Insurance Resources by Guest Blogger, Tony Steuer

Tony Steuer, our guest blogger shares some great insurance articles and updates for your planning needs. Tony is an Insurance Literacy Advocate, Founder of The Insurance Literacy Institute, Creator of The Insurance Bill of Rights and Author of The Questions and Answers on Insurance Book Series. His website is

Resources for Long-Term Care Insurance

Thanks to Lisa Fu for the opportunity to be a resource for her article “3 Things to Know About Long Term Care Insurance” on Lisa takes a look at the basics of long term care insurance and the age at which a person should consider purchasing a long term care insurance policy. Long Term Care insurance is an important part of a financial plan as it is estimated that 70% of Americans will have a health issue that requires some type of Long Term Care services – home care, facility care, adult day care and so on. These are services that are not covered by Medicare. The average daily cost can be hundreds of dollars depending on your location and the type of service. To find out the cost in your area, visit the Genworth cost of care survey.

The complete article “3 Things to Know About Long-Term Care Insurance” can be read by clicking on the article name. A few highlights below:

Once in retirement, the average American is expected to spend as much as $250,000 on medical expenses.

Like any insurance, the trade-off with long-term care insurance is the leverage provided. If you can’t afford the premium and it doesn’t provide good leverage, investing in long-term care insurance might be unwise.

Steuer advises those who expect a need to purchase a long-term care policy after the age of 40. But purchasing long-term care insurance in your 40s also could save you hundreds of dollars in premium costs, compared to doing so in your 50s.
Depending on the health issue, you may not be able to meet the requirements to file a claim. To use the benefit, you have to be unable to perform two of six activities, such as bathing or feeding yourself. Your health may not be poor enough to use it as a result. “It is likely that a claim won’t be made until someone reaches their 70s.

You may not be able to afford it right now. If you have student loans and other expenses that have placed you in debt, paying for a long-term care insurance premium simply may not be possible. Steuer advises those who expect a need to purchase a long-term care policy after the age of 40 and if you have assets between $1 million and $5 million. “Someone who either has less than $1 million or more than $5 million should not consider it,”he says.

Long-term care insurance as an industry is going through some transitions. Prior to purchasing a policy, you should read my take on this: Can Long-Term Care Insurance Survive? The answer is a definitive yes and this article will provide you the knowledge to make a wise choice on this important coverage especially if “You Are in Denial About Long-Term Care Insurance“. And insurance regulators have formed a Long-Term Care Insurer Solvency Team. Insurance companies must remain solvent and profitable to be able to pay claims, unfortunately this was not the case for Penn Treaty policyholders (who can go here to get answers to their liquidation questions). It’s important to note that life insurance, health insurance, disability insurance and long term care insurance policy holders do have protection through the National Organization of Life and Health Guaranty Associations.

Key Person Insurance Coverage

Key Person Life and Key Person Disability Insurance is used to provide cash inflow when a key person is disabled or passes away. Thanks to Kristin Colella of RSL Media for the opportunity to be a resource for her article on on “Does Your Business Need Key Person Coverage”. Kristin takes a look at the impact to a business of a key person becoming disabled or dying and how insurance can be used to protect against that loss financially. When a key person is suddenly removed from company operations for an unspecified period of time or permanently, it will have an impact on the company financially.

The complete article “Does Your Business Need Key Person Coverage” can be read by clicking on the article name. Article excerpts including my comments follow below:

Keep in mind that not just any employee can be considered a key person. “The insurance company is going to want to know how that person is essential to the business, and will ask for financials and a job description to prove it,” says chartered life underwriter Tony Steuer, founder of the website The Insurance Literacy Institute. You will also need the key employee’s consent to take out the coverage.

In some cases, a business owner or partner can be insured as a key person. “Oftentimes, owners are the key people because a lot of the business is dependent on them or their connections,” Steuer says.


