Presented By:Gerard J. Kassouf, CPA, PFS, CFP®Beth Vittitow, CPA, PFS, CFP®

Financial Planning & Investment Management

What is Financial Planning?• Financial planning is a process:

• What do you want?• What will you have?• Will you have a shortfall?• What strategy will you employ?• What actions will you take?

Develop your Financial Goals –What Do You Want?

• Identify your specific goals• Identify your time horizon• Quantify your saving goals• Prioritize your saving goals – need vs. want

Identify Your Specific Saving Goals

• Pay down existing debt• Create an emergency fund• Save for retirement• Accumulate a down payment for a house• Build a college fund for your children’s education• Set aside money for a specific short term goal 

(vacation, car, etc.)

Assess Your Resources• What are your assets today?• What future income will you have?• What future earnings on investments will you have?• What expected future benefits from sources such as 

your employer retirement plan or social security will you have?

Examine Your Spending Habits• Keep a list of all spending for 3 months• Compare total spending to take‐home pay• Use a program to automate it‐ such as www.mint.com• Make and review goals• Focus on one area at a time• Identify a weakness and be creative

“Good Debt” vs. “Bad Debt”• Good Debt:  Debt borrowed to purchase an asset that 

will increase in value (home, education)

• Bad Debt:  Debt borrowed to purchase an item that will disappear (cup of coffee) or decline in value (car)

Reducing Debt• Simple and Straightforward

• Stop adding to the current amount owed• Lower the interest rate and/or late fees• Pay as much as you can on the debt

Credit• www.annualcreditreport.com• Credit Score

• 35% Payment History• 30% Available Credit• 15% Length of credit history• 10% Inquiries• 10% Type of Debt

Saving vs. Investing• Savings is not spending money and needs to be done 

in a regular, disciplined manner.• Investing is doing something with money to earn a 

return and needs to be done carefully and with due consideration

Create an Emergency Fund• Set aside 3‐6 months of living expenses• Use it for emergencies, not discretionary spending• Replace funds used

Evaluate Your Alternatives• Consider pros and cons of each option• Consider the opportunity costs of what you will give 

up to pursue your goal through each course of action

Identify Alternative Courses of Action• Reallocate existing resources to increase savings• Generate new resources

Insurance

Property & Casualty• Homeowners Insurance

Property & Casualty

• Homeowners InsuranceReplacement versus actual costPersonal property inventoryAutomatic value increases in comparison to value

Property & Casualty• Personal Liability Insurance/ Umbrella Policy

Personal liability above and beyond coverage of auto and home policySold in increments of $1 million

Disability• Employer and association coverages• Private coverage• Government coverage

DisabilityItems to review• Occupational Definitions• Waiting Period/Elimination Period• Benefit Period

Life

Term Insurance • Stated period of coverage at affordable cost• No value during or at end of term• Term Riders

• Guarantee Insurability• Convertibility

Life

Permanent Insurance • Higher insurance cost with forced savings • Cash value can be borrowed or withdrawn for goals• Asset Protection

Education Planning

Education Planning

• 529 Plans• Educational IRAs

Education Planning

529 Plans• Federally tax free withdrawals• Alabama resident/plan benefits• Investment Options• High Contribution limits• Control

Education Planning

Alabama 529 Plan• State tax deduction for contributions and rollovers• State tax free withdrawals• Age based, static and individual funds • Low minimum contributions

Education Planning

Educational IRA• Expansive education years• Income limits for contributions• Limited contributions• Little flexibility

Investments

Major Asset ClassesMajor Asset Class

Characteristics Goals

Cash Matures in less than 1 year

Capital preservationLiquidity

Bonds Fixed incomeVaried maturities

IncomeCapital preservation

Stocks Company ownership Possible dividend incomeCapital appreciation

Avoid Market TimingAsset Class Returns (as of 12/31/16)

• You never know which market segments will outperform from year to year. • By holding a globally diversified portfolio, investors are well positioned to capture 

returns wherever they occur.

Source: Morningstar Direct

Importance of Time HorizonGrowth of a Dollar, 1926–2015(Compounded monthly)

$0

$1

$10

$100

$1,000

$10,000

$100,000

1926 1936 1946 1956 1966 1976 1986 1996 2006 2015

$16,743 US Small Cap Index

$5,386 US Large Cap Index

$135 Long-TermGovt. Bonds Index

$21 Treasury Bills

$13 Inflation (CPI)

In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. US Small Cap Index is the Fama/French US Small Cap Index; US Large Cap Index is the Fama/French US Large Cap Index; Long-Term Government Bonds Index is 20-year US Government Bonds; Treasury Bills are One-Month US Treasury bills; Inflation is the Consumer Price Index. Fama/French Data provided by Fama/French. Eugene Fama and Ken French are members of the Board of Directors for and provide consulting services to Dimensional Fund Advisors LP. Bonds, T-bills, and inflation data © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). Past performance is no guarantee of future results.

The financial markets have rewarded long-term investors. People expect a positive return on the capital they supply, and, historically, the equity and bond markets have provided growth of wealth that has more than offset inflation.

Save for Retirement• Start early• Take advantage of employer matches• Tomorrow’s retirees will need to depend more on 

their own savings to fund retirement• Discuss retirement plans with your spouse

Retirement Savings AccountsTaxable Account

Employer Roth 401(k)

Pre‐TaxEmployer 401(k)

Salary $40,000 $40,000 $40,000

Pre‐tax $ $2,000 $2,000 $2,000

Tax at 25% $500 $500 N/A

After‐tax $ $1,500 $1,500 $2,000

Employee contribution $1,500 $1,500 $2,000

Employer match – assume 4%

N/A $1,500 $1,600

Total contribution $1,500 $3,000 $3,600

% of salary contributed 3.75% 7.50% 9.00%

Retirement Savings Accounts

$118,587

$237,175

$284,604

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

Taxable Account Employer Roth401(k)

Pre‐Tax Employer401(k)

Account Balance in 30 Years

*Assume 6% annual rate of return

Retirement Savings Accounts

$118,587

$237,175$213,453

$0

$50,000

$100,000

$150,000

$200,000

$250,000

Taxable Account Employer Roth401(k)

Pre‐Tax Employer401(k)

Available After‐Tax in 30 Years

*Assume 6% annual rate of return

Social Security• What age to apply?• Spousal Benefits• Survivor Benefits

Estate Planning

Estate Planning• Last Will and Testament• Trusts• Power of Attorney• Advance Health Care Directive

Estate PlanningAssets that pass by contract• Life Insurance• Retirement assets/IRAs• POD accounts• By ownership• Trust

Estate PlanningLast Will and Testament• Personal Property Distribution• Remaining Asset Distribution• Trust for children• Executor• Guardian

Estate PlanningPower of Attorney• Financial Decisions• Springing versus sprung

Estate PlanningAdvance Health Care Directive• Living Will• Health Care Proxy

What if I Die Without a Will?

If you are single

½ to mother ½ to father

What if I Die Without a Will?

If you are married with no children

First $100,000 plus ½ of the balance to the spouse

½ of the balance to parents

What if I Die Without a Will?

If you are married with children

First $50,000 plus ½ of the balance to the spouse

½ of the balance to children

Beneficiary Designations• Check beneficiary designations on qualified accounts 

and insurance policies

Questions?