Financial planning

California Dept. of Corporations Has "Must Read" Publication

By admin  |  2010/01/20 13:24 Posted in Financial planning, General info, Investing  |  Comments (0)

In over 25 years for helping people to preserve, protect and grow their assets, many publications have crossed my desk. All were designed to help those approaching or in retirement. Perhaps the best one ever is from the Ca Dept of Corporations and is free. “Protect Yourself from Fraud” is easy to read, well written covers a large variety of topics and should be a must read for everyone.

The Dept of Corporations is the States’ Investment Financing Authority. It protects consumers by regulating companies and individuals that offer investment advice, securities, and consumer loans amongst other things.

The Department is committed to making the public more aware of the types of fraud and schemes that are being committed against consumers but particularly seniors.

Common Investment scams are reviewed including seminars with ”Free Meals”. It is always amazing the number of people who do not know that there is “no free lunch” and those that are advertised as free always have a hook.

Several telephone scams are reviewed including those telling you that you must return a call to “area code 809” for what appears to be a legitimate reason, only to discover the toll charges to the Virgin Islands could be hundreds of dollars per minute.

Other common scams involve con artists posing as a Charity or home repair while others go so far as to use a distraction and actually commit a burglary.

With the recent events in the housing market, there are increased scams with predatory mortgage lending. There are also companies preying on those that are behind in their mortgage payments and trick the unsuspecting into ”jumping from the frying pan into the fire”.

The publication has a good section on how to check your credit, protecting your credit and what to do if your identity is stolen.

One of the best tips that I wish everybody would listen to is to “Investigate before you invest and not after”. It could be your bank, insurance salesman or a call over the phone that tells you about a product/ investment that sounds to good to be true. If you only had read the fine print or asked for a second opinion (from an expert who is not selling) before you write the check, you would be better off.

There are other sections on important topics such as reverse mortgages, annuity purchase, end of life paperwork, and things you can do when you have financial difficulties.

Elder abuse and financial elder abuse are increasing in frequency as there are more people living longer every year. Unfortunately financial abuse often goes on without the victim’s knowledge. The exploiter can often be a family member or trusted personal attendant. If you experience, witness or suspect elder abuse immediately contact Adult Protective Services.

Lastly is a wonderful “resource section” that lists the contact information for a number of agencies that are designed to help safeguard those that would be intended victims.

I encourage everyone to pick up the phone and call 866-275-2677 and ask that you be mailed the booklet entitled “Protect Yourself from Fraud”. Do not miss this very worthwhile free publication.

Michael Chamberlain CFP®
Ca Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340
This article is for informational purposes and should not be taken as legal, tax or investment advice.

The Difference Between “Saving” and “Investing”

By admin  |  2010/01/13 10:51 Posted in Financial planning, General info  |  Comments (0)

As a financial planner, I work with clients of all ages and income levels. The basis of good financial planning is great communication between the clients and the planner. Clients are always encouraged to ask any question that pops into their mind. Recently, a young newlywed who is expecting her first baby was in the office and said: I have a very basic question: What is the difference between “saving” and “investing”?

That is a great question because many people think saving and investing are one in the same. In reality they represent two distinct ways of managing your money for the future. Not understanding the difference can be costly.

When you are “saving”, your intent or goal is to preserve the principle and not subject it to loss. Savings are also typically used to fund goals or needs in the immediate future (less than 5 years). Using a bank savings account, money market fund, US treasury bills, certain annuities or certificate of deposit are commonly used for saving. The downside to the “stability of principle” is that these savings options usually offer low returns when compared to other “investment” options.

Investing, on the other hand is when you place your money into vehicles that give you a greater potential for gain. But with the greater upside comes a potential for loss of principal as well. When you “invest” your intended use of the funds should be more than 5 years away. Having a long time frame is why most people invest in stocks, bonds or real estate, (or mutual funds investing in stocks, bonds or real estate) within their retirement accounts.

Different investment vehicles have different levels of risk. In general, bonds are thought to be less risky than stocks. It is important to keep in mind that some bonds are in fact more risky than some stocks. Having the correct mix of asset types is key to controlling risks, which is a whole other topic.

