FAQ

An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. Typically, ETFs will track a particular index, sector, commodity, or other assets, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.

A stock, also known as equity, is a security that represents the ownership of a fraction of the issuing corporation. Units of stock are called "shares" which entitles the owner to a proportion of the corporation's assets and profits equal to how much stock they own. 

Stocks are bought and sold predominantly on stock exchanges and are the foundation of many individual investors' portfolios. Stock trades have to conform to government regulations meant to protect investors from fraudulent practices.

Diversify Your Investments. Diversification can be neatly summed up as, “Don’t put all your eggs in one basket.”. The idea is that if one investment loses money, the other investments will make up for those losses. Diversification can’t guarantee that your investments won’t suffer if the market drops. But it can improve the chances that you won’t lose money, or that if you do, it won’t be as much as if you weren’t diversified. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Rebalancing refers to the process of returning the values of a portfolio's asset allocations to the levels defined by an investment plan. Those levels are intended to match an investor's tolerance for risk and desire for reward.

How often should you rebalance? General consensus is that a well-diversified portfolio may need rebalancing every 12 months, especially if you are in an accumulation phase. If you are in retirement or getting ready for retirement, a de-accumulation phase, your portfolio may need to be rebalanced more often because of a lower risk tolerance. 

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. 

Several of our advisors hold the Certified Financial Planner designation, a standard of excellence denoting extensive training and adherence to rigorous ethical standards.

A financial advisor is worth the money if you are uncertain about how to manage your money, invest for your future, and take care of your family. Specialized financial advice may be needed at various turning points in your life: when you have a child, get a promotion, or come into an inheritance..

The following savings guidelines can be a starting point for evaluating your progress toward a fully funded retirement. These rules of thumb say you should have saved ...

•2 to 3 times your income by age 40.
•3 to 4 times your income by age 45.

These income-based targets assume you can live on a similar or slightly lower income during retirement. The absolute dollar amount you need for retirement can vary a lot depending on where you live, health needs, and other variables. Here are two examples of where these guidelines might land you.

Annual income: $60,000

•Retirement savings by age 40: $120,000 to $180,000.
•Retirement savings by age 45: $180,000 to $240,000.

Annual income: $100,000

•Retirement savings by age 40: $200,000 to $300,000.
•Retirement savings by age 45: $300,000 to $400,000.

No matter how much you earn, these amounts might seem high, especially if you’re raising children, have high medical expenses, or are paying off a mortgage. You might also have realized that if the goal is to save a percentage of your income and your income changes, then you’re chasing a moving target. However, if you aim to save a consistent percentage of each paycheck and not a fixed dollar amount, you may be able to keep up.

IRA one-rollover-per-year-rule

You generally cannot make more than one rollover from the same IRA within a 1-year period. You also cannot make a rollover during this 1-year period from IRA to which the distribution was rolled over.

When you do a rollover from any one of your IRAs (traditional or Roth), and then do another IRA “rollover” within a twelve-month period, any previously untaxed funds distributed from the second IRA must be included in your taxable income and may be subject to the 10% early distribution penalty.

With a traditional individual retirement account (IRA) or 401(k) plan, you don’t pay ordinary income taxes on the money you’re contributing. Instead, you’ll be taxed when you withdraw your savings at then-current income tax rate. This reduces your tax expense in the year that you contribute. You could further benefit later because your tax bracket in retirement might be lower than it is today.

Yes, you can have both accounts and many people do. The traditional individual retirement account (IRA) and 401(k) provide the benefit of tax-deferred savings for retirement. Depending on your tax situation, you may also be able to receive a tax deduction for the amount you contribute to a 401(k) and IRA each tax year.

The following are some examples of how to calculate if you are ready to retire:

•If you have 10 times your annual take-home pay saved, you might be ready to retire.

•If the 4% rule will give you enough to cover your expenses, you have enough saved. 25 times rule: Take your annual expenses and multiply them by 25.

•70%-80% rule: Many experts say you will need about 70% to 80% of your average income during your working years annually to fund your retirement.

•15% rule: If you start at the beginning of a career, saving 15% of income should be enough to fund your retirement

A 529 college savings plan is a state-sponsored investment plan that enables you to save money for a beneficiary and pay for education expenses. You can withdraw funds tax-free to cover nearly any type of college expense. 529 plans may offer additional state or federal tax benefits.

529 college savings plans can be withdrawn tax-free to pay for qualified higher education expenses, which include tuition, fees, supplies and equipment, computers, internet access and even some room and board. Prepaid plans, on the other hand, usually only cover the costs of tuition and fees.  

