverage, if necessary, beyond the initial 18 months following your employment termination?
  • Continuing Cooperation.  Are you required under the separation agreement to be available to your former employer if needed as a witness or to participate in a legal investigation on behalf of the company?  If so, how will you be compensated for your time and your out-of-pocket expenses?  Is there flexibility in the amount of time you are required to provide and when you must make yourself available to your former employer?
  • Scope of general release.  Is the general release that you are required to sign prepared broadly to cover any possible claim of any kind and at any time in the past, present or future, in connection with your former employer?  Or does it address only claims relating to your employment relationship and its termination?  When must you sign and return the release? Is this at the same time as the date your separation agreement must be signed and returned?

Some additional pointers

If the provisions of your separation agreement require negotiation of its terms, then you should seek at the outset a written extension of time to sign and return the separation agreement and release.  In fact, it is a good idea to obtain a written  extension as soon as the need for it is apparent to give you sufficient time to resolve issues of concern in the agreement or release without undue pressure to accept terms you might not otherwise agree upon simply to avoid forfeiting the severance amount that was offered to you.

Prior to signing any release you should consider and discuss with your attorney whether you have any potential claims—which would most likely be employment or benefit related—that you would be giving up by signing the release.  Your attorney should confirm with you after reviewing your employment related documents, including your written employment agreement if any, and copies of any retirement or welfare plan documents, as to whether the severance payout under the separation agreement is a sum that justifies your signing the waiver of claims under the release.  To this end, any compensation and benefits that you already earned prior to the termination of your employment should not be counted as part of your severance amount.

If you are participating in various stock-based compensation plans and programs, you should assess prior to signing your separation agreement whether you are “leaving money on the table” in the form of appreciated but unvested shares, options or units as of your effective termination date.  If so, you may consider whether some or all of your unvested interests can be vested as of your termination date, or whether you can receive an extra amount of cash to compensate you for this forfeited benefit.

Your qualified and non-qualified retirement benefits are generally governed by plan documents other than your separation agreement. Again you will need to assess whether and how your employment termination will affect your vested interest in these retirement plans. Although not of immediate concern, you should also eventually determine whether it might be best to rollover any retirement benefits from your 401(k) plan into an IRA or another 401(k) of your next employer.

Before signing the release you should understand exactly what it is you are signing.  Once the release has been signed, you will have permanently given up your rights in exchange for the severance payment agreed upon in the separation agreement.  There cannot be any lingering doubts or other second thoughts about whether you should have signed the separation package and release.  Once it is done there is no looking back.

This blog post is certainly not intended to be a complete discussion of all potential concerns and issues that may arise in connection with your decision whether to sign the proposed separation agreement.  In fact, your circumstance may call for your separation agreement to be dealt with differently from the way your co-worker deals with an identical separation agreement.  That is why when your livelihood and rights are at stake, consulting with an experienced attorney may, in the long run, be the right decision for your career.

Daniel N. Janich is a Partner in the Employee Benefits and Executive Compensation Practice Group at Greensfelder, Hemker & Gale, P.C. in Chicago.  He has extensive experience representing clients in a broad range of benefits and compensation matters, including the drafting, negotiation and litigation of employment agreements and separation packages.  He can be reached at dnj@greensfelder.com or 312-558-1070.  Check out Dan’s profile on LinkedIn as well. Dan is an excellent resource should you find yourself in this position.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services. 

Photo credit:  Flickr

Enhanced by Zemanta

7 Year-End 2013 Financial Planning Tips


Thanksgiving is behind us and we are in the home stretch of 2013.  While your thoughts might be on shopping and getting ready for the holidays, there are a number of financial planning tasks that still need your attention.  Here are 7 financial planning tips for the end of the year.

