12 expert financial planning tips for 2017
TRANSCRIPT
As 2016 winds down, the holiday season approaches and a new government administration gears up to take office, many Americans are struggling to figure out their goals and finances for next year.
Jamie Hopkins, who was instrumental in the creation of the Retirement Income Certified Professional® (RICP®) program at The American College of Financial Services, reached out to the leading financial planning thought leaders and professors at The College for tips on improving your clients’ financial situation in 2017. Following are their insights.
TIP #1
MAXIMIZE YOUR RETIREMENT SAVINGS
TIP #1
MAXIMIZE YOUR RETIREMENT SAVINGS
“There are three secrets to maximizing retirement savings. The first is to put savings on autopilot—salary deferrals to 401(k) plans, automatic monthly withdrawals from a checking account, paying down a mortgage. The second secret is to fully utilize tax-advantaged retirement vehicles like IRAs and Roth IRAs. The third secret— forget that you have this money!”
– DAVID LITTELL, JD, CHFC®, PROFESSOR OF RETIREMENT INCOME PLANNING
TIP #2
REALLOCATE YOUR INVESTMENTS
TIP #2
REALLOCATE YOUR INVESTMENTS
“With the recent surge in equity values, remember that long-term performance, particularly for the portfolios of retirees, is better when the stock allocation is returned to the target allocation on a regular basis. In simple words, with the elevated values of equities we are currently seeing, it is a good time to lighten the equity load and add to the bond allocation.”
– WALT WOERHEIDE, PHD, CHFC®, CFP®, RFC®, PROFESSOR OF INVESTMENTS
TIP #3
DON’T FORGET YOUR ESTATE PLAN
TIP #3
DON’T FORGET YOUR ESTATE PLAN
“Comprehensive financial planning includes estate planning and emergency planning for families. The client’s will, personal asset titling, and beneficiary designations all need to be reviewed to ensure that family needs will be matched by both the amount of funds available and how the funds are made available.”
-TED KURLOWICZ, JD, LLM, CAP®, CHFC®, CLU®, PROFESSOR OF TAXATION
TIP #4
INVEST FOR THE LONG TERM
TIP #4
INVEST FOR THE LONG TERM
“Success in investments is a marathon and not a sprint. Develop an investment strategy and stick with it no matter what the conditions in the market. Since 1926, a diversified portfolio of large capitalization stocks has earned, on average, 10% compounded annually. Corporate and government bonds have returned approximately 6%. Woody Allen said 80% of success is showing up. Success in the stock market is largely about showing up and sticking to a long term plan.”
- ROBERT R. JOHNSON, PHD, CFA®, CAIA®, PRESIDENT AND CEO
TIP #5
CAPITAL OWNERSHIP IS KEY
TIP #5
CAPITAL OWNERSHIP IS KEY
“Strive to be the owner of capital. Appreciation is never taxed until you decide to be taxed. That means you have control. Those gains are preferentially taxed at long-term capital gains tax rates. Whenever one can afford to be compensated with stock rather than with ordinary income, there will be a greater long-term advantage.”
– CHRISTOPHER WOEHRLE, JD, LLM (TAX), PROFESSOR OF TAXATION
TIP #6
MANAGE YOUR DEBT TO STAY OUT OF DEBT
TIP #6
MANAGE YOUR DEBT TO STAY OUT OF DEBT
“Without a strategic debt management plan, you will likely continue to accrue debt. Debt management includes strategically paying down the most expensive debt first. However, debt management is also just as much about avoiding future debt and looking for areas to cut back spending or at least, spend smarter.”
- AJAMU LOVING, PHD, PROFESSOR OF FINANCE
TIP #7
TALK WITH LOVED ONES ABOUT MONEY
TIP #7
TALK WITH LOVED ONES ABOUT MONEY
“Often, couples hide financial secrets from their partners. Talk to a significant other about your financial goals and what you want for the future. Build a shared vision of what your future looks like. For parents, take time to teach your children about money. Children learn about money whether we deliberately teach them or not, so be conscious about what money messages your children are getting.”
- BENJAMIN CUMMINGS, PHD, CFP®, PROFESSOR OF BEHAVIORAL FINANCE
TIP #8
REVIEW INSURANCE COVERAGES
TIP #8
REVIEW INSURANCE COVERAGES
“Review insurance coverages regularly to ensure coverage amounts are still consistent with your original needs and intent. Review life, health, disability, car, and homeowners insurance. You might need additional coverage from an umbrella policy. Insurance is not the sexiest of discussions but it’s crucial to living a financially secure life. Be sure to reevaluate your life insurance beneficiary designations and coverage amounts after major life events.”
- C.W. COPELAND, PHD, PROFESSOR OF INSURANCE
TIP #9
DO SOMETHING FOR YOUR KIDS
TIP #9
DO SOMETHING FOR YOUR KIDS
“Think about what you can do in 2017 that will have a huge future impact on your children. Maybe it’s funding a 529 account for college, a new 529 ABLE account for children with disabilities, establishing a trust or even funding a small investment account so they have a safety net after college. Small acts today can be lifesavers plus, it may avoid the likelihood of them living in your basement when they’re 30.”
- ADAM BECK, JD, PROFESSOR OF HEALTH INSURANCE
TIP #10
REFINANCE OR CONSOLIDATE EDUCATION LOANS
TIP #10
REFINANCE OR CONSOLIDATE EDUCATION LOANS
“Now is a great time to consolidate or refinance school loans. Interest rates will likely continue rising in 2017 and direct loans are variable. Grab a lower rate now. Consolidated loans qualify for repayment plans such as PAYE and REPAYE which are income sensitive. Also, start saving in 529 plans, but don’t forget to shop around. Not all 529 plans are equal. The Nevada and Ohio plans are popular, but check your own state’s plan to see if you’re eligible for special income tax benefits.”
- CRAIG LEMOINE, PHD, CFP®, PROFESSOR OF FINANCIAL PLANNING
TIP #11
MAXIMIZE FLEXIBLE SPENDING ACCOUNTS
TIP #11
MAXIMIZE FLEXIBLE SPENDING ACCOUNTS
“Take full advantage of flexible spending accounts (FSAs) that your employer may offer for out-of-pocket medical expenses and dependent care costs. The tax savings can be substantial, because monies deferred into FSAs avoid all taxes. But remember, there is a use-it-or-lose-it stipulation with FSAs. Unused monies at the end of the year are forfeited. So, it is important to accurately estimate the annual contributions.”
- KIRK OKUMURA, MSFS, CHFC®, DIRECTOR OF THE FSCP® PROGRAM
TIP #12DEVELOP A RETIREMENT RISK MANAGEMENT STRATEGY
TIP #12DEVELOP A RETIREMENT RISK MANAGEMENT STRATEGY
“Retirees need a plan to manage market volatility, their unknown longevity, and a variety of spending surprises such as long-term care. Planning with only investments or insurance is rarely the most efficient way to develop a plan that can manage these varying risks. Now is a good time to start reading more about retirement income to develop an integrated and cost-effective plan for managing all the retirement risks.”
- WADE PFAU, PHD, CFA®, PROFESSOR OF RETIREMENT INCOME PLANNING
Remember these tips to position your clients for a financially successful 2017.There is power to planning, so get a plan set up. Automate their savings and investment strategy whenever possible. Help them envision their financial future. Review their emergency fund, insurance coverages, and investments this year, making sure they still meet their goals. Lastly, don’t underestimate the importance of strengthening your professional expertise with recognized credentials like the RICP®, ChFC®, CFP®, CLU®, or CFA®.
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