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

Custodial accounts under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) are accounts created under a state’s law to hold gifts or transfers that a minor has received. The accounts are managed by a custodian, and once a gift or transfer is made to an account, the gift or transfer cannot be revoked. Because the minor owns the assets in the account, the account is held and reported under the minor's Social Security number (SSN).

An annuity is a contract between you and an insurance company in which you make a lump-sum payment or series of payments and, in return, receive regular disbursements, beginning either immediately or at some point in the future.  

The typical age restriction is around 80. Many insurance companies will not allow you to purchase an annuity with an income rider until you are 50 or older.

Warning: If you withdraw money from a fixed index annuity contract before you are 59.5 years old, you will have to pay taxes and a 10% early withdrawal penalty.

Annuities can provide a reliable income stream in retirement, but if you die too soon, you may not get your money’s worth.

Annuities often have high fees compared to mutual funds and other investments.

You can customize an annuity to fit your needs, but you’ll usually have to pay more or accept a lower monthly income.

Because annuities grow tax-deferred, you do not owe income taxes until you withdraw money or begin receiving payments. Upon a withdrawal, the money will be taxed as income if you purchased the annuity with pre-tax funds. If you purchased the annuity with post-tax funds, you would only pay tax on the earnings. A beneficial reason to buy annuities is that they grow tax-deferred in the accumulation phase.

A deferred income annuity (DIA) allows you to use a lump sum or multiple purchases to receive a guaranteed "retirement paycheck". The DIA provides guaranteed income (your "retirement paycheck") beginning at a future date of your choice (generally, 13 months to 40 years from the initial purchase).

MYGAs are a type of fixed annuity. The main difference between traditional fixed annuities and MYGAs is the period of time that the contracts guarantee the fixed interest rate. MYGAs guarantee the interest rate for the entire duration of the contract, which could be, for example, 10 years.

Generally speaking, fixed annuities are less risky than variable annuities. Fixed annuities offer a fixed interest rate. Market volatility or company profits don’t affect the interest rate on a contract. For conservative investors who seek stability and safety, a fixed annuity might be a better investment option. Knowing that your payments will never fluctuate or vary may put a conservative investor’s mind at ease.

A variable annuity, regulated by the Securities and Exchange Commission (SEC), is a retirement product in which funds are directly tied to the market.

A fixed annuity is a retirement product that earns a fixed interest rate.

The value of a variable annuity fluctuates and poses the greatest risk to an investor during a recession.

The advantages of indexed annuities include the potential to earn more interest and the premium protection they offer. The disadvantages include higher fees and commissions and caps on gains.

An index annuity is an annuity whose rate of return is based on a stock market index, such as the S&P 500. Unlike most variable annuities, an indexed annuity sets limits on your potential gains and losses, so these annuity contracts are less risky than investing directly in the market but also have less upside

The main drawbacks are the long-term contract, loss of control over your investment, low or no interest earned, and high fees. There are also fewer liquidity options with annuities, and you must wait until age 59.5 to withdraw any money from the annuity without penalty

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing.  Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.  Variable annuities are subject to market risk and may lose value.

Having a written financial plan gives you a measurable goal to work toward. Because you can track your progress, you can reduce doubt or uncertainty about your decisions and make adjustments to help overcome obstacles that could derail you.

There are five essential components of a financial plan such as Insurance planning, Retirement Planning, Investment Planning, Tax Planning and Estate Planning.

8 Components of a Good Financial Plan

• Financial goals. 
• Net worth statement. 
• Budget and cash flow planning. 
• Debt management plan. 
• Retirement plan. 
• Emergency funds. 
• Insurance coverage. 
• Estate plan.

What is financial planning? Financial planning is a step-by-step approach to meet one's life goals. A financial plan acts as a guide as you go through life's journey. Essentially, it helps you be in control of your income, expenses and investments such that you can manage your money and achieve your goals.

A financial plan example of possible goals might include the following: Pay off your credit card debts. Create a budget that you can live with. Save an emergency fund of three to six months' worth of your income.

This is the most common rule of thumb which is used in the investment world. The rule says Equity percentage in your portfolio should be equal to 100 minus your age or in other words, debt should be equal to your age. For example if you are 30 you should have 30% of your investments in debt & 70% (100 – your age) in equity.

Step 1: Identify your Financial Situation

The first stage of the financial planning process constitutes assessment on what is happening in your life right now and how you can change your financial situation.

While setting goals is a key part of the financial planning process, implementing your plan and working to meet those goals may be the most important step.

