Why it might be a smart move to hold off on starting that college fund

When asked to choose between a college education and their own retirement, parents will often put their children first and focus on saving money for college.

Michael J. Daso, CHFC, a financial consultant at AXA Advisors LLC, understands the thought process, but doesn’t agree with it.

“I believe strongly in flipping it,” Daso says. “Retirement should be the first priority. There are dollars out there for college through loans, grants and scholarships. But there are not dollars available to borrow for retirement. Too often, we focus on our short-term needs first and ignore the long-term financial goals because they seem so far away.”

Whether it’s a college fund or a retirement plan, saving money today for tomorrow has never been an easy thing to do. Determining the best plan to maximize your investment is further complicated by your age and life status.

“Time horizon has the most significant impact on how aggressive or conservative you should be in your investment strategy,” Daso says. “If you have 20 years until retirement, you can afford to be more growth oriented than someone who might be retiring next year. You need to reassess that risk level over time and adjust your strategy as you get closer to the date of your financial goal.”

Smart Business spoke with Daso about how your age and life status can affect your wealth-building strategy.

Which age groups tend to have a more conservative investment strategy?

The baby boomers and millennials both tend to be more conservative. A lot of the millennials entered the workforce during the 2008 financial crisis. It was a really tight job market and a period of historically low returns in the stock market. That made a lot of millennials worry and it carried over into their investment philosophy. It’s the same thing with the baby boomers, so they tend to be more conservative as well.

The challenge for both groups is if you’re too conservatively invested, particularly with the low interest rate environment we’re in now, you won’t even keep pace with inflation. Then we have the middle generation, Generation X. The biggest mistakes made by members of this group are not saving enough money, and then outspending what they make each month.

It isn’t so much a risk concern as a cash flow concern. The best way to combat that problem is to set up automatic monthly savings plans, either through your 401(k) at work or through supplemental savings. One of the best ways to do this is through monthly automatic bank transfers. It forces you to save money and pay yourself first.

How do you know how much you will need to retire?

Two of the biggest questions people have are will I have enough to retire and will I outlive my retirement outcome. It used to be that a three-legged stool was a good metaphor for what you would need in retirement. You had Social Security, your company pension and then your personal savings only had to provide a third of your retirement income.

But these days, fewer and fewer people are retiring with a pension from their company. They have to come up with a larger percentage of their retirement income from their personal savings. That is making them scared to lose their nest egg and it causes them to invest too conservatively.

What are some principles to follow regardless of age?

Establish an emergency fund before you save for other long-term goals. Long-term savings accounts have penalties if you need to access them prior to retirement. Life is definitely unpredictable and having an emergency fund should be the basis of your sound financial plan.

Start small and get something going where you’re saving on a monthly basis. It could be $100 into an investment account on the 15th of each month. That’s really empowering and helps change your mental outlook on saving. It can spill over into changing the way you spend money on a monthly basis. Once you get the account open and started, even if it’s a modest amount, that’s a huge hurdle to clear. 

Securities are offered through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA/SIPC. Insurance and annuity products are offered through AXA Network, LLC. AXA Advisors and AXA Network do not provide tax or legal advice. AGE 100896 (1/15)(Exp 1/17) 

Insights Wealth Management is brought to you by AXA Advisors LLC


How to satisfy the fiduciary duties of your 401(k) plan

If your organization sponsors a 401(k) or qualified retirement plan, then, as a plan trustee, you are legally responsible for the decision-making surrounding the plan.

These fiduciary duties are something many plan sponsors aren’t aware of. But even if trustees recognize them, they usually don’t understand what the responsibilities entail.

The fiduciary is tasked with running the retirement plan in the best interest of its participants — ensuring investments perform well relative to their benchmarks, and that fees follow industry standards. It’s the prudent man standard: You must do what is prudent for employees in the plan.

“I think the biggest difficulty is that most employers aren’t investment experts. They have little understanding of the 401(k) industry and its fee structures. As a fiduciary, it’s their job to make sure they are giving their employees the very best, but they have no education or understanding to take on that role,” says Daniel Halle, vice president and manager of Retirement Plan Advisors at Fragasso Financial Advisors.

