Consider the financial implications of a divorce before it’s too late

In typical divorce settings, two parties work with their attorneys to divide property, a decision that’s usually centered on assets, current income and expenses. How the division of assets will affect each party over the long term, however, isn’t often part of the discussion.

“There’s no one there to provide long-term financial projections and illustrate the consequences of those actions,” says Amy Weldele, CFP®, CDFA™, Senior Wealth Manager at Budros, Ruhlin & Roe, Inc.

When shared assets are divided, it must be understood that each spouse likely won’t be able to afford the same lifestyle as before the divorce, she says. A Certified Divorce Financial Analyst (CDFA™) can point to potential problems before a divorce, giving each party more information on which to base long-term planning decisions.

“If you’re close to retirement and splitting assets in a divorce, you don’t have much time to make up for a financial mistake,” Weldele says. “It’s very important for older people to think about the effects of a divorce settlement before a legally binding decision is made.”

Smart Business spoke with Weldele about the long-term financial considerations that should be made when getting a divorce, CDFAs™ and how they fit within the collaborative divorce process.

What is the CDFA™ designation?

The CDFA™ designation is acquired by financial professionals through the Institute for Divorce Financial Analysts. Financial professionals who have this designation are considered experts on the financial planning side of divorce.

A professional who has the CDFA™ designation can act as a strategist and prepare long-term financial projections that attorneys would often not prepare. CDFAs™ provide a second layer of financial expertise that adds value to what attorneys bring to divorce settlements.

CDFAs™ also provide litigation support to attorneys if a case goes to trial. These professionals can testify as financial experts and expert witnesses because the designation often carries more weight in a legal setting.

What is collaborative divorce and how are CDFAs™ involved?

In thinking about hiring a divorce attorney, many people are not aware of the collaborative approach to divorce. It’s not for everyone, but it can be beneficial in the right circumstance.

Traditionally, the two people pursuing a divorce each hire individual attorneys and enter into an often protracted legal battle over assets, with the final decision made by the court.

When the lines of communication are somewhat open, the couple may instead seek out attorneys trained in collaborative law. These specially trained attorneys work with a couple outside of court on the premise that they can find a compromise without requiring a judge to issue a decision.

Two attorneys, one for each person in the divorce, and the couple work together along with a mental health professional to come to the terms of the divorce. Often a CDFA™ is brought in to consult with both parties on the division of assets and the financial consequences of those decisions.

How can a CDFA™ help?

Bringing in a CDFA™ as soon as possible to help divide assets and highlight long-term financial goals can save people from realizing, after the fact, that they’ve taken on more than they can afford.

There are major financial planning issues to consider when entering into a divorce, such as Social Security benefits, which have a number of technicalities; estate planning adjustments; and health insurance issues. As the divorcing couple faces these decisions, a CDFA™ may present the financial implications of the decisions today and in the future.

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

How to create a safety net for using accumulated wealth in retirement

You’ve spent years putting funds away in order to earn a relatively large retirement income, but spending that income may be more difficult than you expected when you no longer have a paycheck coming in — especially if you’re a “saver” by nature.

Adam Spiegelman, wealth management advisor at Northwestern Mutual, says there’s a psychological shift when you start drawing down your assets.

“Many retirees become more frugal in retirement, regardless of the amount of income or assets they have,” he says. “Their biggest fear is running out of money — and it goes across all levels of net worth, whether you have $1 million or $20 million.”

For example, if you go out to dinner when you’re making a couple hundred thousand dollars a year, paying $100 or $150 isn’t a big deal. But after you’ve retired, that expensive dinner is coming from a bucket of money you’re not replenishing.

Smart Business spoke with Spiegelman about planning to spend your wealth in a way that still provides peace of mind.

Why do some retirees in particular fear that their income is going to run out?

It’s interesting. If you were a big spender during your working years, that won’t necessarily change in retirement — your philosophy is ingrained. The same is true for those who are savers. They are always going to be somewhat frugal and often find retirement spending much more difficult.

For people in their 30s, 40s and 50s, the name of the game is accumulation. But when you retire, the biggest questions are do you have enough money to live for the rest of your life and are you losing principle? That’s why you need a more conservative investment strategy.

