Avoiding a Crisis: Questions to Help Secure Your Financial Plan

If you think of your investment portfolio as your financial plan, you’re missing the big picture. Worse, you may be preparing for the kind of planning no one wants: crisis planning.

Your financial plan is more than your investments. Here are some crucial questions you should ask yourself or, better yet, your financial advisor should ask you.

¦ How are your investment accounts registered? Do you have your joint accounts registered as co-ownership with right of survivorship? Is your child listed as the owner or do you have beneficiaries on your accounts? An in-trust account does not necessarily provide you with complete protection of your assets. A misstep in this area could be very costly.

¦ Do you realize that there could be negative consequences of claiming Social Security at age 62? Choosing the wrong strategy could be devastating to your spouse in their future retirement years.

¦ Have you thought that there could be a negative chain reaction when selling investments in your portfolio? You may inadvertently set up next year’s Medicare Part B and Part D prescription drug coverage monthly premiums.



¦ Have you considered the resulting tax implications of a Roth conversion? You could be the source of what is known as the “fiscal torpedo”.

¦ When doing your estate planning on your own – or not doing it, or letting your church guide you in preparing your documents – do you understand the potential pitfalls you may have created for your family? If the wrong legal terminology is used in your documents, it could create unintended consequences upon your death. You should never ignore paid professional assistance from a qualified estate planning attorney.

¦ Do you realize that when you buy an annuity, the recommendation of the person selling it may be affected by their own interests? An annuity may indeed be the right product, but you need to understand why it’s right for you and why you should own it. If the seller can’t explain things clearly, they’re not the right seller.

¦ Do you know that a divorce settlement with a 50/50 asset split does not necessarily yield a 50/50 percentage? Or that a $100,000 401(k) has a bigger tax effect than a $100,000 Certificate of Deposit? You must consider the tax implications of the assets assigned to you in a divorce.

¦ If you’re 70½ or older, have an IRA, and want to donate to charity, did you know there’s a better way than writing a check – a way that allows you to donate to your favorite causes and keep your tax money from going to Uncle Sam? A qualified charitable distribution can lower your required minimum distributions and save you taxes at the same time. If your financial advisor doesn’t want to bother with the paperwork, you might consider working with a financial professional who does. Less taxes for you means more money for you and your heirs.

¦ Do you understand the difference between a Medicare Advantage plan and a Medicare supplement, and which would be more appropriate for your health and your family? The right choice at election time (whether you’re on Social Security disability or starting Medicare at age 65) can have major consequences in the event of a major health event.

¦ Do you know that by mistakenly designating minors as beneficiaries on your retirement account, you could create unnecessary legal costs? By naming a trust, you could create a tax nightmare for your family. Using the correct legal terminology for your documents is key to ensuring your beneficiaries receive things the way you intended.

The purpose of my questions is simple: to get you to stop and think. At the complex intersection of finance and law, non-professionals often don’t know what they don’t know. And what you don’t know can indeed hurt you.

These are the days of Henny Penny, with so many people shouting “The sky is falling!” when it comes to markets and news. So my advice is to be careful where you get your advice. Searching for health-related symptoms on WebMD is not a substitute for examination by a competent physician. The same principle applies to your financial plan. Avoid taking it from neighbors, friends or family (unless one of them is a trained professional). Instead, consider talking to an experienced financial planner who will take your entire situation into account.

You deserve someone who can guide you in crafting a unique plan for you and your family, one that helps you navigate the future with confidence. ¦

— The opinions expressed in this column are for general information only and are not intended to provide specific advice or recommendations to any individual. Fero Financial and LPL Financial do not provide legal and/or tax advice or services. Securities offered by LPL Financial, member FINRA/SIPC. Advisory services offered by IFG Advisory LLC, a registered investment adviser. Fero Financial and IFG Advisory LLC are separate entities from LPL Financial.