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Combining Your Finances When You Marry

How separate (or intertwined) should your financial lives be?

Some spouses share everything with each other – including the smallest details of their personal finances. Other spouses decide to keep some individual financial decisions and details to themselves, and their relationships are just fine.

Just as a marriage requires understanding, respect, and compromise, so does the financial life of a married couple. If you are marrying soon or have just married, you may be surprised (and encouraged) by the way your individual finances may and may not need to change.

If you are like most single people, you have two or three bank accounts. Besides your savings account and your checking account, you may also have a “dream account” where you park your travel money or your future down payment on a home. You can retain all three after you marry, of course – but when it comes to your expenses, you have a fundamental decision to make.

After you marry, the two of you may also find it best to have three checking accounts. A joint account can be set up specifically for household expenses, with each spouse retaining an individual checking account. Of course, each spouse might also maintain an individual savings account.

Do you want to have a joint bank account? The optimal move is to create it as soon as you marry. Some newlyweds find they need a joint bank account only after some financial trial and error; they may have been better off starting out married life with one.

If you only have individual checking accounts, that forces some decisions. Who pays what bill? Should one of you pay most of the bills? If you have a shared dream (like buying a home), how will you each save for it? How will you finance or pay for major purchases?

It is certainly possible to answer these money questions without going out and creating a joint account. Some marrying couples never create one – they already have a bunch of accounts, so why add another? There can be a downside, though, to not wedding your finances together in some fashion.

Privacy is good, but secrecy can be an issue. Over time, that is what plagues some married couples. Even when one spouse’s savings or investments are individually held, effects from that individual’s finances may spill into the whole of the household finances. Spouses who have poor borrowing or spending habits, a sudden major debt issue, or an entirely secret bank account may be positioning themselves for a money argument. The financial impact of these matters may affect both spouses, not just one.

A recent TD Ameritrade survey found that 38% of those questioned had little or no information about the debts their partner may hold. In another survey by Fidelity, 43% of respondents indicated that they had no idea what salary their partner brings home. This is hard to reconcile with the same Fidelity survey indicating that 72% of couples say that they are excellent communicators. Still, an effort to live up to that impression is a step in the right direction; more communication may help put both partners on the same page.1

So, above all, talk. Talk to each other about how you want to handle the bills and other recurring expenses. Discuss how you want to save for a dream. Chat about the way you want to invest and the amount of risk and debt you think you can tolerate. Combine your finances to the degree you see fit, while keeping the lines of communication ever open.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – time.com/money/4776640/money-tips-married-couples/ [6/1/17]

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You Can Limit Financial Costs if You Predecease Your Spouse, if Not the Emotional Ones

The transfer of assets when a spouse dies can be fairly simple—if you learn from my mistakes.

I pride myself on keeping meticulous financial records. But since my wife died on Jan. 1, I discovered I had made some real rookie mistakes that led to hours of extra work and substantial fees. The transfer of assets between spouses can be fairly simple—if you learn from my mistakes.

Dr. Lisa Jane Krenzel and I shared everything throughout our marriage. Like many couples, we split responsibilities. I paid the bills and made investments. She took care of our health insurance, plus the house. We maintained individual checking and savings accounts, as well as separate retirement accounts from various jobs throughout our careers. What went wrong?

  • Issue One:When we opened those checking and savings accounts, we never named beneficiaries. I had assumed, incorrectly, that our accounts would simply transfer to the other in case of death. The banker who opened the accounts never suggested otherwise. With a named beneficiary, her accounts would have simply been folded into mine. Instead, I had to hire a lawyer—at $465 an hour—to petition the court to name me as the executor of her estate. I needed this power to transfer her accounts. Filing costs in New York City for the necessary document was $1,286. The running bill for the lawyer stands at $7,402.00, and I expect it to rise.

I also needed the documents for the companies that managed her retirement accounts and a mutual fund, because, as at the bank, we never named a beneficiary. By the way, this paperwork also required signature guarantees or a notary seal, which can take up an afternoon.

  • Issue Two: The highly charged question of funeral and burial. Last summer, when I was told Lisa would not survive this illness, I tried to raise the issue of burial with her. She refused to have the conversation, but I quietly went ahead and purchased a plot of graves in the cemetery in Wisconsin where my parents, grandparents and great-grandparents are buried. This was something I actually did right.

We had to employ two funeral homes—one in New York and one in Wisconsin—and her body had to make the journey out there. All told, I spent $46,359 to cover funeral expenses, graves, transportation, a headstone and a basic casket.

I noticed something interesting in this process. All of my fellow baby boomer friends I have since asked have so far refused to deal with the issue. They wince when I even raise the question. Hear me: You don’t want to have to make this decision at the time someone close to you dies. You simply are not thinking straight.