What are some options that may put their minds at ease?

If this is something you’re struggling with or you think might be a concern, first hire a professional to oversee everything and put you at ease. It doesn’t matter if you’re an expert on managing money and investments, you don’t want to have to worry about where your money will come from or what funds to sell to fund your lifestyle.

Consider purchasing guaranteed income products like annuities to add to your monthly pension and Social Security income. This is where you turn over a lump sum to a life insurance company and in exchange it provides you a monthly income for life. If you outlive your expected life expectancy, you’ve made money from the deal. (You can estimate your life expectancy with this calculator.)

With annuities, there are many ways to protect your income stream from a sudden death. For example, in a joint and survivor arrangement, you receive a lower monthly payout, but when you die your spouse continues getting that income for the rest of his or her life.

If you want to buy an annuity, do your due diligence because lots of different products, such as market-based annuities or indexed annuities that keep pace with inflation, are available from many companies. Expenses and performance can vary as well.

Another option is an investment or rental property that provides a monthly income, if you have the available discretionary capital. Again, you need to know what you’re doing and like any other investment it may take a while to get a return.

Medicare premiums are an expense that many people approaching retirement might forget about, so get in touch with the state health insurance assistance program, also known as California’s Health Insurance Counseling and Advocacy Program, (800) 434-0222. This volunteer organization consults on Medicare and advises retirees how to find the most efficient and cost effective plan.

Keep track of what you spend and try to stick to a budget. If possible, plan to spend close to what you did in your preretirement years until your 80s. That figure can be dropped by roughly 20 percent later in retirement, but you also want to create a plan for a long-term care event, whether that is spending down some assets or through some other means.

If you’re careful and deliberate in your plan, you can have the peace of mind that you can be comfortable for the rest of your life and still provide for your heirs.

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities) and its subsidiaries.


Insights Wealth Management is brought to you by Northwestern Mutual

Think about what you want before engaging with a financial professional

It’s never too late to make plans for your retirement, even if you just retired.

“There are plenty of people who choose to wait,” says Matthew Goedde, CFP, a financial professional at AXA Advisors, LLC.

“These are individuals who have been saving for their entire lives and have done a good job. But the next step is the distribution phase and there are so many more pitfalls that can come up during this phase. The professional’s job is to help you navigate through those pitfalls so they don’t become a problem.”

Everyone takes a different approach to retirement planning. But no matter the process, there is almost always something to be gained from sitting down with someone who does it for a living.

“The financial professional’s job is as much about helping you accumulate and protect your wealth as it is about managing it,” Goedde says. “A lot of people think you have to be rich in order to work with a financial professional. But part of the job is to help you define your goals, prioritize your objectives and develop a road map to your definition of wealth.”

Smart Business spoke with Goedde about how to find the right financial professional to suit your needs.

Where is a good place to start when looking for a financial professional?

You have to ask a lot of questions to find out whether or not the professional will be a good fit. What you are trying to figure out is if the professional has the experience, knowledge and skills to best help you. How long has this person been in the financial industry? Is this someone who has advanced skills and the ability to explain complex concepts in everyday terms?

Look at the tools and services that would be available to you and the different investment vehicles that exist through this person.

Would the professional work alone or is he or she part of a team that would help you?

In the middle of all that, you’re going to want to know about the compensation for services that are provided.

If you don’t have a specific person in mind to speak with, look at referrals from family and friends or colleagues at work. Referrals from co-workers can often be very helpful, especially if your employer has specialized benefits such as a pension or bonus plan.

What are some red flags that should make you wary?

Communication is the key. If there is a breakdown and you don’t feel satisfied or don’t understand the advice the financial professional is giving you, it’s probably not a good fit.

If it sounds too good to be true, it probably is. If they are putting pressure on you in any way or hasn’t asked you a single question, but is already going into a sales pitch, it’s probably time to take a step back.

What materials can you bring to your first meeting with a financial professional?

It’s great to have any financial statements on hand from any current accounts that you have. You should also be prepared to share as much information about your attitude and your core beliefs when it comes to investing.

It’s definitely not a cookie-cutter approach. The professional needs to get a feel for what you are trying to accomplish and use the right tools to help.

