‘Punching Out’ for the Last Time

Ray’s take: According to AARP, baby boomers are turning 65 at the rate of 10,000 per day. That means a lot of people are looking at the traditional retirement age coming up fast. Whenever you plan to not have to work anymore, there are some basic financial decisions you should make as you near that age.

The first thing to do is to take a look at your budget. In order to know your future cash flow needs, you need to know what they are currently. Don’t assume that number will be lower during retirement.

Looking at the bottom line of your 401(k) or IRA statement won’t give you the detail you need in order to plan. An itemized monthly budget will give you a much better grasp of expenses compared to what you can realistically draw from those accounts on a monthly basis.

Look into health insurance. If you are retiring before age 65, you will need coverage until Medicare kicks in. And you could still need health insurance even after age 65 because Medicare does not cover everything. This is an expense to include in your retirement cash flow analysis.

If you feel that refinancing your home is a solid financial move to make, do it before you retire. It’s much harder to refinance later. Creditors might be hesitant to provide loans to those who are living on retirement funds.

Make a decision about when you will begin drawing Social Security benefits. Smart use of funds from your retirement accounts can be one way to comfortably postpone the start of Social Security benefits. The longer you wait, the higher the amount you will receive. Further, the base upon which cost-of-living increases start matters a lot, particularly if you live longer than statistical life expectancy.

These are just a few of the things you need to consider before you make the transition from working to retirement. A financial planner or tax professional can assist you with making the best decisions for your future.

Dana’s take: Retirement is the rainbow at the end of long years of working and saving. But is there a pot of gold there? And how can we add to that pot of gold now? Which discretionary expenses can we cut at 40, 50 and 60 to help us live more comfortably in retirement?

I’ve been curious about the tiny house movement lately. If we only had one closet, imagine all the shopping we couldn’t do for shoes, clothes and home supplies. With all the big backyards in Memphis, could renting some of that land for a tiny house provide an income stream? Or for middle-aged renters, might a tiny house save on living expenses?

Think creatively now to fund your retirement dreams for tomorrow.

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Changing For The Better

Ray’s Take Nobody cares more about your financial well-being than you do. The good news is that handling your money is a learned behavior. The bad news is that you might be making some financial decisions that are not moving you towards your goals.

Change starts with a choice. But change can be one of the hardest things we do in life.

As you start your financial plan, have an end in mind. What are the overall goals you hope to achieve with your plan? What is the time line? What will it take to get there? This may mean downsizing, less outings with friends and family, no more vacations until debt is paid off or a savings goal is reached.

Create a budget. I have never seen a successful plan without one. Review and revise it regularly in order to accommodate any changes in your lifestyle. Look at your goals often to ensure you are on track. It pays to be consistent. Starting small is OK. Just start. The changes will build over time.

Pay yourself first (PYF). We may have heard the advice, but it’s worth repeating. Instead of saying you will save whatever is left at the end of the month, pay yourself before it gets eaten up and there’s nothing left to save. An emergency savings account can do more than pay unexpected expenses. It can give you peace of mind.

Create a retirement plan. Having a plan is critical because it typically takes many years to accumulate the necessary funds to live comfortably when you no longer have the advantages of a salary. Some investors make the mistake of only planning to have enough funds to last until the average life expectancy, instead of being careful and planning to live beyond that.

Creating goals, making a plan and putting the brakes on spending behaviors that don’t advance your goals will lead to a future that is bright.

Dana’s Take When you hear stories about friends or relatives who’ve had to downsize their homes or take a second job, the assumption is that they were living beyond their means.

But that’s not always the case. Even if you think you’ve done everything right, sometimes juggling your bills, living within your means and having enough to put toward financial goals can feel like a pipe dream.

There’s no one size fits all solution when it comes to figuring out what type of lifestyle change to implement to help get your financial life on track.

Some people may find ways to boost their income. Others may cut costs to the bone. In either case, the goal is the same: Improve your household’s cash flow, so you’re doing more than just treading water.

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Rise of The Telecommuter

Ray’s Take: Telecommuting is on the rise and, for many people, being able to work at home gives them the best of both worlds. They have the job security and income of a regular full-time job, without the time, expense and hassle of going to an office.

The trend is likely here to stay. According to Global Workplace Analytics, 80 percent of employees consider the ability to telecommute a workplace perk.

Aside from being the envy of your office-bound friends, what impact could it have on your personal finances? First, you save on time, gas, and wear and tear on your vehicle since there is no daily drive to an office. If you work from home, you no longer have to maintain a professional wardrobe – which often has to be dry-cleaned.

Additionally, you will probably save money you previously spent on eating out and possibly the vending machine. Working from home can also expand your employment opportunities and possibly land you a job at a higher pay rate with a company located in another state that is open to telecommuting employees.

Finally, you can take a tax deduction for your home office space if you telecommute. Just make sure you understand the rules, and how they work, before you start taking the deduction.

According to an article on Salary.com, a telecommuter can have an average savings of $4,172 per year based on tangible numbers from these perks of telecommuting. That’s money that can go into your retirement accounts or be saved for emergencies.

A workplace provides social benefits that are more difficult to quantify, as well as a structure that helps many individuals. But make no mistake; this trend is likely to expand to a home near you.

Dana’s Take: Telecommuting is a great way to be able to spend more time with your children – for both women and men. Most telecommute jobs have some flexibility built in, and you can take advantage of this perk to attend daytime school functions that you might have missed or struggled to attend in the past.

Stress reduction is another benefit. Since you are no longer battling traffic on the way to the office, you arrive at your job in a much more relaxed state of mind, which will lead to greater productivity.

And the flexibility can make it much easier to take time to handle things like taking the car in for an oil change or routine maintenance. Things that had to be handled before or after your office hours when you were going into an office every day. More stress relief!

Some of the benefits of telecommuting are counted in nonmonetary gains that make your life better in other ways.

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The Power Of Money

Ray’s Take We talk a lot in this column about how to handle your money. Your choices really do matter. We didn’t make the rules. But sometimes it’s important to remember limitations as well.

So, what can money do for us? And how about what it can’t do for us?

It can buy us health care, but not good health. It can buy us things, but not happiness. It can buy us the opportunity for a good education, but it can’t make us go to class. It can purchase leisure time, but not wholesome, genuine relationships to fill that leisure time. It can help you create visions that will live on after you, but not more time. It can buy you power over other people and property, but not the ability to be a communicator, leader and steward.

According to the Wall Street Journal article, “Can Money Buy You Happiness,” new research is suggesting that happiness is determined not by how much money one earns, but rather, how one spends it. Once our basic needs are met, having more money will not make us exponentially happier.

According to the book “The Paradox of Generosity,” there is a strong and highly consistent association between generous practices and various measures of personal well-being like happiness, health, a sense of purpose in life and personal growth.

Money can purchase options rather than happiness. You can then use that money to do things that can make you happy.

Being happy, healthy and educated are the true currencies of a good life. And all of them are in your control. Never underestimate the importance of money and what it can do, but make it your servant rather than your master.

Dana’s Take One of the hardest lessons I still haven’t learned as a parent is that spending more money on our kids doesn’t make them better people, more appreciative or more loving. In fact, the relationship is probably inverse between money spent on kids and their characters.

Spending more also creates materialistic young people who demand more things and more expensive brands each year. A 10-year-old used to get a cap gun for a birthday present. Today, an iPhone, iPad or gaming system would be on that child’s birthday list plus some designer sneakers or clothing. What are we doing?

Although we have spent a fortune on gadgets for our teenage son, the happiest I have seen him lately was when he discovered an old rope swing while exploring through a forest.

Don’t make our mistakes. Provide your child with nature, bugs, mud and sticks and you will see more smiles, hugs and kindness than you can buy in any electronics department.

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Spending Every Dime – Is It Feasible?

Ray’s Take In the good old days, when you retired you got a gold watch and a pension and didn’t worry about much else.

Investment management was somebody else’s problem. You watched the sunset, not CNBC. This gave way to more recent retirement planning where you worked 30 or 40 years, saving along the way and when you got to 67 (or older) you quit, and lived on your Social Security and 401(k) savings and sometimes some part-time work. If you did it “right” you withdrew a set percentage of the funds and lived comfortably until age 85, as long as you didn’t hit some kind of devastatingly expensive health event.

But what if you don’t want to leave anything when you’re gone? It would save a lot of estate planning, probate and who gets what in inheritance.

How do you balance enjoying your retirement, spending down your money with being careful in case of catastrophic illness or another, unforeseen, financial issue that could decimate your funds? How about inflation? What if you’ve spent your last dime and are still breathing? A lot of things can go wrong.

And what if, at some point later down the line, you change your mind and want to leave money to your loved ones or a particular charitable group? You’ve lost the time to create something big.

It’s a nice dream to think we can play the odds so close that we will be able to live fully in retirement and leave this world owing nothing and having nothing left.

But, life is far too unpredictable in general not to have a plan in place and try to calculate as many of the odds as you can so that you don’t end up old and broke. As Tennessee Williams said, “You can be young without money, but you can’t be old without it”.

Dana’s Take Now that the inconveniences of aging are coming into focus for me, I can see how having a comfortable income stream might help cushion the strains and losses of advanced years.

Unfortunately, the time when we need to take action and begin saving money – immediately after college – is when we are enjoying the bloom of youth. The aged seem to be a different species and one that we cannot imagine becoming. It’s difficult to start dedicating significant resources every paycheck to something we’re not ready to become: a senior citizen.

When we are young and healthy, we go to the doctor for physicals and shots, even though it may hurt. Perhaps young adults may be helped by retaining the services of a trusted financial adviser to set a plan in place to ensure fiscal health across the years, even though it may hurt a little to get started.

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Pre-Planning For The End

Pre-planning your funeral may well be the most important and considerate gift you leave your family.

When you plan in advance, there is time to contemplate decisions such as what type of service you would like – traditional or unique and related to the life you have led. You also limit costs when you plan in advance, limiting the trauma and “upsell” risk to your family. When you plan in advance, you decide the priorities.

Pre-planned does not necessarily mean pre-paid. It just means you’ve thought through all of the options in a careful, analytical fashion and written it down in a way your family will understand and respect. It’s important to remember that the budget you work out as you are planning your funeral today will need to be adjusted for inflation. Some funeral homes do offer a guaranteed price plan, but there may still be unforeseen costs down the road. Try to build in a cushion to handle inflation or unforeseen costs.

Once you have made your decisions, you can look into payment. There are several options for this including savings and life insurance, funeral insurance, pay on death accounts and pre-payment. If you choose the pre-pay route, be aware that there are a number of consumer advocacy groups that feel it is inadvisable to pre-pay.

Allow someone else to be involved in the process so that in the event of your death, everyone knows that arrangements have been made.

Funeral pre-planning is a practice that is becoming more common and appreciated. By making these decisions ahead of time, you are taking the pressure off your loved ones in a time grief and giving them one last gift.

Dana’s Take

Do you remember making mix tapes? Or maybe you still make them, but use your iPod or other smart device to store your music mix these days.

When planning for your funeral, the mix of music you choose can really set the tone for how you want friends and family to remember you. There’s a Trisha Yearwood song called “The Song Remembers When” that I think really speaks to this subject. I think we’ve all experienced that sense of deja vu when a particular song comes on the radio, and, for a split second, we’re back somewhere in time.

While a funeral is far from a joyous occasion, think about choosing music that brings back happy memories of good times and good friends. Choose songs from across your whole life to bring back the most memories. It’s a good way to let those who care for you smile amidst the tears.

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Life Events and Your Financial Plan

Ray’s take: The Greek philosopher Heraclitus said, “Nothing endures but change.”

When it comes to creating a financial plan, there’s always room for change. There are major events that occur in life that will require a review of, and revision to, your existing financial plan.

If you have gotten married since you created your original financial plan, it’s a good idea to update your beneficiary list to include your spouse. If you haven’t built a financial plan yet, you should know that in some cases your spouse and children wouldn’t automatically inherit your funds, so be sure to put your plan together as soon as possible.