  • Issue Three: Our health insurance plan covered the long hospital stays and doctors’ visits. However, shortly after Lisa died, I still received bills, even though our deductibles and copays had long since been covered. I paid them immediately, which was a mistake. I was incorrectly billed and I have been fighting the hospitals and insurance company since January to get a refund, even though everyone agrees the bills were incorrect. Before you pay any medical bills, make a simple call and determine their legitimacy. Mistakes are constant: The systems are so complicated, even people in these offices don’t always understand the intricacies.
  • Issue Four:Lisa had two life-insurance policies—one through her work and the other we purchased privately. The former was handled quickly and efficiently by her job and a check arrived almost immediately. Although the insurance company sent me a check for her private policy soon after her death, it took three months of constant calls and emails to determine a refund of the premium I had already paid for three months past her death. I kept getting wrong information from the company, because the people I dealt with didn’t understand it themselves.
  • Issue Five: Over the course of Lisa’s working life—from her first job at a fast-food restaurant to medicine—she paid more than $100,000 to Social Security. Since she died at 60, and our 19-year-old daughter is one year past the age of receiving a monthly benefit, all this money has simply disappeared into the lockbox in Washington. Nothing you can do about this one.

Finally, there is the major psychological trauma of grief. I think most people believe death will never intrude on their lives and when it does, we will be so old and decrepit that it won’t much matter. Trust me on this—even when it’s been expected for a while, it still shocks deeply. There is absolutely no way you can prepare yourself for the shattering heartbreak of loss. When it did come to me, I found the support of friends, family and faith to be invaluable. Amazingly, that cost nothing.

Mr. Kozak is the author of “LeMay: The Life and Wars of General Curtis LeMay” (Regnery, 2009). Appeared in the April 28, 2018, print edition.

Rich Arzaga, CFP® & David Winkler
Cornerstone Wealth Management, Inc.

2400 Camino Ramon, Suite 175
San Ramon, CA 94583

CA Insurance Lic# 0D92796 & Lic# 0G10586. Rich Arzaga and David Winkler are registered representative with, and Securities and Advisory services offered through, LPL Financial, a registered investment advisor, Member FINRA/SIPC. Financial planning is offered through Cornerstone Wealth Management, Inc. a registered investment advisor and a separate entity from LPL Financial. The information contained in this e-mail message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed. If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited. If you have received this message in error, please immediately delete.

This article was prepared by a third party for information purposes only. It is not intended to provide specific advice or recommendations for any individual.

LPL Tracking 1-728789

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Managing Money Well as a Couple

What are the keys in planning to grow wealthy together?

When you marry or simply share a household with someone, your financial life changes – and your approach to managing your money may change as well. To succeed as a couple, you may also have to succeed financially. The good news is that is usually not so difficult.

At some point, you will have to ask yourselves some money questions – questions that pertain not only to your shared finances, but also to your individual finances. Waiting too long to ask (or answer) those questions might carry an emotional price. In the 2017 TD Bank Love & Money survey consumers who said they were in relationships, 68% of couples who described themselves as “unhappy” indicated that they did not have a monthly conversation about money.1

First off, how will you make your money grow? Simply saving money will help you build an emergency fund, but unless you save an extraordinary amount of cash, your uninvested savings will not fund your retirement. Should you hold any joint investment accounts or some jointly titled assets? One of you may like to assume more risk than the other; spouses often have different individual investment preferences.

How you invest, together or separately, is less important than your commitment to investing. Some couples focus only on avoiding financial risk – to them, maintaining the status quo and not losing any money equals financial success. They could be setting themselves up for financial failure decades from now by rejecting investing and retirement planning.

An ongoing relationship with a financial professional may enhance your knowledge of the ways in which you could build your wealth and arrange to retire confidently.

How much will you spend & save? Budgeting can help you arrive at your answer. A simple budget, an elaborate budget, or any attempt at a budget can prove more informative than none at all. A thorough, line-item budget may seem a little over the top, but what you learn from it may be truly eye opening.

How often will you check up on your financial progress? When finances affect two people rather than one, credit card statements and bank balances become more important, so do IRA balances, insurance premiums, and investment account yields. Looking in on these details once a month (or at least once a quarter) can keep you both informed, so that neither one of you have misconceptions about household finances or assets. Arguments can start when money misunderstandings are upended by reality.

What degree of independence do you want to maintain? Do you want to have separate bank accounts? Separate “fun money” accounts? To what extent do you want to comingle your money? Some spouses need individual financial “space” of their own. There is nothing wrong with this, unless a spouse uses such “space” to hide secrets that will eventually shock the other.

Can you be businesslike about your finances? Spouses who are inattentive or nonchalant about financial matters may encounter more financial trouble than they anticipate. So, watch where your money goes, and think about ways to repeatedly pay yourselves first rather than your creditors. Set shared short-term, medium-term, and long-term objectives, and strive to attain them.

