Tips to Finally "Check the Box" on that Estate Plan You've been Putting Off

As a parent of a five year-old, my wife and I cherish our occasional date nights together. For some reason, serious topics and concerns about our family seem to come up during those times. One evening we found ourselves discussing our out-of-date Will that we completed before my son was born. We both agreed that the decisions we made back then needed to be updated. We revisited questions like, “If both of us were to pass away, who is the right person to take care of our son? How much money would he get from us? Would he be responsible enough to handle that money when he turns 18?” For most of us, conversations like these tend to go nowhere and we move on with our busy lives. This task then falls into the dreaded pile of “things we need to do.”

As human beings, we are experts at procrastinating, which is evidenced by a recent survey that showed that 72% of adults either had no estate plan or their plan is out-of-date1. I have experienced many people admitting that they need to create/update their estate plan but never take the action needed to complete it. Common reasons I have heard over the years include:

“I’m really busy right now and I will do it later”
“I’m not sure if I need it”
“I don’t know where to go to get it done”
“I am concerned about the cost”

SO HOW CAN WE REMOVE THE BARRIERS THAT PREVENT US FROM DOING WHAT WE KNOW IS IMPORTANT?

In my experience advising clients on estate planning, I have found the following tips help remove these barriers:

GET A “WORKOUT” PARTNER - Similar to exercising with a partner, finding a partner to keep you accountable can greatly increase your odds of success. Tell your advisor that this is an important goal for you and ask them to make it part of their follow-up service. If you don’t have an advisor, ask a friend or family member.

GET EDUCATED - Becoming informed and taking the time to understand why removes much of the uncertainty, helping you feel comfortable and motivated to take the first step. Ask your advisor for an education session. If you know an estate planning attorney, you can check to see if they will provide a complimentary first meeting where you can ask questions. Another option is to do your own research on websites like the Oregon State Bar Association http://www.osbar.org/public/legalinfo/wills.html

GET PREPARED - Establishing your goals and making a handful of key decisions ahead of time makes your meeting with the estate attorney more productive and can save you money if they charge by the hour. In addition, it helps create progress and momentum so that the process does not stall. Ask your advisor or an estate attorney if they can provide you with a questionnaire to help you prepare. Then carve out about an hour with your spouse/partner to write down information and discuss key decisions that require thought and debate. Examples of these preparation items include:

Decide who will be the guardians of your minor children.
Decide who do you want to be the beneficiary(s) of your assets and how would you like them to be distributed.
Decide who will be in-charge of managing and carrying out your plan after you pass away.
Determine your view of the probate process.
Prepare a list of your assets, debts and any life insurance.
Prepare a list of your personal information – names, dates of birth, contact information for yourselves, children, beneficiaries, etc.

GET A REFERRAL – Ask your advisor, friend or family member for a referral to an attorney who specializes in estate planning AND SCHEDULE A MEETING. Scheduling a meeting creates a deadline that will help you to move forward with the process. At Human Investing, we will often facilitate the first step by scheduling the meeting for our clients. Ask your advisor to help you take this first step for you.

LASTLY, REMEMBER WHY THIS IS IMPORTANT - An estate plan protects the people and causes you care about the most in life. Keeping this in mind can provide the motivation you need to see it through.

CONCLUDING THOUGHTS

With just a little focus and help, you can “check the box” on completing/updating your estate plan. My wife and I did end up turning that date night conversation into a new, updated estate plan by following the above tips. Now we have peace of mind and can have more enjoyable, light-hearted conversations going forward.

1The USLegalWills.com survey conducted by Google Consumer Surveys, June 2016.

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Marc Kadomatsu, CFP®, ChFC®, CLU®
Marc brings extensive experience in financial planning, executive benefit, estate, tax and insurance planning. He’s a CERTIFIED FINANCIAL PLANNER™ practitioner and holds the Chartered Financial Consultant (ChFC) and Charted Life Underwriter (CLU) designations. He’s a member of the Estate Planning Council of Portland and is the former President and Board Chair of the Financial Planning Association (FPA) of Oregon and SW Washington.

Change your Pre-Tax 401(k) to a ROTH 401k Contribution

If your 401(k) has a ROTH contribution type option (over half of all plans do today) changing your contribution type to a ROTH will automatically have you saving more money. For example, someone making $50k and saving 5% is contributing $96 per pay period (assuming bi-weekly payroll). By saving via the pre-tax type, that $96 feels like $75ish (depending on tax variables) but you have to pay taxes on it later. By switching to ROTH you pay the taxes now, but you are physically contributing more money (the full $96) to grow over time. There are other variables that can go into the pre-tax vs. ROTH discussion, but note that if you are saving the same percentage ROTH will always win because you’re saving more.

