six steps toward financial independence...

BUILDING BLOCKS for Wealthy Living

SIX STEPS TOWARD

FINANCIAL INDEPENDENCE

Mark Reynolds, CFP® Mark Reynolds and Associates

123 Main Street, Suite 100San Diego, CA 92128Phone: 800-123-4567Fax: 800-123-4567www.markreynoldsandassociates.com

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Building Blocks for Wealthy LivingEVT-092-07-000000

Building Blocks for Wealthy LivingLIVE WITHIN YOUR MEANS 3 Are you throwing money away?

FOLLOW SOUND INVESTMENT PRINCIPLES 7 Don’t make the most expensive mistakes of your life.

BE READY FOR ANYTHING 11 Understand the five areas of coverage.

PAY ATTENTION TO TAXES 14 Taxes may be your single greatest expense.

CONSIDER YOUR ESTATE 16 Manage assets during your lifetime. Distribute assets after death.

DON’T DO IT ALL YOURSELF 18 Why work with a professional?

This material was written and prepared by Emerald Connect.

Copyright by Emerald Connect, LLC. All rights reserved. No part of this publication may be copied or distributed, transmitted, transcribed, stored in a retrieval system, transferred in any form or by any means—electronic, mechanical, magnetic, manual, or otherwise—or disclosed to third parties without the express written permission of Emerald Connect, LLC, 15050 Avenue of Science, Suite 200, San Diego, CA 92128, U.S.A.

The information contained in this workbook is not written or intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from your own tax or legal counsel. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

Emerald Connect assumes no responsibility for statements made in this publication including, but not limited to, typographical errors or omissions, or statements regarding legal, tax, securities, and financial matters. Qualified legal, tax, securities, and financial advisors should always be consulted before acting on any information concerning these fields.

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© 2015 Emerald Connect, LLC 3

Live Within Your MeansWhen was the last time you tore up a dollar bill? Tossed money

out the window? Lit money on fire? Threw money in the trash?

Never, right? You wouldn’t dream of it. But have you ever:

• Bought something just because it was on sale?

• Subscribed to a magazine that you never read?

• Bought some clothing and then used it as a justification to buy new shoes?

• Paid for something on a monthly basis that you never used? In fact, can you name all the charges you have posted automatically to your credit card or bank account?

• Bought dinner with a credit card and then allowed yourself to be charged interest on the purchase?

The more cash flow you have, the more likely you are to spend carelessly.

The Latte FactorEvery day on his way to work, Paul stops to get a caffè latte.

When he goes to lunch, he gets another one. Lattes cost about $4.00 each. That means Paul is spending $8 each day on his habit. A quick bit of math reveals that Paul spends about $176 per month

on lattes. If Paul were to invest the amount he’s spending on lattes, he might be able to accumulate a sizable sum over time (see graph below).

Are you in the habit of purchasing small “luxury” items on a regular basis? Consider the monthly cost and the potential opportunity if instead you used some or all of the money to invest in pursuit of your financial goals.

This hypothetical example is used for illustrative purposes only and does not represent the performance of any specific investment. Rates of return will vary over time, especially for long-term investments. The effect of fees, expenses, and taxes is not considered. Actual results will vary.

V15N2

$176 per month8% rate of return25 years

The $140,000 Latte$160,000

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$0

$143,267

5 years 15 years 25 years

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4 © 2015 Emerald Connect, LLC

Put It in WritingA cash-flow analysis can

help you clarify your priorities. Once you have everything in front of you

in writing, it’s easier to make decisions about

how you want to spend your money.

Three Steps to Living Within Your Means1. Analyze Your Cash Flow

Analyzing your cash flow is important whether you are rich or poor because it requires you to be honest with yourself about how you spend your money.

Obviously, analyzing your cash flow can help prevent you from overspending. But it can also help prevent you from underspending, so that you aren’t living too frugally. If you know how much money you have available for spending on luxuries or fun activities, then you can spend it without guilt. If you spend money on something that you aren’t sure you can afford, then you won’t be able to fully enjoy your purchase. This exercise can help you feel better about your spending.

