Retirement is just around the corner.  You think you’ve saved enough; but with the recent market drop, you are just not sure. Your retirement accounts have taken drastic blows and now you’re in doubt if you will ever retire. You decide it’s time to sit down with a Certified Financial Planner^TM to see if you are still on track for a successful retirement.  Here are the 5 things that you don’t want to hear:

1. You Will Have To Work Longer.

Unfortunately, this might be the reality of many hopeful soon to be retirees. If you have taken a substantial hit in your portfolio, and you hadn’t saved enough to fund your retirement needs, this may be a sad truth that you have to face.

With the rising cost of health care and increasing cost of goods, your nest egg may be depleted where your employment income is the only thing keeping your savings account from dwindling down even further. By working longer, it will allow you to do # 2…

2. You Need To Save More.

If retiring is not happening next week and you still have a few more working years ahead of you, now is the time to sock away as much as you possibly can afford.  What that might mean is eating out less, maybe putting off a vacation here or there, or not remodeling the living room that drastically needs it. All those extra savings will either go to funding retirement vehicles, which are your 401(k)’s or IRAs, or just putting it in your emergency/savings account.

3. You Will Have To Live On Less.

Many retirees, or soon to be retirees, assume that there lifestyle will remain the same once retirement comes. In fact, 6 out of 10 workers believe that their standard of living will not change when they reach retirement.  Many of them fail to plan for longevity; meaning that they don’t have a good sense of how much they actually will need for their actual time in their retirement years.

This is a wake-up call to most when realizing that their retirement assets and Social Security, or any pensions, are not sufficient to cover their month to month expenses during retirement. Coming up with a budget and figuring a safe amount to withdraw off your investments to make up the gap between Social Security and/or pensions is a must if you want your nest egg to last you throughout all your retirement years.

4. You Need To Take More Risk.

In the light of what’s occurred in the market the past year and half or so, this might sound completely absurd.  This is mostly based on two different scenarios.

1. The person has not saved enough for retirement and just to try and keep up with their income needs they are forced to take more risk to generate income.  Obviously, in the past year this strategy would have backfired, but if the are unwilling to back to work or live on less; this leaves little options.
2. The person has not taken into consideration the cost of living.  Many times I have seen retirees that once they hit retirement, they shift their whole retirement portfolio from the stock market into 100% bonds and/or CDs/money market. If your retirement portfolio never has a chance to grow or appreciate, the portfolio will most likely be eroded away by inflation.  Cost of living is constantly rising with no end in sight. A retiree must have a portion of their portfolio in the market to battle inflation, or that hard earned dollar today will have far less purchasing power in the years to come.

5. You Have To Work Longer.

Sorry to bring this up again, but this is usually the one thing that people don’t want to hear.  By this point you have put in several years at your employer and retirement is so close you can taste it. Unfortunately, the reality is that you just haven’t saved enough.  Or maybe you thought you did, but what the market has giveth has now taketh away.  Whatever the reason, your daydreams of sipping Pina Coladas on the beach are just that: daydreams, while you are still sitting at your office desk staring out your window wondering what you could have done differently.

Much of this could have been avoided if you had taken the time to meet with a financial planner in advance.  Often time, people put off planning for retirement until it’s too late. A study showed that 43 percent of workers who did a retirement needs analysis did in fact make changes to their retirement portfolios.  The most common change: Save More.

When reviewing portfolios, I often see subtle changes that could have been made years ago that would have made a huge difference today.  The lesson learned is: Don’t procrastinate.  Review your financial situation annually to make sure you are on track. That way when you do meet with your financial planner regarding the possibility of retirement, you instead hear, “Congratulations, you are now ready to retire.”  Doesn’t that sound better?

Securities offered through LPL Financial, Member FINRA/SIPC

Questions For Your Financial Planner

As the year rolls on, risk and credit are being repriced and financial markets remain in some turmoil.

In the last few client reviews I’ve had, the clients have all stated that they haven’t even looked at their statements.   If you find yourself in this situation and retirement is creeping around the corner, this is highly not suggested.

Now, more than ever, you need to be on top of your financial situation.  Your portfolio could be completely intact, but most likely there might be some opportunities to take advantage of.

When meeting with your financial planner, here are 7 questions you should ask to get a better sense of where the market dump has left you.

