The road of life is filled with big and little steps. When you’re ready to take a leap, do your homework. To get you started, we gathered some wisdom from local professionals. Take advantage of their experience and expertise to move forward with confidence as you plan your future.
Marriage
Say “I Do” to Financial Success
Marriage is a great opportunity to double-check your employee benefits, such as insurance coverage. According to Tim Berlin, an agent at Unruh Insurance, “One to three times your salary is often not enough coverage, considering many newlyweds have mortgages and student loans.”
Couples often choose term life insurance, since these policies provide larger amounts of coverage at an affordable price. Premiums stay the same for the term of the policy (10, 15, 20, 30 years). Some term plans offer return of premium, which means you receive 100 percent of the premiums paid at the end of the term. This money could be used during retirement or could be reinvested.
As couples get older and accumulate more savings, they may want to consider more permanent life insurance options. According to Berlin, “most term policies allow the insured to convert from a term policy to a permanent policy without having to prove insurability (no medical exam or underwriting).”
More permanent policies include whole life, universal life, and variable universal life. These policies are more expensive, but also accumulate money over time. This money could be used as a legacy for family or for philanthropy.
If you receive cash as a wedding gift, consider putting that money in savings to make a house down payment or to build an emergency fund. Couples could also put some of these gifts into an IRA. “Make sure the interest rate growth is compounded — this is what really makes the money grow,” says Berlin. In addition, couples could put money in a health savings account to help pay for health care expenses.
Berlin also advises that couples prepare a will, a health care directive, and a durable power of attorney. Prepare these in person with an attorney, rather than using the Internet. You will enjoy lasting benefits by building a relationship with a trusted professional.
Unruh Insurance Agency Inc. | 877.854.3309 | unruhinsurance.com
Home Buying
In Your First Place
Before you start looking at houses, get pre-approved for a mortgage. “This is by far the most important step,” advises Jaime Perez, a Realtor with Berks Realty Group. Lenders will need to see your last two years of tax returns, as well as two months of bank statements and pay stubs.
The more money you have for a down payment, the better the terms of your loan. Perez suggests that people save around $5,000. FHA mortgages are available, as well as seller assist programs. Ideally, if you have 20 percent of the cost of the home, you can qualify for the best interest rates when taking out a mortgage.
“Buying a house is a compromise process,” Perez says. He advises buyers to consider size, location, must-haves and nice-to-haves, reminding them, “Affordability has to be the priority.” Real estate professionals can help you get the most for your money.
After your offer is accepted, get the home inspected before the sale is final. Your realtor can assist with referrals. Typically, the inspection must be completed within 10 to 15 days.
Perez says more people are staying in their first home longer — nine years on average, according to the National Association of Realtors. If you anticipate selling your home in less than five years, he suggests looking for a good deal. Think about a property’s investment value. Some homes sell for less money due to outdated features. If you can update the house, you could get a return on your investment when you sell. Or you could choose to keep it as a rental property.
Kitchens, bathrooms and outdoor areas are important. “High impact improvements will greatly improve your sales price.” Perez suggests that no part of the home be older than 20 years (except the house itself). Update your home for your enjoyment and to reap the benefits when you’re ready to move on.
Berks Realty Group | 610.926.8610 | brgpa.com
New Baby
Give Your Child a Lifetime of Benefits
Before your baby arrives, take time to create a safety net for your child. See an attorney and a life insurance professional. Make sure you have a will and that you are appropriately insured.
“LIMRA (Life Insurance Market Research Association) studies show that people in the United States admit to being underinsured,” says T. Wayne Fanning, a partner at New York Life Insurance Company. If a parent passes away, life insurance can serve as income replacement and help provide for a child.
Naturally, these are things we don’t want to think about. Fanning notes that when “you put your plans in place, you don’t have to think about it.” Revisit your plans annually and update accordingly.
If you have life insurance through an employer, do you need more? “Yes,” says Fanning. “Be in control of your benefits. Don’t let them control you.” Having your own policy offers portability and stability. By working with a professional, you can get coverage that matches your family’s specific needs.
Once your baby is born, a whole life insurance policy is an excellent investment. Permanent insurance provides lifelong benefits. “This is one of the things that I love talking to new parents about,” says Fanning. Purchasing life insurance for your child ensures that child will always be protected. Premium costs on a whole life policy will always stay the same. As people age, they may acquire health conditions that make buying life insurance difficult. “The amount of people that are in their 30s and 40s and are uninsurable is eye-opening,” notes Fanning.
