More Than Money: Creative Financial Gifts for Graduates

 “If you don’t make the time to work on creating the life you want, you’re eventually going to be forced to spend a LOT of time dealing with a life you don’t want.”  ~ Kevin Ngo

More Than Money: Creative Financial Gifts for Graduates

I always used to find it difficult to come up with a creative gift idea when I was invited to birthday, anniversary, and graduation parties. Rather than give the obvious “money in an envelope,” I wanted to offer something more permanent. And sometimes it was not appropriate to give money, no matter how appreciated it might be.

So over the years I have taken note of what others give at these times and kept a list of good ideas. With graduations, both college and high school, right around the corner, I pulled out some clever and financially-focused ideas from that list to share with you.

Of course, there is always the contribution to a 529 for the high school graduate, or a US Savings Bond or Direct Stock Reinvestment Plans for any graduate. You can even make a contribution to an IRA or a Roth IRA for the working student. Something always appreciated is paying off a student’s credit card bill; or for college graduates, you might make the deposit on their first month’s rent or buy the outfit for their first day at work. These are creative variations on the cash gift.

Books on personal finance are always a good idea, too, and they abound on Amazon. Some of my favorites are by Dave Ramsey, and one of the most unusual financial books I like is Consequences: A Unique Approach to Financial Planning for Young Adults, by John Blankenship. This book is not the typical “Investing 101” text, but more of a lesson that teaches young people about financial decisions by exploring consequences associated with the choices they make.

I have a friend who gives board games with her gift of money. These are usually Monopoly or The Game of Life–games that make a statement about handling finances and life. Some more unusual ones are Rich Dad Cashflow 101 board game, by Rich Dad Poor Dad; I’m Debt Free Game by GMB Products; and Charge Large by Hasbro.

And a more personal option is to purchase a session with a Financial Consultant. A first-time session should cover Budgeting, Use of Credit, Investing 101, as well as planning for future goals such as home ownership or retirement.

Whatever the gift, the fact is obvious that all graduates need money. But more importantly, they need to learn how to manage that money wisely. A unique or fun approach beyond the “money in the envelope” might get them thinking about good money management early. And the earlier the better.

10 Ways to Screw Up When Picking Life Insurance Beneficiaries

By Barbara Marquand

Naming who should get the life insurance money after you die sounds simple, but designating beneficiaries can get tricky. Mistakes are common, financial advisers say — and they can be heartbreaking and expensive. When mistakes are made “you’re not creating problems for you,” says Keith Friedman, principal of FBO Strategies, an estate planning and insurance firm in Stamford, Conn. “You’re creating problems for the people you leave behind.”

Here are 10 life insurance beneficiary mistakes to avoid.

1. Naming a minor child

Life insurance companies won’t pay the proceeds directly to minors. If you haven’t created a trust or made any legal arrangements for someone to manage the money, the court will appoint a guardian, a costly process, to handle the proceeds until the child reaches 18 or 21, depending on the state.

Instead, you can leave the money for the child’s benefit to a reliable adult; set up a trust to benefit the child and name the trust as the beneficiary of the policy; or name an adult custodian for the life insurance proceeds under the Uniform Transfers to Minor Act. Consult an estate attorney to decide the best course.

2. Making a dependent ineligible for government benefits

Naming a lifelong dependent, such as a child with special needs, as beneficiary puts the loved one at risk for losing eligibility for government assistance. Anyone who receives a gift or inheritance of more than $2,000 is disqualified for Supplemental Security Income and Medicaid, under federal law.

Work with an attorney to set up a special needs trust, and name the trust as beneficiary. A trustee you appoint will manage the money for the dependent’s benefit.

Here’s more on life insurance planning for parents of children with special needs.

3. Overlooking your spouse in a community-property state

Generally you can name anyone with whom you have a relationship as beneficiary, even a secret lover.

“Life insurance is not a judge of someone’s morals,” Friedman says.

