Subscribe to Perrotto Wealth 7 steps you can use to bounce back from divorce.
Between forty to fifty percent of all marriages end in divorce. Maybe you have gone through it, or chances are, you know someone who has, you don’t need me to tell you how financially devastating divorce can be. Many people lose half of everything they’ve saved over their lives. Considering the high cost of legal fees, even more money is depleted. Sometimes the home needs to be sold, retirement accounts split up, investments divvied up, basically every asset you own. If that doesn’t sound...
How I saved over 700 a year on car insurance.
Between forty to fifty percent of all marriages end in divorce. Maybe you have gone through it, or chances are, you know someone who has, you don’t need me to tell you how financially devastating divorce can be. Many people lose half of everything they’ve saved over their lives. Considering the high cost of legal fees, even more money is depleted. Sometimes the home needs to be sold, retirement accounts split up, investments divvied up, basically every asset you own. If that doesn’t sound bad enough, divorcees often see their income go down while their expenses go up. No doubt about it, divorce is terrible news financially.
Even though this looks bad, don’t worry, there are plenty of things you can do to improve your financial situation significantly. If you have gone through divorce recently, here are seven things you can do now to help yourself get back to some level of normalcy as quickly as possible.
Do Not Panic or do anything irrational. This is easier said than done for obvious reasons, but you need every ounce of energy you can keep to rebuild your financial life. Don’t waste time worrying, and taking no actions, it won’t get you anywhere. Also, please know that you are not alone, there are many ways you can use to turn things around. You have many choices, many avenues, and as bad as it may look right now, you probably aren’t going to be out in the street or penniless.
Take stock of Your Financial Life. You may have never needed to, or may not understand what stocks or bonds are, or what a mutual fund is right now, but in time, you will improve your knowledge. At this moment, it’s time to account for where you are and that means painting the full picture of your financial life; income, expenses, assets and liabilities. My suggestion is to either use Excel or Google Sheets to catalog everything. You can create four sheets, one for each category. Sites like Mint.com also can help you with this. It’s great to have one place where you literately can see a snap shot of your financial life. Lastly, take a look at your credit report. Both spouses most of the time take a ding when they get divorced, so it will give you a good starting point to repair your credit.
Time to balance Your Budget. This is a priority. After a split, it may take you time to adjust to your new lifestyle with the income you take in alone and the expenses you need to payout. If you are not careful you could put yourself into more debt during this period. Work as hard as you can to not let this happen. If you don’t know what you spend on average right now, start keeping track. This is the most important piece of financial information you can have. With it, you’ll know if you need to cut back or go back to work or if your situation is sustainable. If you figure out that your spending exceeds your income, it may not make you happy, but ignoring a bad situation doesn’t make it go away.
Start naming Priorities. Divorce often comes as a shock after many months/years of trying to make it work. When people have too much on their plate they can easily become overwhelmed and then freeze up. That’s understandable but dangerous. If you determine that you don’t have enough income to make sure your bills are paid, this has to be your number one priority. If you depend on your ex-spouse for continued support, make sure they are required to buy life insurance and name you and the children as beneficiaries. If budgeting isn’t the biggest problem, phenomenal. What do you want to focus on? Improving your finances? Finding new work? Moving? Make yourself a list of everything you want to do and discuss it with your objective friend in order to come up with an action plan and time frame. A goal without a time frame is just a dream.
Start building your financial team. In picking yourself up financially, you can do a lot of this yourself, but you don’t have to. Don’t be shy about getting expert tax, legal and financial advice. Of course, you want to get referrals from trusted sources but don’t stop there. Make sure your team empowers you and makes you feel comfortable. It’s their job to make sure you understand what they propose doing and why. Make sure they are all on the same page with you. And remember, It’s your money. If you feel intimidated or confused, go to someone else. You have the right to expect a professional and supportive team.
