Cyber-fraud is on everyone’s minds these days. For instance, we probably all know of someone who was scammed through their email. A common and all-too-effective ploy is for a hacker to send an urgent and alarming email of distress–from a loved one–requesting that money be sent immediately. A good friend of mine responded to one such request for help because ostensibly it came from his best friend; as a result, he lost thousands of dollars.
At Entrust we are vigilant about protecting our clients’ information. Among the tactics we employ are three easy ones you, too, can use to protect your personal information.
Never use public Wi-Fi, unless your device has absolutely NO private information on it.
Never send documents with personal information, such as account numbers or social security numbers, through email.
Change your passwords at regular intervals–no less often than quarterly. And store your passwords securely on software–such as KeePass–designed for such storage.
What prompts us to blog about the topic of cyber-fraud? Hacking–now frequently PHISHING–has become a big business and we are all at risk. No longer is the hacker a late teenager, stoned, sitting in his mom’s basement hacking away on his computer to pass the time while he tries to “find” himself. No, today we are surrounded by global networks of hackers and what do they have in common? They are PATIENT. They are content to gather massive amounts of information and take all the time they need to sift through it for the nuggets of value, no matter how long it takes.
How can utilizing the foregoing tactics we enumerated protect you?
If you use public Wi-Fi, you are opening the door to hackers to gather whatever information happens to be on your computer. This information could be about you, or they could simply be gathering data about all of your connections–including your connections on LinkedIn or Facebook, for example.
Avoid public Wi-Fi and you are adding a layer of protection over your personal information (and your friends’ information, too!)
If you send private information by email, hackers truly love you because they do not even have to sift through anything to take the data they want. Use your secure portal, such as your Entrust portal, instead. Even if it takes extra time to provide information, avoid sending private information by email.
Because massive amounts of information are gathered and it takes time to sift through it, if you change your passwords at regular intervals, the likelihood is that when a hacker circles back to you, he will no longer be able to gain access because your credentials have now changed.
For all of us, protecting our information is becoming more difficult while at the same time doing so is more important than ever. Contact us to continue this conversation about how you can better protect yourself and those you love.
We spend most of our lives working and saving so that at some point we will have the financial freedom to step away from the grind and do something else. Do you know if you are on track for financial security throughout retirement?
Just posing this question reminds me of our clients Brent and Wanda. When we began working together in 2005, they were about forty years old. As small business owners, their demanding schedules prompted them to aspire to retire early–preferably before turning sixty years of age. Their rationale was that since they devoted almost every waking hour to their business, they wanted the option to step away sooner rather than later, and start enjoying the money they were accumulating from all their effort.
When we met initially, Brent and Wanda were worried. They could easily identify their primary goal: retire, and when they wanted to reach it: before the age of sixty, but they had no idea what steps to take to accomplish it. Preparing financially to have enough income during retirement felt like an insurmountable task to them.
To fulfill their goal within the timelines they preferred, we began by creating a retirement game plan with three major steps:
Identify their “number.”
Implement a savings plan to attain their number.
Design an investment portfolio.
Having agreed upon the strategic steps to take, it was time to dig into the details for each step. Read on!
Step 1: Identify their “number.” Brent and Wanda were diligent savers but had no idea how much to save to fully fund their retirement; in other words, their number. We began by establishing where they were financially, and followed that analysis by making projections for future income needs. To replace the income for their current style of living, aiming for financial security throughout retirement, we discovered that a minimum of $4.5 million would need to be accumulated in their retirement accounts.
Step 2: Implement a savings plan to attain their number. Once we identified their number, $4.5 million, it was time to calculate how much Brent and Wanda would need to save annually and in what type(s) of accounts. For instance, it is typical to maximize tax-deferred accounts for annual retirement savings. Business owners have a variety of such accounts, or retirement plans, to choose from. We recommended that this couple utilize a 401k and Profit Sharing Plan because these plans permit maximum savings for the future, in part by reducing current income tax liabilities.
Step 3: Design an investment portfolio. The right portfolio of investments makes all the difference in whether investors achieve their retirement portfolio goals, and achieve them on time! Disciplined asset allocation has been proven time and again to be the effective choice for achieving the results required to attain those all-important retirement numbers.