What about the flip side of marriage? If you’ve gotten a divorce, you need to adjust your financial plan to reflect new beneficiaries.

When children come along or get older, this is another significant time to take a look at your estate plan. Add them and then, as they get older, make changes to reflect their level of maturity regarding inheriting. Guardians and trustees may make sense at one point but not a few years later.

Nothing is certain but death and taxes – your own death, or the death of someone you have named as a beneficiary or given power of attorney. Re-evaluate your plan and make appropriate changes as soon as possible if someone named in your plan passes away.

You should review your plan on a regular basis to make sure your wishes are clearly mapped out in case of your own death. Be sure to also check the beneficiary forms on your retirement assets and change them appropriately. Know the difference between a will, a living will and a revocable living trust and apply them to your plan with the help of a financial expert.

A well-thought-out, and regularly reviewed, financial plan can make for easier transition of your estate and retirement accounts.

Dana’s take: Life change is certainly a constant. We can plan for some changes, like having a baby or sending a child to college. But sometimes life hands us a surprise and knocks us for a loop.

Since change involves loss, transitioning can entail a period of grieving and possibly depression.

If you’re having trouble adapting to new circumstances, it may be helpful to talk it through with a therapist. Your counselor can help you honor what once was and make room for new possibilities and hope.

Support groups for grieving, loss and divorce can also be an effective and affordable way to feel understood while adapting to change. A support group may also provide a new circle of friends for a new way of life.

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Building Blocks of Estate Planning

Ray’s take: Estate planning is one of the most important steps any person can take to ensure their final property and health care wishes are honored when the time comes. You may not be able to take it with you, but you can have a say about where it goes.

If you don’t have a plan, your state has one for you – and it’s probably not one you will like.

The first step in an estate plan should be a will or living trust or possibly both. A will is the document by which you make your wishes known and utilizes the probate process. Some things must go through probate. However, jointly owned property and assets for which a beneficiary are named do not go through probate. Be aware of the names listed on these. Beneficiary designations trump wills every time.

You also should have a living will that documents how you want your health to be treated in the instance that you cannot make decisions for yourself.

Another basic item in estate planning is a durable power of attorney for property matters. This appoints someone to handle your assets before your death but when you cannot. There is also a power of attorney for health care. It can be the same person, but make sure it is someone you trust to carry out your expressed wishes and has a cool head when things are chaotic.

Another item to consider is life insurance. In the event of an untimely death, life insurance can replace lost earnings, which can be especially beneficial for younger individuals.

These are just the basic building blocks of an estate plan. The most important part is meeting with an estate planning attorney. This is not something to entrust to the Internet.

Dana’s take: As a parent of minor children, I feel that the importance of estate planning cannot be stressed enough. You may think you always have time, but none of us know how long we will be here.

Choosing someone to be the guardian of your children in case of your sudden death is one of the most important decisions you can make. Placing the future of you children in the hands of the wrong person, or a person chosen by the state if you fail to make your choice known, can result in additional heartache for your children.

None of us want to think we won’t be the ones to raise our children, but for their sake, you should imagine the worst and make the best plan for them.

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Timing the Market

Ray’s take: I once had a client tell me that all she wanted me to do was have her in the market while it went up, and get her out of it before it went down. Sounds great! The only problem is that an honest person can’t do that on a consistent basis.

As we enter the seventh year of an extraordinary bull market, those that have participated in the rise are starting to get worried about the inevitable next bear market. But they are afraid of missing more upside to the current bull market phase.

By 1987, I had been managing money professionally for five years. I was trained to never try to “time” the market when an obscure analyst named Elaine Garzarelli went on “Money Line” predicting an eminent crash advising all within the sound of her voice to get out.

A few weeks later the market fell 22.61 percent in one day. She gave credibility to timing. Unfortunately, for those who followed her predictions for the next decade, she only got it right five out of 13 times – 38 percent.

For some, it’s starting to feel like a game of chicken, but only if you believe that “timing” is possible on a consistent basis. I don’t believe that it is. This begs the question of what professional money management can be expected to do. The answer is a great deal, but that is a topic for another column. In the meantime, remember that investors’ biggest enemies are fear and greed. You should never take on more risk than necessary to achieve your goals. If you enjoy risk for fun, go to Tunica – at least you get dinner and a show.

Dana’s take: During the last six years encompassing the current bull market, many of our children have reached an age where they develop an understanding of and begin to demonstrate financial skills. They’ve only seem the upside of finances and markets.

So how do we teach them about the downside when they have never experienced it?

Ultimately, times of scarce money can be a blessing. Ask someone who grew up with no air conditioning, no car and limited cash and they will tell you about growing a garden, walking to the store and picking up small jobs to bring in money. In other words, they will tell you about becoming self-sufficient at a young age.

Maybe the market will bless our kids with some tougher times in the coming decade and we can see how they either learn to tighten their belts or create new streams of income. What a gift that would be.

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Things or Experiences: Which Mean More?

Ray’s take: We talk a lot about budgets in financial planning, but less often about the type of spending we should do. Finances, like so much in life, are personal.

Some prefer to spend money on things. A newer, bigger TV. A nicer house or car. These things are items that should take some thought before buying. But what about impulse buying? Does that make us happy in the long term? For some the answer is yes.

Would spending that money on experiences be better? Memories last a lot longer than things. But even with experiences, prices may vary. A month in Europe is much more expensive than a week at a local beach. Is a vacation with the whole family a better way to spend money?

A January 2013 Cornell study found that talking about an experience allows you to relive it, which makes you enjoy the experience even more. The study found that the same is not true about material goods.

According to a May 21, 2010, Psychology Today article, “If you spend your money on experiences, you can increase your happiness. There are two key ground rules, though. First, stay within your budget. Spending more money than you have creates stress and lowers happiness. Second, don't blow all of your money on one great event. You are better off sitting in the cheap seats for a number of sporting events than sitting courtside at one.”

The truth is, either of these could make us happy depending on our individual personalities, situations and needs. There are times when you will want or need to buy things. A college education is a thing that can bring both great memories and a higher income in the future.

Spending (and saving) money is a personal decision. But having the conversation about what you are spending your money on can result in better decisions and a greater level of happiness.

Dana’s take: Whether on things or experiences, our family seems to be in a summer spending free fall. Too much money is going out for camps, trips, cool clothes and teen gas runs, and not enough is being earned with summer work.

A family friend established a summer policy that if his teens didn’t get a job, he would not provide their air conditioning during the day. Sitting outside in the Memphis heat provided a powerful incentive to find employment.

Summer activities provide great times and memories and we’ll keep struggling to balance that with appreciating and participating in the costs.

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Managing an Inherited IRA

Ray’s take: I remember when the original law went into effect creating IRAs. It was a short read. Now it’s a monster with more options, opportunities, and risks than anyone ever imagined. Here are a few of the most common mistakes made with inherited IRAs:

• Not Taking Required Minimum Distributions (RMDs): A person who opens a traditional IRA is required to start taking distributions at age 70 1/2. But when you inherit an IRA, you’re also subject to RMD rules. If you don’t take them, you’ll face IRS penalties and if you inherit an IRA from someone who wasn’t taking RMDs and should have been, the IRS will come after you for part of the value of the account.

• Not Taking a Spousal Roll-Over: This applies to surviving spouses over age 59 1/2, since anyone younger than that will face a 10 percent early withdrawal fee. When you inherit an IRA from your spouse, you have a special option to roll over the IRA that isn’t available to non-spousal beneficiaries. As a surviving spouse, you can roll the inherited IRA into your own IRA and not take RMDs until the date your late spouse would have been required to take distributions. Using this option allows you to preserve the tax-sheltered gains of the inherited account.

• Not Utilizing the “Stretch Out” Option: There’s a move called the “stretch out” that helps beneficiaries make an inherited IRA last longer. Heirs often choose to take the IRA money in a lump sum and spend it. This causes a large tax bill on the entire distribution rather than a smaller one over time using smaller distributions.

• Not Renaming the IRA: Non-spousal heirs who inherit IRAs should take special care in renaming the inherited account. It seems unimportant, but the name you choose can make a very big difference in the taxes on the account. You should name the account according to the following formula: “Name of Benefactor, Deceased, Inherited IRA for the Benefit of Your Name, Beneficiary.”

Consulting a financial expert or tax specialist can help you to understand requirements and make the best decisions for your own future.

Dana’s take: The death of a loved one is very hard to take in at any time in life but especially so for children, even adult children.

And it can be a nightmare for the average person to figure out implications of an inherited IRA, especially if there are multiple children as beneficiaries and making sure your forms and your will have the same beneficiaries.

Leaving clear instructions and educating yourself and your children about finances and inheritances will help to lessen some future issues.

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Deadlines Everyone Should Know

Ray’s Take: Deadlines are good for the soul. It’s always important to keep track of significant ones in life. At 16, we can drive, and at 18, we can vote. Your taxes are due on April 15. But what about other significant deadlines that may not be as familiar?

Here are some that can impact your retirement planning:

Age 50 – You can now “catch up” on contributions to tax-advantaged accounts like employer-sponsored 401(k)s and also IRAs.

Age 59 1/2 – You can now make withdrawals from retirement accounts without paying an early withdrawal fee. However, you may still owe regular income tax on the distributions.

Age 62 – the minimum age at which you can choose to begin receiving benefits from Social Security. But keep in mind that for each year you postpone taking this benefit (until age 70), your monthly check will be larger and the cost of living compounds on a larger base.

Age 65 – the age at which most Americans are eligible for Medicare. But Medicare comes in several segments – parts A, B, C and D – and the rules for signing up and receiving benefits through each one are complex.

Age 66 and Age 67 – If you were born between 1943 and 1954, age 66 is your "full retirement age" for Social Security. Your "full retirement age" is the age at which you may first become entitled to full or unreduced retirement benefits. For those born after 1954, the age for “full retirement” increases incrementally until it reaches 67 for those born after 1960.

Age 70 – The age at which you can receive the highest dollar amount of Social Security benefits.

Age 70 1/2 – When you reach age 70 1/2, you must begin taking required minimum distributions from traditional retirement plans. The amounts are calculated as a percentage of your account balances and are based on your life expectancy. If you don't take the full amount of these distributions within the required time frame, you'll incur an additional tax of 50 percent of the difference between what you received and the required amount you should have withdrawn.

A good financial planner can help you to create the best plan for you that will incorporate all the age requirements.

Dana’s Take: When we first had children, Ray and I were told again and again, “They grow up so fast!” How true that is. It’s also true of the parents. Because we are marrying and starting families so much later in life, those retirement-age deadlines arrive just when the kids head out of the house.

That’s a great reason to start funding a retirement plan while still young and single. Don’t wait to settle down or those precious decades of compounding interest could be lost forever.

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Gift It or Will It?

Ray’s take: Is it better to give now or leave items in your will to beneficiaries? This depends on your own plans, but here are some things to consider.

You can currently make annual tax-free gifts of up to $14,000 per recipient. If you are married, you and your spouse together can give $28,000 per recipient per year. You can either give $14,000 each, or one spouse can make a $28,000 gift with the consent of the other spouse on a timely filed gift tax return. You can also give an unlimited amount for tuition and medical expenses, if you make the gifts directly to the educational organization or health care provider.

The gift exemption is not limited to cash. If you want to gift some land, stocks, bonds, artwork, etc., you can do so using the gift exemption. It’s a good idea to get appraisals on any non-cash gifts and document them in case there are any questions later.

A tax drawback of giving today is that when you give away an appreciated asset, it keeps your original cost basis. If, on the other hand, you don't give it away and it stays in your estate, the asset may receive a step up in basis as of the date of your death.

Though it may seem merely like a matter of preference, there are both financial and emotional pros and cons to early inheritances.

