Archived Articles

What's the real value of working with a Financial Advisor?

It seems you can do just about anything by yourself these days. During the pandemic, many of us learned a new skill, either out of necessity or boredom.

• Sourdough bread? Check.
• Haircut? Check.
• Calligraphy? Check.
• Furniture makeover? Check.
• Snow removal? Landscaping? Check. Check.
• Fitness plan? Check.
• Financial plan? Maybe.

When it comes to your finances, do you really want to do it yourself? Sure, it’s nice to work with an advisor, but do you need one? As you might imagine, there are pros and cons to working with an advisor versus going it alone when it comes to financial planning. Let’s discuss.

“I’ve made it this far on my own,” might be your thinking when it comes to finances, so why do I need an advisor? Many people have done just fine managing their own finances. Indeed, a sizable portion of the population enjoys watching the markets, budgeting, and analyzing their next move. Yet there is a question to be considered: have you done everything to optimize what is available to you?

Of course, if you are managing finances on your own, you are not paying an advisor a fee for advice or investment management, resulting in cost savings for you and your family. If you put those savings back into your portfolio rather than spending, it could result in more money for your future goals.

Financial planning is personal. We all have ideas and values when it comes to money, and for many people talking about money is taboo. “My finances are no one else’s business,” may be your philosophy, and if that’s the case, being a “do-it-yourselfer" could be the best solution for you and your finances.

Let’s look at a few reasons you might want to think about shifting your mindset and working with a professional financial advisor:

Your time is valuable. The time you spend working on your finances could be delegated to a financial professional. You could then spend that time on something else: career, family, rest.

As mentioned above, finances are personal. Sometimes our emotions take the lead, and that’s not necessarily a good thing when making decisions about money. Have you been excited to watch an investment climb, only to hold it too long and then watch it decline? Advisors help you walk through hard data and provide an independent, non-emotional perspective.

What is your strategy? Financial advisors are generally helpful not because of their “magic formula” for higher returns, but because of their measured approach and experience. One size does not fit all when it comes to financial planning. From putting the right piece of insurance in place at the right time to actively rebalancing investments, to tax-loss harvesting, a financial professional can implement strategies that may not be instinctive for you. Though there is a monetary cost, there is often a monetary benefit to knowing all your options when it comes to integrated, optimized financial planning.

Behind every great advisor is a great team. Executing strategies, moving money, and saving into the appropriate accounts are time sensitive and often tedious. Being able to reach an advisor or team member without calling an 800-number and having the confidence you are making the proper moves, can be a real advantage to working with an advisor.

Advisors and their teams keep an eye on the ever-changing world of financial planning tools, rules, and regulations. Are you allowed to contribute to certain accounts? Are you allowed to distribute from certain accounts? What is the best way to save for the next generation? An advisor can walk through your options.

While you’re walking together, your advisor can be an accountability partner. Did you invest as you had planned? Did you make those financial changes that you were planning to “get around to”? Most people do better when someone’s following up and encouraging them to take next steps.

When you look at your DIY projects, have you nailed them or failed them? Sure, you can do it yourself. You can do just about anything yourself. Is it worth your time and effort to do so? While there is a cost to working with a professional, there is also a reward: a personalized strategy that is an investment in your financial fitness that will strengthen and optimize your unique values today, tomorrow, and for generations to come.

If you’d like to explore how your financial planning can go beyond your expectations, reach out to our team today: beyond@nm.com.

How to get Smart and Intentional with your Finances

A new year often inspires new goals. It’s a great time to assess where you stand personally, professionally, and financially. Afterall, you have months to make smart decisions with your money. And then, just like that -- a few months have passed because life was busy. The good news is that you’re not alone, some stats estimate that as many as 90% of people don’t stick to their New Year’s goals. If this sounds familiar, don’t worry, there’s still time to get smart and intentional with your money.

You may have seen John Roland’s comments to CNBC about things to consider by the end of the year. However, if you didn’t have chance to take stock of your finances in December, the first quarter is still a great time to review where you can make improvements. The busyness of the holidays is over, and your spring and summer plans haven’t materialized yet. You’re in the 'sweet spot' to make some serious progress towards your financial goals. Read on for some tangible ideas to get yourself back on track:

Are you contributing as much as you can to your 401(k)? The IRS increased the annual contribution limit for 2022. This year, you can contribute up to $20,500. If you are older than 50, you can contribute up to $27,000 for the year.

