Are you familiar with the KISS (“Keep it Simple, Stupid”) concept? KISS helps you refine your elevator speech, write concisely…and can boost your financial health. KISS is a wonderful tool to cut through the never-ending avalanche of financial and investment information and tips.
After working with hundreds of financial planning and investment clients, here are relatively simple and straight-forward KISS (“Keep it Simple, Stupid”) tasks for improving your financial health. Guide to the perplexed: If you look at this list and roll your eyes in exasperation, consider leaning on a trusted financial advisor who does thorough financial planning and has YOUR best interests at heart (see Step 10, below).
Crush Toxic Debt:
Credit Card debt is highly toxic. Consolidate accounts or move them (if that lowers your interest rate ) and follow a realistic plan to rid yourself of this insidious form of debt.
Streamline Your Investments and Reduce Costs:
Two factors drive returns and risk: asset diversification and investment expense ratios. Asset diversification – especially with professional guidance – helps you avoid putting too many eggs in one basket. The running costs of your portfolio (e.g. mutual fund fees) also drive returns. Look up the underlying fund expenses on www.morningstar.com and ask your advisor/broker why you need to buy A, B or C shares from him/her when there are less expensive options.
Consolidate as many of your accounts as possible, especially old 401(k) and other retirement accounts that charge administrative fees (even if you’re left the employer)
Avoid purchasing annuities (esp. variable annuities) unless you fully understand the benefits and drawbacks, are aware of potentially high fees, know the tax implications and know about surrender penalties. Get 2nd opinions on annuities from someone who doesn’t sell them!
Pay Attention to Overlooked Assets (Social Security/retirement planning):
Social Security is a “taken for granted, often overlooked asset” for many people. If you are tempted to take Social Security at age 62, think again and get grounded advice from a financial planner on the benefits of postponing benefits. Married couples benefit additionally from some Social Security planning strategies that can provide you with additional income. Social Security will not (and is not empowered) to advise on strategies – seek the input of a financial planner!
Work as long as possible. A financial planner can tell you how long you should work and what you should do in retirement to avoid outliving your assets.
Your Loved Ones Will Thank You…. (Estate Planning):
You could be handing an enormous mess to your heirs (family, friends) if you don't have your estate documents in order OR you don't have estate documents (wills, living wills/medical health care directives, powers of attorney). Estate attorney fees may seem high but you could be saving hundreds of thousands of dollars in estate tax when your assets pass to your family, friends or charity.
One of the smartest estate planning techniques to reduce estate taxes are Irrevocable Life Insurance Trusts (ILITs) that shelter your life insurance assets. Your financial planner or estate attorney can tell you if this is a strategy you could use to increase your children’s inheritance.
Avoid Excessive Tax Payments:
It pays in spades to time IRA distributions if you work (or not), consider Roth IRA conversions (if you qualify), give charitably in the form of investments (instead of cash), etc. Wise advisors consider which types of investments are best held in taxable accounts, which in tax-deferred accounts, etc.
Who Delivers Advice That Puts Your Interests First?
Bone up on the pros and cons of different types of financial advisors and investment managers. The big buzz word in financial planning is “Fiduciary.” Brokers do NOT have a fiduciary obligation to put your interests before their own. Ditto for advisors who sell products/receive commissions. Financial planners/advisors who DON'T sell products (=fee-only) DO have a fiduciary obligation to put your needs before theirs. The quality of the advice you receive can depend upon how your advisor is paid.
Eve Kaplan is a Fee-Only (no products sold) Certified Financial Planner® Practitioner with 30+ years of investment/planning experience. Kaplan Financial Advisors upholds the highest fiduciary standards in the planning industry. Eve opened Kaplan Financial Advisors in 2004 to provide comprehensive financial planning and investment management services to single women and couples. Eve can be reached at 908-898-0549 or Eve@KaplanFinancialAdvisors.com. Visit her website at www.KaplanFinancialAdvisors.com
Copyright © 2011-2017 by Eve Kaplan
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