Make sure your own future is secure before you give to others. Wanting to help your loved ones is natural. But unless your own retirement is well-funded and planned, giving a gift now means you may come up short later on – which helps neither you nor your beneficiaries.

Like most financial choices, giving an early inheritance isn't always the right move. If it's on your mind, it's important to consult a financial professional to help you decide which option can best help you provide for your loved ones without compromising your own financial health.

Dana’s take: Giving to others is one of life’s greatest joys. Sometimes the ones we give to already have so much that our gift doesn’t have the impact we would like. Giving time or money to those who have very little can provide a great reward.

Rather than giving money to a grandchild, consider taking the child or teen with you on a mission trip to another country. It’s a gift of travel and cultural exchange and also the gift of helping others. It could be life-changing for both of you.

Look around for a cause that interests you. Opportunities abound in Memphis to give time, love and money. From Streets Ministries to Binghampton community projects and building projects to revitalize Frayser, your gifts can make a difference.

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Heirloom Jewelry and Your Heirs

Ray's take: One of the most contentious issues when distributing an estate can be the division of heirlooms. It would help to know which family heirloom holds special meaning to which heir. An item that you think is the most important may not be the most important to others.

Talking with your heirs to determine who should receive each piece, and why they want that particular piece, can avoid a lot of heartache, squabbling and an outright break between family members.

Get everything appraised so that you know the monetary value of the items you have. Then consider sentimental value and your own desires and the desires of your heirs regarding the pieces. Then determine how you want to disperse the items.

If one heir wants a particular piece, a possible solution is to make an equal trade within the overall estate. Reduce the monetary amount received by the value of the piece for that particular heir. This can assist in reducing feelings that one heir “got more” than others.

Another possible approach is to treat all of the jewelry as strictly sentimental with specific recipients and no value to the rest of the estate when determining who will inherit. You can use the appraisals to try and make each heir “equivalent” in what they receive.

Regardless of the way in which you choose to disperse these family heirlooms, the goal of estate planning is two-fold. First, you must protect yourself and ensure you have the means to live comfortably. The second goal is to see that your assets are distributed according to your wishes after your passing.

With a little planning and some conversations with those you love, it is possible to achieve both goals.

Dana's take: We have a classic jewelry conundrum, three family engagement rings but only two children. The three rings are very different, so it’s not an even-steven situation. Our teens don’t care a lot about it now, but will they later? Can we count on a decision they make today being what they will want two decades from now? These are emotional, not rational questions and that’s why they can lead to generations of hurt feelings.

Don’t let a piece of jewelry become an emotional time bomb that detonates after you are gone. Start the conversation today. If feelings are sensitive, bring in a Certified Marriage and Family Therapist or your Certified Financial Planner.

When holding on causes harm, maybe it’s best to sell the assets and plan a family trip instead.

Ultimately, family memories are held in our hearts and minds and not in an heirloom.


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How Deflation Impacts Your Portfolio

Ray’s take: Last month, we talked about inflation and how it can impact financial planning. This month, we’re taking a look at inflation’s opposite – deflation – and how that can impact your planning.

Investopedia defines deflation as “a general decline in prices, often caused by a reduction in the supply of money or credit.”

A decline in prices sounds like a good thing, right? But, in this case, it’s also accompanied by a reduction in the money supply or credit. So while lower prices sound good, often people don’t have the money to purchase the goods at lower prices. During a deflationary period demand for goods and services falls as individuals and businesses wait for lower prices

Now, let’s take a closer look at the impact on investments. Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. Deflation is not pretty, and deflationary effect will be seen in consumer decisions small and large.

Equity prices begin to decline as people sell off their investments, which are no longer offering good returns, and bonds temporarily become more attractive. Were sustained deflation to take hold, it would make government bonds and cash more attractive than equities, property and corporate bonds for investors.

This can make a big impact on your portfolio.

A period of short deflation can be beneficial to stocks, but a prolonged deflation can tank them.

There are not very many Americans still living who remember deflation. The last time a deflation took place in the United States was during the 1930s and it was World War II that really got us out of it. Do I think it’s coming? Probably not. However, it’s always a good idea to review all scenarios when creating a financial plan to be more confident that you are prepared as much as possible for multiple scenarios.

A financial planner can assist you with making decision relating to how your asset allocation should look based on your own plans for the future.

Dana’s take: To help your children understand deflation and the impact of the Great Depression on families, check out the movie “Kit Kittredge: An American Girl.” It’s a good reminder of all the things we take for granted, like a job, house, food and clothing. The movie provides a nudge to families to maintain an attitude of gratitude for our many blessings.

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Financial Information in the Digital Age

Ray's take: As we spend more of our lives online – paying bills, collecting credit card rewards points, shopping, creating photo albums, emailing – it's increasingly important to consider how beneficiaries can access those accounts and any assets they hold, once we're gone.

In its 2013 annual Wealth and Worth study, U.S. Trust said 45 percent of the high-net-worth people it polled had not organized passwords and account information for their digital lives in a place where heirs or an executor would find them.

In the past, “organized” people put together a written or typed list of bank accounts, insurance policies, retirement accounts and other financial information and placed it in a safety deposit box. They told their executor where the box was and where they hid the key, so that upon their death, the heirs could find everything easily.

But now, with so much information strictly online, that’s not always easy to do.

One problem lies with changing passwords. With the recent strong focus on cybersecurity, it becomes more important than ever to do everything in our power to prevent identity theft and changing passwords frequently is one key factor. Another is using answers to specific questions in addition to passwords to gain access to online accounts. But keeping ourselves and our accounts protected means that it’s difficult to put together a list of passwords and security question answers that stays accurate.

Make it a point to update the list each time you change a password or add a new account. Additionally, make sure to include combinations to any safes and location of safety deposit box keys. This may seem like a burden, but in the long run it will make things a little easier for your heirs.

Dana's take: Most of the time, Ray and I are struggling to keep one step ahead of our teens by constantly changing our passwords on smart devices and accounts.

It takes both of us just to remember the latest versions. If something were to happen to us, however, we would want our children to have access to our computers and account information.

One place to start is with your Certified Financial Planner or estate planning attorney. They can advise you about best practices. It’s tempting to mail or email updated passwords to a trusted family member or friend. But consider that your passwords may provide open access to your bank and investment accounts. At least your professional advisers have laws and ethics governing their access to accounts.

In the meantime, wish us luck on dreaming up new passwords that our kids haven’t cracked.

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Planning for Those With Special Needs

Ray’s take: Sometimes life throws us a curve in the form of a child with special needs. And when that happens, the best gift we can give them, beyond our love and care, is a future securely planned to meet their individual needs.

It’s so difficult to imagine someone stepping up to the challenges involved that parents ignore the possibility altogether. Understandable, but that just makes the possibility worse. There are many considerations to take into account. Here are a few to think about.

Learn about all the avenues of help available. A special needs child can receive benefits from Medicaid, Medicare, the State Children's Health Insurance Program (SCHIP) or the Children with Special Health Care Needs (CSHCN) provision of the Social Security Act.

Most parents plan to leave assets directly to their children, but with a special needs child, that is a very bad idea. Assets in excess of $2,000 distributed directly to a person with disabilities will impact their eligibility to receive government benefits.

Maintaining eligibility for government benefits is important, so you should make sure that you structure asset distributions so that these benefits will not be eliminated. One common way to do this is through a special needs trust.

Who will take care of your child if you cannot? Will siblings be able to step in, or is another solution better? One possible solution is a guardianship or conservatorship. These grant a designated adult legal power to make decisions for another person who is considered unable to make decisions on their own. Additionally, parents don't remain legal guardians of their special needs children once they reach the age of legal adulthood. They must apply through the courts to be legal guardians of their adult children.

An attorney who specializes in special needs issues can assist you with detailed information when planning for a special needs child.

Dana’s take: It’s incredibly tough to have a child with special needs. It can be a drain on you emotionally and physically in addition to creating a whole new list of financial decisions. You have to rethink all the plans you made before the diagnosis and learn new ways of handling childcare. Your dreams for your child, by necessity, must change.

This doesn’t mean your child will not have a quality life. Reach out to support groups to help you and your extended family process the steps of accepting and dealing with the situation. Start with online organizations and identify local groups and resources.

Individual and family therapy can also help with the grieving process of adapting to a new normal.


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Multigenerational IRAs and Estate Planning

Ray's take: A multigenerational IRA is an individual retirement arrangement that works well not only to first-generation beneficiaries upon your death, but also to subsequent heirs who follow the original beneficiaries. These are also sometimes called a “stretch IRA.”

A stretch IRA is a traditional IRA that passes from you to a younger beneficiary at the time of your death. Since the younger beneficiary has a longer life expectancy than you, he or she will be able to “stretch” the life of the IRA by receiving smaller required minimum distributions each year over his or her life span. More money can then remain in the IRA with the potential for continued tax-deferred growth.

This is a tool that can be used to grow wealth by further deferring taxes. If you have a qualified plan that you don’t anticipate needing for your own retirement, this might be a good choice for you. With standard retirement planning, much of the money could be lost in accelerated income and possibly even estate taxes. None of us ever know exactly when we’ll “make the switch,” but this at least can offer an opportunity. Keep in mind though, that creating a stretch IRA has no effect on your own minimum distribution requirements during your lifetime.

Some important points to keep in mind are that the beneficiaries have to make sure that they receive the required minimum distributions each year (based on their own life expectancy) and that the beneficiary will still owe income tax on the money received.

Because there are many complicated laws involved – both governing IRAs and taxes – it’s extremely important to work with a professional financial planner and a tax expert to make sure you understand all of the implications of using this tool.

Dana's take: It’s always a good idea for kids to learn about finances as early as possible to build their own understanding for their lives and it’s good for them to have some “skin in the game” when it comes to paying their own way.

But taking care of our children and grandchildren is something we all want to do. This type of tool is something that can assist with that.

It’s best to keep it even-steven with your children, but if they choose, they can renounce their own part of the inheritance in favor of their own children in the future.

By making money available, you can assist in getting the next generations started on their independent lives by providing them with a steady stream of income that they can rely on regardless of what else may be going on in the economy.

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Inflation and Your Plan for the Future

Ray’s take: Inflation is one of the financial facts of life. You cannot control it, and you do not know what it will be in the future. Inflation is a silent thief.

You must take inflation into account when planning for future expenses, particularly for retirement. Maintaining the financial lifestyle you desire in your retirement years is dependent on how much you have accumulated by the time you retire, how fast you spend those funds during retirement and what those funds can buy going forward.

Inflation rates have been low recently, but there are no assurances the low rates will continue into the future.

When creating and updating your financial plan, you should be aware of the long-term rate of inflation and factor in a realistic inflation rate to get numbers that are closer to reality. The inflation rate is probably more likely to rise over the next several decades than it is to fall, and in addition, some of your costs, such as health care, may increase faster than the overall inflation rate as you age.

Inflation will probably always be with us; it’s been an economic fact of life. You should understand the impact of inflation and structure your portfolio accordingly. Most retirees cannot afford to retire on fixed income only and need growth in their portfolio. Yes, there’s a risk your value will go down. But there’s another risk – going broke safely with too little growth.

There’s been talk of yet another risk in recent years: deflation. There aren’t many people still around that remember how bad it is, and we can’t rule out the possibility of a recurrence. But that’s a subject for another time.

Dana’s take: Inflation and its impact on our lives is something we all need to understand. Consider these examples: Parents today pay more for one year of college for their children than they did for all four years of their own college education. People in their 70s now pay more for a new car than they did for their first home.

If you’ve been grocery shopping, paid your utility bill,or paid your property taxes, you’ve probably noticed that these expenses cost more than last year. Prices of different products go up at different rates and at different times. Being aware of these changes can help you make decisions in the future.

Looking at it from that perspective really brings home how inflation and buying power changes over time.