Speaking of retirement, have your contributed to your IRA for 2021? You have up until April 15, 2022 to make a 2021 contribution to a Roth or Traditional IRA. The contribution limits are the same as last year: $6,000 if you are younger than 50, $7,000 if you are older than 50. If you’re contributing to an employer plan, be sure to check with your financial advisor to find out if contributing to an IRA is a wise move, and which type of account is best for you. Remember, you cannot access funds designated for retirement until age 59 ½. If you do, you’ll have to pay a 10% penalty. If you contribute to a SEP IRA, you have until April 15th (or whenever you file taxes) to make your 2021 contribution.

Next, ask yourself if you have a savings reserve with a balance adequate to meet your core expenses for three to six months? Not surprisingly, many people increase their spending in December and dip into their accounts. If your cash accounts look a little low, devise a plan to start building them back up. Small changes in your daily spending habits, can make a big impact at the end of the year.

Do you anticipate any extra expenses this year? Are you paying for education or planning a home renovation? Do you anticipate a large tax bill in April? Do you know how you will pay for those things? You might consider setting aside those dollars now so they will be available when needed.

If you’re working, you’ve probably already received your W-2. You’ll likely receive notices over the next month or two for other tax documents. Start gathering your tax information now in one place so the documents are easy to find and access. A manilla envelop or file folder can be a great place to keep these documents as they get delivered to you. Take note of those accounts that send documents electronically and set aside time to go online and download them. Having everything in one place will make it easier and save time when it’s time to do your taxes.

Are you systematically saving? If you received a raise last year or expect one this year, think about increasing your monthly savings. You might consider setting up an auto transfer from your paycheck that goes directly to an account you don’t access regularly. Depending on your goals, it may make sense to set up a systematic transfer to fund an investment account. Now’s is a great time to take inventory of where your money is going and allocate dollars to pay yourself first.

Of course, there is always the possibility that you haven’t set any goals yet, or you’re not sure where to start. If that’s the case, don’t worry, a conversation with your financial advisor is always welcome. The professionals at Beyond Financial Advisors are happy to talk through your priorities and hold you accountable.

Planning for Health Care Expenses in Retirement

Planning for health care expenses in retirement is an important consideration of an overall retirement plan. Many people are surprised to realize that being enrolled in Medicare does not mean “free health care.” In fact, for most of our clients previously covered by employer-provided health insurance, the health care costs they incur when on Medicare are greater than what they paid previously. Depending on your income, the cost of Medicare Parts A, B, and D ranges between $160 and $582 per month, per person. Therefore, a couple in retirement could spend between $320 and $1,164 each month on Medicare premiums. In addition, there are co-pays and deductibles to consider, along with the cost of supplemental coverage if obtained. For example, the cost for a 65 year old female Medicare Plan F is, on average, is $207 per month¹.

These costs demonstrate the need for thoughtful planning prior to enrolling in Medicare, particularly as it relates to taxable income throughout your retirement years. Even if you are not earning income through employment, distributions from pre-tax retirement accounts like 401(k)s and IRAs can add to your taxable income for purposes of Medicare premiums. Diversifying the tax treatment of distributions of your retirement savings is an important aspect of a thoughtful, well-designed retirement income strategy. Taking advantage of Roth 401(k) and Roth IRA accounts, accessing cash value from life insurance policies², or distributing funds from after-tax accounts can help to minimize taxable income throughout retirement, keeping Medicare premiums low.

This article provides additional details on Medicare—how it works, what it covers and doesn’t cover, what it costs, and when to enroll. Please reach out to our team to discuss your retirement plan further.

Learn How to Protect Yourself From a Cyber Security Breach

“Hello. I need you to wire USD. I am very busy today. Please let me know how soon you can execute my transfer request.”

