Plan Your Financial Future - A Comprehensive Guidebook to Growing Your Net Worth

Contents

About the Author

Foreword to the First Edition

Acknowledgments

Preface

Part I: The Financial-Planning Process

Chapter 1: Understanding the Challenge: The Need to Begin

Wealth and the PADD Approach

Steps in the Financial-Planning Process

Determine Where You Are Now

Creating a Personal Balance Sheet

Creating a Cash-Flow Statement

Budgeting

Cash Flow and Debt Management

Monitor Your Progress and Life-Cycle Planning

Chapter 2: Do You Need a Financial Planner?

A Word About Self-Help

Types of Financial Planners

The Certified Financial Planner Professional and Other Financial-Planning Designations

Questions to Ask a Financial Planner

Chapter 3: Elements of Personal Financial Planning and the Wealth-Management Process

Personal Financial Planning and Wealth Management

The Need for an Investment Policy Statement

Statement of the Investor’s Objectives

Statement of Investment Constraints or Limitations

Meeting the Investor’s Objectives and Allocation of Investment Resources

Monitoring the Performance of the Investment Plan

The Basics of a Diversified Portfolio

The Basics of Rebalancing

Investment Strategies

Dollar-Cost Averaging and Share Averaging

Averaging Down

Dividend Reinvestment Programs

Laddering

Buy and Hold

Market Timing

Value vs. Growth Investing

Investing in Real Estate

Part II: Protecting Yourself, Your Family, and Your Property

Chapter 4: Insuring Yourself and Your Family

Do I Need Life Insurance? How Much?

Term vs. Cash Value Insurance

Types of Term Insurance

Types of Cash Value Insurance

Insurance Company Selection and Ratings

Chapter 5: Insuring Your Health and Long-Term Care

Considerations in Selecting a Health Insurance Policy

Consider Participating in Your Employer’s Plan

Carefully Review Plan Details

Flexibility Costs Money

Know Your Rights

Patient Protection and Affordable Care Act of 2010

Types of Health Insurance Policies

Indemnity (Fee-for-Service) Policies

Managed Care Policies

Health Savings Accounts

Continuation of Health Insurance Coverage After You Have Left Your Job

Portability of Health Insurance Coverage

Medicare and Medigap

The Importance of Long-Term Care Insurance in Protecting Your Wealth

Alternatives to Long-Term Care Insurance

Chapter 6: Insuring Your Earning Power

Is the Loss of Your Earning Power Already Adequately Covered?

Definitions of Disability

Additional Important Provisions in an Individual Disability Policy

Policy Continuation Provisions

Additional Policy Benefits to Consider

Policy Exclusions

Questions to Ask Before Purchasing an Individual Disability Income Policy

Chapter 7: Insuring Your Property

What to Consider When Insuring Your Home

Coverage A: Dwelling

Coverage B: Other Structures

Coverage C: Contents or Personal Property

Coverage D: Loss of Use

Coverage E: Personal Liability

Coverage F: Medical Payments to Others

Types of Homeowner’s Policies (and the One You Want)

What to Consider When Insuring Your Automobile

Coverage A: Personal Liability

Coverage B: Medical Payments

Coverage C: Uninsured Motorist’s Coverage

Coverage D: Physical Damage or Loss Coverage

No-Fault Insurance

Umbrella Liability Insurance

Business Property Insurance

Chapter 8: Optimizing Your Employment Benefits

Group Medical and Dental Insurance

Group Life Insurance

Group Disability Insurance

Group Long-Term Care Insurance

Dependent Care Assistance

Employer Educational Assistance

Saving for Retirement Through Employer-Sponsored Plans

Section 401(k) Retirement Plans

Section 403(b) Retirement Plans

Other Retirement Plans

Company Stock Purchase Plans

Stock Options and Other Forms of Incentive Compensation

Restricted Stock

Nonqualified Deferred Compensation

Part III: Accumulating Wealth

Chapter 9: Investing in Financial Assets

Cash Investments and When to Use Them

Bank Deposits

Money Market Deposits

Bonds and When to Use Them

Corporate Bonds

Government Bonds

Municipal Bonds

Bonds as a Part of Your Portfolio

Stocks and When to Use Them

Stocks as a Part of Your Portfolio

Mutual Funds and When to Use Them

Index Funds

Exchange Traded Funds

Mutual Funds as a Part of Your Portfolio

International Investing

Chapter 10: Investing in Real Assets

Direct Investments in Real Estate

Vacation Homes

Rental Homes

Commercial Real Estate

Raw or Unimproved Land

Indirect Investments in Real Estate

Real Estate Investment Trusts

Real Estate Limited Partnerships

The Use of Leverage in Real-Estate Investing

Correlation

Financial or Real Assets: Which Are Better?

Chapter 11: Investing in Use Assets

Your Home as an Investment

Buying vs. Renting a Home

Selling Your Home

Automobiles: Do You Really Need That New Lamborghini?

Tangible Personal Property and Collectibles

Part IV: Defending Wealth

Chapter 12: Income-Tax Planning and Management

Basics of Income-Tax Rates, Withholding, and Estimated Taxes

Social Security and Medicare Taxes

Regular Income Tax vs. Individual Alternative Minimum Tax

Basic Tax-Planning Technique #1: Tax Avoidance

Tax Avoidance vs. Tax Evasion

Basic Tax-Planning Technique #2: Tax Deferral

Basic Tax-Planning Technique #3: Conversion of Income

Tax-Smart Investing

What You Can Learn From Your Own Tax Return

Chapter 13: Transfer-Tax Planning and Management

The Advantages of Lifetime Gifting

Gifts to Minors

A Basic Primer on the Use of Trusts

Revocable Trusts

Irrevocable Trusts

Components and Valuation of the Gross Estate

Deductions and Credits Available to the Estate

Tax Rates and the Possible Repeal of the Death Tax

Do I Really Want to Leave It All to My Spouse or Charity?