Automation can either be a huge win (think about direct deposit from your paycheck) or an epic failure (think about when predictive text messages create awkward moments between you and your parents). One way to implement automation in the retirement plan space is to implement auto increase. This feature allows you building your savings in a timely manner and creates the ability for to set up future savings in a customized and structured way.

Target Retirement funds, while not universally the best investment allocation for everyone, create an easy and efficient way to allocate your account that aligns with your age. By doing this, you don’t have to be worrying about checking in on your allocation and consistently making changes. It allows you to focus on your savings rate and letting the Target Date fund take care of investing appropriately.

If 2017 is the year you want to dive into your 401(k) we want to dive in with you! Feel free to email or call our office any time and we would happy to walk through any questions you have.

Andrew NelsonJanuary 20, 2017

Is Your "Uncle Larry" Giving You The Best Investment Advice?

I’ve done it with a construction project at my house and maybe you’ve done it with your retirement account. Yes, I’m talking about going to Uncle Larry, the person who is never short on advice but not necessarily an expert. For those of you who aren’t tracking, “Uncle Larry” is a figurative yet all too real figure who is willing to give out advice about most anything, and we tend to eat it up. Even though Uncle Larry is a tongue-in-cheek character, the reality is I’ve seen the damage he or she has done to retirement accounts. I get it, finding sound unbiased advice isn’t easy and the deck can be stacked against investors when it comes to receiving it. The good news is there’s hope. While we can't always run away from unsolicited advice, we can be equipped with some perspective and good questions to ask. My hope is to provide an outline with some good questions and standards when it comes to receiving advice, regardless of whether it’s from a family member or professional.

What’s your track record?

This question might be a little awkward if you’re asking your sister-in-law at the Thanksgiving table, but it is a reasonable one if she is offering advice on your retirement plan.
Don’t be afraid to get specific! If it’s an advisor, ask for references. If it’s a family member, ask for last year’s statement!

What’s your process for a recommendation?

If all your older brother is doing is simply looking at what fund has performed best for the last 3 months, odds are you aren’t going to be in a good situation. Instead, looking at the funds expense ratio, or cost structure of the fund can be a great resource. The lower the expense ratio (relative to the asset class) the better the predictor of returns.

Is there a conflict of interest?

This question is more specific to the cousin who works as a stock broker. If the name of the company she works for is the same as the name on the mutual funds in your account, that’s probably not a good sign. Imagine if Pizza Hut was the judge of the country’s best pizza; that’s like asking for the best fund from someone who is compensated by the recommendation they are making!

So what do I do?

Ideally you have a personal financial advisor or an advisor through your retirement plan who aligns with your best interest, Registered Investment Advisor (RIA). It’s worth asking if your advisor is a “fee only” fiduciary who by law is required to act in your best interest.

Human Investing is one of many companies who act as a fiduciary to clients and plan participants. Note: that our official stance on receiving advice from a non-professional family member is not a best practice. However, if your Uncle Larry has given you advice and you would like a second opinion, we would love to help you. Please don’t hesitate to email or call!

Call: 503.905.3100

Email: andrew@humaninvesting.com

Featured

Andrew Nelson
Andrew is passionate about diving into the details of organizations and how they serve their employees. Working with companies, increasing the financial literacy of employees and committees and stretching employee benefit dollars are at the core of what Andrew and his team get excited about.

So you're seeing Brexit in the news? Here's what you need to know about your retirement account

I’ll be honest, before two weeks ago I had to Google what “Brexit” was. During that search I quickly learned that the term referred to Britain leaving the European Union. Fast forward to last night, Americans went to bed hearing doomsday scenarios on the news, on Twitter, etc. and woke up this morning seeing red numbers roll across the TV screen. When newsworthy things like this occur I ask the question what does it mean? What's the impact? Bottom line, how does this affect my day to day, the people closest to me, and my future? While it’s not my job or my place to speak into your personal lives and how an event like this affects you. It is my job to speak to how an event like this affects your retirement account because that’s what individuals, families, organizations, and companies hire our firm to do.

Before you scroll down to the info-graphic Will Kellar (our newest advisor) and I put together HEAR THIS THE LOUDEST. Being reactive in markets like this (aka Market Timing) is rarely a good idea. Instead, take this as an opportunity to evaluate your portfolio and the risk you are taking. Saving for retirement is a long term strategy. Regardless of Brexit, you may be taking on too much or too little risk in your portfolio to meet your goals. Let us help you figure that out.

