Atlantic Capital Management

Atlantic Capital Management (105)

Wednesday, 11 July 2018 18:54

Who Is Your Trusted Contact?

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This vital investment account question should be answered sooner rather than later.

Investment firms have a new client service requirement. They must now ask you if you want to provide the name and information of a trusted contact.1

You do not have to supply this information, but it is certainly welcomed. The request is being made, with your best interest in mind, to lower the risk that someone crooked might someday make investment decisions on your behalf.1

Financial scams rob U.S. seniors of more than $36 billion per year. As a CNBC article notes, 27% of these frauds represent abuse or exploitation committed by third parties; 23% are wrongdoings committed by family members or trustees.1

The trusted contact request is a response to this reality. The Financial Industry Regulatory Authority (FINRA) now demands that investment firms “make reasonable efforts” to acquire the name and contact info of a “trusted person,” who they can get in touch with if they feel fraud or financial exploitation is occurring or if they suspect the investor is suffering notable cognitive decline.2 

Investment firms may now put a hold on disbursements of cash or securities from accounts if they suspect the withdrawals or transactions amount to financial exploitation. In such circumstances, they are asked to get in touch with the investor, the trusted contact, and adult protective services agencies or law enforcement agencies if necessary.2

Who should your trusted contact be? At first thought, the answer seems obvious: the person you trust the most. Yes, that individual is probably the best choice – but keep some factors in mind.

Ideally, your trusted contact is financially savvy, or at least financially literate. You may trust your spouse, your sibling, or one of your children more than you trust anyone else; how much does that person know about investing and financial matters?

The trusted contact should behave ethically and respect your privacy. This person could be given confidential information about your investments. Is there any chance that, in receipt of such information, they might behave in an unprincipled way?

Your family members should know who the trusted contact is. That way, any family member who might be tempted to take financial advantage of you knows another family member is looking out for you, which may be an effective deterrent to elder financial abuse. The trusted contact can optionally be an attorney, a financial advisor, or a CPA.1

Your trusted contact is your ally. If you are being exploited financially, or seem at risk of such exploitation, that person will be alerted and called to action.

An old saying states that money never builds character, it only reveals it. The character and morality of your trusted contact should not waver upon assuming this responsibility. If given sensitive information about your brokerage accounts, that person should not sense an opportunity.

Now is the perfect time to name your trusted contact. You want to make this decision while you are still of sound body and mind. Choose your contact wisely.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - cnbc.com/2018/05/15/advisors-are-asking-their-clients-for-a-trusted-contact-choose-wisely.html [5/15/18]

2 - finra.org/newsroom/2018/new-finra-rules-take-effect-protect-seniors-financial-exploitation [2/5/18]

Thursday, 28 June 2018 18:19

The Case for Women Working Past 65

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Why striving to stay in the workforce a little longer may make financial sense.

The median retirement age for an American woman is 62. The Federal Reserve says so in its most recent Survey of Household Economics and Decisionmaking (2017). Sixty-two, of course, is the age when seniors first become eligible for Social Security retirement benefits. This factoid seems to convey a message: a fair amount of American women are retiring and claiming Social Security as soon as they can.1

What if more women worked into their mid-sixties? Could that benefit them, financially? While health issues and caregiving demands sometimes force women to retire early, it appears many women are willing to stay on the job longer. Fifty-three percent of the women surveyed in a new Transamerica Center for Retirement Studies poll on retirement said that they planned to work past age 65.2

Staying in the workforce longer may improve a woman’s retirement prospects. If that seems paradoxical, consider the following positives that could result from working past 65.

More years at work leaves fewer years of retirement to fund. Many women are worried about whether they have saved enough for the future. Two or three more years of income from work means two or three years of not having to draw down retirement savings.

Retirement accounts have additional time to grow and compound. Tax-deferred compounding is one of the greatest components of wealth building. The longer a tax-deferred retirement account has existed, the more compounding counts.

Suppose a woman directs $500 a month into such a tax-favored account for decades, with the investments returning 7% a year. For simplicity’s sake, we will say that she starts with an initial contribution of $1,000 at age 25. Thirty-seven years later, she is 62 years old, and that retirement account contains $974,278.3

If she lets it grow and compound for just one more year, she is looking at $1,048,445. Two more years? $1,127,837. If she retires at age 65 after 40 years of contributions and compounded annual growth, the account will contain $1,212,785. By waiting just three years longer, she leaves work with a retirement account that is 24.4% larger than it was when she was 62.3

A longer career also offers a chance to improve Social Security benefit calculations. Social Security figures retirement benefits according to a formula. The prime factor in that formula is a worker’s average indexed monthly earnings, or AIME. AIME is calculated based on that worker’s 35 highest-earning years. But what if a woman stays in the workforce for less than 35 years?4

Some women interrupt their careers to raise children or care for family members or relatives. This is certainly work, but it does not factor into the AIME calculation. If a woman’s work record shows fewer than 35 years of taxable income, years without taxable income are counted as zeros. So, if a woman has only earned taxable income in 29 years of her life, six zero-income years are included in the AIME calculation, thereby dragging down the AIME. By staying at the office longer, a woman can replace one or more of those zeros with one or more years of taxable income.4

In addition, waiting to claim Social Security benefits after age 62 also results in larger monthly Social Security payments. A woman’s monthly Social Security benefit will grow by approximately 8% for each year she delays filing for her own retirement benefits. This applies until age 70.4  

Working longer might help a woman address major retirement concerns. It is an option worth considering, and its potential financial benefits are worth exploring.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - dqydj.com/average-retirement-age-in-the-united-states/ [6/11/18]

2 - thestreet.com/retirement/18-facts-about-womens-retirement-14558073 [4/17/18]

3 - investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator [6/14/18]

4 - fool.com/retirement/social-securitys-aime-what-is-it.aspx [6/9/18]

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