Sharing Economy Concerns:

Thanks to Ingrid Case for the opportunity to be a resource for her article on on “3 Tips for Seniors Looking to Make Extra Income”. Ingrid takes a look at how Seniors can earn money in retirement through the sharing economy (think: driving for Uber or Lyft, hosting guests through Airbnb or offering services through TaskRabbit”. As Ingrid points out, these are great ways to make extra money while setting your own hours, there are other considerations some of which I covered in “Thoughts on the sharing economy“. Article excepts including my comments follow below:

You may need to augment your insurance coverage if you are, say, using your car in a ridesharing service. “If you’re a senior, you do not have time to replace the nest egg that an uninsured accident could destroy,” says Tony Steuer, an insurance industry consultant in Alameda, Calif.
There are other insurance considerations for example, if you are driving for Uber or Lyft, your personal auto insurance will not provide any coverage during the time you are in your car waiting for a passenger. Coverage through Uber or Lyft starts when you have a passenger. If you are renting out your home, your homeowner’s coverage may not provide coverage. It’s important to read and understand the terms of your policy and to seek out supplemental coverage as needed.

Othello Powell, GEICO director of commercial lines points out that “Rideshare drivers take ‘huge risk’ with personal auto coverage“, most personal auto policies were never designed to protect you or your vehicle for commercial purposes. A typical personal auto policy contains coverage gaps and limitations for ridesharing and package delivery. If an accident does happen with drivers’ personal auto policies, they have to provide their insurance carriers with specific details, including the phase of the ride they were in. For example: Was the app on or off? Was the vehicle carrying any passengers or packages? Depending on the answers, drivers may not have the coverage they thought they had.

If you are working in the sharing economy, be sure you’ve read your homeowner’s insurance, auto insurance or related policy to determine what’s covered and what’s not covered. If your “work” is not covered, then you should strongly consider obtaining insurance to fill that gap.

Consumer Insurance Rights:

There continues to be more resources and protections for insurance consumers, depending on the state you live in and the type of insurance coverage. The Michigan Department of Insurance recently posted: Know Your Rights When Working With Insurance Companies. You can help increase awareness of the need for insurance and advocate for these rights by participating in The Insurance Bill of Rights Movement and signing The Insurance Bill of Rights petition (please share the petition). This is your opportunity to make a positive change as a consumer and as a member of the insurance industry.

The Department of Labor fiduciary rule has been delayed for an additional 60 days (link includes a countdown clock). The National of Association of Insurance Commissioners is moving forward to address this uncertainty by reviewing their annuity suitability guidelines. Annuities have been a prime area of sales abuses ranging from having high fees to contracts with surrender charges that exceed the contract holders’ life expectancy to those that can not be surrendered. If the annuity companies and those who sell annuity products were to concentrate on the positives of annuities – providing a guaranteed stream of income while minimizing fees, it would benefit consumers and more Americans would use this as part of their retirement distribution plan.

Health Care/Health Insurance Update:

Some of you may be fatigued by the ongoing health care/health insurance discussion, however, this appears to be the issue that just won’t die, despite Paul Ryan declaring that “Obamacare is the law of the land“.

Trump continues to poke at it, which creates uncertainty for insurance companies (Obamacare’s insurer’s struggle for stability amid Trump’s threats), in turn creating uncertainty for insurance consumers.

Insurance regulators also are concerned. Trump has stated that he is not sure if his administration would fund what are known as cost-sharing reduction payments, which reduce deductibles and co-payments for lower-income people.

Trump’s administration did announce some minor fixes last Thursday (a good start, just nowhere close to enough according to health insurers). However, despite uncertainty, insurers gear up for Obamacare 2018.

South Carolina is suing the federal government over the collapse of their health insurance exchange.

The IRS stated that the Earned Income Tax Credit has helped in that subsidies paid to an insurance company rather than directly to the taxpayer cut down on tax fraud.

For a thorough look at the issues, take the time to read “A Health Care Roadmap” and it includes an overview of the issues and includes areas that can be improved and ways to increase cost efficiency, make the plan financially do-able – please take the time to read it and share it. Yes, this is fixable, Alaska just did it.

Visit Tony’s website for more relevant articles on insurance:

Can Volatility Predict Returns?

When investing in stocks, understanding the volatility of their returns can be an important ingredient to help investors maintain a disciplined approach. People invest their capital hoping to earn a rate of return above that of just holding cash, and there is ample evidence that capital markets have rewarded disciplined investors. For example, the exhibit below illustrates what investing $1 in 1926 into various asset classes would have translated to through the end of 2015. Nevertheless, returns can be negative for days, months, and even years. After such episodes, investors are frequently exposed to stories exclaiming what may cause the next financial crisis.