Use appreciated investments for charitable donations

 If you would normally contribute to charity why not donate appreciated stocks, mutual funds, ETFs, closed-end funds, etc.?  The value of doing this is that you receive credit for the market value of the donated securities and avoid paying the capital gains on the appreciation.  A few things to keep in mind:

  • This only works with investments held in a taxable account.
  • This is not a good strategy for investments in which you have an unrealized loss.  Here it is better to sell the investment, realize the loss and donate the cash.


English: A bauble on a Christmas tree.


Harvest losses from your portfolio

The thought here is to review investments held in taxable accounts and sell all or some of them with unrealized losses.  These may be a bit harder to come by this year given the appreciation in the stock market.  Bond funds and other fixed income investments might be your best bet here.

The benefit of this strategy is that realized losses can be offset against capital gains to mitigate the tax due.  There are a number of nuances to be aware of here, including the Wash Sale Rules, so be sure you’ve done your research and/or consulted with your tax or financial advisor before proceeding.

Establish a Solo 401(k) 

If you are self-employed and haven’t done so already consider opening a Solo 401(k) account.  The Solo 401(k) can be an excellent retirement planning vehicle for the self-employed.  If you want to contribute for 2013 the account must be opened by December 31.  You then have until the date that you file your tax return, including extensions, to make your 2013 contributions. 

Rebalance your portfolio

With the tremendous gains in the stock market so far this year, your portfolio might be overly allocated to equities if you haven’t rebalanced lately.  The problem with letting your equity allocation just run with the market is that you may be taking more risk than you had intended or more than is appropriate for your situation.

Rebalance with a total portfolio view.  Use tax-deferred accounts such as IRAs and 401(k)s to your best advantage.  Donating appreciated investments to charity can help.  You can also use new money to shore up under allocated portions of your portfolio to reduce the need to sell winners.

Review your 401(k) options 

This is the time of the year when many companies update their 401(k) investment menus both by adding new investment options and replacing some funds with new choices.  This often coincides with the open enrollment process for employee benefits and is a good time for you to review any changes and update your investment choices if appropriate.

Be careful when buying into mutual funds 

Many mutual fund companies issue distributions from the funds for dividends and capital gains around the end of the year.  These distributions are based upon owning the fund on the date the distribution is declared.  If you are not careful you could be the recipient of a distribution even though you’ve only owned the fund for a short time.  You would be fully liable for any taxes due on this distribution.  This of course only pertains to mutual fund investments made in taxable accounts.

Required Minimum Distributions 

If you are 70 ½ or older you are required to take a minimum distribution from your IRAs and other retirement accounts.  The amount required is based upon your account balance as of the end of the prior year and is based on IRS tables.  Account custodians are required to calculate your RMD and report this amount to the IRS.

Note beneficiaries of inherited IRAs may also be required to take an RMD if the deceased individual was taking RMDs at the time of his/her death.

If you have multiple accounts with multiple custodians you need to take a total distribution based upon all of these accounts, though you can pick and choose from which accounts you’d like to take the distribution.  Make sure to take your distribution by the end of the year otherwise you will be faced with a stiff penalty of 50% of the amount you did not take on top of the income taxes normally due.

If you turned 70 ½ this year you can delay your first distribution to April 1 of next year, but that means that you will need to take two distributions next year with the corresponding tax liability.  Also if you are still working and are not a 5% or greater owner of your company you do not need to take a distribution from your 401(k) with that employer.  You do, however, need to take the distribution on all remaining retirement accounts.

For those who take required minimum distributions and who are otherwise charitably inclined, you have the option of diverting some or all of your distribution via a provision called the qualified charitable distribution (QCD).  The advantage is that this portion of your RMD is not treated as a taxable income and may have a favorable impact on the amount of Social Security that is subject to income taxes for 2014 and other potential benefits.  Note that you can’t double dip and also take this as a deductible charitable contribution.  Consult with the custodian of your IRA or retirement plan for the logistics of executing this transaction.

With all of the strategies mentioned above I recommend that you consult with a qualified tax or financial advisor to ensure  that the strategy is right for your unique situation and if so that you execute it properly. 