1. What is my true financial situation?

Re-examine your investment goals, time horizon, risk tolerance and financial circumstances. Have any of these objectives or circumstances changed?

Have you added to your bond and money market investments during this volatile time? If so, will that more conservative investment mix still allow you to meet your long-term goals of saving for your children’s college education and funding a retirement income plan?

Allow your planner to assess your true financial situation by providing complete information on your current financial picture. Make sure to include not only your  investments held with them,  but other investments as well, including bank savings accounts.

2. How should I be thinking about risk in this environment?

Did you used to consider yourself an aggressive investor prior to 2008? It’s time to truly ask yourself what your risk tolerance is.  Has it changed — or are you just feeling natural unease following a downturn?

The hardest thing to do when markets and stocks are going down is to stay the course.  For some, that happens because they have taken too much risk at the top of the market. Many investors end up going to cash or bonds when markets are declining. Eventually, after a recovery begins, they think, ‘What have I been missing?’ They eventually come back in, but miss a good deal of the recovery.

Communication is vital in financial planning process

3. Do I need to reconsider my time horizon?

How long is your time horizon? All things being equal, you can afford to be more aggressive if you have a longer time horizon. For example, most planners would recommend that the investment mix of a 32-year-old be more heavily weighted in equities than that of someone who is close to retirement.

Do you have multiple time horizons? A 32-year-old who is saving for a down payment on a house in three years would be investing a portion of her money with a three-year time horizon despite the fact that retirement may be 33 years away. Given the short time frame, it would be prudent to invest those assets more conservatively because there is little time to make up any losses.

Can you adjust your plans to retire? Perhaps you once planned to retire early at 62 and your investment portfolio shrank in 2008. Ask your adviser to calculate how long you would have to work beyond 62 to build a portfolio that can produce a lifelong income stream. If you could wait to retire at 65, you would add three more years of income and investing, while reducing your withdrawal phase by three years. It would also enable you to postpone the year you start claiming Social Security benefits. If you claim before your full retirement age, your benefits would be reduced for life.

4. Does my investment strategy need readjusting?

If you are retired and withdrawing income from your investment portfolio for living expenses, talk to your financial planner about taking out less today and over the next several years. This approach can help make your investments last longer. You can’t predict or control the stock market, but you can control your income withdrawal strategy.

5. How do changes in my personal life affect my financial situation?

If you can answer “yes” to any of the questions below, your planner may need to adjust your investment mix to provide for these changes.

• Have you changed jobs or decided to take a buyout offer or early retirement?
• Did you get married, have a child or become a grandparent?
• Has there been a divorce, or is your son or daughter getting nearer to needing money for college tuition and expenses?
• Do your grown children need temporary financial assistance?
• Are you now helping to financially support a parent or parents?

6. What if I haven’t invested enough for retirement?

Talk to your financial planner about a number of possible strategies to help build up your assets prior to or during retirement:

• Delay retirement until you are 65 or older. If you could use a few more years to invest, it may be worth thinking about staying in your current job or starting a second career.
• Work part time in retirement. Bringing in extra income may keep you from using up your retirement savings too early. Nearly one-quarter of adults 65 to 74 years old are in the work force.
• Reduce your spending during market declines. By cutting expenses in a down market, you can significantly lessen the financial impact on your portfolio. Retirees who move everything from stock investments to bond and money market investments risk missing out on the potential gains generated by stocks once they recover.
• Contribute as much as possible to your retirement plan. If you are 50 or older, you may be able to make catch-up contributions that set aside an additional $5,500 for a total of $22,000 401k contribution for 2012. If possible, try not to borrow or make a large withdrawal from your retirement plan.

7. Are there any tax implications for my moves?

Did you sell an investment  in December, hoping that you could take a loss on your next year tax return? If you want to buy that same investment in the current yer, keep in mind you must wait for more than 30 days. Otherwise, you violate the “wash sale” rule and you will not get the benefit of the loss to offset other capital gains.

If you have never met with a financial planner before, check out my guest post at Get Rich Slowly on 8 questions you should ask before you hire a financial planner.

Be sure to consult a tax professional about this and other tax issues.

Source: Capital Guardian

photo by worshiphim24_7

Today is the big day for Alliance Investment Planning Group to move into our new building.  Yeah!  We’ve been anticipating this move for several months now, so we’re very excited for the big day to actually arrive.  Looks like mother nature is going to be nice to us and give us some sun just chilly weather (high of 36 degrees).  I’ll take it considering the single digit weather we had last week.