Smart Business spoke with Halle about mitigating the risks of fiduciary duties.

Who typically serves as a trustee?

Many times the trustee who has fiduciary responsibility is the business owner, but in a corporate environment it could be more than one person like the owner, CFO and HR manager. With nonprofits, the board of directors and finance committee are often tasked with making decisions for the 401(k) or 403(b) plan.

If these fiduciaries don’t fulfill their duties, what problems can result?

As a fiduciary, you can be held personally liable for the decisions you make regarding the retirement plan. The Department of Labor or IRS likely won’t come after your personal assets unless you’ve done something illegal, but a former employee or group of employees may file a lawsuit. Those same employees could lodge a complaint with the Department of Labor.

The Department of Labor’s Employee Benefits Security Administration also is increasing retirement audits. This group, which has hired more personnel, would like to be in a position to audit every U.S. retirement plan every two years. And, these auditors will often find something wrong, which means paying fines and fees, and then going through a correction process.

How can trustees educate themselves to better understand fiduciary duties?

If you become a trustee or fiduciary and aren’t familiar with how to meet your responsibilities, at the very least, download the Department of Labor primer: Meeting Your Fiduciary Responsibilities.

Once you are familiar with what you need to do, consider whether you have the capability to do what the department is asking. A lack of knowledge is not an excuse.

Most people find they spend too much time trying to become an expert at something that doesn’t help the business. Instead, consider outsourcing it to an adviser willing to share that fiduciary liability with you, and who will help you mitigate it.

If you decide to outsource, how does it work?

It can sound like you’re adding another management layer, but often it’s a matter of redirecting the resources your plan was paying a broker to a registered investment adviser. Then, he or she not only acts as a fiduciary to the plan but also handles education, investment analysis and helps ensure all responsibilities are met.

What are other tips for mitigating liability?

Sit down with your adviser or broker at least annually to ensure plan investments are doing what they should be, according to your investment policy statement and investment benchmarks. Overall plan fees also should be examined to ensure they are reasonable. Then document that meeting.

Most importantly, if there are changes that need to be made, those changes must get initiated. If you find a problem and don’t take action, it can create more trouble than if you didn’t realize there was an issue.

Make sure you do everything you can. Look at the plan. Have an evaluation process. Fix problems. It’s not so much that you have the right or wrong investment. It’s what process did you use to help ensure that the offered investments meet their benchmarks as described in the investment policy statement, and then continually monitor those investments going forward.

Insights Wealth Management is brought to you by Fragasso Financial Advisors

Hidden fees mean financial advisers don’t have your best interest at heart

Investors working with a wealth manager or financial adviser may be satisfied with their returns. But that doesn’t mean they’re getting all they should.

“Many times prospective clients come to us for a second opinion on their investment strategies. We look into their portfolio and see fees the client is paying that they were not aware existed,” says Daniel Roe, CFP, Chief Investment Officer at Budros, Ruhlin & Roe, Inc.

“These can be in a variety of forms, often not well disclosed, particularly in products that are sold for ‘sizzle,’ which actually have little substance when it comes down to it.”

Smart Business spoke with Roe about the fees some advisers may be hiding in your investment portfolio.

Why should investors be wary of advisers who recommend annuities?

If an adviser suggests a variable annuity as an investment, it should sound an alarm. It’s not considered a standard vehicle for high-net-worth investors.

Some annuities may appear similar to stocks, bonds or mutual funds and have some attractive features, such as guaranteed levels of income upon retirement or downside protection from stock market declines. Their high fees, which manifest as commission to the adviser, as well as provisions that often work against the investor, mean stock exposure can be better obtained elsewhere.

There are times when annuities are useful, such as when a high-net-worth investor has no access to a tax-deferred retirement plan, but those applications are rare.

How can mutual funds be of more benefit to advisers than investors?

There are many mutual funds and each fund can be designated as one of many share classes. The only differentiation among the share classes is the underlying expense or fee structure of the fund.

