All Things Financial Planning Blog


A Cautionary Tale: Protect Yourself from Identity Theft

The call came while I was cooking dinner the other night – my mother had received a phone call from a woman purporting to be calling on behalf of Medicare. It was late in the afternoon when Mom was tired and before she realized it was a scam, Mom had given her personal bank account information to the woman on the phone. Identity thieves have been targeting senior citizens and tricking them into giving out personal information by threatening they will lose Medicare benefits if they don’t give the information.

Identity theft happens when someone steals your personal information and uses it without permission. Thieves can run up your credit accounts, get new credit cards, medical treatment or a job – all in your name. Identity thieves cause a lot of damage – and they don’t just target the elderly.

There are several activities which, when made part of your regular routine, can help you reduce the risk of identity theft or the damage when it occurs:

  1. Monitor all your accounts on a routine basis – look at transactions each month to be sure that they are authorized and contact your financial institution immediately if you discover a problem.
  2. Read your credit reports from each of the credit reporting companies each year – you have a right to a free credit report every 12 months and can access these reports at
  3.  Remember to keep your anti-virus and anti-spyware software up-to-date and if you haven’t done so already, add a firewall to your home network.
  4. Keep your personal and financial papers secure and shred them before discarding them.

These are just a few suggestions – for more information, check-out the resources provided by the Federal Trade Commission, the Consumer Financial Protection Bureau, or the Consumer Federation of America.

If, despite your best efforts, your information does become compromised, act fast to limit the damage:

  1. Flag your credit reports by calling one of the credit reporting companies, and ask for a fraud alert on your credit report. The company you call must contact the other two so they can put fraud alerts on your files. An initial fraud alert is good for 90 days.
  2. Contact your bank’s fraud department to secure your personal accounts and ask for further guidance on securing personal information.
  3. Consider placing a “freeze” on your credit – the freeze should prohibit anyone from opening accounts using your name and Social Security number.

Identity theft can happen at any time and any place – the thieves may appear in person, online, or over the phone. Take precautions to secure your data and help your loved ones do the same.

By FPA member Jeanie Schwarz, MBA, CFP®
Lumina Financial Consultants
Special to FPA




6 Tips for a Better Financial Future

Summer is upon us and in full swing. While you (hopefully) have some well-deserved time off, take the necessary steps to get your financial life back on track. No matter what stage of your life you are currently in, these simple but valuable financial planning tips may help you do so.

  1. Take 5 minutes to check your beneficiary designations– Young or old, chances are you have some type of life insurance policy or retirement plan. And chances are, you have not taken a look at who will inherit these funds/accounts since you opened the account several years ago. Countless times I have seen clients shocked when I uncover their beneficiary designations to be an ex-spouse, a deceased family member, or even worse – a big blank line. Take the time now to check to ensure that you have the appropriate beneficiary designations in place on all retirement accounts and insurance policies. Your financial professional can help you with the tax and estate planning advantages to certain beneficiary designations for each type of account.Tip: The most common (and basic) type of life insurance most employees have is an employer-paid policy with a $50,000 death benefit (this is the most common type because the IRS requires you to be taxed on the value of employer-provided group term life insurance over this amount). More often than not, when employees go through their first-day-of-work orientation and elect their new benefits, they leave the beneficiary designation for this standard policy (and probably their 401(k) account) blank. Check it out now and make sure you have elected a primary AND contingent beneficiary.
  2. If you don’t know how to do taxes; it may not be a great idea to do your own taxes– It’s really as simple as that. Oftentimes, we attempt to do our own income taxes in order to save some money, but have no real knowledge of our complicated tax system. This may be a costly mistake if you are not aware of many important and ever-changing tax laws. Are you aware of all of the various deductions and credits you are entitled to? Are you aware of the rules for claiming dependents? Do you know how to properly calculate your charitable contribution deductions? Do-it-yourself tax software has made it very convenient to complete your own taxes, but tax planning is not simple and the decision to do your own taxes should not be taken lightly.Tip: One of the most common mistakes people make when they attempt to do their own taxes is failing to utilize carry-forwards from prior tax years. For example, you can carry unused capital losses (say, from a bad investment loss) forward for your lifetime. Your capital losses will offset other capital gains, and if there’s still a loss remaining, you can deduct $3,000 p/year from other taxable income. If you do not keep track of your carry-forward balances or look at your previous returns for guidance (assuming these prior returns are correct), you may miss this valuable deduction, costing you hundreds or thousands of dollars in tax savings. If you are not confident in your ability to prepare your return, consider having a professional complete them this time around.
  3. Can you name three investments in your 401(k) account?– If someone asked you if your car had leather seats and air conditioning, would you be able to tell them? Absolutely. Then why shouldn’t you know what your biggest retirement asset is made up of? Take the time to understand your 401(k) account as it will be an important savings vehicle for your retirement years. Explore your available investment options, know the deferral percentage rate you need to elect in order to take advantage of your employer match (if any), and ensure that your investment allocation is appropriate for your risk tolerance, time horizon and retirement goals.Tip: Some 401(k) plans allow you to automatically increase your deferral percentage each year by a desired increment. This will allow you to gradually increase your contributions effortlessly and systematically without dramatically impacting your cash flow. Consider the following example which shows the difference in ending account values between keeping a constant deferral rate compared to increasing it incrementally over the years. Both examples assume a starting account balance of $20,000 and a beginning gross salary of $65,000 p/year:

    Constant 3% p/year deferral rate: $1,576,264*

    Starting at 3% deferral and increasing by 2% p/year until 10%: $2,693,714*

    *Assumes 3% raises p/year, 7% annual return, and a 3% employer match, for 40 years.


  4. Do you know what will happen to you, your children and your assets when you pass away or become incapacitated?Estate laws are complicated, ever-changing and mostly misunderstood by the average American. Not having a basic estate plan in place is like showing up to a job fair without a resume. Did you know that in 2011, over 70% of Americans did not have a basic will in place? This is one area of your life that you do not want to risk being unprepared. At the very minimum, you will want to have a will, guardianship provisions (if you have children or legal dependents), and power of attorney documents. A revocable living trust is also an important estate planning tool you will want to consider, depending on your situation, estate planning goals and objectives.Tip: Many people believe that only the very wealthy need estate planning. This is simply not true. Basic estate planning documents are important to ensure you have control of your assets and well-being during your lifetime and after your death. Do not let the state decide how your assets will be distributed or who will care for your loved ones.
  5. Planning for educational expenses begins at birth– Far too many parents begin to plan for their children’s college expenses when it’s far too late – when the college-bound child is sitting in their driver’s education course. At this point, the tax advantages and compounding advantages of a 529 college savings plan are greatly diminished, and the impending expenses are likely to be paid out of any cash flow and lots and lots of debt.According to the College Board, the increase in college tuition at a public four-year school was 8.3 percent between the 2010-11 and 2011-12 school years. That’s over twice the inflation rate over the same period! Take actions as soon as possible to begin planning for your child’s education. All things being equal, the earlier you start saving, the longer you have for your savings to grow and compound.

    Tip: Once a college savings vehicle is established, try to increase the amount you contribute each year. Aim to increase the total amount you save each year by at least 6%. For example, if you save $100 a month this year, you should save at least $106 a month next year. This will help your savings keep up with the high college inflation rate.

  6. Do you know what your risk tolerance is?– The old adage that says you should hold your age in bonds (as a percentage of your overall portfolio allocation) may no longer be appropriate for today’s investor, especially in today’s economy. Don’t know what your risk tolerance is? Think about the following scenario. You are given a choice between two cars to take on a cross country vacation. Option 1 is a fast, attractive, high risk sports car with very bad crash ratings. Option 2 is a slower, unattractive, safe sedan with excellent crash ratings. Which do you choose and why?Consider another scenario in which you have the option to stay in one of two resort hotel rooms. Option 1 is a suite on the 25th floor with great panoramic ocean views. Option 2 is the same sized suite, but on the first floor with convenient emergency exits. Which do you choose and why?

    The amount of risk you are willing to assume for a chance at receiving a desired return can help you begin to design your overall investment portfolio. Among the various factors to consider when deciding on an appropriate allocation are: your proximity to retirement, how comfortable you are with investing, your other available income streams, liquidity needs, and your general comfort level with the financial markets.