Sources and Uses of Funds

EmploymentSalary, wages, tips $ ––––––––––––––Business income $ ––––––––––––––

InvestmentTaxable interest (from CDs, savings accounts, etc.) $ ––––––––––––––Nontaxable interest (from bonds, etc.) $ ––––––––––––––Dividends (from stocks, mutual funds, etc.) $ ––––––––––––––Rental income $ ––––––––––––––Partnership income $ ––––––––––––––

OtherAlimony, child support $ ––––––––––––––Pensions $ ––––––––––––––Social Security benefits $ ––––––––––––––Other income $ ––––––––––––––

TOTAL MONTHLY INCOME $ ––––––––––––––

MONTHLY INCOME

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TaxesFederal income taxes $ ––––––––––––––State income taxes $ ––––––––––––––FICA (Social Security) /self-employment $ ––––––––––––––Real estate taxes $ ––––––––––––––Loan PaymentsMortgage (or rent) $ ––––––––––––––Automobile loans $ ––––––––––––––Credit cards $ ––––––––––––––Education loans $ ––––––––––––––Other installment loans $ ––––––––––––––InsuranceLife $ ––––––––––––––Auto $ ––––––––––––––Homeowners $ ––––––––––––––Long-term care/disability income $ ––––––––––––––Medical/dental $ ––––––––––––––Liability $ ––––––––––––––HouseholdFood $ ––––––––––––––Clothing/laundry $ ––––––––––––––Utilities (electricity, heat, water, phone) $ ––––––––––––––Household repairs/maintenance $ ––––––––––––––Auto expenses (maintenance/fuel) $ ––––––––––––––Other transportation $ ––––––––––––––Recreation/travel $ ––––––––––––––Entertainment/dining out $ ––––––––––––––Charitable contributions $ ––––––––––––––Unreimbursed medical/dental $ ––––––––––––––Child care $ ––––––––––––––Education expenses $ ––––––––––––––Other expenses $ ––––––––––––––TOTAL MONTHLY EXPENSES $ ––––––––––––––

MONTHLY EXPENSES

Total monthly income (from facing page) $ ––––––––––––––Total monthly expenses (from above) – $ ––––––––––––––

NET CASH FLOW $ ––––––––––––––

NET CASH FLOW

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2. Pay Yourself FirstYou may have heard this expression, but what does it mean?

Paying yourself first is deciding to set aside your first dollar of income toward your financial goals. The key word is “deciding” because this is really an act of will. It is a deliberate effort to devote your first dollar of income to your number-one financial priority, whether that is saving for retirement, saving for a family member’s college education, saving for a down payment on a major purchase, or simply getting out of debt.

If you wait until the end of the month, you might find that you don’t have enough money left over to fund your first priority, and you will be unlikely to reach your long-term financial goals.

Starting Now Pays Later

Assumes a 6% rate of return in both accounts. This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investments. Taxes and investment costs are not considered. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return also involve a higher degree of investment risk. Actual results will vary.

3. Stay Interested in InterestCredit-card interest is another way that you might be throwing

money away. Credit cards are a big convenience, but they can become quite costly when used to finance a large purchase.

Time Will Not Wait

Procrastination is the bad habit of putting

off until the day after tomorrow what should

have been done the day before yesterday.

— Napoleon Hill

Source: BrainyQuote.com

1 $20,000 $ 21,200 $0

2 $20,000 $ 43,672 $0

3 $20,000 $ 67,492 $0

4 $20,000 $ 92,742 $0

5 $20,000 $119,506 $0

6 $0 $126,677 $20,000 $ 21,200

7 $0 $134,277 $20,000 $ 43,672

8 $0 $142,334 $20,000 $ 67,492

9 $0 $150,874 $20,000 $ 92,742

10 $0 $159,926 $20,000 $119,506

Contributions: $100,000 Contributions: $100,000

Earnings: $ 59,926 Earnings: $ 19,506

Total value: $159,926 Total value: $119,506

Jim Year Investment Value

Susan Investment Value

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Follow Sound Investment PrinciplesCASE STUDY: Roger worked for a living and made a good income. He started

investing in “Company E” because he believed it was destined to be the leader in its industry. Roger believed that Company E’s prospects were so strong that he purchased every share of Company E that he could afford.