There are pitfalls when individuals “invest” for the short-term. This was very apparent to some with the recent downturn in the market. If you were intending to buy a new car with cash and you had it parked in a savings account, it would be there when you went to buy the car. If, on the other hand, you had invested the money in the stock market with the intent of buying the car in the summer of 2009, you would have lost part of the money for that new car and you instead might be buying a used car.

There are also pitfalls when individuals “save” for the long term. Saving vehicles rarely provide enough after tax return to exceed the inflation rate. Therefore, over time you will lose purchasing power and either need to start cutting back on your lifestyle needs or start spending principle.

In conclusion, savings is for the short term, where the return is low but there can be little possible loss of principle. Investing is a type of money management that seeks a higher return while knowing there is the potential for loss of principle. Investing is appropriate when the funds would not be needed for at least 5 years. Not understanding the difference is a common money management mistake.

Michael Chamberlain CFP®
CA Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340
This article is for informational purposes and should not be taken as legal, tax or investment advice.

Protect Yourself From Investment Fraud

By admin  |  2010/01/04 10:47 Posted in Financial planning, Investing  |  Comments (0)

The media is full of stories about investment fraud and sales abuse. Wells Fargo was sued by the State of California for selling investments that were not as safe as reported. Bank of America was sued for involvement in a Ponzi scheme. Ameriprise paid a fine for selling products unsuited to clients retirement accounts. And of course the Bernie Madoff hedge fund scandal where people lost millions.

Now is a great time to review some methods to protect yourself from possible investment fraud and misrepresentation.

1. If an investment salesman uses the phrases such as; high rate of return, risk-free, your investment is guaranteed against loss, you must invest now, you should be wary and be extra careful.

2. Security laws protect investors by requiring companies to provide investors with specific written information about the company. Unfortunately, this information is very detailed and is buried amongst dozens of pages of the prospectus. Security laws safeguards are of no value if you don’t read the information prior to the purchase.

3. Be aware of the risk associated with an investment. Most people know that a certificate of deposit at a bank is less risky than investing with someone who contacted you by phone or investing with someone you know through your church or a friend. Many people do not know how to assess the risk of bonds, mutual funds or stocks.

4. Suppose a friend tells you about an investment opportunity that has earned returns of 20% during the past year. Your investments have been performing poorly and you’re interested in earning higher returns. This person is your friend and you trust them, however you should not invest until you call your securities regulator to see if the investment has been registered to be sold legally. It would be wise to get a second opinion from an investment professional who is not selling the investment.

5. When making an investment, do not rely on testimonials of others, advertising and news stories in the media or on the Internet, or technical data that you don’t really understand. You should rely on information that has been filed with your securities regulator. If you don’t understand it don’t buy it.

6. The best way to protect yourself from investment fraud includes; read all disclosure documents about the investment, be skeptical and ask questions and never write a check for investment in the name of your salesperson. The NASAA recommends investors seek the advice from an independent objective source (a professional who is not selling the investment).

7. When dealing with an investment salesperson who you consider reputable, you should; request copies of opening documentation to verify your investment goals and objectives are stated correctly, evaluate your salesperson’s recommendations by doing your own research before you buy, review all correspondence and account statements when received, and never allow the salesperson to manager assets as they see fit.

8. Numerous investments have been used to defraud the public including; short-term promissory notes, deeds of trust, offshore investments to avoid taxes, Nigerian advance fee letters amongst others. If it sounds too good to be true it probably is!

9. If you work with the an investment salesperson and he or she asks you to invest in a product that they are really excited about but the recommendation is different from financial products you have previously invested in, you should be sure to check with your security regulator to see if there’s any information on the investment product and that the salesperson is authorized to sell that product.

10. Do not assume an investment is legitimate just because the promotional materials and company website look professional, have a prestigious office location, other investors report quick upfront returns or the company has an official sounding name. Make the decision only after completing your due diligence.

11. Remember, no one insures you against investment loss. Make sure that your investments are appropriate for your risk tolerance (your ability to mentally handle the ups and downs) your risk capacity (your financial situation) and your goals and timeframe.