What if you’re considering a change after years with one financial professional?

You always need to look out for your own best interests, but be sure to keep communications open with your current professional. It might be that he or she doesn’t realize that you want to be contacted twice a year instead of once a year. A communication breakdown is something that potentially can be worked out so you can keep moving forward.

Matthew T. Goedde is a registered representative who offers securities through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC and an agent who offers annuity and insurance products through AXA Network, LLC. Investment advisory products and services offered through AXA Advisors, LLC, an investment advisor registered with the SEC.  AXA Advisors and AXA Network are affiliated companies and do not provide tax or legal advice.

AGE 102242 (3/15)(Exp 3/17)

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

How to estate plan, beyond just creating a basic will

Half of Americans with children and 41 percent of baby boomers don’t have a will according to a 2012 survey by Rocket Lawyer.

The lack of planning is an epidemic, says Melissa Richey, an executive vice president of sales and marketing at Fragasso Financial Advisors. People aren’t prepared for an untimely death, and they aren’t prepared for their timely death either.

“People need to understand that life is unpredictable. They should not put estate planning off,” she says. “People get caught up in the investment rate of returns and the stock market — none of that means anything if you lose half your money to the government because you died without a will or didn’t plan well and your family suffers.”

Smart Business spoke with Richey about the pieces of your individual estate plan, including looking beyond a will.

What are the basics that you need in your estate plan?

Three pieces to a solid estate plan are the simple will, power of attorney and living will. The power of attorney guides financial decisions and allows somebody to manage financial tasks if you’re incapacitated. A living will is a legal document that provides end of life directives like medical decisions. When emotions are running high, it can be hard for family members to make decisions. Clearly defined documents make it easier.

Why do you think people put planning off?

People often think they are too young. Others don’t think they have the time or money to spend. For some, it’s just not a priority. There are reasons to plan no matter who you are or what your situation is, but it usually takes a triggering event. People taking care of both their children and elderly parents may realize how much needs to be done with their parents’ affairs and they spring into action for their own.

What are the repercussions — financial or otherwise — to poor planning?

If you die intestate, meaning you don’t have a will or any way to transfer your property, the state comes in and says who gets what.

The federal estate tax can go as high as 45 percent if your estate is over $5 million or $10 million as a married couple. A business owner can easily have an estate, including the value of the business and life insurance, over that amount.

In Pennsylvania, there’s a state inheritance tax assessed no matter how large or small your estate is, which you can possibly protect against.

It’s also important to properly designate your accounts. If your will states that your husband gets everything, but your IRA, 401(k) and life insurance beneficiaries are different, that supersedes the will. If you’re going through a life change update all your beneficiaries. It’s easy to do; you just have to fill out the paperwork.

What are some other estate planning tools?

Gifting is something most high net worth people need to consider while they are still alive, because it removes funds from the estate. You can give to charities, your kids or educational accounts for your grandkids.

Trusts can get complicated, but a couple of key ones are charitable remainder trusts (CRUTs) and irrevocable trusts. A CRUT is typically funded with highly appreciated stock. You get a tax deduction for the contribution, the assets transfer to a charity at death where they are not taxed and you can get income for life from the trust.

An irrevocable trust typically is funded with life insurance. For example, you calculate your estate or inheritance tax at $500,000, buy a $500,000 life insurance policy and set up an irrevocable life insurance trust. It pays the tax of your estate, protecting the assets that pass on to heirs or charity. The caveat is that you must be healthy to get the life insurance.

Are trusts only for the wealthy?

Beyond wealth, there are lots of reasons to set up a trust, like family dynamics, special health considerations or multiple properties across state lines. Trusts are great for going into detail about distribution of wealth and property. They also can help you avoid probate, which is public.

How often do you need to update the plan?

Once a year is common, but whatever life throws at you — a divorce, birth of a child or a severe car accident — pause and think about the repercussions on your planning.

Insights Wealth Management is brought to you by Fragasso Financial Advisors

How Ohio’s new residency provision affects financial planning decisions

As of March, Ohio became more favorable to those who spend most of the year here but winter elsewhere. People, such as retirees, who have ties to Ohio but wish to be residents of Florida, can now extend their stay in Ohio without concern for the tax implications.