Now is the time to learn. By taking inventory, balancing your budget, creating a priority list and assembling a strong team, you’ll learn a great deal about finances in general. But keep the wagon rolling. Devote 20 to 30 minutes a day to expand your education. Ask questions, attend webinars and seminars. Never stop learning. You will learn something new every day.
Lay out a Plan for your future. By now you’ll be well on your way to a more solid financial house than when you first divorced. Now is the time to create a financial plan for yourself with your new lifestyle. Take broad strokes; Do you want to have a yearly vacation? Do you want to own a home? Do you want to save for retirement? A financial plan tells you where you will likely end up if you continue on your current path and what you might consider doing differently in order to have a different outcome. If you have a financial advisor, you should already have a solid plan you can refer to.
These seven steps won’t change your life as quick as you may want, but by taking it one day at a time, and doing each of these steps, things will improve. If you need a hand, ask for help from people you trust and who care about you. You don’t have to rush, there is nothing here you can’t do. You’ll see that rebuilding your life after divorce isn’t as bad as it seems.
As many of us know in New York, car insurance is not optional. If you have a car, you need car insurance, and if you finance/lease a car, you need comprehensive car insurance. Many of us really love our cars. I love my Nissan Altima. I am on my second Nissan lease now, it drives like a dream, and is great on gas. One thing I don't love? My car insurance costs. The last 5 years I've had the two leases I have paid an ever-increasing cost for my insurance.Even though I have been getting older,...
The Ultimate Financial Cheat Sheet at 40
As many of us know in New York, car insurance is not optional. If you have a car, you need car insurance, and if you finance/lease a car, you need comprehensive car insurance. Many of us really love our cars. I love my Nissan Altima. I am on my second Nissan lease now, it drives like a dream, and is great on gas. One thing I don't love? My car insurance costs. The last 5 years I've had the two leases I have paid an ever-increasing cost for my insurance.
Even though I have been getting older, I haven't had an accident, and I have a clean driving record. I've heard excuses of raising my rate from anywhere glass being broken in my neighborhood, to Ice hail storms in midwest. Anything and everything to raise my payment every 6 months. Quite frankly, I was sick of it, and as many of you know, getting quotes from every carrier, all the time, is a time consuming tedious process, with tons of going back and forth to make sure the plan and discounts you are looking for match what you have now.
In comes Gabi
is a new type of insurance company. They even call themselves an insurance concierge. They are a full-service, online advisor who compares all your insurance options to find you the right policy, all in under two minutes. They hook directly up into your current policy and searches out cheaper policies. Gabi
not only does auto insurance, but rentals, homeowners, and everything in between.
So how does it work? Gabi first scans your existing insurance plan, then compares rates from the 20 largest auto insurers that do business in your area. They then show you the rates of every carrier for the same policy and discounts and gives you the option to sign up on the spot for the cheapest insurance. Not only that, but they continue to monitor rates for you looking for the cheapest rate. Gabi says it finds an average savings of over $460 per year for more than 60% of its customers. 460 dollars can go a long way into a 529 plan, an IRA account, or even an HSA account. I myself was paying 185 a month for my insurance policy, and I now pay 119 through Gabi
. A savings of almost 800 dollars a month!
There's no reason you’re still paying the same rate you were paying back in your youthful, less responsible years as a driver. Most of these insurance companies don't care for loyalty anymore, so why pay more to keep something that wouldn't do the same for you?
And as always, if you need any help with getting this going, don't hesitate to reach out to me at (718) 551 - 7131 or DPerrotto@ceteraadvisors.com
Many people have no gauge on where they should be at their age, nor do they have a benchmark, or a simple playbook to look at to see where their goal’s align. Let's first make sure your retirement funds are adequate. A checkpoint at age 40 is somewhere near $250,000. According to FinancialSamurai the average 40 year old has 100,000-150,000 in their 401k. If you want that income but your savings are considerably lower, consider adjusting your retirement contributions before doing other types...
What are ex-spousal benefits?
Many people have no gauge on where they should be at their age, nor do they have a benchmark, or a simple playbook to look at to see where their goal’s align.