As an added benefit, whole life insurance provides cash value. The money paid in premiums grows over time. When that child becomes a senior citizen, he or she can cash the policy in, if the insurance is no longer needed. Or they can systematically withdraw it to use as retirement income.
T. Wayne Fanning, New York Life Insurance Company | 610.781.0241
College
Take the Time to Save for Higher Education
Start saving for college at birth. With a 529 plan, investment earnings are not taxed by the federal government. These tax-free benefits continue when the money is withdrawn to pay for college (and other qualified education expenses like room and board). If your child earns a scholarship and has money left over, that 529 plan can be rolled over to a sibling.
Since college costs grow every year, talk to an investment firm to make the most of your 529 savings. “The investor should be looking for low cost funds that invest in good quality stocks,” recommends Thomas W. Weik, President & Chief Investment Officer of Weik Capital Management. Weik’s focus is on how to invest the money and increase the rate of return.
Taking the long-term historic view, it is possible to earn an average of 9-10 percent a year in stocks. According to Weik, for people investing over an 18-year period, “they shouldn’t worry much about short-term risk.”
Speaking of risk, Weik suggests that people try to increase their investments when there is a substantial downturn in the stock market. In these bear markets, “instead of being worried and pulling back, that would be a time to increase their contributions to the plan.” For example, if you are investing $100, try to increase that amount to $125 or even $200. While this sounds counterintuitive, you can buy a lot more stock for your money. When markets start improving, you will get more on your return. Weik adds, “that will be very rewarding if they can do that.”
If your child is older and you are just getting started with a college savings plan, less time means more risk. Weik suggests investing a small portion in stocks, with the rest of the money in interest bearing accounts (savings and money market).
Weik Capital Management | 610.376.2240 | weikinvest.com
Retirement
Enjoying the Fruits of Your Labor
“If you have a goal to retire at a specific age in the future, start working on a plan today,” says Beth Gallen Mastromarino, CFP®. As President of Van Reed Wealth Management and Financial Planning Advisors, she suggests people begin investing as soon as they start earning a paycheck. “A good rule of thumb is 15 percent of your income should be set aside for retirement each year.” Take advantage of your employer’s 401(k) plan. Try to invest enough to qualify for an employer’s matching funds.
IRAs, or individual retirement accounts, are another option. With traditional IRAs, anyone can contribute up to $5,500 a year. If you’re over 50, you can contribute up to $6,500. Like a 401(k), money in an IRA grows tax deferred. The assets won’t be taxed until the money is withdrawn. Also, both 401(k)s and IRAs allow you to contribute pre-tax dollars, meaning you are not taxed on that money the year you earn it.
With Roth IRAs, you pay tax on income before you contribute to the plan. The money grows tax-free, and you won’t pay taxes on money withdrawn after age 59 & 1/2 years. Another benefit to a Roth IRA is that there is no mandatory withdrawal at age 70 & 1/2 years.
When you retire, you need “enough money to create the income you need to support your lifestyle for the rest of your life,” advises Mastromarino. You could easily spend 20 to 30 years in retirement. Consider how much money you spend annually. Factor in inflation and rising healthcare costs. Mastromarino uses checklists and tools to assist clients with retirement cash flow planning.
Think about your vision for retirement and work with a financial planner to turn that vision into reality. Mastromarino cites this quote from French author Antoine de Saint-Exupery: “A goal without a plan is just a wish.”
Van Reed Wealth Management | 610.678.8999 | vanreedwealth.com
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Van Reed Wealth Management, a registered investment advisor. Financial Planning Advisors and Van Reed Wealth Management are separate entities from LPL Financial.
Navigating Difficulties
When facing a job loss, unexpected medical bill, or other financial hardship, remember: you are not alone. “It happens to more people than you think. There are solutions and next steps, and you’re going to get through this,” says Richard E. Guerra, President and CEO of RIG Financial Solutions.
Examine your bills and tighten your budget wherever possible. The amount of savings you have will tell you how long you can maintain your current lifestyle. “Everybody says that you should have six months’ worth of savings, but that’s easier said than done,” says Guerra.
Don’t wait for bills to pile up. Let creditors know your situation. “It’s always better to over communicate rather than under communicate,” advises Guerra. Some lenders have hardship programs, which allow you to postpone payment up to six months without impacting your credit.
Seek out the pros to come up with solutions. “We try to manage the crisis with as minimal impact as possible. That’s the biggest key to what we do and how we do it,” says Guerra.
As an independent third party, a company like RIG can work with you and your lenders. You’ll benefit from having a plan tailored to your specific needs.
RIG Financial Solutions | 877.393.0372 | rigfinancialsolutions.com