Certainly year-end is about the holidays, family, friends, food, and football.  It is also a great time to take execute some final year-end financial planning moves that can have a big payoff and in the case of RMDs save you from some hefty penalties.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of  your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.  

Photo credit:  Wikipedia

Enhanced by Zemanta

Do You Have a Back-Up Financial Plan?


English: Green Bay Packers starting quarterbac...

In a recent Monday Night Football game against the hated Bears, Green Bay Packer star Aaron Rodgers went down with down with a game ending injury.  The second-string quarterback was Seneca Wallace who was at best an NFL journeyman with at best a checkered career.  Needless to say the Packer’s high-octane offense came to a grinding halt and the Packers lost a key divisional game.

Seneca Wallace in this fan’s opinion was not a credible back-up plan, but rather a joke and an insult to loyal Packer fans everywhere.  Regular readers of this blog know that I stress financial planning as a starting point for almost every financial endeavor you might undertake.  Part of a sound financial plan involves planning for the curve balls that life sometimes throws at us.  Here are some components of a solid back-up financial plan.

An emergency fund 

This represents very liquid savings that are set-aside for emergencies such as job-loss, the need to replace your furnace on the coldest day of the year, unforeseen medical expenses, and other unexpected events that have a way of popping up in life.  This is not money that is invested in stocks or mutual funds, but rather in a money market fund or a similar vehicle.  Liquidity and little or no risk of loss are key.  For example a CD that ties up your money for a period of time and assesses a penalty if you need it early is not a good vehicle for this money.  The rule of thumb is 6-9 months of expenses, your actual need will vary and you should look at your own unique situation.  If you don’t have enough right off the bat for an adequate emergency fund, accumulating this money should be a top savings priority.


Regular readers of this blog know that I have a healthy skeptiscm of many insurance and insurance-based financial products and many of the folks who sell them.  However insurance is a key component of a financial plan for most people.  The key is finding a competent financial professional who will assess your needs and sell you the insurance product that is right for the risk that you need to insure.  I assist my clients in finding and working with insurance professionals of this type.

Life insurance is a basic component of a financial plan for many folks.  Insurance replaces some or all of your future income for your family or other beneficiaries in the event of your death.  It can help pay off the mortgage, send your kids to college, or fund the retirement for a surviving spouse if you haven’t had time to accumulate sufficient assets.  Even in the case of a non-working spouse it can replace the “services” he or she provides in terms of child-care and the like.  Life insurance can also be used as an exit strategy for a closely-held business or to offset the impact of losing a key employee.  All too often life insurance is sold for purposes other than providing a death benefit.  This is often in the form of some sort of policy that builds cash-value and for uses such as a supplemental retirement vehicle.  For many folks inexpensive term insurance is the best deal, be very leery of a pitch for whole life, Variable Universal Life, and the myriad or other cash value policies out there.  These are very lucrative for the agent, not always so for you.

Disbility insurance is perhaps more important than life insurance in that it provides coverage for an event that is more likely to occur than death.  This is “lifestyle” insurance and I generally urge folks who have access to it via the workplace to buy as much Long-Term disability insurance as possible.  These policies are not always great in that their definition of disability and own occupation is often broad.  Private policies will often have a narrower definition of your own occupation for purposes of paying a benefit, but these policies can be expensive.  On the other hand I’ve seen several high earning professionals over the years become disabled and having proper disability insurance has been a financial life-saver for them and their families.

Property and casualty and liability insurance comes in various forms and can help insure against all sorts of events that can occur on your property or in the course of doing business.  These range from personal polcies such as umbrella coverage against the UPS guy falling and hurting himself while delivering a package to your home to having sufficient auto liability coverage for yourself and perhaps younger drivers using your vehicles.  Professionals such as doctors, financial advisors, and lawyers need professional liability insurance to protect them.  Details on these and other types of liability coverage (both personal and professional) are beyond the scope of this article, but they are none the less a key part of a back-up financial plan.  One successful judgement against you or your business can bring financial ruin without proper insurance and asset protection planning.

