Posts Tagged ‘financial planning’

Why Work With An Advisor?

Thursday, February 16th, 2012

 

There is nothing worse than a home improvement project gone wrong. You waste a ton of time running back and forth to Menards because you know you can do-it-yourself and end up wasting way more money in the long run more often than not. (Been there, done that, more times than I want to admit.) That’s exactly what I thought of when I read this stat from a recent Franklin Templeton survey:

 

78 percent of 35-44 year olds are concerned about managing their retirement plans to cover expense, yet only 23 percent work with a financial advisor.

 

Findings like these are a red flag in my industry. When I read reports like this I get the same look on my face that our handyman gets when he sees something I tried to do on my own. On second thought, that’s not true because he usually laughs at what I try to do and I’m not smiling right now.

 

66 percent of those who map out retirement strategies with an advisor understand what they will need to withdraw each year in retirement.

 

Now, I’m smiling.

 

No Wealth Requirements

 

Ask 10 different people why they don’t work with a financial advisor directly and you’ll get 10 different answers. Reasons, beliefs and excuses come in all kinds of shapes and sizes:

 

41 percent of those who don’t use an advisor say it is because they think they don’t have enough money to do so.

 

Now, I’m mad. Having enough money is what this is all about. Planning is building, and we all start from different places. There is no level we have to reach before we can seek help.

 

So, why would the surveyed respondents feel this way?

 

There are three reasons I can think of: 1) It’s just one those many (erroneous) assumptions we make about things, 2) They met an advisor who only works with high value accounts – strictly a business prerogative, or 3) A carnival barker told them so. Enough said.

 

No Instruction Manuals

 

Unlike putting in a new sink, planning for retirement, or any other monetary based goal, does not come with an instruction manual. Variables affect money management:

 

65 percent of Americans aged 65 or older said they will have to work between one and 10 more years before being able to retire.

 

The top two retirement concerns cited in the survey, after “running out of money”, were healthcare expense and changes to Social Security that would reduce or delay benefits. Both variables; add to these: societal change, market fluctuation, the cost of living, interest rates, and job opportunities.

 

30% percent of people who don’t use an advisor say it is because they want to do it themselves.

 

If I were to give the number reason why you should work with a financial advisor, it would be because of variables. Professional advisors understand actuarial concerns as well as they do the concerns of their clients. Matching peoples’ personal needs and goals with the right mix of financial instruments is tricky. There is no one size fits all approach; nor should there be.

 

Navigate the variables with the help of a financial advisor and put a smile on your/my face!

 

Kurt Rusch  CLU, ChFC

 

Retirement Confidence Survey

Tuesday, March 8th, 2011

 

Up three percentage points up from an all time low in 2009, the percentage of American workers who feel “very confident” that they will have enough money for a comfortable retirement is 16%.

Not to play Devil’s Advocate, but we really need to rephrase that: 84% of the American workforce doesn’t think they’re going to have enough money to retire comfortably.


When the Employee Benefit Research Institute (EBRI) sent out a press release on the 20th Annual Retirement Confidence Survey last week, the headline read “New Research from EBRI”: Between 4–14% More U.S. Households “At Risk” of Running Short of Money in Retirement Due to 2008–2009 Recession.

 

Choosing their copy wisely, EBRI notes that: the likelihood of becoming “at risk” because of the economic crisis depends to a large extent on the size of the retirement account balances the household had in 401(k)-type plans and/or individual retirement accounts, as well as their relative exposure to fluctuations in the housing market.

 

No matter how you slice it, way more than the majority of us working folk have little confidence life will be grand after we stop working. This is not a good thing. Further workforce results provide:

Covering Basic Expenses 29% are very confident they will be able to cover their basic needs

Unaware of  Goals 46% don’t know how much money they will need to retire comfortably

Not Enough Savings 54% say the total value of their savings and investments excluding their home and any defined benefit plans is currently less than $25,000

No Savings At All 27% say they have less than $1,000 in savings (up from 20% in 2009)

 

In 2010, 33% workers were polled as saying they expect to retire after the age of 65. For workers who fall into some of the categories above, the amount of money they will need to save from unpreparedness and unawareness will be overwhelming to say the least. But what of the people who did/do have good plans in place? How much will these workers need to save to recoup their losses from the economic crisis?

