■
A Special Advertising Section of THE COLUMBUS DISPATCH |
sunDAY, october 5, 2014
Ohio’s largest membership organization for CFP professionals including members who support the financial planning process. ®
We serve to inspire those who deliver, support and need financial planning. are you in charge of your money?
Let us help you. Our members... adhere to the highest standards of professional competence, ethical conduct and clear, complete disclosure of those they serve.
Finan Plann cial ing D ay We dnes
Oct. day, 8 see page
2
Find a financial planner in your area at PlannerSearch.org
G2
THE COLUMBUS DISPATCH | Special Advertising Section | sunDAY, october 5, 2014
You are invited to the fourth annual Financial Planning Day Instead, the focus will Regardless of be on you and personalincome or age, everyized private advice in the one can benefit from areas of several planning financial planning. topics such as budgeting, Research shows that debt management, retirethose with a plan are ment, investments, edumore likely to pay cation, estate, taxes and their credit card bills in more. Workshops will full each month, have also be available throughmore money saved and Kristen E. out the event on topics have more confidence Moosmiller, CFP® such as Social Security with their money. President, Financial The Financial Planning Association of and Medicare, credit and Central Ohio debt management, estate Planning Association planning and education of Central Ohio invites you to join us Wednesday, Oct. 8, funding. By preregistering you will be from 3-7 p.m. at the downtown granted first admission to the Columbus Metropolitan Library event. Preregister online at for a truly no-strings-attached financialplanningdays.org/ opportunity. columbus or by calling toll free On Financial Planning at (877) 861-7826. Walk-ins are Day, Certified Financial also welcome. Planner™ professionals will be We hope you will join us on available for one-on-one counselOct. 8, and take the steps to ing with individuals and couples. feel empowered so that you can No products will be sold, and no achieve your personal life goals. business cards will be exchanged.
■
Long-term care insurance — is it right for you? While baby boomers are aging, so are their parents. As clients get more involved in the process of moving their folks out of the family home and into the next phase of living, we Andrew P. Keeler, are receiving more CFP® questions relatKeeler & Nadler ing to home care, assisted living and skilled-nursing care. Many clients are wondering whether they should purchase long-term care insurance (LTC). If you choose not to purchase LTC, you are choosing to accept the burden of paying for any expenses associated with long-term care out of pocket, or out of portfolio. This isn’t necessarily wrong, but before you do, you should understand the risks, and evaluate if self-insuring makes better sense for you than paying a premium to an insurance company. Buying LTC ensures that more of your assets will be passed on to heirs instead of being drawn down by the high costs of nursing care. You should also understand the likelihood of the
risks and their magnitude. A semi-private room in a skilled-care facility costs roughly $81,000 per year. If you and your spouse are paying more than twice that living the way in which you’ve grown accustomed, you may actually save money if you both move into a retirement center or assisted-living facility. If your current standard of living is below this figure, then your portfolio will need to support the higher expenses necessary to cover skilled-nursing care. The average stay in a nursing home is a little more than two years, so you will experience a spike in outflows, but for a short period of time. If you desire to leave assets to your children, one way to improve the chances that they will receive something from your portfolio is to purchase LTC. This forces the insurer to bear the risk of any spikes in income necessary to cover the costs associated with providing care, instead of drawing down your portfolio. At what age should someone consider purchasing LTC? Certainly it depends on each individual’s situation, including a person’s health and insurability. We seldom suggest a healthy 40-year-old purchase LTC, but at age 55 or so one should be considering it if circumstances warrant it.
Protect your assets in estate planning You’re beginning to accumulate substantial wealth, but you worry about protecting it from future potential creditors. Whether your concern is for your personal assets or your business, various tools exist to keep your property safe from tax collectors, accident victims, health-care providers, credit card issuers, business creditors and creditors of others. To insulate your property from such claims, you should evaluate each tool in terms of your own situation.
Christopher Johnson
CRPC, AAMS, CLTC, CEP, AWMA Collaborative Financial Partners You may decide that insurance and a Declaration of Homestead may be sufficient protection for your home because
your exposure to a claim is low. For high exposure, you may want to create a business entity or an offshore trust to shield your assets. Remember, no assetprotection tool is guaranteed to work, and you may have to adjust your assetprotection strategies as your situation or the laws change.
