Does Your Financial Plan Have Holes?

From paltry emergency savings to excessive investment fees, there are numerous issues that can cause a financial plan to leak money like a punctured bucket leaks water. Here are a few of the most common holes advisors often find in their customers financial situations.

Not enough emergency savings — Most experts recommend their clients set aside at least six months' worth of living expenses in case of emergency. Setting up a monthly transfer from your checking account to a savings account can make this as automatic as your 401(k) contribution. However, if you hate the idea of earning lackluster interest, you might want to talk to your advisor about equally liquid alternatives that offer a better return.

Too much company stock — Accumulating stock in your employer through an incentive plan or stock purchase plan can lead to a dangerous situation. If most of your nest egg is company stock and something happens to the organization, you'd lose your job and your investments at the same time. Some experts recommend having no more than 10 percent of your portfolio invested in your employer.

No asset allocation plan — If you haven't put any serious thought into the risk and return of your investments, you probably lack an asset allocation plan. Talk to your advisor about making sure you've properly diversified each of your investment accounts. You may even want to consolidate them.

High investment fees — If you have no idea how much you're paying in fees on your investments, you're not alone. Unfortunately, mutual fund loads, expense ratios, trading costs and advisory fees can really add up. You could easily be losing several percentage points a year in returns. You may want to talk to your advisor about the benefits of passive index funds over actively managed funds.

Poor retirement calculation — You may be maxing out your contributions, but that doesn't mean you're saving enough. Retirement needs vary and are influenced by your timeframe, desired income, Social Security payments and other such factors. Ask your advisor for assistance calculating the savings you'll truly need in retirement and adjusting your plan accordingly to ensure the funds are there when you need them.


This Newsletter Is Compliments Of:
Marlene Schell
Diana Wood
Janet Thompson
Lisa Davis
(714) 891-1936 - (562) 594-9721