Follow the fantastic and successful example of Brent and Wanda. Contact us today to confirm that you are on track for financial security throughout retirement.
2017 is well underway and it is time to accelerate the implementation of your tax savings strategies, before spring arrives on Monday, March 20th. A key step for maximizing your savings this year is to take advantage of opportunities to reduce your taxable income in the months ahead.
Whether you are a business owner or an employee, these money-saving tips for funding medical expenses and your retirement plan (assuming you are eligible) could enable you to trim thousands of dollars from your taxable income in 2017. Let the savings begin!
Funding an account such as an HSA (health savings account) or FSA (flexible spending account) is a great way to reduce taxable income and to put money away for medical expenses that crop up unexpectedly during the year. Fortunately, a variety of medical expenses qualify for payment using an HSA or FSA account: expenses such as prescription medicines, doctor visit co-pays, and certain dental expenses.
A superb illustration is provided by our client Susan, who proudly reported to us recently that her HSA now exceeds $50,000. She has been funding it aggressively over a period of years, with the following intentions: 1) to reduce her taxable income in the year in which she made contributions, and 2) to accumulate tax-free funds for a variety of medical payments when she transitions into retirement.
We encourage you to consider following Susan’s great example. As you can see, in addition to the annual tax savings, if you do not need to use the funds currently you will get the added benefit of boosting your preparation for financial security in retirement.
While both HSAs and FSAs can help reduce taxable income, step one in your deliberations is to determine whether a plan is available to you, based upon your circumstances. Here are some basics to get you started:
HSAs are only available to those who have a high-deductible health plan, whereas the FSAs have no eligibility requirements.
For 2017–HSA contributions are capped at $3,400 per individual and $6,750 per family annually; FSA contributions are capped at $2,600 per year for both individuals and families.
FSAs are only available through your employer, whereas HSAs can be opened by anyone as long as you have a high-deductible plan. If you are interested in opening your own HSA; check out Ardent Credit Union HSAs.
Retirement Plan Contributions
One of our favorite clients, a business owner named Paul, was thrilled when we introduced him to the power of fully utilizing a company retirement plan to save money on his annual income taxes. Paul has always enjoyed being a diligent saver but did not understand that tax-deferred saving meant keeping a lot more money in his pocket, compared to just setting money aside that would be fully taxed in the year he earned it. His situation has a degree of complexity so we were able to help him establish not only a 401(k), but also a profit-sharing plan, thereby doubling his income tax savings in the first year.
Retirement savings come in many shapes and sizes. The following are some specifics to prompt your thinking about how to maximize your tax savings this year:
If you are an employee, choosing to contribute to a retirement plan such as a 401(k) or 403(b) can reduce your taxable income and thereby save you money in taxes. For the 2017 tax year, the IRS has approved tax-deferred contributions up to $18,000. Employees aged 50 years and older have the option to add an additional $6,000 to their annual contributions for a total of $24,000 contributed into their retirement accounts this year. Or in other words, they can reduce their taxable income by $24,000 in 2017. Talk about savings!
If you are a business owner, implementing a company retirement plan such as a 401(k) in tandem with a profit sharing plan, like our client Paul chose to do, provides you with a number of benefits. First, it boosts your personal retirement savings; second, the contributions save you money in taxes; and third, such plans are attractive and beneficial to your employees, resulting in enhanced firm loyalty as well as improved morale at work. Such tandem plans also offer higher contribution levels than those cited above for individual employee contributions.
Not surprisingly, retirement plans are subject to numerous and changing rules and regulations that must be honored because the IRS does pay attention and penalties can be confiscatory.
If you read all the way to this conclusion, congratulations for wading through a dizzying array of options for saving money on taxes. We all want to pay less income tax on our earnings but strategies to accomplish this worthy goal are incredibly complex, as you can see.
We welcome the opportunity to assist as you make an effort to accelerate the implementation of your tax saving strategies over the coming months. We can help and look forward to hearing from you.
When I established my holistic financial planning firm in 2000, I was advised by colleagues to avoid using the word “holistic” to describe Entrust Financial’s services. “It sounds too new age,” they said, “Like you are reading taro cards or something. It just doesn’t sound like you are offering rigorous financial and investment advice.”