Liability insurance is your first and best line of defense Liability insurance is at the top of any plan for asset protection. You should consider purchasing or increasing umbrella coverage on your homeowner’s policy. For business-related liability, purchase or increase your liability coverage under your business insurance policy. Generally, the cost of the premiums for this type of coverage is minimal compared to what you might be required to pay under a court judgment if you are sued.
Dividing assets between spouses can limit exposure to potential liability Perhaps you work in an occupation or business that exposes you to greater potential liability than your spouse’s job. If so, it may be a good idea to divide assets between you and your spouse so that you keep only the income and assets from your job, while your spouse takes sole ownership of your investments and other valuable assets. Generally, your creditors can reach only those assets that are in your name.
Certain trusts can preserve trust assets from claims People have used trusts to protect
their assets for generations. The key to using a trust as an asset-protection tool is that the trust must be irrevocable and become the owner of your property. Once given away, these assets are no longer yours and are not available to satisfy claims against you. To properly establish an asset-protection trust, you must not keep any interest in the trust assets or control over the trust. Trusts can also protect trust assets from potential creditors of the beneficiaries of the trust. The extent to which a beneficiary’s creditors can reach trust property depends on how much access the beneficiary has to the trust property. The more access the beneficiary has to the trust property, the more access the beneficiary’s creditors will have. Thus, the terms of the trust are critical. There are many types of assetprotection trusts, each having benefits and drawbacks. These trusts include: • Spendthrift trusts • Discretionary trusts • Support trusts • Blend trusts • Personal trusts • Self-settled trusts Since certain claims can pierce domestic protective trusts (e.g., claims by a spouse or child for support and state or federal claims), you can bolster your protection by placing the trust in a foreign jurisdiction. Offshore or foreign trusts are established under, or made subject to, the laws of another country (e.g., the Bahamas, the Cayman Islands, Bermuda, Belize, Jersey, Liechtenstein and the Cook Islands) that does not generally honor judgments made in the United States.
■
THE COLUMBUS DISPATCH | Special Advertising Section | sunDAY, october 5, 2014
College preapproval: A 3-step process to graduate with less debt We’ve all seen this storyline unfold before — a recent college grad is buried in six figures of student loans, has no foreseeable job prospects and has been forced Joseph Messinger to move back in CFP,® ChFC,® CLU Capstone Wealth with mom and Partners, Ltd. dad. Increasingly, more college-educated adults are returning to the nest, putting off first-time home purchases and delaying marriage and having children. In large part, this is because they are financially overburdened with student loans — a growing trend that isn’t good for individuals or the economy as a whole. How did we get here? My observation is that many people are making emotional decisions about college selection with complete disregard to the long-term financial effects that such an investment typically entails. This underestimation of total college costs has resulted is a massive amount of easily attainable education loans. By and large, consumers are making uninformed decisions, albeit well-intentioned ones, about how to pay for college and, in turn, are getting in way over their heads. If you’ve purchased a home recently, you likely obtained a mortgage preapproval letter — an official document from a lender, stating a preliminary determination of your qualifications as a borrower for a particular loan amount under that lender’s guidelines. That determination was based on your income, assets and credit worthiness — in other words — your ability to repay the loan. So, with combined college costs for two children rivaling that of a typical suburban home, why is there no process like this for financing a college education? According to a recent report from the Project on Student Debt at The Institute for College Access & Success (TICAS), graduates who borrowed for bachelor’s degrees granted in 2012 had an average student loan debt of $29,400. Seven in 10 college seniors (71 percent) who graduated last year had at least some student loan debt. And since 2004, the total student loan
debt has grown from $250 billion to more than $1.2 trillion, a staggering increase of nearly 25 percent per year. The cost of an undergraduate college education is now exceeding $250,000 at some of the most elite colleges and is continuing to rise 6 to 8 percent per year. At that rate, the cost of college doubles approximately every 10 years. The takeaway? It’s time to be proactive about college, rather than reactive. Remove the emotion, educate yourself and become an informed buyer of a college education. What if funding a college education required a preapproval process, much like buying a house? Here is a simple three-step process to preapprove your college choice: 1. Determine the true out-ofpocket cost to earn a degree after all scholarships and grants are applied. Every school is now required to have a Net Cost Calculator available on their websites that will estimate your eligibility for scholarships and grants. These take into consideration both your family’s estimated financial need, as well as the pure academic merit of your student. 2. Determine how much of the unfunded cost you can afford to pay from your existing college savings plans and out of cash flow while in school. If you have multiple children, divide your savings accordingly. 3. Calculate the total amount of loans that will need to be taken out to fund the remaining balance, including an estimated monthly repayment schedule (this can be a real eye opener). A good rule of thumb is to take out no more in student loans than what is expected in firstyear earnings. So, if your student projects having a starting salary of $35,000, then $35,000 should also be the maximum student loan total. High school and college counselors will help you with this process, but ultimately, you have to decide which colleges fall within your preapproved budget. All the numbers mean very little to a starry-eyed teenager. As a parent, you have to help get this right and prevent your student from getting in over his or her head, or robbing your own retirement. A college preapproval letter is a great place to start in becoming an informed buyer of college education.