Have you ever sent an email with those words? Probably not. But, your financial advisor receives emails like that frequently. The message claims there’s an urgent need, but you – the person making the request to transfer money – can’t be reached to talk about it. Hackers are incredibly savvy when it comes to cyber security, and the scary thing is, sometimes the wording even sounds like you when it isn’t. Another element of the scam: hackers do a great job of making an email appear to be sent from your email address. This is called ‘ email spoofing’. Or worse yet, they may have actually sent it from your email address. I once spoke with a client whose email had been hacked. I received an email from him with wording similar to what I referenced above. When I spoke with the client, he told me that when he was logged in to his email account, he could see the fraudulent sent messages being deleted in real time right before his eyes! That client suddenly had a greater understanding of the need for all of the security measures financial institutions have adopted.

Whether it’s a fake email, false tax return, credit card fraud, or something else, cyber security threats are all too common. And they are not always easy to remedy. As a client, security protocols can be annoying. However, there is a good reason we have them in place: to protect you and your assets.

One of the latest cyber security tactics is credential stuffing. Criminals will use email addresses, usernames, and passwords and try them on various sites using an automated script. Even finding handful that work successfully can be very lucrative. This is why you are encouraged to change your password, and to use different passwords for different accounts. “Password” is not a good password!

You should also always opt for “multifactor authentication” whenever it is offered. If you have ever attempted to log in to an account and get a message that the entity wants to send you a one-time confirmation code via text message or through an authentication app, you have used multifactor authentication. Yes, it’s an extra step, but one that may be able to stop a hacker and keep your accounts safe.

What other pro-active steps can you take?

• Freeze your credit
• Monitor your credit through one of the three credit bureaus
• Monitor your children’s credit
• Change your passwords
• Consider closing accounts you don’t use

Follow directions for cleaning up email and creating strong passwords. Use a password generating tool, like the one provided from LastPass. It will create a random and secure password for you. Other tips to consider: If you have been a victim of identity theft, listen to the experts. Don’t try to correct the issues on your own. If your bank offers credit monitoring, enroll. If your internet provider is willing to help you clean up your email account, take them up on the offer.

Technology is a wonderful thing and can be a major advantage, especially during a time when working remotely is the norm and convenience is not only appreciated but expected. However, it can be a negative if information falls into the wrong hands, so it’s imperative you take the time to manage and monitor your accounts closely.

Lastly, be aware. Change your passwords. Check your accounts for suspicious activity. And don’t be afraid to pick up the phone and call your financial advisor for advice or to execute transactions. He or she would be happy to speak with you in real time!

The opinions expressed are those of Becky DeVries as of the date stated on this material and are subject to change. Becky DeVries is an Associate Financial Advisor with the Northwestern Mutual Wealth Management Company.

What’s Important About Money to You?

“What’s important about money to you?”

I’ve asked this question hundreds of times to prospective clients during our initial conversation to determine how my team and I might be able to help. While the answers vary, the responses from those nearing or in retirement are often very similar:

• “I never want to run out of money and be a burden on my family.”
• “I want to remain financially independent.”
• “I want to be able to spend my time during my retirement years sharing experiences with loved ones and not having to worry about finances.”
• “What’s important about money? Having enough to never have to think about it.”

I’ve heard it said that the biggest fear that many retirees have isn’t declining health or even death itself but running out of money. Whether we like it or not, money provides the ability to maintain a standard of living and quality of life that we wish to achieve, and the prospect of running out of money feels like the ultimate failure for many people who have spent their lives working, saving, and trying to be responsible with their finances.

As a financial advisor, I think about the financial fears of our clients every day. I’ve shared with others that if the Hippocratic Oath for doctors is, “Do no harm,” for financial advisors it should be, “Don’t let your clients go broke.” While I usually say that with a chuckle, I believe it is the fundamental role we play. Without the confidence that our clients will never run out of money, the rest of our ideas are rather insignificant. Because of this, for our clients who are early in their careers, we work with them to establish savings and investment habits to accumulate the assets needed for retirement. In addition, we implement insurance products to protect against premature loss of their income. We focus on savings and investing in tax-preferred accounts to maximize compounded growth over time and diversify in such a way to achieve growth at a level of risk our clients are comfortable with, even during periods of market losses.