I admit I was puzzled by the strong negative reaction to the word holistic because to me, offering financial advice using a holistic process was the natural outcome of observing what clients needed to be successful. For example, early in my career I was referred a couple, Emily and Dan, who reported they wanted to meet because they were “hemorrhaging money.” To them, this meant that although they inherited a substantial portfolio a couple of years before, they had already dissipated about $2 million dollars of it.
How could this be? Two things stood out when we completed our discovery meeting. First, the allocation of their inherited portfolio was not structured to generate the income they were taking or to minimize taxes. Second, Emily and Dan had inadvertently overlooked the need to plan for their family’s financial concerns that went beyond investing. These concerns proved not only expensive but extensive as well, including things such as: promised payment of expensive college tuitions for four children, long-term care expenses for a parent, and private, unreimbursed therapist expenses for their children, to name a few. Not surprisingly, the money hemorrhaging continued until we were able to reallocate their portfolio with a tax-sensitive income objective and to address their family’s other financial concerns.
Let us return to the term holistic for a moment. It is an adjective that means to comprehend the parts of something as intimately interconnected and understandable only by reference to the whole¹. Emily and Dan were faced with a dissipated portfolio because they had failed to look at the interconnection between the asset allocation of their inherited portfolio, their family’s financial concerns that went beyond investing, the inevitable tax consequences, and their current need for income. Fortunately, Entrust’s commitment to using a holistic process provided the structure they needed to turn things around and re-position their personal finances for long-term success.
Today, unlike in 2000, Entrust can use the word holistic with confidence, knowing the term is a positive indicator of the extra layer of care we provide to clients. In fact, when Mckenzie and I made the decision to reorganize Entrust Financial as an independent fee-based firm in 2015, we chose the descriptor: Partners in Holistic Wealth Management.
Our years of experience have continued to teach us that ensuring financial security and independence for clients is a holistic endeavor requiring more than astute investment planning. We have positioned ourselves as the financial quarterback, meaning we see the big picture, coordinate related professionals, deploy resources and respond with appropriate strategies within the context of life transitions and unexpected events. The job of our Entrust team is to be each client’s financial partner, the fundamental multi-faceted resource they can count on, no matter what.
Surprisingly, despite the benefit to clients of the extra layer of care offered when a holistic process is utilized, fewer than seven percent of financial advisors have adopted this service-delivery model. Rather, the financial services landscape has remained virtually unchanged over the past twenty years, with the vast majority of advisors trying hard to sell investment products, instead of addressing investors’ complex financial needs.
Whether you are preserving your affluence or are in the process of building your wealth, Gloria Steinem’s wry observation sums up the need for using a holistic approach: “Rich people plan for three generations; poor people plan for Saturday night.” Planning your personal finances for long-term success is not about a product sale. It is about achieving a holistic balance as you address your complex financial needs.
You can instill a sense of gratitude and generosity in even the youngest children by teaching them to share with others, beyond the immediate family. For instance, a great place to start is to encourage your kids to volunteer their time or share a portion of their allowance with the causes they love.
Strategies for transforming your children into young philanthropists include:
Discover what sparks their interest
Create a family tradition
Establish a donor-advised fund
Discover what sparks their interest
You can easily discover children’s interests by having a conversation, or better yet, by holding a family meeting. Facilitate the participation of each family member regarding their special interests. Identify what captures the heart of each child; then select charities that fulfill his or her passion.
For example, if your child likes pets, that might generate interest in a local animal rescue group. Once the organization is selected, look for opportunities to support them by donating time or money. As an added incentive you might agree to match the donations your child gives.
Create a family tradition
Celebrate a holiday, anniversary, or other event as a family by giving back to those in need. Not only will your children learn the importance of volunteering and generosity, they will also look forward to this traditional family endeavor every year. For example, participate in a family-friendly one-mile or 5K walk that benefits a cause important to your family. Or enjoy beautiful spring or summer days by volunteering for a park cleanup project or a local community building project. These shared experiences provide valuable lessons about the impact of giving back to the community.
Establish a donor-advised fund
A great charitable tool you should consider is a donor-advised fund. Many families establish a donor-advised fund because it’s flexible and a great tool to teach their children about giving, saving, and investing. When you and your family donate to your fund, you may be eligible for an immediate tax deduction.