Typically, a letter of the alphabet — A, B or C class, for instance — identifies U.S. stock funds. High-net-worth investors want to avoid most of these and invest instead in institutional class funds, typically called I shares, which have the lowest cost.

Choosing one of the higher fee share classes creates more income for the adviser, because they represent different compensation or commission schemes. Institutional funds don’t have that.

What costs might municipal bonds hide?

High-net-worth investors often have municipal bonds, issued to raise capital for government projects, in their portfolios. While the interest paid on these bonds is tax-free to the investor, they may incur significant costs.

The secret advisers keep is that municipal bonds can be traded like used cars, with wide variations in costs even though the products are identical. Investors mistakenly believe buying a municipal bond is the same as buying stock, which has a publicized, commonly accepted price. They’re unaware of the markups that are made as these bonds are resold.

Municipal bonds are bought in a negotiated market. If your adviser is not negotiating, that’s a problem.

What reason do investors have to be cautious with exchange-traded funds?

Exchange-traded funds (ETFs) have exploded in popularity, but many investors don’t understand they can accrue a lot in added costs if they’re not traded efficiently. There’s a spread between the buy and sell price, so when investing in ETFs be careful you’re not paying too much per transaction.

How can investors be confident an adviser is working in their best interests?

Don’t be afraid to get a second opinion on your investment portfolio, or even find a new adviser. An adviser who is independent, fee-only and is willing to act as your fiduciary is the best way to ensure investment recommendations are sound.

The phrase ‘acting as your fiduciary’ has legal significance that means the adviser is acting without conflict and in the client’s best interest.

Often brokerage statements say explicitly that the adviser will not act as an investor’s fiduciary, which should be troubling. Work with an adviser who will sign a letter stating that in every facet of your business relationship he or she will act as your fiduciary so he or she can never put his or her interests ahead of yours.

Insights Wealth Management is brought to you by Budros, Ruhlin & Roe, Inc.

Teachers nearing retirement put in a tough spot by new service timetable

Ohio teachers face a new retirement timetable that will go into effect this summer and affect how many years they are required to work, as well as how much they can collect when they retire. It’s creating a lot of stress for all teachers, particularly those close to retirement, says Randy Lupi, a financial professional at AXA Advisors, LLC.

The major change is that instead of being required to work 30 years, teachers will now need to work for 35 years and be at least 60 years of age before they can retire and collect an unreduced pension benefit.

“If a teacher is currently at 35 years with continuous Ohio service credit in the State Teachers Retirement System (STRS), they will receive 77 percent plus an extra bonus of 11.5 percent when they retire,” Lupi says.

“Unfortunately, the 11.5 percent bonus is being dropped after July of this year. A teacher who has less than 35 years as of July will no longer be eligible to receive the bonus. Many teachers decided to work over 30 years due to this incentive.”

Smart Business spoke with Lupi about the STRS changes and what options younger teachers have at their disposal to modify their retirement plans.

What else is changing with the STRS?

The final average salary (FAS) is currently calculated based on the three highest years of earnings. Going forward, the FAS calculation is being changed to cover the average of a teacher’s five highest years of earnings, which can result in a lower base figure. Also, the contribution requirement of a teacher has increased from 10 percent to 14 percent of their current salary, impacting cash flow for all teachers.

These changes were implemented by The State Teachers Retirement Board to make sure the pension system remains solvent.

What is the lesson for teachers?

These changes make it even more important to begin retirement planning several years in advance. Some teachers delay saying, ‘I’ll just go to the STRS and they’ll tell me my options’ or ‘I’ll just choose the highest payout.’

The pension election is irrevocable, so all options should be considered before a final decision is made. Teachers should start planning at least three to five years prior to retirement and consider their pension options based on their lifestyle and that of their spouse. They also should consider how their choices will affect their beneficiaries in addition to themselves.

What is the partial lump sum option (PLOP)?

The PLOP allows the STRS member to receive six to 36 months of their fixed benefit upfront.

The STRS will then pay the member a reduced monthly pension benefit. Teachers have been funding their pension by contributing at least 10 percent of their pay throughout their career. By electing a PLOP, they are essentially receiving part of their initial contribution back in the first year of retirement. Teachers that elect the PLOP typically roll the funds over into another pre-tax retirement plan like a traditional IRA or 403(b).