However, in community-property states, your spouse typically would have to sign a form waiving rights to the money if you designate anyone else as beneficiary. Community-property states are:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin.

4. Falling into a tax trap

Life insurance death benefits are generally tax-free — except when three different people play the roles of policy owner, the insured and the beneficiary. In that case, the death benefit could count as a taxable gift to the beneficiary, says Amy Rose Herrick, a Chartered Financial Consultant and life insurance agent with offices in the U.S. Virgin Islands and Tecumseh, Kan.

Say, for instance, a wife owns a life insurance policy on her husband’s life and names their adult daughter as beneficiary. The wife effectively is creating a gift of the policy proceeds to her daughter, Herrick says. The person who makes the gift — the wife — is the one who would be subject to the tax, if the amount of the gift exceeds federal limits.

The problem could be avoided in most cases by having the husband own the policy, insuring himself. However the situation can get tricky in community-property states. Consult a financial adviser to decide the best way to structure the policy.

5. Assuming your will trumps the policy

A life insurance policy is a contract. Regardless of what your will says, the life insurance money will be paid to the beneficiary listed on the policy. That’s why it’s important to contact your insurer to change your beneficiary if needed.

See more information on wills vs. life insurance policies: Who’s the boss?

6. Forgetting to update

“Designating beneficiaries are not ‘set it and forget it’ events,” says Tara Reynolds, vice president at MassMutual. You should review your policy every three years and after major life events, such as marriage, having children or divorce. Change the beneficiaries when circumstances change.

Unfortunately, many people forget to do so.

“Half of my practice is second or third marriages,” says Peter Blatt, a tax attorney and financial adviser in Palm Beach Gardens, Fla. “It’s not uncommon to find the ex-spouse still listed as beneficiary on the life insurance policy” when reviewing a client’s portfolio.

7. Neglecting Details

Be specific when you name beneficiaries. Instead of “my children,” list their names, Social Security numbers and addresses, says Ed Graves, a professor of insurance at The American College in Bryn Mawr, Pa.

Otherwise, “the insurance company has to launch a search and that can take a lot of time,” Graves says.

When naming multiple beneficiaries, decide whether you want the money divided “per stirpes,” which means by branch of the family, or per capita, which means by head.

8. Staying mum

“The most important thing is to tell someone so they know you have a life insurance policy, where it is and how to find it,” says Joshua Hazelwood, vice president at MassMutual.

Open communication with beneficiaries now can save a family from chaos later – or even worse, never claiming the benefit.

9. Giving money with no strings attached

Naming your young-adult children as beneficiaries without setting any conditions for how the money is dispersed can be a setup for financial failure. How many 18- or 21-year-olds can handle a huge influx of cash? One way is to set up a trust with specifics for how the money can be released and what it can be used for until the young adult reaches a certain age.

“It allows me as a parent to instill what I feel is valued in my absence,” Friedman says. “I don’t want to leave my children with millions of dollars when they’re 18 with unfettered access.”

Insurers are beginning to introduce policies that let you arrange for the death benefit to be paid out in installments. Minnesota Life Insurance Co.’s new indexed universal life product, Omega Builder IUL, includes that option, calling it an “income protection agreement.”

10. Naming only a primary beneficiary

“Most people just think they’re going to make their spouse beneficiary, but don’t take into account the spouse might predecease them,” Friedman says. “It’s conceivable that something would happen to you and your spouse together.”

Blatt says he even sees cases where people fail to name any beneficiaries. When there is no living beneficiary, the life insurance benefit typically goes into the estate and is subject to probate. That leads to two complications. One, heirs might face a long wait to get the money. Two, the life insurance proceeds, which normally would be protected from creditors, can now be open to creditors’ claims.

Advisers recommend naming secondary and final beneficiaries. If the primary beneficiary dies before you do, then the money passes to the secondary beneficiary. If the secondary beneficiary has passed away when you die, then the death benefit goes to the final beneficiary.