1. Eugene Fama and Kenneth French, “Q&A: Timing Volatility,” Fama/French Forum, December 19, 2008,

1. Monthly Growth of Wealth ($1), 1926–2015

Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. See Index Definitions in the Appendix for more information. US Small Cap Index is the CRSP 6−10 Index; US Large Cap Index is the S&P 500 Index; Long-Term Government Bonds Index is 20-year US government bonds; Treasury Bills are One-Month US Treasury bills; Inflation is the Consumer Price Index. CRSP data provided by the Center for Research in Security Prices, University of Chicago. Bonds, T-bills, and inflation data provided by Morningstar.

When volatility spikes, remaining disciplined can be even more challenging as pundits are quick to link volatility to any number of impending “crises” and to predict that short-term returns will be poor. See my blogpost on Coping with Market Volatility. Based on these predications, their advice for investors is often “sell now” to avoid these poor returns. But as Professor Eugene Fama points out, “The onset of high volatility should be associated with price declines that increase expected returns going forward (to compensate investors for the higher volatility).”1 That is, volatility often increases after a price decline, which may increase expected returns. So these pundits may be reflecting on what has already occurred, not what will occur. Do recent stock market volatility levels have statistically reliable information about future stock returns? We can examine historical data to see if there have been statistically reliable differences in average returns or equity premiums between more volatile and less volatile markets, if a strategy that attempts to avoid equities in times of high volatility adds value over a market portfolio, and if there is any relation between current volatility and subsequent returns.

A simple way to see if stock market volatility and returns are related is to look at average returns across different market environments. In Exhibit 2, we take monthly returns for the US equity market (represented by the Fama/French US Total Market Index) and break them up based on the previous month’s standard deviation (computed using daily stock market returns). Average returns in months when the previous month had higher volatility (75th percentile or above) were slightly higher than when the previous month had lower volatility (25th percentile or below). This conforms with the intuition presented by Fama.

2. US Equity Market, January 1927–April 2016

Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. US Equity Market is the Fama/French US Total Market Index. Data provided by Fama/French.

But, because stock returns have been noisy, these differences in average returns have not been reliably different from zero. In other words, at a glance there does not seem to be an economically meaningful difference in average equity returns based on the volatility of the prior month.

Exhibit 2 demonstrates that average stock market returns appear similar across various levels of market volatility. Is the equity premium (the return over US Treasury bills, or “T-bills”) also similar across different levels of volatility?

Exhibit 3 shows the average monthly returns for the US equity market and T-bills from January 1927 through April 2016. The full sample is further broken out into average returns for months following a “high volatility” month (75th percentile or above) and the remaining months.

3. Average Monthly Returns, January 1927–April 2016

Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. US Equity Market is the Fama/French US Total Market Index. Data provided by Fama/French. US Treasury Bills data provided by Morningstar.

We see that the average monthly equity premium has been higher after high volatility months. Nevertheless, the difference with all other months is not reliably different from zero—meaning we cannot reliably say that the premium is higher or lower after months with high volatility.2 These results suggest it is unlikely we can learn anything about this month’s equity premium based on last month’s volatility.

What if we had a trading strategy that attempted to avoid investing in equities when volatility was high? How would such a strategy perform relative to the market? Exhibit 4 shows returns and standard deviations for the US equity market,
T-bills, and a hypothetical trading strategy that bails out of equities and invests in T-bills when the previous month’s volatility was high—a strategy that “flies to safety.” If the previous month’s volatility was high (75th percentile or above), the strategy invests in T-bills. If the previous month’s volatility was not high, the strategy invests in US equities.

Over the period from January 1927 through April 2016, the volatility of the “fly to safety” strategy, as measured by its standard deviation, was lower than the volatility of the US equity market (12.21% vs. 18.66% annualized). This makes sense because the fly to safety strategy is invested in
T-bills one quarter of the time, so we would expect it to have a lower volatility. However, this lower volatility came with lower returns, as the fly to safety strategy had an annualized return of 8.22%, compared to 9.75% for US equities. A strategy investing 75% in the market and 25% in T-bills would have performed similarly to the fly to safety strategy, as illustrated in the last column of Exhibit 4.

4. Performance, January 1927–April 2016

The Hypothetical “Fly to Safety” Strategy invests in T-bills if the previous month’s volatility was high (75th percentile or above). If the previous month’s volatility was not high, the strategy invests in US equities. Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. US Equity Market is the Fama/French US Total Market Index. Data provided by Fama/French. US Treasury Bills data provided by Morningstar.

