By Carl Trevison and Stephen Bearce 10 Reasons Why Beneficiary Designations Are Important Beneficiary designations can provide a relatively easy way to transfer an account or insurance policy upon your death. However, if you’re not careful, missing or outdated beneficiary designations can easily cause your estate plan to go awry. We often complete these designations without giving it much thought, but they’re actually important and deserve careful attention. Here’s why: Beneficiary designations take priority over what’s in other estate planning documents, such as a will or trust. For example, you may indicate in your will you want everything to go to your spouse after your death. However, if the beneficiary designation on your life insurance policy still names your ex-spouse, he or she may end up getting the proceeds. Where you can find them… Here’s a sampling of where you’ll find beneficiary designations: Employer-sponsored retirement plans [401(k), 403(b), etc.] IRAs Life insurance policies Annuities Transfer-on-death (TOD) investment accounts Pay-on-death (POD) bank accounts Stock options and restricted stock Executive deferred compensation plans Because you’re asked to designate beneficiaries on so many different accounts and insurance products, it can be difficult to keep up. However, it’s worth the effort; failing to maintain the beneficiary designation on that 401(k) from three employers ago could mean money will go to the wrong place. When you first set up your estate plan, go over all the designations you previously made and align them with your plan. After that, you should review and update them regularly – a least once a year. 10 Tips About Beneficiary Designations Because beneficiary designations are so important, keep these things in mind in your estate planning: Remember to name beneficiaries. If you don’t name a beneficiary, one of the following could occur: The account or policy may have to go…
By Carl Trevison and Stephen Bearce Understanding the complexities of Medicare While they’re working, many Americans become accustomed to getting health insurance through their employer. They make their initial selections and then update their choices once a year when its time to renew and during life events like adding to the family or, perhaps, starting a new job. But virtually all U.S. residents face a milestone when they reach age 65 and qualify for Medicare, which provides a new and, possibly, more complex approach to health insurance. Keep in mind that even if you take early Social Security benefits at age 62, you must wait until age 65 for Medicare. Breaking down Medicare’s four parts Part A: Hospital insurance Helps pay for: Inpatient hospital care Hospice care Skilled home-health services for homebound patients Part A also helps with short-term inpatient care in Medicare-certified skilled nursing facilities, but only if the patient is there for rehabilitation – not for long-term or custodial care. Qualifying Once you reach age 65, you qualify for Part A. It’s unlikely you will be charged a monthly premium if you have worked and paid the Medicare payroll tax for a minimum of 10 years. Part B: Medical insurance Helps pay for: Doctors’ services Outpatient hospital care Medical equipment and supplies Some preventive services Qualifying All U.S. citizens and all legal aliens who have lived in the United States for at least five years qualify for Part B at age 65. No work history is required, but everyone who wants Part B must pay a monthly premium. Monthly premiums are based off the worker’s modified adjusted gross income (MAGI) from filed taxes with higher income individuals paying more. Your first opportunity to sign up for Part B is the initial enrollment period, which begins three months…
By Carl Trevison and Stephen Bearce The Caregiver Crunch: Five Time-and-Money Coping Strategies For millions of unpaid U.S. caregivers, finding a healthy balance between taking care of children and elderly loved ones is a constant challenge—and often a drain on time, health, and finances. According to a 2017 report from Transamerica Institute, 74 percent surveyed have been caregivers for one or more years, with 27 percent providing care for five or more years. Caregiving is a full-time job for many—even though 52 percent are already employed. Thirty-six percent of caregivers spend 100 or more hours per month on time-intensive duties including companionship, meal preparation, personal care, and feeding.¹ Additionally, the same Transamerica report cites that the health of caregivers often takes a back seat to those they care for—55 percent admit their duties leave them physically and emotionally exhausted. Seventeen percent say their general health has declined since becoming a caregiver. Which begs the question: “Who cares for the caregivers?” If you’re a caregiver, or know someone who is, here are five practical ideas to consider. If you work, talk with your employer. Caring for family members can be a 24-hour-a-day responsibility, making it nearly impossible to coordinate with the demands of a full-time job. Among those who are employed or who have held jobs during their time as caregivers, approximately one-third have used personal, vacation, and sick-leave days for caregiving. Furthermore, depending on household income level, as many as one-fifth of caregivers have taken a leave of absence.¹ To find a better balance between your home and work life, discuss these options with your manager and human resources professional: Determine if your situation qualifies for the Family and Medical Leave Act (FMLA). Under this federal law, covered employers may be required to protect your job while you take unpaid…