The so-called “snowbird rules” that determine whether or not an individual is an Ohio resident for income tax reporting purposes have been altered to allow people to spend an extra 30 days in the state without being considered a resident.

“From a financial planning perspective, this is a benefit to those who are looking at ways to maximize the wealth available for themselves and their heirs,” says John Schuman, Chief Planning Officer at Budros, Ruhlin & Roe, Inc. “Now people who are here for fewer than 212 contact periods don’t need to report their income to the state. They’re essentially getting to stay seven months in the state instead of six months.”

Smart Business spoke with Schuman about the implications of Ohio’s revised snowbird rule.

How can residency affect a person’s financial planning decisions?

What most people don’t account for on their balance sheet is the tax impact of their residency. Where one resides affects the net cash that can be generated from a pension, IRA or portfolio assets. When that’s measured over a long period of time, it affects lifestyle and the amount of wealth that can be left to heirs. Residency, then, becomes a big part of the financial planning discussion.

Changing the state in which you live is often done purely as a tax play. Most people, however, found it hard to be out of Ohio more than six months, which was the condition under the old rule. The weather makes it easy to reside elsewhere from January through March, but people want to come back for holidays, summer and fall. That means difficult choices had to be made when deciding which months to not be in the state.

The law change allows snowbirds to pick up an extra month in Ohio without negative tax implications.

What is a contact period and what impact does it have on residency decisions?

The new presumption of residency is based on being in Ohio for 212 contact periods rather than 182 contact periods. More than 212 contact periods and you’re considered a resident, and you’ll pay tax to Ohio on all of your income.

A contact period can be interpreted as staying in the state overnight — it means you’re in Ohio part of any two consecutive days. For instance, if you’re in Ohio at 11:59 p.m. and stay through 12:01 a.m. that’s considered one contact period, even if you’re only here for those three minutes. That doesn’t count as two days, only one contact period.

Just how many contact periods a snowbird has in the state is a source of anxiety for many. That’s because anyone who is called by the state to substantiate his or her residency bears the burden of proof — it’s not the state’s responsibility to show the person should, in fact, be considered a resident. It’s the person’s responsibility to show they aren’t.

Filing Ohio Tax Form IT DA-NM creates an irrebuttable presumption of nonresidency with the state. It’s a good idea for those who have a home in Ohio to file this form, even if they don’t have a tax filing requirement here.

Based on the rule changes, what financial planning advice would you offer Ohio residents who winter outside the state?

This opportunity that the state is providing is making Ohio friendlier to the retiree community. Snowbirds should give this new residency provision a close look because it can be a significant benefit — the ability to keep an extra 5 percent of a pension or Social Security, or the income generated from an investment portfolio.

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

The rules for retirement are changing for public employees in Ohio

The Ohio Public Employees Retirement System (OPERS) recently enacted changes to its pension and health care plans that place more of the burden on retirees to pay for their health care coverage.

Also being adjusted is the elimination of the annual 3 percent cost-of-living adjustment (COLA). The COLA will now be based on the consumer price index, says Phillip Natale, RCIP, a financial consultant at AXA Advisors, LLC.

“Depending on what the index has done, the participant will get between a zero and 3 percent COLA each year,” Natale says. “This could have a huge long-term effect on the participant’s income.”

Another component of the changes is a tier system that will force some OPERS employees to work a little longer than they had previously planned.

There’s not much good news in these changes, Natale says. But that doesn’t mean public employees in Ohio are out of options.

Smart Business spoke with Natale about the pension and health care plan changes and what OPERS plan participants can do to come out ahead.

How is the retirement timetable for OPERS members changing?

People fall into one of three groups, depending on their years of service at the time of the pension change, which went into effect Jan. 7, 2013. Participants in Group A can still get their unreduced benefits at any age with 30 years of service or at age 65 with five years of service.

In Group B, participants must have at least 31 years of service and be 52 years old; have 32 years of service at any age; or have five years of service at age 66, in order to get their unreduced benefits.

What is being changed with health care coverage?