2. The t-statistic for the difference in equity premium between months after high volatility and non-high volatility is 0.70. Normally, a t-statistic of at least 2 is necessary to reliably say that the result is different from zero.

Consistent with the analysis presented thus far, Exhibit 5 shows the randomness of the relation between recent volatility and future returns. The relation between them looks “flat.” That is, recent volatility does not indicate if future returns will be “high” and does not indicate if future returns will be “low.” This is confirmed through regression analysis, which further indicates there has been no reliable relation between recent volatility and future returns.

What can we take away from this analysis? Put simply, we can expect volatility when investing in stocks. There is considerable academic evidence that an investment strategy attempting to forecast short-term price movements is unlikely to be successful. Forecasting short-term stock market performance based on current volatility is no different. We believe that developing an asset allocation to match up with your desired risk tolerance and investment objectives, and staying disciplined and rebalancing in all market environments, remains an effective way to pursue your long-term investment goals.

5. US Equity Market Volatility This Month vs. Return Next Month

US Equity Market is the Fama/French US Total Market Index. Data provided by Fama/French.

Index Definitions

All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.Past performance is no guarantee of future results. There is no guarantee an investing strategy will be successful.

Fama/French US Total Market Index: Value-weight return of all CRSP firms incorporated in the US and listed on the NYSE, AMEX, or NASDAQ that have a CRSP share code of 10 or 11 at the beginning of month t, good shares and price data at the beginning of t, and good return data for t.

Brexit impact on US Investors

Brexit: What It Means for You

Brexit impact on US InvestorsLast Thursday, June 23, British voters voted in favor of “Brexit” — British exit from the European Union. I would like to share with you Union Financial Partner’s perspective on this decision.

In the short term U.S. markets have joined the global reaction to the surprise British outcome. Stocks have declined sharply and bond prices are higher, reducing interest rates. But the U.K. vote makes little difference for many U.S. companies and investors– so don’t overreact. Vanguard founder, Jack Bogle says “I think whatever your view of the world is, you have to invest,” says Bogle. “The alternative is – I mean, the only way to guarantee you will have nothing at retirement is to invest nothing along the way.”

While it’s natural to be concerned when stocks drop, sticking to the plan is the key in moments like these. Staying invested in a diversified-long-term portfolio will help you achieve your long term financial goals, despite these short-term changes. World stock market statistics have proven resiliency over and over again to provide capital for businesses and returns for investors regardless of shifting political and social alliances. Trying to forecast economic events, and then moving in and out of markets based on those forecasts, has proven to be a fool’s game. The only thing more foolish would be to sell after markets tank, which is an all too human response.

Leading up to and since the vote, Dimensional Fund Advisors (DFA) has worked with their counter-parties, including custodians, brokers, and dealers, to assure operational integrity throughout any disruptions resulting from the UK’s leaving the EU. We urge caution in allowing market movements to impact long-term asset allocation. Long-term investors recognize that risks and uncertainty are ever present in markets.

While I am unconcerned about the economic and market implications of the Brexit vote, I am disturbed by reports of racism following the vote and the cultural protectionism that seems to underlie the movement. Money is only a part of the foundation of our current and future well-being and we need to work for the peaceful cultural integration of people, families and communities so that we can enjoy our financial prosperity.

Union Financial Partners has 30 years of experience managing portfolios, including during periods of uncertainty and heightened volatility. We monitor market events—including their impact on trading and trade settlement—very closely and consider the implications of new information as it comes to light. We are paying close attention to market mechanisms and they appear to be functioning well. Our investment philosophy and process have withstood many trying times and we remain committed.

If you have specific concerns about your portfolio, please call me (415.563.3000) or email me to discuss.

From One Woman to Another: How to Handle that Financial Adviser Conversation

I’ve heard this story from so many women around the world. You go to the financial adviser meeting with your husband and he – the financial adviser – spends all his time talking with your husband and not you. You know that it’s important for you and your husband to make financial decisions together and you do. You are an integral part of these decisions, sometimes even taking responsibility for most of them. And yet you feel left out of this process.

How can you be more effective in meetings with the financial adviser?

How can you obtain the important information that you and your husband need to make better financial decisions for you as a couple and as a family?

The most often cited cause of conflict in marriages is money. You need to get this right.

I will help you get at the essential information that you need to manage your financial life effectively…and harmoniously.