What are the benefits of the PLOP?

In certain circumstances, the PLOP allows teachers to better manage their taxable income at retirement, maintain control over the money and designate beneficiaries on the money. Some teachers will keep their investment conservative while many will maintain a balanced portfolio in efforts to grow their nest egg.

Many retired teachers still enjoy working and may have income from a new second career. By electing the PLOP, they are able to choose not to receive taxable distributions from their PLOP investment until they are truly ready to stop working and settle into retirement. Not taking distributions may help to better manage their taxable income, especially if their spouse is still working.

There are many variables to be considered before making any decisions regarding retirement plans. Teachers should get all of the facts before making these decisions. Consulting a financial professional may help them better understand the options, and the potential results of those options.

Randy Lupi offers securities through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA/SIPC, and offers insurance and annuity products through AXA Network, LLC. AXA Network conducts business in CA as AXA Network Insurance Agency of California, LLC, in UT as AXA Network Insurance Agency of Utah, LLC, and in PR as AXA Network of Puerto Rico, Inc. 
This information is not approved or endorsed by the STRS. Randy Lupi, AXA Advisors and AXA Network do not offer tax or legal advice, and are not affiliated with the STRS.
AGE 100610 (1/15)(Exp 1/17)

 Insights Wealth Management is brought to you by AXA Advisors, LLC



What’s your financial IQ?

Imagine you’re on a TV quiz show. The host turns to you and offers a list of topics, one of which is “Your Personal Finances.” Based on your knowledge, is this a category you would choose?

If you answered no, you’re not alone. Four out of five Americans admit they know more about a variety of topics other than their own finances. That’s about the same share that would choose to answer questions about subjects far less personal, such as current events, entertainment or science and technology.

These results were gathered as part of a research study, sponsored by Northwestern Mutual, to help gauge the American public’s overall financial knowledge — as measured by a financial IQ index — and its understanding of insurance products.

“For me, the results were a powerful reminder of the reason why financial advisers need to make it a point to help clients — even those in the business world — fully understand their personal finances, so they can make the informed choices that are right for them,” says Michael Byrne, a managing partner at Northwestern Mutual.

It’s also helpful for employers to help ensure their employees are educated on personal finances because it can affect their ability to retire.

Smart Business spoke with Byrne about the online survey, which was conducted by an independent research firm, of 1,664 Americans, ages 25 to 65, in 2010.

What financial concepts did Americans understand, according to the study?

The survey found that some basic financial concepts are well understood, including the best way to minimize losses in investments (88 percent answered correctly), asset allocation (79 percent) and dollar-cost averaging (57 percent).

Likely because of their self-explanatory names, high numbers of Americans also recognize what disability income insurance and long-term care insurance are designed to do.

Where did the survey respondents’ knowledge fall short?

More often than not, Americans fail to understand many key financial concepts like the average inflation rate over the past decade, which was known by about 1 in 3. Also, less than one-third knew the product that has traditionally mitigated inflation risk the best.

This lack of financial knowledge appears to be particularly acute when it comes to permanent life insurance. Only a small percentage of Americans seem to know even the basics of this type of risk protection.

What else did the survey results reveal?

Knowledge is power — and Americans recognize it. Nearly eight out of 10 consumers feel the need to learn as much as possible about their personal financial situation.

As to where they find that information and whom they trust, it was good to hear that when asked to rate the reliability of several sources of financial information, Americans rate financial advisers as the most reliable source.

A successful long-term investment strategy is a process that evolves as your needs and goals change at different points in your life. An experienced financial professional can be invaluable in helping you continually educate yourself on your personal finances — taking an objective, unemotional approach to investing and keeping your overall performance and goals in sight, even during market ups and downs.

In addition to talking to a financial adviser, be sure to check out this retirement savings calculator that can be used to show how contributions affect your ability to fund your retirement, as well as a lifespan calculator to estimate how many years you may live past retirement.


Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities) and its subsidiaries. Byrne is an insurance agent of NM and Registered Representative of Northwestern Mutual Investment Services, LLC (securities), a subsidiary of NM, broker-dealer, registered investment adviser, member FINRA and SIPC.


Insights Wealth Management is brought to you by Northwestern Mutual

Tips on assembling New Year’s resolutions for your finances

As you’re thinking about what you’d like to achieve in 2015, something to consider is your long-term financial future.

January is a time for pledging to make changes, so if you haven’t taken a hard look at how you’ll fund retirement, or even what you’d like your life to be like when you’re retired, now is a good time to put a plan together.

Smart Business spoke with Peggy M. Ruhlin, CEO of Budros, Ruhlin & Roe, Inc., to get tips on setting long-term financial goals.

What are some financial moves or considerations people should make at the beginning of the year?

There are a few financial resolutions to consider making as we enter 2015.

  • Resolve to write down your financial goals. That’s called a goal planning statement, and its abbreviation, GPS, is intentional. Writing down goals is like using a GPS to find your way to your destination, but even the best GPS won’t work if it doesn’t know where you want to go. Determine the position you want to be in financially, when you want to be there, and what you want to accomplish once you’re there. That will give you the road map you need to achieve your goals.
  • Resolve to pay yourself first. Instead of waiting to see if you have money left over at the end of the month, plan to pay yourself first. You could ask your employer to send a portion of each paycheck to a savings or investment account instead of your checking account. Paying off your credit cards is a simple way to save money in finance charges. Contribute the maximum amount to your 401(k) or retirement plan. It’s especially important to increase the contribution to get the maximum employer match, otherwise you’re throwing away free money. Also consider funding an IRA, and a 529 plan for your children’s or grandchildren’s education.
  • Resolve to check your investments. Make sure your investments are still in line with your asset allocation and that that’s still appropriate given your financial circumstances and risk tolerance.
  • Resolve to check your credit report. Get your free report at annualcreditreport.com and not one of the other so-called ‘free’ sites.
  • Resolve to review your estate planning documents. Make sure your beneficiaries, durable power of attorney and health care directives still name the people you want making decisions in the event that you are struck by disability, serious illness or death.
  • Resolve to talk with a wealth management professional if you need help setting long-term financial goals.

How often should people review their financial goals throughout the year?

Be cautious when reviewing your long-term financial plans too frequently. If you try to review your plan to see if it’s still feasible, it can give you an excuse to not do what you set out to do. We’re talking about a long-term plan, the success of which requires the fulfillment of many short-term goals. Unless you decide not to ever retire, it’s not likely that your long-term goals will change that much.

It’s wise to review your plan annually because new financial opportunities might arise during the course of a year. For instance, new tax savings opportunities could be come available through new legislation, new investment opportunities could be present that didn’t exist last year, your family circumstances might drastically change — birth of a child, marriage, death in the family — all of which could justify making adjustments. If nothing has changed, at least an annual review reminds you of what you’re working toward and the progress you’ve made so far.

Your long-term goals are personal, so it’s not up to someone else to set them for you. Professional wealth managers, however, can help you select the best tools and tactics to achieve your goals, especially if you’re having trouble or are ‘paralyzed’ when trying to set them yourself.

Insights Wealth Management is brought to you by Budros, Ruhlin & Roe, Inc.

How to build, and be a part of, a powerful nonprofit board of directors

The Pittsburgh region is nonprofit rich, which helps make the area a special place to live and raise a family. But it also makes it incredibly competitive for funding, which means nonprofits need to build powerful boards of directors who can help advance the mission of the organization and ensure its perpetuity.

Getting involved with a board is a great way to give back to a cause you care about because nonprofits are looking for passionate people who advocate for the group as part of their normal networking.

“You should look at me, because you’ve heard me talk about them enough, and say, ‘Here comes Dotti, I wonder if she’s going to tell me about the Pittsburgh Vintage Grand Prix or the Vintage Senior Community Center in East Liberty,’” says Dotti Bechtol, fiduciary asset business development officer at Fragasso Financial Advisors.

