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| Money Talks, LLC Newsletter August 2010 |
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In This Issue
Brian's Financial Plan:
401k Fees and Beyond
Financial Advisors:
How Much Control is Appropriate?
Links to resources in this issue:
IRS Income Tax Calculator
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Money Talks, LLC
511 SW 10th Ave.
Suite 805
Portland, Oregon 97205
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Thanks to everyone who contacted me regarding the last email newsletter. I really appreciate the feedback.
One reader emailed to say the Bank of America continues to charge $10 for cashing Bank of America paychecks unless the payee has a Bank of America account. She was recently charged $10 to cash a $40 paycheck.
Best Regards,
Susan |
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Susan Hammitt
Financial Counselor
Divorce Financial Analyst
Mediator
Life Planning Specialist |
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Personal Financial Sustainability:
Fees provide a revenue stream for valuable services, they are a necessary fact of life. However, layers of fees in investment portfolios; redundant fees for managing "managed funds", adminstrative fees, advisor fees and hidden fees that reduce the return on investments must be scrutinized. This month a case study focuses on 401k plans. However, the lesson translates to all investment accounts.
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Brian's Plan:
When Brian called he told me he just read a disturbing article about hidden fees and expenses in employer sponsored retirement savings plans. He got my name from a friend, visited my website, and wanted to make an appointment to discuss his financial plan. Brian did not ask me about my fee so I told him. He simply said, "Yea, that's about what I expected" We made an appointment.
Brian arrived well prepared. He opened his folder and carefully presented me his recent paycheck stub, a summary of his credit report, two years of tax returns, and his 401K and bank statements. After reviewing the documents I had quite an impression of the 28 year old man. We began talking about money.
Here is Brian's financial profile. Click on the links to explore details of Brian's financial perspectives and plan.
- Brian graduated from Portland State University four years ago. He now works in IT for a local small company. He believes he will change jobs sometime in the next three years.
- Brian's salary is $36,000 a year, his employer matches up to 3% of his 401k contributions, and provides medical insurance.
- Brian has been contributing 10% of his salary to the company 401k plan.
- Combined balances of retirement and personal savings accounts are approximately $30,000. He saves all gifts of money and rarely taps his savings.
- Brian's valuable life (he used my term from the website) cash flow requirements are $1,700 a month, including funding a small reserve account.
- He does not use credit because he has witnessed the effects on his peers and his parents discouraged the use of credit.
- The previous two years Brian paid approximately 17% of his gross earnings in State and Federal Income Taxes.
- Brian gives 10% of his gross earnings to charitable donations through a payroll deduction plan.
Brian emailed me a couple of times with follow up questions and I will likely meet with him in a year. For now, this was all the financial planning he felt he needed.
Make a Plan That Works For You! |
NOW IS THE TIME TO PLAN FOR THE HOLIDAYS!
Every year we have an opportunity to reformulate our traditions, holding on to that which is valuable, letting go that which is stressful, and creating new traditions that are meaningful.
Changes in the economy require all of us to be more sensitive in our expectations of others. Friends and Family members who suggest a pot-luck rather than a hosted holiday dinner need the gracious support of their loved ones. Even modest gift giving may be too much for financially challenged friends and family.
Schedule a family meeting and plan an inclusive holiday season that is filled with genuine celebration!
Make a Plan That Works For Everyone! |
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Talk About Money
How Much Control is Appropriate for Financial Advisors?
Most of the readers of this newsletter wouldn't consider allowing anyone to secure a blanket power of attorney authorizing a financial advisor to control their lives and financial affairs. However, each of us knows at least one person who is so trusting and in need of help they may authorize inappropriate power and control.
Recently I have encountered a disturbing case of elders who signed authorization for an advisor to control asset accounts, direct the details of estate documents, execute the purchase financial products, and pay whatever fees the advisor charged; all without specific consent or acknowledgement. The client ended up losing thousands of dollars and it could have been worse. Sometimes victims lose everything.
Over the years I have met with many people who have given too much access and control to advisors who have taken advantage of their trust and vulnerability. Before signing a power of attorney or authorization it's important to clearly define the scope required for the services contracted. The broader and more inclusive the scope, the more likely the need for third party consultation, perhaps an attorney.
Unfortunately predators target people who are trusting and vulnerable.
Trustworthy professionals do not contract for more authority than is required to perform specific services.
Trustworthy professionals recognize that trust grows as relationships develop and mature. Limiting the power of a new advisor provides an opportunity to withdraw, hold steady, or increase authority as appropriate over time.
Trustworthy professionals rely most heavily on performance of their duties rather than flattery and seductive reassurances. That's not to say trustworthy professionals lack social skills. But, when asked direct questions regarding their services or expertise, they answer the question with verifiable accuracy.
Most of us will never experience this abuse. However, all of us know someone that is a trusting and vulnerable target. Sometimes all it takes is a little dialogue and conversation to protect prospective victims.
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