Is it okay to list just one of our children as the beneficiary of our investment accounts and let him divide it up amongst our other children after we pass away?

Answer: Typically not. You should list all of your beneficiaries individually unless they are minors or need help managing money. In that case, you may want to consult with an attorney to set up a trust inside of your Will which will have instructions in it as to how the beneficiaries will receive their inheritance. Listing your children individually allows them to take advantage of potential tax benefits and doesn’t cause an undue burden on any one of your children to make sure that their siblings receive their inheritance.

College Planning 

What is the best way to save for future college expenses?

Answer: Look into a 529 College Saving Plan. 529 plans offer unsurpassed income tax breaks. Although your contributions are not deductible on your federal tax return, your investment grows tax-deferred, and distributions to pay for the beneficiary’s college costs come out federally tax-free. The tax-free treatment was made permanent with the Pension Protection Act of 2006.

Estate Planning

How do I protect the assets that I have accumulated over my lifetime in case I need long term health care?

Answer: Buying Long Term Care Insurance is one of the best ways to protect your assets. Another way is to consult with an attorney to come up with a gifting strategy to help ensure that your assets go to whom you intended. It’s important to start this planning sooner rather than later. Typically, in your mid 50’s is a good time to start having this conversation with your financial planner.

Financial Planning 

Why should I do any financial planning?

Answer: Like most people, you have hopes, dreams, and life goals for yourself and your family. These might include buying a home or business, saving for college education for your children, taking a dream vacation, reducing taxes, and retiring comfortably. Financial planning is the process of wisely managing your finances so that you can achieve your dreams and goals — while at the same time helping you negotiate the financial barriers that inevitably arise in every stage of life. Managing your personal finances is ultimately your responsibility. However, you don’t have to do it alone. A qualified financial planner, such as a Certified Financial Planner professional, can help you make decisions that make the most of your financial resources. 

Insurance Planning

How much life insurance do I need to protect my family?

Answer: A starting point is 15-20 times your income. The exact amount depends on many factors such as, how many people depend on your income and how much debt do you have. Term insurance is a cost effective way to buy the right amount of coverage. Buying the correct amount is more important than the particular type of coverage.

How do I protect my income in case I get sick or hurt?

Answer: The largest asset that most people have is their earning potential and therefore protecting it is very important. The best way to do this is to look into purchasing a Long Term Disability Policy. Whether you get a policy through your employer or you purchase your own, these policies typically pay a tax-free benefit to the policy holder for a particular time-period; say for 5 years or until you turn 65. There are many ways to design these polices which allows you the ability to customize the benefits to fit your exact needs.

Retirement Planning

What percentage of my income should I be saving for retirement?

Answer: A general rule of thumb is to try to save 15% of your gross income. This percentage could change depending on how old you are when you start saving, but the earlier that you start the easier it will be to get to your retirement goal.

What is the best way to handle the retirement accounts that I recently inherited?

Answer: Typically, it is best to set up a Beneficiary IRA which will allow you to “stretch” out the withdrawals that the IRS will require you to take. In order to “stretch” out the payments, you have to make the election by December 31st of the year following the date of death. If you don’t make this election in time, you will have to withdraw the entire retirement account within 5 years of the date of death and in doing so, you will have to pay income tax on all of the withdrawals.

Social Security

How is my benefit calculated?

Answer: Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. They apply a formula to these earnings and arrive at your basic benefit, or “primary insurance amount” (PIA).

When should I apply for Social Security Benefits?

Answer: The answer is highly personal and depends on a number of factors, such as your current cash needs, your health and family longevity, whether you plan to work in retirement, whether you have other retirement income sources, your anticipated future financial needs and obligations, and, of course, the amount of your future Social Security benefit.