Budgeting and saving goals within a financial plan

In this case, budgeting and saving are the critical factors. You can't build wealth without having a handle on your expenses and knowing what you can save. If you don't already, start tracking and categorizing your monthly income and expenses.

• Cash flow planning: In simple terms, cash flow refers to the inflow and outflow of money. It is a record of your income and expenses. ...
• Retirement planning: This kind of planning means making sure you will have enough money to live on after retiring from work.

Rule of thumb: Most financial planners recommend an amount 10-15x your current income. Life insurance rates are influenced by a number of factors, but your health has the biggest impact on the final cost

Common types of life insurance include: Term life insurance. Whole life insurance. Universal life insurance.

You'll want to consider several factors when calculating how much life insurance you need. These include your age, overall health, life expectancy, your income, your debts and your assets. If you've already built a sizable nest egg and you don't have much debt, you may not need as much coverage.

Disadvantages of buying life insurance

•Life insurance can be expensive if you're unhealthy or old.

•Whole life insurance is expensive no matter what age you get it.

•The cash value component is a weak investment vehicle.

•It's easy to be misled if you're not well-informed

No, you do not get your money back at the end of a term life insurance policy. The policy expires, and that is the end of your coverage. You have paid for the coverage for the length of time specified in the policy, and that is all you will receive.

SYou may still want to consider purchasing life insurance if you have no dependents. Many people choose to purchase a life insurance policy with their spouse as the beneficiary. You can also use your life insurance policy's death benefit to leave a legacy. Some policyholders choose to leave the payout to an organization such as a church, university or charity.

Whole life insurance guarantees payment of a death benefit to beneficiaries in exchange for level, regularly-due premium payments. The policy includes a savings portion, called the “cash value,” alongside the death benefit. In the savings component, interest may accumulate on a tax-deferred basis.

A term life policy is a contract between you and an insurance company for a defined period, typically between 10 and 30 years. During that term, you promise to pay a premium each month. In return, the company promises to pay a specific amount of money – a death benefit – if you pass away during the term.

Variable universal life (VUL) insurance is a form of permanent life insurance. It combines the main benefit of life insurance - a financial payout to your loved ones when you die - with investment subaccounts. These investment subaccounts can be used to invest the cash value of your policy.

Universal life insurance is a type of permanent life insurance. With a universal life policy, the insured person is covered for the duration of their life as long as they pay premiums and fulfill any other requirements of their policy to maintain coverage.

You can sell your policy to a third party for cash, but there are limitations, tax implications and fees to consider — and it makes sense financially only in a few instances, like when you have a whole life policy with cash value.

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

There are three main types of long-term care insurance: traditional long-term care insurance, hybrid long-term care insurance and life insurance with a long-term care rider. Each type of coverage has different pros and cons worth considering.

Indemnity benefits set a monthly benefit amount and will pay that full amount once you qualify for long-term care benefits. For example, if you buy $5,000 per month in indemnity long-term care benefits and you have only $3,000 per month in long-term care expenses, the policy will pay you the full $5,000 that month.

Under the indemnity method, once you are eligible to receive benefits, the company will pay you the amount specified in the policy, regardless of the cost of service. Under the reimbursement method, the insurer will pay all or a portion of the actual expenses you incur, up to the maximum stated in the policy.

The exact type of covered varies by policy, but it often includes: Home health care such as skilled in-home nursing care; occupational, speech, physical and rehabilitation therapy; and help with activities of daily living like bathing and eating.

5 Key Factors to Consider When Buying Long-Term Care Insurance:

•The daily benefit amount.

•The amount of inflation protection.

•The length of benefit payments.

•The waiting period before benefits begin.

•Your current age

According to the National Clearinghouse for Long-Term Care Information, a person's lifetime risk of needing long-term care services in their lifetime is 1 out of 2; that's a 50% risk. As age increases, so does the likelihood of needing long-term care.

Long-term care insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details. All policy guarantees are based upon the claims paying ability of the issuer.

Disability Insurance or Disability income insurance is an insurance policy that pays benefits to disabled persons unable to work because of their disability. Disability insurance provides a percentage of an individual’s regular income per month to protect that individual from financial loss caused by disability.

An individual long-term disability insurance plan costs about 1% to 3% of your annual salary, according to Life Happens, a nonprofit dedicated to disability insurance education. For example, if you earn $50,000 a year, your disability insurance will cost you $500 to $1,500 per year.

Disability Benefits: Supplemental income for disabled people and their family members who meet certain qualifications There are two types of disability programs: Supplemental Security Income (SSI), and Social Security Disability Insurance (or SSDI). SSDI is for working-age adults who are unable to work due to a disability

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.