Roger’s total investments: 60% to 70% in Company E

Roger’s 401(k) plan: $900,000 of Company E stock

Total Company E holdings: $2 million

After Roger retired and Company E went bankrupt (Company E = _______________):

Roger’s 401(k) plan balance: $ 4,000

Total Company E holdings: $10,000

Source: Seattle Post-Intelligencer, December 9, 2001

Roger’s MistakesRoger’s circumstances might seem to be unusual, but he actually made some classic mistakes

that we all can learn from.

• Did not diversify

• Allocated his portfolio improperly

• Did not obtain professional guidance

DiversificationInvesting in different asset classes and investment vehicles in an attempt to limit exposure to losses in any one sector of the market.

This hypothetical example is used for illustrative purposes only. Actual results will vary. Diversification is a method used to help manage investment risk; it does not guarantee a profit or protect against loss.

Single investment Diversified

$1,000,000

$200,000

$200,000$200,000

$200,000

$200,000

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Asset AllocationA systematic approach to diversification that determines an efficient mix of assets for a given investor.

Asset allocation involves strategically dividing a portfolio into different asset categories — typically, stocks, bonds, and cash alternatives — to seek the highest potential return for an investor’s risk profile. It utilizes sophisticated statistical analysis to determine how different asset classes perform in relation to one another, and its goal is to achieve an appropriate balance of security and growth potential.

Whether you know it or not, your assets have been allocated — perhaps in a single stock, in a savings account, in a mixed portfolio, or under the mattress. However, finding an appropriate mix of investments for your risk profile, financial needs, and time frame is more difficult. It may require careful calculations and the benefit of professional guidance.

My Asset AllocationTake a moment to divide up the pie chart below to show your current

asset allocation. You can do this by asset class (such as stocks, bonds, cash alternatives) or by type of investment account (employer-sponsored retirement plans, IRAs, brokerage accounts, bank savings). Include only investable assets, not your personal residence.

Why are we concerned with asset allocation? One landmark study showed that up to 91 percent of a portfolio’s performance is a result of the overall asset allocation of the portfolio — in other words, how the funds are spread across a variety of asset classes.1 This means less than 10 percent of overall return is attributable to specific investment choices, versus the choice of broad asset classes.

Source: 1) Financial Advisor, April 3, 2014

Pay Yourself First Putting your saving and

investing plan on auto-pilot could help you pursue your goals more

successfully and with less hassle. Consider directing

some of your paycheck into savings and

investments before the money ever touches your

hands and before some of it goes to Uncle Sam.

Asset allocation does not guarantee a profit

or protect against investment loss.

It is a method used to help manage investment risk.

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S&P 500 Versus Balanced Portfolio

This graph compares the performance of the S&P 500 stock index with a more balanced portfolio consisting of 50 percent stocks, 40 percent investment-grade corporate bonds, and 10 percent cash. During this time period, the average annual return for the S&P 500 stock portfolio was 9.85 percent, whereas the average return for the balanced portfolio was 8.40 percent. So during this 20-year period, the all-stock portfolio performed better than the diversified portfolio of stocks, bonds, and cash.

The same two portfolios are charted differently below. The annual return of each portfolio is shown on a year-by-year basis. Although the two portfolios differed by 1.45 percent in average annual return after 20 years, the stock-only portfolio was far more volatile than the balanced portfolio. The S&P 500 had annual returns varying from a 37.58 percent gain to a 37 percent loss in a single year. The returns of the balanced portfolio were more steady.

Source: Thomson Reuters, 2015, for the period 12/31/1994 to 12/31/2014. Stocks are represented by the S&P 500 Composite total return, an unmanaged index that is generally considered representative of the U.S. stock market. Corporate bonds are represented by the Citigroup Corporate Bond Composite Index, which is generally considered representative of U.S. investment-grade corporate bonds. Cash is represented by the Citigroup Three-Month Treasury Bill Index. Treasury securities are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. The effects of income taxes and capital gains taxes are not considered. Past performance is no guarantee of future results. Rates of return will vary over time, particularly for long-term investments. Actual results will vary.

Stocks: 9.85%

Balanced:8.40%

Difference:1.45%

1995 2000 2005 2010 2014

1995 2000 2005 2010 2014

40%

30%

20%

10%

0%

–10%

–20%

–30%

–40%

$70,000

$60,000

$50,000

$40,000

$30,000

$20,000

$10,000

1995–2014

Stocks Balanced

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Reallocating a PortfolioOnce you decide on an asset allocation model based on your investment goals,

time frame, and risk tolerance, it is then possible to reallocate your portfolio to the optimal mix of assets.