12. Whenever the sale of investment generates a commission for the salesperson, there is a possibility of misrepresentation or that it may not be as well suited to your circumstance and situation. This is the reason investors are wise to get a second opinion from an investment professional who does not sell product but only provides objective advice.

Michael Chamberlain CFP®
CA Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340
This article is for informational purposes and should not be taken as legal, tax or investment advice.

Legislature Does Not Protect Investors

By admin  |  2009/12/30 11:52 Posted in Financial planning, Investing, My soap box  |  Comments (0)

Congress is reportedly attempting to improve the safeguards for the investing public. Sweeping financial services reform legislation was approved last week in the House of Representatives. But there were some evidently last minute changes inserted into the bill by lobbyists to benefit big Wall Street Broker Dealers such as Charles Schwab.

Registered Investment Advisors give investment advice and they have a fiduciary duty to always do what’s in the best interest of the client. Broker dealer representatives are not responsible to do what’s best for the client and operate at a lower standard of what is called “suitability”. They only have to do what is suitable for the client, not what is best.

Some financial advisors are registered as both investment advisors that operate under the fiduciary duty and also representatives of the broker dealer and operate under the lower suitability standards. These double licensed individuals change from the White hat of investment advisor to the Black hat of the salesman. It is impossible for clients to know which hat the advisor is wearing and whether they are getting advice or being sold a bill of goods.

It was the Security and Exchange Commission’s recommendation that all individuals who give financial advice should operate with the client’s best interest in mind at all times. The head of the committee that produced the bill, Barney Frank, agreed that investors should be projected by the fiduciary standard.

So how is it that the House of Representatives passes legislation, if enacted, would require the Securities and Exchange Commission to write rules that would establish a fiduciary duty for brokers to provide investment advice but the bill adds a qualifier to that requirement saying,” nothing in this section shall require a broker or dealer or registered representative to have a continuing duty of care or loyalty to the customer after providing the personalized investment advice about securities.”

Consider the example. You go to a financial adviser and pay a fee to analyze your investments. As a result of the analysis, it is recommended that you buy $10,000 of an emerging market fund, $15,000 of a small value fund and $25,000 of an intermediate bond fund. Ideally the advisor then would present the best, lowest cost funds of each type. However this legislation would allow the adviser at take off his “fiduciary duty hat” and put on his “suitability hat’. The salesman is then free to sell his company’s high priced funds in each of the general categories.

This provision that was inserted, with virtually no one knowing about it, would render the fiduciary duty of brokers useless and therefore the public would have no safeguards, as was the intent of the Securities and Exchange Commission recommendations.

This is yet another example of how money from Wall Street goes into the lobby industry’s pocket to influence legislation that is not in the best interest of the public but is in the best interest of Wall Street.

If you as an individual want objective unbiased investment advice that is always in your best interest, it is essential that you seek advice only from Registered Investment Advisors that are not representatives of a Broker Dealer.

The simple test is to call your advisor and ask if they are a “representative of a broker dealer”. If they say yes, you have the wrong advisor.

For list of fee-only advisors check the website for the National Association of Personal Financial Advisors (NAPFA) or Garrett Planning Network.

Michael Chamberlain CFP®
Ca Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340

This article is for informational purposes and should not be taken as legal, tax or investment advice.

Financial Planning at My Age?

By admin  |  2009/12/21 11:37 Posted in Financial planning, Retirement planning  |  Comments (0)

Many people do not fully understand what Financial Planning is all about in the first place so they cannot really know if they would benefit from a plan.

In a nutshell, Financial Planning is a method of achieving the type of life that you plan for. Unfortunately many people do not plan and they end up not getting what they wanted.

Everyone’s financial plan is based on his or her own unique situation. But most plans address the following elements:

Current Financial Situation – Both you and the planner need to know where you are at financially which includes a net worth statement ( list of assets and liabilities) as well as a cash flow determination (income and outgo). This is important to identify areas of potential savings and have an ability of judging progress over time.