As always please do not hesitate to call or email us with questions. As Fiduciaries, our advice comes from a place to act in your best interest. Ultimately, this is money you’ve worked for and sleeping at night takes priority over most (if not all) other variables.

401k@humaninvesting.com

Andrew@humaninvesting.com

Will@humaninvesting.com

503-905-3100

Andrew NelsonJune 24, 2016

3 Ways to Plan for Healthcare in Retirement

At Human Investing our advisors talk a lot about retirement, but more and more so, health care is becoming a larger component of how we need to plan. Below are 3 ways you can prepare for the medical needs that come with retirement years as well as an illustration from my life of what happens when you take your health for granted. This past weekend I competed with a team of coworkers and friends in the Wild Canyon Games, a weekend long multi event adventure race that takes pride in pushing its competitors to “find their limits.”

My most anticipated event was geocaching. My teammate/coworker Andrew Nelson and I spent 4 hours running 17 miles in the rugged terrain near Antelope, OR hunting for and finding hidden objects (caches) by means of GPS. Leading up to this event we knew preparation was key so we diligently used google maps and GPS software to plot our course to find the most valuable caches. We printed off maps and purchased the necessary gear to compete in this event.

GPS
The Right Equipment
A Winning Strategy
Slight Insanity
A Below Average Sense of Direction

We were as prepared as a team could be, or so I thought… Now fast-forward to the event. It was mile 13 of 17 total miles and the end was in sight. Andrew and I were running to the finish line, and this is when things started going south for me. My vision blurred, my hamstrings balled up, my mental determination faded and each step was more difficult than the previous one. I didn’t “find my limit,” my limit found me and hit me square in the jaw. I wanted to crawl into a hole and hide. My body was shutting down. In all my preparation, I didn’t take into account my physical health. I didn’t train enough, eat enough or drink enough I didn’t prepare accordingly.

When running the race of life, many make a similar mistake. We become so busy thinking about everything else that we forget to take care of ourselves. Our busyness may hinder our health, especially as we look to the future and see the reality of our situation. The reality: health care in the United States is becoming more expensive: • Premiums, deductibles and other out-of-pocket expenses could cost a 65-year-old couple retiring today a jaw-dropping $220,000 – and that’s in addition to Medicare premiums.” (AARP.org)

• “The cost of health care is rising faster than inflation” (Forbes)

• According to the World Bank the average life expectancy in the US is 79 years, meaning retirement is lasting longer than ever before.

As we look down the trail towards retirement we can expect the same trend of rising health care needs and health care costs. The more you know and plan for you and your family’s health care, the better off you will be in the long run. Here are 3 thoughts to help you make sure your golden years of retirement stay golden:

1. Take advantage of your HSA- Many companies today are going the way of a High Deductible Health Plan (HDHP), frequently paired up with a Health Savings Account (HSA). An HSA has a triple tax advantage when used to save for inevitable health care costs:

1) Contributions (money put into the account) are pretax. 2) Through interest, dividends or capital gains your account can grow tax free. 3) Any withdrawals for qualified medical expenses are tax free.

So how much can you save?

hi-chart

Some HSA’s also have an option to invest these dollars with the goal of growth for a later date, similar to a retirement plan. If you have access to an HSA don’t miss out on this great opportunity to save for future health care expenses.

2. Save accordingly- Control what you can control. • Start saving, keep saving and stick to your goals. • Take advantage of your company’s 401(k)! Sign up and contribute as much as you can. • Ask questions: call the 401(k) Advisors at Human Investing with questions regarding saving for retirement - 503.905.3100

3. Invest in yourself- Whether you plan to travel the world, spend time with family, or give back to the community you will need good health to achieve your goals and dreams. You can begin making healthy choices today by sticking to those New Year’s Resolutions, eating right and exercising. Invest in yourself - keep your mind and body active and healthy for years to come.

Just like geocaching, it’s necessary to make adequate preparation for your future, but unless you invest in yourself well it becomes difficult to finish strong in the race of life.

Featured

Will Kellar, CFP®
Will is motivated by the opportunity to serve hardworking people and their financial pursuits, through advocacy, problem solving and great advice. He’s a CERTIFIED FINANCIAL PLANNER™ practitioner who loves the feeling of when our team makes a positive tangible impact in someone's life. He’s also serving as an adjunct professor of Retirement Planning at George Fox University.