Let's first make sure your retirement funds are adequate. A checkpoint at age 40 is somewhere near $250,000. According to FinancialSamurai
the average 40 year old has 100,000-150,000 in their 401k. If you want that income but your savings are considerably lower, consider adjusting your retirement contributions before doing other types of investments. You want to make sure you are on goal for retirement.
Make sure you understand fee’s inside your 401k and your financial accounts.
Second, let’s talk estate planning. Get a power of attorney, which designates someone to act on your behalf in business and legal matters should you become incapacitated, and a living will, which outlines in advance what actions you’d like taken regarding your health should you no longer be able to make those decisions yourself. Also, name a health care proxy, which is a power of attorney for your health decisions. These are all extremely important, to not hold anything up for your family. A great article on USNEWS
breaks down all the details of what you need to do for an estate plan. Put all your document’s in a safe, and easy to access place for your family.
Get disability insurance. If your employer doesn’t offer it and you can afford it, this insurance will provide you an income stream should you become unable to work. It’s critical, whether you’re in your, 30s, 40s, 50s or 60s. According to the Council of Disability Awareness
, 1 in 4 people will become disabled before they retire. A typical female, age 35, 5’4", 125 pounds, non-smoker, who works mostly an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has a 24% chance of becoming disabled for 3 months or longer during her working career. If this same person used tobacco and weighed 160 pounds, the risk would increase to a 41% chance of becoming disabled for 3 months or longer.
Determine job market
competitiveness. Don't let your skills get out of date - consider new training if necessary. If you already have in-demand skills, think about whether you are maximizing the career opportunities for those skills. Make sure you are advancing your career. When you switch jobs, be sure to negotiate. The earlier you start earning more, the more you’ll earn over your lifetime, as those increases compound on each other. LifeHacker
has an amazing article on how to negotiate your salary. According to a recent study in the Journal of Organizational Behavior, failing to negotiate on an initial job offer could mean missing out on over $600,000 in salary during a typical career. Don’t leave money you are worth on the table.
Look into getting life insurance. Some couples will opt to get life insurance right away and others might wait until they have children. Some couples in which each partner earns roughly the same amount may opt not to, but others in the same situation might buy life insurance simply to lessen the blow of the loss of that income during an already difficult time. Look into getting group term insurance, which will cover you for a period of time, through your employer, or if you feel you need extra coverage, buy your own individual term insurance. According to LIMRA’s
2012 report 70 percent of U.S. households with children under 18 would have trouble meeting everyday living expenses within a few months if a primary wage earner were to die today. 4 in 10 households with children under 18 say they would immediately have trouble meeting everyday living expenses.
Make sure you start saving for your children’s college education. Open a 529 account for them, and get in the habit of saving every month with automatic transfers, but if you have to choose, make saving for retirement a higher priority. Your children can always take out student loans, but there are no loans for retirement, and if you save for their college over your retirement, they may end up having to support you later on. According to YahooFinan
, roughly 20% of children are now supporting their parents, financially. Save for yourself first, and the 529 second.
Start trying to max out your retirement contributions and be proactive with your tax planning. Meet with a licensed CPA to maximize your deductions, since this is also the time when you are likely to be paying the highest taxes. This is critically important. Retirement may only be 20 to 25 years away.
You may also want to set up a Health Savings Account, which will allow you to save on health expenses with pretax money, while also potentially using that money as an investment vehicle. Also
have three really good advantages. The first advantage is that contributions are tax-deductible, or if made through a payroll deduction, they are pretax. Second, the interest earned is tax-free. Third, account owners may make tax-free withdrawals for qualified medical expenses. Here
is a great article on all the ways you can use a HSA.