Investment Risk Tolerance and Capacity – It is crucial to understand these areas before attempting to determine whether your current investments are appropriate for your situation.

Investment Analysis and Recommendations- It’s important to know what investments you have currently prior to determining whether they are appropriate for your situation (based on risk tolerance, risk capacity and goals). Only than can alternative recommendations be appropriate.

Investment Policy Statement - Many people get off track in their investments because they don’t have a clear game plan. An Investment Policy Statement clearly outlines the objectives of your investments, expected returns, possible gains and losses based on historical data, and provides guidance for managing your investments going forward.

Retirement Planning – This element identifies the goals that you have now and in the future, takes into account current and future income and assets and then determines the likelihood that you do not run out of money before the end of the line.

Estate Planning - This is about having the proper documentation so that you are cared for the way you want should you become incapacitated as well as passing on your assets when you are gone in the best possible way.

Risk Mitigation -Bad or unexpected things can occur if life and there should be a plan to deal with them as they occur. How would you; handle a 3 million dollar health problem, are sued for 2 million due to a car accident, die prematurely, need long term care. Risk mitigation planning is avoiding some risks, transferring some risk with insurance and retaining the risk in some areas. If insurance is part of the plan you want to make such you have the right type in the right amount and at a good price.

Debt Management - While this does not apply to everyone, some people need help in recognizing good and bad debt and having a plan to decrease both in the best manner.

Tax Planning – The less you pay in taxes, the more that’s left in your pocket. Identifying ways of decreasing taxes can be to your benefit. This planning often involves your accountant, CPA or enrolled agent.

Regardless of your age, financial planning can help you live the life you want through the proper management of your finances and risks.

Based on their education, experience and ethics, those advisors who are Certified Financial Planners ® would be a good choice to analysis your situation and craft a written financial plan to address the above topics

Michael Chamberlain CFP®
CC Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340
This article is for informational purposes and should not be taken as legal, tax or investment advises.

Consider Target Date Retirement Funds Carefully

By admin  |  2009/12/14 12:40 Posted in Estate planning, Financial planning, Investing, Retirement planning  |  Comments (0)

In the last several years, numerous mutual fund companies have developed Target Date Retirement Funds (TDR) that are based on when people plan to retire. The longer away the retirement date, the more aggressive the allocation (more stocks) and it gets more conservative (more cash and bonds) as the retirement date nears.

The idea is that with one fund you get exposure to domestic and international stocks as well as corporate and government bonds and the allocation automatically adjusts over time.

These companies realize investors often do not pay attention to their asset allocation of their investments. People tend to put money into mutual funds but do not monitor them over time.

These funds are designed to fix that but there are some issues that you should be aware of if you are considering this type of an investment:

1. The proper mix of asset types within your portfolio should be based upon your tolerance for risk (your mental ability to deal with volatility), your capacity for risk (your financial situation) as well as your goals including your time frame. The problem with these retirement date funds is they look only at a point in time to determine the allocation and totally disregard your risk tolerance and capacity. The result could be an allocation that is not appropriate to your situation, which could be greater volatility or under performance of your investment.

2. Each investment company has a different philosophy as to the allocation for a given retirement date. How is a person to know which of the 100’s of funds is best suited to their situation? Note the difference in allocation amongst these funds:

Fund Name

Stock %

Fixed income %

Fidelity adviser freedom 2015 A

53%

47%

J.P. Morgan Smart retirement 2015 A

52%

48%

T. Rowe Price retirement 2015

65%

35%

Vanguard target retirement 2015

61%

39%

Schwab retirement 2015

55%

45%

Putnam retirement ready 2015 A

42%

62%

There can be as much as a 50% difference, which has a huge impact on risk and expected return.

3. The target date funds often do not provide great enough diversification across different asset classes. Value style funds, small-cap funds, emerging market and REITs are usually underrepresented. This lack of diversification may increase volatility and provide smaller returns than a more properly allocated portfolio.

4. A recent study has revealed there are many misconceptions amongst those who have invested in these funds.

a. 40% think that the fund has a guaranteed return- NOT TRUE

b. 40% think they get higher returns than the stock market in general- NOT TRUE

c. 60% think that they will be able to afford to retire on that date of the fund-NOT TRUE.