Long-Term care insurance provides coverage for long-term health problems that can plague us later in life.  This might include a nursing home stay or home health care.  This insurance is complicated and expensive.  Whether or not buy Long-Term Care insurance, which features to buy, and many other decisions requires research and perhaps professional guidance.  The reason to consider this type of coverage is that the cost of caring for a loved one with a long-term health situation can be staggering and can wipe out the finances of a family.

Estate Planning 

Estate planning is all about ensuring that your assets pass to your desired beneficiaries in the manner that you intend.  A will naming a guardian for minor children is a must for parents.  Retirement plans and insurance and annuity products are passed on via a beneficiary designation so make sure these are up to date.  A trust may or may not be in order depending upon your situation.  An often overlooked factor are items such as a medical power of attorney and other similar documents that designate who can handle your affairs and/or make decisions for you in the event that you are incapacited.  Few of us will have to worry about paying estate taxes, but these other issues can be huge and if not handled properly can cause major financial headaches for your family and loved ones.

Accumulate wealth and become financially independent 

This is along the lines of “… the best defense is a good offense…”  Saving and accumulating wealth and building financial independence represent the best financial contingency plan.

Contribute to your 401(k) or similar retirement plan.  Investing for retirement via salary deferral is painless and doesn’t require you to do anything except make an election to have the money withheld from you paycheck.  Obviously you will want to make good 401(k) investment choices and you will certainly want to make good decisions with your 401(k) account when leaving a job.

Starting a business or investing in one is another way to build wealth.  Business ownership if managed properly can be a great way to accumulate and pass on wealth to your heirs.

If you’ve saved and positioned yourself properly over the years you’ll be like several of my clients who couldn’t wait to receive a buyout offer from their employer so they could retire and/or otherwise move on with their lives.

The items listed above are not meant to be an exhaustive list, but they do represent a good starting point to help you prevent a potential financial catastrophe.  I want you to be better prepared then the Green Bay Packers were at quarterback.

Check out the retirement planning calculator tool at the end of this post.  At the very least this will help you determine where you stand in terms of your readiness for retirement which can provide peace of mind in the event of a job loss or other unexpected financial life event.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your financial planning and investing questions including your financial back-up plan. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.

Loading Financial Calculator...


Photo credit:  Wikipedia

Enhanced by Zemanta

Financial Planning: The Power of Questions


As you might imagine there are innumerable financial planning software tools available to financial planners and individuals.  Technology is a wonderful thing for our profession and more importantly for the clients we serve.  To this financial planner, however,  asking questions and the dialog this creates might be the most important financial planning tool of all.

Question mark

The initial conversation 

When I first speak with a prospective client, either in person of via a phone call, I ask many questions.  Let’s assume the prospective client is his/her 50s and approaching retirement.  The main question I generally ask in one form or another:

What prompted you to contact a financial planner?  My main objective is uncovering their “pain point” or what is bothering them financially.  The issue often surrounds their retirement readiness in the case of a pre-retiree or managing retirement withdrawals in the case of someone in retirement or on the cusp of retirement.  Often this single question will get the prospective client to me all about his or her financial concerns.  My preference is to do as much listening and as little taking as possible during this conversation.

During this initial conversation I want to learn several things which I use questions to accomplish.  These include:

  • Understanding their financial resources.
  • Understanding their spending needs in retirement.
  • Understanding their vision of their retirement.

These items are crucial to me in that I want to understand if this person has reasonable expectations as to the type of retirement lifestyle his or her financial resources will support.  It is also vital to understand if this prospective client has realistic financial expectations in general.