G3
Financial Planning Association of Central Ohio
board of directors
Kristen Moosmiller, CFP® President
Scott Eichar, CFP,® CPA Treasurer
PDS Planning, Inc. (614) 481-8449 kmoosmiller@pdsplanning.com
Erin Gaeta, CFP,® MS Public Relations Director
Mentel Financial Services, LLC (614) 985-3730 erin@mentelfinancial.com
GBQ Partners LLC (614) 947-5233 seichar@gbq.com
Paul Dolce, CFP® Career Development Director Financial Solutions LLC (614) 604-3551 pdolce@financialsols.com
Michael H. Mulhern, CPA (inactive), CFP® Government Relations Director
Isao Shoji, CFP,® CLTC Pro Bono Director
Total Retirement Solutions, LLC (614) 854-6669 mike.mulhern@LFG.com
William Vasil, CFP,® CPA, MAcc MEMBership director
The Schumacher Group (614) 390-9642 isao.shoji@ampf.com
David Bowman NexGen Director
Ary Roepke Mulchaey (614) 486-3600 wvasil@armcpa.com
Hamilton Capital Management (614) 273-1000 dcb@hamiltoncapital.com
Martina Peng, Ph.D., CFP® programs director
Bill Shorthill, CFP® partnership director
Franklin University (614) 947-6174 martina.peng@franklin.edu
Beacon Hill Investment Advisory, LLC (614) 469-4685 bill@bhadvisory.com
admin@fpacentralohio.org www.fpacentralohio.org
G4
G5
THE COLUMBUS DISPATCH | Special Advertising Section | sunDAY, october 5, 2014 ■
Mark Aldridge, CFP,® CFA, ChFC® Aldridge Financial Consultants, LLC (614) 824-3080 mark.aldridge@raymondjames.com
Teri Alexander, CFP,® MSFP Alexander Financial Planning, Inc. (614) 538-1600 talexander@afp-advisors.com
Samantha Anderson, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 samantha.anderson@b-r-r.com
Aaron Armstrong, CFP,® CFA Budros, Ruhlin & Roe, Inc. (614) 481-6900 aarmstrong@b-r-r.com
Diane Armstrong, CFP,® CPA Armstrong Financial Services, LLC (614) 725-5260 diane@armstrongfinancialservices.com
James Budros, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 james.budros@b-r-r.com
Jason Buehner, CFP,® CRPC Ameriprise Financial (614) 621-2639 jason.a.buehner@ampf.com
Joseph A. Chornyak, Sr., CFP® Chornyak & Associates Chornyak.com chornyak@chornyak.com
Joseph A. Chornyak, Jr., CFP® Chornyak & Associates Chornyak.com chornyakjr@chornyak.com
Robert Cochran, CFP® PDS Planning, Inc. (614) 481-8449 rcochran@pdsplanning.com
Shawn Ballinger, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 shawn.ballinger@b-r-r.com
Mark Beaver Keeler & Nadler Financial Planning (614) 791-4123 mark.beaver@keelernadler.com
Geoffrey Biehn, CPA, CFP® Trinity Financial Advisors, LLC (614) 848-7667 gbiehn@tfadvisors.com
Pamela Birkenholz, CRPC Waddell & Reed, Inc. (614) 799-0373 x110 pbirkenholz48370@wradvisors.com
Kurt Brown PDS Planning, Inc. (614) 481-8449 kbrown@pdsplanning.com
Mark Coffey, JD, CFP® Summit Financial Strategies (614) 885-1115 mark@summitfin.com
John Deitrick, CFP® Advanced Retirement Design, LLC (614) 602-6506 jdeitrick@advancedretirementdesign.com
Daniel Due, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 daniel.due@b-r-r.com
Jason Eliason, CFP,® ChFC, CFA Waller Financial Planning Group, Inc. (614) 457-7026 jeliason@waller.com
Andrea Ellis, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 aellis@b-r-r.com
The largest membership organization for CFP® professionals in Ohio that includes members who support the financial planning process.