These questions are organized into easy, hard and hard-ball. Even asking the easy ones gets you into the game as an active participant in the process. The harder questions are more confrontational, but essentially necessary if you are going to make sure your own financial needs are going to be met.

Some of these questions are geared towards interviewing a new adviser, however, they can certainly be asked when a relationship is already established. If you think the question may have been addressed, already,you can simply say ‘can you remind me again….” If you are looking to establish a relationship with an adviser you will want to interview several people to make sure they’re the right match for you and exhibit key traits of a good adviser.

You can also do some research on your own before the meeting. This will make you more aware of the people and the company you are dealing with and will make you more confident. Review the company’s website. Google the Partners’ names and find out as much as you can about them. Look at their profiles on LinkedIn. Jot down any questions that come up for you as you perform this review and add them to your list of questions for the next meeting.

Easy Questions

  1. What are your qualifications?
  2. Do you have many clients like me?
  3. How will you help me reach my financial goals?
  4. What happens to our relationship with the firm if something happens to you?
  5. What types of clients do you typically work with? Are we typical clients for you?
  6. Are you the only adviser that we will be working with?
  7. What services do you provide?
  8. How are you compensated?

Hard Questions

  1. Are you held to a fiduciary standard?
  2. Are you held to any specific Code of Ethics?
  3. Do you provide comprehensive financial planning or just investment management?
  4. What experience do you have? Tell me more about your professional background.
  5. What is your approach to financial planning?
  6. What is your approach to investment management?
  7. How much are we paying for your services?
  8. Can we have a copy of your Form ADV Part II?

Hard Ball Questions

  1. If you accept commissions, will you itemize the amount of compensation you earn from products that you recommend to us?
  2. Do you accept referral fees?
  3. Would you sign a fiduciary oath committing you to put our financial interests first?
  4. Have you ever been disciplined by the SEC or FINRA?
  5. What is your investment management track record?
  6. Is there anyone else who stands to gain from the advice that you are giving us?
  7. Have you ever been publicly disciplined for any unlawful or unethical actions in your career?

It is very important that you identify which services the financial adviser provides and think about what services you really need. If you need comprehensive financial planning and your financial adviser provides only investment advice, you may have uncovered a source of frustration. Use these questions to insinuate yourself into the conversation when you and your husband meet with your financial adviser. As you do, you will gain confidence and effectiveness as a financial decision-maker for yourself, your marriage and your family.

Workers Saving Too Little for Retirement

Retirement - Workers Saving Too LittleAre you saving enough for retirement?  According to this article in the Wall Street Journal, fifty-seven percent of U.S. workers surveyed reported less than $25,000 in total household savings.

While many of us are saving, increased life expectancy, increased costs for goods and services and the decrease in the number of companies that are contributing to their employee retirements or defined benefit plans are all having an impact on how much we will have for retirement.

Read the attached article from the Wall Street Journal and consider working with a financial planner to help secure your retirement.

Workers Saving too little for retirement


To Take Control Of Your Personal Finances Requires Knowing Your Starting Point

Do I really need a Personal Balance Sheet? (Yes!!)

This is the first of a 3-part series about “Taking Control of Your Finances”.  The series will cover these interrelated topics: “Your Personal Balance Sheet”, “Your Cash Flow”, and “Managing Spending.” In this series of articles, I will describe how to gather and organize the building blocks of financial information that you will need to take control of your finances.  The first building block is your Personal Balance Sheet.  Creating a Personal Balance Sheet is a great way to start the drive toward your goals, stay on top of your finances, and successfully manage your money.
To Take Control Of Your Personal Finances Requires Knowing Your Starting Point

Taking control of your finances necessitates knowing your starting point by taking a snapshot of your financial status. That is what a Balance Sheet is – a snapshot in time of your financial status that lists of all of your assets (cash plus items you own) and liabilities (your debts, if any).  Knowing your financial starting point is essential to achieving your financial goals.  You need this information to gauge your success and then calculate the rate at which your wealth is growing over time. Think of this as getting directions to a destination … you must first know your starting point.

That is why you need a Personal Balance Sheet.

Businesses use financial statements to successfully manage their operations and to measure their growth.  The most basic and commonly used financial statements are a Balance Sheet and a Cash Flow Statement (also called a Profit/Loss Statement).  You, too, can apply these basic financial principles to successfully manage your personal finances thus treating your personal finances with professional sophistication and applied analytical methods.