Communication is key to all this. In the TD Bank survey, 78% of the respondents indicated they were comfortable talking about money with their partner, and 90% of couples describing themselves as “happy” claimed that a money talk happened once a month. Planning your progress together may well have benefits beyond the financial, so a regular conversation should be a goal.1

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – newscenter.td.com/us/en/campaigns/love-and-money [1/2/18]

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Who’s in Charge Here? Aging Parents Resist Interfering ‘Helicopter’ Children

Joshua Coleman remembers watering down a glass of wine before giving it to his father, then in his 90s.

“What the hell is this?” he recalls his father asking.

“I feel a little guilty about that now,” says Dr. Coleman, whose father died in 2001. “The poor old guy had few remaining pleasures left. But I would have felt bad had he gone back to assisted living and slipped.”

There’s a fine line between being an appropriately concerned adult child and an overly worried, helicopter one, says Dr. Coleman, a psychologist who specializes in family dynamics. If a parent is in an accident, it might be time to talk about driving, as he did after his father sideswiped three cars. But if Mom doesn’t want to wear a hearing aid, it might be wise not to nag. Maybe she doesn’t want to listen to anyone at the moment.

When Cathy Walbert, a mother of five, picked up a baby at a family gathering last year, her daughter rushed to her side, worried she might drop her. Another daughter hovers when Mrs. Walbert—who says she probably is more candid than she was years ago—starts talking to someone. Her son tells her to be careful on the steps.

“I think, ‘What’s wrong with you people?’ I’m an adult,” says Mrs. Walbert, of Pittsburgh who says she is older than 75.

“You start treating them like a child, saying ‘Don’t do this’ or ‘Don’t do that,’ ” says her daughter, Lisa Spor. Her mother, she says, usually responds “What do you mean, ‘Don’t do that?’ ”

A big question adult children need to ask is whether they are intervening for their parents’ well-being or to alleviate their own worries, says William Doherty, a family therapist and professor of Family Social Science at the University of Minnesota. “If your 80-year-father is still driving, you worry,” even if he is capable of driving, he says. “If he’s not driving, you don’t worry, but your father has had a big loss.”

During her career as a clinical psychologist, Laura Carstensen, who is also founding director of Stanford University’s Center on Longevity, heard from both sides. Parents wanted advice on how to get their kids off their back. Adult children wanted advice on how to persuade their parents to give up their family home.

In general, her advice is that unless a parent is cognitively impaired and not aware of the level of his or her impairment, children need to respect the parent’s decision.

“These are difficult situations,” she says. “I know that first-hand.”

In 2015, Dr. Carstensen tried to talk her father, then 95, into leaving New York and moving to the California home she shares with her husband. Her father, a scientist, was still writing and publishing papers. But he was having trouble with balance and lived in a two-story house where he had to go down to the basement to do his laundry.

“Was I worried? Yes, I was worried,” she says. He was hard of hearing, so phone calls were difficult. A few times when she couldn’t reach him, she worried that something had happened, only to learn he had simply gone to the drugstore.

Her father did agree to have activity sensors installed in certain places in the house—his chair by the computer, the refrigerator, the cutlery drawer. Every morning, Dr. Carstensen would check the sensors and if they indicated activity, she knew not to worry.

“He really wanted to live in his own home,” she says. She talked to him about her concerns that he would fall. He told her that falling down in his own home was as “good a way to go as he could imagine.” Her father did eventually die, at 96, after a fall at home.

Do kids need to monitor every time a parent crosses the room or goes to the bathroom? You have to give them space to live their own life.’

                        —Grace Whiting, chief executive of the National Alliance for Caregiving

Grace Whiting, chief executive of the National Alliance for Caregiving, says monitoring devices can turn into a proxy helicopter. They can be extremely useful, especially in the case of an emergency, she says, as long as they don’t compromise the dignity of an older adult. “Do kids need to monitor every time a parent crosses the room or goes to the bathroom?” she asks. “You have to give them space to live their own life.”

Even small, well-intentioned acts can send the wrong message to parents, says Ellen Langer, a Harvard psychologist and author. If a parent fumbles with the key when trying to unlock a door, kids should be patient and wait, rather than grabbing the key and taking over. While you may be trying to be helpful, the message, deliberate or not, is that you are competent, and the parent isn’t, she says.

When Rip Kempthorne’s parents were having trouble covering the mortgage on their farm in Kansas, he suggested they relocate to Olympia, Wash., and move in with his young family. They did. Charley, 80, and June, 71, have a basement apartment to themselves. Their 5-year-old granddaughter runs in and out.

“There was no pressure,” says Charley Kempthorne. He and his wife expect the time will come when they can’t make decisions on their own and are grateful to be with family before that time comes. For the moment, the younger Kempthornes don’t have to hover over Charley and June because they watch out for each other.

June tells Charley to put in his hearing aid. He tells her not to leap out of the car. After several falls, she has given up sandals for sturdier shoes. “They won’t let me carry groceries,” says June, but that is probably a good thing. “I tend to carry too much and fall over.”

