Women may need to plan for long lives

The basics of financial planning are essentially the same for males and females. However, there are some aspects of financial planning that have greater impact on women than on men, regardless of marital status or profession.

The first is life expectancy. In general, women have a longer life expectancy than men. This natural longevity advantage, coupled with family history and lifestyle, could necessitate planning for an extended life expectancy. A woman's money may need to last longer than the money of a male counterpart. Should that influence how you invest or how much you spend, or both?
One could argue that there's a greater need for the types of longevity protection offered through insurance products.

Long-term-care insurance is one example. Living well past life expectancy creates a greater likelihood of being alone significantly longer. I do not recommend a spouse at home as the long-term care giver for a spouse, but many do end up in that role anyway. If the odds are that the woman will live longer, then perhaps long-term-care coverage is worth considering.
Annuities are another financial product created by insurers that are designed primarily to provide for retirement. Annuities are used to accumulate assets for retirement years and to produce an income stream that cannot be outlived.
Planning for Social Security may also present an entirely different opportunity for long-lived women. In general, the longer you wait to take Social Security benefit payments, the larger that amount gets, until age 70. For the person who lives 10 to 12 years past age 70, waiting frequently produces a larger total benefit than taking a reduced amount of Social Security any time between the ages of 62 and 70. For the woman who lives well beyond age 82, each month's payment just makes the benefit from waiting better.

Depending on the family, the loss of a spouse may cause other problems.
A common void for many women after the loss of a husband is in the area of home maintenance. The husband may have performed a long list of upkeep chores. It is wise to understand that your cost of living without your male spouse may not drop as much as you expect, because of the services you may now need to pay for.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

Financial planning more than investing

When I speak to people about financial planning, they most often want to talk about investing. I understand the fun and seductive nature of seeking higher returns for your money, but the financial planning process is far more important than any one investment or portfolio.

This should include a discussion of your goals and dreams, and fleshing out some goals that you've eliminated from memory because you didn't think they were achievable.

But beyond the life planning part of financial planning, a planner should take a close look at many quantitative issues. At a minimum, these issues should include a look at your cash flow, what you earn and how much you spend. It should also look at your assets and liabilities from many perspectives: what you own, how you own it, what you owe, what your assets are worth and the tax cost or basis for each asset.
The planning process should then include a detailed analysis of the following areas: risk management, investment analysis, tax planning, retirement planning and estate planning. A detailed analysis of your risk management program, for example, should include a review of each policy for insurance and any other plans for risk mitigation.
For a review of your estate plan, the planner should perform a rigorous review of your current plan including all relevant documents and legal agreements for applicability to your situation today and appropriateness given your goals, family situation and the current tax environment.

A financial plan can be done as a one-time engagement based on your current circumstances. It is better, however, due to the barriers that naturally occur in financial markets, tax codes and your personal life to be current at all times with no less than annual reviews with a qualified professional.

Now a newer term, "wealth management" is being bantered about. In my opinion wealth management is the same as financial planning. The problem is that many firms call themselves financial planners or wealth managers, and do not follow a process designed to deliver proactive and holistic financial counseling.
They use the terms as a lure for attention to get themselves in a position to manage your assets or sell you insurance.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

Your business can survive your death

No one lives forever, but in theory, a business organized as a corporation or LLC could survive beyond your lifetime. This is one area that business owners frequently ignore until there is a problem.
The first pitfall is either not having a written succession plan or having one that is so old that it is ineffective. A succession plan should involve all stakeholders. That may include family and surviving dependents, partners, clients or customers and employees.

For partners, make sure there is a written agreement that covers succession for a few contingencies. The first would be not waking up for breakfast. The death of an owner with no succession plan invites battles with remaining shareholders and family.
The second contingency would be the disability - temporary or permanent - of an owner, either a temporary or permanent one. In many ways, this could be more harmful to the business than the death of a shareholder.
The last contingency would be a partner wanting out of the business.
People get burnt out, want to retire or desire a major change in their lives. A written agreement with fellow shareholders must address this possibility.

Valuation of the business is another common pitfall. Many written agreements between owners are vague or poorly drafted when it comes to the pricing and payout of an owner's interest. The worst kind of valuation language asks that an outside accounting firm value the business or suggests that several valuations are obtained, with an average of them becoming the actual price. A better way is for the shareholders to agree each year on a current valuation should any contingencies occur during the coming year.
Beyond valuation, funding for the buyout is a sticky issue. Many have insurance policies to back up the agreement, which is a good thing. But frequently the policies are inadequate or owned in such a way as to trigger tax consequences that may differ from your understanding. The insurance obtained should cover both death and disability, and match up with the terms of the buyout.

Inadequate funding is frequently the kiss of death for the business, the survivors of the deceased and the remaining shareholders. Many businesses can't afford to stay in business following the death or disability of a key shareholder.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

Several tax increases loom in 2013

The Affordable Health Care Act, aka “Obamacare,” has been the news most read by Americans in the past week. But beyond the fact that the Supreme Court found it was not unconstitutional to levy a new tax to help pay for mandated health insurance, there are other taxes ready to be levied on Jan. 1.
An additional 3.8-percent tax will be levied on capital gains and investment income for high wage earners starting in 2013. For the same earners, there will be a 0.9-percent increase in the Medicare tax.
Flexible spending accounts will have a $2,500 cap and the threshold for the medical expense itemized deduction is going to be 10 percent of adjusted gross income.

There is concern among investors about the consequences of larger taxes on investment income and capital gains. This speculation includes thoughts that taxpayers may elect to sell appreciated assets in 2012 to lock in the lower tax rate in effect for 2012, adding downward selling pressure on your portfolio.

The second 2013 tax increase would be in the estate arena. Currently there is a $5 million dollar exemption for both gifts and estates.

Starting in January, the estate limits are set to revert to the previous $1 million level.
The problem with the scheduled estate tax increase is that many believe that the law will not regress to the limit of over 10 years ago, even though that is exactly how the law reads today. Many people simply feel that the government will pull another rabbit out of its hat and maintain the $5 million exemption. This has many holding off updating their estate plans on blind faith and crossed fingers. This is not something I would recommend, especially if your estate is substantial and taking advantage of the $5 million exemption makes good estate planning sense.
The last set of tax changes scheduled to take effect next January are from the expiring Bush-era tax cuts. These could raise the tax on dividend income from 15 percent to as high as 43.4 percent if you make more than $250,000.

Politics created these uncertainties and politics will likely determine if change. Your financial future, however, is too important to leave to politics. You may have to plan using two scenarios, but that may beat doing nothing and leaving it up to congress.
John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.