Thoughtful Spending: From “Gotta Have It” to “Gotta Think It Over”

The price of anything is the amount of life you exchange for it.”
~ Henry David Thoreau

It is not unusual for clients to tell us that they find it hard to keep on budget, or they find it impossible to come up with additional funds for savings and investing, or they just always seem to overspend.

When we delve further, we often find that impulse buying and those “little things” are to blame.

Impulse buying is purchasing items you just happen to see. These are not on your shopping list; they are not necessities; they are not budgeted. But there they are, staring at you as you wait in the checkout line, or hanging on the mannequin as you pass by, or jumping out at you as you browse the store. Even harder to ignore are those items that pop up on your computer screen or cry out to you from Amazon or Google. Merchants count on you seeing and buying. And without a great amount of discipline, it is difficult to avoid the temptations.

Spending money on daily or weekly “little things” reminds us that impulse buys can become habitual expenses. Think about the “little things” you spend your money on every day. Purchasing unnecessary items such as lattes, bottled water, fast food, cigarettes, magazines, and so on can be a significant waste of money. Chances are you don’t even realize how much you’re actually spending on these seemingly “little” purchases.

So how can you get all of this under control?

Some strategies can be used while you’re shopping. Before you take out that cash-or worse, the credit card-to make a purchase, take out your smartphone instead. Take a picture of what you are thinking of buying and walk away. Wait until the next day to look at the photo. In most cases, the impulse will have passed.  

When buying online, most sites allow you to use a wish list or add items to a shopping cart for future purchase. Do this and then wait one day. The item you have to have today probably won’t be a “must have” tomorrow. And if the urge to buy it is still there, consider what you earn at work on an hourly basis and calculate how many hours of your life you will need to exchange to buy the item.

If that doesn’t do it and it is really something you would like to have, decide what you need to do to pay for the item in cash rather than credit. Saving the cash to make the purchase will again delay the impulse, and once you have accumulated the cash you may decide to use it for something more worthwhile.

It’s also important to think long-term. Start by honestly identifying those “little” expenses and considering whether you could redirect that spending somewhere else. For those little items that you buy out of habit, take the picture, print it out, and for one month list on the picture the item’s cost and how many times you bought it. At the end of the month, total your cost and multiply by 12. What amount of money are you really spending for those “little” things? Are they worth the cost? Could you have used the money more wisely? Could you substitute a more cost effective option?

At the end of the day, it all comes down to thinking before you buy. A purchase delayed could be a purchased denied, and most likely that’s a good thing.

Who Needs A Business Valuation?

In the business world, the rearview mirror is always clearer than the windshield.” ~Warren Buffett

Who Needs A Business Valuation?

MFG Honored to Receive Firm & Advisor Recognition – Wealth Watch – February 2015

What you do makes a difference, and you have to decide what kind of difference you want to make.”  ~ Jane Goodall 

Four Advisors Win 2015 Five Star Wealth Manager Awards 

Congratulations are in order for Mary Grace Musuneggi, Christopher S. Musuneggi, Rosalind Frazier, and Christine Pikutis-Musuneggi, all recipients of the 2015 Five Star Wealth Manager Award. The Five Star Award recognizes an exclusive group of Pittsburgh wealth managers who provide quality services to their clients. Mary Grace first won the Five Star Award in 2012. This marks the third consecutive year Christopher has won the Five Star Wealth Manager Award, and it is the second consecutive Five Star Wealth Manager Award for Rosalind. Look for their Five Star Award announcement in the July issue of Pittsburgh Magazine.

MFG Named to Pittsburgh Business Times’ Largest Area Investment Firms List

Each year, the Pittsburgh Business Times names our area’s 25 largest investment firms and takes a closer look at the firms who “just missed the list.” The Musuneggi Financial Group is proud to be listed as #30 this year.  See the full list in the January 30, 2015 issue of the Pittsburgh Business Times.

Taxing Tax Planning

Have You Had Your Family Meeting?