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Estate Planning and Your Collectibles

Ray's take: We’ve all heard those stories about someone inheriting Great Aunt Matilda’s Avon bottle collection and having no idea what to do with it. But the collection meant something to Aunt Matilda. She could have planned differently for her collection and it might have found a home with someone (or somewhere) who loved it.

Money is fairly simple to divide up, but a collection can be a real headache. Like anything, it can be sold, passed on or given away. But since its value is harder to estimate than publicly traded securities, even that process gets complicated. And keep in mind that the Internal Revenue Service expects its share, too.

Whether your collection consists of Avon bottles or art by the masters, it’s essential to get a qualified appraisal ahead of time so you know what you are dealing with.

Once you’ve completed that, you should consider your options.

Sell it. If you know no one who would truly love to have the collection, you can sell it off in your lifetime, pay the tax on the gain, and allocate the money however you wish.

Pass it on. If you do have a family member that would love the collection, you can use the annual gift exclusion to begin passing along the items while reducing, or eliminating, the tax burden. Be sure to file a gift tax return even though no taxes are due, just in case of an audit later.

Give it away. Sometimes you can find a museum that would be interested in having your collection. Smaller museums may want money to help with your collection. If that is the case, then a trust might be a good option for you. One important reminder – the qualified charity must make a related use of the gift. If you donate your art collection to a hospital that sells it, you can only deduct your basis. But if you donate it to a museum that displays it, you can deduct the appraised value.

No matter how you choose to handle the disposition of your collectibles, a financial expert can advise of you various options available.

Dana's take: If you have something you collect, it represents you and your passions and memories; and a price is not easily put upon that. But inheriting fine collectibles, antiques and art sometimes brings out unattractive qualities in people, one being greed.

A sudden death or incapacitating illness may cause you to have missed the opportunity to ensure that your collectibles are distributed according to your wishes. It’s best to sit down with your family and discuss the collection. Are there specific things that certain people want? And what if more than one wants the same piece?

Knowing that it’s all been settled ahead of time can give you a deep sense of peace and dealing with these issues before you’re gone can save a lot of heartache in the future.

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Enjoy Now While You Build Your Future

Ray’s Take Invariably, one boring little word seems to be the answer to virtually every personal finance question you’ll face: save. Save, save and save some more. Frugality is the new black.

But, like many things, doing too much of any one thing while depriving yourself of others can make for a very dull life.

In our financial lives, we face the same predicament. How can we balance satisfying the desire to live well now with satisfying the desire to retire well – or at least avoid being old and broke?

Careful goal setting and thoughtful spending are keys. The clearer you are about what you want to do in the short and long term, the easier it is to make spending and saving choices that you’ll be happy with when you look back at them.

Personal finance isn’t just about building up emergency funds and maxing out retirement plan contributions. It also should be about balancing the moments.

Once you know how much money you will need for the future, you can calculate what kind of money you have left to spend now. This is, of course, the money you have left after covering your basic living expenses for today. If you have $100 extra month to splurge, then spend it – guilt free.

Over time, if you’re sticking to your goals and objectives, you should find that your quality of life – and the comfort factor of knowing you’ll have enough to retire – are in harmony with each other.

Live life to your own design. If you need to work a few years longer to enjoy some special things now, it may be worth it to you. Only you can make that call. Plan to live until the age of 100, but live like you won’t be here tomorrow.

Dana’s Take For an individual, hitting the right balance between saving and spending can be tricky. For couples, chasing that balance can lead to decades of conflict.

Money decisions can become so emotionally charged that neither member of the couple can hear the other or respond in a loving way. Nobody wins and the whole family suffers.

Try to remember if your parents fought about money. Looking back, do you wish they had sought help to sort out their different points of view?

When marital fights over money persist, it may be time to schedule an appointment with a Certified Financial Planner or a marriage and family therapist. Grievances may be vented and options explored in a cooler environment before trust and hearts are damaged beyond repair.

Money can’t buy happiness, but marital harmony regarding money can help.

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Making Sense Of the 1099 Alphabet

Ray’s Take: As the April 15 deadline for filing taxes approaches, we are all looking at the various forms we’ve received related to tax filing.

Many people receive one or more 1099 forms with various letters following the number. These can be confusing if you don’t know what they mean, and not all dollars reported on 1099s should show up on your 1040 form as taxable income. Whatever you were paid last year, if it wasn’t wages on your W-2, it’s likely to be on a Form 1099.

So, how do you know?

Some of the most common 1099 forms are:

1099-INT reports taxable interest, 1099-DIV reports taxable dividends and 1099-R reports retirement income – usually from an IRA or pension. Those are pretty easy to figure out based on the letters following the number, and all are taxable. If retirement money was rolled over consistent with certain rules, that 1099-R must be reported but is not taxable.

For any freelance or consulting work, you will receive a 1099-MISC. These letters aren’t as closely related to the income as the ones previously listed, and the income is taxable.

There are two 1099s that are potentially not taxable. The 1099-G is a payout from a government entity, usually a state refund, and generally is not taxable. The 1099-Q is a distribution from a college plan and the funds were used for qualifying costs.

A 1099 form that could potentially save you on taxes is the 1099-B. This form comes from your securities custodian and shows proceeds from any sale of stocks, mutual fund shares or other assets. You get to subtract your basis -- that’s generally what you paid for the asset. If that’s more than the proceeds, you have a loss that will offset other taxable income and reduce your tax bill.

Consulting a tax specialist can help you wade through all the forms and determine what should be reported on your taxes.

Dana’s Take: This is a great time to educate your kids about income, taxes, FICA and all those other important issues they will deal with on their paychecks and W-2 forms. Also, include them in the visit to a tax preparer that goes along with all of it.

The most common form of income for teenagers, outside of working for a company, is babysitting. If more than $400 is earned, under IRS rules, this income must be reported. For those under 18, there is a special form to be completed so that self-employment taxes are not owed.

The reporting and taxes owed can be a little tricky for a teenager, and a tax specialist will be able to assist with the requirements

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Utilizing Health Savings Accounts

Ray's Take: Health savings accounts turned 10 in 2014. These accounts, which allow individuals to set aside money for current or future health care costs on a tax-free basis, are an under-utilized tool that few of us take advantage of.

Only 20 percent of those who are eligible have an HSA account, according to the Washington-based Employee Benefits Research Institute.

There are four qualifying factors involved with getting an HSA: You have to have a high deductible health plan. You can't be enrolled in Medicare. You can't be anyone's dependent. And you can't have other health coverage.

For those 50 and older, out-of-pocket health care expenses are likely to be higher and continue to rise as you age. From a tax standpoint, an HSA is the best thing out there because it has a triple tax advantage. The money goes in tax free, it builds up tax free and it comes out tax free if withdrawn for qualified medical expenses.

Taking advantage of an HSA can help you with costs down the road. And participating in a wellness program offered at work can assist with uncovering health issues early along with creating a more health minded mindset. The American Medical Association recently revealed that at least 25 cents of every health care dollar is spent on the treatment of diseases or disabilities that result from potentially changeable behaviors.

Consumers can "stockpile" assets in an HSA and then use them later for nursing home care or other health-related expenses, Medicare premiums, cancer treatments, dental care, vision, medical screenings, hospitalizations that aren't covered by insurance and more.

Health care costs are on the rise and will continue to go higher. Even if you don’t have major health issues, there will always be medical costs associated with living and the money will likely be used.

Dana's Take: Yesterday I paid a prescription co-pay at the pharmacy that equaled my first car note. When Ray injured his wrist on a Saturday, our emergency room co-pay was $500 – enough to make anyone wince with pain. Just imagine how the expenses add up with a longer illness.

A Health Savings Account is a great way to be prepared for everyday medical expenses plus the unexpected expenses of ill health. With a prepaid medical account, your family may rest easier.

None of us can predict our future health, we can only invest in good health today and save for the unknown. Investing in an HSA at work can set you on the path to growing healthy, wealthy and wise.

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Self-Employment and Retirement Planning Responsibility

Ray's Take: Being self-employed has some great perks, such as the financial freedom to expand your business on your own terms. You decide about days off and holidays. You make all the executive decisions. But with those freedoms, comes responsibility.

No one is going to take care of you but yourself. Kemmons Wilson once quipped that when you work for yourself, you only have to work half a day. It can be the first twelve hours or the second twelve hours.

According to a November 2014 TD Ameritrade survey, nearly 70 percent of America's 10 million self-employed workers aren't saving regularly for retirement, and 28 percent aren't saving at all. Those are some big numbers with some scary ramifications. There’s always a reason to defer savings this month. Don’t wait.

When you’re self-employed, squeezing extra money out of your budget can be tough. Income might be unpredictable and cash flow might be tight. It can be hard to prioritize retirement when you are trying to build a business. And knowing what retirement savings vehicles that are available to you can be confusing.

Some of the possibilities are a solo 401(k) which is similar to a corporate 401(k); a SEP IRA which can be a great choice for self-employed workers without employees or moonlighters; and a simple IRA, which is a type of traditional IRA for small business owners with 100 or fewer employees, and the self-employed, with aspirations of growing their businesses. Will you be able to sell your business when you reach your chosen retirement age and use the profit for your retirement lifestyle? Protecting your personal assets in case the business does not succeed is another important decision to make. The money is not really yours until you get it out of the business.

But don’t get so caught up with the pros and cons of each plan that you delay saving a second longer. Savings into the worst plan is still better than waiting another day.

Dana's Take: One of the beauties of a family-owned business is passing it on through generations. Ray’s grandfather started his firm, so it’s run by the third generation now. What about that fourth generation–our children and their cousins? Will they enter the family business or follow their own dreams?

An adult child refusing to enter or remain with a family business can create painful emotional waves. The adult child may resent the pressure to follow his family’s pursuit or the family may resent that child ending a family legacy. In either case, it’s a good idea to consult with a licensed marriage and family therapist to address those feelings before they break a limb from the family tree.

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Good Health, Wealth Go Hand in Hand

Ray’s Take: One of the biggest and most challenging issues in retirement is how to plan and pay for health care expenses. Medical bills can mushroom in later life and empty nest eggs. Reimbursements are being reduced regularly. The healthier we are, and remain, the lower our health costs will be. Especially in a world where health costs are rising more each year.

The 2011 documentary, “Forks over Knives,” suggests that “most, if not all, of the degenerative diseases that afflict us can be controlled, or even reversed, by rejecting our present menu of animal-based and process foods.”

A recent article from Rutgers titled, “The Financial Impact of Improved Health Behaviors,” states that “health and wealth are strongly related and changes in one area of life can have positive effects upon the other.”

Recent studies show some astounding statistics regarding health and associated costs.

A Forbes article, “Obesity Now Costs Americans More In HealthCare Spending Than Smoking,” states that “obesity is 34% higher than in 1960 and morbid obesity is up six-fold.”

According to a Fox News story in 2013, “Study: Dementia Tops Cancer, Heart Disease in Cost,” “Dementia’s direct costs, from medicines to nursing homes, are $109 billion a year in 2010 dollars, the new RAND report found. That compares to $102 billion for heart disease and $77 billion for cancer.”

With statistics like these, the investment return on good health could swamp the efforts made on your portfolio. Not only does it pay dividends now in increased activity levels and earning power, it will lower your medical expenditures in retirement leaving you more money to spend on activities that, because you are healthy, you can go out and enjoy.

The ancient philosopher, Virgil, was once quoted as saying, “The greatest wealth is health.” Pleasant words yes, but this issue can be reduced to dollars and cents.

Dana’s Take: Healthy food is the new pharmacy, so I was thrilled to discover a vintage cooking gadget updated to turn a reluctant cook into a farm-to-table gourmet in minutes.

The pressure cooker has been reborn without the shake, rattle and explosions for about $100 for electric or stove-top. Check out the website “Hip Pressure Cooking” or “Peggy Under Pressure” for recipes and how-to videos. Our refrigerator is brimming with tasty meals made in under 30 minutes. Broccoli in one minute under pressure. Steel-cut oats in three minutes. Dry black beans quick-soaked and made into soup in 20 minutes. Perfect pot roast in 35 minutes. Risotto, polenta, exotic rice and quinoa in five minutes.