Gathering the information to create your Balance Sheet can be accomplished with just a few clicks thanks to the availability of data aggregation software applications that access the information needed and present it in simple consolidated view.  You can quickly create a list of all of your financial accounts and their corresponding balances.  These balances will automatically be updated for you on an ongoing basis.  I highly recommend the use of an online application such as SaveUp ( to access and aggregate your financial data into such a list. There are other programs, online and offline too, such as Mint; however SaveUp is a great choice because it encourages you to save money, and rewards you for doing so.

SaveUp Accounts List (select to view larger image)You simply list your bank accounts, credit card accounts, investment accounts and retirement account (including your company 401k account) and SaveUp does the rest. Your SaveUp dashboard automatically fetches, updates, and shows you your balances. To complete your Personal Balance Sheet, you will want to add other significant personal assets such as the value of your home, automobiles, and anything else of significant value that cannot be retrieved by a data aggregation application. To do this, I recommend using a spreadsheet program such as Excel, Google Docs, etc. to create your Personal Balance Sheet.

To turn a bunch of numbers on a page into useful information, I recommend that you organize your assets and liabilities into three categories:  Personal Assets, Investment Accounts, and Cash Flow Accounts.  The way you manage money, invest, or make decisions, as you will see, is very different for each of these categories, so organizing your assets into these categories is essential.

Personal Assets are acquired for personal use and are distinct from investment assets that you acquire to meet some future financial need. That future financial need really is living expenses and the purchase of personal assets at some point in the future.  Your home, furniture, automobiles, collectibles and other assets have personal value that you can derive pleasure from.  However, you are unlikely to want to sell Personal Assets to meet your lifestyle needs in retirement.  As an example, you don’t expect to be in the position of having to sell your car to pay for food.  While your home certainly has investment characteristics, it is essentially the place you live.  You do not want to be forced to sell it for financial survival in the future.

Investment Assets are acquired specifically to meet your future financial needs. We do not derive any specific value or pleasure from these assets. We don’t eat them, live in them, drive them, etc. These investments are a means to an end. These assets are saved and invested to grow so that they can be used by you and your family to meet future personal and lifestyle needs and goals.  Investment assets include taxable investment accounts, stocks, bonds, mutual funds, exchange traded funds (ETF), cash savings, retirement accounts and rental real estate.

Cash Flow/Spending Accounts are the accounts you use to manage your daily, monthly and annual spending.  These accounts are generally held at a bank or credit union, but could include money market funds in a brokerage account.  These types of accounts provide ready access to your money through checks, debit/credit cards, online access, transfers, and automatic bill paying.   Credit cards, too, can also be a part of your of your cash flow system as many people like the miles or rewards points associated with them.

This general rule will make it easy to classify accounts:  If an account has money in it that you intend to use in the next year – classify it as a Cash Flow/Spending Account.  If the money is going to be used one or more years into the future, then classify it as an Investment Account.  If you are never going to sell it to buy groceries or pay for common living expenses, then classify it as a Personal Asset.

Your Personal Balance Sheet will be most useful if you further classify your Investment accounts in order of liquidity, or in other words the length of time before you expect to use the money accumulating in that account.    Think of liquidity as a way to begin matching each investment account with the time horizon that corresponds to the financial need or goal that account is intended to fulfill.  For example, you may have an investment account earmarked to fund a child’s college tuition.  The time horizon on that money could be 5 – 15 years depending on your child’s age when you initially establish the account. Your retirement accounts have a much longer time horizon (20 – 40 years).

Your Personal Assets are last because they are likely to be with you forever and be passed on to your heirs, so you should put them at the bottom of your Balance Sheet. Here is an example of what your Personal Balance Sheet might look like.

Mary and Tim’s Personal Balance Sheet as of October 2012 (starting point)

Assets Person Amount  Notes:
Checking Mary $1,500
Checking Tim $1,800
Checking Joint $3,200 Household spending acct.
Investment Account Tim $35,682 Adding $500/month (avg. annual 6%)
Job 401k Mary $58,336 Adding $500/month  (avg. annual 8%)
Job 401k Tim $28,452 Adding $600/mo (avg. annual 8%)
Home Joint $650,000
Total Assets $778,970
Student Loan Tim $38,452 6%, $456/mo.
Mortgage Joint $552,000 5% interest, $2,952/mo
Total Liabilities $590,452
Net Worth $188,518

Let’s now address what do you do with your Personal Balance Sheet. You can begin to track your progress building your net worth by comparing balance sheets over time. You can compare your current Balance Sheet with last year’s Balance Sheet and see your progress.