Of course, there are additional considerations to determine the most effective asset mix. And although sophisticated analysis is used in this process, it does not turn investing into a science. A model can provide a scientific basis for determining an investment portfolio, but investing is still an art that relies on the different needs and goals of each individual investor. You should be aware that reallocating assets in a portfolio may result in a taxable event.

Keeping Expectations in CheckBecause your financial strategy depends on the return you expect from your

investments, it is important to be realistic about the return your portfolio will yield from one year to the next. It is unrealistic to think that the markets will perform the same way every year. Inflated expectations may cause you to overspend or fall short of your goals.

Sources: Gallup, 2003; Kiplinger’s Personal Finance, January 2014; Thomson Reuters, 2015. Actual stock performance shown is for the periods 12/31/1999 to 12/31/2000, 12/31/2002 to 12/31/2003, and 12/31/2013 to 12/31/2014. Stocks are represented by the S&P 500 Composite total return, which is generally considered representative of the U.S. stock market. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. The effect of taxes and fees is not considered. Past performance is no guarantee of future results.

2000 2003 2014

18.4%

8.5%

28.69%

8.0%

13.69%

–9.11%

Expected stock returns (from poll results)

Actual stock returns

CurrentCash

Short-term bondsSmall-cap stocksLarge-cap stocks

Intermediate bonds

ProposedLarge-cap stocksLow-grade bondsReal estateInternational stocksSmall-cap stocksIntermediate bonds

This hypothetical example is used for illustrative purposes only.

Risk Aversion In 2014, only 24% of

investors aged 35 to 49 said they were willing to take substantial or above-average risk in their portfolios, down

from 46% in 2008.

Source: Investment Company

Institute, 2014

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Be Ready for AnythingThere are many threats to building wealth, and some of them can be effectively

managed with the appropriate insurance coverage. Most people need protection in five basic areas.

1. Health Benefits When you retire, you can’t count on health insurance from your former

employer. Were you aware that only 25 percent of large companies (200 or more employees) offer health insurance benefits to their retired workers? This figure is down from 66 percent in 1988.

One way to help protect against the risk that medical expenses will consume your assets is to carry the appropriate health insurance. This sounds simple, but simply having a current health insurance policy probably isn’t enough. There remains the question of how to pay for medical expenses in retirement. Failing to adequately address this situation could force you into a lower standard of living in retirement.

Source: Employer Health Benefits 2014 Annual Survey, The Kaiser Family Foundation and Health Research and Educational Trust

Many people underestimate the potential costs of health care in retirement, forgetting the premiums, copays, deductibles, and prescription costs they might have to cover.

If Medicare benefits remain at current levels, it’s estimated that a 65-year-old man who retired in 2014 and lives an average life expectancy might need about $116,000 to cover his health expenses in retirement. A 65-year-old woman might need $131,000, and a married couple might need $241,000. And these estimates don’t include dental expenses, glasses, or hearing aids for those who need them.

Source: Employee Benefit Research Institute, 2014

Health Care: How Much Can You Expect to Spend?

Worried SickIn an April 2015 poll, 55% of Americans were worried about not being able to pay medical costs in the event of a serious illness or accident, and 36% were worried about not being able to pay normal health-care expenses.

Source: Gallup, 2015

ProposedLarge-cap stocksLow-grade bondsReal estateInternational stocksSmall-cap stocksIntermediate bonds

$241,000

66%

25%

1988 2014

Woman

$116,000Man

$131,000

Married couple

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Rough Spot

Dog bites account for more than one-third of all homeowners insurance

liability claims. The average cost of dog bite claims was

$27,862 in 2013.

Source: Insurance Information Institute, 2014

2. DisabilityHealth insurance can help pay your doctor and hospital bills, but it won’t compen-

sate you for income lost because you were unable to work due to illness or injury.

When you suffer a disability, your income is likely to fall while your expenses are going to increase. This destructive cycle can force you to dip into savings and take on debt in order to pay your living expenses until you are well enough to return to work.

To help protect yourself financially from the possibility that a disability will force you to go into debt or tap your investments for living expenses if you’re unable to work, you may want to consider disability income insurance.