Find a financial planner near you at PlannerSearch.org
Jason Farris, CFP® Waller Financial Planning Group, Inc. (614) 457-7026 jfarris@waller.com
Brian Fenstermaker, CFP® Envision Consulting Group, LLC (614) 794-1111 brian@envisionconsulting.com
Bob Franz Alexander Financial Planning (614) 538-1600 bfranz@afp-advisors.com
Erin Gaeta, CFP,® MS Mentel Financial Services, LLC (614) 985-3730 erin@mentelfinancial.com
Gwen Gloeckner, CDFA, CLTC Gloeckner Financial Group (614) 310-2400 gwen@gloecknerfinancial.com
Jim Hamilton PDS Planning, Inc. (614) 481-8449 jhamilton@pdsplanning.com
Robert Hamilton, CFP® PDS Planning, Inc. (614) 481-8449 bhamilton@pdsplanning.com
Rita Itsell PDS Planning, Inc. (614) 481-8449 ritsell@pdsplanning.com
Christopher Johnson, CRPC, AAMS, CLTC, CEP, AWMA Collaborative Financial Partners (614) 799-2900 christopher.k.johnson@ampf.com
Andrew Keeler, CFP® Keeler & Nadler (614) 791-4123 andy.keeler@keelernadler.com
Clint Keener Keener Wealth Management (614) 410-6842 clint@keenerwm.com
Scott Kidwell, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 skidwell@b-r-r.com
Katherine Kincaid, CFP® Waller Financial Planning Group, Inc. (614) 457-7026 kkincaid@waller.com
Michael Kline, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 michael.kline@b-r-r.com
Anthony Konecny, CFP® First Command Financial Services (614) 944-5720 adkonecny@firstcommand.com
Charlene Kott, CFP® Asset Management/RJFS (614) 895-2990 charlene.kott@raymondjames.com
Jessica Lee Budros, Ruhlin & Roe, Inc. (614) 481-6900 jlee@b-r-r.com
Laurie Licata PDS Planning, Inc. (614) 481-8449 llicata@pdsplanning.com
Whitney T. Logan, CFP,® CLU, ChFC ® Logan Financial Group, LLC (614) 442-0214 whitney.logan@raymondjames.com
Samantha Macchia, CFP,® ChFC ® Summit Financial Strategies (614) 885-1115 samantha@summitfin.com
Meghan Mader, CFP,® CRPC, RICP Collaborative Financial Partners (614) 799-2900 meghan.m.mader@ampf.com
Richard Martin, CFP® Steinhaus Financial Group (614) 431-4342 ric.martin@lfg.com
Robert Mauk, CFP® Chornyak & Associates Chornyak.com rmauk@chornyak.com
John McHugh, CFP,® CPA Budros, Ruhlin & Roe, Inc. (614) 481-6900 jmchugh@b-r-r.com
Jamie P. Menges, CFP,® CPA PDS Planning, Inc. (614) 481-8449 jmenges@pdsplanning.com
Michelle Merkel, CFP® Merkel Financial Services, Inc. (614) 481-4455 merkelfinancial@merkelfinancial.com
Joseph Messinger, CFP,® ChFC,® CLU Capstone Wealth Partners, Ltd. (614) 754-7805 jsm@capstonewealthpartners.com
Andrew Michel, CLU , ChFC ® Andrew Michel & Associates, LLC (614) 885-2853 andy.michel@lfg.com
Brian Mills, CFP® SS&G Wealth Management, LLC (614) 573-7776 bmills@ssandg.com
Michael Mulhern, CFP,® CPA (Inactive) Total Retirement Solutions, LLC (614) 854-6669 mike.mulhern@LFG.com
Richard Nadler, CFP ® Keeler & Nadler Financial Planning (614) 791-4123 richardnadler@aol.com
Christopher Olsgard, CFP® Waller Financial Planning Group, Inc. (614) 457-7026 colsgard@waller.com
Christina Povenmire, CFP,® MBA CMP Financial Planning (614) 487-1244 christina@cmpfinancial.com
Debbie Price, J.D., CPA, CFP® Price Planning, LLC (614) 848-3860 debbie@priceplanning.com