By this point we should both have a good feel if there is a potential match.  Am I a financial advisor in whom they have confidence and with whom they want to work to achieve their financial goals?  On the flip side I also have to make a determination if this is a client to whom I can add value.  Questions back and forth will have allowed both of us to make that determination.  If I feel that I am not the right fit for an individual I will make every effort to refer them to another advisor that I feel would be a better fit for their situation.

Client data gathering-quantitative 

Once someone becomes a client the questions not only continue, but they accelerate.  Certainly there are quantitative questions known as data gathering.  The types of informational questions most advisors ask include:

  • Statements or similar information for all retirement and investment accounts.
  • Cash holdings.
  • Other signification assets such as real estate, an interest in a business, a potential inheritance, etc.
  • Information about life insurance, disability, and long-term care policies as well as any annuities in force.
  • Social Security statements.
  • Information about pensions and other retirement accounts not covered above.
  • Information about the client’s employee benefits if they are working.
  • A copy of their most recent tax return.
  • Cash flow data if spending is an issue for the client.
  • Any additional financial data that is relevant.

The reasons for asking these questions and requesting this quantitative data I think are pretty obvious.

Client data gathering-qualitative

Beyond the numbers and dollar amounts I generally ask many questions both initially with a new client and periodically when we meet to review their situation:

  • When do you see yourself retiring?
    • How do envision spending your retirement years?
    • Where do you envision living during retirement?
  • What are you goals?
    • College educations?
    • Retirement?
    • Travel?
    • Starting a business?
  • Do you have parents that you will need to support?
  • What does your monthly cash flow look like?
  • Has anything changed in life?
  • How is your health?
  • Do you have any major cash flow needs over the next 12 months?

This is only a sample of the types of questions that I ask clients on a regular basis.  Of course not all of these questions are applicable to every client and for some clients the questions will be somewhat different.

As you can see, the answers to these and other questions can carry significant financial ramifications for people.  It is vital that I understand these types of issues as they concern my clients.

If you are doing your own financial planning, it is critical that you step back from your own situation and ask yourself these questions and that you discuss them with your spouse or significant other if applicable.

In my experience questions are among the most powerful financial planning tools available.  Make sure that your financial advisor is asking the right questions of you or that you are asking the right questions of yourself.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.   

Photo credit:  Wikipedia

Enhanced by Zemanta

Open Enrollment 2014 – Don’t Just Check the Boxes


This is an update of Employee Benefits Open Enrollment – Make Good Choices which originally appeared on the blog on September 12, 2012.

Health Care Costs

Fall is traditionally open enrollment season for many companies.  In our house I’m self-employed and my wife works for a major corporation with a full array of employee benefits.  As you might suspect she hands me any information about her benefits with the implicit instructions “… deal with this…”

While it has never been a good practice to just “check the box” and to automatically go with the same benefit choices year-to-year, this is an especially risky practice as you enroll in your 2014 benefits this open enrollment season.  All of the hoopla over ObamaCare and its impact on health insurance for those without coverage and for those with employer provided plans is front and center in the news media.  The general trend across all employee benefit options is for companies to seek ways to reduce costs which often translates to reduced benefits.

Health Insurance 

Clearly the trend here is less coverage for more money.  Beyond this some companies are making some major changes in their coverage.  As an example one major Chicago area company is setting up a private exchange for their employees.  Another major corporation eliminated the option of spousal coverage for employees whose spouses have access to coverage elsewhere.  Even in our case, if I had access to outside coverage and still wanted to be covered under my wife’s plan there would have been a monthly surcharge.  The bottom line with health coverage is that you need to take a fresh look at the options offered for 2014 and align those with your family’s needs and usage to determine the best option for you at the best price.  For example you might consider a high deductible plan with an HSA to save on premium costs. 