5. The fees associated with these accounts vary dramatically and are a huge revenue stream for some companies. The commissions and operating expenses can be a drag on performance. People may be better served with those funds with no commission and lower operating expenses.

Fund Name

Commission %

Gross expense Ratio

Fidelity adviser freedom 2015 A

5.75%

0.93%

J.P. Morgan Smart retirement 2015 A

4.5%

1.35%

T. Rowe Price retirement 2015

0

0.65%

Vanguard target retirement 2015

0

0.18%

Schwab retirement 2015

0

2.35%

Putnam retirement ready 2015 A

5.75%

1.1%

If you are invested in these types of funds or are considering them, you should find out their allocation and determine if the mix of asset classes in the fund is really suited to you and to be sure that your fund has low fees to help increase your return.

Michael Chamberlain CFP®
Ca Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340

This article is for informational purposes and should not be taken as legal, tax or investment advice.

Should I Roll My 401K to an IRA?

By admin  |  2009/12/04 13:01 Posted in Financial planning, Investing, Retirement planning  |  Comments (0)

Ok, you have gone ahead and retired. Now you are wondering, “What should I do with my 401K; leave it where it’s at or convert to an IRA?” Unfortunately, it’s not a simple question to answer. It depends upon the choice of investments as well as the ongoing costs of the 401(k) compared to that of an IRA. Other factors to consider are your age and whether you would need the funds before 59 1/2 as well as the amount involved.

Advantages of the keeping the 401(k) include:

  • You can borrow money from the 401(k) without penalty, as long as you pay it back.
  • If you’re less than 59 ½, you can withdraw money in your 401(k) under certain circumstances such as needing to pay medical bills. The qualifying expenses would have to be tax deductible and would exceed 7 ½% of your adjusted gross income.
  • If you become disabled before 59 ½, you can make early withdrawals from the 401(k).
  • Management fees of the funds within the 401(k) at very large companies are sometimes less than those of an IRA.
  • If the amount involved is small, you may get better diversification amongst different asset classes since the 401(k) often does not have a minimum account size.

Advantages of the IRA include:

  • Greater selection of investment options.
  • Management fees of the funds within the 401(k) at small to mid sized companies are often more than those of an IRA.
  • More freedom to switch investments with greater frequency.
  • The IRA may provide easier to deal with than dealing with a 401(k) and an existing IRA. There is less administration and record keeping with one account rather than two.

Once you have established that none of the advantages of the 401(k) would benefit you and that you understand the costs of the 401(k) compared to an IRA, converting to an IRA could allow for a better asset allocation than your 401(k).
Having the correct asset allocation of different investment types is perhaps more important then deciding to convert from the 401(k) to the IRA. The proper mix of asset classes can decrease your risk and increases your return. The allocation should be based upon your tolerance for risk, your capacity for risk and your goals including your timeframe.

Most people need some professional assistance to determine the proper allocation. Many financial publications recommend people use a “Fee-Only” advisor who does not sell products for objective advice that is free of conflict of interest (similar to a doctor or CPA).

If you convert to an IRA, considering using low-cost mutual funds and or exchange traded funds (ETF’s) to keep your investment costs low.

The time when it DOES NOT make sense to move your funds from a 401(k) to an IRA is when you are getting recommendations to buy a product that has commissions and high fees associated with the IRA. Unfortunately most financial advisors sell product and the commissions of 3 ½ – 7% can come right out of your account. Most retirees do not have the experience to fully understand the fees involved and the long-term impact on their nest egg.

If you are considering your options for converting a 401(k) to an IRA be sure to talk to a financial advisor who is not going to try to sell you the IRA.

Michael Chamberlain CFP®
CA Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340

This article is for informational purposes and should not be taken as legal, tax or investment advice.

