Don’t lose $400,000 in social security benefits!

Surveys have shown that a very large portion of households make very important social security decisions at random. Make these decisions incorrectly and maybe you receive $750,000 over your lifetime. Make smarter decisions and maybe you receive $1,150,000 over your lifetime. (These numbers based on average situation.) We can run social security projection scenarios for you, so you can maximize your social security received. Even more importantly is to make the decisions in the context of an overall comprehensive plan – social security is just one element of your overall plan. Many people do not know that you receive 132% of your base monthly benefit by waiting to age 70 to receive it. And you lose 25% of your base benefit if you take it at age 62. However, don’t always assume “age 70 is the answer”. There may be times it makes to start earlier. Furthermore, once you’ve made the decision, your ship has sailed – too late to change. Actually you can change your mind within one year but you must write the government a check for the full amount received so far. A lot of people also don’t know about the “spousal benefit”. Once one spouse begins receiving social security and the other is of social security age but have deferred their personal benefit to age 70 – they can opt for the spousal benefit until they reach age 70 which is 50% of their spouse’s amount. You don’t get it if you don’t ask! “Free” money! We would be happy to run your social security scenarios for you – just contact...

Fiducaries vs. Financial Product Salesperson (8/10/2010)

Follow the Money It’s important to know how your advisor gets compensated because it impacts their behavior: so follow the money! Two ways for a financial advisor to get paid: 1) Commissions from the products they sell you, or from security trades they make for you or 2) A percentage fee charged on the assets under management  – called “fee-only advisor”. The problem with commissions is they influence advisor loyalty toward their boss or to the products they sell, rather than to you.   It’s not an indictment of the person receiving the commissions.  Their intentions are probably good, but all things being equal why deal with the possibility that their judgment could be impacted?  Often hidden fees and penalties are present in this environment as well as we point out in an example below. The only investment professionals held to a fiduciary level of responsibility are Registered Investment Advisors (RIA) often called fee-only advisors. Lynn O’Shaughnessy wrote a wonderful article, “Financial advice better from fiduciary than broker” on this important topic. Common Mistakes 1) Using a commission-based advisor (broker) and not demanding (in a nice way)complete disclosure of all fees.    Be specific and get it in writing. 2) Comparing expenses of a fiduciary RIA vs. a broker before getting a complete disclosure of the broker’s fees.    You may mistakenly assume the RIA is more expensive since they fully disclose.   Usually RIA’s are competitive, and often provide superior service for the same or less cost. (We know of a recent situation where an RIA was charging an initial one-time financial planning fee of $2,000 with ongoing planning at no...

Investing 101: Discipline & Diversification (7/13/2010)

New, Practical & Brief Newsletter One of these newsletters could save you from making a big mistake. This is basic and “ready to act on” advice for those serious about making smart choices. By Luck or On Purpose? We want to help you grow your wealth. To prove that, we are willing to show you how to implement these ideas on your own. If you can invest with discipline and diversification over long periods of time, your returns will be higher than most everyone else. Your success will be purposeful; the few that exceed your results were lucky. Luck or on purpose? Your choice! Discipline: 1) Stay in the market, 2) stick to your strategy long term and 3) manage other aspects of your finances so that your portfolio can grow undisturbed. Diversification: Own a little bit of everything using low expense ratio funds. To accomplish this we use Dimensional Fund Advisors (DFA) which is available only to select advisors. The next best approach is using Vanguard index funds as your portfolio building blocks. We are willing to share our Vanguard portfolio designs, contact us. Discipline and diversification are fundamentally sound and can be found in lofty documents like the Uniform Prudent Investor Act (UPIA) and Restatement 3rd of Trusts (Prudent Investor Rule). There are many great articles on these concepts, click here for one of our favorites. These complex concepts have been presented briefly. Not convinced; need more explanation? We would happy to help, just contact us. Common Mistakes Typically mistakes can be traced to, you guessed it, poor discipline and diversification. 1) Poor Discipline. Moving in and...

O’Reilly Wealth Advisors Inaugural Prudent 401(k) Fiduciary Newsletter

O’Reilly Wealth Advisors Inaugural Prudent 401(k) Fiduciary Newsletter Greetings! Welcome to our inaugural issue! In these newsletters, we will expose the myths about 401(k) Plans. Does your 401(k) Plan have an ERISA Section 3(38) fiduciary? In our first article, you’ll learn more about Plan Sponsors delegating investment decisions to an ERISA 3(38) fiduciary advisor. You might want to click on the article, “Prudent Fiduciary Part 1”, to the right, and come back to this introduction once you’ve read the first article. What are the ERISA 3(38)-advised plan benefits? Complete fee transparency Far less fiduciary liability on plan overseers Much higher quality investment vehicles Advisor-managed portfolios Built-in checks and balances due to the independence of the team members. No mutual fund 12b-1 fee-sharing (and the resulting conflicts-of-interest & lack of transparency) The most significant improvements available to be made to 401(k) plans cannot be made without moving to an ERISA Section 3(38)-advised plan. At the end of this introduction we reveal how to find out if you have a 3(38)-advised plan. (It is highly unlikely.) Why are there so few 3(38)-advised plans? Because mainstream providers are making plenty of money without having to take on the increased fiduciary responsibility. Bundled 401(k) plans that dominate the 401(k) market have fewer and in some cases NO checks and balances. In our 3(38)-advised plans – O’Reilly Wealth Advisors is an independent 3(21) fiduciary, Advisors Access is an independent 3(38) fiduciary, McCready & Keene is an independent TPA/record-keeper that will not accept 12b-1 revenue streams and TD Ameritrade is an independent custodian with strict fiduciary requirements. Checks & balances are built into our plans....