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Tag: Financial Planning

Financial Planning: When Dad Isn’t the Greatest Financial Role Model

The following article, written by st. louis based financial planner and founder of the chamberlin group, don chamberlin, was originally published on money.com on october 6th, 2015:

Sometimes the best money lessons come when you learn from someone else’s mistakes.

Financial Planning When Dad Isn’t the Greatest Financial Role Model

The bond between a father and son can be special. Fathers pass family traditions down with the idea that their son will maintain the legacy. However, if the family tradition is poor financial practices, it’s my job as a financial planner to step in and put a stop to those bad habits.

Some time ago, after a client’s father passed away, the client asked me to help make sense of his father’s assets. The father left his son with what he thought was a well-thought-out legacy, but a few elements of it ended up leaving the son extremely confused.

Reviewing the father’s assets, I realized he was a perpetual investor in certificates of deposit. The son explained that his dad would go online to find the state that offered the best interest rates, and he would open an account with a bank there and invest in a CD.

While this may have seemed like a smart strategy, the father didn’t keep accurate records of each of his accounts.

In fact, the son couldn’t even figure out how many CD accounts his father had opened up; he only learned about each of them as he received his father’s statements in the mail. To make the son’s life easier, I advised him to keep the estate open for at least a full year, while these surprise statements trickled in.

The father also had the foresight to establish a trust to hold the CDs, but he didn’t properly title all his assets. So two of the 12 CDs he turned out to have owned at his death had to go through the probate process.

Ultimately, much of the savings and earned interest in the father’s rate-hunting portfolio was wiped out by his estate planning mistakes. The legal fees associated with probate ate into the the two incorrectly titled accounts. So much for avoiding probate.

An Organized Legacy

Despite seeing his father’s mistakes, the son wasn’t sure how he could do it better. As a father himself, he wanted to ensure his family wouldn’t go through the same difficult experience in the future, so he came to me later for help.

I advised him to open his own trust to pass all his assets to his children outside of probate, and I made sure he worked with an attorney who could advise him how to title his family’s assets correctly. Then I helped create organized records in a “Family Estate Organizer” binder that compiled important legal, financial, and other estate planning information–everything from account statements to a personal belongings inventory.

We also prepared for his wife documentation on what to do in the event of his death. This “Survivor’s Checklist” gives family members guidance on the various steps of settling an estate. It’s particular helpful for surviving spouses or beneficiaries who have not been involved in deceased’s finances.

This was a crucial step for not just the son, but for his family legacy as well. He wanted to ensure he would leave his own family with a well-organized, easy-to-manage inheritance, and the binder provided just that. It allowed him to sleep better at night knowing his family could easily step in to manage the assets should the need arise.

As a financial planner, I understand a well-thought-out estate plan is a critical part of a holistic retirement plan. But I don’t think I realized how foreign this concept might be for some people until I met this client. I have since come to realize that some of the most valuable advice I have given clients is also the simplest: get organized and stay organized.

So share your plans with your loved ones and seek the assistance of a holistic adviser. You can even make it a family affair. Take the time to document your assets, then sit down with your loved ones so they can understand what you own, how it’s titled and what needs to happen as major life events take place. It will be time well spent and money well saved.

For the original Money.com article, please click here. To contact Don Chamberlin and The Chamberlin Group visit their website here.

Don Chamberlin Debunks 4 Social Security Myths

Although we live in an age where information is often readily available, we still require some expert guidance when it comes to certain topics. Personal finance, in this case preparing for retirement, is an example of one of those areas where it is hard to obtain the right, trustworthy information with ease. If you are thinking about retirement, whether it will be happening soon or many years down the line, you are most likely planning out those years around the idea of social security benefits.

If so, there are 4 myths that come up often when people discuss social security benefits that you should be aware of. Financial planner Don Chamberlin, as the CEO and Founder of The Chamberlin Group, has appeared on Fox 2 Now (KTVI) in St. Louis, MO to set the record straight:

1. 65 is the “Full Retirement Age”

As Don Chamberlin explains in the video below, the full retirement age (FRA) actually depends on the year in which the individual was born. In fact, you can start claiming at any time between 62 and 70. At 62 you can start claiming at a discounted rate but the longer that you put off claiming your benefits, the more money you will get. Don points out that many times, people miss out on thousands of dollars that they could have received in all had they just put off claiming for longer. As for the FRA, for those people retiring soon it is likely to be 66 but if you were born after 1960, it will be 67.

2. It is easy to decide your claiming strategy

It is important to decide on your claiming strategy but it is not exactly easy. The number of claiming strategies that are available to you depend on whether you are single or married, and that can make a huge difference. If you are single, you have 9 different strategies as options. However, if you are married you suddenly have 81 different claiming strategies. This is one of the many reasons why it is important to dedicate time to plan out your retirement. Choosing the worst strategy for yourself or for yourself and your spouse can mean losing out on tens of thousands of dollars down the line.