Family members meet regularly to review their contributions, their investment strategy, and the value of their donor-advised fund. They make decisions about when to grant money and to what organizations. Some families set savings goals; they wait for the fund to reach a certain value prior to dividing funds among their favorite charities. Because grants are made only to qualified charities, an added benefit is that investment appreciation has the potential to grow tax-free.
Givers for life
By teaching lessons in gratitude and generosity early on, you can set your kids up for a lifetime of giving back to those in need, to their local communities, and to cherished causes. If you would like to discuss specific strategies for incorporating charitable giving into your family planning, contact us today or take a look at the BalancingActBook.com Charitable Planning Map.
Entrust’s November video, intended to help you make good financial choices, focuses on: How can you get your children excited about giving back? It all starts with family meetings about the family finances, followed by conversations with children about sharing some of their money, and for many families expands into funding a donor-advised fund as a component of the family’s charitable giving road-map.
NewsWorthy, Entrust’s monthly video intended to help you make good financial choices, focuses today on: What do you need to consider when hiring a financial advisor?
To get your thinking started, consider whether you want to work with an advisor who focuses on investment products and pretty much stops there, or whether you prefer to work with an advisor who partners with you to help you make good financial decisions in all aspects of your life. You can usually tell the advisor’s focus before the first meeting, based upon the documents you are asked to bring with you.
You may be asked to bring only investment statements. On the other hand, if you are asked to bring all documents relating to your financial life (investment statements, tax returns, legal docs, insurance policies, and so forth), that is a sign that the advisor’s approach is to get a good understanding of your financial concerns that go beyond investing, too.
Another key consideration is communication. For instance, when you first meet with the advisor, how do you feel? Does it seem that the meeting is primarily designed to tell you about their firm and their products? Or do you feel like the first meeting is structured for the advisor to listen to you, to better understand you–your style of living, values, goals and needs? You should walk away from the meeting feeling like the advisor truly understands you, and is genuinely concerned about all aspects of your financial well being. In other words, the advisor has a strong commitment to partnering with you using a holistic approach.
Sherri contacted us because she was concerned that she was not getting the best financial advice. She was retired and using her nest egg for income; she wanted to make sure that her investments were doing okay because she was always worried about running out of money.
Our meeting began with my gaining a good understanding of where she was today and what she was trying to accomplish. I then asked what questions she had brought with her to our meeting. She responded, “I’m sure I should already know all this, but,” and then asked me a couple of questions. I could tell that she felt tense and uncertain what questions to ask.
Asking the right questions can make all the difference in an investor’s comfort and confidence regarding the choices they make about their money, especially because there are many different types of financial advisors out there–often claiming to provide identical services. Following are key questions to ask, when you evaluate a financial advisor. I shared them with Sherri:
1. Are you a fiduciary?
Working with an advisor who is a fiduciary is an important first step to ensuring that the advice you receive will be in your best interests. As a fiduciary, an advisor has an ethical commitment to put the client’s interests before his or her own. In other words, the advisor is client-centric, not product-focused. The advisor must also disclose how he or she is compensated, as well as any conflicts of interest that might arise in the working relationship. Financial advisors who have earned their CFP® certification are held to this highest standard in the financial services industry.
2. Do you work with a team?
Many advisors practice on their own, perhaps with support staff. However, some firms choose a team structure, because they value having team members representing a variety of expertise, ensuring rich collaboration for providing clients with a holistic experience. Just as important, a team also serves as a succession plan, so you can be confident that your needs will be met even if the unexpected occurs.
3. What services do you offer?
All financial advisors offer slightly (and sometimes significantly) different services to their clients. It is important to know exactly what services an advisor will provide and to make sure they are aligned with your values and needs. For example, for most advisors managing investments is the end-game. At Entrust Financial, we start with astute investment management. But that is only the beginning because we know that to help clients make good financial choices in all aspects of their lives, we also need to address their financial concerns that go beyond investing.
4. What will our relationship look like after I become a client?
You want to understand that the investment philosophy and asset allocation approach of the firm is disciplined, deliberate and articulated in advance so emotional decisions may be avoided during times of heightened market volatility. You also want to know how the firm will communicate with you. For instance, at Entrust Financial, we schedule regular progress meetings to fit each client’s needs and preferences, as well as communicating current events perspective by email to inform clients about the economic and capital markets climate.
