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2014

February: I recently checked my credit report and found an error. How do I fix it?

If you find information that appears to be inaccurate you should file a report with both the credit bureau and the company that furnished that information to the credit bureau. They are both legally obligated to investigate your enquiry.

There are three nationwide credit bureaus:

  • Equifax
  • Experian
  • TransUnion

Federal law requires each of these companies to provide you with a free credit report every 12 months upon request. Learn more at: AnnualCreditReport.com.

Each credit bureau formats and reports your credit information differently but they essentially contain your:

  • Name
  • Address
  • Social Security Number
  • Date of birth
  • Credit accounts including type of account or loan, balance, and payment history
  • Recent credit inquiries
  • Collection agency debt or any public information such as bankruptcies, foreclosures, etc.

Checking your credit report at least once a year may assist you in catching inaccuracies and signs of identity theft. Analyze your report for any signs of identity theft including but not limited to:

  • Unknown accounts
  • Inaccurate addresses

If you find information that you think is suspicious you can place an initial fraud alert online at:

An additional step you may consider is to opt out of prescreened offers of credit and insurance at: Opt Out Prescreen


January: With the New Year upon us, I am worried that I am not prepared if a natural disaster strikes this year. What should I do?

With all of the news of hurricanes, tornados, floods and other natural disasters it can seem that there is always a natural disaster somewhere. There are several things you may want to do to help you recover quickly should a natural disaster hit your home or business.

  1. Build a basic supply kit to be prepared in case of a natural disaster. For ideas visit: www.ready.gov/build-a-kit
  2. Create a financial emergency kit that is kept in a secure place that is waterproof and fireproof and includes:
    • Cash
    • Checks
    • Insurance agent contact information
    • Copies of IDs, birth certificates, marriage certificates, insurance policies, wills, trusts, deeds, etc.
  3. Safeguard your assets against risks. You can do things such as install an emergency generator, keep large yard objects such as grills secure, remove overgrown tree branches, park your car in a garage, etc.
  4. Maintain an update-to-date inventory. Take pictures and record serial numbers of valuables including appliances, electronics, jewelry, artwork, etc.
  5. Understand your insurance policy. Not all damage caused by natural disasters may be covered in your policy. Consult with your insurance agent to review your current policy.
  6. If a natural disaster does strike, remember that your home or business may not be structurally sound after withstanding damage. Take pictures and record any damage to property.
  7. Understand your employer's assistance programs.
  8. Reach out to emergency resources such as the Red Cross, United Way, Salvation Army, etc.
  9. Consult with a tax professional to review any tax allowances allowed due to losses.
  10. Consult with an attorney if you experience legal difficulties and need guidance or in Illinois visit the Insurance Department at: insurance.illinois.gov
  11. Do not be afraid to ask family and friends to assist you and your family in getting life back to normal.

2013

December: What should I know about 401(k) fees?

401(k) fees may affect your investment returns so it is important that you know all the fees that might be associated with your 401(k) account. You will need to locate and read the disclosure information associated with your 401(k) plan. Generally there are two types of fees:

Investment Fees

The disclosure statement will likely clearly state the total annual operating expenses of each investment option. These expenses will typically be shown as a percentage of assets and as a dollar amount for each $1,000 invested. So if an account has an expense ratio of .10% that would be $1.00 for each $1,000 invested.

The disclosure statement should also include transaction fees, withdrawal fees, surrender fees, and transfer fees. Yes, there are many fees you should be aware of.

Administrative Fees

The disclosure statement should also include information detailing any fees that may be charged to your account for the day-to-day operation of the 401(k) plan.

In short, carefully review the disclosure materials so you can be well-informed about your retirement investment options. Minimizing the fees you pay to your 401(k) plan may help you to increase your retirement funds.


November: My elderly Father is starting to become confused about his financial life. What do I do?