3. Those who claim Social Security benefits don’t have to pay taxes

Just because you are retired and claiming your Social Security benefits does not mean that you do not have to pay taxes. In fact, Social Security benefits can be taxed up to 85% – that can really put a dent in certain plans post retirement. When preparing to retire, you should evaluate your Social Security benefits with the goal of minimizing tax liabilities as you should do with any source of retirement income.

4. One can live comfortably on Social Security benefits

This claim goes against one of the very foundations of Social Security. Social Security, as Don Chamberlin explains, was not intended to replace a person’s income. In fact, when Social Security was founded the average life expectancy was 64 while Social Security benefits were taken at age 65. So in all, Social Security benefits were designed not to replace income but to supplement other sources of post retirement income. Now with our average life expectancy reaching close to 80 years, it is even more important for retirees who do wish to live comfortable to also have other sources of income post be it regular savings, retirement savings or investments.

Watch Don Chamberlin on St. Louis’ Fox 2 Now (KTVI):

Planning for Retirement: 10 Things to Avoid

Retirement is one of the most difficult things to plan, especially in this day and age. As our life expectancy continues to increase, so does the amount of years we spend in retirement. This means that it is important for your retirement savings to last Retirement Savingslong as well. More so, it is important that you have retirement savings in the first place.

Below are 10 of the biggest retirement blunders that have been pinpointed by financial experts that you can make and how to avoid them:

  •  Not having a plan for your retirement money: This seems relatively self-explanatory. Not planning for retirement is literally the worst thing you can do when it comes to retiring. How to avoid: Create a cash flow scenario says Herb White, a certified financial planner  and president of Life Certain Wealth Strategies in Denver.
  • Forgetting about or ignoring inflation: One very common mistake is completely forgetting about or, even worse, ignoring the reality that is inflation. How to avoid: Make sure you take this into account so that you have enough money when you are ready for retirement. For starters, work with your financial expert to ensure that your investments are keeping up with the rate of inflation.
  • Not saving enough money: This is almost as bad as not planning for your retirement at all. Making sure you have enough money is key to being able to retire comfortably and happily. How to avoid: Although it may not seem like you can afford to save, you certainly cannot afford to not save. According to T. Michelle Jones, vice president of Bryn Mawr Trust, working towards eliminating small expenses, like eating out instead of at home, can help you free up cash to put into savings. It adds up over time.
  • Withdrawing from retirement accounts early: Pulling money out of your accounts before you even retire is a way to ensure that you have less money for when you really need it in the future. How to avoid: Don’t withdraw from your accounts. Don Chamberlin, the president and CEO of The Chamberlin Group in St. Louis, Missouri, says that taking loans and money from your 401(k) accounts and IRA is possible, but it is a mistake to do so. By keeping your money in those accounts, it will accumulate compound interests. Over time, this has the potential to add tens of thousands of dollars, or more, to your account over the course of your career.
  • Investing emotionally: Wealth management advisor Chuck Downs points out that we live in a culture of timing and selection. When investing in funds, people look at the recent performance and then panic when the market downturns. By buying high during these periods of hot performance and then panic-selling, they are letting emotions run their strategy. How to avoid: Patience. While that’s a lot easier said than done, having an expert by your side can help with being patient.
  • Being a conservative investor: This ties in with having your investments keep up with inflation. Currently, many investors are underperforming even when the market is performing well because of little exposure. How to avoid: Retired investors need higher growth in their funds to ensure that they can stretch their retirement money over what is expected to be a longer retirement period. This wasn’t the case many years ago.
  • Missing out on employer’s 401(k) match: Recently, a study by Financial Engines, an independent investment advisory firm, revealed that American workers miss out on $24 billion in matching funds for their 401(k)s yearly. How to avoid: Not making your own contribution to your 401(k) if your employer matches it is a big mistake, says Don Chamberlin. By not taking advantage of this, employees are essentially missing out on what equates to a free 50% return on the money they are already setting aside.
  • Letting all your retirement money be taxed: Putting all of your money into retirement accounts that do not ensure that at least some of your money is tax-free later in life is a mistake. How to avoid: Don Chamberlin of The Chamberlin Group points out that putting money in a Roth IRA or asking if a Roth 401(k) account is available through your employer is a great alternative. Money deposited into Roth accounts is taxable, but then it grows tax-free. If you already have all of your money in a traditional IRA, the Internal Revenue Service allows for those accounts to be converted to Roth IRAs.
  • Underestimating healthcare: Medical expenses can get large during retirement. Herb White of Life Certain Wealth Strategies explains that people overlook or underestimate future health care expenses. How to avoid: Properly planning for future medical expenses is important. This isn’t difficult and an expert can help you strategize on the best plan that will fit your needs and deliver the best benefits.
  • Filing for Social Security too early: Once you retire, it may appear tempting to begin filing for your Social Security benefits at the age of 62, when you are allowed to do so. But you will be receiving a lower amount. How to avoid: Plan out your retirement and wait to file for your Social Security benefits by the full retirement age. If you are retiring this year, that will be 66 years of age. By this age, you will receive a higher amount than if you did it by 62. T. Michelle Jones of Bryn Mawr Trust points out that those who wait up to four years to file for benefits can 132 percent of their monthly benefit.

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