Our new electric pressure cooker has cured my cooking guilt and made healthy cooking easy and fast.

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Tax-Smart Investment Strategies

RAY’S TAKE: I’ve heard it said that it’s not what you make, it’s what you keep that counts. Taxes matter, and over time they matter a lot. Using tax smart investments can reduce the amount of taxes you pay while you are in your accumulation years and also impact taxes you pay after you retire.

One tax smart investment is using an asset multiple placement strategy.

It is difficult to know the exact timing of realized gains from different asset classes. Capital gains from growth stocks come at different times from international stocks. Special dividends from your equity income portfolio can vary widely. If you’re over 70 and ½, your required minimum distribution will depend in large part on last year’s investment performance. Interest rates on taxable bonds vary greatly over time. Unless you have a crystal ball, your best bet is to cover multiple asset classes and manage your taxes from year to year depending on how those variables line up.

Placement matters as well. Tax-efficient assets — like municipal bonds, stock index ETFs, or growth stocks you hold for the long term — may generate relatively small tax bills and make more sense in a taxable account.

For those looking to save for college and also pick up some tax advantage, 529 college saving accounts and Coverdell accounts will allow you to save after-tax money but get tax-deferred growth and tax-free withdrawals when used for qualified expenses.

If you are in a current high marginal tax rate, you may want to consider the impact of taxes when making changes to your investments. This is one of those times it pays to have, and review, a solid financial plan.

Good advisers know better than to guess, or — worse — sit back and wait. And there are a lot of well-honed methods, some better known than others, for lowering tax bills. Your best bet is to sit down with a qualified financial planner or tax adviser who can assist you with creating an individualized tax strategy.

DANA’S TAKE: Investors these days have more investment options than were available to the average investor just a few decades ago. But having multiple options can lead to brain overload for the beginning or average investor. That brain overload can lead to putting off making a decision.

Your financial journey begins with that first step and it’s not a journey you should take alone. Getting professional advice is one of the best decisions you could make. After all, you go to a professional to get your hair cut, why would you do any less with your financial dreams?

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Retirement for the 'Sandwiched'

Ray's Take: If you’re in the “accumulation years” – meaning before retirement – you may find yourself in a tough situation.

You may be sandwiched between adult children trying to find their feet in a tough economy and aging parents needing care and support. Helping both often comes at the expense of your own long-term security.

According to a nationwide 2012 Pew Research Center survey, about half of adults ages 40 to 59 supported a grown child in the previous year, and 21 percent provided financial assistance to a parent age 65 or older. These percentages aren’t going down.

So how do you prioritize your own financial needs and goals when it’s really hard to say ‘no’ to your parents and children?

It may seem easier to leave your job and care for your parent, but you compromise your ability to rejoin the workforce at a later date and when leaving the workforce for a period of time, you compromise your Social Security and retirement benefits.

Seek out agencies that may be able to assist before making the more drastic decision of leaving the workforce. If it becomes necessary to take the step of leaving work, check into Family Medical Leave Act eligibility.

How about your adult children? In today’s economy, it can be difficult to find employment, so they may be living with you while they search. Discuss with them a time frame and the finances you are willing – and able – to assist them with paying. Stick with your decisions and time lines. Determine if monetary support is a gift or a loan and set stipulations accordingly.

It’s very difficult to see our children struggle, but the best gift you can ever give them is your own financial independence.

Dana's Take: The New York Times just ran a story of a handsome Princeton graduate who murdered his 70-year-old father. The 30-year-old son didn’t have a job and was angry that his father had reduced his monthly allowance.

Mental illness likely contributed, but what can we learn from it?

The story gave me pause to ask if I can strengthen my children by doing less for them and spending less on them. Will they be ready to live independently if I send them on exotic summer “experiences” instead of letting them find a job? When I solve problems for them, am I depriving them of self-sufficiency?

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One Size Does Not Fit All

Ray’s take: Some things are always true about financial planning. Everyone should have a plan. Everyone should review his or her plan on a regular basis.

But when it comes to more specific things like, “How should I invest?” “Should I retire at 65 or 67?” or “Should I invest in a 529 plan for my kids’ college?” the correct answer will be, “It depends.” This is the point where the one-size-fits-all train goes off the rails. Because everyone is different and their financial plan should be as individual as they are.

Great financial advice is not a list written in stone. It comes from an in-depth review of each individual financial situation, goals, risk tolerance and other factors. Then, once that is completed, a good financial adviser will be able to begin to create a plan.

So, you met with a financial planner, discussed your individual goals and created a plan. Now you’re done and can check that off your to-do list. Right? No.

A great financial plan is an always-evolving entity that needs regular review. A good financial planner, when asked for advice about an investment, will not just think about the investment’s returns and risks, but will look all around the issue to consider the impact that taxes, retirement planning and cash flow may have on the advice and discuss the ramification with you so that you can together reach the best decision.

So how do you find the adviser who’s right for you and your plans? The best way to find a good match is to consult with friends who have financial goals and values similar to your own. Another option is to ask your current trusted advisers for recommendations. Try to always consider at least three possibilities. One might be very smart, but if the personality mix doesn’t work, the plan probably won’t work either.

Dana’s take: Denial isn’t just a river in Egypt – denial is one of the best reasons to retain a financial planner. A financial planner confronts a couple’s denial when they have a 20-something daughter and no savings set aside for a wedding. The planner dispels denial when a client is over 50, has three kids heading for college and more house and cars than retirement funds.

When we don’t want to face an imbalance in our finances or a couple can’t agree on saving and spending, an objective outsider can address and resolve those issues. Hiding from financial realities works for a while, until it doesn’t. If you suspect you’re not returning the calls of your financial future, it may be time to call in a financial planner.

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Save More Or Earn More?

Ray’s Take There are two main ways to increase funds for retirement purposes. Save more of what you currently earn (by spending less) or earn more than you currently do. It’s all about having funds available to invest for your future.

Frugality as the key to success seems to be the mantra in the news these days. The problem is you probably don’t want to live like a college student for the rest of your life. There are ways to do it that don’t include eating Ramen noodles as your main meal. And controlling your spending is always easier than increasing income or investment returns.

Take a close look at your expenses and determine ways to decrease, or eliminate, many items. This seems like common sense, but it pays to periodically look at where your money is going to determine if your expenditures are consistent with your priorities and plan. Far too often we leave things on “auto pilot.”

Another great way to save is when you get a raise or bonus, or any unexpected or irregular income. It’s OK to “splurge” with some of it – just don’t increase your regular monthly expenses. You don’t need to put away every penny, but putting the bulk of it into a savings vehicle or investment product will push you closer to your long-term goals.

During much of the 1970s, people socked away more than 10 percent of their disposable income, according to U.S. Department of Commerce data. This personal savings rate went on a steady and steep decline and even flirted with zero before the bubble burst in 2007 and 2008. It jumped to 5 percent and even 6 percent during the subsequent “new frugality” period of the recovery. But it’s fallen since then, hitting 3.5 percent in late 2011.

Investing in yourself to improve your future earnings works to a point, but it is far easier to save more than to earn more. Making do with less in order to achieve goals can be a very satisfying experience.

Dana’s Take When Jerry Seinfeld accepted the advertising industry’s Clio Award last fall, he quipped, “In between seeing the commercial and owning the thing, I’m happy. And that’s all I want.”

His words delivered a sting. How much of our buying behavior is simply chasing the brief buzz of anticipation, followed by the inevitable letdown of ownership?

I’m shopping for a car right now because I don’t like the new car I already bought. I can’t tell you how stupid I feel about this costly mistake, and my financial planner husband’s not too giddy about it, either. Jerry Seinfeld nailed me – anticipating the car was better than owning it.

Next time you want something, see if you can enjoy the bliss of anticipation and skip the disappointment of purchase.

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IRA Rollover Changes for 2015

Ray’s Take: Recently, new regulations went into effect that affect your IRAs and rollovers. Prior to 2015, the rule in effect allowed you to do a rollover each year, in which you received a check made out to you, rather than to another IRA custodian, on each IRA you own.

So if you owned multiple IRAs, you could withdraw money from each of them and have 60 days to either deposit that amount of money into a new IRA or back into the old IRA. This strategy was sometimes used by IRA owners as a short-term loan tool. As long as the money was placed either into a new IRA or back into the old IRA, no taxes or penalties were owed.

Effective January 2015, that is no longer the case. The new rule closes the loophole that allowed IRA owners to essentially obtain short-term loans with no interest.

Now, regardless of the number of IRAs you own, you may only do one IRA rollover per year. This rule only applies to distributions where the IRA holder receives a check from the IRA custodian. It does not apply to transfers that go directly from one IRA custodian to another. There is no limit on the number of such transfers that can be made each year.

If you roll over more than one IRA, the withdrawals after the first will be taxed to you at regular rates, plus potentially a 10 percent early withdrawal tax, if you are under 59 and 1/2. In addition, the disallowed rollover will be subject to the regular IRA contribution limits and a 6 percent per year excess contributions tax, as long as that rollover remains in the IRA.

This change affects a relatively small number of investors, but if you are concerned, meeting with a tax accountant or a financial planner can assist you in navigating your way through the new regulation.

Dana’s Take: Change can be difficult but changes we don’t understand are even more difficult. Just reading about IRA rollover regulations makes me want to roll over and pull the covers over my head. If you feel the same way, make sure you set aside money and time to fully understand your retirement finances before you take that leap. Establish a relationship with a financial adviser early so that you may call with questions as they arise.

You wouldn’t take a trip without planning ahead. Retirement is a journey you want to map ahead of time with trusted advisers to get them most out of it.

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Save Time in Addition to Money

Ray’s take: I’ve often heard that you can tell more about a person by looking at how he or she spends their time and money rather than what they claim is important to them. January is a good time to take stock of not only your finances but also how you spend your time. And the two can be related.

Staying healthy is a great way to cut expenses and save time. If you aren’t sick, you aren’t spending money not covered under your plan and you aren’t spending time at the doctor’s office.

But in your efforts to stay healthy, think carefully about expensive extracurricular activities. Previously, we mentioned those gym memberships that never get used. Spend your dollars and your time wisely.

Another time/money saver is to take enough cash from the ATM at the beginning of the week to last you all week. You save time by not making multiple trips to the ATM and money by not making so many impulse purchases.

Time your major purchases so that you are buying when they are on sale. And speaking of sales, only buy what you would have bought anyway. You’re not saving money if you buy something on sale that you wouldn’t have bought anyway.

Keeping your car in excellent condition saves time and money. If you keep it maintained, it’s cheaper than major breakdowns and you aren’t spending time waiting for completed repairs to take place.

The list of ways to save both time and money is endless. Take time at the beginning of the year to review how you can make changes that will benefit you and your financial plan.

Dana’s take: Another habit that consumes time and money is eating. After gorging ourselves over the holidays, Ray and I watched a documentary called “Forks Over Knives.” In it, Drs. Esselstyn and Campbell recommend a plant-based diet to reverse and prevent heart disease and most other western diseases. President Bill Clinton has followed their plant-based diet since his bypass surgery.

Their research claims that a pristine diet can reverse blockages, eliminating the need for medications and more invasive interventions. Dr. Esselstyn’s heart patients who abandoned processed foods and animal fats to save their lives sounded like they had found the fountain of youth.

It made me think that as Americans, we spend half our lives consuming less-than-healthy food and the other half paying for it, literally and figuratively.

What are your eating habits costing you? Cleaner eating could be a resolution that saves health care dollars and adds time in years of improved health.

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Charitable Giving a Win-Win

Ray’s take: The UBS Investor Watch “Doing Well at Doing Good” report released recently says, “In spite of the recent economic uncertainty, America's ‘giving gene’ remains intact, and donations of money have actually increased.”