Here at The Musuneggi Financial Group, we made 2014 the Year of the Family Meeting. We focused on educating you about the importance of sitting down with your loved ones to have those sometimes difficult-but necessary-talks about Estate Planning, Long-Term Care Planning, and your Family Letter.

Many of you asked us to help by facilitating your Family Meeting here at the office, and we were honored to be able to guide you through the process. Some of the meetings were eye-opening and heartwarming.

At one of our meetings, the parents came with the desire to start gifting their assets to their children and grandchildren. With an Elder Care Attorney in attendance, we were able to spell out the pros and cons of various planning options. Because the children were in attendance they were able to share their ideas, too. As the meeting progressed, one of the sons spoke up and said,

“Mom and Dad, we are so grateful that you would want to share your assets with us and our children. Wanting to help us to pay to educate our children is a wonderful idea. But what we would rather you do is keep your money, see that it is set up to provide you with all you will need during retirement, in your later years, and help to provide you with the best medical care and best long term care that you can afford. Because, you see, as much as we love you and would do anything for you, I have a stressful job, two teenagers and two dogs. I just can’t have you moving in with me, and I can’t take care of my home and yours. The best gift you can give us is to keep your money, plan well, and have all the things you need to take good care of yourself. Besides, you worked hard to pay for our education; we need to do the same for our children.”

His words brought tears to the eyes of everyone in the room. The parents were grateful for his appreciation and honesty, and we were glad to have an understanding of the children’s expectations.

Family Meetings are your opportunity to have an open conversation–with your family members and trusted advisors–about your later-life planning. But this is not just a financial affair; rather, Family Meetings account for family members’ emotions and lifestyle concerns.

If you haven’t done your Family Meeting, Estate Planning, Long-Term Care Planning, or Family Letter, call us at 412-341-2888 ext. 301. We will be happy to help you map out these important conversations and decisions in 2015.

Just a Reminder…

What Goes Up Must Come Down…Or Not

By Mary Grace Musuneggi

I am thinking this is a good time to revisit our October newsletter. Volatile markets should remind us to stop and remember.” –Mary Grace Musuneggi

Back in June 2008, I remember fielding calls from clients who were pretty sure they would spend their retirement years living under the Smithfield Street Bridge. As 2008 and early 2009 brought financial markets to their knees, we felt their pain. In lighthearted moments we would laughingly say maybe we needed to change the name on the door of the office from The Musuneggi Financial Group to The Musuneggi Dog Walking Gang. But the fact is it was more important for us to hold on to the belief that “this too shall pass”–and it did.

We are currently at the historic highs of the stock market…and we have bond rates that are at historic lows. Double Whammy! And although there is no crystal ball, and past history cannot predict future history, I do believe that history can lend some perspective.

In a recent article by Brenden Gebben, Portfolio Manager for Absolute Capital, he refers to the Ned Davis Research that says that during Bull Markets, on average, the stock market has historically sustained upward trends for 331 market days before a 10% correction occurs and upward for 1105 market days before 20% correction occurs. So from this view we are certainly due for a correction.

And what if we are? What are some things we need to do? What are some things we need to remember?

1. Avoid trading too frequently.

2. Stop. Don’t panic. Trust your strategies. Trust your money managers’ strategies; after all, that’s what you’re paying for.

3. Don’t get out of the market at the worst times.

4. Be sure you are diversified. There are other market segments beyond just domestic stocks and government bonds. Be sure you understand them all.

5. Rebalance sometimes. Often. Frequently. Or whenever it is appropriate for your risk tolerance and for your objectives.

6. Don’t ignore tax ramifications. Return on investment is not the same as after-tax return on investment.

7. Consider taking profits. When markets go down the most common theme we hear from our clients is that they have “lost” what they had previously earned. If you transfer profits to cash along the way, you keep those earnings to either spend or to reinvest in the markets when they go down. Buying opportunities.