Historically, pension plans picked up most, if not all of the cost of health care coverage in retirement. But with more and more pension plans struggling to remain solvent, many pension plans are moving away from paying for health care and turning this responsibility over to the retiree.

As a result, married couples are looking at anywhere from $1,000 to $1,200 a month for health care coverage, a figure which could add up to as much as 50 percent of the person’s pension.

Is it too late for those close to retirement age to turn things around?

It’s not too late. People who are nearing retirement need to talk to a professional. A few simple decisions can drastically change their status. Unfortunately, many people don’t know or don’t understand their benefits or their pension plan and end up making decisions that aren’t necessarily the best for their specific situation.

For instance, an individual will pull $30,000 or $40,000 out of their retirement plan to pay for their home, a move that could leave the person in a tough spot should an emergency situation arise.

The key lessons are to start saving earlier and to find a professional who can help you develop a customized retirement plan.

How can a single-life or joint-and-survivor annuity help?

Take a married participant with a pension that pays $5,000 a month. The participant receives $5,000 a month when he dies and nothing goes to a spouse. If the participant chooses joint-and-survivor, he can get $4,000 and his beneficiary can get $2,000 a month. So he’s essentially paying the pension plan $1,000 a month to give his wife $2,000 a month.

If individuals start planning early, this man may be able to buy his own life insurance policy for $100 a month. If it builds sufficient cash value, he can then take the single-life annuity and make an extra $900 in retirement. When he dies, his wife ideally would get a lump sum that produces the same amount of income if he had taken joint-and-survivor. This strategy will only be suitable under certain circumstances, and may not work for all people. Please consider all factors before taking any action.

This promotional information is not approved or endorsed by the Ohio Public Employees Retirement System. Neither AXA Advisors, LLC (and its affiliates) nor Phillip Natale is affiliated or associated with the Ohio Public Employees Retirement System. 

Phillip Natale offers securities through AXA Advisors, LLC (NY, NY, 212-314-4600), member FINRA, SIPC, offers investment advisory products and services through AXA Advisors, LLC, an investment advisor registered with the SEC, and offers annuity and insurance products through AXA Network, LLC. AXA Advisors and AXA Network do not provide tax or legal advice. AGE 101614 (03/2017)

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



Can the 1% afford to retire? Few assumptions are safe with retirement planning

It may seem obvious that the top 1 percent of earners can afford to retire. There are, however, distinct changes that must take place in order for these retirees to keep up the lifestyle they had during their working life.

“Most people, regardless of income, have a hard time maintaining their standard of living when they retire,” says Jim Budros, chairman and founder of Budros, Ruhlin & Roe, Inc.

Determining what it will take to replace that income is the toughest question to answer, especially if the answer is based on commonly held, but false, assumptions.

Smart Business spoke with Budros about retirement planning for high-income earners.

How much money does someone in the top 1 percent of earners need for retirement?

The simple answer is that a portfolio designed to not run out of money during one’s lifetime might require $8 million. To get to that number, a person must accumulate assets that represent that value during his or her productive life.

Some in this income range falsely assume that Social Security payments can help offset that income requirement. Social Security, however, has little value for those accustomed to high earnings. Where, then, does one get the rest of the $7.5 million that is still needed?

How does someone calculate retirement spending?

Some people think they can adjust their standard of living downward during retirement, or that their spending will be less as a matter of personal choice.

Let’s say a couple retires at 65. The likelihood is that only one of them makes it to age 95. Retirement may encompass the last one-third of the couple’s lifetime. The last 30 years might be divided into three periods.

The first 10 years is the most active, ‘bucket list’ period, and is carried out with the greatest expense. The second period is a transition where likely one spouse dies. The surviving spouse, then, doesn’t need as much money and begins to readjust his or her standard of living. Health care is likely to take over as the dominant expense, depending on the person’s insurance coverage. The last period is probably occupied by one spouse with low, extremely fixed expenses.

Attempting to calculate the cost of retirement highlights the complexity of what can be called ‘decumulation,’ which is spending without saving. That means one has to spend at a pace that doesn’t risk exhausting one’s available assets during one’s remaining lifetime.