A fun and rewarding exercise to do is to prepare a future Personal Balance Sheet. Simply create a copy of your spreadsheet and plug in amounts that you want to achieve – your future goals. Don’t worry too much about the math being used to calculate the future value.  Just getting a sense of future balances will help you start the goal-setting process. Being able to visualize your goals in this way is a very motivating way to capture your starting point and begin moving towards your goals. Here is the same balance sheet 5 years into the future:

Mary and Tim’s Personal Balance Sheet as of October 2017 (5 years later)

Assets Person Amount  Notes:
Checking Mary $1,500
Checking Tim $1,800
Checking Joint $3,200 Household spending acct.
Investment Account Tim $83,015 Adding $500/month (avg. annual 6%)
Job 401k Mary $123,650 Adding $500/month  (avg. annual 8%)
Job 401k Tim $86,475 Adding $600/mo (avg. annual 8%)
Home Joint $650,000
Total Assets $949,640
Student Loan Tim $16,564 6%, $456/mo.
Mortgage Joint $481,152 5% interest, $2,952/mo
Total Liabilities $497,716
Net Worth $451,924

This 5-year growth example used reasonable assumptions to show what is potentially achievable.  It may seem astonishing that this example shows a net worth increase of $263,406 in five years!  How did such growth occur? It is easy to see by comparing the two Balance Sheets! Retirement of debt was $92,736 for 35% of the total increase. Savings deposits totaled $96,000 for 36% of the increase.  The remaining 29% growth in net worth of $74,670 came from the growth of the investments. Of course, there is no guarantee your investments will increase at the rates shown in this example, or at all in any given period of time.  Managing the uncertainty of investment returns is addressed on the Union Financial Partners website at links provided immediately below. A future blog and webinar series will be also be devoted exclusively to this topic.

Your Personal Balance Sheet is a great place to start to take control of your finances.  Applying this basic business principle to your personal financial management brings a level of care, sophistication, and objectivity to your own financial management process. Your Personal Balance Sheet is the foundation for you to build strategies to reach your goals effectively.  Your data is now organized into a structure that is conducive to personal financial analysis and decision-making.  Your Personal Balance Sheet puts you in the driver’s seat on your financial journey.

Next in this series I will give you an organizational structure to help you understand and manage your cash flow – money coming in and going out.  The final installment of this series will address managing spending that will include simple and easy organizational methods that you can use to make conscious choices about your spending – without keeping track of every penny – so that you can “spend with confidence.”


Learn more about Investment Management Strategies:

In any financial reporting there is a possibility of human or mechanical error.  Union Financial Partners, Ann Terranova, or any financial source cannot guarantee the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Union Financial Partners or Ann Terranova or any other employee of Union Financial Partners be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of this content.

© 2012 Union Financial Partners. All rights reserved.


Considerations for Inherited Retirement Assets

Your options in managing assets that you inherit from a loved one’s qualified retirement plan may depend on the type of retirement plan in question — for example, 401(k)/403(b) plan or IRA — and your relationship to the deceased.

Employer-Sponsored Retirement Plans

Federal laws require that a spouse be the primary beneficiary unless he or she waives that right in writing. When retirement plan assets are left intact within an estate, spousal beneficiaries may inherit the money without paying federal estate or income taxes. After age 70 1/2, the surviving spouse must begin required minimum distributions (RMDs) based on his or her life expectancy. The RMDs are taxed as ordinary income.

With nonspousal beneficiaries, the plan’s rules may determine the beneficiary’s options. Some plans require nonspousal beneficiaries to cash out retirement plan bequests between one and five years after the account owner’s death. In contrast, other employer plans may offer nonspousal beneficiaries the option of completing a trustee-to-trustee transfer from an employer-sponsored plan to an IRA established for this purpose and subsequently taking annual distributions based on the beneficiary’s life expectancy. Regardless of the method that you follow, distributions taken by heirs are taxed as ordinary income.

It is critical that beneficiaries determine the rules of the deceased’s retirement plan and consult a financial advisor who can make sure that a bequest from an employer-sponsored retirement plan is managed properly, thereby avoiding unnecessary tax payments.