You may have the option to fund a Flexible Spending Account or a Health Savings Account. Both allow for the payment of medical expenses with pre-tax dollars. The FSA is a “use it or lose it” proposition, the HSA is not. Take a look at your spending patterns for health care and also look at your out-of-pocket expenditures from past years. Both accounts have their pros and cons so read up, ask your benefits people and decide if either of these options (if offered) are right for your situation.  The HSA is typically only an option in conjunction with a high deductible health insurance plan.

Company Life Insurance 

Company life insurance often can be competitive in terms of price and the death benefits offered, but this is not always the case.  If you have a health condition that might preclude you from buying life insurance outside the company this coverage can be crucial.  I often suggest to clients to look outside the company for coverage while they are in good health so that they will have the death benefit they need should they leave their current employer, regardless of any change in their future health status.  Many plans offer some amount of life insurance (such as 1 times your salary) for free; additional coverage may carry a charge.  If you have health issues that might make it difficult or impossible to obtain an outside policy you will want to check out the conversion rules on this coverage should you leave the company at some point in the future. 

Disability coverage 

I generally suggest that you take advantage of any disability coverage offered and that you buy any extra benefit that is available to you. Disability coverage is “lifestyle” insurance. There is usually a short-term component and a long-term component. The long-term portion generally covers 60 percent of your base salary, though coverage can vary. If you receive a substantial bonus or compensation or other sorts of compensation beyond your base salary you might want to consider looking into a supplemental disability policy from an outside insurance carrier as this compensation might not be covered under the disability insurance offered via your employer.

Your 401(k) plan 

Enrollment in your company’s 401(k) plan is generally not limited to the annual open enrollment period, but this is often the time that companies will announce changes to their plan.  These changes might include new investment options, a change in the matching formula, and others.  This is a good time for you to look at increasing your salary deferral if you are not already contributing the maximum and to take a look at your investment allocation. 

Other coverage and benefits

We generally take dental and vision insurance.  Beyond that you really need to look carefully at benefits offered such as accidental death and dismemberment insurance (AD&D), cancer insurance, and other supplemental coverages.  A heath insurance agent put it quite well in saying to me that coverages with low premiums generally indicate a low probability of loss.  For example AD&D requires injury or death under specific parameters that many people will not incur, hence the low cost.  You choices should be based upon your situation and the type of job you perform.

Depending upon your organization, you might also have access to benefits for transportation, parking, child care, deferred compensation (if you are at a high enough level in the organization), and many others.  These are all potentially valuable options depending upon your needs.

If you and your spouse both work look at both benefits packages and coordinate the best options between the two plans.

Your employee benefits can add up to a significant percentage of your overall compensation.  These benefits are potentially quite valuable to you and your family, take the time to review your available options in order to make the best choices for you and family.  Especially in this year of drastic upheaval in health insurance and across the employee benefits landscape, don’t just let your selections default to your existing choices.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss your open enrollment options and to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services. 

Photo Credit:  Flickr

Enhanced by Zemanta

4 Reasons to Accept Your Company’s Buyout Offer


English: A bag of money, US dollars, spinning ...

Many companies offer employees a buyout package to encourage them to leave the company.  This is generally done to encourage voluntary departures when the organization is looking to reduce headcount.  These offers can cover employers across all levels of experience, but are often structured as early retirement packages geared to older workers.  Over the years I’ve been asked by Baby Boomer clients and friends whether they should accept this offer from their company.  Almost without exception I’ve encouraged these folks to take the money and run.  Here are 4 reasons to accept your company’s buyout offer.

There’s a target on your back 

If your company has identified you as somebody who might be a good candidate for a buyout offer this generally means you are on their list.  In my experience I’ve invariably seen folks who have turned down the first offer finding themselves out of a job within a year or so.

The first offer is likely as good as it’s going to get 

A number of years ago a friend called me to discuss a buyout offer he had received from his employer, Motorola.  Given his age and the favorable terms of the buyout offer I strongly encourage him to take the package.  He ended up not taking the offer and stayed with the company for a bit over a year afterwards.  Sadly he was let go and the financial terms of his separation were not nearly as favorable as they would have been had he taken the initial buyout.