Consider your own long-term care plans. This is also a good milestone to look at, “What can I do, so I’m not a burden on my family?” Investigate traditional long-term care insurance, which would provide nursing-home care, home-health care or other types of personal care for people over 65 who need supervision. Because many people find long-term care insurance expensive and they are mostly considering buying it right when they are also facing the financial challenge of retirement (usually in the 50s), many opt not to buy an expensive type of insurance that they are not certain they will use. One new option that helps alleviate those fears of not using the insurance is hybrid policies that offer life insurance with a long-term care option attached.
Lastly, make sure you have a stable, liquid emergency fund. As your income and expenses increase, remember, to increase your emergency fund.
Ideally, this financial review will find you are starting to reap some of the benefits from financial moves you began making around the time you turned 30. If not, don't worry - it's not too late to start, but it is time to get going so you have some progress to show by the time you turn 50. All of these can be achieved with the help of a licensed financial. So don’t be afraid to reach out, if you don’t have any one of these items on your check list.
So, you have been divorced for a few years now, and are heading into your sixties, what are your social security options? Did you know you can collect what Social Security calls ex-spousal benefits? Social Security operates with a philosophy that a divorced person may deserve a personal benefit, having been the long-term partner and companion of a productive member of society. The benefit is similar to the spousal benefit that is available to a person who is still married. Basically, there...
7 Reasons to buy Life Insurance in an Irrevocable Trust
So, you have been divorced for a few years now, and are heading into your sixties, what are your social security options? Did you know you can collect what Social Security calls ex-spousal benefits? Social Security operates with a philosophy that a divorced person may deserve a personal benefit, having been the long-term partner and companion of a productive member of society. The benefit is similar to the spousal benefit that is available to a person who is still married.
Basically, there are two sets of rules that determine whether you qualify. The first one is if your ex-spouse is living, and the second applies if he's passed. Either way, it won't surprise you that the rules are complicated, and you'll need to take some time to navigate the rules, and become familiar with them. It may make sense to find a financial advisor that specializes in divorcees or retirees, to help guide you. Something important to know as well, Social Security is gender neutral. Though many of its rules date to a time when one-income ruled the household, with the man working and the woman staying home and raising the kids, everything that applies to a divorced woman would apply equally to a divorced man.
Also, any benefits that you as a divorced spouse might receive would have no effect on the amount of benefits your ex-spouse gets.
First let’s start with if your spouse is still living. Basically, you can receive benefits based on your ex-spouse's work record if your marriage lasted 10 years or longer, you are currently unmarried, you're 62 or older, and any retirement benefit that you're entitled to receive based on your own work record must be lower than the benefit you'd receive from your ex-spouse's record. You collect whichever benefit is higher. Sorry, you can't collect both, you can’t have your cake and eat it too. Lastly, it doesn't matter if your ex-spouse has remarried.
Either way, before anything can happen, there's a "test" for your ex-spouse, too. He must be entitled to Social Security retirement or disability benefits. If he qualifies for those benefits even if he has not begun taking them, Social Security will allow you as the ex-wife to go ahead and take your ex-spouse benefits, providing that you've been divorced for at least two years.
Not bad, right? Now how much you get depends on what you qualify for. If you're at full retirement age, you'll be eligible for 50 percent of whatever he would get. Now consider that filing early reduces that amount even more—between 6 ½ and 7 ½ percent for each year leading up to your full retirement age. So even filing at age 64 could mean a significant financial hit in the long term. Remember, if you take it early, you are permanently reducing your benefits.
That's basically the same as what would apply if you were still married and your husband retired: You could get a spouse's benefit of 50 percent.
Now let’s suppose your ex-spouse has already died. You would have to meet these conditions: You are 60 or older, or 50 if you're disabled, your marriage lasted at least 10 years, your own retirement benefit would not be higher than what you could claim on your ex-spouse's record, and lastly, there's a special twist concerning your marital status. If you remarry before age 60 (or 50 if you're disabled), you can't receive such a benefit. But if you remarry after 60 (50 if disabled), you can.