Kenneth Reed, AAMS Logan Financial Group (614) 442-0214 michael.reed@raymondjames.com
Scott Rendle, CFP® Waller Financial Planning Group, Inc. (614) 457-7026 srendle@waller.com
Daniel Roe, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 droe@b-r-r.com
Peggy Ruhlin, CFP,® CPA/PFS Budros, Ruhlin & Roe, Inc. (614) 481-6900 pruhlin@b-r-r.com
Ted Saneholtz, CFP,® CPA, ChFC® Summit Financial Strategies (614) 885-1115 ted@summitfin.com
Michael Scherer, CFP® Summit Financial Strategies (614) 885-1115 mike@summitfin.com
John Schuman, J.D., CPA, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 jschuman@b-r-r.com
William Shorthill, CFP® Beacon Hill Investment Advisory (614) 501-3205 Bill@bhadvisory.com
Franklin Simon, III Keener Wealth Management (614) 410-6842 frank@keenerwm.com
Douglas Smith Douglas C. Smith Company, LLC (614) 885-1480 stocksmith@hotmail.com
Timothy Stevenson, CFP,® EA Frazier Financial Advisors, LLC (614) 793-8297 tstevenson@frazierfinancial.com
Matthew Stewart, CFP® Key Private Bank (614) 460-3453 Matthew_J_Stewart@keybank.com
Isaiah Stidham, CPA, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 isaiah.stidham@b-r-r.com
Jeffrey Suchy, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 jeffrey.suchy@b-r-r.com
Tim Swain, CFP® Summit Financial Strategies (614) 885-1115 tim@summitfin.com
Gary Vawter, CFP,® MS, ChFC, AEP Vawter Financial, Ltd. (614) 451-1002 gary@vawterfinancial.com
Todd Walter The Joseph Group (614) 907-8638 todd.walter@josephgroup.com
Amy Weldele, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 amy.weldele@b-r-r.com
Kevin Wuebker, CFP® Budros, Ruhlin & Roe, Inc. (614) 481-6900 kevin.wuebker@b-r-r.com
Larry R. Zapp, CFP® Larry R. Zapp & Associates, Inc. (614) 478-0500 lrzapp@sbcglobal.net
Key to Accreditations: AAMS. . . . . . . . . . . . . . . Accredited Asset Management Specialist AEP. . . . . . . . . . . . . . . . . Accredited Estate Planner AWMA . . . . . . . . . . . . . . Accredited Wealth Management Advisor CDFA. . . . . . . . . . . . . . . . Certified Divorce Financial Analyst CFA. . . . . . . . . . . . . . . . . Chartered Financial Analyst CFP®. . . . . . . . . . . . . . . . Certified Financial Planner ChFC®. . . . . . . . . . . . . . . Chartered Financial Consultant CLTC . . . . . . . . . . . . . . . . Certified in Long-Term Care CLU. . . . . . . . . . . . . . . . . Chartered Life Underwriter CPA. . . . . . . . . . . . . . . . . Certified Public Accountant CRPC. . . . . . . . . . . . . . . . Chartered Retirement Planning Counselor EA. . . . . . . . . . . . . . . . . . Enrolled Agent J.D. . . . . . . . . . . . . . . . . . Juris Doctor MBA. . . . . . . . . . . . . . . . Master's in Business Administration MS. . . . . . . . . . . . . . . . . . Master of Science MSFP . . . . . . . . . . . . . . . Master's in Financial Planning PFS. . . . . . . . . . . . . . . . . Personal Financial Specialist RICP . . . . . . . . . . . . . . . . Retirement Income Certified Professional
The Financial Planning Association of Central Ohio serves and inspires those who deliver, support and need financial planning.