Special Gratitude

Special thanks to Jonathon and the boys at Reppert Publishing for helping us move our furniture today.  Don’t know what we would do without you.

Same Phone

To all that are curious we will still have the same phone number in place as we had at our own office.  Our new address is as follows:

115 S. Washington

Carbondale, IL  62901

It that’s not good enough, here are some directions compliments of Google Maps:

View Larger Map

Have a Happy New Year!

Ready, Set, Go!

Whenever I first talk to somebody that is interested in utilizing my services, I often get recurring questions into how the whole process works.  Some of the most common questions are, “How much is this going to cost?”  or “What can you do for me?”  For those that have never sat down with a financial planner before, I wanted to share an example of how a first meeting might go.

First Financial Planning Meeting

First and foremost, I do not charge anything to meet with somebody for the first time.  The first meeting is solely an interview for both parties.   I’m interviewing you to see if you are a right candidate for my financial planning process.  You are also interviewing me to see if I’m the right man for the job.  A casual sit down face to face meeting will help both of us answer this question.

Information To Bring

Typically, I will talk to the potential client and instruct them on the type of materials that they would need to get together for our first meeting.  This would include:

It never hurts to have too much information.  If feasible, I like to meet in my office, but a house visit is nothing out of the ordinary.  Actually, sometimes it’s nice to go to the home so that all the paperwork is already there and easily pulled from a file if it was initially forgotten.

Let’s Talk

The first part of the meeting is getting to know each other.  Kind of like an informal interview process to see if there is anything that I can bring to the table to better their situation.  It also works the other way in that they are interviewing me to make sure that I am the right guy to help out with their investments.  Hopefully, I make a good impression.    One of my best qualities is that I’m a naturally curious person.  I always like to find out what’s  “their story”.  Where did they come from?  Where have they worked? What do they do for fun?  What’s the best place they ever visited?  What was their first job?  It’s always interesting to find out what got that person to where they are today.

Down To Business

Then we’ll discuss their investment situation.  What’s working for them now?  Any investments that didn’t work out in the past? What do they like or dislike about their current situation? Have they ever worked with a financial planner in the past? This will ultimately lead into a discussion of what they need their investments to do for them: Fund their retirement goals. Buy a vacation home.  Pay for their daughter’s college, etc.

Crunching The Numbers

I will then take their investment information and head back to the office where I will input it into a tool to where I can analyze their portfolio to make sure they are maximizing their full potential.  Often times, people are not diversified enough or some of their current investments are lacking in performance. We will then schedule a second meeting to go over my recommendations to see where we might be able make some adjustments to put them in a better situation.

Overall, the first meeting is the most fun because I enjoy to meet new people.  I could listen for hours of people telling me all their life experiences.  That’s what makes starting the financial planning process such unique and enjoyable experience.

Securities offered through LPL Financial, Member FINRA/SIPC

For those of you that have actually built your own home or been in the process of building your own home, you know the hours and hours it takes in the planning process. Most often or not, this is the home that you will either retire in or live a great majority of your life. Within the planning process you will scrutinize over your house plans and keep in constant contact with your contractor to make sure that your “Dream Home” is being built to your standard. And this is how it should be, because you will be in that home for a good portion of your life. What’s most puzzling in my profession is that people spend very little time planning for retirement.

Most Important: Vacation or Retirement?

In fact, I just read a study that said on average people spend more time planning their annual vacation than they do actually planning their retirement. Think about that for a second. What’s most important: Disney World or supporting yourself and family for 20-30 years?

Disney Land

VS.

Happy Retirement

Starting Your Financial Plan

Building your dream financial plan is similar into building your home. It does take some time into getting the information together, but shouldn’t any plan that will last 2 to 3 decades? In the process, I will be the contractor that puts everything together and continually monitors to make sure your plan is still working. We will make sure that we have all the proper materials and use them the most effective way possible to get you the retirement plan of your dreams. The best part is that I won’t avoid your phone calls and will even return your call promptly. When’s the last time you heard a contractor say that? Well, at least say it and then mean it.