Taking over your father's financial life might not be your first choice of activities nor the easiest thing to do. However, if an elderly parent can no longer manage on their own but can still articulate their wishes, you may want to consider several things:

  1. Finances

    Start an open dialogue with your parent to discuss their finances. You may want to access bank accounts, brokerage accounts, and insurance policies, to review their current situation and safeguard assets. If your parent works with a financial advisor or an accountant, set up a meeting to review the current situation. Now may be the time to arrange for direct deposits of income and direct payment for recurring bills to simplify and track money management.

  2. Health Care

    Consider discussing with an attorney a health care proxy that will designate who will make decisions about their medical care and incorporating end-of-life care decisions into a living will.

  3. Daily Life

    Consider discussing with a Professional Geriatric Care Manager your needs in caring for an elderly parent. Visit http://www.caremanager.org/ to learn more. These professionals are trained in areas such as: nursing, gerontology, social work, and/or psychology.

In short, trust your intuition about how much assistance is needed and develop a support team.

The National Association of Professional Geriatric Care Managers is not affiliated with LPL Financial or Guidant Wealth Advisors.


October: What is a Bond Ladder?

Building a bond ladder generally consists of assembling a portfolio of bonds that have staggering maturity dates. Bonds are subject to market and interest rate risk if sold prior to maturity so the bond ladder strategy generally includes holding bonds until maturity. It is important to remember that bond values decline as interest rates rise and are subject to availability and change in price. Government bonds and Treasury bills payment of principal and interest are guaranteed by the U.S. government if they are held to maturity offering a fixed rate of return and fixed principal value. Generally a bond ladder strategy allocation seeks to produce a steady stream of income.

There are generally considered to be two types of bond ladders. These include:

  1. Perpetual Bond Laddering: generally used by an investor who wants to conserve capital, predict cash flow, and understands the limited liquidity of strategy. The ladder might be assembled with Treasury bonds, with 10% being redeemed and reinvested each year.
  2. Fixed Term Laddering: generally used by an investor who wants a steady cash flow for a predetermined number of years. The ladder might be assembled with zero-coupon bonds. This type of bonds pays off of its interest in a lump-sum at maturity. Zero coupon bonds are subject to large fluctuations if sold prior to maturity. Investors pay ordinary income tax every year even when no payments have been received. The government guarantee applies only to the timely payment of principal and interest, not to market value if sold prior to maturity.

The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.


September: Why do some companies check your credit during the hiring process?

Companies may want to run a credit report on a potential employee to have insights into the potential employee’s lifestyle choices including previous addresses, bill payment history, and bankruptcy filings. The Fair Credit Report Act requires that your consent is given prior to reports being provided to potential employers. Currently, some states ban employers from running credit checks on prospective employees. To learn more visit: www.consumer.ftc.gov/articles/0157-employment-background-checks


August: Should I open a custodial account for my child?

Custodial accounts are opened for many reasons. However, it is important to remember that custodial accounts have legal and tax implications that need to be considered before opening an account.

Legal implications:

Once funds are transferred into a child’s custodial account the parents generally act as the custodian of the account. However, it is important to remember that legally the money now can only be used for expenditures that benefit your child.

Tax implications:

Custodial accounts do not act as tax shelters as they did in yesteryear. If the income from your child’s custodial account exceeds $1,000 (for 2013), then the child will likely owe taxes on this income.

Congress created “Kiddie Tax” rules (IRS Form 8615) that includes taxing a minor child’s investment income at the parent’s higher tax rate on investment income over $2,000. A parent might choose to use IRS Form 8814 (Parents’ Election to Report Child’s Interest and Dividends) on the income if they qualify.

You can move up to $14,000 (for 2013) under the annual federal gift tax exclusion into your child’s custodial account. Gifts up to the $14,000 limit do not reduce the lifetime $5.25 million federal gift tax exemption. However, after $14,000 is transferred, you must file a gift tax return (IRS Form 709).

See www.IRS.gov to learn more. Keep in mind that state taxes may be due as well.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. This information is not intended to substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.


July: Should I purchase pet insurance?