Tips for a more successful retirement

By admin  |  2009/12/02 09:50 Posted in Financial planning, General info, Retirement planning  |  Comments (0)

At a recent meeting of retirees, a presentation of the “10 biggest retirement planning mistakes” was given. There were many questions and much discussion. Everyone left having a few pearls of wisdom to take home. When all others were gone, a retired teacher approached me and said “Mike, I learned a lot but having been a teacher for many years, you might want to consider dwelling on the positive not the negative.” In that spirit of accentuating the positive, here are some tips for a more successful retirement rather than mistakes to avoid.

Have Goals Tasks you wish to accomplish, places you want to go, and people you wish to help. The goals are a list of things you plan to do. There can be both short-term and long-term goals, large goals as well a small. The chances of reaching the goals are much greater when the goals are written, have a time frame attached to them, as well as the expected financial cost and where the funds will come from to accomplish the goal. For instance, I will complete Spanish 1 at the Community college by next June with a grade of B and the fees of $250 will come from the interest on my CD.

Make timely decisions (do not procrastinate). Some retirees are afraid of making the wrong decision so based on that fear do not make decisions at all. A common comment is “I’ll think about it”. If you have all the accurate information and understand the circumstances you have all the facts necessary to make a decision. Getting accurate information can be difficult particularly so in a sales situation. Do not be afraid to get a second opinion from someone who is not trying to sell you. Ask family members or trusted advisor such as your tax preparer, attorney or financial planner depending on the decision at hand.

Due not put all your eggs in one basket. Your investments should be diversified across different types of investments. Having all your assets in CDs may not yield enough return to meet your needs. Having all your investments in stock (or mutual funds invested in stock) is much too risky. The correct asset allocation for you and your situation should be based on: your risk tolerance (a mental state) your risk capacity (a financial state) and your goals including your timeframe. Determining the correct allocation sometimes is best accomplished with professional help.

Good debt – bad debt. Not all debt is created equal. Some interest such as a home mortgage is tax-deductible and would be much preferred than the interest on an auto loan. Credit card debt is the worst type due to its non-deductibility and very high interest rates. It should be avoided like the plague.

Mitigate your risks. In dealing with risk, your options are to avoid the risk, transfer the risk to an insurance company or retain the risk and pay the price should the dread event occur. These three options exist for all risks including; health, auto, home, disability and long-term care. Unfortunately some people have too much insurance while others do not have enough and most are paying more premium than they should for the insurance they have. Everyone is different and your risk mitigation program should reflect your unique situation.

Proper estate planning documents. All retirees should have proper estate planning documents that designate who should make health care decisions for you or control your finances should an incapacitation occur. It is so much easier to address this ahead of time than after an event such as stroke, Alzheimer’s disease or other incapacitating affliction. If you own real estate, a living trust may be a good way of making sure your assets go to whom you choose upon your passing. Always consult with an estate-planning attorney for these matters.

Ask for help if needed. Financial planning, insurance, investments, taxes, retirement planning are subjects that are complicated. The way most retirees learn about these subjects is through the “school of hard knocks”. It is the age of specialization. We go to the doctor for a checkup on our health, we take our car for tune-ups at the garage, the gardener tends our garden, and for financial advice there is a financial planner.

To help identify the areas where help may be needed complete a “Financial Satisfaction Survey”. It’s free and can be very reveling. Go to the website below and download the survey or call 800-347-1340 and it will be mailed to you. There is one survey for those who are retired and a different one for those not yet retired. http://www.chamberlainfp.com/pdf/fp_security_survey_retire.pdf

Michael Chamberlain CFP®
CA Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340

This article is for informational purposes and should not be taken as legal, tax or investment advice.

NAPFA Presentations are Free and Worthwhile

By admin  |  2009/11/25 12:14 Posted in Estate planning, Financial planning, Investing, Retirement planning  |  Comments (0)

There is a free offer that everyone should know about. The National Association of Personal Financial Advisors is providing free monthly educational presentations about personal finance to the public.

“The Basics of Investments” is the next presentation and will be on December 4th from 10 to 11 am. Most people have read about stocks and bonds or have heard people talk about them but this is the opportunity to get the basics about what they are, how they operate, risks associated with each and what might be appropriate for you.