David Solie, an expert in geriatric psychology, says he was overly anxious when caring for his mother, Carol. As her health deteriorated, he was urged by a cousin, who lived closer to her, to move her into assisted living, which she strongly opposed. At one point, he went to the family attorney asking what he could do. The attorney told him his mother moved slowly and couldn’t open a jar of food, but was coherent and articulate. He advised Mr. Solie to wait, which he ultimately did. His mother remained at home until she had a massive stroke.

In retrospect, Mr. Solie says he wishes he had relaxed more and not been so consumed by getting her to give up her home.

Mr. Solie cautions other adult children against trying to make sure everything is perfect, with every pill taken and every appointment kept. “Don’t point out everything that they forgot or that they aren’t as clean as they should be,” he says. “Cut them some slack.” And if they want to date—something that many adult children oppose for fear of their parents being hurt or losing part of their inheritance—don’t stand in the way. “Allow them to be happy.”

How to avoid becoming a helicopter child:

  • Unless your father or mother has dementia, don’t make decisions for him or her. Discuss matters and remember he or she has a right to take informed risks.
  • If you and your parents don’t agree on their level of competence, consult a professional together.
  • Don’t go through your parents’ mail or screen their calls unless asked.
  • Pick your battles. If a parent is getting lost or has stopped bathing, talk about what help he or she might need to remain independent. If his or her clothes don’t match, get over it.
  • If a parent has cataracts in both eyes and continues to drive at night, ask the primary-care physician to intervene.
  • If your parents forget to turn off the stove, don’t jump to the conclusion they can’t stay in their home. Look into devices that turn stoves off automatically.
  • Use classic ‘I’ language, such as: ‘I am concerned about you living in a two-story house after your heart attack.’ Avoid: ‘You can’t live here anymore.’

Write to Clare Ansberry at clare.ansberry@wsj.com. Appeared in the April 24, 2018, print edition as ‘Aging Parents Resist ‘Helicopter’ Children The Right Approach.’

LPL Tracking 1-728975

Did Your Kid Get Placed on a College Wait List? Don’t Hold Your Breath

Liam Tormey, a senior at Valley Stream South High School in New York, applied to 15 colleges. Four rejected him. Four accepted him.

The remaining seven put the 17-year-old on their wait lists—a rapidly growing admissions limbo from which few students escape.

“I thought for sure, after getting wait list after wait list, that something was wrong with my application,” said Mr. Tormey, who thought he would get into more schools than he did.

As hundreds of thousands of high-school seniors face a May 1 deadline to put down deposits at their college of choice, many still face uncertainty over where they will end up. Their futures are clouded by the schools’ use of wait lists to make sure they have the right number, and type, of students come fall.

The University of Virginia increased the number of applicants invited onto wait lists by 68% between 2015 and 2017. At Lehigh University, that figure rose by 54%. And at Ohio State University, it more than tripled.

At some schools, the chance of getting off the wait list has plummeted as the pool has expanded. For the fall 2012 entering class, the University of California, Berkeley admitted 66% of the 161 applicants that were wait listed. Last year, only 27% of the 7,459 applicants on the wait list were ultimately admitted.

With high-school students applying to more colleges these days, schools have a tougher time predicting how many admitted students will actually enroll. Too few students can lead to financial trouble. Too many means overcrowded dorms and classrooms.

Some schools are locking in more students through binding early-decision offers. They are also keeping a deeper bench of backups to whom they can turn if, come the deposit deadline, they are still short of enrollment targets or don’t have quite the right mix of students. Wait-listed applicants usually accept admission offers, allowing schools to control enrollment numbers.

“It’s an admission dean’s dream. You see where you are on May 1, then you round out the class by going to the wait list,” said Michael Steidel, dean of admission at Carnegie Mellon University.

That school, with a target of 1,550 freshmen, offered wait-list spots to just over 5,000 applicants this year.

“You can take stock and ‘fix’ or refine the class by gender, income, geography, major or other variables,” said Jon Reider, director of college counseling at San Francisco University High School. “A large waiting list gives you greater flexibility in filling these gaps.”

This year, applications to Carnegie Mellon rose 19%. With more students accepting its offers of admission, it couldn’t risk over-enrolling. The school admitted 500 fewer students and expects to go to some of its wait lists to make sure each undergraduate program meets enrollment goals, and that there is a good mix of students, including enough aspiring English majors or kids from South Dakota. The school can also take into account the financial situations of wait-listed candidates.

Carnegie Mellon University Dean of Admission Michael Steidel has been sent a variety of objects by eager applicants, including a replica of CMU’s Walking to the Sky sculpture and a painted coconut. PHOTO: MICHAEL HENNINGER/CARNEGIE MELLON UNIVERSITY

Berkeley spokeswoman Janet Gilmore said rising out-of-state tuition and competition from other colleges courting California students have caused uncertainty over how many accepted students will enroll, so more conservative offers for regular admission and reliance on the wait list offers flexibility.