    Tip: Your risk tolerance (once you determine it) should help you and your financial professional design an appropriate and diversified investment portfolio that will help you achieve your goals and objectives. It is important that you are comfortable, knowledgeable and confident in your investment plan, or else it may be very difficult to stay on course.

By FPA member Grant Webster, MSBA, CFP®
AKT Wealth Advisors
Special to FPA


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Do Young Adult Children Need Estate Planning Documents?

Recently my son, a 21 year old senior in college, required some minor surgery. I felt pretty comfortable with the privacy rules pertaining to young adults and the need for my son to give his doctor permission to talk with me about his condition. We discussed this and my son decided to sign a Health Care Proxy and HIPAA (Health Insurance Portability and Accountability Act) Release form so the doctor could talk with me about his specific care. We thought we were good to go.

The day of the surgery, I drove him to the hospital, filled out the “Responsible for Payment” forms, gave my contact information and waited patiently in the waiting room for his procedure to be completed. After about 2 hours, I walked to the front desk to inquire if they had any word on his status. You can imagine my surprise when the clerk informed me that she could not share that information with me. I explained that my son had filled out and signed a Health Care Proxy and HIPAA form so that I could get this information. She explained that while he may have done that with his doctor, the hospital unfortunately did not have a copy in their files. Of course, I didn’t have a copy with me, as I had mistakenly thought this information would be sent to the hospital.

This incident got me thinking about my kids and what would happen if we were faced with an emergency situation. Would access to our children’s health care provider be limited? I became anxious, realizing that I might not be able to help my child in their time of need! Isn’t that every parent’s biggest fear?

If my child was unable to make financial decisions due to a medical situation or condition, I also realized I wouldn’t have access to my child’s financial information (banks, investment accounts, credit cards, etc.).

Fortunately, there are a couple of simple forms that can alleviate these parental anxieties. Planning ahead of time, before the emergency, is the key. Consider having your child sign a statutory health care proxy, naming a parent as the child’s health care agent. Also, your child might consider a durable power of attorney, giving a parent access to their financial assets if they are unable to manage them themselves. The power of attorney should be carefully drafted by an attorney as they can vary greatly.

If your child becomes incapacitated and does not have a health care proxy or power of attorney in place, then your only recourse will be to go to court to obtain a Guardianship and/or Conservatorship. This involves a public process that can be expensive and time consuming. In contrast, these basic documents are straightforward and can be prepared by your estate planning attorney relatively quickly and at a much lower cost than a court proceeding. Once these documents are drawn up, be sure to ask your child for a copy and keep it in a safe but accessible place that family members can find easily.

Thank goodness my son came through his surgery without any complications. Nevertheless, if we had these documents in place before hand, my anxiety would have been greatly eased. I am once again reminded that the planning we do today can have an important impact on the options that are available to us when we need them the most.

By FPA member Jessie L. Foster, CFP®, CDFA™, MBA
Special to FPA 



Invest Outside the Box

Most people consider the Morningstar Style Box, the ubiquitous 9 square grid seen all over financial publications, as the entire spectrum of investible assets. These same individuals consider stocks, bonds, and real estate to be the only acceptable forms of investments (aka: asset classes). While these certainly are the primary investment vehicles used by most, and granularity within these sectors allows further diversification, they do not represent the whole spectrum of investment options. Building a well diversified portfolio entails combining assets that compliment each other and reduce risk; in finance parlance, they have low correlations. During times of stress, correlations tend to be high, which means assets move in tandem; this explains why even the most diversified stock and bond portfolios sometimes lose value in a down market, albeit not as much as the overall market. However, there are many asset classes that are often overlooked, despite their low correlations.

