Improving Your Financial Health is Not Very Hard

“Keep it Simple, Stupid” is a great approach to organizing your finances.

Some folks think financial planning is very difficult. While certain aspects are hard, such as constructing the right asset allocation to meet your goals, the basic concepts are not. One approach to organizing your finances is the KISS rule: “Keep it Simple, Stupid.”

KISS can help you cut through the endless avalanche of financial and investment information. The financial truth is that there are relatively simple and straightforward methods that may help improve your financial health.

If you look at this list and need help implementing it, consider consulting a financial professional who does financial planning.

Banish Toxic Debt

Work to eliminate all credit card debt. Consolidate accounts and create a manageable plan to rid yourself of insidious and toxic debt.

Streamline Your Investments and Reduce Costs

Two factors can contribute greatly to your returns and risk: asset diversification and investment expenses. Asset diversification, especially with professional guidance, may help you avoid putting too many eggs in one basket.

The cost to run your portfolio (e.g., mutual fund fees) affects how it performs as high costs can eat away at growth.

• Look up the underlying fund expenses on www.morningstar.com and ask why you need to buy A, B or C funds when there are less expensive options.
• Consider consolidating as many of your accounts as possible, especially old 401(k) and other retirement accounts that charge administrative fees, even if you left the employer. You may want to roll that 401(k) from the previous job into an individual retirement account, whose cost you can better manage.
• Avoid purchasing annuities (especially variable annuities, whose value fluctuates with the market) unless you fully understand the pros and cons, tax and inheritance implications, potentially high fees and surrender penalties. Consider getting second opinions on annuities from someone who doesn’t sell them.

Pay Attention to Overlooked Assets (Social Security/Retirement Planning)

Social Security is an asset that is often taken for granted for many folks. If you are tempted to take Social Security early, when first eligible at age 62, think again:

Your check is up to 25% lower than if you wait until what’s called full retirement age.

• Get grounded advice on the benefits of postponing benefits. If you begin receiving benefits from age 62 up to your full retirement age, your benefits will be reduced.

Married couples can benefit additionally from Social Security planning strategies that can provide additional income. The Social Security Administration is not allowed to advise on strategies to maximize your benefits, so don’t expect to learn about this from the government.

And maybe you should work as long as possible. A financial professional can work with you to help decide how long you should work and what you can do in retirement to potentially avoid outliving your assets.

Your Loved Ones Will Thank You (Estate Planning)

You could be handing an enormous mess to your heirs (that is, family and friends) if you don’t have your estate documents in order – or you have no estate documents. That means a will, a living will or health-care directive (governing medical treatments to prolong your life) and granting powers of attorney to a trusted person should you not be capable of running your own affairs.

Estate attorney fees may not seem high if they potentially save your heirs hundreds of thousands of dollars of estate tax when your assets pass to your family, friends or charity.

One common estate planning technique to help reduce estate taxes are irrevocable life insurance trusts (ILITs) that shelter your life insurance assets. While insurance benefits usually are tax-free, they still may be subject to estate taxes if the beneficiary is not your spouse. An ILIT allows you to give benefits to whomever you want. Your financial professional or estate attorney can help you decide if this is a strategy you could use to increase your children’s inheritance.

Avoid Excessive Tax Payments

It pays to time IRA distributions if you work (or not); consider Roth IRA conversions (if you qualify, you pay taxes up-front on the account and then future appreciation is not taxed); and give charitably in the form of investments (instead of cash). A financial professional can work with you to consider which types of investments are best held in taxable accounts, which in tax-deferred accounts.

Your Financial Professional

KISS may be able to help you cut through the noise, focus on what’s most important and become better informed on your financial journey.

If this list overwhelms you or you have questions about how to move forward, talk to your financial professional.

Important Disclosures

Asset allocation does not ensure a profit or protect against a loss.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by AIQ.

LPL Tracking #1-05210192

Keri Pugh

Keri Pugh is a Wealth Advisor with Fusion Financial Group, an independent financial planning firm and fiduciary based in Denver, CO. Keri has over 20 years of experience in the industry, as both a financial advisor and Principal. She obtained a bachelor’s degree in Finance from the University of Northern Colorado and is an alumna with national sorority Delta Zeta. Keri holds a variety professional licenses, carries the esteemed mark of Certified Financial Planner (CFP®), meeting rigorous education and experience requirements in key areas of financial planning, as well as the designation of Accredited Investment Fiduciary (AIF®), a symbol of her dedication to upholding the fiduciary standard for clients. As a wife and mother to two young children, Keri is particularly drawn to working with thriving families and women. This is not only reflected within her practice but also in her regular sponsorship of the local PTA and volunteer work with the elementary school. Outside of the office, Keri enjoys traveling, skiing, and the Colorado great outdoors with her family. She often lines up movie marathons for the family and, in line with many clients, is a beginner golfer and a wine enthusiast. To learn more about Keri, connect with her on LinkedIn.