When we’ve reached the point where we decide to retire, and shift from accumulating assets to distributing them, the planning changes. We must determine how much we can comfortably spend without running out. This is difficult to do with certainty, given the assumptions we need to make. The planning software and models we run for our clients help give us perspective and a range of spending that is sustainable but need to be updated and reviewed regularly to determine if our initial assumptions were correct.

Fortunately, there are financial tools that can be implemented to take away much of the uncertainty of retirement income planning and provide a more confident retirement experience. In particular, income annuities provide guaranteed payments month after month, year after year, for an entire lifetime. Many income annuities also provide the opportunity for growth of that monthly payment, with the potential to keep up with inflation and the cost of living. But the biggest benefit, in my opinion, is that a recurring payment, guaranteed to keep coming in month after month, gives our clients the freedom and confidence to spend the money they receive, knowing it will be replenished. From my experience, clients are much happier spending from guaranteed income rather than taking distributions from an investment portfolio, slowing watching their balance decline and wondering how long it might last.

Recently, Ernst & Young (EY), published a study about the impact of incorporating income annuities into a retirement plan. They determined that using an income annuity as a portion of the fixed income component of a well-diversified investment portfolio can increase the amount of retirement spending up to 8% per year over an investment only approach (as per the full report page 8). A link to the entire EY Study can be found here.

Many of our clients have strategically integrated income annuities as part of their retirement plans, for both quantitative and qualitative reasons. As the EY study shows, the math works—more income with lower risk throughout retirement. More than that, guaranteed lifetime income provides an additional level of security and confidence, without the risk of outliving the funds. It’s part of the planning we provide as we follow our number one rule: don’t let your clients go broke.

*Withdrawals from annuities may be subject to ordinary income tax, a 10% IRS early withdrawal penalty if taken before age 59½, and contractual withdrawal charges.

*All guarantees in annuities are backed solely by the claims-paying ability of the issuer.

Navigating FAFSA

You may have heard it said of parenting, “the days go by slowly, but the years go fast.” You’ve laughed. You’ve cried. You’ve put in the hard work of parenting. Now, the moment that seemed a lifetime away has arrived: high school is winding down and college is on the horizon. You’ve saved and you’ve navigated college visits (or maybe you are in the process of visiting schools). Now, it’s time to think about financial aid. FAFSA® has become a household term. But what does it mean? And should you pursue it?

FAFSA® is the Free Application for Federal Student Aid. As the name implies, completing for the form is free, and it allows you to apply for financial aid for college or graduate school. Should your student complete the form? Well, about 20 million Americans do every year, and with good reason. As you may have guessed, the federal government uses the form to determine who qualifies for aid. States and schools use the form when looking at eligibility for assistance as well. The deadline to apply varies by state, however, the federal deadline for the upcoming 2022-2023 school year is June 30, 2023.

“Apply early,” is one piece of advice Niki Curatti, recent college graduate and Beyond Financial Advisors team member offers families starting the process. Assistance funds are limited, and the sooner you apply, the better. Completing the form may not be a particularly enjoyable process; that’s why Curatti advises blocking time on your calendar to get it done. Aside from general identifying information (social security number, driver’s license number, etc.), information for the student’s parents will be required as well. If the child is a dependent, the parents’ tax returns and bank statements will also come in to play.

While the application is extensive, there are some assets that are not considered for financial aid purposes. These include: life insurance cash value, primary home equity, retirement accounts, and annuities. The FAFSA® does look at non-retirement accounts belonging to both parents and students, as well as 529 college savings accounts.

Completing the FAFSA® may be the first “adult” task many students undertake. While it may or may not yield federal aid, keep in mind it is also used to assess state and college aid. The process can also be a good learning experience for students. Once it’s completed for the first time, it gets a bit more efficient in the following years. “Remember your PIN and be organized, similar to how you would approach doing your taxes,” Curatti advises.

The FAFSA® isn’t your only option for aid. There are various websites that will direct you to scholarship options based on your gender, ethnicity, religion, geographic location and other characteristics. There are more scholarships with a narrower focus, such as one for Catholic students with the last name Zolp. (If you happen to fall into that category, you can check it out here.) You get the idea.

You can complete the FAFSA® form here. You can also watch videos about establishing an account and using the myStudent Aid mobile app on the Federal Student Aid YouTube channel.