We’re going to talk about examples of how charitable giving can be part of both your estate planning and yearly giving schedule.

As we approach the end of the year, many people look at charitable giving to both decrease their tax liability and to give something back. Many investors will be looking at sizable capital gain tax liabilities for 2014. So while it’s always a good thing to make a charitable donation, maybe now is also the time to be looking at your giving schedule for next year. Further, five years of strong equity gains has made gifts of appreciated stock a much more tax-favored strategy.

Most people write those donation checks in December, but that may not be the best time to write them. Advance planning can assist both you and the organization to which you are donating. Perhaps making donations earlier in the year would make a different impact.

When you’re gathering your receipts for your contributions, make it a priority to look into doing it differently next year to have the biggest impact. Talk to someone at your favorite charity or your local Community Foundation and find out if a one-time cash gift at a particular time of the year would have the greatest impact or larger donations spread over several years would be more helpful. If the second option is better, you might want to look into a charitable trust.

Whichever route you decide to take, and there are more than the two mentioned here, charitable giving remains a wonderful gift to those in need. They can be a great part of your estate plan and a financial adviser will be able to assist you with the various options available.

Dana’s take: When you give to charity, you may benefit economically, but you can also benefit psychologically, spiritually, socially and physically. Research has been conducted into how giving benefits us outside of tax deductions and has shown across the board that those who give are happier and have less stress.

Another great thing about giving is choosing favorite causes, locally, nationally and even globally. You get to put your money where your heart is. Business owners can support a non-profit through sponsoring an event or advertising in a program. It’s a giving twofer because the ads reach a select audience while also funding the work of the organization.

We all give different things to different organizations for different reasons. And a tax deduction is one of them, but mostly we do it because we believe in the value of giving itself.

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You Better Care About Global Economy

Ray’s Take Most people tend to think provincially. We see and weigh what is closer to us more heavily than things and events that are further away. Americans in particular have long believed that what happens to the economies outside our borders doesn’t really affect us. The euro may be threatened and certain countries facing default, but we tend to believe that our economy is so massive and insulated that it won’t really bother us.

However, that’s not the case anymore. Our economy is tightly tied into the world’s. In fact, international transactions account for more than 30 percent of our total output. Our Fortune 500 companies get half their revenues from international operations, and foreign capital stakes a significant investment in domestic entities.

Our global economic involvement is a two-edged sword: it has enriched the U.S. more than a trillion dollars each year, yet nearly a half million American workers lose their jobs at least temporarily annually. So, while international commerce has many benefits – we love low prices at Walmart – it has also brought individual pain.

Regardless, any crisis in the global economy directly threatens American companies – not just their profitability but also their employees. Our exports would decrease, which would create a negative ripple effect throughout our own economy. Foreign investment here would diminish simply because there wouldn’t be as much capital to invest. Less confidence in the global economy – and the European Union is of particular concern – means less spending and investing all around the globe.

We might like to think that we’re insulated from the rest of the world, but we’re all in this together. So be aware of what is happening to economies beyond our shores.

The United States is still the leader of the global economy, but the continuation of our economic strength and influence doesn’t just depend on what we do here. For better or worse, our economy is intertwined with that of the rest of the world. In this day and age, no one “goes it alone” and thrives.

Dana’s Take For two decades my sister has worked as an accountant for a company whose name begins with the word “American.” A few years ago her company was purchased by a business in Singapore. Now, her boss and the accounting team speak Chinese.

How do we prepare our children for this global marketplace? Start small by exposing kids to international foods and sports with global appeal, like soccer. Invite friends from other cultures to your home. Friendship is the shortest route to understanding.

Take it up a notch by hosting a foreign exchange student. When planning a family vacation consider far-flung spots like India or Thailand. A college student’s junior year abroad could be in a city outside of the EU, like Hong Kong or Sao Paulo.

Opening our kids’ eyes to the world will position them to adapt and succeed.

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Money Management Principles

Ray’s take: Most things in life involve a set of basic principles, and money management is no exception to the rule.

First, you should know and understand what you earn. You should not only know your gross salary and net pay amounts, but you should also understand your withholding and insurance benefit withdrawals. Without earnings, there would be no need for money management principles. Make the most of what you earn by following other principles.

Saving and investing are smart money management principles. These allow you to buy a big-ticket item like a home and plan for retirement when properly managed. You should always have a current budget and review your financial plan yearly to make any adjustments to stay on track with your plans.

Another useful money management tool is to protect your financial future by allocating funds to an emergency account so that you don’t have to dig into your retirement funds or the money intended to buy a home. Have the right insurance so that you don’t have to shoulder the entire cost of an unforeseen event. Evaluate risk by magnitude first and probability second.

Spending is a part of money management, too. Make sure when you spend you are getting the best value for your money regardless of what you are buying. Shop around. Consult professionals.

Borrowing is a fact of life today. But make sure you borrow wisely. Check interest rates, payment schedules and think hard about wants versus needs before you borrow. Keeping debt low is key.

Managing your money wisely brings peace of mind. Becoming an effective, frugal money manager enables you to take care of yourself and your family.

Dana’s take: Make money management a family affair and teach the importance of understanding the difference between wants and needs.

Your kids may want the latest gadgets and you may be dreaming of a yacht. However, your needs are food, clothing and shelter. Knowing the difference between wants and needs opens the door to better decision-making, and following good principles makes sure the money is there for wants from time to time.

Teaching your kids these basic skills helps them build a great foundation for making good financial decisions when they are older and out on their own.

When they’re really young, you can use the piggy-bank method for teaching and later help them open a checking and savings account where they can put their own money and make decisions regarding spending and saving.

A good financial education is priceless.

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Roth Conversion, Should You Do It?

Ray’s Take There’s been a lot of discussion in recent years about Roth accounts, specifically the Roth IRA and the Roth 401(k). Maybe you’re wondering if you should convert your own accounts but aren’t sure.

The truth is, the best candidates for the Roth conversion strategy are people who believe they will never need that money and want to pass it on to children or grandchildren. It can be advantageous if you’re fairly young, in a low bracket, and not likely to need the money for 10 years or longer.

A conversion of your current non-Roth IRA or 401(k) is treated as a taxable distribution because you’re deemed to receive a payout from the traditional account with the money then going into the new Roth account. So doing a conversion before year-end will trigger a bigger federal income tax bill for this year. It could also trigger a bigger state income tax bill, if you live in a state that collects taxes at that level.

But rates are lower today than they were 15 years ago, and as Mark Twain said “no one’s property is safe as long as Congress is in session.” If you do make the conversion, make sure you won’t need the money for five years or you’re looking at penalties. There are also a few “hidden” speed bumps as you evaluate conversion. First, the new 3.8 percent Medicare surtax applies to investment income if MAGI exceeds a certain threshold. Second, Medicare Part B premiums can increase as a result of increased MAGI. Finally, tax laws can and do change. Once you pay the tax, you are unlikely to get it back. The break-even point is usually further away than people think.

A good tax professional and financial planner can help you have all the information you need.

Dana’s Take It’s a crazy busy world we live in and creating harmony within your life involves many divergent paths. And often resembles a juggling act. Keeping the plates spinning for controlling spending, contributing to savings and participating in retirement planning programs, available either through your employer or privately, is just a part of the big picture.

Planning for the future means being involved in and understanding all aspects of your family finances. But don’t feel that you have to struggle alone. Make it a joint venture. And possibly even an adventure by working together for a common goal.

By participating in meetings with tax professionals and financial planners, you empower yourself to make informed decisions that will benefit not only your own immediate future and retirement, but also the future of your children and grandchildren.

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Reinventing Retirement

Ray’s take: At the turn of the 20th century, the average life expectancy was 47 years. Today, the average American can look forward to about 78 years of life. The average life expectancy for today's 65-year-old has increased to 84, according to the National Center for Health Statistics. I currently have twelve clients over 90.

The baby boomer generation has begun to retire and they don’t see retirement as a withdrawal from activity but a new adventure to pursue.

"Baby boomers are known for being a hardworking, trailblazing generation," says Sherry Chris, president and CEO of Better Homes and Gardens Real Estate. "As they have done with every other major life event, they are marching head-on into retirement with big plans and no desire to change pace."

The traditional life cycle has been school, work and retirement, with retirement being the shortest phase by far. The traditional definition of retirement has been a time of leisure after years of working. With all the changes to technology and health care, people are living longer, healthier, more active lives and making different decisions about what to do during their “retirement” years.

The news is full of reports of those over 60 who are still working. Some are doing so out of necessity due to the financial meltdown and some because they gain a sense of fulfillment from their job. Or perhaps it’s a mixture of both. Many boomers will go back to school and begin new careers in a field that perhaps wasn’t available in the past, become entrepreneurs to fulfill a passion or fill their time with volunteer and community service activities.

We try not to use the “r” word now. Our clients invest for a day when they do what they want just because they want to, and not because they have to. In the coming decades, "retirement" will mean something different to each of us. Regardless of your decision, you'll need to design a financial plan suited to your specific vision of the future.

Dana’s take: For Thanksgiving, my 95-year-old aunt flew to Miami where she joined family at a Miami Dolphins game. Is that how you pictured life at 95 – plane tickets and NFL games? I sure didn’t.

Maybe an updated vision for your retirement will make sacrificing now to save for tomorrow seem more fun.

I hate the term bucket list, so I’ll say living list. Make a living list of some amazing things you want to do as you head toward the triple digits. Remember, you’ll have the time to linger in New Zealand, France or the dreamland of your choice, if you have the cash. Virtually anything is possible.

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Required Minimum Distributions

Ray's take: Once you reach age 70 1/2, you are required by law to begin taking required minimum distributions (RMD) from your tax-advantaged retirement account, or accounts, each year.

This is a time when you need to take advantage of all the tools available to make this as simple as possible as well as to allow the volatility of the markets to work for you.

As you get closer to age 70, or even well before, take a look at any 401(k) accounts or IRAs you may have. Do you have more than one 401(k) due to a change of employer? This is the time to consolidate 401(k) accounts to reduce your required minimum distribution amount to help you stretch your retirement dollars further. If you have multiple IRAs, you won’t be required to take a distribution from each IRA, as long as the total amount taken equals the required amount across all IRAs. But if you have more than one 401(k), you will be required to take a distribution from each account.

You can begin taking withdrawals without paying an early withdrawal penalty at age 59 1/2, but this may not be the best plan for everyone. If you don’t need the money now, waiting could mean a larger nest egg to draw from down the road when you need it more.

Also, converting existing tax-advantaged accounts to Roth accounts might be an option for you, depending upon your individual circumstance. RMDs are not required from these type accounts.

The amount you are required to take each year varies with your age and the value of your accounts. Calculating withdrawal amounts can be tricky. Be careful and seek professional advice on timing and required withdrawal amounts. The IRS can impose a 50 percent additional federal tax for missed or insufficient RMDs.

Dana's take: When it comes to retirement planning and figuring out how much money you’re going to need for an extended period of time, it can get pretty confusing. Required minimum distributions are just one aspect.

If you’re used to spending a certain amount now, will you be able to spend that amount going forward or will you need to re-evaluate what you believe you need in order to make money last and be comfortable into your later years? Is continuing to do things the same old way the most conducive to a sound financial future? Sometimes we get in a rut and just keep doing things because that’s just the way we’ve always done it.

As you age, it’s always a good idea to take the time to sit down and look at expenses, future plans and how all that ties together.

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Estate Planning and State Taxes

Ray’s take: A lesser-discussed aspect of estate planning is state inheritance taxes. Some states have tax separate and in addition to federal estate taxes. And to make it even more confusing, some states collect estate taxes and some states collect inheritance taxes, while two states collect both.

So what is the difference between the two? They seem to be the same thing using different words. An inheritance tax is based on who receives a deceased person's property and how the beneficiary is related to the deceased person, while an estate tax is based on the value of the deceased person's estate and not on who gets what. For example, in an inheritance tax state, a spouse usually gets an exemption based on the relationship.