  • Become a venture capitalist
    Venture capitalists provide early stage financing, either through debt or equity, to companies they believe will be profitable. Unfortunately, not all good companies have access to venture capital because of their size, and not all companies are good investments. Given the current economic climate, even good small businesses are having a very difficult time obtaining bank financing. Do you know someone who recently started a company or is thinking of expanding their existing profitable business, but is unable to obtain financing? If you believe in this person and their product/service, then consider investing in their company by lending money at a reasonable market rate, buying shares in their firm, or both. Your investment in their firm will be less tied to the stock market, give you diversification, and of course help a small business; all good things.
  • Invest in consumption
    Another way investors can enhance their portfolio returns and minimize risk is by investing in commodities. Many people think of commodities as just gold or silver. However, commodities are a much broader category than just these two metals. Commodities are divided into two categories: Hard and soft. Hard commodities are those that are mined such as gold and silver, while soft commodities are grown and consumed. Commodities are not only a good hedge against anticipated inflation, but they also have a low correlation with the stock market. A more recent trend in commodities investing is in water rights. Water is a scarce resource and some experts predict that in the future, territorial conflicts will shift from energy to water rights. If this prediction-theory is correct, investing in water rights may be lucrative.
  • Collect something
    Collectibles such as stamps, art, wine, coins, vintage car collections, etc. are usually considered hobbies, but they are all forms of diversifiable investments. The mere existence of large auction houses validates the significance of the collectibles market. Many famous entrepreneurs and entertainers from Bill Gates to Elton John have invested in art and collectibles. In 2006, famed entertainment mogul David Geffen, purportedly auctioned off a painting by American painter Jackson Pollock for $140 million, the highest single amount paid for a work of art. Beyond collectibles, some people buy and sell websites. According to a recent Bloomberg Businessweek article, an investor bought in 1995 for $150,000, and sold it four years later for $7.5 million. The most important rule of investing in collectibles is to buy what you know and love. Don’t buy baseball cards just because you think they will go up in value someday, buy cards because you understand and love the game.

The aforementioned investments are not risk free, and require a tremendous amount of due-diligence prior to making a commitment, which is why their payoffs are so great. Therefore, it is important to know what you are investing in before committing your hard-earned funds. Investors should also keep in mind that such investments are often illiquid, do not generate cash, require a long time horizon, and may have unique tax consequences. Whether you decide to lend capital to your best friend from high school for her new ultra-hip restaurant, or buy stock in your college roommate’s medical device company, it is always a good idea to draft the appropriate legal documents to protect both parties. Lastly, as with any asset class, determine an appropriate and strategic percentage of your portfolio to allocate to such investments which are based on your goals and risk tolerance. Remember to always remain within that range; do not overexpose yourself to any investment. And as always, an informed investor is a successful investor.

By Ara Oghoorian, CFP®, CFA
Special to FPA


Planning Basics for New and Expecting Parents

Making the decision to start a family is not an easy one. It’s one that comes with excitement, terror, and the need to get both your physical and financial house in order. As new parents, you will be faced with the prospect of adjusting your spending plan, creating an estate plan, and ensuring you have the appropriate insurance coverage in place so that you and your little ones are protected.

When budgeting for a baby, the below are just a few of the items you need to consider within your spending plan:

  • Emergency Funding: Do you have an emergency fund of at least 3-6 months of living expenses in place?
  • Groceries: How much will items such as diapers, formula and baby foods affect your grocery bill?
  • Transportation: Does your current car provide safe and adequate space for a car seat? Will you need a second or replacement vehicle?
  • Medical Costs: How much will your costs for medical premiums and co-pays increase when adding a child?
  • Childcare: What are the costs of child care in your area? Will you or your spouse stay home from work as opposed to paying for daycare? If so, how does that affect your income situation?
  • College Funding: Consider the costs of a college education for your children and start saving as early as possible. Even the smallest amount today can help trim future out-of-pocket costs.  
  • Overall Cost: According to the U.S. Department of Agriculture, in 2010, the average cost of raising a child to age 18 was $226,920 for middle income parents. This includes costs for housing, food, transportation, clothing, health care, child care, education, personal care and entertainment expenses. Keep in mind that extracurricular activities such as sports, dance classes, and more can add up over the years.

In addition to evaluating your spending, it’s imperative that you update or implement an estate plan. Although no one likes to think about the possibility of not being around for long, it is in your (and your future children’s) best interest that you begin to prepare for the unknown.