The Unintended Danger of Generation-Skipping Transfers

Chapter 14: Life Events that Endanger Wealth

Divorce

Alimony

Child Support

Property Settlements

Principal Residence

Loss of Employment

Death of a Spouse or Life Partner

Titling Assets Jointly

Using Beneficiary Designations

Establishing and Funding a Revocable Living Trust

Dependent Parents

Claiming Your Parent as a Dependent for Income-Tax Purposes

A Developmentally Disabled Child

Your Own Physical or Mental Incapacity

Part V: Distributing Wealth During Your Lifetime

Chapter 15: Planning for Your Child’s Higher Education

How Much Will I Need?

In Whose Name Do I Save?

Types of Financial Aid

How Do I Save?

Custodial Accounts

Education Savings Accounts

Section 529 Savings Plans

Other Methods of Saving for College

Tax Deductions and Credits Available for Paying for College

Deduction for Student Loan Interest

Qualified Higher-Education Tuition and Fees Deduction

Higher-Education Tax Credits

American Opportunity Tax Credit

Lifetime Learning Credit

The Tax-Coordination Rules: Why Can’t I Do That?

Using a Roth IRA in College Funding

Chapter 16: Planning for the Financial Aspects of Retirement

How Much Will I Need?

Other Questions to Ask When Planning for Retirement

Mortgage Expenses

Health Care Expenses

The Financial Risks of Retirement

The “Three-Legged Stool” of Retirement Savings

Employer-Sponsored Retirement Plans

Personal Savings Plans

Social Security

When Should I Elect to Begin Receiving Social Security Retirement Benefits?

Understanding Distribution Options from an Employer-Sponsored Retirement Plan

Required Minimum Distributions

No Loopholes

IRA Rollovers and Conversions

IRA Conversions

The Use of Annuities in Retirement Planning

How Much Should I Withdraw Annually During Retirement?

Chapter 17: Planning for the Lifestyle Needs of Retirement

Housing Options for Retirees

Single-Family Dwellings

Town Homes

Condominiums

Apartments

Living with One or More of Your Children

Independent-Living Communities

Assisted-Living Communities

Continuing-Care Retirement Communities

Skilled Nursing-Care Facilities

Nursing-Home Care

Using Your Home to Fund Retirement: Reverse Mortgages

Do I Need Life Insurance During Retirement?

Retiree Health Insurance

Medicare and Medicare Supplemental Insurance (Medigap)

So, I am Retired! Now What?

Future Work

Education

Travel and Recreation

Accommodating Change

Chapter 18: Planning for Other Lifetime Financial Goals

Starting Your Own Business

Begin a Business with What You Already Know

Write a Business Plan

Consider the Form of Business Operation

Possibility of Personal Liability

Ease of Formation and Ability to Raise Capital

Income-Tax Consequences

Recruit Individuals with Different Strengths

Plan for Business Succession

Buying a Personal Residence

Saving for a Home

Understanding Types of Mortgages

Purchasing and Using a Vacation Home

Like-Kind Exchanges

QPRT

Investing a Windfall: So You Won the Lottery!

Part VI: Distributing Wealth at Death

Chapter 19: Estate Planning

Do I Need a Will?

Leaving Property via Beneficiary Designations

Titling Property

Should I Avoid the Probate Process at Death?

Estate Taxes

The Importance of Durable Powers of Attorney

Living Wills

Personal Letter of Instructions

When Should I Change My Estate Plan?

Chapter 20: Philanthropy

Choosing a Charity to Benefit

Public Charities

Private Charities

Substantiation Requirements

Gifts to Charity Using Trusts and Annuities

Charitable Trusts

Charitable Gift Annuities

Hail, Hail to Your Dear Old Alma Mater

Private Foundations

Donor-Advised Funds

Part VII: Summarizing the Personal Financial-Planning Process

Chapter 21: Reaping the Rewards

Appendix A: Sample Data-Gathering Form

Appendix B: Sample Budget

Appendix C: Power of Attorney

Durable General and Financial Power of Attorney

Section 1: Designation of Attorney-in-Fact

Section 2: Effective Date of Power of Attorney

Section 3: Powers

Section 4: Ratification; Use of Photocopy; Revocation of Prior Powers: Construction of Instrument

Appendix D: Declaration as to Medical or Surgical Treatment and Medical Durable Power of Attorney

Declaration as to Medical or Surgical Treatment

Life-Sustaining Procedures

Artificial Nourishment

Other Specific Requests:

Medical Durable Power of Attorney

Designation of Health Care Agent

Creation of Medical Durable Power of Attorney

General Statement of Authority Granted

Access to Medical Records

Advance Medical Directive

Autopsy, Anatomical Gifts, Disposition of Remains

Designation of Alternate Agent

Nomination of Guardian and Conservator

General Provisions

Hold Harmless and Third-Party Reliance

Severability

Statement of Intentions

Inconsistency in Provisions

Revocation of Prior Powers

Applicable Law

Statement of Witness

Appendix E: Sample Personal Letter of Instruction

Glossary

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Index