Mississippi and Arkansas do not collect either. Tennessee has an inheritance tax. However, as a result of changes enacted in 2012, the state of Tennessee is phasing out its inheritance tax through 2015, when the exemption amount will be $5 million ending with full repeal in 2016.

If a decedent owns property in another state that does have either an inheritance tax or an estate tax (or both), then that property will be subject to the laws of that state.

It’s important to be aware of the tax laws in those states and how it may affect your heirs. It’s no wonder that individuals with sizable estates think carefully about where they want to be living when they die!

Because of the moving target of state inheritance tax laws, estate planning is more challenging. As tax regimes change, so do the planning strategies to get the best results. It is important to consult the appropriate professionals who can guide you regarding estate planning and state taxation.

Dana’s take: So what about that vacation property you are considering purchasing in Florida or Gulf Shores or any other location that you have loved to visit for many years? How will the state taxes affect your heirs down the line and does it make a difference in where you plan to buy that home away from home?

We already know that the state tax laws are ever changing, so it could be difficult, if not downright impossible, to determine tax issues far into the future.

While it’s important to be aware of and include any financial issues in purchases – be they large, like real estate, or smaller, like a car – as long as you know that you have considered the possibilities and implemented your best plan for the future, you should feel confident in making purchases that fit in with your overall financial plan.

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Ask Your Parent the Difficult Questions

Ray’s take: The whole idea of talking to your elderly parent about their finances and estate planning may make you feel slightly ill.

You may worry that they’ll think you’re invading their privacy, don’t trust their judgment or are trying to make a grab for their money, all of which seem like good reasons to put off that conversation. The more financially successful many parents are may make them more patriarchal.

But putting it off doesn’t make sense when you are just trying to understand their plans for themselves and make sure they have everything in place to make those plans happen.

You don’t need to get into the details, just keep to the broad strokes.

Do they have a will or trust? Is there an insurance policy in place? How do they feel about a retirement home? Are they open to in-home health care? What about memorial services? Do they want to be buried or cremated? Explain to them that without proper estate planning, some of their assets could be taxed in ways they didn't expect or could be taken from the family, depending on the situation.

Make it very clear that they still have control over the decision making, but that you’d like to know where important documents are and who has the ability to make decisions, if they aren’t able. Do they have a list of all the financial institutions that they use? And have they decided on the details of their own memorial service?

The best time to have this conversation, or series of conversations, is when your parents are relatively healthy and active. Otherwise, you may find yourself making critical decisions on their behalf in the midst of a crisis – without a road map.

Dana’s take: We don’t like to think of anyone we love dying or becoming incapacitated, especially our parents. But a part of being an adult child means it becomes our responsibility to double check on things our parents have put into place.

Intrinsically, we feel it’s not our place to inquire into our parent’s financial affairs because (no matter how old we are) we are still their children. But we need to ask the hard (nosy) questions ahead of time so that heartache and misunderstandings may be avoided at a later date.

Be aware that your parents may be embarrassed by their financial situation, or simply think that their generation needed to keep information about their bank accounts private. We aren’t asking these questions to be intrusive. We want to be sure they have taken care of things to their satisfaction when it comes to their final wishes.

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Financial Literacy Is a Must

Ray's take: I occasionally am asked to teach a short financial literacy course in the Shelby County Schools system. I am amazed how many 11th and 12th graders already have credit cards. When I ask if they pay off their cards each month, they usually respond, “Oh yes, I pay the minimum balance every month!”

The National Financial Educators Council defines financial literacy as: “Possessing the skills and knowledge on financial matters to confidently take effective action that best fulfills an individual’s personal, family and global community goals.”

Unfortunately, the level of financial literacy has fallen and, as a result, young adults are struggling more than ever with money matters.

According to the Council of Economic Education, only 17 states require students to take a course containing personal finance and only five require a stand-alone course in personal finance to graduate. Misunderstanding the basic concepts about money, debt, compound interest, and many other financial topics can have severe long-term financial consequences.

If you don't know where you are financially, it can be challenging to plan for where you want to be next year, let alone five years or decades down the road in retirement.

A good understanding of financial matters is more important than ever. Research shows the earlier you start learning the topic – preferably before you graduate high school – the better. Even if you are older, it’s never too late to learn how to manage money.

To help improve your financial literacy, talk to a financial planner; explore free financial websites and access government sites such as the financial literacy resource directory at www.occ.gov or National Endowment for Financial Education at nefe.org.

Dana's take: When I was in high school, we were required to take an Economics course. Fortunately, Tennessee is one of only four states that currently require students to take a personal finance course in order to graduate.

But what about our adjoining states, Mississippi and Arkansas? They are not on the short list of four.

Financial literacy should be a priority for everyone. But is requiring a single course in high school enough to create a generation of financially literate adults? I don’t think so.

Learning financial responsibility should begin young, and at home. Teach not only by example, but also by requiring tasks be performed to obtain an allowance. Or create your own tools for teaching. The goal is to teach, regardless of the forum you choose to use.

Saving isn't always as much fun as spending. But a teen might be reminded that just because you save money today doesn't mean you can never spend it. That item you want to buy today might go on sale tomorrow … allowing you to both save and spend.

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A Gift That Can Give For A Lifetime

Ray’s Take Every so often, a client calls and asks if I would spend some time with their son or daughter to help them get off on the right foot financially. When they look back on their own early choices, they can see how much a few right decisions, and the avoidance of a few poor ones, would have been worth.

It’s a heady feeling having a diploma hanging on the wall and that first paycheck in hand. It’s tempting for new graduates to skip the 401(k), overspend, and rack up debt when what they need to be worrying about is paying down student loans and planning for retirement.

A gift of financial planning can help a new graduate establish and prioritize financial goals and develop a budget to meet them. They can also make recommendations on how to allocate investments into a 401(k) plan or other group benefit decisions. All without those pesky parent-child dynamics that come if you offer the advice yourself.

Newly minted graduates often feel that they already know all they need to know about such things, or that the answers are just a few Google clicks away. Advice that’s neither asked for nor paid for (out of their pocket) is often given very little credence. One thing I have seen work is a simple lunch introduction. An advisor is introduced as the family’s trusted council for decades, and is available if they ever need a sounding board. It just might take.

Ultimately, it’s the relationship that counts. A gift that adds to a young person’s financial understanding and stability is one that is both practical and lasting, and one that feels good to give.

Dana’s Take I’ve heard terrible stories of adult children with great jobs who are so far in debt they can’t see the way out. All because they didn’t have the knowledge and insight they needed to avoid going down the road that led to financial meltdown.

We all want the very best for our children so why not do something for them that will help them to attain that? Begin teaching them about money from a young age to give them a solid grounding. Later, provide them with the best tool of all, access to a financial advisor who can enhance their financial knowledge and help them to make the best decisions to get them to the life they dream of.

That iPod or laptop may seem like a cool gift now, but why not give them something that will last forever?

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Choosing Your Own 401(k) Mix

Ray’s take: Recently, we talked about Target Date Mutual Funds and how these preset funds could be an effective tool for your retirement. These funds have a particular mix that changes as you approach your projected retirement date. These can be good as long as you have researched the funds and determined if the “mix” meets your unique retirement goals.

Now, let’s talk about choosing your own funds for your 401(k) plan. Going “outside the box” is a more involved scenario and one that can also be a great tool.

You will still need to have a retirement date in mind. But you need to look at how many years to expect after that magic retirement date. We always plan to live to at least age 95. That means that a retirement at 55 is very different from a retirement at 70.

You can review the various indexes and benchmarks to familiarize yourself with expected returns. Use this information to determine what indexes you wish to use in your portfolio mix. You should pay more attention to long-term returns, rather than recent performance. A 401(k) is a long-term investment.

Also, generally speaking, the younger you are, the more risk you can handle over the long term. If you are planning to retire in the near future, you will not want to put nearly as much of your money into higher risk categories, no matter how well they’ve been doing recently.

There is no set way for any one person to set up their retirement accounts. The important part is to get a plan in place. The process really isn't as hard or intimidating as Wall Street makes it seem, as long as you take the time to sit down and think it through thoroughly at the beginning. And using a financial planner can help you to navigate the murky waters.

Dana’s take: When I worked, we had to choose a fund in which to put our retirement dollars. I always used the dartboard method, and this isn’t the best way to go about allocating dollars for retirement.

More recently, Ray helped my mother and my sister choose the funds for their 401(k) dollars. Once their current allocations had been reviewed, compared to where they wanted to be, and new allocations were chosen, their funds performed much better.

Their examples are a great argument for spending the money to consult with a CFP or seasoned adviser when choosing among retirement funds for your 401(k) dollars. With improved returns and compounded interest over decades, that could mean tens or even hundreds of thousands of dollars in potential gains.

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Retirement: Savings-to-Income Ratio

Ray’s take: If you've at least started planning for your retirement, congratulations. It's often a hard first step. Follow-up steps are just as important.

When you are looking to buy a home, the mortgage company uses something called the “debt-to-income ratio” to determine if you qualify for the loan you are seeking. When determining the savings required to reach a retirement income goal, you can use a similar process to determine if you are targeting the correct ratio.

There is no ‘one size fits all’ solution. Every individual is surrounded with a unique situation. To reach this number, there are a host of online resources.

Most sites suggest that you start with a spending plan. Spending everything you earn may work for a while, but in the long run, inflation will become a problem. A recent Wall Street Journal article debated between a budget of 80 percent or 85 percent of your preretirement budget. Let me offer some advice based on my 31-plus years of experience. Try 120 percent.

That sounds like a big number creating an unreachable goal, but it’s closer to reality. But when you put all your resources to work, create a detailed plan and stick to it, the unreachable becomes reachable.

So, what is the reasoning behind the 120 percent number?

When you work, you spend less money. Once the work stops, the travel and spending usually increase, not decrease. Will that mean you usually have to work longer and save more? Probably. Will targeting that goal mean there will be no worries? Probably not. Will it reduce the odds of having to move in with your children? Definitely.

Dana’s take: Ray and I have seen how expenses can grow as we “downsized” our home. Tired of mowing, edging and tree limb removal, we sold our house with a yard and “downsized” to a zero-lot home. The irony is that the zero-lot doubled our square feet – meaning higher property taxes, insurance and utility bills. Add to that monthly association dues, and expenses just went up as we “downsized.”

Consider smaller zero-lot homes. Do you really want to go from cleaning two bathrooms to cleaning four? Wouldn’t you rather spend lavishly on trips to the beach and Europe instead of overhead?

Another pitfall is buying the supersized zero-lot and turning around and selling it once it has eaten through a pile of money. The cost of buying, selling and buying smaller adds up.

Before going condo, look at your current monthly home expenses and compare it to yard-free living. Will your expenses really shrink? Keep looking until you find an option that frees up monthly cash for living large, now and post-retirement.

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Certified Financial Planner – One Big Thing

Ray's take: In today’s world of financial specialists, each one has their own view of what you should do – because each one is focused on their own focused area of the big picture: the CPA, the insurance agent, the attorney, etc.

The same is increasingly true in your health care. We see more and more specialists for focused areas of medicine. Hopefully, you have one professional who coordinates all of the parts.

Wouldn’t it then make sense to have someone whose “specialty” is to coordinate all the specialized financial information and create the best big picture for you? Certified Financial Planners have the knowledge and training to bring together all the disparate pieces of information from all the various parties involved and mold them into a cohesive plan that is clear to you. They are aware of financial opportunities, financial tools, and how to use them. They can help you develop a solid well-researched financial plan, which will create more money for your family, allow you to handle life changes easier, and help protect you against disruptions in the stock market.

In an analogy from an essay by Isaiah Berlin called “The Hedgehog and the Fox” on Tolstoy's view of history, Berlin says that the fox knows many things but the hedgehog knows one big thing. Don’t you want to look into finding the person who knows one big thing that can work for you?