Now we move on to children. You can get benefits from your ex-spouse's record at any age if you're caring for that ex-spouse's child, who is also your natural or legally adopted child and who is younger than 16. Your benefits will continue until the child reaches 16 or is no longer disabled. Importantly, you can receive this benefit even if you weren't married to your ex-spouse for 10 years.
What about people who've had multiple marriages and divorce? Although it will depend on how long the marriages lasted and other circumstances. But they can't collect multiple benefits on the records of multiple ex-spouses. Just one. They also have to still follow the same requirements as well.
You may also be wondering, what if your ex-spouse remarried, and got divorced again, and his new ex-spouse applies for his benefit before you. With Social Security, it doesn't matter who gets there first. There isn't just one benefit available. If you meet the qualifications, you get a benefit, regardless of what another ex-spouse has or hasn't done. So, don’t worry!
So, lets help you actually collect an ex-spouse's benefit. You can either go online to Social Security or call 1-800-772-1213. Be prepared to provide documents that establish your right to the benefit. You'll likely be asked for your birth certificate, marriage license and divorce decree. Plus, you'll need your ex-spouse's Social Security number. If you don't know it, you'll be asked for his date and place of birth and the names of his parents, information which will allow Social Security to look the number up.
So, this gives you a quick summery about ex-spousal social security benefits, the requirements to get them, as well as how to get them. If any of this is too complicated for you, don’t hesitate to reach out to a financial advisor to help you out. You earned these benefits, make sure you get the best of them.
There are many reasons people buy life insurance as it offers some unique features that are not found in many other financial products. For example, you can build cash value, over fund policies, and have access to tax free withdrawals. With many permanent polices, you also have access to accelerated benefits for long term care or critical care. One of the biggest benefits you can do, is buying life insurance in an Irrevocable trust. An Irrevocable Life Insurance Trust (ILIT) is created to...
7 reasons why you should meet with a Financial Advisor
There are many reasons people buy life insurance as it offers some unique features that are not found in many other financial products. For example, you can build cash value, over fund policies, and have access to tax free withdrawals. With many permanent polices, you also have access to accelerated benefits for long term care or critical care. One of the biggest benefits you can do, is buying life insurance in an Irrevocable trust. An Irrevocable Life Insurance Trust (ILIT) is created to own and control a term or permanent life insurance policy or policies while the insured is alive, as well as to manage and distribute the proceeds that are paid out upon the insured’s death. An ILIT can own both individual and second to die life insurance policies. Second to die policies insure two lives and pay a death benefit only upon the second death.
An ILIT has several participants; the grantor, the trustees, and the beneficiaries.
The grantor is the one who creates and funds the ILIT. Gifts or transfers made to the ILIT are permanent, and the grantor is giving up control to the trustee. The trustee manages the ILIT, and the beneficiaries receive distributions when the grantor passes. It is important for the grantor to avoid any incidental
ownership of the life insurance policy. Any premium paid should come from a checking account owned by the ILIT, not the grantor. If the grantor transfers an existing life insurance policy to the ILIT, there is a 3-year look back period in which the death benefit could be included in the grantor's estate.
Once built and paid for, an ILIT can serve many reasons such as:
Minimize Federal and State Estate Taxes. If you are the owner and insured, then the death benefit of a life insurance policy will be included in your estate. However, when life insurance is owned by an ILIT, the proceeds from the death benefit are not part of the insured's estate and are not subject to estate taxation. A properly drafted ILIT can provide liquidity to help pay estate taxes, as well as other debts and expenses, by purchasing assets from the grantor’s estate or through a loan. This is one of the main reasons to use an ILIT.
Avoid Gift Taxes. A properly constructed ILIT avoids gift tax consequences since contributions by the grantor are considered gifts to the beneficiaries. To sidestep gift taxes, it is crucial that the trustee, using a Crummey letter, notify the beneficiaries of the trust of their right to withdraw a share of the contributions for a 30-day period. After 30 days, the trustee can then use the contributions to pay the insurance policy premium. The Crummey letter(Download a template here
) qualifies the transfer for the annual gift tax exclusion by making the gift a present rather than future interest, thus avoiding the need in most cases to file a gift tax return. It is a technicality that many fail to satisfy.