Between fall 2015 and fall 2016, the latest year available, the average number of students offered spots on wait lists increased by 11% and the number admitted from those lists jumped 31%, according to the National Association for College Admission Counseling.

But there is a backlash to the surging numbers of students offered spots on the lists.

“It is cruel and keeps FAR too many students hanging on with unrealistic hopes of being accepted,” Cristiana Quinn, an admission consultant in Rhode Island, wrote last month in an open letter posted to an email list for the college-admission association.

Ivy League school applicants receive acceptance and rejection letters this week, but many students will wind up on wait lists. College Essay Advisors founder Stacey Brook and WSJ’s Tanya Rivero discuss tips for students and their parents. Photo: iStock (Originally Published March 30, 2017)

Joseph Humphrey, an 18-year-old senior at Homewood-Flossmoor High School near Chicago, called his wait-listed status at the University of Michigan, Northwestern, Vanderbilt and Notre Dame “college admissions purgatory.”

He signed up for all the lists but also put down a deposit to enroll at the University of Illinois Urbana-Champaign, where he was offered a merit scholarship. He said he would definitely attend one of the four if admitted off the wait list but would have to think carefully about the others.

Officials at the University of Oregon determined last year that their wait list—on which spots were offered to roughly 1,000 applicants for a freshman class of nearly 4,000—had gotten out of hand.

“We had moved into this place where students saw it as just kind of a deferred denial,” said Roger Thompson, vice president for student services and enrollment management, noting that sometimes only a few dozen students got off the list.

Oregon offered wait-list spots to 134 applicants for the fall 2017 class, ultimately admitting 73. Applications jumped by 20% this year, and the school invited about 300 applicants to join its wait list.

Schools are doing little more than “emotionally stringing the student along” by dangling a wait-list offer, said Whitney Bruce, an admission consultant in Portland, Maine.

She urges clients to “start to fall in love with one of the schools where they were accepted.”

Mr. Tormey of Valley Stream South High School didn’t want to remain unsettled into the summer months and so decided against putting his name on the wait lists at Boston College and Villanova University, his original top-choice schools.

“I have four schools that I’ve been admitted to, who want me,” he said. He plans to submit a deposit at Providence College in Rhode Island.

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Sell in May? Not so fast….

May’s arrival has brought warmer weather to many parts of the U.S. (finally), but it also brings talk of one of the most widely cited stock market clichés in history. “Sell in May and go away” is a longstanding investment adage because historically, the six-month period from May through October has been the weakest stretch of the year. However, before you spring into action, it’s important to step back and look at the big picture of what’s really driving our current market environment. The fundamentals of impressive earnings, modest valuations, and a strong economic backdrop may be better indicators to watch.

Looking at these underlying factors of today’s economic and market environment suggests opportunity for further growth, despite this historically weaker season. Here are a few highlights to note:

  • Impressive earnings season. With most companies having reported first quarter results, earnings for the quarter are tracking to a double-digit increase (more than 20%) compared to the first quarter of last year. Guidance for future earnings has also been positive.
  • Solid economic growth. The initial estimate for gross domestic product for the first quarter was a slowdown from the prior three quarters, but it still exceeded expectations. The slowdown seems to be a result of temporary factors, and leading indicators suggest continued growth for the U.S. economy.
  • Reasonable stock valuations. Although stock valuations are slightly above average right now, when considering the positive earnings outlook, low inflation, and low interest rates, stocks don’t appear to be as expensive as some would suggest.

Combined, these factors paint a favorable picture overall for the potential of further market gains. At the same time, it’s prudent not to dismiss the possibility for some seasonal weakness or other risk factors that could impact the markets. The possibility for a modest pullback during this upcoming period remains; for suitable investors, this could present an opportunity to rebalance portfolios and potentially add to equity positions. All in all, for many investors, the main takeaway is to stay focused on the long term, as reacting to seasonal weakness by selling stocks could prove detrimental to the long-term performance of portfolios.

While keeping an eye on historical trends and seasonal patterns is important, as they can provide valuable context to the market environment—they shouldn’t dictate your investment strategy. So don’t let the “sell in May” adage bring you down. Enjoy the warmer weather and extra hours of sunlight, and stick to your long-term investment plan.

As always, if you have any questions, I encourage you to contact me.

Important Information

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Economic forecasts set forth may not develop as predicted. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

This research material has been prepared by LPL Financial LLC.

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Where Retirees Underestimate Spending

Where Retirees Underestimate Spending         

Underestimating how much you’ll spend can be costly, so it’s key to know the common pitfalls


Navigating retirement can be difficult for lots of reasons. One of the biggest is that it forces people to make plans based on spending assumptions that won’t become a reality for decades.

Guessing wrong can be the difference between a comfortable retirement and one that is a struggle.