Dana's take: A financial planner’s role with a family’s money is not unlike a wedding planner’s role in a wedding. When an anxious bride and groom are overwhelmed with choices, the wedding planner enters as the calming voice of experience, coordinating trusted service providers. More importantly, the planner is the point person as problems arise. The bride’s family wants a kosher menu at a barbeque? No worries. Ceremony on the beach threatened by a category 4 hurricane? Plan B is on the ready.

Similarly, a Certified Financial Planner is a family’s go-to person for all things financial. Choose among six funds for your 401(k) plan? Have no fear; your financial planner is here. Your spouse, the CEO of the family business is diagnosed with a terminal illness at 40 – what now? Stay at your spouse’s side while your planner starts your family’s plan in motion, coordinating insurance, estate plans and trusts, retirement funds and investments.

While a wedding planner’s work culminates in one special day, a financial planner’s work pays dividends for generations.

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Beneficiary Forms Trump Your Will

Ray’s take: Few people like to think about death – particularly their own. But a sound estate plan includes dealing with that possibility to be certain your wishes are honored after you “make the switch.”

An integral part of the estate planning process includes reviewing all of your accounts and comparing your beneficiary forms to your will and making sure everything is consistent with your plan. By doing this, you will avoid headaches for those left behind.

Any assets that can’t or don’t have a beneficiary or transfer on death designations go through probate in order to determine their disposition. While non-probate assets can be a handy tool for keeping assets out of the sometimes expensive and longer probate process, unintended consequences can arise.

Any asset that has a beneficiary designation, or TOD, go wherever that designation says. These accounts include life insurance, annuities, your IRA and 401(k), and sometimes mutual funds or brokerage accounts.

Many people are not aware that the beneficiary and TOD designations override a will. As a result, an asset may pass to someone whom you designated many years ago, rather than to the person whom you have named in your will more recently.

A regular review of how you wish your assets to be dispersed, along with a review of all associated beneficiary forms, will lead to the best execution of your wishes.

Dana’s take: Having a hard time coming up with a gift for your spouse? One of the best gifts a couple can give each other is an appointment with a Certified Financial Planner, an estate attorney or, better still, both.

Think of it as creating a support team for your surviving spouse and children. It’s a professional relationship that provides a sense of security as you move through life together.

By reviewing our assets, beneficiary forms and wills regularly, or at least when major life changes take place, we are insuring that once we are gone, things go smoothly for those left behind.

Death is not something we want to picture, and we don’t have to actually think about the how of it, just what will happen afterward to those we love. For those left behind, death is always a difficult issue to deal with for so many reasons. Take the time to make a difficult period in your survivors’ lives just a little easier by choosing to take care of the details ahead of time.

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In Case of Incapacitation

Ray’s take: A financial power of attorney is a powerful tool in your financial planning arsenal in the event your investments or other financial matters need action and you can’t do it.

The reason could be an accident or other health-related issue, or even just being out of the country. With this document, you, as the principal, give power to act on your behalf to an “attorney-in-fact.” This person does not need to be a lawyer to take responsibility.

There are several levels of authority you can grant to the attorney-in-fact, and the choice should be thought through very carefully. A durable power of attorney grants the chosen person the authority to conduct all of your financial affairs with or without consulting you.

A limited power of attorney is just that. It limits the specific occasions in which the attorney-in-fact is authorized to act on your behalf to specifically stated situations. A springing, or conditional, power of attorney comes into play only once you are totally disabled. While it is tempting to go with a limited or conditional choice, it is impossible to predict exactly which “conditions” will come up. If you choose the more comprehensive approach, the trust level should be very high.

The primary goal for a power of attorney is to make sure your financial obligations are met if you are unable to handle them – bills paid, deposits made, administrative details continued. This can also include handling tax matters, dealing with the IRS and making decisions regarding retirement assets. These would all be clarified in the particular power of attorney you choose to implement. You should always seek professional legal counsel on how and when to use these tools.

Dana’s take: Even though it’s difficult to imagine a medical event or accident that could leave you unable to pay your mortgage or bills, it’s important to plan for that possibility.

Choosing someone to handle your affairs can be a daunting decision. Your spouse would make sense as your first choice, but what happens if you are widowed? Who do you trust to make the right decisions for you and any children you have who are currently underage?

If you have adult children, do you want to give them the authority to make your decisions? Are they mature enough? What about your own parents? Are they able to make these type of decisions for you? Are your children or parents knowledgeable enough about the assets you have to make sound business decisions you your behalf?

Make sure you choose wisely when you are thinking about creating this document. Power of attorney puts your financial affairs in the hands of someone else. If you don’t choose wisely, it could boomerang on you with negative results.

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Over 50 – Should You ‘Catch Up’?

Ray’s Take: If you’re age 50 or older, you can make extra “catch-up” contributions to certain types of tax-favored retirement accounts.

Is this something you should take advantage of? On the surface, it seems like a positive for your retirement account. But take a long honest look at why you are going to make those catch-up contributions and check your plan to make sure you qualify. There is a lot of information out there regarding these types of contributions, and you need to separate the good from the not so good.

If it means you are saving more and truly “catching up,” then is could be a good decision for you. Maybe you weren’t able to make contributions or only small contributions to your 401(k) or IRA in past years. This could assist you under those circumstances.

But where will that money come from? If you are reducing your current lifestyle to fund the additional savings, then great. If you’re increasing your credit card or HELOC or eating into your emergency fund to sustain lifestyle to compensate for the additional deductions, then probably not. It’s always best to start with a plan. If you’re already on track to reach your objectives without additional funding, why would you do it? Just be sure your choices are objective driven. I have seen people make draconian current lifestyle choices for that “some day” only to stress themselves into an early grave. Without a crystal ball, it’s always a balance.

Dana’s take: When we were kids, we were allowed to call a “do over” under certain circumstances in certain games. This is known as a mulligan in the game of golf.

For the Baby Boomers out there, the catch-up rule was created to help you reach retirement goals as you approach the transition from career to retirement. Educate yourself. Look at all the positives and negatives associated with this rule. Discuss your finances with your significant other to see how you might be able to use this rule to your advantage, or not as the case may be.

If your circumstances meet certain criteria in your financial plan, the “catch up” for those over 50 might be just the thing to help you meet goals that you set up for your golden years. Take charge of your plan and your future.

Make sure you have your money under control. As Dave Ramsey says, “A budget is telling your money where to go instead of wondering where it went.”

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How Much Should I Save for Retirement?

Ray’s take: Saving for retirement. It’s something we are all aware of and working on regularly. But how much do you need to save for retirement?

That is the quintessential question everyone asks. And the answer is not so clear. It depends. Truly.

There are three key factors in how much you will need: When do you plan to retire? How much will you need at the time? And how much risk can you tolerate until then and afterwards?

The interaction of the three can be complex, but answering and prioritizing those questions will take you pretty far down the road of retirement planning.

With regard to the first question, we prefer not to use the “R” word. We like the concept of “financial independence.” That way you can continue to work if you choose, but you just don’t have to any longer. It amazes me how much our clients suddenly enjoy what they are doing when they no longer have to do it!

Whatever your answer to these questions, and others, it’s important to have a dynamic approach to saving that accommodates changing retirement needs and savings capacity. When making your plans, using at a minimum age 95 as your end-of-life age when calculating how much you will need is a good idea. You may not live that long, but with health care and technological advances, who can say how long we may live? Any way you look at it, you want to avoid being old and broke.

Dana’s take: Ray has been a financial planner for over 30 years and one thing he has learned is that people underestimate how much they will want to spend in their golden years. When I think of retirement, I picture living in a little cottage out of “Hansel and Gretel,” wearing a calico apron and baking cookies. Maybe I need to update my vision because I live near many people in their 80s who live in big homes, drive nice cars and travel more than we do.

The cost of assisted living is another shocker. The buy-in can be a half a million dollars – plus a monthly fee that is comparable to renting a nice home. Social Security probably won’t cover all that.

Taking the steps to prepare for decades of financial independence is painful. Most of us don’t have that kind of discipline, alone. Start the conversation now and create a sustainable plan that will keep working when you’re ready to work less.

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What’s Your Investment Risk Profile?

Ray’s Take Risk. It’s something we are all involved in every day – sometimes consciously and sometimes not.

Just walking out the door of our homes and driving our cars involves a level of risk we don’t think about. We just assume we will arrive at our destination in good shape. There’s our daily subconscious risk.

How about conscious risk? How much are you comfortable with having in your life? Does the thought of going to Tunica and gambling make your heart race in a good way or a negative way?

Risk tolerance is just what it sounds like – a measure of how much risk you can handle as an investor. There are a number of types of risk. You can go broke simply due to inflation.

When it comes to building a solid and comprehensive financial plan, it’s critical to get a sense of your tolerance for risk. We have no way of knowing what’s coming, as shown by the financial crash of 2008. Long-term averages mean nothing if you can’t be committed for that long term.

If we want to have that comfortable retirement, we have to factor in risk. In addition to the risk that you can accept financially, risk tolerance also includes how you feel, personally, about taking risks and losing money. Always consider adjusting your risk tolerance based on your personal response to risk. A successful portfolio mix is one that you can live on and live with.

No matter how you slice it, risk is unavoidable. Keep in mind that your risk tolerance may change as your time horizon changes. Take as much risk as you need to achieve your goals, and no more.

Dana’s Take One pearl of wisdom I recall from finance class is, “The higher the risk, the higher the variability of the return.” Our sage professor impressed upon his students that greater risk did not insure greater returns, only a greater swing of volatility in the return – a risky business if you will. More risk meant winning big, losing big or falling anywhere in between; there’s not much comfort in that.

Seeking balance is a good thing for your personal health and financial health, too. A trusted physician can help keep your health in balance – cut back on the fast food and add more exercise. A good financial adviser will discuss risk, balancing your range of comfort with the required amount of risk to achieve your goals. Make sure you’re truly comfortable with the level of risk so that there are no big surprises later.

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Develop Interests Before Retirement

Ray’s take: Retirement success is not automatic. It takes planning – and not just financial planning. According to a study by University of Missouri – Columbia, couples should plan for retirement, both financially and socially, and consider the changes that may occur in their relationships and day-to-day activities.

Some of the most dissatisfied people I know spent too much time on the financial aspects of their plan and not enough on the rest. So, who do you and your spouse want to be when you retire? Do you picture yourselves on the golf course or sailing a boat around the Gulf Coast? How about being more involved in volunteer groups? Now is the time for both of you to develop interests that will carry you over in retirement.

Find your unique talents and capabilities and build on those things that bring you joy and satisfaction. These are the things that will make your retirement years so much fuller. Think about activities that interest both of you, along with activities each of you can participate in with friends. You create interest in your life by having things you do together and things you are involved in separately. These are the basic building blocks for a more satisfying retirement life.

Retirement is about so much more than the money. People who fail to develop sincere interests during their lifetime struggle with doing so after retirement, and wind up bored and disappointed. Make sure to take the time now to enjoy life, cultivate hobbies and develop interests. Then, when you retire, you can devote more time to your existing activities, while exploring others to add to the mix.

Dana’s take: In Susan Cain's book “Quiet: The Power of Introverts in a World That Can't Stop Talking,” the author discusses the needs of introverts living in a world dominated by extroverts. She found the majority of people feel introverted but believe others are more extroverted.

When the office no longer provides social interaction, choose social activities that fit in your comfort zone for socializing. If you prefer tea for two over a cocktail party, plan social opportunities that suit your preferences, rather than avoiding going out altogether. Studies show that maintaining social connections plays a big part in our mental health.

Some people fear moving to retirement communities because they're not "joiners" or extroverts. Good retirement communities offer small book clubs, small exercise classes, and activities for all kinds of interests. Ask questions about activity options for members who aren't as gregarious. Social interaction is important to happiness; find the right fit for greatest benefit.

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