 

“Early Boomer households, will generally need to save between 1 and 4 percent of compensation  more each year between now and retirement age”,  provides EBRI. (These amounts will vary to the personal and market profile of each worker.) While another 1-4% may not sound that bad, it may become quite challenging in a climate of increased taxes, higher employee benefit deductions and every changing inflation rates.

 

When it comes to providing for retirement, overall confidence may not be high, but it is changeable. Decide what you would like to have, try out some online tools such as, retirement calculators, to get a feel for your  goals and sit down with a professional advisor to construct the best plan for you.

 

Kurt Rusch  CLU, ChFC

 

 

 

 

 

 

Protection 101

Tuesday, February 15th, 2011

Today marks the first day of a new job duty for me, blogging. (In my wildest imagination never did I think I would become a blogger). Naturally, my first challenge was to decide what to write about. When it comes to basic financial planning, what has the most impact on most people?

The answer is property insurance. Glamorous, it’s not, but protection of our automobiles, homes (whether personal residence, seasonally lived in, or rented out), boats, recreational vehicles, and additional liability policies, such as umbrella policies, is a core element in having a financially secure foundation.

Premium vs. Protection When I review property protection policies with clients, it is acutely evident that most people have no idea what exactly is or is not covered by their policies. My observations are that people typically know their premium and deductible and that’s about it. While having a good grip on expense is good thing, a lack of understanding for proper coverage can actually put your financial future at risk for a couple of dollars in saved premium.

But here’s the good news, in many cases, rearranging where the premium dollars are allocated, can ensure more appropriate coverage for no additional premium outlay. This is why it is so important to  discuss what the best options are for you, your business and/or your family with a licensed professional. Steer clear of  do-it-yourself online issue and toll free numbers to save a buck; they are void of the personalization needed to get the best coverage at the best price.

Auto Liability Some of the most common misunderstood concepts relating to auto insurance are the liability amounts. What people should have to be well covered and what is mandated by the government are two drastically different amounts. The State of Illinois mandates minimum bodily injury liability coverage of $20,000 per person and $40,000 per accident, and $15,000 for property damage – this is where the problem starts.

Unfortunately, government mandated amounts such as these, won’t go very far in the real world. How many people have you known who were hospitalized that left with a bill of less than $20,000? How often do you think that totaled cars would be worth more than $15,000? Both of these situations illustrate why it is so important to really understand the coverage you pay for before you need it.

Consider further, what happens if you get into an at fault accident without proper liability coverage. The other party can come after you for the amount over and above the covered amount. If you don’t have the ability to pay, they can seize your home, other assets and/or have your wages garnished. Is this the type of exposure you really want to put yourself or your family through to save a few bucks?

Water Claims A common item neglected in the Chicago area has to do with homeowners insurance; specifically, water claims. There is a difference between flood insurance and water backup insurance. Flood insurance covers damage relating to a body of water leaving its banks and causing damage to your property. This is a separate policy that would be available for purchase if you live in a floodplain. Typically, if you have a mortgage and live in a floodplain, the mortgage company will require this coverage be in place.

In contrast, water backup coverage describes a claim arising from water backing up through the plumbing system in your home. This coverage typically comes in the form of a rider that can be added to an existing homeowner’s policy for an additional fee. In the absence of this optional rider, there is no coverage on a typical homeowner’s policy for any water claim. The exception to this statement is if the homeowner has purchased an all perils policy.

Premium costs, auto liability and water claims are just a couple examples of how underestimating and misunderstanding property coverage can send you into financial peril. Reviewing and weighing all the options available for each type of insurance you may need is imperative in choosing what coverage is appropriate for you and yours.

Kurt Rusch CLU, ChFC