“It’s a lot more difficult to recover in retirement,” says Adam Van Wie, a financial planner in Jacksonville Beach, Fla. “You can try to find another job, but that’s not an option for everyone.”

We spoke to financial advisers about some of the most frequent mistakes people make when it comes to estimating how much they’ll spend in retirement.

Helping family. You may be willing to slash your own expenses in retirement if times get tough. What will you do if your children, or grandchildren, get in a bind? Saying no is much harder.

  • In Defense of thsy Retirement

But saying yes can imperil your own retirement. A number of parents who guaranteed their children’s school loans have seen their own finances ruined when the child defaulted on the loan.

Mark McCarron, a financial planner in Charlottesville, Va., is working with a retired couple who paid for the wedding of one daughter, and expect to pay shortly for the wedding of their other daughter as well.

They have the cash, says Mr. McCarron. The rub is that they just hadn’t planned on paying for weddings when they retired, and it reduces the funds they can draw upon for other purposes.

Big-ticket periodic items. Would-be retirees often meticulously estimate day-to-day expenses, but forget to factor in more periodic, and mostly predictable, expenses like a new car or a new roof. And those big-ticket items inevitably blow holes in their budgets.

Dana Anspach, a financial planner in Scottsdale, Ariz., recommends that clients set aside 3% of the value of their house each year for maintenance—as well as plan on setting aside money for the periodic new car.

One caveat: Beware of taking big chunks of money out of a 401(k) or other tax-deferred accounts, Ms. Anspach says. Such withdrawals are treated as taxable income and can push retirees into a higher tax bracket. A better approach is to withdraw the money gradually over a two- or three-year period for an expected expense.

Belinda Ellison of Greenville, S.C., who recently retired as a lawyer, sets aside money for unforeseen landscaping expenses. So she was ready when she had to spend $10,000 recently to remove a huge tree on her property. Ms. Ellison owns a 100-year-old home, and has another fund set up for renovation expenses.

It’s not so with everybody she knows. “I have friends who have trouble when they need a new set of tires,” Ms. Ellison says.

Entertainment. Many retirees are surprised at how much their entertainment costs rise when they stop working, says Neil A. Brown, a financial adviser in West Columbia, S.C. Instead of working five or six days a week and playing one, it can be the opposite. “You’ve got five or six days to play,” Mr. Brown says.

Americans age 65 to 74 spent an average $5,832 on entertainment in 2015, according to a study from the Employment Benefit Research Institute, based in Washington, D.C. Entertainment spending declines with age; people 85 and over in the study spent $2,232 on average.

Health care. Even Medicare recipients are frequently shocked by the cost of health care, says Joan Cox, a financial planner in Covington, La. Ms. Cox says a married couple in their late 60s can expect to spend close to $13,000 a year in medical expenses. That assumes $8,000 in Medicare premiums and supplemental insurance premiums, $1,200 for drug coverage, and $3,700 in out-of-pocket expenses.


“I’ll do their financial plan, and it looks like they have plenty of assets” for retirement, she says. “Then I’ll put in health-care costs, and all of sudden their plan doesn’t work.”

Drugs costs, in particular, surprise retirees, says David Armes, a financial planner in Long Beach, Calif., who specializes in helping clients evaluate Medicare options. “Many of these cost drivers cannot be accurately predicted when you’re in your 60s,” he says. “There’s no way for 65-year-olds to know, for instance, whether they will need to take expensive brand-name drugs when they reach their 80s.”

For affluent retirees, there can be another surprise with Medicare. Couples whose modified adjusted gross income exceeds $170,000 a year must pay higher premiums. To lessen those expenses, a couple might try shifting income to one year so that they will avoid higher Medicare premiums in other years, says Mr. Armes.

Long-term care. The need for long-term care is perhaps the most costly unexpected expense in retirement.


About 15% of retirees will spend more than $250,000 on such care, according to a research report to be released this spring by Vanguard Group The problem is it is impossible to know who will be part of that 15%. Some 50% of retirees won’t spend anything at all, and 25% will spend less than $100,000, the Vanguard report says.

“It’s hard to plan for,” says Colleen Jaconetti, a senior investment analyst with Vanguard.

For years, financial planners urged people to buy long-term care insurance. But that market has shrunk dramatically in recent years after insurers underestimated costs and were forced to jack up premiums or withdraw from new sales. Some insurers now offer hybrid policies that combine life insurance and long-term-care insurance. These policies allow consumers to tap their death benefits early to pay for costs such as help with feeding, bathing and other personal needs.

Living a long life. One of the biggest mistakes people make in estimating retirement expenses is underestimating how long they will live.

The average 65-year-old in the U.S., for example, is likely to live an additional 19.4 years, according to data from the National Center for Health Statistics.

Obviously, the longer the life, the more the spending. It can be a good problem to have—but one that surprises too many people.