3. Property and CasualtyIf you are a homeowner, you are required to carry homeowners insurance by your

mortgage lender. This type of coverage is critical because it helps protects what may be your largest asset: your home and everything in it. It can also provide some measure of protection against liability claims and medical expenses that result from property damage or injuries suffered by others on the property.

It’s important to review your homeowners coverage on a regular basis to help ensure that the coverage limits are keeping pace with inflation and any growth in your net worth and income.

Homeowners Insurance Quiz

Are you covered if ...

Your dog bites a neighbor? Yes No

A guest falls in your home? Yes No

Your child injures a neighbor with a baseball? Yes No

Your home is damaged by a flood? Yes No

A liability claim exceeds your policy limits? Yes No

IncomeExpenses

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• 50% of consumers don’t believe they have enough life insurance coverage to meet their family’s needs2

4. Umbrella Liability InsuranceTo help protect against the risk of a large liability claim, you may

want to consider owning an umbrella liability insurance policy. This type of coverage takes effect in the event that the limits of your primary insurance policies are exhausted. To qualify, buyers must generally purchase the maximum liability coverage available on their auto and homeowners policies, which serve as the deductible for the umbrella policy. If policyowners are ever found liable for an award greater than the limits on their primary policies, the umbrella policy can help pay the difference.

Umbrella policies typically charge a few hundred dollars a year for $1 million of coverage. The benefits can be used, up to the policy limits, to:

• Pay jury awards

• Pay plaintiff medical expenses and legal fees

• Defend against a lawsuit, regardless of its merit

• Defend against claims of libel, slander, and defamation

5. Life InsuranceCertain types of life insurance actually offer some benefits during your

lifetime, and they can help protect your family from the financial consequences of a breadwinner’s unexpected death.

Unfortunately, many Americans are underinsured. In fact, about 36 million U.S. households have no life insurance protection.1

Only 46 percent of households have individual life insurance.3 Among those who do have individual life insurance, the average coverage is only $165,000, which would translate to about four years of personal income.4

Sources: 1–3) LIMRA, 2013–2014; 4) American Council of Life Insurers, 2014, and U.S. Bureau of Economic Analysis, 2015

50%

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Pay Attention to TaxesMany people don’t realize that taxes, when all added up, may be their single

greatest expense.

According to the Tax Foundation, the average American will work about 114 days in 2015 just to pay federal, state, and local taxes. Americans spend more in taxes than they spend on food, clothing, and housing combined!1

The top 25% of taxpayers pay 86% of all federal income taxes.

When you hear “top 25 percent,” you may be thinking that this is a very wealthy group, but that isn’t necessarily the case. If your household has a modified adjusted gross income (AGI) of $73,354 or more, that places you in the top 25 percent.2

Source: 1–2) Tax Foundation, 2015, 2014

Four Kinds of Taxes• Income taxes. These can include federal, state, and local taxes and the

alternative minimum tax. Federal income taxes alone range from 10 percent to 39.6 percent.

• Penalty taxes. Early withdrawals from tax-deferred plans prior to age 59½ may be subject to a 10 percent federal income tax penalty on top of ordinary income taxes owed on the withdrawal. You could also incur a 50 percent income tax penalty for failing to take annual required minimum distributions from employer-sponsored retirement plans and traditional IRAs after reaching age 70½.

• Consumption taxes. These include not only sales and excise taxes but literally dozens of other types of taxes (see next page).

• Estate taxes. At death, there may be estate taxes. The federal estate tax exemption has been $5 million (indexed annually for inflation) since 2010; therefore, only large estates are subject to the federal estate tax. The federal estate tax rate was raised permanently from 35 percent to 40 percent by the American Taxpayer Relief Act of 2012. Because of inflation, the applicable estate tax exemption rose to $5.43 million in 2015. Many states also have their own estate and/or inheritance taxes, which could make the tax bill even larger. If you give away assets to avoid estate taxes, you could be faced with gift taxes on annual gifts exceeding $14,000 per recipient.

86%

Sizing Up the Tax Code

The U.S. tax code is more than 74,000 pages long.

Many Americans — 47% of those with incomes between $30,000 and

$99,000 and 55% of those with incomes of

$100,000 or more — are bothered “a lot” by

the complexity of the federal tax system.