You might want to consider purchasing pet insurance if you are a concerned pet owner conscious about the rising costs of veterinary services. Many pets will become sick or injured during their life and reviewing pet insurance coverage might be a worthwhile exercise to review your options.

It is important to understand the costs and coverage offered by different pet insurance policies. A few things to consider:

  • What does the policy cover (preexisting conditions)?
  • What are the deductible options?
  • What are the coverage limits?
  • How are claims processed?

Carefully review your options to determine if the investment is worth it for your type of pet. Visit the American Veterinary Medical Association to learn more.


June: What are all of these senior certifications I see advertised by financial advisors, brokers, and insurance agents?

According to a recent report by the Consumer Financial Protection Bureau (CFPB) there are now more than 50 senior-certification designations that vary in credentials and have acronyms that are similar. The report concluded that this puts older adults at serious risk for fraud.

The CFPB recently recommended to Congress that the SEC should establish a portal through which senior investors could verify a financial adviser’s designation. This portal would include the coursework details to obtain this credential and allow users to understand the credentials.

The CFPB recognizes that senior investors are vulnerable to financial fraud. A starting point to decipher the various designations is a smart move by the CFPB to protect the growing segment of seniors


May: Why should I consider investing in bonds?

Every investor has to understand their threshold level for risk. Many investors will invest in bonds to attempt to balance out short-term volatility historically associated with stocks. However, investing in bonds is not a guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.

A bond is essentially an I.O.U. The bond issuer agrees to pay interest at a stated rate (a.k.a. coupon rate) and to repay the investor the original principal when the bond matures. It is important to note that bonds are subject to market and interest rate risk if sold prior to maturity, and bond values will decline as interest rates rise and are subject to availability and price changes.

Generally, there are four types of bonds:

  • Corporate
  • Government
  • Government agency
  • Municipal

Corporate bonds generally provide a steady stream of potential income at a higher rate than other bonds. If the corporate bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.

Government bonds include long-term and U.S. Treasury bonds and can range from three to thirty-year maturity periods. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

Government agency bonds include those issued by Fannie Mae and the Government National Mortgage Association, GNMA’s are guaranteed by the U.S. government as to the timely payment of principal and interest, however this guarantee does not apply to the yield, nor does it protect against loss of principal if the bonds are sold prior to the payment of all underlying mortgages.

Municipal bonds are issued by a government authority to raise funds for a public works project or general use. Municipal bonds interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. The news frequently mentions high yield or junk bonds. These bonds generally are part of a diversified portfolio of a sophisticated investor that is comfortable with substantial risks.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.


April: What are the pros and cons of a 529 plan?

PROS

Section 529 plans--both college savings plans and prepaid tuition plans--offer a combination of features that have made them attractive to college investors:

  • Tax-deferred growth at both the federal and state levels
  • If the money is used for college and is a qualified
  • withdrawal, the earnings are not subject to federal income tax
  • Contributions qualify for the $14,000 annual federal gift tax exclusion
  • Contributions are generally not considered part of your estate for federal tax purposes
  • A few states provide matching scholarships or matching contributions
  • Some states exempt qualified withdrawals from income tax or offer annual tax deductions for contributions
  • 529 plans are available to anyone
  • The amount you can contribute to a 529 plan is generally $300,000
  • 529 plans are managed by professional money managers
  • Generally you can't shop around for a prepaid tuition plan but you can shop around for the best 529 plan for you
  • You are allowed to roll over an existing 529 plan or a prepaid tuition plan once every 12 months without paying a penalty
  • 529 accounts are not complicated to open and generally offer automatic payroll deductions or electronic bank account transfers
  • 529 plans will continue to evolve as Congress periodically revises the law and states continue to refine their plans

CONS

Some of the drawbacks of 529 plans include:

  • With a 529 plan you generally have little control over specific investments once the initial choice of portfolio is made. With a prepaid tuition plan the plan’s money manager is responsible for investing your contributions
  • College savings plans do not guarantee your investment return. It is possible to lose your contributions. Prepaid tuition plans generally guarantee your investment return; however, modifications are possible due to projected actuarial deficits
  • Rules of the plan determine if you can redirect contributions. However, you do have one option that's allowed by federal law and not subject to plan rules. You can do a "same beneficiary" (without a change of beneficiary) rollover to another 529 plan (a college savings plan or a prepaid tuition plan) once every 12 months, without penalty
  • 529 plans will charge a 10% penalty fee on the earnings on any withdrawal that is not used for college expenses; a state penalty may also apply. You'll pay income taxes on the earnings, too. With a prepaid tuition plan, you must either cancel your contract to get a refund or take whatever predetermined amount the plan will give you for a nonqualified withdrawal
  • Fees and expenses are generally associated with 529 plans. Charges may include an annual maintenance fee, administrative fees, and/or an investment fee based on a percentage of your account's total value. Prepaid tuition plans may charge an enrollment fee and various administrative fees

March: I have several different IRAs. Can I combine them into one?

Many people have several different IRAs from participating in different retirement plans at different jobs and/or opening IRAs. This can lead to confusing separate accounts. Generally, if a record of pre-tax and after-tax contributions (for the purpose of computing taxes on distribution) in your retirement accounts is maintained, the funds from separate accounts can be combined into one IRA.

Potential benefits include:

  • Overall simplified retirement planning and distribution
  • Potential savings in fees
  • Increased buying potential
  • Consolidation of beneficiaries
  • Future streamlined paperwork
  • Tax consequences
  • Any charges associated with selling or buying investments before and after consolidating accounts

You will need to gather:

  • Most recent IRS tax filing documents
  • Most recent statements from all of your retirement and IRA accounts
  • Website URLs, usernames, and passwords to all plans

Your financial advisor can assist you in reviewing and evaluating your options to meet and/or define your consolidation goals.


February: Why should I hire a financial planner?

Financial planners are professionals that have developed a skill set that includes estimating financial needs, minimizing the impact of taxes, and pursuing a diversified portfolio. In addition, a financial planner can keep your long-term strategy on track by reducing the emotions involved in decision making.

It is important to find a financial planner that you trust and feel comfortable with. A CERTIFIED FINANCIAL PLANNER™ is a professional designation that signifies the financial planner has fulfilled certification and renewal requirements of the CFP® Board. Overall the CFP® designation signifies a high level of competency, ethics and professionalism.

Not all financial planners have the CFP® designation. Learn more about CFP® professionals at:
www.LetsMakeAPlan.org


January: I am overwhelmed by financial planning. How can I develop a simple plan I understand?

It is understandable with all of the news regarding financial market volatility that one might feel overwhelmed with financial information. In addition, financial decisions are generally filled with mixed emotions that can complicate decision-making.

A simple way to develop a personal financial plan is to consider:

On one side of paper:

1. Write down your short-term financial goals. These might include purchasing a home, going on a vacation, or buying a new car.

2. Write down your long-term financial goals. These might include retirement savings, a child’s college fund or paying off a home mortgage.

On the other side of the paper:

3. Write down your monthly net income.

4. Write down your monthly expenses. These might include mortgage/rent, car payment or transportation costs, insurance, food, taxes, utility bills or credit card payments.

5. Determine your discretionary income after all your bills are paid.

On a new piece of paper:

6. Create a monthly budget that includes line items for your short and long term retirement goals.

Now that you understand your goals and your financial situation, try to make arrangements to automatically invest funds for your short and long term financial goals.


2012

December: I inherited $6,000 from a great aunt but I have $8,000 in credit card debt. Should I invest the money or pay off the credit card debt?

The rule of thumb is if you can earn a higher after-tax return on your investments than the interest rate you are paying on the credit card debt, you should invest. However, if the interest rates on the credit cards are higher than you should pay off your debt.

For example, if the $8,000 credit card debt has a 14% interest rate, then given the current market conditions, you would want to pay off the credit card debt. Even in conditions the market is experiencing annual gains of 9%, paying off the credit card is still the best option.