“Everybody worries about dying young,” says Prof. David Littell of the American College of Financial Services. “People should be more worried about living too long.”

Mr. Templin is a writer in New Jersey. He can be reached at reports@wsj.com.

Appeared in the April 23, 2018, print edition.


This article was prepared by a third party for information purposes only. It is not intended to provide specific advice or recommendations for any individual. It contains references to individuals or entities that are not affiliated with Cornerstone wealth Management, Inc. or LPL Financial. LPL Tracking# 1-723395


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The Risks of Putting Too Much Money Into an Annuity

These private income contracts do have potential flaws.

It may not be good to have all your eggs in an annuity basket. Or even a majority of your eggs, financially speaking.

Fundamentally, an annuity contract means handing over your money to an insurer. In turn, the insurer pays out an income stream to you from that lump sum (or from the years of purchase payments you have made). The insurance company holds the money; you do not. From one standpoint, this arrangement has some merit; it relieves you of the burden of having to manage that money. From another standpoint, it has a few drawbacks.1,2

Annuities are often illiquid. If you run into a situation where you need cash in retirement (a major home repair, a legal settlement, big medical expenses), it may not be prudent to withdraw cash from your annuity. If you have not owned the annuity for some time, you may have to pay a hefty withdrawal penalty to access the money. From the insurer’s point of view, you are violating a contract. Should you have buyer’s remorse and decide you want out of your annuity contract soon after its inception, you will probably face a surrender charge. If you back out after the initial year of the contract, the surrender charge is commonly about 7% of your account value; it usually declines by a percentage point for each subsequent year you have spent in the annuity contract before surrendering.2

Annuities come with high annual fees. A yearly management fee of 1.25% or more is not uncommon. Then there are mortality and expense (M&E) fees, fees for add-ons and guarantees, and up-front charges. If you have a variable annuity, throw in investment management fees as well. These fees for variable annuities may effectively eat away at their annual returns.2

Annuity joint-and-survivor income provisions may not be as beneficial as they seem. Many annuities feature this payment structure, whereby the income payments continue to a surviving spouse after the death of one spouse. The downside of this arrangement: from the start, the income payments are less than what they ordinarily would be. If you are the annuity holder and you think your spouse may pass away before you do or are already confident that your spouse will be in a good financial position after your death, then a joint-and-survivor annuity payment structure may be nice, but not really necessary.3

If you do not yet own an annuity, consider that you may not need one. The federal government basically gives you the equivalent of a deferred annuity: Social Security. Like an annuity, Social Security provides you with a reliable income stream – and your Social Security income is adjusted for inflation.4

Think of an annuity as one potential piece of a retirement strategy. See it as a component or a supplement of that strategy, not the core.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.


1 – tinyurl.com/y9mukmp3 [2/28/18]

2 – annuitieshq.com/articles/annuities-good-bad-depends-actually/ [7/28/17]

3 – forbes.com/sites/forbesfinancecouncil/2018/03/29/five-reasons-not-to-buy-an-annuity/ [3/29/18]

4 – ssa.gov/oact/cola/latestCOLA.html [4/6/18]


Six Things to Know About Appealing Financial Aid Awards

A college’s first offer doesn’t always have to be the final one.

This is the time of year when college-bound high school seniors are receiving their financial aid packages. The results may be disappointing to some parents.

The good news is, a college’s first offer doesn’t always have to be the final one. It is possible to appeal disappointing awards. This is true, by the way, for need-based financial aid awards, as well as merit scholarship awards.

Parents will boost their chances of being successful if they understand why appeals are possible and what’s involved in the process.

Here are six things that parents need to know about squeezing more money out of a college.

  1. At most colleges, it’s a buyer’s market.

You wouldn’t know it from media reports, but the majority of private and public colleges and universities struggle each year to meet their freshmen enrollment goals.

Gallup documents just how difficult it is when it conducts a yearly survey of admissions directors at public and private colleges and universities. In its most recent survey, 66 percent of admission administrators said they fell short of attracting enough students for the 2017-2018 school year.

If asked, schools that aren’t filling their freshmen seats are more likely to sweeten an applicant’s offer.

  1. Know what schools aren’t panicking.

The most elite private colleges, which enjoy the luxury of being deluged with applicants from highly qualified students, are in a separate category from most of their higher-end peers. The public research universities, which tend to be the most popular schools in their states, are also less likely to worry. In this category are institutions such as the University of Michigan, UCLA, University of California, Berkeley, University of Texas and University of Virginia.

  1. Share competing offers.

Families can often boost their chances for better awards if they have competing offers that are superior. Here is an example from a mom whom I heard from last month. Her daughter received a $29,000 yearly award from Susquehanna University and a $25,000 merit scholarship from Juniata College, which are peer institutions in Pennsylvania. If her daughter decides to attend Juniata, the mom will ask that school to match Susquehanna’s award.

When parents contact schools, admission offices will often ask families to scan or fax competing awards to them.