Our solution to identifying your investment risk… and why it matters

This past weekend my wife and I went and visited two of our best friends in the hospital who just had a baby girl. When we got the text that the baby had arrived, we were in line at the Nike employee store. As we got up the counter, my wife became teary eyed with thoughts of happiness for our friends, as you can imagine the check in person didn’t quite know what to do! The cool thing about being at Nike at that time, was that we were able to pick up this little number as a gift for the newborn, which I would highly recommend simply because it's awesome.

Later that night we went to visit them, and I had not been to a doctor’s office/hospital in a while, and while I was there noticed the “pain tolerance scale” up on the wall in our friend’s room.

This scale has always made me laugh as often times it is usually relative and doesn’t define what the parameters are. What signifies a 10 on the pain scale? A broken leg? Something more painful? I know for me it was crashing my bike and meeting the gravel face first.

This got me thinking about a financial scale that many of us have seen before called the “risk scale”. Most people who have invested before have probably been asked the question, “Are you more of a conservative, moderate, or aggressive investor?” And most people say some form of, “Moderate, I think? I obviously want to make money but don’t want to lose it all”. Similar to the pain tolerance scale, the question needs to be asked; what does conservative, moderate, or aggressive mean? This is a reasonable question many people have a hard time answering. Human Investing has recently partnered with Riskalyze, a company that looks to provide tangible risk information that investors can act on.

Here is how it works: After completing a simple risk questionnaire you are given a risk score from 1 to 100. This score acts as a benchmark (investor lingo for pain scale) and explains what to expect during different market conditions. For example, if you are invested in the S&P 500 your risk score is a 78 according to the assessment. It also shows you that generally in a given 6 month period of time you can expect a best case return of 28% and a worst case return of -18% with a historical average rate or return of around 9%. As the investor, YOU get to decide if you’re comfortable with that and can look at different investment options or portfolios that fit your goals and timeline best.

So why does this matter? Because over time investors typically under-perform the market due to things like lack of discipline, changing strategies, and trying to time the markets. We believe that a more informed investor who understands their risk and the upside and downside of their allocation can fair better. When I show this tool to 401k participants I often use the following sound bite to explain that most investors are emotional and have a short-term view; In 2014 the 20 year backward looking S&P 500 annualized return was 9.85% while the average US equity mutual fund investor annualized return was only 5.19%! Yes you read that right. Over a 4% difference per year the average investor missed out on.

Our hope is by equipping investors with information like this people can have a better understanding of which investment mix is best for them and how to stick to it over time. Thus, creating higher returns by increasing discipline.

If you are looking for an explanation about the pain scale, I am just as confused as you and probably can’t help. But, if you would like to have a conversation about your risk score and how to implement it, don’t hesitate to email someone from our team or give us a call!

Featured

Andrew Nelson
Andrew is passionate about diving into the details of organizations and how they serve their employees. Working with companies, increasing the financial literacy of employees and committees and stretching employee benefit dollars are at the core of what Andrew and his team get excited about.

5 Ways to Leverage a Volatile Market for Tax Savings

When the market is volatile it can make investors feel uneasy. In a perfect world the market would never be down, but unfortunately ebbs and flows come with the territory. When the market does slow down, here are a few tax saving strategies that may be worth taking advantage of:

Sell the Losers – Investors who have assets in a taxable account might consider selling the assets on which they have unrealized losses. Capital losses generated can offset capital gains or up to $3,000 can be deducted against ordinary income. Additional losses can be carried forward indefinitely.
Contribute to a Retirement Plan – Contributions to IRAs, 401(k)s, and Roth 401(k)s are capped at specific amounts. Taxpayers can invest in their retirement accounts while values are lower and realize the benefits when the market recovers.
Convert to a Roth – Roth retirement accounts offer significant potential tax savings. IRA owners are allowed to convert to Roth IRAs but income tax would be due upon conversion. One strategy is to convert while the value of the assets are down in order to minimize the tax bill.
Exercise Employee Stock Options – Workers who received “non- qualified” options usually owe taxes on the difference between the grant price and the current value of the shares. Exercising stock options in a down market will lower the tax cost for the employee.
Make Gifts of Assets - If you are looking to gift stock to family or to a trust, you are limited to tax free gifts of $16,000 per year or $32,000 for married couples in 2022. A market when the cost per share has declined allows you to transfer more shares. When the value of shares rebound down the road, the IRS doesn’t assess gift tax on the increased value of the gift.

If you have questions on these strategies feel free to email or call and we would be happy to walk you through this blog post in more detail.

*Please note that Human Investing does not provide tax advice/guidance and you should contact your CPA with specific tax related questions.

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