Taxes. Irrevocable trusts have a separate tax identification number (TIN) and has a very aggressive income tax burden. However, the cash value accumulating in the policy is free from taxation just like the death benefit. If properly constructed, an ILIT can allow the trustee full access to the accumulated cash value, by taking loans and/or distributions at cost basis, even while the insured is alive.
Asset Protection. Each state has different rules and limits regarding how much cash value or death benefit is protected from creditors. Any coverage above these limits held in an ILIT is generally protected from the creditors of the grantor and/or beneficiary. The creditors may however attack any distributions made from the ILIT, so be careful. Assets of an ILIT could also generally be immune from claims in a divorce or dissolution of marriage. An ILIT may also provide for termination of a spouse’s interest in the event of remarriage.
Distributions. The trustee of an ILIT can have discretionary powers to make distributions and control when beneficiaries receive the proceeds of the policy. The insurance proceeds can be paid out immediately to one or all of your beneficiaries or you can specify how and when beneficiaries receive distributions. The trustee can also have discretion to provide distributions when beneficiaries attain certain milestones, such as buying a home or having a child, or even something like graduating. It’s really up to the trustee. This can be useful in second marriages to ensure how assets are distributed or if the grantor of the trust has children and want to make sure their children from the first marriage are taken care of.
Government Benefits. Having the proceeds from a life insurance policy owned by an ILIT can help protect the benefits of a trust beneficiary who is receiving government aid, such as Social Security disability income or Medicaid. The Trustee can carefully control how distributions from the trust are used so as not to interfere with the beneficiary's eligibility to receive government benefits. Then from there, the trustee may be able to set up a special needs trust to help the beneficiary continue to receive government benefits.
Legacy Planning. The generation-skipping transfer tax (GST) imposes a tax of 40% on both outright gifts and transfers in trust to or for the benefit of unrelated persons who are more than 37.5 years younger than the donor, or to related persons more than one generation younger than the donor. A common example is gifting to grandchildren instead of children. An ILIT helps leverage the grantor of the trust’s generation-skipping transfer (GST) tax exemption by using gifts to the trust to buy and fund a life insurance policy. Since the proceeds from the death benefit are excluded from the grantor’s estate, multiple generations of family -- children, grandchildren and great grandchildren -- may benefit from the trust assets free of estate and GST tax.
ILITs are a seriously powerful tool that needs be considered in many financial plans. ILITS help ensure that the policy is used in the best possible way to benefit your family exactly how you wish proceeds to be used. Even with the federal estate and gift tax exemption at $5.43 million, it is still possible to owe state estate taxes. Many states begin taxing your estate at $1 million or less. ILITs have some technical rules that your estate planning lawyer can further explain to you. Using an ILIT is a simple way to protect your family and lower your estate tax burdens. If you have any questions about this, don’t hesitate to call. Run all this by your tax attorney and CPA before you implement any of these strategies.
David Perrotto, an advisor with Perrotto Private wealth, has been helping people with all different backgrounds for over a decade, and he says he still finds that people overlook the value of an advisor and misunderstand what they do.Many people believe that advisors only sell what’s best for the advisor, what’s best for the company they are working for, and usually sell based on specific products.On the contrary, a good financial advisor isn't going to sell you a specific product in order...
David Perrotto, an advisor with Perrotto Private wealth, has been helping people with all different backgrounds for over a decade, and he says he still finds that people overlook the value of an advisor and misunderstand what they do.
Many people believe that advisors only sell what’s best for the advisor, what’s best for the company they are working for, and usually sell based on specific products.
On the contrary, a good financial advisor isn't going to sell you a specific product in order to make a commission. Instead, a quality advisor will listen to your goals, look at your current finances and recommend how best to move forward with your money, and build you an actual plan. Then help you execute that plan going forward.