G6
THE COLUMBUS DISPATCH | Special Advertising Section | sunDAY, october 5, 2014
■
Transitioning into retirement — the ‘zone’
If you’re considering retirement within the next five years or so, you’re in the retirement “zone.” This is a critical period during which you will be faced with a Meghan Mader number of imporCFP,® CRPC, RICP tant choices, and Collaborative Financial the decisions you Partners make can have long-lasting consequences. It’s a period of transition: a shift from a mindset that’s focused on accumulating assets for retirement to one that’s focused on distributing wealth and drawing down resources. It can be confusing and chaotic, but it doesn’t have to be. The key is to understand the underlying issues, and to recognize the long-term effects of the decisions you make today.
Are you ready to retire? The first question you should ask yourself is: Am I ready to retire? For many, the question isn’t as easy to answer as it might seem. That’s because it needs to be considered on two levels. The first, and probably the most obvious, is the financial side. Can you afford to retire? More specifically, can you afford the retirement you want? On another level, the question
relates to the emotional issues surrounding retirement. How prepared are you for this new phase of your life? Consider both the financial and emotional aspects of retirement carefully. Retiring before you’re ready can put a strain on the best-devised retirement plan.
Transitioning into retirement: Financial issues The basics: • If you do not already have a projection of the annual income you will need in retirement, spend the time now to develop one. Factor in anticipated costs relating to basic needs, housing, health care and long-term care. If you plan to travel in retirement, estimate a corresponding annual dollar amount. If you’re financially responsible for other family members, or plan to make monetary gifts, you will want to include these commitments in your calculations. Be as specific as you can. If it’s been more than a year since you’ve done this exercise, revisit your numbers. Consider and account for inflation. • Estimate the income that you will be able to rely on from Social Security and any benefits from a traditional employer pension, and compare the result with your projected retirement income need. The difference may need to be funded through your personal savings. • Take stock of your personal savings. Are your personal savings suf-
The average cost of health care during retirement is
$197,000. (And that’s a sick amount of money.)
ficient to provide you with the annual income that you will need? • When will you retire? The age at which you retire can have an enormous impact on your overall retirement-income situation, so make sure you’ve considered your decision from every angle. Why does the timing of your retirement make such a difference? The earlier you retire, the sooner you need to start drawing on your retirement savings. You’re also giving up what could be prime earning years, when you could be making substantial additions to your retirement savings. That combination, even for just a few years, can make a tremendous difference.
The perfect storm: Retirement challenges today Does anyone feel as if they have too much money saved for their retirement? Or even enough money? Every person nearing retirement faces this concern, but Jamie P. Menges now more than CFP,® CPA ever, it seems to PDS Planning, Inc. be more challenging. According to a Boston Research Group study, only 22 percent of retirement-plan participants feel they are on track to have enough money in retirement to live their desired lifestyle. There are many factors merging to create a perfect storm for those who have retired or will be retiring over the next generation. Longer life expectancies, health-care costs, alltime low interest rates, volatile investment markets, companies abandoning traditional pension plans and a U.S. balance sheet that suggests taxes will rise all enhance the challenges we face today trying to retire. How do we address these challenges? Let’s consider two key areas.
Accumulation
2200 West 5th Avenue, Suite 200 Columbus, OH 43215 614.481.8449 Investments | Retirement | Financial Planning
pdsplanning.com
Other factors to consider: • The longer the retirement period that you need to plan for, the greater the potential that inflation will eat away at your purchasing power. That means the earlier you retire, the more important it is to account for inflation in your overall plan. • You can begin receiving Social Security retirement benefits as early as age 62. However, your benefit may be as much as 20 to 30 percent less than if you waited until full retirement age (65 to 67, depending on the year you were born). Weigh your options, and choose the start date that makes the most sense for your individual financial circumstances.
For starters, save as much money as possible. I am yet to have a client tell me they have saved too much money for retirement. The next step is to take the long view in your portfolio. Historically, stocks have outperformed fixedincome instruments such as bonds. Yes, stocks have come with considerable volatility in some instances, but the long-term potential of stocks should serve you well, if you have the patience to accept the volatility that the market can sometimes bring. Also, try to avoid the silent killers of any portfolio: expenses and taxes. In some cases, they go hand in hand.