That’s a difficult shift in thinking because during the working years, a person is one point on a cash flow pipeline. Income moves from the payer to that point person, then along to pay expenses and then the cycle begins again with the next pay period. In retirement, there’s no flow. There’s just a big bucket full of money in the form of a 401(k), IRA and personal investments. A person in retirement, then, shifts from a pipeline person to a bucket person. That is a tough transition partly because the assumptions are difficult to make — how much longer the person will live, for example.

Is it safe for the top 1 percent of earners to assume they will be in the same tax bracket when they retire?

The tax bracket won’t change much in retirement for most of the 1 percent. The largest source of their wealth is typically retirement plan accumulation, which is all pretax dollars. Every dollar that replaces one’s income from that source is taxable. If a portion of their portfolio isn’t in after-tax vehicles, when any money comes out it’s all taxable.

When should someone start thinking about retirement planning?

Thinking about financing retirement requires one to consider his or her goals, then accumulate the savings and investment returns to meet that expectation. If those goals aren’t established in one’s early 40s, chances are those goals will be missed by a mile.

Wealth management firms base much of their business on questions of sufficiency. The answers form the basis of the most fundamental retirement concern, which is how much does one need to retire and how does he or she get there.

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

Five things to remember when transitioning business ownership

There’s no one-size-fits-all way to transition a business to a new owner. The type of business and its customer relationships can dictate a very short or lengthy transition period. But in either case, it’s critical to thoroughly plan to minimize potential hiccups.

“There is lots of minutia and details that need to be mapped out. And even if you plan things out, you still can run into trouble. But mapping everything out will help smooth the ride,” says Adam Spiegelman, wealth management advisor at Northwestern Mutual.

Smart Business spoke with Spiegelman, who is taking over his father’s practice, about overseeing a sound business transition.

How do the right buyers and sellers connect?

Thoroughly explore and know exactly what you’re getting yourself into. For buyers, that means looking at the risks of the business. How much travel will be involved? Are customers getting discounted rates that you will have to live with when you take over? How established are the client relationships, and are they easily transferable? Is there potential for new business with existing clients? Does the company have good accounting records? Can you understand the cash flows and current expenses? What is the staffing model? What types of relationships does the staff have with clients?

If you’re selling, research all your options to find the right buyer. A family member or key employee can be more of a proven entity than a third-party because you know their work habits, work style and personality.

What’s important to remember about valuing the business?

There are several accepted methods for valuing businesses. Your CPA can run through the numbers, but he or she might not be well equipped to value your business. You’ll want to get a proper valuation — maybe even more than one from a professional valuation company specific to your industry. If you’re the buyer, however, keep in mind that all business valuation companies would like to broker your deal, so they can tend to overvalue the business a little bit in order to please the seller.

As a seller, you can increase value by cleaning up your books, making sure relationships are solid and ensuring a good accounting system is in place to best depict cash flows for potential buyers. Also, try to trim the fat on your infrastructure so the business is lean from an expense standpoint.

What have you learned about the actual transition itself?

In addition to a business agreement that any buyer and seller should have, put contingency plans in place. If during the transition — however many years that may take — one partner becomes disabled, what happens? Does the seller have the first right of refusal to buy back his or her business? If there’s a death, do you have life insurance to cover that death or does the owner’s spouse get involved and work with the new buyer?

Also, clearly establish your roles from the get-go. What type of role does the old owner play in the new business? Who will run meetings? Who will talk to clients and distributors? Who will work with staff? Make sure you put steps in place to resolve disagreements, such as having an outside adviser you both trust arbitrate.

How can you best transfer client and staff relationships?

Don’t underestimate the time a transition takes. Delicate issues are involved, especially in a family business. Professional business transition consultants can work with you, acting like a mediator, helping you plan and holding everyone accountable to ensure you’re both meeting goals. A good business attorney and accountant can help as well.

During the transition period, a buyer might want to put golden handcuffs on the former owner to keep him or her in the game. With these incentives, the seller is available to mentor the buyer and help bridge relationship gaps.

What surprised you the most?

The biggest ‘aha’ moment was understanding how difficult it is for the seller to give up control. For a former owner to take on a lesser role, letting go emotionally, is very challenging.

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities) and its subsidiaries.


Insights Wealth Management is brought to you by Northwestern Mutual

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) 

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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