Sweetened terms and incentives 

Every situation is different, but I’ve seen buyout offers that included such incentives as extended medical coverage, years of service added to a pension calculation, and additional severance pay over and above what an employee would have been entitled to based upon their years of service.  Additional incentives might include training and job search help.  In many cases these buyouts can be incentives for older workers to take early retirement and the incentives are geared to areas like the ability to receive early pension payments.

This could be a great opportunity

While most people don’t like the idea of losing their job, a generous buyout might be a great opportunity for you.  If you will continue to work and you are able to find a new job quickly the buyout could serve as a nice financial bonus for you.  This situation might also serve as an opportunity to start your own business.  If you were looking to retire in the near future this could be just the opportunity you were looking for.  I’ve had more than one client over the years joyously accept their company’s early retirement incentive.

In analyzing whether to take the buyout you should at a minimum consider the following:

  • Your current financial situation, what impact will this have on my overall financial plan and my goals such as retirement and sending my kids to college?
  • What you might do next:  Retirement, self-employment, look for another job
  • If you will stay in the workforce what are your employment prospects?
  • Health insurance options.
  • How good are the incentives being offered?  Can you or should you try to negotiate a better package?

Corporate buyouts and early retirement packages are clearly here to stay.  If you are a corporate employee, especially one in the Baby Boomer or the Gen X age range, you should give some thought to what you would do if this situation were to present itself.

If you’ve been offered a buyout or early retirement package, check out the retirement planning calculator tool at the end of this post.  At the very least this will help you determine where you stand in terms of your readiness for retirement which will be key factor in your decision, especially for older workers.

While this is an excellent tool, please remember the results only provide a first step in the retirement planning process.  This is not a substitute for an in-depth financial plan done by a qualified financial professional.

If you’ve been offered a buyout package please contact me at 847-506-9827 for a free 30-minute consultation to discuss the package and all of your financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.   

Retirement plan sponsors, would you like to offer access to professional, unbiased financial advice and counseling to your employees?  Whether prompted by an event such as a corporate downsizing or just a general desire to provide this valuable service to your employees we can help.   Please feel free to contact me to discuss your organization’s needs and to discuss services such as group seminars and one-on-one counseling.

Loading Financial Calculator...


Photo credit: Wikipedia

Enhanced by Zemanta

5 Essential Financial Planning Steps for Your 30s and 40s



Many of the calls that I receive are from folks in their 50s or 60s who are either within sight of retirement or already retired.  Many of these callers are pretty well-prepared for retirement and are seeking my help to fine-tune their situation and/or to help them through this next phase of life.  This type of financial readiness doesn’t just happen it takes planning and preparation.  Here are 5 essential financial planning steps for those of you in your 30s and 40s to help you reach your retirement goals and more importantly to help you achieve financial independence.

If for whatever reason you haven’t done much of anything to ensure your financial future it’s time to get going.  Today is the best day to get started, tomorrow is the second best day, and so on.  If you are in your 30s or 40s and haven’t begun to save for your retirement, if you have a family and don’t have a basic will or any life insurance, if you have debt or spending issues it’s time to get started on a path to secure your financial future.

Protect your family and yourself

I can’t tell you how many phone calls I’ve received from a 30 or 40 something professional (always a male) with young kids and a stay at home spouse.  Typically the caller is all excited about investing or perhaps about buying income property.  Both are great ideas.  However when I ask whether he has any life insurance in place or even a basic will naming a guardian for his young children the answer is something like “… we’ve talked about that…”  My response is to implore him to stop talking about it and get it done.  I generally follow-up the phone call with a list of estate planning attorneys for them to consider.

My point is this, if you are in your 30s or 40s and have a family you need to ensure their financial security.  Term life insurance is very cheap in this age range assuming that you are in good health.  Until you’ve accumulated sufficient assets to provide for your family in the event of your death, life insurance is a great way to build an estate quickly.