Oftentimes, more expensive actively managed mutual funds have meaningful capital-gains distributions each year. Lower-cost index funds rarely distribute capital gains at the same rate as their actively managed counterparts. Finally, hold your advisor accountable to a high standard when it comes to managing taxes in your portfolio. For example, we try to use a strategy called asset placement in our client portfolios. This allows us to place specific tax-sensitive investments in the most efficient account registration in order to minimize the impact of taxes. In summary, save money, invest it for the long term and keep money in your pocket by not paying too much in taxes and expenses.
Income Strategies There are many factors that impact how our clients derive their income during retirement. Guaranteed income sources such as pensions, part-time wages or a working spouse, passive income such as rental income, qualified retirement-plan assets, Social Security and annuities will all have an impact on your distribution strategy. Balancing income needs against estate-planning objectives is also important. For example, a Roth IRA is a fabulous asset to pass to heirs. We often have clients fill their marginal income tax bracket with Roth IRA conversions in order to pass the most tax-efficient assets possible to their children, thus elongating the tax savings for multiple generations. However, that must be balanced against available resources, monitoring the taxation on any Social Security benefits and trying to avoid the trickle-down effect on things such as itemized deductions and exemptions. It can be a complex puzzle, so ordering where you will take money from each year is vitally important.
■
THE COLUMBUS DISPATCH | Special Advertising Section | sunDAY, october 5, 2014
Get ready for a new acronym — IRMAA 25 percent. Starting IRMAA is not in 2007, those the name of BB with a Modified King’s second favorAdjusted Gross ite guitar, Erma. Income (MAGI) It’s the acronym above the threshold that is affecting are required to pay more clients who a higher percentage normally wouldn’t of their premium be categorized as (IRMAA-B). The “high income.” It’s Bob Franz percentage of the Social Security’s Alexander Financial premium the recipiIncome-Related Planning ent is responsible for Monthly Adjustment Amounts (IRMAA) to Medicare rises as their income increases Parts B & D premiums. It’s also — 35 percent, 50 percent, 65 known as the Medicare Subsidy percent or 85 percent. As of January 2011, recipiReduction. ents enrolled in the Part D Don’t let the complicated name lock you up like a deer in (prescription drug plan) with higher income may also be headlights. It’s pretty straightrequired to pay a higher preforward. IRMAA is greater cost mium (IRMAA-D). Since the sharing on the part of those premiums vary by state and at higher income levels. Two plan, those with higher income Medicare laws changed how Part B and D premiums are cal- pay an additional flat dollar amount. culated for those with higher The higher premiums for income. Part B and D are withheld from The government typically one’s Social Security check. If pays 75 percent of the Part B the premium is greater than (doctor visits and outpatient services) and the recipient pays the Social Security benefit,
a separate bill will be sent. IRMAA is recalculated annually on the MAGI of the most recent tax return. MAGI is the Adjusted Gross Income (AGI) with several deductions and incomes added back in. There is typically a oneor two-year lag in the detection of IRMAA based on one’s most recent tax return. This can really impact those in their first few years of retirement. For example, we had a client who is a retired schoolteacher with some part-time earned income. He filed married separate in 2012. His STRS pension was around $59,000; work income was $26,000 and he had $2,000 in investment income. The total put him over the threshold by $2,000, causing his Part B premium to increase from $104.90 to $272.70 per month for 2014. He also had to pay $300 per month for Part D even though this coverage was not elected. Married couples filing separately, be aware of IRMAA. This
is a new wrinkle that isn’t especially well known. Threshold levels are not adjusted for inflation, and if your Part B
G7
premium is affected, it is likely your Part D premium will be, too. IRMAA could affect more people than one might think.