8. And remember, in 1921 the Dow Jones was at 60 and recently it was at 17000. Obviously it has gone up. But to get there it has gone up and down and up and down and up and down along the way. Time can certainly be more important than timing.

No matter what the markets are doing, your investment decisions need to be those that are right for you. At the right time. In the right allocation. To review your current strategy give us a call.

Planning for the Wild Child – Wealth Watch – January 2015

A goal without a plan is just a wish.”

~ Antoine de Saint-Exupery

Planning for the “Wild Child”

By: Mary Grace Musuneggi

Since I am the parent of one child, it sounds like my Estate Planning should be quite simple. But being the majority shareholder of a closely held family business means it just got more complicated.

If you are a business owner with no children, this should also sound like an easy Estate Planning arrangement; but if you would like to sell that business to add to your Retirement Income, the plan just got more complicated.

And if you have a child who wants to take over ownership of your business, planning could be easy…or seriously complicated if they have no funds, you have other children who want “their share,” or if you are the parent of the “wild child.”

Now the “wild child,” whether you have one child or five children, is not necessarily the one who is irresponsible. It could be that child whose ideas on running your business or handling your finances or using your estate assets are totally counter to yours. It can be that child who went through a divorce, lost a job, or somehow fell on hard times. It can be the child who has health or mental issues. But the fact is, unless you have one child who gets everything and he is as responsible as you, all Estate Planning can be complicated.

I have often seen responsible children feel very disappointed when parents use assets to support the child who is not. Or when I have heard parents say, “Well, Joe and Susan have lots of money and good jobs and a nice life, so we are leaving everything to Karen.” Karen failed out of college, never has been able to keep a good job, and is in debt up to her ears. But as parents, the concern is “if we don’t take care of Karen, who will?” This is understandable. But if Karen has never done well with her own planning, how will she survive on your assets?

All of these questions can be answered with some wise Estate Planning. Business owners can create Buy-Sell agreements; parents can establish trusts; life insurance can be used as a tool to compensate the “other children”; the “wild child” can receive restricted Required Minimum Distributions from IRA’s to limit their ability to spend; or assets can be allocated over a period of time or to provide income only. Parents can bypass the child and provide for education for grandchildren. In any case, these issues can-and should-be planned for.

Estate Planning is not the fun thing we do. Fun is planning for retirement, buying the summer home, paying for the great education, setting aside funds for travel. But Estate Planning is a necessity. When done correctly it provides peace of mind and the freedom to concentrate on the “fun” stuff.

Start 2015 off on the right financial road. Contact us to help guide you to the appropriate programs for you, your family, your business and your future.

Are you a business owner? Contact us for a Valuation of your business for Estate Planning or business planning purposes.

Do you know a business owner? Please pass this newsletter along to them. Thank you!

This information should not be considered as tax and legal advice. You should consult your tax and legal advisor regarding your own tax/legal situation.

It Isn’t Too Late to Save for Retirement

If you’re 40 or 50 and haven’t begun, you must make the effort.

Some people start saving for retirement at 20, 25, or 30. Others start later, and while their accumulated assets will have fewer years of compounding to benefit from, that shouldn’t discourage them to the point of doing nothing.

If you need to play catch-up, here are some retirement savings principles to keep in mind. First of all, keep a positive outlook. Believe in the validity of your effort. Know that you are doing something good for yourself and your future, and keep at it.

Starting later means saving more – much more. That’s reality; that’s math. When you have 15 or 20 years until your envisioned retirement instead of 30 or 40, you’ve got to sock away money for retirement in comparatively greater proportions. The good news is that you won’t be retiring strictly on those contributions; in large part, you will be retiring on the earnings generated by that pool of invested assets.