With an IRA, spousal beneficiaries may designate themselves as the account owner and treat an inherited IRA as their own. This means a surviving spouse can transfer the assets to an existing IRA or to an employer-sponsored plan. These transfers typically do not trigger tax payments as long as a spouse follows the rules for trustee-to-trustee transfers. After age 70 1/2, a spousal beneficiary is mandated to take annual RMDs, which are based on the surviving spouse’s life expectancy and are taxed as ordinary income.

Nonspousal beneficiaries cannot transfer assets within an inherited IRA to an existing IRA. Instead, they have two options: They may take all distributions within five years of the original account owner’s death or take annual distributions determined by the life expectancy of either the beneficiary or the decedent, whichever is longer.

Because determining the tax status of inherited assets can be complicated, you may want to consult an estate-planning attorney or a financial advisor to answer any questions you may have.



Because of the possibility of human or mechanical error by McGraw-Hill Financial Communications or its sources, neither McGraw-Hill Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall McGraw-Hill Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2012 McGraw-Hill Financial Communications. All rights reserved.

Ann Terranova Financial Advisor

Don’t want money to mess up your beautiful relationship?

Whether you are in a committed relationship, engaged, newly married, or a veteran spouse you probably have experienced at least some tension around money in your relationship. I think we all know this: money wrecks more relationships than any other single issue! A good, healthy financial partnership will support your love relationship. While divorce can be among the most ruinous financial moves anyone can make, shared financial goals and a coordinated financial program can create huge success and lasting satisfaction. No issue is as vital to your future happiness as how you’ll handle your finances. Let’s look at how to create an analytical framework to help you organize, analyze and talk about your money.

Many times one person in a relationship will say “I think we should buy a house” and the other person will say “I think we should wait.” Or they have different ideas about the size of house they think they can afford, or the ‘right’ amount of financing. Neither has any facts or analysis to back up their opinion. By developing an analytical framework for looking at a financial decision, the couple can together use that analysis to make a decision that they can both support enthusiastically. Here is how it works:

  • When creating an analytical framework, use real numbers wherever possible.
  • Separate the process of a) gathering information from b) organizing information and from c) analyzing that information to make financial decisions. If you are gathering information and you are trying to analyze it at the same time, your mind will play tricks on you. Get the information onto paper (spreadsheet, word doc) first, then organize it, and then sit down together to talk about what it means. Even after an analysis is prepared, you may identify areas where you will need to gather additional facts.
  • The types of financial information you want are similar to the information commonly used in a business or project management context: a balance sheet, cash flow (spending and savings) statement, and goal statements. Use the “now” information to compare “what if” scenarios for buying a house, saving for a major purchase, or increasing 401k contributions.
  • If numbers make your eyes roll into the back of your head, use pictures (think about it).

It’s your life – any system that works for you both is ok. What is most important for you is that the system you adopt ‘works’ and that both of you have the sense that it is fair.

money and relationshipsManaging finances ‘separately’ vs. ‘together’ is something every couple has to work out. The biggest advantage to keeping finances separate is independence. As long as everything is paid, you don’t have to justify personal purchases. But keeping finances divided is harder on couples; it separates them in many ways. Instead of communicating and working toward a common goal, it’s like the other person’s finances are secret. Like many multiple choice questions, the best answer is the long one – some combination of “Mine,” “Yours” and “Ours” works best.

Sit down and organize your household and personal expenses into categories and use separate bank accounts for each. Once you have had the discussion and made these decisions, let them go and let the system work for a period of time. Check in every few months and adjust as needed. Implementing any money management system means not having to constantly discuss money issues. This, all by itself, can be a big relief!
Here are two examples of the kind of financial information you will want to gather before you sit down to discuss, analyze and make financial decisions. The first is an ‘Asset and Liabilities Report’ that is a useful snapshot of your current financial position. The second is a ‘Cash Flow’ report giving you a snapshot of what is coming in and what is going out, including taxes and savings. A more detailed look at spending, for example, can be created as another useful, but separate, report.
Money and relationshipsMoney and relationships
The specific approach you choose to organize your finances and make financial decisions together as a couple is not nearly as imperative as using accurate information and having open and honest communication about it. Whatever you decide to do together, you will have forged a team approach to financial matters. You will be building a strong foundation for your future happiness together.