The following tables are the MAGI thresholds and the corresponding IRMAA increases for 2014. Single, head-of-household or qualifying widow Part B Prescription Drug MAGI Level: Premium*: Premium:
< $85,000 > $85,000 6 $107,000 > $107,000 6 $160,000 > $160,000 6 $214,000 > $214,000
MAGI Level:
Plan premium $12.10 + Plan premium $31.10 + Plan premium $50.20 + Plan premium $69.30 + Plan premium
Married, filing jointly Part B Prescription Drug Premium*: Premium:
< $85,000 > $170,000 6 $214,000 > $214,000 6 $320,000 > $320,000 6 $428,000 > $428,000
MAGI Level:
$104.90 $146.90 $209.80 $272.70 $335.70
$104.90 $146.90 $209.80 $272.70 $335.70
Plan premium $12.10 + Plan premium $31.10 + Plan premium $50.20 + Plan premium $69.30 + Plan premium
Married, filing separately Part B Prescription Drug Premium*: Premium:
< $85,000 > $85,000 6 $129,000 > $129,000
$104.90 $272.70 $335.70
Plan premium $50.20 + Plan premium $69.30 + Plan premium
Talking to your aging parents about their finances Each day between 2011 and 2030, 10,000 baby boomers will celebrate their 65th birthdays. As the boomers grow older, their middle-aged children may Diane Armstrong find themselves CFP,® CPA in a challenging Armstrong Financial situation — proServices, LLC viding financial assistance to their parents as well as their own kids. According to a poll by the Pew Research Center: • 75 percent of adults believe that they have a responsibility to provide financial assistance to their aging parents. • 63 percent of adults have given some type of financial support to their grown children in the past year. Members of the Sandwich Generation — those who are taking care of aging parents while supporting their own children — often come under serious financial and emotional stress. As your parents move into retirement, it is wise to plan ahead for any financial and legal responsibilities that they may expect you to take on.
Starting the conversation These days, 65 is hardly considered old age. But it’s crucial to sit down with your parents and have an honest discussion about issues that may arise — before they need your help. What are their expectations for the future, and what kind of assistance will they need from you? Will they have sufficient resources to cover their care as they age? As part of this conversation, be sure that they have their important
documents and information organized. You’ll want to know where to locate items including: • Wills and legal documents • Investment, bank and insurance account numbers • Safe deposit boxes, real estate deeds and automobile titles • Emergency contact numbers (medical providers, neighbors and friends, and financial, tax and legal advisors)
Looking into legal matters If they haven’t already done so, your parents may want to hire an attorney to help them manage their affairs. For example, they may need assistance with: • Appointing a health-care representative. Without legal authorization, medical privacy laws prevent doctors from discussing a parent’s medical conditions with you. In addition to appointing a health-care power of attorney, your parents may want to consider a living will, which provides instructions on how to manage treatment if they have a terminal or irreversible condition and cannot communicate. • Reviewing and updating estate planning documents. Besides the basic estate planning documents, such as wills, durable powers of attorney and revocable trusts, your parents may wish to draft a letter outlining who will receive personal effects like jewelry and family heirlooms.
Discussing their financial situation Depending on your parents’ circumstances and financial savvy, they might need help managing their money as they age. Making arrangements now can help prevent confusion down the road. • Look into banking options. Most banks offer automatic bill pay-
ment services from checking or savings accounts — a convenient option if your parents are comfortable with the Internet. • Review insurance coverage. Be sure to discuss your parents’ existing life and long-term care policies, and make changes if necessary. • Enlist an advisor. Now may be a good time to get to know your parents’ financial advisor, or to talk to your own advisor about your parents’ situation. He or she can make recommendations that are suitable to their investment goals, whether that means income, capital preservation or growth. An advisor can also propose cashmanagement solutions, which allow your parents’ monthly Social Security, retirement plan and annuity payments
to be deposited automatically into an account. You can typically access these funds through a debit card, unlimited check-writing capabilities and online bill-pay services — everything that a bank checking account offers.
Looking to the future As your parents age, a number of other considerations will likely come into play. Will they be able to continue living at home? How long will they be able to drive? Although these topics may be difficult to discuss, it’s important to start the conversation early — for your parents’ sake as well as your own. By planning ahead for any financial assistance and other care they may require, you’ll help ensure that everyone’s needs are met.
Lifestyle & Legacy SM Choices by Design
Columbus Location
941 Chatham Lane, Suite 212 Columbus, Ohio 43221 P 614-457-7026
Naples Location
801 Laurel Oak Drive, Suite 710 Naples, Florida 34108 P 239-325-8505
www.waller.com
G8
THE COLUMBUS DISPATCH | Special Advertising Section | sunDAY, october 5, 2014
■