Smart Business spoke with Bechtol, who has served on nonprofit and for-profit boards and as a nonprofit executive director, about how nonprofits and boards can work together to create a strong organization.

What is the biggest misconception of executives who join nonprofit boards?

If you’ve joined a board because you think it will be good exposure to have your name on the website, you’re not being a strategic partner who can help guide the organization. It’s really not about you. It’s about the benefit you can bring to the nonprofit. And it really isn’t the place to market yourself; that’s not why you were invited to join, and it’s not what your focus should be.

You will have a number of expectations put on you as a board member, so it’s critical to join an organization where you have a particular interest. For example, if you have a child or family member with autism, you care about and are experienced with it and, therefore, will make a better board member for an autistic society.

Are nonprofit boards different from serving on for-profit boards?

It depends on whom you ask, but not really. They have the same problems. Just because you’re a nonprofit doesn’t mean you don’t pay attention to your budget. You can’t be losing money constantly and keep your doors open. The expectation of profit is just a lower amount of money with nonprofits.

So, what kinds of fiscal problems should board members be on guard against?

You need to thoroughly understand the financial statement, as a board member, in order to have the foresight to see problems. You can’t just rely on your finance committee.

As a board member, you are a fiduciary and have personal liability for what happens to the assets you’re charged with guarding. That fiduciary responsibility doesn’t just apply to the endowment and board directed funds, it also applies to the retirement plan.

In your experience, what are best practices for creating a strong board of directors?

Nonprofits should recruit board members carefully, and then vet them through LinkedIn, Google and referrals. Fill board seats with people who have the skills to fill a gap, and then be honest about why they are being asked to join. If an organization can’t afford an attorney on staff, find an attorney willing to give general guidance pro bono because he or she is on the board.

It’s a good idea to have a written job description so everyone understands the expectations and limitations. It’s better if board members know upfront the attendance policy, if they need to join a committee and if they are responsible for a certain amount of fundraising.

New board members should go through a thorough orientation. They need to learn about the organization’s history, get a tour of the facility, understand all of the programs and meet the people the nonprofit serves.

The executive director needs to run an efficient meeting that gives an overall view of what’s happening. Board members should contribute time beyond the scheduled meetings, including reading board packets in advance. It shouldn’t be something board members just think about when seated at the table for the meeting.

Finally, senior staff and board members should celebrate the successes. Boards don’t need to just be present for the problems. Celebrate your shared successes, acknowledge each other’s contributions and say thank you.

Insights Wealth Management is brought to you by Fragasso Financial Advisors

Why you can find time in your busy schedule to plan for a great retirement

Fear can be a significant factor in the retirement planning process, hanging over every discussion you have about when you want to retire, what you want to do in retirement and how you’re going to pay for it all.

What people often lose sight of, however, is that they don’t have to iron out every detail of the next phase of life in a single session.

“It’s the ability to take small, manageable steps,” says Angela Anderson, a financial professional at AXA Advisors LLC. “Every person manages the process differently. Maybe you take a step back and focus on understanding how your pension works. Or you look at what’s involved in setting up an IRA. Find an advisor who will work with you and create a user-friendly process that moves at a pace you’re comfortable with, removing the fear.”

Smart Business spoke with Anderson about how to calculate your needs so you can plan to retire with the lifestyle you expect.

Where do you begin in planning your retirement?

Visualize an ideal day for you in retirement. What does that day look like? Let’s say you want to travel to Hawaii once a year. How much is that going to cost? If you haven’t thought about things in that much detail, consider more open-ended questions. Do you want to travel? Do you want to go back to work? Do you want to volunteer?

Start with broader questions and you can at least start to formulate a picture of what you want retirement to look like. Once you have that, you can begin thinking about how to make that happen.

The biggest thing is to not be scared of the process. Think of it like going to a doctor. You don’t expect the doctor to write you a prescription before an exam has been done. It’s a process of discussion and examination to figure out what you want and what you may need to do in order to get there.

How do you find an advisor you can trust?