Future topics include:

  • Advanced investment concepts – January 8, 2010
  • Managing your 401(k) – February 5, 2010
  • Leaving a legacy – March 5, 2010
  • Women and money – April 2, 2010
  • Financial planning and small business owners – May 6, 2010
  • Your retirement- June 4, 2010
  • Financial windfalls – July 1, 2010

The presentations are in the “webinar” form. This involves watching a presentation on the computer while listening to the presentation on the telephone. Each monthly session is one hour in length and contains a formal 40-minute presentation and 20-minute Q&A opportunity. To register for the meeting log on to the NAPFA web site at http://www.napfa.org/ then click on the “Consumer Webinar” logo on the right. It is as easy as that.

The Consumer Webinar Series is designed to help consumers across the country better understand personal financial matters. Each session will be led by a NAPFA-Registered Financial Advisor who commits to the highest of standards in the financial planning industry. Many of the instructors are authors, educators and leaders in the industry. The advisers will bring their knowledge and experience to the seminars.

The Consumer Webinar Series sessions are FREE and held monthly. Each is web-based to make “attending” easy no matter if you live in Boston or Los Angeles. Each session is held live but are also recorded and available in the Archived Sessions section on the NAPFA website. The public is encouraged to register for the live sessions as there is an opportunity to ask any related financial questions you may have.

NAPFA is an organization of 1000 financial planners from around the country that work with clients to improve their financial lives by making better decisions and without selling investments or insurance.

Michael Chamberlain CFP®
Ca Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340

This article is for informational purposes and should not be taken as legal, tax or investment advice.

10 Tips About Buying Annuities

By admin  |  2009/11/18 10:05 Posted in Financial planning, Investing, Retirement planning  |  Comments (0)

What are Banks, Broker Dealers and local friendly insurance salesman selling to retirees and those near retirement? The answer is Annuities.

The stock market has plummeted and people are worried about losing more. Insurance salesman (could be in a bank, or at a broker dealer) can take advantage of that fear and use it to sell the apparent benefits of an annuity.

An annuity is a contact from an insurance company to pay back the principle with interest. However the devil is in the details. Remember, if it sounds too good to be true, it probably is. Before you buy an annuity think about these tips!

1. Always know what the interest rate will be for the entire duration of the surrender period. Do not buy one where you know the first year rate and the following years are left to the discretion of the company.

2. In a low interest rate environment (such as what we have now) it is not wise to purchase an annuity with a long lock on the rate. When interest rates rise, you are locked in to the low sub market rate.

3. The preferable time to purchase an annuity is in a high interest rate market. If rates fall in the future you locked in the higher rate.

4. Get annuity quotes from 3 separate sales people. The reason is that some annuities have high commission that hurt the client either with long surrender periods or reduced interest. Some salesman are more motivated by the higher commission than doing what is best for the client. By talking to 3 different salesmen you are more likely to be offered a better contract.

5. Index Linked Annuities are very complex. New rules are being put into place to create more regulation for their sale. These are sold primarily because the agents make bigger commissions than fixed annuities.

6. Be very skeptical of an annuity salesman who recommends an annuity as a means to access Medicaid if a nursing home may be needed. There have been changes in the law in this area and further change can occur.

7. Depending on the age of the client (and other factors), make sure there is no surrender charges should the funds be needed for a nursing home.

8. Avoid those annuities that have a “bonus up front”. They either have long surrender periods, lower interest in later years or limit how much you can withdraw.

9. Be sure to specify the correct beneficiaries. Should you pass away you need to be certain to whom the money will pass. This should include both primary and secondary beneficiaries.

10. It goes with out saying that you want a highly rated company. The best list of all the rating services of all the companies is The Insurance Forum that publishes a list each year and is available for a small fee. http://www.theinsuranceforum.com/pages/ratings.html

Keep in mind that big companies like AIG and The Hartford got Government bailout money so how safe is the annuity?

If you are thinking of an annuity, talk to an expert that is not trying to sell you one.

Michael Chamberlain CFP®
CA Registered Investment Advisor

Send your questions to mike@chamberlainfp.com or call 800-347-1340

This article is for informational purposes and should not be taken as legal, tax or investment advice