Some tips to pay off your credit card aggressively include:

  • Contact the credit card companies and request lower rates
  • Consolidate all credit card debt balances to one card with the lowest interest rate
  • If one card is not possible, then start paying as much as you can to pay off the credit card with the highest interest rate first
  • If you have money sitting in a low interest savings account consider using some of your savings to pay off the higher rate credit card debt
  • Monitor your discretionary spending on gourmet coffee and eating out and try to shift this expenditure to a credit card payment
  • Every time you receive your paycheck, make a habit of paying the credit cards first to help you stick to your budget
  • Leave your credit cards at home so you are not tempted to make impulse purchases

Research credit card interest rates at:

When your credit card balances are paid off, reward yourself with a new financial plan that includes saving more aggressively for your retirement.


November: What are some tips for starting a business in retirement?

While some retirees are happy to relax or play golf and tennis, others find that retirement is as an opportunity to open a long-dreamed about business.

One great thing about being an entrepreneur at an advanced age is not only the list of contacts but the invaluable life of lessons learned.

A few tips:

  • Consider starting small to test the waters of not only the possibilities of the business but how much you enjoy the different aspects of the business
  • Weigh the pros and cons of taking out any debt or touching retirement funds
  • Spend time and make an effort to truly understand the possible financial liabilities of the business
  • While younger entrepreneurs might not have the financial cushion a retiree does, the retiree does not have the time to rebuild assets.

    An interesting article for potential retiree entrepreneurs is from Inc.:
    5 Reasons to Start a Business after You Retire


October: How can I protect myself from online identity theft?

Online identity theft is on the rise in the United States because identity theft schemes like phishing, pharming, and other Internet schemes are constantly improving.

Being armed with knowledge about how these schemes work is your first line of defense.

TERMS TO KNOW:

PHISHING: A popular Internet scam in which a criminal attempts to obtain your personal information by using e-mail spam.

PHARMING: A scam in which malicious code is installed on a personal computer or server, misdirecting users to fraudulent Web sites without their knowledge or consent.

To avoid compromising your personal information, use the tips below to help protect your identity online:

  • Never click a link provided in email from someone you don't know or trust. It may contain a virus that can contaminate your computer and steal your information.
  • Ignore, delete, and report as spam any email - even if it appears to be from a reputable company - that urges you to click a link to verify your account information. This is what is known as a phishing scheme.
  • Shield your computer and wireless router with firewalls and antivirus software to catch viruses, hackers, spyware, and crimeware.
  • Create tough-to-crack passwords, change them often, and never let financial programs or websites auto-save your passwords.
  • Avoid unknown sites that offer free music, ring tones, and/or game downloads.
  • As much as you can, connect to your financial accounts only from your own computer.
  • Regularly monitor your financial accounts online for charges you didn't make.
  • Contact all three major credit bureaus below and place a fraud alert on your file:
    • TransUnion: 1-800-680-7289
    • Experian: 1-888-397-3742
    • Equifax: 1-888-766-0008
  • Contact your credit or debit account companies.
  • Contact the Social Security Administration Inspector General in cases of benefit fraud, employment fraud, or welfare fraud: 1-800-772-1213
  • Wheater or not you have a passport, write to the passport office and alert them in case anyone tries to order a passport fraudulently: SSA Fraud Hotline, P.O.Box 17768, Baltimore, MD 21235
  • Contact your local police department. Report the crime and get a copy of your report; otherwise, you have no proof that the crime occurred.
  • Notify the Federal Trade Commission: 1-877-438-4338

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Securities offered through LPL Financial, Member FINRA / SIPC.
Investment advice offered through Guidant Wealth Advisors, a registered investment advisor and separate entity from LPL Financial.
The LPL Financial registered representative associated with this page may only discuss and/or transact business with residents of the following states: AR, AZ, CA, CO, CT, FL, GA, IL, IN, KY, MA, MD, MI, MN, MO, NC, NH, NJ, NM, NV, NY, OH, OR, PA, SC, TN, TX, VA, WI.