While you don't always need to work with an advisor on an ongoing basis, there are times when it makes sense to stop in for some financial advice and consultation.
When you start working for a new company. It doesn't matter whether it pays $40,000 a year or $400,000 a year, starting a job is a good reason to check in with a professional financial advisor. Not only can they advise you on how to best save for retirement, they may also provide insight on how to maximize your employer's benefits package.
Getting married or divorced. Another good time to seek out professional financial advisors: whenever you enter or leave a marriage. Bringing in an unbiased third party can help minimize financial losses in a divorce and may make it easier for engaged couples to have conversations about combining assets and income in their marriage. Having an unbiased third party can help remove the emotional mistakes couples me. For example, a spouse might feel attached to a family home and insist on keeping it as part of a divorce settlement. In exchange, he or she may lose out on retirement savings that could prove to be much more valuable in the long run.
When you receive a large sum of cash. Receiving a large sum of money, such as from an inheritance, bonus, buyout or big raise, should be a boon to your financial health. There are many vehicles that will allow you to defer taxes, help your overall balance sheet, and grow your net worth. Unfortunately, many people tend to squander the opportunity for financial advice that it presents. Regardless of the amount of your windfall, meeting with a financial advisor can ensure you put the money to good use and not waste it.
When you need to take care of aging parents. People should consider all options on what kind of advice financial advisors can provide. Many advisors are also registered to sell insurance. Aging parents want to stay in their homes, so it’s worth to check out what your financial advisor can do for you. If you think your parents or another elderly loved one will need care, either in-home or in a nursing home, talking to a financial advisor sooner rather than later can help you prepare for this sizable expense.
When you are thinking about retirement. Retirement planning is one key area where financial advisors do their best work. You should begin planning in your 50s, at the latest. Most good strategies need to be set up 10 to 15 years in advance. Just like you wouldn’t plan to buy a home the day before you purchase it, the same goes for retirement planning. Everyone around age 40 should check in with an advisor just to see where they stand and what they are not thinking about. Making sure you are hitting your financial goals 20 to 30 years in advance of retirement, will still give you plenty of time to make adjustments and save more if needed.
When you are preparing to pass on your wealth. At some point, you and your money will be parted forever. When you start to think about estate planning, it can be smart to bring in a professional for the discussion. A financial advisor may be able to suggest ways to minimize estate taxes, plan for final expenses and review beneficiary details on accounts.
When you are worth a quarter million. In most of the above cases, you may only want to pay for a single visit with a financial advisor, ongoing paid financial advice may not be necessary. However, once your income and assets reach a certain point, you may want to develop a regular working relationship with an advisor who can keep you on track of your financial goals. People start acting to emotional once you reach 200,000 to 300,000 in liquid net worth, and it makes sense to bring in an unbiased 3rd party to keep your priorities in order, and make sure you stay on target. A great article on TheBalance
goes over why in the twenty years ending on 12/31/2015, the S&P 500 Index averaged 9.85% a year while the average equity fund investor earned a market return of only 5.19%. Bear markets and volatile market conditions make it difficult for people to be prudent with their money and practice sound financial planning. Rather than allow a market to stabilize, they may react in fear, sell off declining investments and then lock in their loss by missing the inevitable bounce back in fund values. Beyond helping you make rational money and investing decisions, a professional advisor can help decipher increasingly complex tax laws and investment strategies that apply to high-income earners.
Advisors are the only professionals that are proactive on their choices they make for you, as opposed to your CPA and attorney, who are reactive on your choices. Financial Advisors plan for the future, and try to guide you through any speed bumps that may come with that plan, while CPA’s and attorney’s plan for your future, based on decisions you already made. EG: A financial Advisor may build a plan to save money and buy a house, while a CPA will help you deduct mortgage interest after you have already bought the house. Any one of these reasons is good enough to reach out and find a professional that will help get you where you want to be, or help you shield yourself from risks you are not aware of.