Blueprint for the Financial Plan

The financial plan will be the blueprint that we will review each year to make sure we are still on track to get us where we want to go. As house plans change, so does life; so we want to make those changes accordingly to keep us on course.

Spending a little time to review your situation and meeting with a certified financial planner can be what makes all the difference in a successful retirement. Don’t let a few hours not spent ruin your financial dreams.

“Good plans shape good decisions. That’s why good planning helps to make elusive dreams come true.”

- Lester Robert Bittel (b. 1918), writer

Is Your Financial Planner a crook?

Recently, I caught a story on the local news, a financial planner at out of my hometown, West Frankfort, Illinois, was arrested for violating that trust. He had been a financial advisor for many years and recently was just charged with financial exploitation of the elderly. In one instance, he had gone to one of his clients and was trying to sell her an annuity. She trusted her advisor and considered him a friend and wrote him a check. A check directly to him, not the insurance company, in the amount for $20,000 and then he disappeared. As it turns out, she was not the only client  that had been taken advantage of.

Financial Planner Violates Trust

When I see story like this, I’m angered because I love my profession, I love what I do, and I love earning my clients’ trust. But when you have individuals as such; that abuse that sacred trust with their client, it gives my profession a bad name. You may be wondering if this could happen to you.

What To Do If Your Financial Planner is Crooked

• If the advisor asks you to write him a personal check, that is a clear red flag. Never, never, write out a check directly to the advisor. Especially, if you are purchasing some kind of investment product.
• If you recently purchased something but never received anything in the mail, call your advisor and see if you can get a copy of the confirmation ticket.
• If your advisor is guaranteeing an outrageous rate of return, be extremely cautious. I ran into a competitor that was guaranteeing 12% return on his mutual funds he was offering.

Background Checks On Your Advisor

Start by thoroughly researching any broker, financial planner, or adviser you are considering hiring. Explore the North American Securities Administrators Association Website, www.nasaa.org, or call 888-84-NASAA for a regulator in your state.

State regulators, along with the National Association of Securities Dealers, jointly maintain a database of more than 650,000 stockbrokers and 5,000 securities firms. Known as the CRD, or the Central Registration Depository, the database contains critical information, such as whether a broker has ever been sanctioned or fined for investor wrongdoing. To check CRD records, contact the NASD’s consumer hotline at 800-289-9999, or visit the regulatory arm of the NASD online at www.nasdr.com and use NASD’s “Broker Check” system.

In this day and age, professionals are laden with the alphabet after their names.  My industry is no exception.  When I started my career with my previous firm, we immediately acquired the AAMS (Accredited Asset Managment Specialist) Designation.  While serving in Iraq, in my downtime I studied for the CRPC (CharteredRetirement Planning Consultant).  These are just two of several designations that I could attain if I had the time and patience to study for them.  But despite the two I had, and several I could get: the coveted marks I knew I had to have was the mark of the CFP®.

What Makes a CFP® Different?

From my perspective, the CFP® was the mark of a serious financial planner.  With countless financial consultants at other investment firms, inusrance agents offering investments and banks now having in house brokerages, I knew I needed to differentiate myself.  Many people I know are not familiar with the CFP® mark, so I wanted to share what I had to go through to get it.

Financial professionals who have earned the right to use the CFP® mark have met the following requirements:

Education: There are three ways to meet the CFP® certification education requirement:

1. Completing an education program at a college or university whose curriculum is registered with the CFP Board; or
2. Submitting a transcript of previous financial planning-related course work to the CFP Board for review and credit; or
   Showing the attainment of certain professional designations or academic degrees.
3. Examination: Individuals must pass a rigorous two-day, 10-hour CFP® Certification Examination administered by the CFP Board that covers the financial planning process and includes such topics as tax planning, employee benefits and retirement planning, estate planning, investment management and insurance.

Experience: Candidates for CFP® certification must prove they have experience in the financial planning process before being authorized to use the CFP marks.
Ethics: As a final step to certification, CFP® practitioners agree to abide by a strict code of professional conduct, known as CFP® Board’s Code of Ethics and Professional Responsibility, that sets forth their ethical responsibilities to the public, clients and employers. CFP® Board also performs a background check during this process, and each individual must disclose any investigations or legal proceedings related to their professional or business conduct. Candidates must also adhere to the CFP Board’s Code of Ethics and Professional Responsibility and Financial Planning Practice Standards.