With these questions in hand, Sherri finally began to relax and enjoy our conversation. The answers I was able to provide gave her a new level of comfort because she had a framework for making her decision about how to hire a financial advisor, to help her move past her fear of running out of money.
What do you want in a financial advisor? Asking these questions provides a first step in evaluating your financial advisory relationship. Reach out to us today with other questions that come to mind. We welcome the opportunity to start a conversation.
An unprecedented news flash of earlier this year read: Millennials overtake Baby Boomers as America’s largest generation¹. No wonder parents routinely ask us what advice we have for their millennial offspring–especially their daughters. Well, we have some suggestions and discovered in writing them down that they apply to a larger audience than just Millennial women. So read on!
Affluent Millennial women and those in the process of growing their wealth are known for being highly ambitious, educated, and dedicated. They have redefined what success is and they work hard for their assets. As women of increasing wealth, what do they need to know about taking care of their money?
First and foremost, affluent millennial women need to take charge of their money. Whether they earned it, inherited it, or received a substantial divorce settlement, the decision to take responsibility is paramount. Sound a bit intense? There is a good reason for the passion behind this statement.
As a woman Certified Financial Planner™ professional for the past fifteen years, the number one mistake I have seen women make is to deflect financial decision-making responsibility to a man in their life–whether their father, another male family member, or–often the most damaging of all–to their love interest. No matter how gorgeous, sexy, charming, or authoritative, I can pretty much guarantee that the spouse or life partner in your life will not do a better job managing your money than you will.
Time and again I have witnessed that special person in her life dissipate, spend in ways not aligned with her values, and often just plain take her wealth while she stands on the sidelines wanting affection and rationalizing she doesn’t know enough to make her own choices. Remember, such rationalizations are past thinking. Happily, we are in the twenty-first century and you, as a powerful force to be reckoned with, do know what to do. Or you can avail yourself of the resources you need to figure out what to do with your affluence–so you can fulfill your values, needs, and interests as well as avoid losing your wealth.
Tips for Millennial Women
Tip number one to all affluent millennial women is to take charge of your wealth planning. Tip number two is to avoid the “Just sign here, honey!” syndrome, as described above when that special someone is given authority over your personal finances. Tip number three is to consider the benefits of finding a competent wealth advisor to help you achieve all that is important to you with respect to your money.
To help with tip number three, here are a couple of guidelines for selecting that all-important advisor:
Work with an advisor who has attained the Certified Financial Planner™ credential. This professional is seasoned in the aspects that can help you maintain your financial well-being as well as achieve all that is important to you. Search for professionals in your area: http://www.cfp.net/ When you visit the websites of the CFP® professionals you have identified, make sure they are comfortable working with your team of advisors, such as your CPA and attorney.
Then, during the initial consultation with the advisors under consideration, take note of whether they listen to you, educate you as the conversation unfolds, and have a long-term perspective focused on you. If all they want to discuss is their great investment products, watch out! Your long-term financial success is built upon what you need and what is important to you, not on a product.
Tip number four for wealthy millennial women is to make a spending plan. Yes, even with the best advisor, if you are not quite sure where your money is going (your expenses), you may be in for unpleasant surprises down the road. Never assume you know; be precise about what comes in and goes out; I believe your sense of command over your personal finances will grow accordingly.
Tip number five is to “get started.” No matter what your former experience, muster your courage and begin taking charge of your personal finances now. Even baby steps right now will likely result in better than ever tomorrows. If you are not sure where to begin, I created a how-to guide, complete with exercises, to get you going on your journey– Balancing Act: Wealth Management Straight Talk for Women. All proceeds from the sale of this book benefit a scholarship fund at Temple University.
I predict a couple of phenomenal outcomes when affluent millennial women choose to take charge of their money. The first is they will be better able to take care of themselves and their families no matter what curve balls life throws their way. The second is that women are charitably minded, more so than men, and often serve as a catalyst for social change, change that benefits not only their families but all of us.
So whether you earned your wealth, inherited it, or received it in a settlement award, I challenge you to take responsibility for your money. Learn what you need to know, make choices, and enjoy the experience of growing financial confidence that results.
¹FACTANK: News in the Numbers, Millennials overtake Baby Boomers as America’s largest generation, Richard Fry, April 15, 2