Good retirement planning is always centered on the relationship. Sometimes a client won’t become a client for years. You become friends with an advisor through a business relationship, a networking opportunity or just by being involved in the community. You build trust with that person. And quite often, that trust leads to, ‘OK, let’s sit down and talk about what you do and plan for your future.’ It’s not a one- or two-year conversation. It can be three or four years, or more, of just having those conversations.

How does the retirement conversation differ for women?

There are generally three major obstacles facing women. The first is that women typically live longer than men and that places more strain on cash flow in instances in which they are living five, 10 or 15 years longer than their spouses. What about long-term care when your husband is gone and your children have moved away?

Second, some women just assume that their husbands will take care of everything to secure their futures. It’s important to take care of yourself as much as you take care of your household.

The third obstacle is divorce. Most women have benefits on their own record like Social Security or a pension. So it may not be a lack of financial resources, but a lack of responsibility to take those assets and learn to manage them when you’re living independently from a former spouse.

What’s the key to achieving your retirement goals?

The sooner you plan, the better it will be. It’s never too late to help make those long-term goals come true. But you need a plan just like anything else. There are a lot of things that pull on people and quite often, it’s a challenge to find the time to sit down and think about your retirement. Find an adviser you feel comfortable with and talk about those goals. And then find opportunities to knock out a few steps along the way and give yourself the time so you don’t have to rush the process.

Securities are offered through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA/SIPC.  Insurance and annuity products are offered through AXA Network, LLC.  AXA Advisors and AXA Network do not provide tax or legal advice.  AGE 99808 (12/14)(Exp 12/16)


Insights Wealth Management is brought to you by AXA Advisors LLC 

Last-minute investment strategies, and how not to make them next year

There is nothing magic about year’s end when it comes to wealth management. It is, however, a time that coincides with tax planning, so it’s often an opportunity to consider financial planning moves.

John Schuman, chief planning officer at Budros, Ruhlin & Roe, Inc., says there are considerations to make at year’s end, but none that couldn’t have been decided much earlier.

“Consider your year-end opportunities, but find an adviser to work with so your planning isn’t crammed into the last month or quarter of the year. Advisers can make planning a lot easier and less stressful,” he says.

Smart Business spoke with Schuman about year-end wealth management tips and how to avoid an end-of-the-year rush in 2015.

What should be done before the calendar turns?

From a wealth management perspective, the end of the year is a time to think about maximizing contributions to qualified plans, making sure you’re putting away money in your 401(k) plans and other retirement planning vehicles such as Roth IRAs.

The general rule is to defer income and accelerate deductions. Following that logic, retirees experiencing a low income tax year, who are not withdrawing from their IRAs and have little or no earned income, can convert IRA accounts into a Roth IRA. Basically, you’re paying your tax early, but you’re choosing to pay your tax in the low bracket when having a low bracket year.

For those still in the workforce, there’s an opportunity to move money into a Roth IRA. A nonworking spouse can make a nondeductible IRA contribution and convert it tax-free to a Roth IRA.

It’s also a time to accelerate any tax deductions to offset income, like paying real estate taxes in December rather than January, and paying any local or state taxes in December and not waiting until the next year.

What else might be to an investor’s advantage at the end of the year?

Since 2006, qualified charitable distributions (QCDs) from IRAs have allowed people aged 70.5 or older to make up to $100,000 in charitable contributions and have that count toward their required minimum distribution. The benefit is that instead of having to take the distribution into income and then taking a charitable deduction, the QCD excludes it from your income altogether. This, in turn, eliminates state income taxes on the distribution and reduces the various phase-out limits. QCDs have not been extended for this year, but are expected to be. It’s advisable to make a QCD this year anyway, in anticipation of the legislation being extended.

On the estate planning side, we now have portability, which allows a spouse to inherit a deceased spouse’s unused estate tax exemption. Historically, each individual had to use their own estate exemption (currently $5.34 million). Now, any unused exemption can be passed on to the surviving spouse.

Further, the IRS says it’s permissible to go back for those who have died between 2011 and 2013 and retroactively take advantage of this portability election, but that has to be done before the end of the year.

