There have been plenty of studies examining the mass of data collected about Social Security including the timing of claims, the average benefits, the annual adjustments to benefits, claiming strategies and more. One fairly consistent finding of these studies is that a significant number of workers claim their benefits as soon as they are available and very few defer their initial claim for benefits to age 70. The consensus seems to be that those who claim when first eligible, age 62, are making a mistake that will cost them greatly in terms of the total benefits received over a lifetime.

All too often, we see clients with a potpourri of investments, accounts funded from various sources, opened at different times and using different advisers. There is no overall plan or strategy and the client usually doesn’t exactly know what they have. This is a clarion call for the client to organize and simplify their finances.
What can one do? Merge similar accounts such as IRAs, CDs and brokerage accounts. Exit, combine or exchange products such as annuities and insurance. These actions not only make it easier for you as owner to keep up with what you have but it will save a great deal of effort and aggravation for your personal representatives when you either become disabled or die.

A common issue facing many investors is knowing when the reasons for owning a particular investment no longer apply and how best to exit that investment. One area where this issue may arise is with the ownership of multiple life insurance policies. Often sold as an investment, life insurance may build cash value in addition to its provision of a death benefit in the event of an early and unplanned death.  The ability to combine the risk protection of pure life insurance with the choice of investments within the policy is attractive to some.

Changes to the treatment of IRAs are the focus of the proposed SECURE act. Previously, we addressed a change to the timing of required minimum distributions from IRAs, the act proposing to make age 72 the new beginning date instead of age 70 ½. Since that time, much more attention and discussion has been given to the proposed treatment of inherited IRAs. For most beneficiaries, the new rule would require complete distribution of the IRA within ten years of the death of the IRA owner.
One objection to the proposed change is that it would adversely impact the long term and estate planning of some IRA owners who intend to allow their heirs to take advantage of the stretch IRA to take withdrawals from the inherited IRA over their life expectancies.

Financial planning is a central part of what most investment advisers do for clients. Simply recommending investments because they are surefire winners (as if they ever really can be) will fall flat without consideration of the context of a client’s investing. That involves many factors ranging from age and health to employment status and from the nature of assets to the details of spending and estate goals. However important all these factors – and more – may be to a financial plan and its associated investment recommendations, there is one factor that plays an outsize role and at the same time may be all but invisible to the adviser.

Much of the discussion surrounding the best interest rule has referenced the requirement that investment advisers are fiduciaries to their clients while brokers are not held to that fiduciary standard. Regulation Best Interest and the new customer relationship summary are intended to provide investors with a clear description of the duties and obligations of investment advisers, broker-dealers and dually registered persons and firms. Not surprisingly, this new approach is not meeting with universal approval and acclaim.

With all the changes in the tax law overhaul, one area of interest to most taxpayers is the best approach to deductions on their returns. After all, most taxpayers would like to take the maximum amount of deductions in order to reduce taxable income and so their taxes.
For many taxpayers, the answer is simple. The new standard deduction is much larger than the old standard deduction and does not require the taxpayer to file an itemization of deductions. Many of the usual itemized deductions have been curtailed or eliminated entirely.

In the financial industry, as with many other businesses, how clients pay is constantly under discussion and often changing. In recent years, some advisers have touted their focus on having a fee based business as being superior to other forms of payment, particularly including commissions. Charging a fee based on assets under management is a very common practice and has the benefit of being relatively simple to implement and certainly free of the conflict of interest for advisers who make their money through commissions.

Recently, there has been renewed interest in changing some of the rules relating to the required minimum distributions from qualified retirement plan accounts such as 401(k)s and IRAs. Changing the beginning date is high on the list and for some good reasons. First, confusion with the current beginning date tied to one’s reaching age 70 ½ and the actual due date of that first RMD is common and really unnecessary. Second, longer life expectancies and potentially later retirements would be consistent with a later required beginning date.

A recurring theme in the financial industry media is pundits offering assertive statements (opinions) about what clients really want. It should be obvious by now that clients differ in what they want and it is not just as simple as getting the best investment advice. Recently, speaking with an experienced adviser, I heard first-hand what one client said during the course of a conversation with the adviser about the client’s investments in the context of whether to rebalance to the desired allocation.