Financial Focus by Carl Trevison and Stephen Bearce Build Your Portfolio on a Solid Foundation Asset allocation can be to investment planning what the foundation is to a house or the chassis is to a car. It’s what everything else is built upon. And just as important as constructing a house on a firm foundation, having the right asset allocation can be vital to helping you work toward your financial goals. Although the name may sound intimidating, asset allocation is just a technical term for a rather simple concept. It’s merely how your portfolio is divided up among different types of investments, such as stocks, bonds, and what are called “cash alternatives.” How it works Using asset allocation to build a portfolio designed to help you reach your long-term goals requires taking three primary factors into consideration: Goals. These are simply what you’re investing the achieve. For many of us, a major goal is to enjoy a financially secure retirement. If you have younger children or grandchildren, helping them afford higher education without building a mountain of debt is likely another goal. Or maybe you’d also like to make a luxury purchase – such as buying a vacation home or dream car or taking an exotic vacation – down the road. Time horizon. One reason why knowing your goals is important is because it helps determine your time horizon (how long you have until you need to tap into your investments). If you’re 28, for example, and want to retire at 68, your time horizon is 40 years. Simple as that. Risk tolerance. Your risk tolerance is the amount of volatility in your portfolio’s value you’re comfortable with. If you find you can’t sleep because you’re worried about your investments – especially when there’s market volatility – you…
Financial Focus By Carl Trevison and Stephen Bearce What is behavioral finance … and why should you care? Investors may like to think they’re completely rational in their decision-making, but that’s highly unlikely. We don’t stop being human beings when it comes to investing, so psychology and emotions are apt to play roles—sometimes large ones—in the choices we make. Behavioral finance studies investors’ real-life behavior and common biases. It considers the roles emotions and psychology play in making financial decisions and aims to identify factors that cause investors to sometimes act irrationally. A key concept in behavioral finance is “prospect theory,” which describes how investors make decisions involving risk and gain. Studies have shown people frequently consider losses far more undesirable than they find comparable gains desireable. For example, take the following scenarios: Given the first scenario, most people will avoid the risk and take option one (the sure $3,000 gain). On the other hand, when presented the second scenario, most favor option two (the 75% chance of losing $4,000) because it offers the possibility of avoiding the pain of a loss. Keep in mind – and this is important – all four choices are mathematically equivalent. This means individuals’ responses were based primarily on their emotional reactions to fear of loss vs. enjoyment of gain, not rational decision-making. The psychology of risk and reward If you ever wonder why markets sometimes act in ways that defy logic, behavioral finance helps explain it. For example, bubbles can form when prices rise based on investors’ emotional reactions rather than the fundamentals. Once their sentiment eventually changes, a precipitous sell-off can follow. Take what’s come to be known as the dot-com bubble of the late 1990s. Soon after the internet’s introduction, investors realized its potential to transform our everyday lives (which…
By Carl Trevison and Stephen Bearce Charitable Giving Considerations for 2021 If the COVID-19 pandemic’s far-reaching impacts have you looking to enhance your charitable giving, be sure to remember these tax-related considerations for 2021: Cash gifts. A special rule for this year allows taxpayers who do not itemize deductions to claim up to $300 ($600 for joint filers) for gifts to qualifying charities. If you do itemize, cash contributions to qualified charities in 2021 might be used to offset up to 100% of your adjusted gross income (AGI) (60% of AGI for cash gifts to a donor advised fund or 30% for cash gifts to a private foundation). This means that if you’re in a position to make generous gifts, you may potentially offset all of your taxable income. In addition, cash gifts could be used to offset Roth IRA conversion income or capital gains realized upon the sale of real estate or a large position in a single investment. If you’re unable to itemize but would like to, evaluate the possible impact of bunching several years’ worth of charitable contributions into one year. This may increase your itemized deductions above the standard deduction threshold so you can potentially receive a tax benefit for those gifts. Review your income and deductions for the current year and the next few years with your tax advisor to determine what is the best timing for those bunched contributions. Qualified Chartitable Distribution (QCD). For taxpayers age 70½ or older, a QCD allows you to gift up to $100,000 per year directly from your IRA to qualifying charities. QCDs are tax-free distributions and count toward satisfying your required minimum distribution (RMD). Remember that, while RMDs were waived for 2020, they must be taken for 2021. No deduction is allowed for a QCD…
Financial Focus By Carl Trevison and Stephen Bearce Five ways to help protect your family online From listening to music to ordering groceries to working from home, almost all aspects of our daily lives are connected to the internet in some way. But our always-connected nature can come with risks: According to the FBI’s “2020 Internet Crime Report,” the bureau’s Internet Crime Complaint Center averaged almost 15,000 complaints a week and recorded $4.1 billion in victim losses in 2020. Here are some ways to help protect your family online: 1. Learn to spot imposter scams Have you ever received a call, text, or email regarding suspicious activity detected on your account or suspended online access? It could be a scammer trying to convince you to share sensitive information that would enable them to access your accounts. Increasingly, criminals are able to impersonate financial institutions, large companies, and even government agencies by spoofing caller ID or email addresses so they appear to be legitimate. When you receive a suspicious or unexpected communication, do not respond or click any email links. Instead, contact the company directly using a phone number on its website. Learn more about how to spot common scams at wellsfargo.com/security. 2. Manage and monitor your credit If your data has been compromised through a security breach, consider placing a fraud alert on your credit file by contacting one of the three major credit bureaus – Equifax, Experian, and TransUnion. The one you contact will automatically notify the others. Make a habit of reviewing your credit report annually. You can request a free report at annualcreditreport.com for yourself and children over the age of 13. Look for unauthorized accounts that may have been opened in your names. 3. Limit what you share on social media Thieves scour social media profiles…