It is vital that parents of minor children at least have a will in place that names a legal guardian for their children in the event of their death.

While we are on this subject make sure that all beneficiary designations on retirement accounts, annuities, and insurance policies are up to date and specify the correct beneficiary.  There is no better way to say “I love you” to a spouse than to have you life insurance go to an ex-spouse or somebody else because you forgot to update the policy’s beneficiary designation.

Even if you are single at the very least you will want to give some thought as to where your money and assets would go if you were to die and take the appropriate actions to ensure this would happen.

Perhaps more importantly make sure that you have some disability insurance.  This protects you in the event you are disabled and can’t work for a period of time or perhaps permanently.  Both short and long-term disability coverage is a staple in many employee benefit packages.  Take as much coverage as is offered, this type of coverage is relatively cheap. If you are self-employed or your plan doesn’t offer disability coverage look into a private policy or perhaps something offered via a professional association.  Disability coverage is probably more vital in your 30s and 40s than life insurance.

Save for retirement 

There is still time to accumulate assets for retirement.  Time in fact is one of your greatest assets here.  Contribute to your 401(k) or similar retirement plan.  Contribute to an IRA.

In many cases you may be starting a family or looking to fund college during these years.  While there may be conflicting demands for your money, save as much as you can for retirement.  As you get to your 50s, 60s, and beyond you’ll be glad you did.

If you are single this is all the more reason to ramp up your retirement savings, assuming you never marry it’s all on you to save for a comfortable retirement.

Financial planning is vital 

Many folks get serious about financial planning in their 50s and 60s as they approach retirement.  There’s nothing wrong with this.  However having a plan in place in your 30s or 40s gives you a head start.  Are you on track to beat the odds in the “retirement gamble?”  Better yet what will it take to help you achieve financial independence?

Make sure the basics are covered.  Get your spending in check and pay down your debts.  If you haven’t done so already, adopt the basic fiscal habits needed to live within your means.

If you work with a financial advisor become knowledgeable.  Take an interest in your situation.  This doesn’t mean that you need to be a financial expert, but a bit of knowledge combined with your own good common sense will help shield you from fraud or just plain bad advice.  If your financial advisor recommends what seems to be costly, proprietary (to his/her employer) financial products trust your gut and look for advice elsewhere.  My very biased view is that you should seek the help of a fee-only financial advisor.  Check out NAPFA’s guide to help you in finding the right advisor for your needs. 

Combine and consolidate 

By this time you’ve likely worked for several employers.  If you are like many people you haven’t paid as much attention to your old 401(k) accounts as you should have.

This is a good stage of your life to do something with these old retirement accounts.  Combine them into a consolidated IRA account.  Roll them into your current employer’s plan.  Do something with these accounts, don’t ignore this valuable retirement asset.

Invest like a grown-up 

There’s nothing wrong with allocating a portion of your investment assets to taking some”flyers” on a stock you like, or an ETF that invests in a hot sector of the market,  play money in other words.

The vast majority of you investments should be allocated in a fashion that dovetails with your financial plan.  Have an allocation plan, stick with it, rebalance your holdings periodically, and adjust your allocation as you age or if your situation warrants.

This investing plan should take into account all of your investments including IRAs, company retirement plans, taxable investments, and so on.  If you are married this should include both of your accounts.

For most people mutual funds and ETFs generally make the most sense.  There is nothing wrong with individual stocks, but they require a level of expertise and research that most investors don’t have.

The planning, saving, and investing that you do in your 30s and 40s will pay major dividends down the road, as you seek a comfortable retirement and financial independence.  Don’t waste time, get started today.  Don’t become part of the retirement savings crisis in the U.S.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.   

Please check out our Resources page for some additional links that might be beneficial to you.  

Photo credit:  Flickr

Enhanced by Zemanta