Sources: CCH, 2014;

Pew Research Center, 2015Preview


Every Time You Turn Around, It Seems You’re Being TaxedProperty taxes Estate taxesSales taxes User feesFederal income taxes Medicare premiumsState income taxes FICA taxesLocal income taxes Building permitsTelephone taxes Gasoline taxesUtility taxes School taxesVehicle registration fees Highway tollsAlternative minimum tax Tire disposal tax

Taxes Are Constantly Changing

What Can You Do?What can you do about reducing your taxes? There is no one-size-fits-all

solution. A good first step is to understand how investments are taxed. For example, the source of an investment gain usually affects how it is taxed. Unfortunately, the federal government is prone to rewriting tax laws for political reasons, so it can be difficult to stay abreast of changes in the tax landscape.

You can evaluate your current investments from a tax standpoint. For example, long-term capital gains are taxed at 20 percent for individuals in the 39.6 percent federal income tax bracket or at 15 percent for individuals in the 25, 28, 33, and 35 percent brackets (taxpayers in the 10 and 15 percent brackets pay zero tax on long-term capital gains). Qualified corporate dividends are taxed at the same rates as long-term capital gains.

Once you become aware of your tax circumstances, you may be better able to choose investments that complement your situation.

Source: Tax Policy Center, 2015

84.357%91%

71.75% 70%

31%39.6% 39.6%

1950 1960 1970 1980 1990 2000 2012 2015

Top federal income tax rate

Capital gains from investments held 12 months or less are considered short-term gains, which are taxed as ordinary income.

Unearned Income Tax on High EarnersAs a result of the Patient Protection and Affordable Care Act, single filers with adjusted gross incomes (AGIs) exceeding $200,000 and married joint filers with AGIs exceeding $250,000 may be subject to a 3.8% unearned income tax on net investment income. Unearned income includes capital gains and dividends.

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Consider Your EstateCASE STUDY: Bruce and Anne were happily married for about 20 years when

Anne died suddenly of a heart attack. During Anne’s career as a school principal, she had accumulated nearly $1 million in her pension. Over the years, when Anne and Bruce received her account statements from the pension system, they indicated she had named no beneficiary. She and Bruce both assumed that this meant Bruce was her beneficiary because he was her closest relative.

When Bruce tried to collect Anne’s pension after her death, pension officials told him they were in possession of a form that Anne had filled out in 1974, four years before she met Bruce, indicating that her aunt, uncle, and sister should collect her pension upon her death. Because the aunt and uncle had since died, pension officials awarded the lump-sum payout to Anne’s sister, who wouldn’t share it with Bruce.

Bruce filed a lawsuit, but a Manhattan Supreme Court sided with the pension officials, who maintained they could not assume that Anne intended for her husband to be her beneficiary when they had paperwork that clearly stated otherwise. An appellate court subsequently upheld the decision against Bruce, who told the New York Post that he was left destitute without the money he was counting on from his wife’s pension.

Source: New York Post, January 31, 2005

What Is an Estate?Your estate is simply all the wealth you have accumulated during your lifetime.

This includes real estate, stocks, bonds, business interests, retirement plans, personal effects, and anything else you own.

What Is Estate Conservation?Estate conservation generally seeks to accomplish two goals:

• Manage assets during your lifetime

• Distribute assets after your death

“Death is not the end. There remains the litigation over the estate.”

— Ambrose Bierce 19th century satirist

Source: BrainyQuote.com

Spousal RightsFederal ERISA rules apply

to assets in “qualified” retirement plans such as a 401(k). A spouse

is entitled to inherit the account assets in a 401(k) plan unless she

or he signs a written waiver consenting to the account owner’s

change of beneficiary.

If a former spouse is named as the beneficiary

of your retirement account assets, it is important to remove

the former spouse as beneficiary, even if you have a divorce decree.

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Estate Documents• Power of attorney. Gives a trusted individual the power and authority to act

on your behalf, such as in legal and financial matters.

• Durable power of attorney. Expands the power of attorney function because authorization remains in force even in the event that you become disabled or incapacitated. The person you choose would make investment and other financial decisions for your overall estate until you recover.

• Medical durable power of attorney. Outlines your preferences for forms of medical treatment and gives an individual the authority to make medical decisions for you if you are unable to make them yourself.