  1. Parents need to look for an important number.

To evaluate the generosity of an award letter, parents must know what their expected family contribution is. An EFC represents what a household would be expected to pay, at a minimum, for one year of college.

The aid formula generates the dollar figure after evaluating the financial information that parents share in their financial aid application. If the EFC, for instance, is $33,700, that means the formula is indicating that this is how much a family would be expected to pay at a minimum for one year of college.

Colleges should be including this important figure on their financial aid letters, but it is often missing. If parents can’t find this number, they need to ask the school for it. Without it, they wouldn’t be able to determine if the award is a good one or not.

When parents possess their EFC, they can subtract it from the cost of the school to determine what their official need is.

Here is an example:

$65,000 (price tag) minus $33,700 (EFC) equals $31,300 (family’s financial need).

In this scenario, the school would ideally provide the student with $31,300 in need-based financial assistance with most of it being in the form of grants. This would be the best outcome that a family could hope for.

Let’s say, however, that the college only provides this student a $5,000 grant. That would be a miserly offer and certainly worth appealing.

  1. Be careful what you say.

College admission officers really dislike it when parents use the word “negotiate” when asking for a better award, says David Levy, the former director of admissions at the California Institute of Technology.

Sure, what parents are doing is essentially negotiating, but somehow it’s distasteful when the word is used. Parents should be diplomatic when requesting greater assistance.

  1. Ask how home equity has impacted an award.

The vast majority of colleges don’t use equity in a primary home when calculating need. These institutions typically just rely on the Free Application for Federal Student Aid, which doesn’t even ask parents if they own a primary home.

Just over 200 colleges, however, use a secondary aid application called the CSS Profile, which does ask about home equity. The Profile is popular with elite brand name schools and selective private institutions.

How Profile institutions assess home equity varies widely. A minority of these schools won’t consider it at all, while others use the entire home equity in their calculations. Still others will cap the amount of home equity they use.

Schools that do consider home equity will assess it at 5 percent. So if a family has $250,000 in home equity, the household’s EFC will increase by $12,500. Put another way, the student’s chances for need-based financial aid will decrease by $12,500. That’s a big hit for a family simply living in their home.

Some schools, however, privately share that they are open to families appealing the home equity aid penalty. It’s important that you tell your clients that.

LPL Tracking 1-722123


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Fed Move Suggests Economy Is On Track”

The first quarter of 2018 is wrapping up, and it’s time to spring forward and look ahead to what we could expect in the coming months. After a large market drop kicking off the month of February, March has been relatively calm for stocks so far. The biggest event of the month was the Federal Reserve (Fed) meeting held on March 21—the first with new Fed Chair Powell at the helm.

As anticipated by the markets, the Fed raised the fed funds rate by 0.25% (25 basis points), bringing its target interest rate to 1.50–1.75%. The Fed also upgraded its outlook on economic growth and kept its inflation projection unchanged.

So what does this latest step forward mean for markets overall? Although sometimes markets react negatively to rate hikes, these increases tend to signal the Fed’s confidence in the U.S. economy. The Fed’s dual mandate seeks to balance the often-competing goals of maximum employment and low, stable inflation. With the economy growing above potential and job growth steady, the Fed’s attention has been increasingly focused on finding a rate hike path that does not lead to any bubbles in markets or cause the economy to overheat.

One of the contributing factors to the market decline in early February was the January employment report, which showed a surprise uptick in wage growth. As a result, this increased concerns regarding inflation and whether a faster path of rate hikes was on the horizon. Since then, fears of escalating inflationary pressures may have faded somewhat, although price pressures could continue to build in the coming months. LPL Research continues to believe the Fed will need to see a sustained pace of higher inflation, and potentially a wage growth number as high as 4% annually, before becoming significantly more aggressive.

In addition to the Fed and inflation, there are a number of factors that could have meaningful implications down the line, including:

  • Economic growth: Market participants generally expect the U.S. economy to get a boost from the new tax law, which supports both consumer spending and business spending.
  • Earnings: Corporate America produced the best earnings growth in several years during the fourth quarter of 2017, while 2018 has seen the biggest upward revision to S&P 500 Index earnings to start a year since these data have been collected.
  • Trade policy: LPL Research believes trade policy is among the biggest risks facing stocks right now. The recently announced tariffs may have limited immediate economic impact, but the big concern is China’s intellectual property trade practices.

Although there may never be a dull moment when watching the markets and economy in this day and age, the latest action by the Fed was taken in stride. However, it is important to acknowledge the possibility for further volatility, given geopolitics and trade protectionism. Overall, LPL Research’s outlook remains positive for the remainder of 2018, as continued economic and earnings growth may help offset trade tensions.

If you have any questions, I encourage you to contact me.

Important Information

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
Economic forecasts set forth may not develop as predicted.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This research material has been prepared by LPL Financial LLC. Tracking #1-712538