Lastly, Congress has been focused on compliance with disclosing foreign-owned assets and accounts. A new amnesty program, which allows disclosures with reduced penalties, opened in July of this year. Failure to make a disclosure during the amnesty period can result in penalties larger than the account balance itself.

What would help people avoid having to make a year-end push?

Planning should be an ongoing process, not an event-driven reaction. If your investments get most of your attention during the last quarter, you’re being transactional, and probably not making the best decisions. It’s best that investors have an ongoing dialogue with their wealth management adviser throughout the year.

It’s common for people to procrastinate. But deep within procrastination is confusion, and that can freeze decision-making. People often aren’t aware of the full landscape of investing factors to form a strategy, so they get stuck. Most wealth managers do this for several hundred people every year, and know how to gather the facts and perform the analysis that help their clients avoid confusion, correct misinformation and make better decisions.

Insights Wealth Management is brought to you by Budros, Ruhlin & Roe, Inc.

How to set goals that increase your business’s value before you exit

It’s estimated that 3 million small business owners in the U.S. will sell in the next five years. Yet one-third of those owners don’t have a business or retirement plan to prepare for the transition.

“That’s a million businesses that are really vulnerable to debt, disability, economic downturn, competitors, external and internal strife, and more,” says Deborah F. Graver, high net worth asset development officer and chief compliance officer at Fragasso Financial Advisors. “If they don’t pay attention to it, everything they worked so hard to build could disappear, and then all their dreams of retirement are gone.”

If you fail to plan, you can end up unprepared to sell, she says. And if you have to have a fire sale, you won’t be able to convert what you’ve built into a liquidity event that really represents the true value of your small or midsize company.

Smart Business spoke with Graver about what to consider when you’re seeking to transition your business to the right people at the right time, and for the right price.

What’s the first step to planning a business transition?

First, sit down with an adviser to describe what you want to achieve. You need to work with a financial professional who can help you envision and plan for the transition.

An experienced, knowledgeable financial adviser can help create a transition plan in coordination with your CPA and attorney. While planning for the sale, your adviser should also work with you to create a customized personal plan to ensure financial security during your lifetime and beyond.

When do you need to get started?

Start planning for the transition at least five years out. Planning with foresight gives you time to prepare yourself and your business for the change. Proper business valuations on a routine basis are also vitally important.

What’s critical to prepare internally?

Make sure you have the right people in place. Strengthen your leadership structure, considering long-term goals and the intended succession plan. Are the managers’, directors’ and other employees’ strengths properly aligned with the roles they play in operating the business? Would changes in key employees improve operating efficiency?

If you are unsure of how to evaluate that and restructure where needed, or if you’re simply too close to the subject matter, consider hiring a consultant. A business transition specialist can help interview key stakeholders to determine strengths and weaknesses in the organization and provide guidance on strategic changes.

How else can you get ready?

Create a written business continuity plan, in the event of the death or disability of yourself or key employees. Various types of insurance can also help guard the business against loss of key personnel and protect the future of the company and personal wealth. For example, a key person life insurance policy can help protect the business from the adverse effects of losing essential personnel, and a more comprehensive buy/sell agreement can help provide greater financial protection for business continuity.

What can you do to make the company financially stronger before the transition?

Review the company’s fringe benefits, including the retirement plan. A quality retirement plan is key for retention and ranks as a top priority for job candidates. Many employer-sponsored plans also offer significant tax advantages to the company. A properly structured retirement plan helps to round out a solid business, making it more attractive to potential suitors, which can help you retire with a larger nest egg.

In addition, clean up the balance sheet. Managing assets and liabilities properly with disciplined accounting practices shows prudent financial control systems are in place. Employ cash management and debt reduction strategies to maximize value well in advance of an intended exit.

Planning a business transition can be like another full-time job. That’s why it’s critical to find a financial adviser who can help translate your vision into a plan, help execute the plan on that vision and work systematically with you to get the right people and processes in place. If you haven’t worked with an adviser before, or feel you’ve outgrown your current adviser, schedule an appointment with a seasoned professional more suitable given this stage in your life.

Insights Wealth Management is brought to you by Fragasso Financial Advisors