Financial Focus By Carl Trevison and Stephen Bearce 6 Steps Toward Your Retirement Goals What should you consider today to help you move forward? You want retirement to be your chance to get out of the rat race and have time for the things you’ve always wanted to do. That’s great, but what exactly does that mean? Travelling? Volunteering? Spending time with family and friends? Starting a business? Simply doing nothing? You may think your plans are just like everyone else’s, but that’s unlikely. They’re as unique as you are. As we’ll discuss, exactly how you want to spend your time will definitely affect what you should be doing now to prepare for it. However, there are steps that everyone should consider taking today regardless of their retirement goals. Here are six of the most important: Have a plan If you haven’t gathered your ideas about retirement together and distilled them into a cohesive investment plan, that’s a great place to start. Or if you have a plan stuck in a drawer somewhere, you need to revisit it. Whether you want to start a second career, travel the world, or just do nothing will make a big difference when it comes to what you’ll need to cover your expenses. The better you can define precisely what your goals are and which are most and least important, the better your plan should be. An asset allocation – how your investments are proportioned across different asset classes (stocks, bonds, cash alternatives, etc.) – should be at the heart of your plan. The allocation that’s appropriate for you will vary depending on a variety of factors. Primarily, these are what you want your investments to help you achieve (objectives), how comfortable you are with market volatility (risk tolerance), and how long it will…
Financial Focus By Carl Trevison and Stephen Bearce Career Change Checklist: Are You Prepared? If you’re considering a job or career change, it’s important to do some homework before you make the leap. Many benefits from your current position could be tied to specific dates and time frames. Gathering the right information can help you strategically time your exit and set yourself up for greater success. Consider these steps before you resign: 1. Decide if you’d prefer to quit now or wait until you have an offer. This decision requires you to factor in how unhappy you are in your current position and whether you’re able to live off your savings for a while. If you’re in a traditional industry, such as sales, it might be better to find a new opportunity while you’re employed. But if you’re in high-tech, biotech, private equity, or a similar industry, there may be less risk in taking some time off. 2. Check your employment contract and noncompete agreement. Have a labor attorney review any legal documents you signed when you were hired to evaluate their terms and enforceability. Some contracts may require you to pay back relocation money, education grants, or bonuses if you don’t stay for a certain period of time. Others include “golden handcuffs” that mean you will lose unvested options, restricted stock, deferred compensation, and other benefits upon resignation. Still others may require waiting for a specified length of time before taking a job with a competitor. 3. Review your retirement benefits. Check the vesting schedule for your employer’s 401(k) contributions and profit-sharing contributions to see how long you have to work to claim your portion of the money. Many plans require you be employed on the last day of the plan year to get employer contributions for that year….
By Carl Trevison and Stephen Bearce Top Five Portfolio Ideas for 2021 As we start 2021, with COVID-19 vaccines and therapeutics approved for market, many investors wonder when we can return to more stable social and economic activity. Even though Wall Street recovered before Main Street, history suggests that the two may not diverge for long periods of time. In the “2021 Outlook Report: Forging a path forward,” Wells Fargo Investment Institute (WFII) strategists detail opportunities that may arise in the new year, and how investors might take advantage of them. Here, WFII strategists offer their top five ideas for 2021. Hold the right amount of cash. Investors may be over-allocated to cash, as money market balances remain near all-time highs. In our view, investors should hold enough cash to meet short-term liquidity needs to avoid selling assets at inopportune times. One potential way to invest excess cash is through dollar-cost averaging—instead of investing one large sum, invest smaller sums over time. Selectively increase risk. As investors look forward to the end of the pandemic, we expect riskier assets like stocks to outperform. However, we suggest that investors be selective in how they increase risk. We generally favor U.S. stocks over international stocks, because we believe that growth prospects are stronger in the U.S. Within the U.S. stock market, we prefer large-cap and mid-cap stocks over small-cap stocks, because larger companies tend to have higher cash balances, less debt, and better earnings growth. In fixed income, we favor taking credit risk and keeping interest-rate sensitivity neutral. Consider exposure to higher-quality, growth-oriented sectors. Quality remains a key theme, but cyclicality could play a bigger role. We favor cyclical sectors that should demonstrate more consistent performance as the U.S. economic recovery advances. Our favored sectors include Information Technology, Health Care, Communication Services,…
View More