How much more do you need to save? A ballpark example: Marisa, a pre-retiree, has zero retirement savings at age 45 and dedicates herself to doing something about it. She decides to save $500 each month for retirement. After 20 years of doing that month after month, and with her retirement account yielding 6% a year, Marisa winds up with about $225,000 at age 65.¹

After 65, Marisa would probably realize about $10,000 a year in inflation-adjusted retirement income from that $225,000 in invested retirement savings. Would that and Social Security be enough? Probably not. Admittedly, this is better than nothing. Moreover, her retirement account(s) might average better than a 6% return across 20 years.¹

The math doesn’t lie, and the message is clear: Marisa needs to save more than $6,000 a year for retirement. Practically speaking, that means she should also exploit vehicles which allow her to do that. In 2014, you can put up to $5,500 in an IRA, $6,500 if you are 50 or older – but you can sock away up to $17,500 next year in a 401(k), 403(b), Thrift Savings Plan and most 457 plans, which all have a maximum contribution limit of $23,000 for those 50 and older.²

If Marisa is self-employed (and a sole proprietor), she can establish a solo 401(k) or a SEP-IRA. The yearly contribution limits are much higher for these plans. If Marisa’s 2013 net earnings from self-employment (after earnings are reduced by one-half of self-employment tax) work out to $50,000, she can put an employer contribution of up to $10,000 in a SEP-IRA. (She must also make similar percentage contributions for all “covered” employees, excepting her spouse, under the SEP IRA plan.) As a sole proprietor, Marisa may also make a combined employer-employee contribution of up to $33,000 to a solo 401(k) this year, and if she combines a defined benefit plan with a solo 401(k), the limit rises to $47,400. If her 2013 net earnings from self-employment come out to $150,000, she can make an employer contribution of as much as $30,000 to a SEP-IRA, a combined employee salary deferral contribution and employer profit sharing contribution of up to $53,000 to a solo 401(k), and contribute up to $96,300 toward her retirement through via the combination of the solo 401(k) and defined benefit plan.³

How do you save more? As you are likely nearing your peak earnings years, it may be easier than you initially assume. One helpful step is to reduce some of the lifestyle costs you incur: cable TV, lease payments, and so forth. Reducing debt helps: every reduced credit card balance or paid-off loan frees up more cash. Selling things helps – a car, a boat, a house, collectibles. Whatever money they generate for you can be assigned to your retirement savings effort.

Consistency is more important than yield. When you get a late start on retirement saving, you naturally want solid returns on your investments every year – yet you shouldn’t become fixated on the return alone. A dogged pursuit of double-digit returns may expose you to considerable market risk (and the potential for big losses in a downturn). Diversification is always important, increasingly so when you can’t afford to lose a big portion of what you have saved. So is tax efficiency. You will also want to watch account fees.

If you start saving for retirement at 50, your retirement savings will likely double (at least) by age 65 thanks to consistent inflows of new money, decent yields and compounding.⁴

What if you amass a big nest egg & still face a shortfall? Maybe you can reduce expenses in retirement by moving to another city or state (or even another country). Maybe you can broaden your skill set and make yourself employable in another way (which also might help you before you reach traditional retirement age if you find yourself in a declining industry).

If you haven’t begun to save for retirement by your mid-40s, you have probably heard a few warnings and wake-up calls. Unless you are independently wealthy or anticipate being so someday, the truth of the matter is…

If you haven’t started saving for retirement, you need to do something to save your retirement.

That may sound harsh or scary, but without a nest egg, your vision of a comfortable future is in jeopardy. You can’t retire on hope and you don’t want to rely on Social Security, relatives or social services agencies for your well-being when you are elderly.

This material was prepared by MarketingLibrary.Net 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.

1 – money.cnn.com/2012/08/15/pf/expert/late-start-retirement.moneymag/ [8/15/13]

2 – irs.gov/uac/IRS-Announces-2014-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$17,500-to-their-401%28k%29-plans-in-2014 [11/4/13]

3 – forbes.com/sites/ashleaebeling/2013/11/01/retirement-savings-for-the-self-employed/ [11/1/13]

4 – forbes.com/sites/mitchelltuchman/2013/11/21/financial-planning-for-late-starters-in-five-steps/ [11/21/13]