  • If you don’t have a will in place, now is the time to create one. Not only will this ensure that your assets are distributed in line with your wishes, but it will allow you to appoint an executor for your estate and select a guardian for your children.
  • When choosing a guardian for your children, take time to reflect upon with whom your children would feel most comfortable. Who do you believe could support them emotionally? Ask yourself who shares your same values and beliefs around parenting. Remember to have a discussion with the person you select and to also nominate a contingent guardian should your primary choice be unwilling or unable.
  • Consider creating a trust. A trust document can spell out how you want funds left to your children to be managed and spent. In addition, you can appoint a trustee to manage the funds.

Along with the need for an estate plan comes the need for increased insurance coverage to ensure your family is adequately protected in case the unexpected happens. Evaluate your existing life, health and disability coverage. Be sure to consider the below in your review:

  • Life Insurance: You’ll likely need to increase your death benefit on any existing life insurance policies, or look into obtaining a policy if you don’t have one. By purchasing life insurance, you can ensure that should your family be faced with your premature death, they will have enough money to cover their living expenses and sustain their lifestyle. Be sure to consult with your agent on what type of policy and how much coverage is appropriate for you.
  • Disability Insurance: Purchasing a disability income insurance policy will ensure that you are paid a percentage of your current income should you become disabled for a short or long term period, and are unable to work. This will safeguard your family against a complete loss in income.
  • Health Insurance: Ensure that you have adequate coverage for routine check-ups and prescriptions. Make sure you understand the amount of your premium, deductibles, coverage for catastrophic events, and co-pays. 

The above are a few of the basics to consider when starting a family of your own. Parenting is a “learn as you go” system, and while you may not have all the answers all of the time, you can ensure that you and your family are adequately prepared and protected for the financial unknown.

By Mary Beth Storjohann, CFP®, CDFA
Special to FPA

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It’s Never Too Late (Well, Almost Never)

Saving for retirement, or whatever you choose to call your post-earning years, is something that everyone should plan for. You can’t start too soon and it’s never too late to start, unless of course you’re already retired!

While you would think this is a conversation for the 20-something crowd, you’d be amazed at how many entrepreneurs and others who are well into their 30s and 40s have saved very little or nothing at all for retirement. One statistic I’ve seen indicated that 60% of Americans had less than $25,000 saved for retirement.1 And that is up from 56% the year before.2 This is a trend that clearly is going in the wrong direction.

So what are your options? First, you can spend less and save more. Pretty simple. Second, you can utilize tax-advantage savings plans that may be available through your employer such as a 401(k) or 403(b) plan. Try to target saving 10% or more because these plans allow you to contribute with pre-tax dollars directly from your paycheck. The investment will grow tax-deferred until you withdraw funds in your retirement years.

A third option is to use a traditional IRA. This type of savings account allows you to contribute tax-deductible contributions each year and like the employer plans above, grow tax-deferred. The maximum contribution allowed is significantly less than under the employer plans, but at least you gain some benefit in deferring taxes. If you are self-employed, you have additional options with varying benefits and rules including solo 401(k), simplified employee pension (SEP), savings incentive match plan for employees (SIMPLE) and Keogh plans. You can learn more about these plans on the IRS website,

I know in recent years, many have been forced to take early distributions from their retirement savings and these come at a heavy price. Not only are you required to pay the tax that was previously deferred, but you also incur a substantial penalty unless you qualify for an exemption. Others have fallen victim to changes in their employment while they had a 401(k) loan outstanding. When you take out a loan against your retirement savings and then change employers or lose your job altogether, the loan usually must be paid back and if you can’t, then it becomes an early distribution subject to the taxes and penalties already mentioned. That is one reason why employer plan loans should only be used as a last resort.

No matter how much you have saved today, you can start saving more and improve on your retirement picture. A consideration happening more often is to continue saving but also work later in life. Those at or approaching retirement age are looking at ways to continue earning income either in their chosen career or perhaps through a new business venture. In any case, your decision to save more now will give you more flexibility about what the retirement picture looks like for you.

By Andy Van Ore, CFP®
Special to FPA

1 2012 Retirement Confidence Survey, Employee Benefit Research Institute, March 2012
2 2011 Retirement Confidence Survey, Employee Benefit Research Institute, March 2011