• Living will. Different from a standard will in that it outlines which medical procedures you would want to be used in the event of a debilitating or chronic illness. Living wills are most often used to authorize termination of artificial life support in the event of terminal illness.

• Will. Provides instructions detailing how you would like your estate to be distributed after your death. A will is used by the probate court to determine your wishes.

Note: You should consult with an estate planning attorney who is familiar with the laws of your state.

Beneficiary DesignationsAlthough it’s important to have a current

will in place, a will alone may not settle all estate conservation matters. Assets in life insurance policies and retirement accounts convey directly to the people named on the account beneficiary forms, overriding instructions in a will. That’s why it is a good idea to review and update your beneficiary

designations on a regular basis to help ensure there is no debate over who will inherit your retirement assets and receive your life insurance benefits.

Life insurance. When you purchase a life insurance policy, you are given an opportunity to name primary and secondary beneficiaries. Although it would be unlikely for someone to buy life insurance without designating a beneficiary, your choice of beneficiary may change as your life circumstances change.

Retirement accounts and annuities. Most people assume that the assets in their IRAs, employer-sponsored retirement plans, and annuities will go to their spouses (or children). It’s true that these types of accounts often have default beneficiary provisions, but the default beneficiary can vary based on the account type and custodian — and there’s no guarantee it will be your spouse or children.

Sparing the KidsAs Americans contemplate getting older, 39% are concerned about becoming a burden on their family.

Source: The Associated Press–NORC Center for Public Affairs Research, 2014

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Don’t Do It All YourselfWe all know that there’s been an information avalanche in the past decade,

particularly with the proliferation of material on the Internet.

There are also financial talk shows on the radio, endless market coverage and investment advice dispensed on cable TV, and investment “gurus” who yell and wave their arms in the air or tell you how to become independently wealthy with no money down.

It’s entertaining stuff. But should you really base your decision making on some cable channel’s flavor of the month?

Do You Prepare Your Own Taxes?

Source: Internal Revenue Service, 2015, 2012 (2014 tax-year data for individual filers, 2011 tax-year data for small-business filers, latest available)

Why do so many people get help preparing their taxes? Because mistakes on a tax return can be expensive. None of us wants to get a letter from the IRS telling us we filed our tax returns incorrectly.

And yet, if you make mistakes preparing for your financial situation, how expensive could they be?

52% of individual income tax filers have their taxes prepared

by a professional

92% of small-business filers have their taxes prepared

by a professional

52% 92%

Investors Are Concerned

In a 2013 survey, 69% of investors

(across all age groups) said that more

sophisticated strategies were needed to

cope with volatile financial markets.

Source: onwallstreet.com,

April 4, 2013Preview

© Emerald Connect, LLC 19

Why Work with a Professional? If you are serious about working toward your long-term financial goals and

overcoming some of the challenges Americans face, here are some sound reasons to consider working with a professional.

• NOT to “get rich quick”

• Financial education

• Help determine appropriate strategies

• A knowledgeable sounding board for your financial ideas

Consider Working with a ProShould you consider working with a financial professional? Although working

with a financial professional does not guarantee superior results, a financial professional can provide education and make suggestions that you might find helpful when weighing specific financial decisions.

According to a report by the Insured Retirement Institute, 68 percent of baby boomers who work with a financial professional are “very confident” or “extremely confident” with their financial preparations for retirement. By comparison, only 42 percent of boomers who do not work with a financial professional have the same level of confidence.1

Although there is no assurance that working with a financial professional will improve investment results, working with someone who focuses on your overall financial objectives can help you consider options that could have a substantial effect on your long-term financial situation.

Would it surprise you to know that most people spend more time each year planning a two-week vacation than they do planning for retirement?2 But let’s face it. Wouldn’t you rather spend time thinking about your vacation or other things instead of focusing on your savings?

Sources: 1) Insured Retirement Institute, 2015; 2) U.S. News & World Report, March 18, 2014

Working and WaitingIn 2015, 13% of workers said they were planning to postpone retirement. The most common reasons were the poor economy, not being able to afford retirement, and a change in employment.

Source: Employee Benefit Research Institute, 2015

68%

42%

Source: Insured Retirement Institute, 2015

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